What to do after Bankruptcy.

Bankruptcy is sometimes hard to avoid, especially during tough economic times. Let’s face it, nobody wants to file bankruptcy. There are two types of common bankruptcies. They are Chapter 7 and Chapter 13. Once your bankruptcy is discharged you will need to re-establish your credit score with each credit bureau.

Instructions:

1. Make sure you pay all your current bills on-time. You definitely don’t want troubles after a bankruptcy is on your credit report. Have a realistic budget and stick to your budget. If you find that you are having problems paying any debts, make payment arrangements with your creditors. Creditors will typically work with emergency circumstances. Remember your payment history accounts for 35% of your overall credit rating.

2. Get a family member to add you as an authorized user on a credit card. This will allow you to ride the coat tail of someone that has good credit. Also get a couple of secured credit cards. Secured credit cards are a great way to re-establish credit.

3. Establish at least 3 lines of good credit on your credit report. This is very important. I know that maybe credit card got you in trouble to begin with, but they are a necessary evil. With 12 to 24 months of good payment history you will see an improvement in your credit scores.

4. Get some installment loans. Installment loans are a great way to re-establish credit after a bankruptcy discharge. Typically car loans are easier to get when you have low credit scores.

5. Have savings for emergencies. Any financial adviser will recommend that you have 6 months worth of income in savings. When something happens you have some breathing room until you can resolve matters. If you don’t have any savings, then avoid all the little pleasures, like eating out, going to the movies, shopping for clothes, etc….until you have 6 months income in the bank.

Author: Mike Clover

CreditScoreQuick.com

FHA increasing costs on October 4th 2010.

Over the last 10 years FHA was providing financing to just about anyone. They also allowed you to get into a home with little or no investment. So essentially you could buy a home and actually get money back at closing. Sound crazy? Well it was going on everywhere. Now the bar for FHA credit criteria has been raised, but the damage has already been done.

During 2007 the bottom fell out of real estate and foreclosures were on the rise. FHA charges an up front Mortgage Insurance Premium (M.I.P.) and a monthly Mortgage Insurance (M.I.) to the cover the cost of these foreclosures. M.I.P. is a one time fee of 2.25% of loan amount that is financed into the note. Earlier this year the M.I.P. was 1.75, which was increased to 2.25%. They also charge .50% of your loan amount that is paid monthly. Well according to HUD they are running out of money to cover all the claims due to foreclosures with the current premiums.

So they have recently passed a bill that will increase the monthly M.I. to .80% of your loan amount and drop the M.I.P. to 1% on October 4th of this year. How does this affect you?  See example Below.

We will use a home of $100,000 for an example.

Illustration from Bankrate.com

You can see how the changes will cause an increase in your monthly payment. Your payment will increase $22 bucks a month with this scenario provided on a $100,000 dollar home. So if you are in the market to buy and FHA is your route, you may want to buy before October 3rd of this year. According to Bankrate.com the new changes will take affect on October 4th.

Author: Mike Clover

CreditScoreQuick.com

Before the recent real estate meltdown, banks were lending to anybody with a pulse. The reason was during the Clinton administration banks were being pressured to make riskier loans. This pressure came particularly from Andrew Cuomo the youngest Housing and Urban Development Secretary in history. Cuomo pushed for equal housing opportunity for low income families. For some strange reason this information was hardly talked about in the news. Everyone was blaming the banks for the melt down which was only partially true.

During 1997 – 2001 Cuomo made a series of decisions with Freddie Mac and Fannie Mae that promoted lenders to plunge into risky subprime investments. This pressure lowered the bar on credit score and down payment requirements for mortgage loans. This was the beginning of a subprime and a- paper loan disaster.

So who is to blame for this? I blame the banks and the government. I particularly blame the Clinton administration for pressuring banks to lend to people who really did not have the financial strength to buy a home. On the other hand banks are to blame as well. They know what type of borrower will default on a loan and should have never given in to the government pressure.

Now most Americans are forced to save their money and work on their credit. This is the case especially for families that want to buy a home or get some type of credit.

During 1997-2006 we were in a false economy that was stemmed from government pressure towards banks to lend to low income families. I believe everyone has a right to home owner ship as long as they qualify.

As a result of this disaster we now are faced with a long road to recovery. The banks I believe have learned not to give into government pressure. The American people have learned that you will need better credit scores and money in the bank to qualify for a mortgage loan.

You have to admit that we have been extremely spoiled over the last 15 years. Now lending is back to the basics. You need good credit scores, money in the bank and a job with provable income.

Like the famous singer Shirley Bassey, said…. “It’s all just a little bit of history repeating……” I hope she is wrong…..

Author: Mike Clover

CreditScoreQuick.com

If you’ve never established credit or if past financial troubles are still haunting you, and you need to rebuild your credit, using your own savings to do so is a simple route to follow.

One way to get started is with a secured credit card.

With this method, you deposit a set amount into an account that is held for security against your line of credit. The credit card issuer will not be concerned with your credit scores, because if you don’t pay, they’ll simply keep the money in your security account.

By using the card wisely you will demonstrate that you are once again a good credit risk. You should be careful never to use more than 30% of your line of credit, and should, of course, pay every statement when it arrives. As long as you make at least the minimum payment, carrying the balance is fine – but it might be expensive. These cards are known for high interest rates. Use the card as a convenience and as a credit building tool, and do your best to pay each statement in full when it arrives.

Before you go this route, shop around and compare offers. Each card will carry an annual fee and the interest rates vary. Also, some cards offer interest on the money you’ve deposited into the security account, while others do not.

In addition, be on the lookout for application fees, transaction fees, statement fees, etc. Because the CARD Act limited some sources of income, credit card issuers are looking for other ways to increase their profits.

Be wary of offers in the mail or in your email in-box, as these will probably carry the highest interest and fees. Instead, take the time for comparison shopping. Choose a card with reasonable rates and fees, and look for one that will pay you interest on the money in your security account.

Another means to accomplish this – and to establish a second form of credit – is to borrow against a CD in your own bank. This is a less expensive method – generally you’ll pay 2 or 3% over the amount being paid to you on the CD.

Since credit scoring models give “extra credit” for managing different kinds of debt, you might want to consider using both a secured credit card and a bank loan. Credit cards are considered revolving debt, while a loan is an installment debt.

CreditScoreQuick.com

What is a credit score and what is it used for?

Not all that many years ago, if you needed a loan you went to see the local banker. The banker would decide if you were credit-worthy based on what he knew about you – and maybe even what he knew about your parents and siblings. Your reputation was the deciding factor.

Now, if you go to the local bank you’ll be handed over to a loan officer, and even if that loan officer knows you well and likes you, you’ll get the loan based on your credit score. If your credit score is too low, you either won’t get the loan or you’ll pay an extremely high rate of interest.

That’s because, to a lender, a low score signifies that you’re a greater credit risk.

Most banks and other lending institutions use a FICO scoring formula, although several similar formulas are also in use. FICO stands for Fair Isaac Corporation – the company that developed the scoring system.

A credit score is a distillation of all the information in your credit report, plugged into a formula that calculates a single number to indicate your credit worthiness. Scores range from 300 to 850 – with most consumers falling into the 600’s and low 700’s. A score of 740 or higher should get you the best rates on any loan.

What factors go into the calculation?

1. Your record of making payments  – making them on time every time gives you a higher score. Late payments, collections, bankruptcies, and foreclosures all lower your scores.
2. The Way you use credit – if your credit cards are at or near their limit, you’re considered a greater risk.
3. The age of your existing credit. If you’ve had and used credit for many years, you’re considered a safer risk than someone who is just starting out with credit usage.
4. The number of inquiries on your file. If you have multiple inquiries from possible credit issuers over a short period of time, you’re considered to be a greater risk. Note, however, that inquiries from creditors for the purpose of soliciting your business do not count against you – nor do inquiries you make on your own credit file. Only inquiries resulting from a credit application count.
5. Your mix of credit. Credit issuers like to see a mix of installment loans and revolving lines of credit. That somehow proves to them that you are able to handle multiple kinds of debt.

How lenders use the information does vary…

Two consumers with identical credit scores can be offered different interest rates for a similar purchase. That’s because these two people had different pluses and minuses that factored into their final scores – and certain things matter more to one type of lender than another.

Credit card issuers, for instance, will place more weight on your credit card payment history, while auto lenders are apt to focus on factors such as the down payment, your debt-to-income ratio, and your length of time on the job. They also look at your history regarding auto payments. To an auto lender, a missed car payment is more damaging than a missed credit card payment.

Mortgage lenders focus on your overall scores, and your score will determine the interest rate you’ll be offered.

However, mortgage lending standards have tightened considerably, and borrowers must once again meet several requirements. An underwriter will consider your down payment, your income, your length of time on the job, your overall debt-to-income ratio, and even the likelihood of you remaining on that job in the foreseeable future. High scores and a “stated income” are no longer enough to secure a loan.

If you’re planning a major purchase, get your scores now…

Credit reports reflect information that has been reported – and entered in a database. Often that information contains mistakes, and those mistakes can lower your scores.

So if you’re planning a major purchase, get your credit report and scores and check it for errors. They are not difficult to correct, but they do take time. In addition, your credit report will offer advice in the form of reasons why your score is lower than it might be. You can use that advice to make changes in the way you use your credit.

So don’t wait until you’re ready to make an offer on a home, drive off the lot in a new car, or apply for a credit card.

Get your free online credit report with scores right now from CreditScoreQuick.com. Or, go to www.annualcreditreport.com to request your free credit report from each of the bureaus. The report will be free, but you will pay a fee for the scores.

If you want to purchase your credit report and credit score, shop around first. The prices vary between the three credit bureaus. Here are the costs and contact information for ordering your own.

Credit Repair is the process of negotiating collections, charge offs, establishing credit, lowering debt, and disputing inaccuracies. Save yourself time and money by repairing your credit yourself.

As a consumer you have rights in regards to what is being reported about you. There are laws that protect your credit rating. However there are various issues with the current credit reporting process that affects the accuracy of credit reporting.

You’re Rights as a Consumer:

1. Fair Credit Reporting Act (FCRA)
2. The Fair Credit Reporting Act (FCRA) and the Privacy of Your Credit Report
3. Equifax FCRA
4. Yale.edu FCRA

There are many helpful sites to repair your own credit report. These helpful links are from the government and consumer advocate sites. These sites charge no fee for this advice.

Credit Repair Links:

1. How to help yourself (FTC)
2. About.com Credit Repair Tips
3. Building a better credit report
4. 5 Steps to do-it yourself credit repair
5. Step by Step Credit Repair guide
6. Law in Plain Language: Credit Repair
7. FDIC on Credit Repair
8. Frequent Credit Repair Q & A
9. Credit Repair Software – This is a great resource for creating credit dispute letters.

Credit Reporting Facts

1. Credit Score Facts & Fallacies
2. Credit Report Facts Freddie Mac
3. Credit Score how it all adds up
4. Consumer Facts FTC
5. Debt Collection

HARP – the Home Affordable Refinance Program – was supposed to help Americans refinance their homes into a more affordable payment. The goal was to refinance from 4 to 5 million mortgages by the end of June 2010. Instead, according to the latest reports, fewer than 300,000 homes have been refinanced under HARP.

The program has been extended for another year – through June 2011 – but so what? Is there any reason to believe that the program will more successful in the coming year?

HARP could have saved many homes from going into foreclosure when their adjustable rate mortgages reset – pushing the monthly payment to a level that consumers hit with the failing economy simply could not meet.

For others – it would have freed up a few hundred dollars per month that would supposedly have stimulated the economy through increased spending on consumer goods.

But this giant stimulus to the economy simply didn’t happen.

Homeowners tried, but for many the limit of refinancing at 125% of value shut them out. In hard-hit areas like Florida, California, Nevada, and Arizona, homes are now worth less than 50% of their mortgage balances.

For others, it was program guidelines and lack of cooperation from the banks that prevented the refinance. For instance, a homeowner with private mortgage insurance is limited to refinancing with their current mortgage company – a company that has zero incentive to help them reduce their interest rate.

Remember that this refinance program was (is) available only to homeowners who have not missed a mortgage payment. So why should a bank reduce their interest from 6.5% to 4.5% when they are able to make the larger payment? From the bank’s point of view, that’s like taking money from their pocket so the consumer can spend it somewhere else.

Like HAMP, which was supposed to have modified 4 to 5 million loans by now but has actually helped fewer than 400,000 homeowners, the big problem is lack of cooperation.

The banks, while being “encouraged” to participate, have no real incentive to do so. Thus, homeowners who want these programs must be persistent and insistent.

One homeowner who was successful in obtaining a lower interest refinance at 125% of value cited 6 months of sending and re-sending documents as they were either lost or his file was transferred to a new servicer. He began with weekly calls and emails and finally ramped it up to more than one a day.

He said that it was easy to see why some homeowners would give up before getting to the finish line. People with jobs that prevent them from making phone calls and sending emails during business hours on a daily basis simply get ignored, and the many setbacks and mistakes on the part of the bank can make it seem impossible to reach the goal.

In his case, the “squeaky wheel” finally did “get the grease.” He advises other homeowners who want and need a lower payment to never give up.

CreditScoreQuick.com

Owing less money will not only build your credit scores, it will reduce your stress levels. Here are 2 ways that consumers have found to spend less and gain more.

1. Get rid of your car…

Owning and maintaining a car drains $6,000 to $10,000 from your income each and every year – more if you’re also making a car payment or paying to park.

In areas where public transportation is available, it makes good sense to get rid of the car and rent one only when its needed for a long trip, a special occasion, or for those times when shopping means coming home with a bulky purchase.

Major car rental companies are now offering hourly as well as daily car rentals, because they’re now competing with a growing new business: Car sharing companies.

Car sharing is fast taking hold in major cities along both coasts and the Midwest – with 75,000 already using the service and an estimated 2,500 new members signing on each month. At present, the two major car share providers are Zipcar and Flexcar.

Consumers who have gone this route say they get a triple benefit – they’re walking and bicycling more, and feeling more fit, and they don’t have to spend the time involved in maintaining a car. Rentals and car shares come to them clean and ready to go – eliminating hours as well as dollars spent on filling the tank, getting the oil changed, washing the car, etc.

The drawback: You can’t take pets unless they’re in carriers, and you can’t leave all your “stuff” in the car, handy for when you need it.

Removing that car debt from your credit report will also give your credit scores an instant boost.

2. Rent out a room in your home.

This is a common practice in college towns, where homeowners offer their extra bedrooms to college students. But it’s now a growing trend in cities, as young people joining the workforce seek affordable housing. The safety and security of living with a family is attractive, and the cost is less than that of a clean apartment in a good neighborhood.

For the homeowner, it can mean having someone in the home to keep an eye on things while they’re away, or to help with yard work, housework, or even child care – as well as extra cash to help pay down debt quickly… and raise those credit scores.

Before you try it, check the local zoning ordinances, and be sure to draw up a tenancy agreement that specifies both the payment terms and the sharing of common areas.

CreditScoreQuick.com

Q:

I have a dispute against Verizon Telephone (not wireless) that I can’t seem to get rid of. I was charged for 6 months of a bundle service from May of 2008 to Jan 2009. I though this was settled when I had a phone hearing with the public utilities people. The Problem is in a nut shell, I moved out on June first 2008. Never had Installation, and Verizon has the records that show that the installation never happen. The original bill was something like $850.00, they (Verizon) said they never received a payment.  My question was what phone co,. would continue service for 7 months without getting the first payment, to say nothing about no payment at all. They say I owe them 2 diff. bills for a total of around $350.00. I have over the past 5 years had payed off 4 car loans. I have 3 ongoing loans at present. Out of all the payments in the past 5 years I was late 60 days 1 time on 1 loan, I have been making payment on time not a day late on all the others. Still only have a score of around 600. Can you help me?

Phillp G.

A:

Hi Phillip,

When having collections on your credit report, this will drag down your credit score until resolved. My recommendation would be to get that resolved with Verizon. I am not sure if I understand completely about the continued service situation. If they show the installation never happened, then there should be no charges. I would recommend disputing this on-line at our on-line dispute section. When there is an error on a creditors part, the bureaus will verify that error and remove if the error can be verified.

Mike Clover

CreditScoreQuick.com