Little Things Can Make a Big Difference

Perhaps you have had credit issues in the past and are trying to get back on track. Or maybe you have perfect credit and want to make sure it stays that way. Here are some important tips that can make a big difference.

Beware of Store Cards

Department stores love to push their credit cards by offering a discount on your purchase if you sign up on the spot. This can be a good deal. But it is handy to know that store cards create triple trouble on your credit report. First, your score will be reduced because of the inquiry. Second, your score will be reduced because of the new account that will soon appear on your report. And third, store cards tend to give a low credit line, often just above your purchase amount. This can be terribly damaging as the FICO credit scoring model puts a lot of weight on the relationship between your balance and your high credit limit.

Watch That High Limit

I run a national credit repair company and speak to people all day long about their credit reports. One of the bits of advice that we like to offer our customers is to pretend they only have half the limit on their credit card that they really have. It takes some discipline to do this but it can make a big difference on your credit score. As soon as your balance exceeds fifty percent of your available limit your credit score will start to suffer. If your credit balances are currently close to your credit limits you might consider calling the credit card companies and asking them to increase your limit.

You will be amazed at how fast this can make your score go up!

The Auto Shopping Credit Trap

I can’t tell you the number of times that we have looked at a credit report and seen multiple auto credit inquiries. When we ask our customer they inform us that they only went to two different dealers. Auto dealers will often shop for the best interest rate for you. If they shop with three auto finance companies you will have three credit inquiries. These multiple inquiries can have a significant impact on your score. This is not the auto dealers fault. After all, they are acting your best interest, but it is best to be aware of the possibilities. If you are shopping for a car I would suggest not providing your Social Security number until you are settled on the car you want.

No More Mr. (or Mrs.) Nice Guy

Just about every day in the credit repair business we come across someone that was nice enough to co-sign for someone on a car loan. I’m sorry to say this, but chances are that if they need you to co-sign they will not make their payments on time. And this will kill your credit scores. I know that this is a tough call. It is hard to say “no”. If this situation arises in your life I suggest an alternative approach. Go ahead and co-sign. But when the payment book arrives ask them to give it to you. Have them pay you instead of the auto finance company. You will make the payments on time. And maybe they will feel some extra obligation to make their payments to you on time as opposed to some anonymous auto finance company.

Don’t get complacent

Check your credit from time to time. In December of 2003 Congress passed the Fair and Accurate Credit Transactions Act (FACT Act) which, among other things gives you the right to get a free credit report from each bureau one time per year. This law was passed to protect you from the credit reporting errors that occur far too frequently. Don’t imagine that because you are doing everything right that the credit bureaus are reporting everything correctly. Get your reports and proof read them carefully. It’s your right.

No explanations needed

Are there errors on your report? Whatever you do please don’t write an explanation for the credit bureaus to include on your credit report. No creditor wants to see your story. Sorry! But it’s true. If there is something wrong on your credit report you should dispute it! If you don’t feel up to the challenge of dealing with the credit bureaus hire a reputable credit repair company. They have the experience and knowledge to get the job done for you. A good credit repair company should be affordable and efficient. You should never have to commit for a predetermined period of time.

Before you hire someone pick up the phone and talk to them. Make sure you are comfortable. It’s your money!

Know Your Lender Before You Take That Loan

If you plan to take a loan against your home’s equity anytime in the near future, better beware of the many frauds and other problems that are associated with some lenders. If you have a bad credit, you are especially vulnerable. The Federal Trade Commission (FTC) has issued a warning to people urging them to be aware of such loan practices to avoid losing your home.

I know it sounds scary and you begin to wonder if you could actually trust anybody. But there is no need for a panic attack. When you plan to borrow, try to keep a cool head and find out if the lender you approach is credible. Some lenders try to ‘steal’ your equity by asking you to pad your income in order to qualify for a loan. Why do they do this? Because at some point of time, you will be unable to make your payments. The lender will then foreclose your home and take away your equity.

Loan flipping is another method used to scam prospective barrowers. This entails a lender making an offer soon after you refinanced your home. He may say you can take a bigger loan for a vacation or other reason. If you accept the offer, he will refinance your original loan and then will lend you the additional money. With each new loan, the lender or broker may collect new points or fees.

If you are going to consider a bad debt consolidation loan, you have to do some of the work yourself.  Take a piece of paper and write down all the money that you owe.  Now write down how much you can realistically pay on this debt every month.  For bad debt consolidation to work, you have to sacrifice some; no question about that.  In addition, you have to make an almost unbreakable commitment to pay that single monthly payment in full and on time. …

Scambusters is a consumer advice column written by the Better Business Bureau of Northern Indiana . It will appear twice a month in Business Monday . debt consolidation loans.

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loanconsolidation. When borrowers consolidate their federal studentloans, they pay off the outstanding balances on theirpre-existing loans with the new consolidation loan. These ‘paymentsin-full’ then are reflected on the borrowers’ credit reports, revitalizingpoor … debt consolidation loans.

According to NextStudent, the Phoenix-based premier education funding company, borrowers’ credit scores may be improved through student loan consolidation. When borrowers consolidate their federal student loans, they pay off the outstanding balances on their pre-existing loans with the new consolidation loan.

Under siege by state regulators, payday lenders unveiled voluntary consumer protections last week, including giving some borrowers more time to repay loans and ending ads promoting the product for “frivolous purposes,” such as vacations.

The proposals will “greatly reduce the risk of any customer getting caught in a new cycle of debt,” says Don Gayhardt, president of Dollar Financial, which operates 1,250 outlets in the United States, Canada and the United Kingdom.

Consumer advocates called the effort, which includes a $10 million outreach campaign in media outlets including USA Today, CNN and Telemundo, a hollow gesture designed to ward off government oversight.

“The whole thing is doublespeak. They put a product on the market that is unsafe, and then they put some warnings on it,” says Susan Lupton, senior policy associate at the nonprofit Center for Responsible Lending.

Payday lenders offer short-term loans to consumers to be repaid with their next paycheck. Many strapped borrowers, unable to repay, repeatedly roll the loans over, incurring fees of 300 percent to 1,000 percent on an annual basis. The industry has grown into a $40 billion annual business, with more payday outlets than McDonald’s fast-food restaurants.

The industry says the fees reflect the risk of its product. But state and federal regulators, in response to consumer complaints, are starting to crack down. Congress set a 36 percent annual interest cap on payday loans to the military. Oregon recently passed a rate cap on loans in that state.

Credit unions are offering lower-cost alternatives to payday loans, and federal regulators want commercial banks to develop small-loan products.

The repayment plan is the centerpiece of the new consumer guidelines by the Community Financial Services Association of America, which represents about half of payday lenders. Borrowers who fall behind would have an eight-week period to pay off their loans. No new fees would be charged during the period, which could be offered at least once in a 12-month period.

“You just need to come to us a day before your loan is due, say, “I don’t have the funds to make my current payment’ and opt into . . . repayment,” Gaylord says.

Lupton says in the few states where repayment options are offered, they are ineffective. Consumers simply don’t have the funds to pay their balance.

In Washington state, borrowers can pay off a loan in installments after taking out four successive loans with a firm. About 5 percent of borrowers used the option in 2005. About 60 percent of all borrowers took out four or more loans that year.

Still, some firms try to evade consumer protections. Washington in January imposed $1.2 million in fines on lenders that exceeded maximum loan ceilings.

The Community Financial Services Association of America, the national trade association for payday lenders, says its $10 million advertising campaign is intended to educate people on how to use payday loans wisely.

But more often than not, any use of payday loans is unwise.
Payday loans are small loans that a borrower promises to repay out of his or her next paycheck, typically in two weeks. A $100 loan might carry a fee of $15.

Consumer advocacy groups are highly critical of these loans because when the fees are annualized, they often amount to triple-digit interest rates — even more than 1,000 percent in some cases. The groups argue that the loans take advantage of cash-strapped consumers.

Last week, the payday-lending trade group announced its ad campaign.

“This is a public relations act from an industry under heavy fire,” says Jean Ann Fox, director of consumer protection for the Consumer Federation of America. “This is a move to derail state and congressional legislation.”

Payday lenders were banned from Georgia in 2004, although lawmakers there are considering letting them back in. Other state legislatures are considering restrictions on payday loans. Last year Congress passed a law forcing the industry to cap at 36 percent the annual interest rates on loans to military-service men and women and their dependents.

Industry executives say their multimillion-dollar campaign is not an image booster. Rather, they call it an effort to encourage consumers to use payday advances in a responsible manner. They argue that payday loans are the more affordable route for people who find themselves in desperate need of money.

“If it only cost $10 to bounce a check, I’m not sure we would have nearly as big a payday loan industry,” says Don Gayhardt, president of Dollar Financial, a payday lender. “Payday loans are not predatory. We enhance the economic well-being of people.”

In fact, to show its commitment to helping people, the trade group is asking members to voluntarily implement new practices. The most notable is an extended payment plan for those borrowers who cannot immediately repay their loans. At no cost, borrowers would be allowed to repay loans over four extra pay periods. For example, if a customer is paid every two weeks, he would get an additional two months to pay off the loan. If paid monthly, he would get an additional four months.

I have no doubt the media campaign will be successful. The ad I viewed, which features Darrin Andersen, president of the CFSA, has soft music and shows a child with his arm in a sling and a man on the side of the road with a car obviously in need of repair. The subliminal message: If you need money to fix your kid’s arm, we’re here for you. If your car breaks down and you don’t have cash, come to us.

So our advise is that people should use payday advances only for unplanned short-term expenses. Borrow only what you feel you can comfortably repay

Mortgage finance giant Freddie Mac said Tuesday it will no longer buy high-risk home mortgages that it deems to be highly vulnerable to foreclosure, in a surprise move that came amid a deteriorating market for subprime loans affected by slumping home prices and rising interest rates

The government-sponsored company, which is the second-biggest financer of home loans in the United States, said it will begin using stricter standards for mortgages that it buys — including limiting the use of loans requiring less documentation of the borrower’s status than conventional mortgages.

“The steps we are taking today will provide more protection to consumers and enhance the level of underwriting standards in the market,” Richard Syron, Freddie Mac’s chairman and CEO, said in a statement.

The changes will take effect Sept. 1, the company said, to avoid disrupting the mortgage market.

The company’s new standards cover certain types of hybrid adjustable-rate mortgages that comprise about three-quarters of the subprime market. An adjustable-rate mortgage is considered a higher-risk loan because it typically draws borrowers in with an initial low, or “teaser” rate, which can rise substantially over time.

Home-mortgage delinquencies and foreclosures are surging, especially for people who took out subprime mortgages — higher-interest loans for those with blemished credit records or low incomes who are considered higher risks — during the sizzling housing boom that waned in the latter half of 2005.

Write-offs of home mortgage loans by banks and thrifts reached a three-year high in the fourth quarter last year, according to the Federal Deposit Insurance Corp. And several financial companies that specialize in subprime mortgages have seen their shares plummet in recent weeks and the industry sector has been roiled.

Low-documentation, interest-only and other nontraditional mortgages, which are riskier than conventional home loans, have exploded in popularity in recent years and raised concern about defaults if borrowers cannot meet rising mortgage payments.

McLean, Va.-based Freddie Mac, like its larger government-sponsored sibling Fannie Mae, was created by Congress to pump money into the mortgage market by buying home loans from banks and other lenders, in order to keep interest rates low and make home ownership affordable for low- and moderate-income people. The two companies bundle the mortgages into securities for sale on Wall Street.

Freddie Mac shares fell 22 cents to $64.71 in morning trdaing on the New York Stock Exchange.

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On the Net:

Freddie Mac: http://www.freddiemac.com

Fannie Mae: http://www.fanniemae.com

Reverse Mortgage of America, a division of Seattle Mortgage Company and one of the nation’s leading reverse mortgage lenders, today announces the opening of its Redding branch. Centrally located, the branch will provide reverse mortgage financing services for senior homeowners throughout the region.Founded in 1944 as a residential lender, Seattle Mortgage is one of the first companies to offer reverse mortgages nationwide. Named Best Large Family Business in the Northwest, the company seeks to provide customers with affordable financing solutions.

“The Redding community is a great fit for us. The senior population is growing and as the financing needs of seniors change, it is important that they are aware of their options,” says David Mahrt, Branch Manager. “We want to educate senior homeowners so that they make the right financing decisions for their circumstances.”

According to the 2000 U.S. Census, California is becoming the next hot spot for mature citizens. Over 3.5 million of the state’s population is composed of seniors 65 and over, the nation’s largest senior population. With home values on the rise, and the cost of living increasing, reverse mortgages are a prime product to assist seniors in meeting their financial needs.

The branch, composed of experienced loan officers, will offer reverse mortgages exclusively. Loan officers are also available to conduct free, informative seminars.

For additional information on reverse mortgages and the new branch location, please contact David Mahrt of Reverse Mortgage of America at 530-223-4196 or log on to www.reversemortgageofamerica.com.

About Seattle Financial Group

Seattle Financial Group, a growing network of innovative financial services, is dedicated to constantly meeting the consumer’s ever-changing needs. Comprised of Seattle Mortgage, Seattle Savings Bank, Seattle Escrow, Seattle Capital, Reverse Mortgage of America and other brands, the company provides real estate financing, savings products, and associated services for all stages of life. General information about the company can be found at www.seattlefinancialgroup.com or by calling 800-643-6610.

Many older homeowners prefer reliable, dependable mortgage interest rates. It helps them plan their monthly financial calendars, especially when they are battling the challenges of paying for health care on fixed incomes.Fixed-rate mortgages have been absent from the reverse mortgage scene for more than a decade as lenders relied primarily on adjustable-rate mortgages insured by the U.S. Department of Housing and Urban Development. These mortgages, known as home equity conversion mortgages, account for nearly 85 percent of the reverse market.

BNY Mortgage (www.bny mortgage.com), which recently announced it would trim the interest rate charged on the adjustable-rate home equity conversion mortgages, will introduce two fixed-rate reverse mortgage products on March 5.

The first, called the New Generation HECM, will be similar to the current FHA/VA rate and hover near 6.5 percent, not including the mandatory mortgage insurance premium. The interest rate is tied to the one-year CMY, or constant maturity treasury index. The second product, the Fixed Prime Advantage, is a “jumbo” product for loans greater than $405,000. The rate, which will be set at closing, is the prime lending rate plus .99 percent. That rate this week was a tick over 9 percent.

“By offering more options to seniors, we feel strongly that we are making reverse mortgages more accessible for today’s senior homeowners,” said Sarah Hulbert, executive director for BNY Mortgage’s western regional center. “Seniors who previously were put off by the adjustable rate options will now have fixed rate options, and seniors who previously did not qualify for a reverse mortgage due to insufficient loan proceeds will now be eligible.”

Reverse mortgages allow senior homeowners, with a minimum age of 62, to receive proceeds from a lender - either in a lump sum, regular monthly payments, a line of credit or in a combination of those options. When the house is sold, or the last remaining borrower dies or moves out of the home, the loan amount plus the accrued interest is repaid. The borrower can’t owe more than the value of the home. The home equity conversion mortgages program has insured more than 240,000 reverse mortgages since 1990, while private “jumbo” reverse plans also have been available.

Wells Fargo Home Mortgage (www.wellsfargo.com/reverse), the nation’s leading retail originator of reverse mortgages, announced it also has trimmed the margin it charges on the home equity conversion mortgages adjustable by 50 basis points. Seniors who have already applied for a reverse mortgage with Wells Fargo will be offered the lower margin.

“Reverse mortgages are about making the most of the equity that seniors have built into their homes,” said Jeff Taylor, vice president of Wells Fargo’s Senior Products Group. “By lowering the margin, we are lowering the interest rate charged on a reverse mortgage. This means more seniors will be able to use the reverse mortgage program, giving them the ability to turn their home equity into additional retirement funds.”

Providential Home Income Plan, Inc., a venture capital funded company whose sole purpose was to originate and service reverse mortgage loans, offered a fixed-rate reverse mortgage in the early 1990s. While the company was one of the first to begin offering a program to enable seniors to tap the equity in their homes, some of loans contained the controversial “equity share” component, giving the lender a significant portion of the appreciation in the home. Often, that portion was 50 percent of a rapidly appreciating home, leaving some homeowners in debt when the senior died or moved out of the home. The “equity share” component no longer is included in reverse mortgages and is a key reason for the popularity of today’s products.

In 1996, Transamerica HomeFirst purchased the reverse mortgage servicing assets of Providential. Three years later, Financial Freedom, the Irvine, Calif.-based company specializing in jumbo reverse mortgages, purchased Transamerica HomeFirst.

Dr. Barbara Stucki, a Bend, Ore., researcher and consultant, completed a study for the National Council on the Aging that supports tapping into home equity via a reverse mortgage as the critical financing vehicle to help seniors afford long-term care services at home.

“There is simply no other pot of funds sitting around that is going to solve the long-term care situation in this country other than home equity,” Stucki said. “I just don’t see any other way - unless people simply want to dig deep down and pay out of their pockets. The idea is to use your home to stay at home.”

Tom Kelly’s book “Cashing In on a Second Home in Mexico: How to Buy, Rent and Profit from Property South of the Border” was written with Mitch Creekmore, senior vice president of Houston-based Stewart International. The book is available in retail stores, on Amazon.com and on tomkelly.com

The number of homes repossessed during 2006 rose 65 per cent compared to the year before, figures from the Council of Mortgage Lenders (CML) have shown.

A total 17,000 homes were seized over arrears last year, “broadly similar” to 2001 repossession levels of one in every 690 mortgages.

This is expected to rise to 19,000 over the course of this year and to 20,000 by the end of 2008 said the CML, as the most financially stressed homeowners struggled with rate rises.

“The arrears picture at the moment is fairly complex,” commented Michael Coogan, CML director general.

“On the one hand, the wave of problems caused by previous interest rate rises has now worked through, so recently arrears levels have fallen.

“On the other hand, interest rates are rising again, and payment shock may be an issue for some this year as their existing fixed or discounted deals expire.”