Credit Repair After Bankruptcy Or Foreclosure: The Secrets They Don’t Want You To Know

If you are among the millions of Americans who are drowning in credit card debt or facing foreclosure, there is one thing you need to know…..there is light at the end of the tunnel. You can rebuild you credit and get back on your feet!

Newspapers, radio, TV and the internet are filled with ads that promise to erase all negative information in your credit report in exchange, of course, for a fee. Companies, marketers, attorney affiliated individuals, attorneys, real estate agents, books, etc., boast about their savvy or legal credit repair services.

However, the truth is Read more

June 1st, 2010 · Filed Under Credit Information, Credit Repair scams

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Repair Your Credit By Legally Removing All Negative Accounts: It’s All Legal, I promise! (Just Don’t Report It To The Authorities)

I am sure that by now almost everyone has seen advertisements on the radio, television or the internet from companies or companies affiliated with law firms claiming to be “credit repair experts.” They boldly claim to be successful at removing from credit reports any derogatory accounts including short sales, foreclosures, and bankruptcies.

Most of the claims in these advertisements say, “We can clean your credit report and save you thousands,” “We remove foreclosures and bankruptcies from your credit report and best of all; it is all legal.”

Well, believe me when I tell you that Read more

November 7th, 2008 · Filed Under Credit Information, Credit Repair scams, Predatory - Subprime Advertisement

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US Financial Crisis: Whose Fault Is It Anyways?

Yesterday Henry Paulson, US Treasury Secretary, announced a plan to spend $250 billion to purchase stocks in at least nine major financial institutions. This money infusion would give taxpayers ownership stake on these banks and guarantee a 5% return. It would also help banks build more reserves and in turn ease lending to consumers and businesses alike, at least that is what we hope banks will do.

The Emergency Economic Stabilization Act of 2008 H.R. 1424 is known in Main Street as the “Wall Street bail out” plan. However, in Wall Street it is known as the “rescue” plan. Regardless of the name; many people Read more

October 15th, 2008 · Filed Under Credit Information, Mortgage - Loan Information, Real Estate Information

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Federal Reserve Rate cuts: How Will It Impact You and Your Money?

Yesterday, December 14, 2004….uuuhhh…wait…I meant yesterday March 18, 2008 the Federal Reserve lowered the Fed funds rate down 75 basis points to 2.25 percent. The reason why I mentioned December was because the last time the fed funds rate was this low was back in 2004 as you can see in the Federal Reserve Board: Monetary Policy, Open Market Operations chart.

I know you probably have read all the gloomy news in the newspapers, TV stations or perhaps you may have received calls from many mortgage brokers telling you that these great news will benefit you if you refinance now, but who is right and who is wrong?

Making the News

The truth of the matter is, Read more

March 19th, 2008 · Filed Under Credit Information, Mortgage - Loan Information

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Beware of Credit Repair Companies

“I have a few credit cards but 2 of them with a balance of $210. I went into bankruptcy years before but ever since then, I’ve been charging my credit card and paying it off in a few months as I heard this would help my credit. I decided to go to Mexico for vacation and I came back 1 month later. While reviewing my bills, I realized I had missed a payment for my credit card and since I needed to refinance my home I realized that I may be in trouble. A family friend and real estate agent, advised me to go to his friend’s office. His friend had a credit repair business. I paid him $500 trusting his promise of bringing my credit up about 100 points so I could refinance. Weeks went by without any results.”

This is one of many similar stories that I have encountered one too many times with clients that come in my office because they had been misguided by their previous real estate agent or loan officer. Agents and loan officers who trust worthless “credit repair” companies. Read more

July 18th, 2007 · Filed Under Credit Information, Credit Repair scams

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You Have Credit Card Complaints? Where Should You Go?

If you have a problem with your credit card, try following these steps, if one doesn’t work try the next step down:

  • Try to resolve the problem directly with the store or credit card company
  • File a complaint with the local Better Business Bureau (you can also do it online) where the company’s headquarters is located, not where you live.
  • File a complaint with your state’s attorney general or banking agency.
  • File a complaint with the federal agency that enforces consumer credit laws for your credit card company as follows:

March 9th, 2006 · Filed Under Credit Information

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Credit Cards: The Devil is in The Detail, The Small Print (Part 2 of 2)

Now that you have read on the previous post about the history of how credit card companies became so profitable I will resume the rest of the show title “Secret History of the credit card”. The following will explain some of the “secrets” or information many consumers are unaware and credit cards companies want it to stay that way.

Many consumers said “I cant say I love my credit card but I would hate to live without it” “I take advantage of the miles and it’s nice to be able to spend what you don’t have” “Americans love to consume, its in our blood.” These are similar views to millions of Americans and that is one of the reasons why the credit card industry is one of the most profitable around the globe.

Actor Ben Stein (from the Visine commercial) carries a “big” wallet with LOTS of credit cards. He uses them to pay for everything. It would appear that Stein is the ideal customer, wouldn’t you think? Stein, like other 55 million other Americans, pays off the balance every month; therefore he incurs no fees on interests or any fees. The credit card industry calls him and others like him “deadbeats” because they CANT make money off of them.

On the other hand, 90 million Americans that do not pay off their credit card debt every month, also called “revolvers” by the industry, are at the center of the credit card industry’s profit pool. Edward Y, incoming president of the American Bankers Association, said revolvers are “the sweet spot” of the banking industry.

The industry’s success has also been shaped by the ideas of financial innovators like Andrew K. He introduced the idea of changing the minimum payment requirement from 5% to 2%. This would entice more people to apply for higher credit lines and spend more.

In the late 90’s Andrew K. came up with more “innovative.” Ideas like offering “0%” introductory rate, millions were and still are attracted to this marketing operation. Andrew says, “People will believe what they want to believe.” What many consumers don’t know is that as soon as they make one mistake, like miss a payment or incur high balances all bets are off and they can be charged a much higher interest rate and it is all very legal.

Credit card contracts are very, very long, difficult to understand and contain difficult to understand technical words. The contracts enforce terms that are viewed by many as “tricks.” One of them is the “universal default.” It explains in the fine print that if you miss a mortgage payment, car payment, credit card payment, ANY payment to a creditor they can change the terms and conditions (interest rates) at any time for any reason with 15 day’s notice. You don’t even have to miss a payment; if you incur a high balance debt, and are now viewed as an “overextended” cardholder, they can do the same because you are NOW a “riskier customer.”

Elizabeth W., a Harvard Law Professor, said the credit card companies are misleading consumers, “These guys have figured out the best way to compete is to put a smiley face in your commercials, a low introductory rate, and hire a team of MBAs to lay traps in the fine print.”

When you miss a payment on a mortgage loan, the mortgage lender cannot double your interest rate but if you miss any type of payment with any creditor, the credit card company can double it and there is no one thing you can do about it. Do you think this is dishonest??

In 1996, another Supreme Court decision lifted the restrictions on the limit a credit card company could charge on fees. This decision is called the “Smiely vs Citibank decision”. Since this decision, the industry has doubled their profits on fees.

The Office of the Controller of the Currency (OCC), part of the treasury department, regulates national banks like Chase, Citibank, MBNA. They are supposed to ensure banks don’t fail, ensure integrity of the banks’ operations; ensure banks deal fairly and honestly with customers. They also have the ability to enforce action.

Pat W. from the Bay Area Better Business Bureau, state regulators from California and other states believe the OCC has done little to regulate fraudulent operations from banks. The OCC has sometimes challenged state regulators because they claim to have jurisdiction over the banks and state regulators do not. In January 2004, the OCC declared itself the “exclusive” regulator of all national bank effectively immunizing the credit card issuers from most consumer protection laws.

The OCC alerted national banks on unacceptable credit card marketing and account management practices like offering “0%” introductory rate and universal default. They have acknowledged these practices are very troubling but they have NOT stopped them. They believe that they don’t have the basis to conclude the banks are involved in unfair or deceptive practices.

Pat W. comments that whatever the OCC is doing, the credit card industry is still number one out of one thousand industries they keep track off in receiving complaints. Pat W. says the credit card industry has more complaints than any other industry nationally.

Perhaps there would be fewer complaints if the industry disclosed that the cost of minimum payments was that they would still be paying yesterday’s trip in 35 years. This would encourage people to pay more than the minimum. Edward Y, incoming president of the American Bankers Association, disagrees. He says it would be a hyper technical expensive disclosure that nobody would understand and that would be wrong 99% of the time. Andrew K, Credit card industry consultant, says that more disclosures would be useless because consumers don’t want to know this information.

Wouldn’t you like a small sentence in your monthly bill telling you “If you make the minimum payment of $xx, it would take you xx years an xx months to pay this off,”?? I think everybody would.

Senator Christopher D, from Connecticut, has tried introducing bills that would regulate the industry on disclosures. Some other bills introduced before were minimum payment disclosure, interest cap rates, remove marketing to college students. Senator Christopher D. is not very optimistic on the passing of the minimum payment bill because like other bills mentioned, will be blocked by the industry. Edward Y., from the American Bankers Association, says that they will continue blocking these bills because their belief is these bills are bad for the consumer……????

http://video.google.com/videoplay?docid=-9048007397539880204

March 9th, 2006 · Filed Under Credit Information

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The Secret History of Credit Cards (Part 1 of 2)

I remember watching a very informative show on PBS titled “Secret History of the Credit Card” last year. PBS replayed this show again recently and I used my so beloved TiVo to recorded. This report explained the history as follows:

The big “Monster,” credit card industry, got free from many restrictions staring a quarter of a century ago in Sioux Falls, South Dakota. Times were hard in South Dakota, there was a nation wide recession, and banks residing in this state were issuing very few loans of any kind. The price of money (interest rates) banks had to pay to get money and make loans were much higher than the rates they were allowed to offer their clients, a clear way to lose money and go broke. There were Usury Laws restricting the interest rates banks could charge their customers so South Dakota decided to remove their Usuary Laws (1979) to stimulate the economy in this state.

Citibank based in New York looked into South Dakota’s new Usury Laws and saw profits. They brought credit card operations to South Dakota and thousands of jobs; which helped the state tremendously but at the same time gave birth to the “monster” credit card companies are now.

An obscure Supreme Court decision called the “Marquette bank decision” basically allowed banks based in any state to export their business to any other state. A bank based in a poor or no Usury Law state like South Dakota could charge any interest rate to anyone across the country with very high cap limits. Soon other states followed like Delaware and were allowed to charge higher interest rates to riskier customers. This also allowed for these riskier customers to switch from small banks that were charging them 30% interest rates for their liability to credit card companies offering them 19% and an annual fee. Deregulation of interest rates enabled more people to get credit and made the credit card industry very profitable.

**On the next post which continues with this story you will see the PBS video report**

March 6th, 2006 · Filed Under Credit Information

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Here You Have The Top Ten Questions About Credit Reports

Most lenders take a lot into consideration in evaluating whether to grant credit and also in pricing their loans. Credit scores are one of their major considerations to offer a higher or lower interest rate for the consumer. A one-point difference on a credit score can easily make a 0.25% difference in interest rates. On a $750,000 loan the difference would be $121.25 more per month.

Here are the top ten questions many consumers have about credit reports and the top ten answers to them:

Q10: What is the highest score I could possibly get? The three credit bureaus (Experian, Equifax & TransUnion) have different ranges but on average, it’s between 300 and 850

Q9: Can anyone really give me the exact amount my score is affected for certain things such as 30 day late payments, opening new account, closing an account, collection filed? The answer here is “no”. But the information given by MyFico (a division of Fair Isaac Corp) says, 35% is based on payment history, 30% balance owed on accounts, 15% length of credit history, 10% new credit (how many new vs total accounts), 10% types of credit used (mortgage, credit cards, car loans, etc)

Q8: Can I increase my score if I close my paid off account? On the contrary, it will reduce it. It’s better to pay off the account and maintain them open. Keep in mind that accounts are usually closed automatically by the credit grantor if not used in over 3 years. My suggestion it to used it once a year for a small purchase and pay it off. The longer you have open accounts the better.

Q7: I’ve heard about hard inquiry and a soft inquiry, what are they? Which one will affect my credit? Only hard inquiries affect your credit. Hard inquiries are posted and are visible to potential creditors. If there are many inquiries, it may look as if you are constantly applying for credit and now you might have a high debt. Creditors checking your credit worthiness make soft inquiries. If you meet their criteria they will send you applications for credit.

Q6: Where can I order my credit report? You can visit TransUnion, Experian and Equifax’s websites pay and order all three or one from each one. If you order your own credit report, this wont affect your score, but if you do it through a mortgage company, this action could bring your score a couple of points down. This is not to be alarmed, as I explained it before it is simply a hard inquiry. If you decide to obtain simply the credit history with no score you could use the ONLY website www.annualcreditreport.com allowed to provide it for FREE.

Q5: Should I use those credit consolidation companies? Well…, I don’t approve of them. There are some good and some bad companies. This is my opinion. I don’t think you should pay for something simple that you can do on your own with a little of information on your side and discipline to make the payments. If you consolidate all debts from your accounts into only one account for ease of payment, it will affect your credit negatively. One or many maxed out accounts affect your score negatively. Part of your credit score is weighted on how much debt and how much credit available you have. If you have one credit card maxed out and 3 others with no balance on them, transfer some of the balance to the other credit cards (only if it is financially beneficial). By maintaining your balance on each account below 30% of the total credit limit, you are helping your score go up.

Q4: How long do derogatory items stay on my report? Read my previous article; which gives you information about this. Normally positive and negative items stay on your credit report for “seven years”

Q3: I have my credit report and I have three different scores. Which score will the lender use? For a single applicant it will normally be the middle score. For a couple applicants it will normally be the lowest middle score between both borrowers.

Q2: Can I have my questions answered by the credit bureaus? Yes, but you will need to have handy your credit report and you will need time, lots of time. You will be on the line for a long time, just think how many people in the US are calling to ask questions.

Q1: How much is my credit score affected by a 30-day late mortgage payment? This is the most important question and the one that will impact your score the most. Your score will take a hit somewhere in the 100 point range. A drop from 700 to 600 could disqualify you for a loan program you might need. Many lenders are very reluctant to loan at all to borrowers with recent late mortgage payments. The lenders that do make the loan charge a high interest rate.

So, if you want to take one thing our of this hole thing is NEVER be late on your mortgage payments

December 22nd, 2005 · Filed Under Credit Information

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How Long Will Collection or Negative Derogatory Information Stay on Your Credit Report?

Credit information can and usually stays on a person’s credit report for 7 years. You can use the information below as a reference to guide yourself and figure out how long derogatory information stays on your credit report

General credit information: 7yrs
Collections: 7yrs from date of last activity
Bankruptcy: 10 yrs
Foreclosure: 10-12 yrs from the date filed
Garnishment: 12 yrs from the date or entry or 7 yrs from the date satisfied
Judgment: 12 yrs from the date or entry or 7 yrs from the date satisfied
Tax lien: 12 yrs from the date or entry or 7 yrs from the date satisfied
Dismissed garnishments, judgments, and tax liens: not reportable

Now that you have this information I’ll give you an example similar to a client. The agent he had worked with before gave him the wrong advice.

Lets assume that you had a collection for $1,000 filed against you in December 1998 and you haven’t paid it. It’s now November 2005, so in a few weeks that collection can come off your credit report. (You will probably have to request all three credit bureaus to take it off your credit report). However, you just applied for a loan today and the loan officer tells you that you need to payoff that debt in order to be approved. Since you have the money to pay it off, you do so. Because the date of last activity is now November 2005, the collection will show on your report until November 2012 – another additional 7 years.

Now let assume that this collection was in June 2005 and you pay it off in November 2005 to obtain the loan, this will reduce your credit score. On the other hand if this collection was in September 2005 and you pay it off in November 2005 to obtain the loan, this will actually increase your score. My point is that a collection account that is less than 6 months old and is paid off will be beneficial but if your collection account is more than 6 months old and is paid off this will be detrimental to your credit score.

You as a consumer can request copies of your credit report from the 3 credit bureaus (although it’s better to get a collective report from all three in one which I can help you with) and dispute information that is incorrect. Incorrect information can be corrected or removed but correct information (good or bad) usually stays on the report for the period allowed. Only the credit grantor (lender/bank) or credit bureau can remove correct information.

If you find incorrect information on your report, contact the credit grantor obtain an explanation, have them corrected and ask them to contact all three credit bureaus and correct that information on your report as well. After this you should also contact all three credit bureaus with another letter including documented proof of the error on your report and ask them to remove this information. The credit bureaus by law have to respond to your letter and request. Depending on your case they might approve or deny your request but they have to respond to your letter. Following are the addresses for all three credit bureaus.

Trans Union
PO Box 4000
Chester, PA 19022
866-887-2673
http://www.transunion.com/

Experian
PO Box 2002
Allen, TX 75013
888-397-3742
http://www.experian.com/

Equifax Credit
PO Box 740241
Atlanta, GA 30374
800-685-1111
http://www.equifax.com/

December 15th, 2005 · Filed Under Credit Information

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Credit cards: Different Balance Amounts and Different Interest Rates on The Same Account

We all know that we have to be cautious when we use our credit cards. Here is some more information so you can be more informed and be able to balance your finances.
Banks charge different interest rates (depending on the transaction type) on separate amounts of your total balance in a credit card.

Lets say that you bought something for $500 with your credit card with a special rate of 3%. Later you decided that you could lower your payments on another credit card so you transferred $5000 from another high interest rate credit card to this card with a special interest rate at 4%. Later you decide to buy something else for $1000 but at your normal interest rate on your card of 8%.

With the example above, when you make your monthly payments, the balance with the lowest interest ($500 at 3%) will be paid off first. Until you pay off the balance with the lowest interest ($500 at 3%), all other balances ($5000 & $1000) in this same card will still accumulate interest each month. Once the lowest interest rate amount is paid off you continue to pay off the next one ($5000 at 4%), meanwhile the balance of $1000 at 8% is still accumulating interest.

You can see with this example that paying off a balance of $5000 might take some time to pay off meanwhile you keep accumulating more interest on the other balance with higher interest rates.

Most of us know that if we don’t make our payments on time, the bank can raise the interest rate, well most don’t know that if you are late with payments on one account, other banks that you have credit with can also raise their interest rates even though the late payment was not made to them.

I hope this can be of some help to someone.

November 13th, 2005 · Filed Under Credit Information

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