Feb 8, 2010

Can Credit Repair Ruin Your Mortgage Hopes?

If you are considering do-it-yourself credit repair in order to qualify for a mortgage, you may be surprised to find out that it can do more harm than good. While you have a right to dispute any inaccuracies on your credit report, and to have them removed if they cannot be verified, Fannie and Freddie have a standard policy that rejects automated underwriting for any applicant with an open dispute. What does this mean? If you are currently disputing any items on your credit report, it means that a mortgage application will not automatically be approved in the system, no matter how high your credit scores.

For individuals with already shaky credit, it may mean that the application is denied outright. This is because many lenders would rather avoid any potential risk associated with disputed listings, and won’t take the effort to perform what is known as manual underwriting in order to get a more accurate picture of your situation. To make matters worse, the dispute does not have to be related to the removal of an item on your credit report – if you have an ongoing dispute over the amount of a bill, or fraudulent charges, you may also be rejected by the automatic underwriting system.

So what can you do to minimize the chances that your application will be denied, while still taking advantage of your legal right to a fair and accurate credit report? If you plan on disputing an item, and you already have decent credit, it may be in your best interests to hold off on the dispute until after your mortgage has been approved.

If you have an ongoing dispute, be up front about it with potential lenders – most will be able to tell you right away if they’ll be able to process your loan application while the dispute is in effect. And lastly, if you do dispute an item and the company agrees to make the adjustment, follow up to be sure that your creditor removes the disputed item notation from your credit report. Even if the account is no longer in dispute status in their system, a dispute notation on the credit report could cause your loan application to be rejected by the banks.

If you are currently using the services of a credit repair company, make certain that they are following up with your accounts to ensure that any successful disputes are taken care of, and that the notations are removed from your credit report in a timely fashion. By being vigilant, you can enjoy both increased scores and increased financial opportunity.

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Jan 10, 2010

Credt Repair – Three Tips to Spot Scammers

Credit repair scams are on the rise – and while the FTC continues to go after fraudulent credit repair companies, being an informed consumer is your best defense against being taken in by a scammer. With credit repair scams becoming more sophisticated, it pays to revisit the three most common red flags when it comes to credit repair scams.

Tip 1: Ask questions to any prospective credit repair company before you sign up for service.

Make certain that you know what you are paying for, and how your credit report will be handled. Be certain that any credit repair company you choose has a privacy policy and security in place to protect your sensitive information. Stay away from any company that refuses to tell you any details about their credit repair services, or that claim they can remove accurate information due to “special relationships” with creditors and credit bureaus. These types of offers are always a scam – there is no credit repair company that can remove accurate information due to special ties with any of the credit bureaus, and creditors do not maintain special relationships with credit repair companies.

Tip 2: Don’t pay large fees up front.

Credit repair companies that charge thousands of dollars up front are almost always a scam. People who pay generally see little if any action on their case, and often these companies disappear as soon as the complaints start to roll in. Charging high fees up front is illegal when it comes to credit repair companies, so if the price seems unusually high, stay away. Additionally, stay away from any credit repair company that does not uphold the legally required grace period when signing up for credit repair services. If you change your mind within the first few days of your contract for their service, you have the right to cancel and not be billed.

Tip 3: Do your research.

Is the company registered to do business in your state? Are they a member of the Better Business Bureau? Do they have any clients that you can contact as a reference? While the answers to these questions may not identify all potential scammers, any company that has problems following state and federal laws should be avoided at all costs. If they don’t follow the laws in regards to providing their service, chances are good that they won’t be working in your best interests. When considering any credit repair company, always check both online and offline sources for any information that may point to a scam – don’t stop at online complaint boards, as an absence of complaints is not a guarantee that the company is trustworthy.

If you follow these three tips when you are looking for a reputable credit repair company, you’ll save yourself time, money, and financial security in the long run. By weeding out the scammers from legitimate credit repair businesses, you can rest assured that your investment in your financial future is a sound one.

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Dec 22, 2009

Loopholes in the New Credit Card Law: Why the New Regulations Could End Up Costing You More

As the new credit card laws are phased in between now and February of 2010, credit card companies across the board are making changes that could end up costing you more for the credit you already have. These changes can also have a detrimental effect on your credit scores, making it more difficult for you to obtain new credit, even if you have a solid payment history.

Under the new credit card regulations, companies are forbidden to change interest rates on pre-existing balances for fixed-rate credit cards. However, many credit card companies are switching to variable rate cards for most of their customers. This means that as the prime interest rate rises, so will the amount of interest you pay on your credit cards. This ultimately leads to higher balances which are harder to pay off, and in turn can damage your credit score by causing you to utilize more of your available credit limit than you normally would.

If your credit card company switches you from a fixed-rate credit card to one with a variable interest rate, you can reject the change. However, in most cases this means that your credit card will be canceled at the end of the current agreement cycle. When this happens, if you’re still carrying a balance on the credit card your credit scores will drop due to the fact that your credit report will show a balance higher than your available limit on that card.

When dealing with a credit card that has been switched to a variable interest rate, it’s generally in your best interest to continue making payments until you have paid the balance of that credit card entirely. Then, if you decide to cancel the card you can do so without having as much of a negative effect on your credit report. Currently, because interest rates are generally low, you may even be able to save money versus your fixed interest rate, assuming you can pay the card off in only a few months.

Another option which may help you to keep your credit scores healthy is to pay off the variable rate card, and then use it for purchases that you can pay in full each month. This will help to prevent any reduction in your credit limits, as well as avoid ‘inactivity’ penalties that some banks have begun to assess. If you have credit cards that you haven’t used in several months, now is the time to do so. Make a small charge to keep the account active, and pay it off as soon as possible. Otherwise, you run the risk of owing fees due to inactivity, which can pile up and cause late payments and higher interest rates overall.

Regardless of whether you decide to keep the account or close it, the important thing to remember is to keep the account open until the entire balance is paid off. In this way, you’ll avoid a major hit to your credit scores, which will save you money on any new credit that you apply for.

Posted in credit card companies, credit card laws, credit cards, credit score, credit scores, interest rates | No Comments »



Dec 14, 2009

Credit Repair and Identity Theft – How to Protect Yourself

When most people think of credit repair scams, what comes to mind are the fraudulent companies that take people’s money and provide little or no service in exchange. While it’s true that there are numerous credit repair scammers out there who thrive on this practice, consumers should also be aware of the threat of identity theft when it comes to fraudulent credit repair companies.  These companies not only take your money, but they take over your identity as well – months or even years down the line, when you’ve finally gotten your credit back on track, they can resurface to wreck havoc on your finances and destroy what you’ve worked to carefully rebuild.

Protecting Your Identity

Because credit repair companies must handle sensitive information in order to help you improve your credit scores, it pays to find out exactly how they secure your information, and what type of policies they have in place to protect your identity. Stay away from credit repair companies that don’t have a clearly visible privacy policy, and/or don’t have any method of contact other than email. Ideally, you want to be able to contact the company via telephone and an actual physical address – not just a P.O. Box. By establishing a physical presence that is easily located, a reputable credit repair company is one that will be around for the long-term.

Online Precautions

You should be able to get answers about the methods used to secure your data, about encryption on the company’s website (if they have one) and who has access to your data, and when. You should also be able to revoke access to this data at any time, if you choose to end your business relationship with the company. Check the security certificates of the website – they should be current, and they should match the name of the website and the credit repair company. Be wary of any company that has an invalid or expired security certificate – without a valid certificate, your information is not safe.

Company Policies

Different credit repair companies will have different policies when it comes to how your information is handled. You should find out who will have access to that information before you sign up for service. While the credit repair company may take appropriate security steps, third-party vendors with access to your information may not, and this can cause troubles with identity theft down the line, if unauthorized people are able to view your information.

The Final Choice

When deciding on which credit repair company to use, always factor in the security of your personal information. Credit repair can benefit you in many ways, including improved credit scores, lower interest rates and better rates on insurance to name a few. Always make sure that your final choice for credit repair is one that protects these benefits by protecting your identity as well.

Posted in credit repair companies, credit repair company, credit repair scams, identity theft, interest rates | No Comments »



Dec 6, 2009

Is Your Mortgage Readjustment Hurting Your Credit Scores?

The current downturn in the housing market has left many individuals ‘upside down’ on their homes – owing more than the home is worth. A common strategy in these situations is to have the mortgage adjusted, generally with more favorable payment terms for the borrower. These loan modifications, some of them sponsored by the federal government, can be beneficial for individuals who need to gain control of their debt and reduce mortgage payments at the same time.

However, some borrowers are discovering that these mortgage readjustments and loan modifications are having a detrimental effect to their credit scores. This is because loan modifications are reported as partial payments, and may even be reported as late payments by lenders. Under the Credit Data Industry Association rules, loan modifications are typically reported as a partial payment, which can lower your credit score 50 to 100 points, or more, depending upon your particular situation.

Unfortunately, lenders are not required to tell you that they will report your loan modifications as a partial payment or a late payment. You may not find out about the damage to your credit scores until you attempt to apply for new credit or see lower limits on the credit that you are to have. Even if you make all agreed-upon payments under the new loan modification consistently on time, you may find that your credit report shows you as delinquent with regards to your mortgage payments. The only way to correct this is to contact the lender directly — the credit bureaus have no control over how your loan modifications are reported to them.

So what can you do to protect your good credit score if you need to have your mortgage modified? Your best option is to speak directly with the lender and find out how your loan modifications will be reported. By working directly with your lender upfront, you may be able to avoid the damage to your credit scores. If you are already taking advantage of a loan modification, it’s in your best interests to check your credit report and be sure that your timely payments are being ported accurately by your lender. If your bank has a policy of reporting loan modifications in a manner that is detrimental to your credit scores, you may wish to try to negotiate more equitable terms for your particular situation. Some banks are willing to work on a case-by-case basis with borrowers, so you may be able to get your credit report adjusted if you speak directly with the lender.

A final option is to place a notation on your credit report, detailing your situation. While this may not make a big difference in your actual credit scores, lenders who pull your credit report will have a more accurate picture of your current financial situation, as well as an understanding of your commitment to pay your creditors on time. By being aware of the potential damage to your credit scores before you enter a loan modification agreement, you can take steps to minimize the negative effects.

Posted in credit scores, loan modifications, mortgage readjustment | No Comments »



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