August 26th, 2009
The news is filled with talk about loan modification and President Obama’s Making Home Affordable plan, and in a nation where over 3 million people are past due on their mortgage payments, a solution to their woes is something worth talking about. Loan modification is being pitched as a way to help troubled homeowners reverse their progression toward a short sale or foreclosure.
While loan modification may be a perfect recourse for some, it should be noted that not all homeowners will qualify for a loan modification and even then, some who do would be better served pursuing a different option.
In order to qualify for a loan modification your mortgage must have originated before January 1, 2009, you must live in the home, your monthly mortgage payment must be more than 31% of your pretax income, you must prove financial hardship, and the amount you owe on your home cannot exceed $729,750. If you do qualify for loan modification, your loan servicer will reduce the interest rate on your mortgage until your monthly payments drop below the 31% threshold. This new interest rate can go as low as 2% but if that is not enough to get below 31% they may extend the life of the loan or offer to defer a portion of the amount you owe until the loan matures.
continue reading “Loan Modification Might Not Be an Option” »
Posted in Mortgage
May 21st, 2009
The statistics on the number of marriages that end in divorce are varied and open to interpretation, but what is certain is no one who enters a marriage with the person they believe to be their perfect match plans to experience the agony of dissolving the union.
As exhilarating as it is when you think you have found the person you will spend the rest of your life with, the realization that it is not meant to be is just the opposite. And if it wasn’t enough that the lifestyle two people have worked so hard to create is torn apart, a divorce can also wreck havoc on a person’s credit score. After the emotional and monetary sting of a divorce has started to subside, many people find they have also lost their good credit rating along the way.
The credit reporting system leaves much to be desired when it comes to accounting for a divorce and this is what makes a divorce one of the five credit killers according to the book “Credit Revolution: Path of the Smart Consumer.”
continue reading “Sometimes Credit Repair is Required to Clean up your Credit Score after a Divorce” »
Posted in Credit Repair
April 21st, 2009
Most people realize their credit score affects their ability to get approved for credit. A lower than average credit score is a warning sign to lenders that you are more likely than most to be late on your payments or default on a loan altogether. Based on this assumption, lenders will either charge you a higher interest rate to account for your high credit risk, or elect to deny you credit outright.
Many of the people trying to clean up credit are looking for a way to improve their credit score for this reason. They are working to get into a new home, purchase a car, or refinance their existing loans, and they realize that by improving their credit score they will increase their chances of accomplishing these tasks and may end up saving thousands of dollars in interest payments.
The benefits of having a good credit score, however, don’t end once you leave the loan officer’s office. Below are 3 more reasons why it is important to keep your credit reports clean.
continue reading “3 Lesser Known Benefits of Having a Clean Credit Report” »
Posted in Credit
March 13th, 2009
The credit reporting system isn’t perfect. Just ask Ken Clark from Little Rock who was turned down for a vehicle loan and accused of being a con man by the auto dealer because his credit report was marked “deceased”.
Credit reporting errors like these are surprisingly common, and this makes sense in a system where so much information is exchanging hands everyday. Even errors with a “one in a million” chance of happening will happen 3,500 times every month when you factor in the 3.5 billion pieces of account information the credit bureaus receive from lenders per month.
Then factor in systemic flaws in the system and credit errors are much more common. For example, the algorithms used to match loans to credit files use partial matches in some cases. Because of this, someone else’s loan could end up on your credit reports if your name and Social Security numbers are very similar.
continue reading “Fixing Your Credit Becomes Necessary in a Broken Credit System” »
Posted in Credit Repair
February 19th, 2009
Daniel from New York wrote into CNBC’s “Ask The Experts” feature with the following question:
“Are there ANY credit repair companies that are legit? I’ve used a couple and both times they have been scams. I obviously won’t do it again but people should be aware if they are all trying to rip you off!!”
His concern is valid. There are all too many credit repair clinics out there who are much more interested in separating you from your cash than in helping your credit situation. But the response he received is even more concerning.
In her response to Daniel’s question, Carmen Wong Ulrich host of the program “On the Money” states:
continue reading “Sometimes Even the Experts Get Confused About Credit Repair” »
Posted in Credit Repair