Bad credit woes rocking mortgage markets

Well, it's not like we didn't see it coming...
As noted on Associated Press reports, published on Yahoo.com March 13, 2007:
Headline: "Late mortgage payments reach high"
Summary:
++Late mortgage payments hitting record levels.
++Consumers feeling pinch, can't keep up with rising adjustable loan payments.
++Delinquency and foreclosure rates were considerably higher for higher-risk subprime borrowers, especially those with adjustable-rate mortgages.
++Nearly 5% of the 43.5 million loans that the Mortgage Bankers Association tracks could be headed for default.
++Wall Street investors' worried about troubles facing "subprime" lenders who make loans to people with poor credit rattle markets, send Dow Industrials plummeting.
++Fearing out-of-control defaults on high-risk mortgages, federal bank regulators were reported earlier this month to be twisting lenders' arms to use caution in making subprime loans and strictly evaluate borrowers' ability to repay them.
++Experts wring hands: "Unfortunately, it appears delinquency rates will likely worsen before they improve," said Gina Martin, economist at Wachovia Corp. Economics Group.
We've been predicting a shakeout in the housing market and the booming mortgage industry for some time now, and the high-risk loans made over the past several years are now proving to be unsustainable.
For readers of this column, they knew that adjustable and interest-only loans were not in their best interests over the long term.
Yes, for short-term financing, those loans did seem quite attractive. For a time. When rates were low and prices were going up.
Problem is, lenders put the wrong people into these loan programs, namely, people who had lousy credit. The folly of banking on people with poor credit to drive the economy always seemed slightly insane to us.
So what's next? It's going to be painful to watch this meltdown. People will get hurt. They will lose homes and banks will lose money.
But we doubt the scoundrels who foisted these loans onto the financial landscape will lose much or suffer. Most will probably manage to dodge penalties or justifiably appropriate prison time.
They will simply move on to their next scam... remember the S&L crisis in the first President Bush presidency? History may be repeating itself here. Stay tuned...

Re-aging credit offers fresh start

Keeping tabs on your credit takes time, but it's worth it in the long run. Sometimes, you're likely to get in a bind when it comes to paying your bills on time. Making late payments is the fastest way to lower your credit score. But it's not always the end of the world.

One thing to keep in mind is that sometimes you can get a creditor to "re-age" your account.

There are limitations to this. Creditors can basically forgive past-due accounts, erasing any record of missed or late payments, by agreeing to re-age the past due account. The account that once was overdue is then current, and you can start fresh.

Yes, you still owe the same amount on your credit card. But your payment history is cleaned up.

As an example, if you are three months late making your minimum credit card payments and your credit card company agrees to re-age your credit card account, then you're in luck. Your record is cleared. All three of those payments are forgiven. The company will stop charging late fees, and, best of all, your credit report no longer shows you as being delinquent on this bill.

Your fresh start is not automatic, and don't expect all creditors to fall all over themselves to offer you this option. Many will only want their money, and you'd best pay them to keep your credit report from getting any more derogatory marks.

Guidelines were established in 2000 to standardize the practice of re-aging consumer credit card accounts.

For your account to be considered for re-aging, you must be able to demonstrate a renewed willingness and an apparent ability to pay your bills.

In most cases, your credit card account must have been open for at least nine months.
Three consecutive minimum monthly payments or the equivalent sum must have been made previously. And, as with all good things, there are limits on the number of times your credit card account can be re-aged.

Currently, your credit card company can only re-age your account once in a 12-month period, and they can only re-age your account two times in any 5-year period. So, it's imperative, that if you find yourself in credit card crisis, you've got a limited number of times to take advantage of this "free spin" to help you improve your credit.

12 Credit Mistakes To Avoid

Guest Editorial:

Common Credit Mistakes Hurt Home Buyers


By Jeanette Joy Fisher

You can buy a home to live in with poor credit. However, you will save thousands in loan costs if you maintain good credit.

A bad credit report leaves home buyers with nonprime loans which cost more money because of:

• high point charges
• high loan processing fees
• prepayment penalties
• high interest rates

If you desire to buy your dream home or investment properties to build your future wealth, you must maintain good credit.

Avoid these 12 common credit mistakes to build strong credit and save money in mortgage loan costs.

1. Mortgage lenders often scrutinize the type of credit used. Consumer credit, the kind associated with department store credit cards and finance companies, has high interest charges and deducts points from your credit score.

2. "Too much consumer credit," a common remark in credit reports, is caused by too many lines of credit or too many credit cards.

3. High balances caused by only paying the minimum due or maxing out credit cards or lines of credit generate deep drops in scores.

4. Cash advances costs higher interest and extra fees. These extra charges accumulate and keep balances too high.

5. Charging over your limit and paying penalty fees causes negative "high proportional amounts owed" remarks on credit reports and deducts points from credit scores.

6. Late payments, sometimes even only by one day, cause unnecessary late fees. Late payments often increase account interest rates.

7. Some consumers charge more than they can afford. This causes a snowball effect of amassing debt with no easy way to pay it off.

8. Co-signing a loan raises debt-to-income ratio and possibly adds "too many consumer accounts" on your credit report, which lowers your score considerably.

9. Don't ignore credit problems. Talk to creditors before making late payments and make correction arrangements. This action heads off negative reporting to credit reporting agencies.

10. Report address changes to creditors to avoid misplaced bills and late payments.

11. Use your full legal name to protect yourself from confusion. Avoid partial names, different names, and initials. If appropriate, use Sr. or Jr. Report name changes to creditors to avoid confusion.

12. Check your credit report often for mistakes and protection from identity theft.

Avoid credit mistakes to build strong credit and keep your credit scores up. Understand the difference between good credit and the credit needed to obtain real estate financing. Finance your dream home or dream investment portfolio!

Copyright © 2006 Jeanette J. Fisher

Jeanette Fisher offers Free ebook: "Credit Tips for Mortgage Financing" at Real Estate Credit Help

http://www.recredithelp.com

Article Source: Joy Fisher

How Impulse Spending Affects Credit

Avoid Impulse Spending! -- This is important because if you want to fix your credit report, you've got to get a handle on your bills, and a tendency to overspend can undermine even the best budget.You know that you need to work on limiting your own impulse spending habits if:

1.) Your spouse complains that you spend too much money every month.
2.) You're surprised each month when your credit card bill arrives at how much more you charged than you thought you had.
3.) You have accumulated more shoes and outfits in your closet than you could ever possibly wear.
4.) You buy things you didn’t know you wanted until you saw them on display in a store.

Sadly, impulse spending will prevent you from saving for the important things like a house, a new car, a vacation or investing your money for retirement. To achieve your financial goals, you simply MUST resist spending money on things that really don’t matter in the long run.

Impulse spending will not only put a strain on your finances but on your relationships, as well. To overcome the problem, the first thing to do is learn to separate your needs from your wants. The best technique is to have a "cooling off" period in which to allow emotions to settle down and let logic take over.

Advertisers blitz us hawking their products at us 24/7. The trick is to give yourself a cooling-off period before you buy anything that you have not planned for. So try this: the next time you go shopping, pr-plan ahead. Make a list and take only enough cash to pay for what you have planned to buy. Leave your credit cards at home. When you pay in cash, you usually will be more hesitant to hand over greenbacks vs. paying with plastic.

On the other hand, if you spot a new item that you think you really do need, give yourself a few days to decide if it is really something you need or something you can easily do without. By following this simple solution, in time you will mend your financial fences and your relationships.

Avoiding impulse spending is a new habit that will take the place of your bad habit of overspending, or worse, of spending money you do not have! This can affect your credit, because you're more prone to be late on bills when you aren't careful with your money, and late payments will drastically lower your credit score.

Refinancing With Low FICO Credit Score

Guest Editorial:

"Bad Credit Refinance Loans - Refinancing With A Low FICO Credit Score"

By Sharon Listner

Your financial situation may have changed for the worse since you first purchased your home. You may have had a great credit score, above 700, back then ... but now you find yourself with a low FICO score below 640 (be it 450, 500, 550, 600 or 620).

Now you need to refinance your existing mortgage loan to take cash out of your home for a home improvement project, credit card debt consolidation or other purposes.

The big question is this: "Can you get a mortgage refinance loan with a low credit score?

The answer is "yes".

Contrary to popular belief, life doesn't end, when your credit score dips below the magic 670 number.

Yes - it is a true that a person with a FICO credit score above 670 will find it easier to get a mortgage refinance loan than a person with a low credit score - but this is doesn't mean that you cannot find a loan.

How to find a poor credit refinance loan


1. The key to finding a lender, who specializes in low credit score refinance loans is to do your research. The power of the internet cannot be underestimated, when it comes to shopping for a poor credit refinance lender.

2. Once you find a lender, ensure that you complete their application form, thoroughly. Remember that you are competing with other applicants, who have excellent credit scores. Leave nothing to chance.

3. Be truthful on your loan application. Don't indicate a "fair" credit rating (620 and above), when you have a "poor" credit rating (any credit score below 600). A lender who specializes in low credit score loans is used to working with consumers with all credit scores and will not turn you down immediately, upon seeing a credit score like 500. Other details on your application form, will factor into the lender's final approval decision.

Research recommended bad credit refinance loan lenders and the various products, they offer at the loan resource guide: http://www.kstreetloans.com.

Sharon Listner writes about finance and conducts in-depth analysis on various consumer mortgage loan products.

Article Source: Sharon Listner

Beware Hidden Costs of Bad Credit

GUEST EDITORIAL:

"The Hidden Costs of Bad Credit"

By Brian Edmondson

Many people don't know or care about their credit. In a lot of cases they may either jokingly say, "I probably have bad credit" or unknowingly assume that their credit is good.

Most people just assume it's either good for fair… but certainly not poor. The realization that their credit is actually considered bad usually isn't made known until it's too late.

Usually the consequences of bad credit are pretty obvious.

Want a store credit card to buy that big screen TV? Denied.
Want to get that new car at the special financing rate? Not a chance.
Looking to lease a new apartment or purchase a new home? Not without a big deposit.

While these are the obvious consequences of not having good credit, there are also many hidden costs of bad credit which you may not be aware of.

Here are 3 of the not-so-obvious costs of bad credit:

1. Higher Interest Rates

This applies to just about everything, whether you are getting a new credit card, purchasing a new car, or buying a new home.

The lower your credit score, the higher your interest rate is going to be. While the rate difference may appear small (the difference between a 7% rate and 9% rate is only 2% right?), the amount you will pay over the term of the entire loan (5 years for a car; 30 years for a mortgage) adds up to several thousands of dollars more.

Be especially careful of credit card offers. They will offer you the card at a very low rate (2.9%, 8%, or 11%) but have very small print that allows them to skyrocket the rate anywhere from 18% to over 20% if you are late on just one payment or go over your limit.

2. Higher Car Insurance Rates

Yes it's true.

Car insurance companies will base your premium on your credit score.

Even if you've never been in an accident, never got a speeding ticket, and always wear your seatbelt you won't get the best rates.

A bad credit score may result in higher insurance premiums and may even result in a denial of coverage!

3. Higher Financial Stress

When most people talk about the negative effects of bad credit, they usually talk about the numbers: credit scores, interest rates, monthly payments, etc.

However, one of the biggest consequences of bad credit is the financial stress it causes in life.

The more money you spend as a penalty of having bad credit means less money in your bank account at the end of the day. Less money lead to more stress, which can have negative effects on you, your job, and your relationships.

Half of all marriages end in divorce, and usually financial problems are cited as a leading cause of a failed marriage. Bad credit certainly doesn't help the situation.

The number one financial mistake people make is not knowing what their credit score is and understanding the consequences of good and bad credit. While there are many obvious disadvantages of having bad credit, there are also many hidden disadvantages of having poor credit.

Knowing, understanding, and managing your credit is an important part of your financial plan, as it effect just about every aspect of your life.

Brian T. Edmondson is a recognized authority on the subject of credit repair and bankruptcy recovery. His web site, http://www.SuccessAfterBankruptcy.com, provides a wealth of informative articles and resources on everything you'll ever need to know about reparing your credit and/or recovering from Bankruptcy.

Article Source: Brian_Edmondson

New E-Book Offers Quick Credit Help

You can take the first step right now and click below to start improving your credit score with our newest e-book available for immediate download!

"How To Fix Your Credit Report For Free!"

It's never too late to get started cleaning up your credit history and giving yourself a fresh start. Only $1.95.... Download your personal copy today!