Foreclosures may hammer credit scores

There's foreclosure madness in the air.Neighborhoods are falling victim to foreclosure rates not seen
in years.People are not only losing their houses. They are losing the
investment they've made in their neighborhoods, in their
communities and schools and churches and businesses.There has been a tidal wave of foreclosures across the nation
as ARM's -- adjustable rate mortgages -- are readjusting as
lenders hike interest rates, and house payments are stretching
household budgets past the breaking point.The houses are going back to the bank in record numbers.USAToday recently reported that homes entering foreclosure hit
a record number in the final quarter of 2006.2007 doesn't seem to be faring any better.There's no quick fix, and the government, in true
Katrina-disaster-style-response, has been loathe to be
proactive. Foreclosures rise, and cities fall apart. I warned of the dangers of relying on interest-only loans over
the past two years, the the short-term benefits seemed sweet:
buy more house than you could really afford to buy, and pay
only a small amount at the beginning. The fairytale was that
by the time the interest rates reset, the housing market would
have pushed home prices up 15-20%, and the homeowners credit
would have magically improved, and a simple mortgage refi could
rescue the occupants and save the day.But that's far from what's actually happened.Burgeoning personal debt levels have stymied the ability to
borrow more. Now that home equity seems to be evaporating as
the housing bubble melts down, there's little wiggle-room to
dodge economic catastrophe.Need proof? Here's what USAToday reported: One Georgia
Institute of Technology associate professor of city and
regional planning, Dan Immergluck, said: "The foreclosure
trends are definitely acelerating in middle-income suburban
communities."Later, he's quoted as saying that the homes surrounding a
foreclosed-upon home drop an average of 1.5%. Each. So if you
have a neighborhood of $300,000 homes, and the home next door
goes back to the bank via Dr. Foreclosure, those home EACH lose
approximately $4,500.Start doing the math, and you'll start to see the tsunami
swells forming off on the horizon.The cluprit are the exotic loans marketed over the past 6-7
years. ARM's and interest-only loans. The hype is forgotten
when the bill comes due. More and more homeowners will find
themselves upside down and in over their heads as their home
payments strip their ability to pay.In the end, their credit will suffer. As they accept the fact
that they will lose their home to foreclosure, they will cease
being a homeowner and they will once again join the ranks of
renters. It is interesting to see large rental development
projects being built in major urban areas. The banks see the
need for these rentals because they helped create the new boom
in homeowners-turned-renters.And, once the credit reports of those former homeowners have
been trashed and ruined and their credit scores are hammered
down to new lows, it may take years to get through this mess.Yes, indeed, foreclosure madness wafts in the air. It was
avoidable once. But not now.

Some free credit reports not free

Unscrupulous companies advertise “free credit reports” these days that aren’t really free.
Sometimes these firms require that you must purchase credit monitoring or other services they offer in order to obtain your free report. Or you are given a free 30-day trial of such-and-such credit monitoring service, then you get charged for it every month thereafter, unless you call to cancel the service.
In our opinion, that's just not fair. Consumers are entitled under federal laws to one free credit report per year from each of the three credit reporting agencies: Equifax, Experian and TransUnion.
Most importantly to keep in mind, there is only ONE official web site to access these free reports: www.annualcreditreport.com .
Or, you still have the option to call the central request phone number: toll free 877-322-8228.
Consumers are cautioned that a simple misspelling of the web site address or conducting an Internet search for phrases such as “free credit report”, “free credit history” or “free credit rating” could take them to a different web site that charges for credit services available to them for free (like the free information you'll find on this site, or on our sister site, http://www.FindHow2.com) .

Following is the current contact information of the three major credit bureaus:

Equifax Credit Information Services, Inc.
P.O. Box 740241
Atlanta, Georgia 30374
Toll Free: 800-685-1111

Experian National Consumer Assistance Center
P.O. Box 2002
Allen, Texas 75013
General inquiries: 888-397-3742
Additional free credit report: 866-200-6020www.experian.com/freestate www.experian.com/reportaccess (if you have been denied credit within the past 60 days)

TransUnion Consumer Relations
P.O. Box 2000
Chester, Pennsylvania 19022
General inquiries: 800-916-8800
Remember, when you are requesting your credit report, you will be asked to provide your full name, current address, your Social Security number, your date of birth, as well as your most recent address.
When requesting your credit report online, you may need to answer some specific questions that only you know, such as a previous mortgage amount.

Greed at root of risky lending practices

An interesting web article published recently at SeaCoastOnline.com caught my eye today: "Greed is root of mortgage crisis issue." It was written by Joe Adamaitis, president of Direct Mortgage, which offices in Portsmouth, Naugatuck, Conn. and Bradenton, Fla. Read the full article here:
http://www.seacoastonline.com/news/03212007/business-b-subprime.column.html
His premise: sub-prime lenders were greedy and took advantage of people with poor credit scores.
He writes: "If we look carefully at the problems linked to this meltdown, we might begin at the root of all fiascoes -- "greed." Sure the (lending) guidelines were loose, but so are the laws that monitor mortgage marketing and advertising to the consumer. Consumers are fed 'bait and switch' ads on a daily basis."
It is important to hear this coming from a veteran in the mortgage business.
Adamaitis continues: "One other issue that can take blame for the subprime problem is today's credit scoring models. I will say that the credit industry has it's own share of blame because the 'scoring formulas' used to rate a borrower are far from as accurate as one would like to believe."
Well said! We too believe that the people who collect and report credit information need to be held to a higher standard, and the current system needs a tune-up. Those with "bad" credit -- as determined by scoring models -- were almost forced to accept higher risk loan programs to get the home loan they were needing.
According to Adamaitis' article: "The inaccuracy pushed many borrowers away from getting conventional financing and into the subprime market. Trying to correct a credit score is virtually impossible for an individual and, therefore, has created an entirely new business."
And he leaves the reader with one chilling warning: "If you're looking for the next subprime-type fiasco, watch the number of credit repair companies that pop up."
It's bad news, but don't blame the messenger. The lending system, perhaps the whole housing bubble, was obviously driven by greed, so Joe Adamaitis' article hits the nail on the head squarely and his observations need to be considered by those who are involved in the industry, as well as consumers who are affected by the fallout of the sub-prime bankruptcies and home foreclosures.
For those working diligently to fix their own credit report, this type of article underscores the need for constant monitoring of not only one's credit report, but also the influences in the markets which lead people down primrose paths to financial disaster.
You CAN fix your own credit and you CAN reduce debt and you CAN build a financial future others will envy, but you MUST be aware that there are constant dangers, and you MUST take steps to remain cautious about things "too good to be true." Again, we recommend that you read and pass along Joe Adamaitis' article link listed above. It could help educate those you love.

Good Credit = Organization + Good Habits + Time

Lenders are now telling home loan applicants: Pay down your debt and improve your credit score. Refinancing is getting more difficult. Getting a mortgage now is a lot harder than it was just a month ago. That includes borrowers with marginal credit who will have to come up with larger down payments and cash-strapped borrowers who are trying to refinance their adjustable-rate mortgages.
"The source of the trouble is the same part of the mortgage industry that helped drive the biggest housing boom in history over the past five years, a corner of the market called "subprime lending" that offered financing to those who otherwise couldn't get a home loan," according to a very telling story in The Star Tribune.
Read the whole article at The Star Tribune
Our message here for more than a year is for people to protect themselves, to pay down personal and business debt, and work hard to improve their credit report.
Fixing your credit report is simple when you follow our free tips at FindHow2.com. There, we've assembled some of the best reports and articles on how to proceed and get your finances in order.
It will pay big dividends to follow our authors' free advice and shape up your spending and saving habits. In summary, the best plan of action to get a better credit score is this: Good Credit = Organization + Good Habits + Time. Organize your bills and your debt obligations. Practice paying your bills on time, all the time. And by doing this regularly, time will come to your aid and help improve your credit.
Try it. You'll be happily surprised at how well these simple free tips work!

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