IMPORTANT: Credit Card Rates are Rocketing!
I got one of those letters you tend to ignore the other day...a boring all legalese style thing from my credit card company. Two of them in fact. I was busy so it wound up in the inbox among the bills. A little voice told me that might be important so I finally opened one in a dull moment and read these words: "Thank you for your business".... yada yada... with some more stuff about informing you of your consumer rights and protecting your credit.... and hidden halfway down in small type this letter informed me of my new interest rate of 29.7%. I nearly feel out of my chair. I've never missed a payment on that card. I keep the balance pretty low. So what gives?
Congress passed a bill out of concern that consumer debt was getting out of control. Months ago. That bill required Big Bank's and Credit Card Companies to give us 30 days notice in writing before they could raise our interest rates and they must have a 'reason'. So what did the Credit Card companies do? They begged. They told their friends in the House Financial Services Committee and all their mates in the banking industry they could not possibly effect such a huge change and inform all their customers in so short a time (this happended like six months ago). So Congress gave your creditors until February 2010--LOTS of time to 'inform consumers' that they are raising our interest rates dramatically. Don't be surprised to see up to 30% as your new interest rate. All in time for Christmas. All in time to 'inform us' before the new congressional bill takes effect stopping them from raising our rates.
Who is being served here? Have you noticed that many of these same companies are the very banks who took our tax dollars as TARP money to keep them afloat? I am seeing more and more consumers come in with the idea in mind of paying down their debt and KEEPING it down. So now these same companies complain that consumer debt is down. Wow.
What's a wise consumer to do? When you get the letter, call your card company and tell them you wish to OPT OUT of the increase. Which means your card will be frozen. You will have the option to pay it off and keep it open with a zero balance (for the foreseeable future) or transfer to another lower balance card. As long as you get a card that guarantees your rate beyond February 2010, that is.
Note: Don't close the credit card as that lowers your available credit. You will have to get through to a person to keep it open and opt out. The scary male voice on the recording I got says "IF YOU OPT OUT...YOUR CARD WILL BE CLOSED"...etc. So your best bet may be to pay your cards down to zero balance and just stop using them. More posts on how to work the credit system right here in the menu to the right. Just click the months to see relevant titles.
Happy Opting Out! Loannetter
© copyright 2009 susan templeton loannetter
Friday, November 06, 2009
FREE Consumer Credit Reports
Order your FREE credit report once a year:
Online: http://www.annualcreditreport.com/ (or download a mail-in form)
By phone: 877-322-8228
By mail: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348
NEVER order a credit report from a site that asks you for a credit card number before giving you a 'free report'. Several firms have been convicted of secretly charging credit monitoring fees.
The best known consumer site is http://www.myfico.com/ which is the Fair Isaac Company site (they invented credit scoring). This site has some useful credit comparison tools showing how credit scores affect interest rates which in turn affects your payments. A Tri-Merge (3 bureau) report costs about $50.00 on these sites. If you check your own credit, it does not affect your FICO score.
Be aware, you do not need to sign up for regular credit check services unless you are concerned that someone has been abusing your identitiy. If you have experienced identity theft and you are concerned that your are still at risk, you can first make a police report, then send than information to all three Bureaus and they will 'lock' your file with a PIN code so no-one can attempt to check your credit without your code and permission.
When a lender pulls your credit, it can deduct up to 3 points from your FICO score, one for each bureau. Loan shopping beyond a 10 day period can impact your score significantly by going outside the 'de-duping period', so try to confine the number of lenders you allow to pull your credit within 2 weeks. Online lending firms have been known to 'shop out' your report to several agents (who each pull your score). The last 90 day period on your report shows the credit checks that were made and by whom. A responsible mortgage broker will only submit your loan application to a qualified lender they know can fund your loan given your specific requirements. Online shopping exposes you to agents seeking 'easy targets'.
Note: Free consumer reports may not show your FICO Score. You can opt to pay a fee for that information, which lenders require. The free reports are offered once a year. I charge the actual cost of approximately $20 for a Tri-Merge report in conjunction with a loan application, which shows your score. We give you a copy and discuss any issues to be aware of. 80% of credit reports have errors on them!!
What's a good score? 300-850 is the score range, with 850 being perfect, 720 is excellent, 620 is the baseline (for lending) with under 600 being considered poor. You'll need 680 for better rates and over 720 if you are self employed for best terms. When you apply for a mortgage your lender should provide you with a copy of your report which may or may not show your score (ours do). If you are declined, they send you a notice and that allows you to mail in for a copy of the report the lender viewed.
Plan ahead! If you are considering applying for a mortgage or major loan within 3-6 months, it's a great idea to check your report to be sure everything is in order. Credit repair can be time consuming--even with sufficient proof.
What about credit repair? There are good and not so good services that act on your behalf to dispute items on your credit. (More on that in other posts). I have seen scores raised 100 pts in three months with diligent effort.
Happy scoring! Loannetter
© copyright 2009 susan templeton loannetter
Online: http://www.annualcreditreport.com/ (or download a mail-in form)
By phone: 877-322-8228
By mail: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348
NEVER order a credit report from a site that asks you for a credit card number before giving you a 'free report'. Several firms have been convicted of secretly charging credit monitoring fees.
The best known consumer site is http://www.myfico.com/ which is the Fair Isaac Company site (they invented credit scoring). This site has some useful credit comparison tools showing how credit scores affect interest rates which in turn affects your payments. A Tri-Merge (3 bureau) report costs about $50.00 on these sites. If you check your own credit, it does not affect your FICO score.
Be aware, you do not need to sign up for regular credit check services unless you are concerned that someone has been abusing your identitiy. If you have experienced identity theft and you are concerned that your are still at risk, you can first make a police report, then send than information to all three Bureaus and they will 'lock' your file with a PIN code so no-one can attempt to check your credit without your code and permission.
When a lender pulls your credit, it can deduct up to 3 points from your FICO score, one for each bureau. Loan shopping beyond a 10 day period can impact your score significantly by going outside the 'de-duping period', so try to confine the number of lenders you allow to pull your credit within 2 weeks. Online lending firms have been known to 'shop out' your report to several agents (who each pull your score). The last 90 day period on your report shows the credit checks that were made and by whom. A responsible mortgage broker will only submit your loan application to a qualified lender they know can fund your loan given your specific requirements. Online shopping exposes you to agents seeking 'easy targets'.
Note: Free consumer reports may not show your FICO Score. You can opt to pay a fee for that information, which lenders require. The free reports are offered once a year. I charge the actual cost of approximately $20 for a Tri-Merge report in conjunction with a loan application, which shows your score. We give you a copy and discuss any issues to be aware of. 80% of credit reports have errors on them!!
What's a good score? 300-850 is the score range, with 850 being perfect, 720 is excellent, 620 is the baseline (for lending) with under 600 being considered poor. You'll need 680 for better rates and over 720 if you are self employed for best terms. When you apply for a mortgage your lender should provide you with a copy of your report which may or may not show your score (ours do). If you are declined, they send you a notice and that allows you to mail in for a copy of the report the lender viewed.
Plan ahead! If you are considering applying for a mortgage or major loan within 3-6 months, it's a great idea to check your report to be sure everything is in order. Credit repair can be time consuming--even with sufficient proof.
What about credit repair? There are good and not so good services that act on your behalf to dispute items on your credit. (More on that in other posts). I have seen scores raised 100 pts in three months with diligent effort.
Happy scoring! Loannetter
© copyright 2009 susan templeton loannetter
Saturday, August 15, 2009
Should You Buy Now?
Facts: 700 billion of our tax dollars gifted to the largest banks in America has not created a high degree of trust in our banking system. New credit card rate restrictions have prompted a cut back of credit limits and closed accounts. Interest rates on mortgages have remained very low. Home values have continued to drop or are stabilizing in some markets. These are crucial timing factors for anyone considering getting into or out of real estate right now.
Who can (or should) get a mortgage in these turbulent times?
While many many potential home buyers are competing for lower priced homes, we are seeing many loan applicants in angst due to longer time frames. New laws are affecting how banks and brokers operate. As a result, many loans that would previously be sent to Fannie Mae or Freddie Mac (big bailout recipients) are now being funded under FHA or USDA to take advantage of easier government loan terms. Folks with decent credit and stable income are buying or refinancing in droves. The lines at our government underwriters became very very long due to this overwhelming demand.
Is this perfect timing to buy a home?
Our sources on several sides of the trading and banking world feel that economic turbulence will be here for a while and likely we will turn a corner some time late in 2010. Mainstream media promotes 'recovery' but few people are feeling that just yet. Realtors and sellers are particularly anxious as property values have continued to fall. Buyers must rely on their knowledge and local advice for which way the tide may be turning.
Bad timing?
For those of you who missed it, several failed banks, including the 3rd largest FHA lender, Taylor Bean Whitaker (closed August 4th 2009), are either merging or reshuffling their decks. Timing could not be worse during the summer sale season. If you had a loan in process at that bank you are now looking for another lender. This situation only provokes more angst and distrust of brokers, bankers and sellers. Banks, meanwhile, have become very very picky.
What can you do to improve your chances of getting a loan?
1. Live within your means: keep your card account balances under 30% of the available or pay these balances down to under 30% (the 30-30 rule).
2. NOW is the time to be disputing errors on your credit report. Chances are there are so many people are overwhelming the credit reporting bureaus that the system won't cope and many will be given the benefit of the doubt.
3. Don't open new credit accounts and don't close your old ones!!! (old history is good history)
4. If you don't have any credit accounts now: establish three accounts over the next six months, say one every other month and follow the 30-30 rule...never go over 30% of the available balance and never miss a 30 day payment. The best accounts to have are a bank card, an auto loan or gas card, and a department card where you regularly shop. Three is all it takes. Manage them well. You need at least one to two year's history to create a solid report.
Live long and prosper!
Seriously folks, a solid credit history will serve you well and save you a bundle over a lifetime of borrowing even small amounts, regardless of the market. If you aren't buying a home then consider the effect of bad credit over your lifetime of owning cars, having credit cards with higher rates, paying higher insurance fees, being denied credit for important needs...all those fees and rates are higher if you have bad credit. What's bad credit? Anyone with a FICO Score under 680 will pay more for everything these days. Achieve 720 and you will enjoy the benefits for many years!
To your successs! Loannetter
© copyright 2009 susan templeton loannetter
Who can (or should) get a mortgage in these turbulent times?
While many many potential home buyers are competing for lower priced homes, we are seeing many loan applicants in angst due to longer time frames. New laws are affecting how banks and brokers operate. As a result, many loans that would previously be sent to Fannie Mae or Freddie Mac (big bailout recipients) are now being funded under FHA or USDA to take advantage of easier government loan terms. Folks with decent credit and stable income are buying or refinancing in droves. The lines at our government underwriters became very very long due to this overwhelming demand.
Is this perfect timing to buy a home?
Our sources on several sides of the trading and banking world feel that economic turbulence will be here for a while and likely we will turn a corner some time late in 2010. Mainstream media promotes 'recovery' but few people are feeling that just yet. Realtors and sellers are particularly anxious as property values have continued to fall. Buyers must rely on their knowledge and local advice for which way the tide may be turning.
Bad timing?
For those of you who missed it, several failed banks, including the 3rd largest FHA lender, Taylor Bean Whitaker (closed August 4th 2009), are either merging or reshuffling their decks. Timing could not be worse during the summer sale season. If you had a loan in process at that bank you are now looking for another lender. This situation only provokes more angst and distrust of brokers, bankers and sellers. Banks, meanwhile, have become very very picky.
What can you do to improve your chances of getting a loan?
1. Live within your means: keep your card account balances under 30% of the available or pay these balances down to under 30% (the 30-30 rule).
2. NOW is the time to be disputing errors on your credit report. Chances are there are so many people are overwhelming the credit reporting bureaus that the system won't cope and many will be given the benefit of the doubt.
3. Don't open new credit accounts and don't close your old ones!!! (old history is good history)
4. If you don't have any credit accounts now: establish three accounts over the next six months, say one every other month and follow the 30-30 rule...never go over 30% of the available balance and never miss a 30 day payment. The best accounts to have are a bank card, an auto loan or gas card, and a department card where you regularly shop. Three is all it takes. Manage them well. You need at least one to two year's history to create a solid report.
Live long and prosper!
Seriously folks, a solid credit history will serve you well and save you a bundle over a lifetime of borrowing even small amounts, regardless of the market. If you aren't buying a home then consider the effect of bad credit over your lifetime of owning cars, having credit cards with higher rates, paying higher insurance fees, being denied credit for important needs...all those fees and rates are higher if you have bad credit. What's bad credit? Anyone with a FICO Score under 680 will pay more for everything these days. Achieve 720 and you will enjoy the benefits for many years!
To your successs! Loannetter
© copyright 2009 susan templeton loannetter
Tuesday, March 24, 2009
Will Credit Get Even TIGHTER?
How does market confidence affect availability of credit?
The current lack of confidence in Banks and Financial Institutions as our folly has come into the public eye has led to a concern over the commitment of banks to lend money to consumers. HUH. Banks make the mistakes and consumers pay? Ah but the the BIG question is...just who is lending and for how long?
For starters, a new FICO-08 Credit Scoring model is in the works at Fair Issac. This model, due for release in a few months, is designed to 'drill down' and more effectively split borrowers into more accurate risk categories. While we are hearing different reports about this model, the overall effect on lending could mean banks will feel 'more informed' and confident about to whom they are lending. New tighter rules for appraisals, national licensing of loan originators, and higher lending guidelines are helping validate higher standards all around. All good.
Of course, nothing beats good old underwriting guidelines applied by trustworthy human beings who know WHAT they are looking at. Here's a very revealing news item showing how some banks circumvented their own guidelines via 'stated income' or 'liar loans'. Check out this MSNBC video clip on the biggest financial abusers, and how they broke the rules.
Some staff inside banks were offered incentives to lie! MSNBC Clip2
Having seen that news story and the results of these practices over the last two years, it's no wonder we have tighter lending guidelines today. Laws are created when we have lawlessness...so this is the banking world's way of making the lending arena safer for borrowers and bankers alike. Surprisingly some of the very banks who committed these loans are still in business. Some of these very banks are, inexplicably, receiving bailout funds. Not everyone 'gets it' how incredibly greed based our systems had become.
So, the question lingers for folks considering their home loan options today: should you borrow now or wait? If you can qualify now, can document sufficient income and can afford the loan, you have done your homework and the investment is within your means-- then now is a very good time to buy or refinance. It's not going to get easier to borrow...in fact we expect even tighter guidelines for quite a while in a correcting swing of the pendulum toward conservative standards.
Happy Spring! Loannetter
The current lack of confidence in Banks and Financial Institutions as our folly has come into the public eye has led to a concern over the commitment of banks to lend money to consumers. HUH. Banks make the mistakes and consumers pay? Ah but the the BIG question is...just who is lending and for how long?
For starters, a new FICO-08 Credit Scoring model is in the works at Fair Issac. This model, due for release in a few months, is designed to 'drill down' and more effectively split borrowers into more accurate risk categories. While we are hearing different reports about this model, the overall effect on lending could mean banks will feel 'more informed' and confident about to whom they are lending. New tighter rules for appraisals, national licensing of loan originators, and higher lending guidelines are helping validate higher standards all around. All good.
Of course, nothing beats good old underwriting guidelines applied by trustworthy human beings who know WHAT they are looking at. Here's a very revealing news item showing how some banks circumvented their own guidelines via 'stated income' or 'liar loans'. Check out this MSNBC video clip on the biggest financial abusers, and how they broke the rules.
Some staff inside banks were offered incentives to lie! MSNBC Clip2
Having seen that news story and the results of these practices over the last two years, it's no wonder we have tighter lending guidelines today. Laws are created when we have lawlessness...so this is the banking world's way of making the lending arena safer for borrowers and bankers alike. Surprisingly some of the very banks who committed these loans are still in business. Some of these very banks are, inexplicably, receiving bailout funds. Not everyone 'gets it' how incredibly greed based our systems had become.
So, the question lingers for folks considering their home loan options today: should you borrow now or wait? If you can qualify now, can document sufficient income and can afford the loan, you have done your homework and the investment is within your means-- then now is a very good time to buy or refinance. It's not going to get easier to borrow...in fact we expect even tighter guidelines for quite a while in a correcting swing of the pendulum toward conservative standards.
Happy Spring! Loannetter
Wednesday, February 18, 2009
Calling All Credit Card Holders!
Creditors have been calling all their cardholders to inform them that their credit cards are either being closed or their credit limits are being lowered. This has broad reaching implications on your 'available credit' and thus your FICO score.
Speak Up, Out and Often!
Housing Rescue Plan to the Rescue?
Why Worry?
The fact is, your almighty FICO credit score is comprised of many factors, not the least of which is how 'fat' your balance is against your available credit limit. So in the case of having your limit lowered, usually to your existing balance (i.e., what is owed now) means the system sees that card as maxed out. If you previously had 50% or more available and unused, the system saw you as managing your credit within reason. 30% or less is the ideal limit for optimal credit scoring. 100% of your balance being used indicates higher risk therefore your FICO Score will be lowered. Since the system analyzes your behavior every month for such things as late payments or limits being reached, the effect of losing your available credit will be four fold:
1. You now have a maxed out balance and
2. You have no available credit on that card.
3. Your FICO score will go lower and affect your ability to get a mortgage or other credit.
4. Because of these 3 factors, your interest rates will be raised on your cards. Hardly fair!
The situation is compounded when every bank does this with every card you hold so suddenly your available credit plummets and so does your credit score. The only small consolation here is that everyone you know is probably having the same experience, so eventually the entire credit system will lower it's settings to the new risk factors. (Credit scores are averaged against other credit users.)
What Can You Do About It?
The situation is compounded when every bank does this with every card you hold so suddenly your available credit plummets and so does your credit score. The only small consolation here is that everyone you know is probably having the same experience, so eventually the entire credit system will lower it's settings to the new risk factors. (Credit scores are averaged against other credit users.)
What Can You Do About It?
Well, you can try calling back and pleading your case to restore your balances and re-open your cards if they were closed. The chances of your success are limited if you have ever in your life missed a payment or have a habit of going over your limit. I know of one client who called their bank to request reinstatement and he succeeded...but this is quite rare! Needless to say this person had a long and perfect record with the company. He was polite and convincing. He was also lucky to get someone on the phone who spoke English and who agreed with him!
Others have found less success. The fact is, many folks are relying on their available credit as a backstop these days. You may be hanging out until your customer pays you or your unemployment kicks in. Please remember you are not alone. Speak Up, Out and Often!
I would urge citizens write their congress persons and speak or write about this particular injustice being meted out by the big banks. The more your representatives hear from their constituents, the more likely they can have an effect on the behavior of our Federal Trade Commission. After all, the Consumer Protection Act is supposed to protect you, and advocate for consumers, not creditors.
Because your credit information is deposited with the three government sanctioned Credit Bureaus, once this system gets wind of changes in your credit patterns, whether caused by you or your credit card companies, it dumbly starts penalizing you for this perceived new 'risk' and lowers your FICO score. High debt to credit balances are top risk factors right up there with late payments. This is not something you can dispute, unlike an inaccurate charge or other record. Housing Rescue Plan to the Rescue?
I am hopeful that as part of the 2009 Housing Rescue, the powers that be will revisit the arcane and increasingly irrelevant FICO Scoring system to help get more folks into home-ownership.
Happy Recovery!
LoannetterHappy Recovery!
© copyright 2009 susan templeton loannetter
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