Jan 10 2012
FTC warns beware of credit repair scams
Archive for the 'FICO' Category
Mar 14 2011
Top 5 bankruptcy myths debunked
I was on a well respected credit website today reading their recent blog and I was blown away by the misinformation they were giving about the pros and cons of filing bankruptcy. Having gone through a bankruptcy personally and having counseled hundreds of clients who have filed a bankruptcy, I can tell you that bankruptcy is not the kiss of death for your credit. While I am not an advocate of people running out and filing bankruptcy without careful consideration, I am advocate for truth.
I often wonder when I see an anti-bankruptcy campaign whose interest is really being considered. Credit card companies will do all they can to have you believe bankruptcy is a horrible thing and you are a horrible person for filing. Consumer credit reporting agencies TransUnion, Equifax, Experian (The Big Three) would have you believe the same.
Why? Obviously the credit card companies want to you pay up, not only what you owe but all of the extras they tack on. I’ve seen a $300 credit card become an over $1000 collection. So why do The Big Three want to avoid bankruptcy? Because they make money every time your account gets sold to another collection agency. And, the worse your credit score the more money they make.
Ok, I know what you are thinking… Victoria, people should take responsibility and pay what they owe. I could not agree with you more. But, what do you tell the family who never missed a payment until the major wage earner was stricken with cancer and the insurance company stopped paying? The number one cause of bankruptcy is…You guessed it – medical bills. And, yes doctors deserved to be paid. The problem is that often doctors will not set up payment arrangements. So good people end up filing bankruptcy.
Now to debunk bankruptcy myths:
Myth 1: A bankruptcy will affect your credit score for 10 years.
Truth: While bankruptcy may stay on your credit report for 10 years (chapter 7 only), your credit score will not be affected for the entire 10 years. With proper reestablishment of credit your score will begin to recover quickly.
Myth 2: Filing a bankruptcy will lower your score to the 500′s.
Truth: If you are not paying your credit cards and have maxed them out. Your credit score is more than likely already in the 500′s.
Myth 3: Accounts included in a bankruptcy will remain on your credit report for 7 years.
Truth: Seven years is a MAXIMUM not a MINIMUM amount of time an account included in bankruptcy may remain on a credit report.
Myth 4: You will not be able to get a good mortgage rate for 5 years after bankruptcy.
Truth: Many consumers can qualify for an FHA (federally backed mortgage) 2 years after bankruptcy with very attractive rates. Three years if a home was involved in the bankruptcy.
Myth 5: Employment and insurance can be severely affected after a bankruptcy.
Truth: The impact on insurance is typically much less than the interest, fees, and late charges charged by credit card companies. And, under United States Bankruptcy Code an employer can not discriminate against you for filing bankruptcy. However, they can and most likely will for judgments, late pays, and multiple collections.
As I said before, I am not an advocate of people running out filing bankruptcy. If you are contemplating filing bankruptcy, make sure you weigh all of your options.
I have spent almost two decades empowering my clients financially through credit education. If you have filed bankruptcy and need help re building your financial life, call me at 317-527-1440. I am here to help.
Feb 15 2011
OMG… Adjustable rate mortgages coming back
According to CNNmoney.com, Adjustable Rate Mortgages, also known as ARMS are coming back. Adjustable rate mortgages accounted for nearly 70% of all mortgages during the housing boom. ARMs disappeared after the bust, accounting for only 3% of the market in 2009. Now, they make up 5% of all mortgages issued. Freddie Mac predicts an increase to 10% in December.
No doubt that a 5/1 Arm can save homeowners considerably, I still think it’s a bad idea. The sales pitch is the same. “This is a great deal for anyone not planning to stay in their home.” “You can get a lower interest rate.” Currently, a 30 year fixed mortgage is at 5% while a 5/1 ARM is at 3.5%. On a $200,000 house that’s a savings of over $10,000 over the 5 year term.
As a former loan officer, I could see the value of ARM products if home buyers were planning to stay in a home for only seven or eight years. The difference – As a Consumer Credit Expert, I always made sure my clients knew the risks.
I asked my clients the hard questions:
What would happen if you lost your job and could not move or refinance, would you be able to handle a mortgage payment that could be $500 more than you’re paying under the ARM?
What happened if something happened to your credit and you could not refinance?
If you find yourself in front of a loan officer pushing an ARM, ask yourself. What happens if I can’t move or refinance when the ARM comes due? Do not be lured by short term savings.
As a Consumer Credit Expert, I educate consumers on the pitfalls of credit mistakes. Credit is important, and we can help you understand it.
Call us with your credit questions 317-527-1440
Feb 08 2011
Buyer beware when purchasing your credit score
You’ve seen the ads, “Get your credit score now” “Instantly get your credit score” and so on. Buyer beware! Not all credit scores are created equal. Fair Issac and Company set the standard for the credit scoring model that we use in the United States. Most lenders will use the FICO score to determine your credit worthiness.
In an attempt to compete with FICO the big three credit reporting agencies, TransUnion, Equifax, and Experian have come up with their own scores. On the surface this does not sound like a bad idea. But, here’s the rub. Many lenders only use the true FICO score. So, the score most consumers buy is worthless.
I have many clients come to me not understanding why when they pull their credit they have a different score than what the lender has. Typically this is because the client bought the wrong score. True FICO scores can be purchased from myfico.com .
I urge my clients to concentrate not on their credit score, but on managing their credit. I urge them to pay their bills on time, keep revolving credit balances low or at zero dollars, and do not open unnecessary lines of credit. Unless you are looking to purchase a home, auto, or need to take out additional credit, you do not need your credit score.
Nov 30 2010
Credit Karma takes the mystery out of credit scoring
As a Credit Expert, I regularly give seminars on credit scoring. My goal is to provide resources and knowledge that empowers my clients financially through credit education.
One of those resources that I recommend is Credit Karma. It is common knowledge that having amount of credit helps to optimize your credit score. But, it is a mystery to most consumers on the right mix. Credit Karma helps to relieve that mystery.
Credit Karma is powered by Trans Union. The site provides consumers with their Trans Union credit score at no cost. Really! No Cost – No Gimmicks! In addition, Credit Karma provides score simulators in which consumers can put in different values to determine the affects of paying off or down their credit cards. The simulator will also allow consumers to see how opening new credit will affect their Trans Union credit score.
All is all I believe Credit Karma is a good resource for consumers. Just keep in mind it is just a resource. It does not address Equifax or Experian scores. If you would like more detailed assistance, contact us via email at info@intcredit.net or via phone at 317-527-1440.
Sep 08 2010
FICO Fact
According to FICO the creator of our current credit scoring model, maxing out credit cards can reduce you credit score by as much as 45 points.