The one thing we can caution you about a loan application is to be honest. Don’t go increasing your income or hiding your expenses. It will just get you in trouble and trouble impacts your business credit scores in a big way. Trouble comes in many forms – you get sick, don’t make the hours you expect to be paid for at work and then don’t have the money to pay the bills, they get paid late and then you have lates on your credit report. Lates cost you lots of points. A mortgage company could audit your loan and find out you really don’t make that much or you have more debt than you said you did and could call the note due and payable immediately. Then you have to find another loan or lose the house. Especially in these troubling credit crunch days, being totally honest with your lender will keep you out of trouble more than not. Don’t get over your head with debt, start a savings plan, prepare for emergency situations, don’t get greedy or try to buy more than you can afford,  be cautious and you will have less trouble dealing with challenges when they do come…   And they will.

Let me share an experience.  Just recently I went in to get a loan for a new home I wanted to purchase.  I went to a lender that I know and trust and asked about the rates, the conditions and what it would take to get a loan for me.  He assured me that there was no problem, since I had enough collateral to actually pay for the home outright.  OK, so I say to go ahead, now, I did go to two other loan companies prior to settling with my friend because I thought I could get a better deal.  Well, I was turned down by both other companies because I had an unusual situation they had to deal with and they said they couldn’t go outside “the box”.  Meaning that unless it was a “check the boxes” loan, they couldn’t help me.  Hey, I have 803 credit score and it didn’t make any difference to them. Well, I started the loan process with my friend and as the loan application was filled out it was obvious that I was beginning to stress my friend.  It is going on 3 weeks now and the loan is still to get started as I have had to jump through hoops and put my down payment at risk before the bank will even begin to get started on the loan.  And this is why, my friends, that you do your homework before you get started.  Yes, you have to have excellent credit (740 or above) and make sure you have worked in the same job for 2 years, have the down payment seasoned (3 months in the same account, not touched) and don’t open or close accounts and don’t pay off any collections within a year. The moral is, the banks are being extra cautious and if your loan officer thinks it’s a slam dunk, be prepared to wait and do what is asked of you quickly.

In fact, council with an expert credit counselor if you are going to plan on purchasing in the next year or so… they will teach you what you need to do to get prepared.  But be cautious, read my blog, read the related blogs in the archive and then ask questions.  I would be delighted to answer them.

WAIT, this is NEW STUFF and not what you think… Let’s talk about this.  Be punctual – Pay all your bills on time.  Late payments, collections, and bankruptcies have the greatest negative effect on your credit score. But let’s talk about “Late Payments” for this week.

Late payments cost you in points, big time, because of what they mean in increased credit risk to the credit bureaus. Higher credit risk means loss of points and lowered credit score.

OK, so you make your payments on time and your scores are still low. What is causing this to happen? Let’s look at what is happening with your payments. Let’s say you have a credit card that is over the 45% debt to credit ratio. You make your payment on the due date but when you pull your credit report, your points have dropped. What is happening is that the credit card company is getting your payment “on time” but the recording date when they determine your interest charged and when they report to the credit bureaus can actually be before the due date. This creates more revenue for them as well as causing your balance to be recorded higher to the credit bureaus thus causing your scores to drop. When you think your payment has lowered your balance to less than 45% by the due date, they have already charged you interest and reported to the credit bureaus and already your scores have dropped. Surprising, but true.

So, the solution is to look over your free credit card debt solution statement and find when the interest is entered onto your statement. Then make your payment to arrive before the interest is applied to your statement and before it is reported to the credit bureaus. Lower balance, lower interest, lower risk, and higher credit score! Ahhhh…

There are horror stories of debt consolidation companies that devastated credit scores for people because of how they work. The debt consolidation company will negotiate payoffs with your creditors and the creditor will automatically and immediately close your account with the debt still owing. This hurts your credit scores several ways. The account is closed and the history is lost, the debt to credit ratio is lost due to the credit limit being reported as $0 and the amount owed still showing, etc. So, my recommendation… avoid debt consolidation companies, debt counseling services at all costs unless they do not negotiate payoffs with creditors.

If you want to negotiate a settlement there are several things you should know before you begin. Understand that the creditor will close your account and you will be hit with the same things I described above, debt to credit limit ratio through the roof and loss of credit history for that account. It is better to make the minimum payments until you can afford to get the debt paid off in full and keep the account in good standing. The only accounts you should really negotiate payoffs which would be collections or accounts already closed by the creditor. The damage is already done and paying off the debt would help your credit scores return upward. Not to the original score because you will have lates, loss of history, but your debt to credit ratio would be negated.

How the payoff is reported will also affect your credit scores. I highly recommend negotiating how it will be reported as well. Reporting as “settled” is not good but being reported as “paid in full” or “paid as agreed” or “satisfied” would then reflect a positive on that account even if there are lates and the account is closed. Remember to always get the negotiated payoff in writing and don’t make the payments until the document is in your hands and written as agreed. Then make the payment and you are done. Oh, you can even negotiate for them to remove the collection off your credit file… if you are tough enough to stick it out with them, as they will complain that they cannot do that or company policy states… etc. They can and do regularly when the stakes are high enough.

How much to negotiate is also very important. If you don’t have the money, then negotiating payments may be the only thing you can do, but always ask to reduce the payment and the amount. If you have the money to pay it off immediately then you can negotiate a payoff that could be as low as 40% of the original debt. Factors such as how big the debt is and how old the debt is will determine how much the collection company will allow to be negotiated down. The bigger the amount and the older the account, the more they will negotiate. But waiting till your collections are old to reduce a payoff is not a good thing for credit scores and establishing good credit history. You will have to decide which is more important. Personally, I recommend getting the debt paid off and having the good credit scores for negotiating better interest rates to save money in the future.

However, there is another, alternative solution.  This involves a group of attorneys that do credit law, only credit law license repair and for over 24 years.  By having them work for you, they will attack the collection companies, and the credit bureaus for you and get the negatives off  your credit report, thus improving your credit scores and giving you back your freedom.  Check out National Credit Federation at http://www.VantageCA.com to see for yourself what they can do.  With an average 127 point increase in just 4 to 6 months… you can get your freedom back and start living life again.  Check it out today.

PS – They can also negotiate settlements down to 9 to 12 cents on the dollar.

Did you know the credit card companies’ rules are changing?

Credit card companies have always had tricks for capturing fees and extra interest from the unknowing card user. Recently, legislation was passed on how credit card companies handle the hikes in interest rates and fees. Much to the credit card industries dissatisfaction, big changes are coming!

Let’s take a look at how these can effect you.

Credit card companies will now have to give cardholders forty-five days notice before their interest rates are raised. What does this mean? Well, those days of opening your statement and seeing interest rates jacked up 5 or 10 or 15% and more because of you being one day late are over! Now, if there is a rate hike you’ll have time to pay off or transfer the balance to another card before getting cracked on the wrist, or rather dinged in the wallet, for being late. 

Banks are now required to mail your credit card statements no later than twenty-one days before they are due. In the past, some credit cards standard operating procedure was to send their statements just a few days before they were due. Why? It’s all about money! A late charge here or a late charge there throughout the year, and you’ve added an extra $100 or $200 to the credit card companies coffers. Multiply that, by a few million cardholders and suddenly late charges are an income on their profit and loss statement that will make your head spin!

These same credit card companies try and tell you that this is not their intent. Believe me, this 21 day change alone will cost them millions in unjust charges and save you perhaps hundreds of dollars a year just because they give you ample time to mail your payment in.

Speaking of late fees, if you get your payments in by 5PM on the due date you will no longer incur a late charge. This eliminates that 12:01 AM deadline joke! This is something I never understood. Why have a deadline, of let’s say the 25^th of the month at 12:01 AM? If you want it in at midnight then just say the deadline is the 24^th. In addition, if the deadline falls on a holiday or a Sunday when the bank is closed the new law allows your payment to be processed the following day without incurring a late charge.

Another big change in the new law is to credit your payments to the balance with the highest interest rate rather than the balance with lower interest rate. In the past it was common practice if you owed say $5000 of which $2500 were misc charges at 8% and another $2500 was cash advance at 18%, to post your payment to the balance at 8% interest. This would mean your overall balance would be charged at the higher rate, thus it became much more difficult to pay off.

In addition, on cash advances the banks require your explicit permission in order to go over your providian automatic credit limit increase. This means no more check postings that you would be hit for an “over credit limit” charge which could also trigger a hike in the interest rate.

Overall, these changes will make it harder for the credit card companies to hold you in financial bondage by hindering your ability to pay off your accrued debts.  Keep in mind that this doesn’t mean you’re in the clear. You still need to be a good money steward, staying within your budget and making your payments in a timely manner. 

Be bold!