A foreclosure is one of the most credit-damaging events that can ever appear in your credit history. What's even worse is that foreclosures stay on your credit report for at least seven years.
No, a foreclosure won't ruin your credit rating forever. But having a foreclosure on your credit report will lower your credit score until you're able to re-establish good credit — and that takes time.
Unfortunately, a low credit score virtually guarantees that you will pay higher interest rates on home and auto loans, credit cards or other forms of credit. How much more will you pay? Experts say that a person with a low credit score, say, below 600, will likely receive mortgage interests rates that are nearly 3% higher than someone with a score above 700. In a worst case, you may be denied credit altogether.
There has been a lot of talk about foreclosure trends in the news especially in recent years. With many Americans spending well beyond their means, foreclosures have become a common part of the overall real estate landscape. Since a foreclosure will lower your credit score, you need to know the facts about bank foreclosures if you plan to buy a home, or if you currently own a home and foresee any problems making the payments.
What exactly is a bank foreclosure?
A bank foreclosure occurs when a bank claims ownership of a property because the property owner has fallen behind on or stopped making mortgage payments. Generally, after three missed payments, banks will start the foreclosure process by sending you written notification that you are in default — or failing to meet the payment obligations of the mortgage agreement. Unless you pay the overdue amount owed, the property will be sold at public auction.One important point to remember: In general, banks want to avoid foreclosures as much as homeowners do. The reason is simple: Banks make more money when a mortgage is successfully paid off. In fact, most banks will often try to avoid a foreclosure, if possible.
Can a foreclosure be deleted from your credit report history?
If foreclosure proceedings are filed against you, there is no legitimate way to have that information removed from your credit report — at least not for seven years. After that, the foreclosure can only be removed from your credit report, which is your official credit history, after you send a written request to the three major credit reporting bureaus. To get your a 3-in-1 credit report and free triple scores and protect your credit, check out the Privacy Matters 1-2-3 program.
As interest rates rise, the same goes for the number of foreclosures.
According to the Department of Consumer Affairs, bank foreclosures in the United States rose 47% between 2006 and 2007. In fact, a leading online marketer of foreclosure properties reports that banks initiated 149,000 foreclosure actions in March 2007 alone — the most since the company began collecting data back in 1996.Owning a home has long been an American dream, but far too many people have done lasting damage to their credit scores by being forced into foreclosure. Short of bankruptcy, having a foreclosure on your credit report may be the longest-lasting obstacle to good credit. Re-establishing yourself as a good credit risk will take time and careful planning after a foreclosure.
To find out more information about how you can repair your credit after foreclosure,go to http://www.debtandcreditrelief.org
Thursday, April 15, 2010
What The New Credit Card Law Means To You
Credit card users can expect the most dramatic changes in credit terms, interest rates and fees in decades once a new federal credit card law fully goes into effect.The new normal for credit cards may be more transparency and easier-to-understand terms, but at a higher upfront cost. Credit card issuers and credit industry analysts say the credit card reform law will make credit cards more costly for all users and unaccessible for low-income families and people with bad credit. Look for the return of routine annual fees, fewer rewards cards and the possibility that credit card bills will be payable immediately rather than after a month-long grace period.The new normal
President Obama signed the Credit CARD Act of 2009 into law May 22, 2009, following passage days earlier in the Senate and the House. (Read the act.)What will the credit card law mean for cardholders? Millions of credit card users will avoid retroactive interest rate increases on existing card balances and have more time to pay their monthly bills, greater advance notice of changes in credit card terms and the right to opt out of significant changes in terms on their accounts. That will take the surprise out of "gotcha" fine print and give consumers time to shop around for better deals if they don't like the new terms. The requirements are being phased in. The first batch took effect Aug. 20, 2009, and the majority of provisions start Feb. 22, 2010, while some begin in August and December 2010. Once in effect, the law will also fundamentally change the way credit card issuers market, bill and advertise credit cards.Here are the highlights of the credit card law: Limited interest rate hikes: Interest rate hikes on existing balances would be allowed only under limited conditions, such as when a promotional rate ends, there is a variable rate or if the cardholder makes a late payment. Interest rates on new transactions can increase only after the first year. Significant changes in terms on accounts cannot occur without 45 days' advance notice of the change.Limited universal default: "Universal default," the practice of raising interest rates on customers based on their payment records with other unrelated credit issuers (such as utility companies and other creditors), would end for existing credit card balances. Card issuers would still be allowed to use universal default on future credit card balances if they give at least 45 days' advance notice of the change.The right to opt out: Consumers now have the right to opt out of -- or reject -- certain significant changes in terms on their accounts. Opting out means cardholders agree to close their accounts and pay off the balance under the old terms. They have at least five years to pay the balance.Limited credit to young adults: Credit card issuers will be banned from issuing credit cards to anyone under 21, unless they have adult co-signers on the accounts or can show proof they have enough income to repay the card debt. Credit card companies must stay at least 1,000 feet from college campuses if they are offering free pizza or other gifts to entice students to apply for credit cards. More time to pay monthly bills: Under the credit card law, issuers would have to give card account holders "a reasonable amount of time" to make payments on monthly bills. That means payments would be due at least 21 days after they are mailed or delivered. Consumers have complained about due dates that change without notice or are moved up, giving them less time to pay their bills and increasing the likelihood of late fees.Clearer due dates and times: Credit card issuers would no longer be able to set early morning or other arbitrary deadlines for payments. Cut-off times set before 5 p.m. on the payment due dates would be illegal under the new credit card law. Payments due at those times or on weekends, holidays or when the card issuer is closed for business will not be subject to late fees. Highest interest balances paid first: When consumers have accounts that carry different interest rates for different types of purchases (i.e., cash advances, regular purchases, balance transfers or ATM withdrawals), payments in excess of the minimum amount due must go to balances with higher interest rates first. Current industry practice is to apply all amounts over the minimum monthly payments to the lowest-interest balances first -- thus extending the time it takes to pay off higher-interest rate balances. Limits on over-limit fees: Consumers must "opt in" to over-limit fees. Those who opt out would have their transactions rejected if they exceed their credit limits, thus avoiding over-limit fees. Fees charged for going over the limit must be reasonable. No more double-cycle billing: Finance charges on outstanding credit card balances would be computed based on purchases made in the current cycle rather than going back to the previous billing cycle to calculate interest charges. So-called two-cycle or double-cycle billing hurts consumers who pay off their balances, because they are hit with finance charges from the previous cycle even though they have paid the bill in full. Subprime credit cards for people with bad credit: People who get subprime credit cards and are charged account-opening fees that eat up their available balances would get some relief under the new credit card law. These upfront fees cannot exceed 25 percent of the available credit limit in the first year of the card. Instead of charging high upfront fees, some issuers are considering high interest rates on these high credit risk accounts.Minimum payments: Credit card issuers must disclose to cardholders the consequences of making only minimum payments each month, namely how long it would take to pay off the entire balance if users only made the minimum monthly payment. Issuers must also provide information on how much users must pay each month if they want to pay off their balances in 36 months, including the amount of interest.Law doesn't cover everything
Consumers should take note: Although the reforms are the most dramatic changes in credit card laws in decades, they do not protect card users from everything. Issuers can still raise interest rates on future card purchases and there is no cap on how high interest rates can go. Business and corporate credit cards also are not covered by the protections in the CARD Act. If credit card accounts are based on variable APRs (as the majority now are), interest rates can increase as the prime rate goes up. Credit card companies can also continue to close accounts and slash credit limits abruptly, without giving cardholders advance warning. Many banks are already finding ways around the law and launching new fees not specifically banned by the credit card reform law.To find out more information about how you can improve your credit score,go to http://www.debtandcreditrelief.org.
President Obama signed the Credit CARD Act of 2009 into law May 22, 2009, following passage days earlier in the Senate and the House. (Read the act.)What will the credit card law mean for cardholders? Millions of credit card users will avoid retroactive interest rate increases on existing card balances and have more time to pay their monthly bills, greater advance notice of changes in credit card terms and the right to opt out of significant changes in terms on their accounts. That will take the surprise out of "gotcha" fine print and give consumers time to shop around for better deals if they don't like the new terms. The requirements are being phased in. The first batch took effect Aug. 20, 2009, and the majority of provisions start Feb. 22, 2010, while some begin in August and December 2010. Once in effect, the law will also fundamentally change the way credit card issuers market, bill and advertise credit cards.Here are the highlights of the credit card law: Limited interest rate hikes: Interest rate hikes on existing balances would be allowed only under limited conditions, such as when a promotional rate ends, there is a variable rate or if the cardholder makes a late payment. Interest rates on new transactions can increase only after the first year. Significant changes in terms on accounts cannot occur without 45 days' advance notice of the change.Limited universal default: "Universal default," the practice of raising interest rates on customers based on their payment records with other unrelated credit issuers (such as utility companies and other creditors), would end for existing credit card balances. Card issuers would still be allowed to use universal default on future credit card balances if they give at least 45 days' advance notice of the change.The right to opt out: Consumers now have the right to opt out of -- or reject -- certain significant changes in terms on their accounts. Opting out means cardholders agree to close their accounts and pay off the balance under the old terms. They have at least five years to pay the balance.Limited credit to young adults: Credit card issuers will be banned from issuing credit cards to anyone under 21, unless they have adult co-signers on the accounts or can show proof they have enough income to repay the card debt. Credit card companies must stay at least 1,000 feet from college campuses if they are offering free pizza or other gifts to entice students to apply for credit cards. More time to pay monthly bills: Under the credit card law, issuers would have to give card account holders "a reasonable amount of time" to make payments on monthly bills. That means payments would be due at least 21 days after they are mailed or delivered. Consumers have complained about due dates that change without notice or are moved up, giving them less time to pay their bills and increasing the likelihood of late fees.Clearer due dates and times: Credit card issuers would no longer be able to set early morning or other arbitrary deadlines for payments. Cut-off times set before 5 p.m. on the payment due dates would be illegal under the new credit card law. Payments due at those times or on weekends, holidays or when the card issuer is closed for business will not be subject to late fees. Highest interest balances paid first: When consumers have accounts that carry different interest rates for different types of purchases (i.e., cash advances, regular purchases, balance transfers or ATM withdrawals), payments in excess of the minimum amount due must go to balances with higher interest rates first. Current industry practice is to apply all amounts over the minimum monthly payments to the lowest-interest balances first -- thus extending the time it takes to pay off higher-interest rate balances. Limits on over-limit fees: Consumers must "opt in" to over-limit fees. Those who opt out would have their transactions rejected if they exceed their credit limits, thus avoiding over-limit fees. Fees charged for going over the limit must be reasonable. No more double-cycle billing: Finance charges on outstanding credit card balances would be computed based on purchases made in the current cycle rather than going back to the previous billing cycle to calculate interest charges. So-called two-cycle or double-cycle billing hurts consumers who pay off their balances, because they are hit with finance charges from the previous cycle even though they have paid the bill in full. Subprime credit cards for people with bad credit: People who get subprime credit cards and are charged account-opening fees that eat up their available balances would get some relief under the new credit card law. These upfront fees cannot exceed 25 percent of the available credit limit in the first year of the card. Instead of charging high upfront fees, some issuers are considering high interest rates on these high credit risk accounts.Minimum payments: Credit card issuers must disclose to cardholders the consequences of making only minimum payments each month, namely how long it would take to pay off the entire balance if users only made the minimum monthly payment. Issuers must also provide information on how much users must pay each month if they want to pay off their balances in 36 months, including the amount of interest.Law doesn't cover everything
Consumers should take note: Although the reforms are the most dramatic changes in credit card laws in decades, they do not protect card users from everything. Issuers can still raise interest rates on future card purchases and there is no cap on how high interest rates can go. Business and corporate credit cards also are not covered by the protections in the CARD Act. If credit card accounts are based on variable APRs (as the majority now are), interest rates can increase as the prime rate goes up. Credit card companies can also continue to close accounts and slash credit limits abruptly, without giving cardholders advance warning. Many banks are already finding ways around the law and launching new fees not specifically banned by the credit card reform law.To find out more information about how you can improve your credit score,go to http://www.debtandcreditrelief.org.
Saturday, January 30, 2010
What Should Your Credit Score Be
A lot of people know their credit score, but have no idea as to what their credit score should be. Or even what is considered good. To review, credit scores can range from 300 to 850. A credit score of 850 would be considered perfect, and a score of 300 would be considered the worst possible score a person could have. Credit scores are a measure of risk, how likely someone is going to be able to repay debt. So a person with a score of 300, for all intents and purposes, would not repay that debt. That is what the score would tell a lender.When it comes to mortgages, people should aim to have their credit score be over 700. Individuals with scores over 700 will get very good rates. A person with a 700 score is considered not very risky to the lender. Individuals with scores over 760 will most likely get the best rates offered by that particular lender. Keep in mind that the median credit score is going to fluctuate around 725.Not to mention that all of this applies to credit card interest rates as well. Considering most American’s are in heavy debt, an incredible amount of money can be saved by increasing your credit score 25 or more points.Closing point, people save a lot of money if they can increase their credit score over 700.To find out more information to raise your credit,go to www.debtandcreditrelief.org.
How Debt Affects Your Credit Score
In these tough times, people need credit and loans. Debt can affect credit, especially if there are recurring debts associated with it. Interest rates and finance charges can be added to your current debt. If this is happening, there are chances that accounts cannot be fully settled. It affects debt in such a way that it makes your monthly balance higher than what it should be. Debts make your credit standing worst. You end up paying interest and finance charges over and above your monthly payment. In case debts are unsettled, there are risks involved such as the next credit application might be denied due to your own credit history. If there are past issues with your creditor regarding existing debts, possible loan and mortgage applications will never be approved. When considering any application, it is up to the creditor to decide if you deserve a second chance. Based on your credit record, if they see that you had difficulty settling accounts in a few months but you were able to produce a good credit standing, a creditor might consider it. But, usually it is a case by case basis.Mostly, debts can affect you in some ways like not being able to apply for another credit. Of course, what you have in mind is only the amount you need to pay. In the long run, application for another type of credit will just fade away. People with outstanding debts are forced to use cash on hand since they cannot use the benefits of their credit cards. As part of their responsibilities, they have to pay the amount due to them before they can even move on and use credit. Unsettled debts have higher risks of getting your credit suspended until you fully settle your account. Worst case scenario would be the termination of your account.In other words, settle your accounts and be financially free. Pay on time to eliminate debts and your credit will no longer be affected.A high amount of debt, especially if it is above 50% of your credit limit will definitely affect your credit score in a negative way. However, if your debt is below 35% of your credit limit, it will have a positive impact. A high amount of debt, especially if it is above 50% of your credit limit will definitely affect your credit score in a negative way. However, if your debt is below 35% of your credit limit, it will have a positive impact. To find out more information to improve your credit score,go to http://www.debtandcreditrelief.org/
Friday, January 15, 2010
Why You Should Care About Your Credit Scores
Credit scores directly affect most of your financial transactions,including:buying a home with a mortgage,borrowing money to purchase a car,credit card interest rates,and even applying for a job.Making sure your credit score is as high as possible is one of the easiest ways of saving money every month.Your credit score tells a lender very quickly and efficiently how likely you are to default on a loan.The lower the credit score the higher the interest you will have to pay-because the lender has to take on more risk to lend you money base on your past payment history.A recent study showed that 75% of credit reports contain errors.By ordering your credit reports and taking steps to make sure your credit reports is 100% accurate,you can save yourself thousands of dollars per year.If you are interested in raising your credit score,go to www.getcredithelpnow.info.
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