Tough Standards By Banks For Mortgage Approval Requires Credit Education

Several years ago, the mortgage underwriting standards of banks were so liberal that nearly anyone could get an approval, regardless of income levels or credit scores. The subsequent real estate crash and huge number of mortgage defaults since those easy lending days has resulted in much tougher underwriting standards.

Many borrowers with adequate income and home equity are still unable to refinance or purchase a home due to credit scores that are below the minimum requirements established by the banking industry.

It is estimated that one third of all Americans are now unqualified for mortgage approval based on credit score.

According to research from Deutsche Bank, the number of Americans with credit scores below 600 has increased to 26% from only 15% prior to the start of the recession. Further examination of credit data reveals that 9% of all Americans have a credit score in the 600-649 range.

Based on current credit score requirements for a mortgage approval, any applicant with a score below 600 is almost certain to be turned down by a banking institution. Borrowers in the 600-649 range are also considered “weak” candidates with a high turn down rate, especially if the credit score is below 620.

Based on the total number of Americans with a credit score of 649 or lower, up to 35% of all Americans are effectively locked out of the refinance or purchase mortgage market for the foreseeable future.

If a low credit score is the primary reason for not being able to refinance and benefit from the lowest mortgage rates in history, there are steps that a consumer can take to raise the credit score. For example, a low credit score may be due to inaccurate information on the credit report which can be relatively simple to correct.

Credit scoring is done using complex models employed by the major credit reporting bureaus that assess factors such as how much credit is currently being used, open collections, amount of debts outstanding, payment history, number and type of accounts and the age of open accounts.

Learning how the credit scoring system works, what can cause a credit score to change and what steps are necessary to improve a credit score can result in a significantly higher credit score and lower consumer borrowing costs. A great way to get started is to take advantage of information offered by government agencies.

The Federal Reserve has published a comprehensive consumer’s guide on Credit Reports and Credit Scores which provides answers to the most common and important questions about credit. In addition, the Fed has a separate section of in depth information on Improving Your Credit Score. The time invested in learning about credit and how to improve a credit score is time well spent since it can result in saving thousands of dollars a year through lower rates on revolving, installment and mortgage debts.

Is your bank manager is spying on you

Ever wondered why you can still be turned down for credit even though you have a spotless credit report? Well it turns out your bank may know a lot more about you than you think.

What does your bank know about you?

This article is about those 6 little letters that can conjure fear even within the most financially hardened individual - C R E D I T. Can I get a credit card? Will I be able to get a mortgage? What does my credit report look like?

The backbone to any credit check will always be the traditional credit report. But did you know lenders are now often looking at between 60 to 80 different factors when deciding whether to accept your application for credit?

Here are some factors they consider that you may not know of...

Liquid assets

Traditionally, lenders have looked at your history of paying off debt as indicator of how reliable you will be as future customer. But, as the financial downturn has thrown many people’s finances into disarray, lenders are now keen to get a fuller idea of your current balance sheet before issuing you with credit.

Referencing agency Callcredit uses SHARE – a collection of customer credit data provided by banks, building societies, credit card companies and finance houses. Data held could include credit limits, outstanding balance, monthly payments, start date and settlement date.

Callcredit and Experian also use a modelling technique known as the ‘affordability index’ to predict the amount of disposable income you possess. This will usually involve balancing any unsecured debt you have (e.g. credit card debt) against your income (obtained from your application or current account details) to give an overall ratio of your indebtedness.

If income details are not available, the model will be based on your current credit facilities and how much credit you have access to – this is why you should always cancel any credit cards you are no longer using. Behavioural data such as the amount of cash you withdraw on your credit card and whether you only pay off the minimum each month may also affect your credit rating, as it suggests a lack of disposable income.

Home value

Lenders are also keen to be totally clued up on your living arrangements. Whether you rent or are a homeowner may have an impact on your ability to get credit. For example,a freelance journalist Karen Houser was recently turned down for a credit card because she was a self-employed renter.

The next few years could also see your reliability in paying rent factor into your credit score. Several agencies have expressed an interest in using data obtained from landlords and letting agents when issuing credit ratings. It’s already in full swing over in the States - credit referencing giant Experian’s US arm has even bought RentBureau, a rental credit agency.

But even if you are a homeowner, the value of your property can still be considered when you apply for credit. Callcredit are now using an Automated Valuation Model (provided by online valuation company Hometrack) which can accurately assess the value of your property. This again allows Callcredit to warn lenders about any big fluctuations to the value of your property, so they can 'intervene' before missed mortgage payments or refuse you further credit on this basis.

Utility payments

Credit scoring agency Experian already uses customer payment data from Gas Companies and is keen for more utility providers to begin sharing information with them. The scoring agencies argue that gas, water and electricity are another form of credit because they are consumed first and paid for after. Thus, the agencies want to factor this payment information into your credit report.

Payday loans are another form of finance that scoring agencies are eager to see included on reports in an attempt to provide a fuller picture of your credit worthiness. As if you needed any more reasons to avoid them like the plague!

Emma Roberts unveils the 5 biggest credit rating myths that could destroy your finances and how to beat them.

Mobile Phones

We all know that your credit record can impact on applications for mobile phone contracts, but did you know that your phone payment information can also affect your credit record?

Mobile telephone providers have now started sharing payment data with referencing agencies in an attempt to identify unreliable customers. So make sure you pay that phone bill on time!

Risk triggers

Credit scoring agencies are very interested in what they call 'risk triggers'. These are vaguely described as 'financial events' such as missed repayments, but basically it's anything that you do that credit agencies can monitor - and lenders want to know about.
These 'triggers' are observed by credit scoring agencies and reported to lenders as an indication of a possible change in your financial situation. Callcredit monitors over 250 different types of triggers, whilst Experian has a tailor-made collection tool called Tallyman to alert lenders of any immediate or forecasted changes on your balance sheet.

Triggers will alert lenders to any missed mortgage, telephone or utility payments allowing them to act quickly to minimise any financial risk they think you may suddenly pose to them. This could involve reducing a credit or overdraft limit or sending out further requests for re-payments.

But as well as ‘risk triggers’, credit agencies are now also monitoring ‘collection triggers’ designed to alert lenders to any improvements in your financial situation – such as an increased income or decrease in credit card spending. This will allow the lender to put further requests in for re-payment, or even send you marketing for further products tailored to your new financial status.

The agencies say the trigger system is designed to help lenders to lend responsibly and so protects both you and your creditor – but you might feel considerably less positive about it... Either way, it pays to remember that big banker is watching!

Postcodes

Credit scoring agencies have also begun profiling you depending on the levels of fraud and indebtedness within your postcode. To find out more read How your postcode costs you money.

I'm sure many of you will perceive these new credit scoring measures as a creepy invasion of our privacy. But after the recent financial downturn – a crisis caused in part by a lack of regulation over credit distribution – perhaps this is short-sighted. Perhaps instead we should be welcoming any improvement in the methods used by lenders to ensure that a borrower can repay debt.

What do you think

Should banks be snooping around in your utility bills? Is it right that lenders can keep tabs on your financial situation 24/7?

Let us know your views in the comment box below.

What you need to know about refinancing costs

When you refinance, you face several different choices that will directly affect how much you pay. There are also several factors over which you have no (or almost no) control that will play directly into the refinancing cost. Here are some facts about refinancing (and financing) mortgages that account for the differences in what people pay:

-Lowering the interest rate means higher closing costs. If you choose to have a lower interest rate, you can pay "points" (a point is 1 percent of the loan amount) to buy down the interest rate. Points count as part of your closing costs, and, while they're deductible, you have to amortize the cost over the life of the loan when you refinance. If you're buying a home, you can deduct points in the year of purchase.

-"No Cost" refinancing costs you very little. But you'll get a slightly higher interest rate than what is otherwise being offered to the best customers.

-Credit history and scores are reflected in price. Today, the best interest rate and lowest closing costs are being offered to those with the highest credit scores (and best credit histories). Lenders will pull credit histories and scores from each of the three credit reporting bureaus, Experian, Equifax, and TransUnion. The middle score is the one that's used to qualify you, and if that middle score isn't above 760 (780 in some cases), you might have higher closing costs.

-Title insurance costs vary. Title insurance can be the single most expensive line item on the HUD-1 (the government mandated closing statement form used in most residential loan closings), and the cost varies from state to state and even from county to county within some states. Some states have very good title insurance lobbyists, and the costs are higher than in others.

-Lender costs are a big component of total cost. Sometimes tthe biggest closing costs are processing and underwriting fees, along with those fees charged by the escrow company (title insurance and escrow).

-Prepaid costs can vary. Depending on the day you close, you'll have to prepay the interest you owe from that day (and including that day) through the end of the month. This gets tacked on to your closing costs. So, if you close on the first of the month, you'll have 30 days of prepaid interest. If you are getting a $420,000 loan, that could be a tidy sum of money. You may also have to prefund your tax and insurance escrow (you'll eventually get a check from your old mortgage company with whatever is left in that escrow account), and that can add to the total closing costs as well.

Understanding Your Credit Score

A great mystery for many U.S. consumers is the credit report/credit score system. These scores are available to, and affect dealings with mortgage lenders, banks, utility companies and prospective employers among others. Unfortunately those pirates you see singing about free credit reports on TV are not much help.

A credit score is a numerical value based on the information found in your credit report. This score gives lenders an idea of what type of credit consumer you will be based on your credit history. Loan approval, loan rates and terms are all determined by how the creditor views your credit. The higher your score, the more likely you are to get credit, at better rates.

Most scores range from 300 to 900, with the majority of people in the 600 to 800 range. To get the most favorable interest rates, you’ll need a score of 720 or higher. In terms of interest rates, a person with a credit score of 520 will get interest rates on loans that are three to four percentage points higher than rates given to a person with a credit score of 720. (source creditreport.com)

Since your credit score is a reflection of your credit report, a number of items in your credit report could negatively affect your credit score. Creditors may look unfavorably on late payments, a short credit history, multiple new accounts, multiple credit card accounts and bankruptcies.

To improve your credit score under most systems, focus on paying your bills on time, paying down any outstanding balances, keep your balances at or below 25% of your card limit, don’t transfer balances, and pay off your debt. Improving your score significantly is likely to take some time, but it can be done.

It is also very important to review your credit reports annually to find any mistakes that could negatively affect your score. If you find errors in your credit report, you may dispute the information and request that the information be deleted or corrected. To do so, you should contact either the credit bureau that provided the report or the company or person that provided the incorrect information to the credit bureau.

In some cases, a lender may tell you your credit score for free when you apply for credit. For example, if you apply for a mortgage, you will receive the credit score or scores that were used to determine whether the lender would extend credit to you and on what terms. You may also receive a free credit score or scores when you apply for other types of credit, such as an automobile loan or a credit card.

You can get one free credit report every twelve months from each of the nationwide credit bureaus–Equifax, Experian, and TransUnion–by

visiting www.annualcreditreport.com

Home Loans: Refinancing Isn't So Easy

Mortgage rates are at all-time lows. Rates range from 4 percent to 4.5 percent for some borrowers.
It's a great time to refinance — if you can.
Many homeowners who would love to lower their mortgage payment don't qualify. And many who do are discovering that getting a new loan isn't as easy as it used to be.

Pennsylvania resident Jeff Marsico has been with the same lender for 15 years. He's had two houses and has never missed a payment. With equity in his house, a solid income and credit score, he figured refinancing with his existing lender would be fairly simple. It wasn't.

It took 90 days to get the loan — and along the way the lender inundated him with requests for documents: every page — even the blank ones — of his brokerage statements, and every page and schedule of his two most recent tax returns.

Tips For Refinancing

Research your credit Score. The credit score cutoff to get any home loan is substantially higher today than it used to be. People are often surprised by their actual score. Check out your score ahead of time.

Shop around. Rates can be lower at regional lenders and independent mortgage brokers than at the top three lenders — Bank of America, Chase and Wells Fargo.

Safeguard personal information. If you're researching a mortgage refinance, be sure you're dealing with a legitimate enterprise. Don't disclose any personal information until you've confirmed that you're dealing with a bona fide lender.

Lock in a great rate. Rates can change quickly. If you're quoted a great rate, then lock it in that day. This requires filling out an application, which can be done online. Your lender can help you calculate how much you'll save by refinancing. HSH.com and Bankrate.com have lists of lenders nationwide and online calculators for determining how much money refinancing could save you.

Don't delay. Rhonda Porter, a blogger and mortgage originator in Kent, Wash., says not to postpone refinancing — especially if it requires an appraisal (most mortgages do require one). If a neighbor's home goes into foreclosure, it has an impact on surrounding property values. As a result, your home could be appraised for "less than originally expected," and have a negative impact on your refinancing application, Porter says.

Expect fees, strict documentation requirements. Consumer Reports says to expect to pay for an appraisal. What's more, because of stricter lending standards, it's likely that you'll have to provide more documentation then you might have thought necessary.

"Many of you who use accountants probably know that accountants staple the top of the tax return," Marsico explains. "So, in order for me to scan those documents I was pressing the paper up against the scanner and it left a black mark at the top."

But it wasn't pristine enough for the lender who wanted blotch-free pages. Marsico undid the staples and rescanned the pages.

There were lots of other frustrations too. But in the end, he got a 4.375 percent loan that will save him about $1,000 a year on his mortgage payment.

But not everyone will be so fortunate. The days of easy-to-get mortgages are over, says Greg McBride, a senior financial analyst at Bankrate.com.

"Prior to the credit crunch, if you had a pulse you got a loan," he says.

But today, he says, many homeowners can't refinance because they don't have enough equity, their incomes are too low, their debt is too high or their credit scores aren't good enough.

The Role Of Credit Scores

FICO scores — the ones used by nearly all the big lenders, range between 300 and 850. These days, a score of 740 or even higher is required to get the best rate. Three years ago a score in the 700 range might have sufficed.

Similarly, McBride says, the cutoff to get any loan is substantially higher than it used to be. Today, if a borrower's score is below about 660, it may be tough to get an attractive rate. And, McBride says, if the score is below 620, the borrower may not find any loan at all.

"Lenders are still pretty skittish because of the high level of mortgage default[s] and borrowers have to bring more to the table than a smiling face," he says.

Seattle area mortgage originator Rhonda Porter says people are often surprised by their credit score.

"They might think they have a 740 score, but when I see the report it's 720," Porter says.

Score Analysis, Low Rates On The Horizon

Part of the reason may be that credit scores provided to mortgage lenders are tweaked slightly differently from those provided to auto dealers or credit card companies.

Lenders typically look at scores from all three of the major credit reporting agencies and use the middle score in assessing the borrower's credit history.

Something as seemingly insignificant as a $550 balance rather than a $500 balance on a credit card could hurt your score, Porter says.

"Credit scoring is not an exact science and yet people are judged heavily by it," she adds.

The Mortgage Bankers Association expects that higher credit scores, more equity and higher income-to-debt ratios will remain extremely important to lenders.

And will the low rates continue? The association believes rates will rise to just over 5 percent next year and up to 5.5 percent in 2012.

Three Debt Collectors Settle With West Virginia

Companies were attempting to collect old, charged off debts

Three debt collection agencies have agreed to cancel $1,277,337 in debts for 161 West Virginia consumers. In addition, some consumers will get cash refunds.

West Virginia Attorney General Darrell McGraw had opened an investigation against the companies - Trailhead Capital, LLC, a debt buyer based in Chicago, IL; Hollis Cobb Assoc., Inc., Trailhead's affiliated collection agency in Norcross, GA; and Troy Capital, LLC, a debt buyer based in Las Vegas, NV - after receiving complaints that revealed the three businesses were collecting debts in West Virginia without a license and surety bond as required by state law.

Records also showed that the debts the companies were attempting to collect were primarily charged-off credit card accounts originally owed to Chase, Wells Fargo Bank, and GE Capital. In other words, the banks were no longer attempting to collect the debts.

In West Virginia, businesses that purchase defaulted debts for collection, as Trailhead and Troy Capital did, cannot avoid being licensed and bonded by hiring other agencies to assist them in collecting the debts.

"Our nation suffers from an explosion of credit card debt resulting largely from companies that extended credit without due regard to consumers' ability to repay and without clearly disclosing the terms of financing," McGraw said. "Rather than working with consumers to develop plans that might enable them to pay their debt over time, banks increasingly sell defaulted credit card debt for pennies on the dollar to collection agencies called debt buyers."

McGraw said companies that buy bad debt often take overly aggressive collection actions that include the filing of lawsuits - even when they have little proof of the debts they seek to collect from consumers.

"My office will continue its vigilance in ensuring that all debt buyers are licensed and bonded as well as follow the letter of our state's consumer protection laws," he said.

NCR Credit Plus Affiliate Program

Do you have a list of clients that are Credit Challenged or have Poor Credit Scores?
Do you have new clients that you cannot get them a loan because of their low scores?
Do you have clients that you have to say “sorry we can’t help you”?

NCR Credit Plus will take your potential client’s enroll them into our program. Educated, counsel and get their scores loan worthy for you and your company. Our education information will
help your clients get past the fears and doubts he or she has about
Credit Restoration.

Every client asks the same kind of questions: “Will this work, how long does it take?”

Credit Restoration is hard work, time consuming, and an ongoing affair. It is against the law to guarantee a time frame it will take to improve or restore anyone’s credit. However, it’s also against the law
to not state an “average” time frame that it will take. Our “Average”
time frame is 6 months.

How much will my score increase?

Your credit score is compiled directly from both positive and negative entries in your credit report.
* If you have open accounts that you are currently paying on, you should not record a late payment.
* If you do not have accounts you are paying on, then we will help you get some credit established.
* Use of 35% or less of your credit line will boost your score’s.
* Avoid a “hard inquiry’s” which can bring about a potential score reduction of five points or more.

* Your credit history accounts for 35% of your score.

Here’s what we think you’ll particularly appreciate about our program, and what it offers you:
NCR Credit Plus’s allows you to incorporate our services with your existing and new clients.
If you have a web site (Your Web-Master must add link) you can add a link offering our services.
In-depth updates about all account activity and progress made: We provide specific day/dates.
Identifying all accounts that are being worked on Ex; To Do / In Progress / Deleted / No Change.
Client score’s can be monitor without creating an inquiry.
Our services not only helped your client’s get approved, but also helps them get “lower interest rates.”
NCR Credit Plus success is illustrated by a client retention and track record that speaks for itself.

Please explore our site (www.ncrcreditplus.com), and contact us to receive full details regarding the services offered by NCR Credit Plus, or to answer any questions or concerns you may have. E-mail us for a Affiliate Welcome Packet.(info@ncrcreditplus.com)

Can a Bad Credit Score Hurt a Relationship or A Marriage?

Do you have a bad credit score? Do you think it could ruin your relationship or cost you your marriage? You may know that money problems are one of the leading causes of divorce. Find out how your credit score can cost you more than money and what you can do about it.

So much of your financial life is determined by that little three digit number called your FICO. Your FICO score will affect how low or high your credit card rates are, how good of a mortgage loan you qualify for, and how affordable your auto and home insurance premiums are. So it is important to keep an eye on it regularly.

If you have a bad credit score you will be forced to pay higher interest charges each month for all your loan products. You will have less money in your bank account each month to pay all your other bills which can be a source of fighting in your relationship.

This is especially the case if one of you is trying to save money and get your debts paid off and the other one has a shopping habit that keeps maxing out all the credit cards especially department store credit cards with 21% APRs which are ridiculous.

Both of you need to work together and communicate about your financial habits and your desires to save and/or spend money. It will not be easy at first but over time you can get on the same page with each other. You can work towards a common goal - a better future.

You can come to an agreement and work on getting your credit card debts paid off first. This will increase your credit score and allow you to apply for a lower rate mortgage and shop for cheaper auto and home insurance rates. This will let you to keep more of your paycheck in your bank account each month and make it less stressful between you and your partner.

Then once you have accomplished this goal you can take a little money from your savings account and go on a little vacation or buy something nice for yourselves. Working together like this can help strengthen your relationship.

You do not want a bad credit score to cause financial problems and lead to your relationship or marriage collapsing. Take the first step and check both of your credit scores free and see where you stand. You may find that you are not in as bad shape as you first thought.

visit www.ncrcreditplus.com for more information.

How to handle collection agencies

If you’ve gone over the edge, so to speak, with your debt and have had your bills turned over to a collection agency, the main thing to do is not talk to them unless you intend to pay them. There are several good reasons for taking this approach.

The strongest reason for not talking to them is because they have a lot of practice in manipulating and scaring people, and many of them are very good at it. When you’re drowning in debt and have ugly marks on your credit report, the last thing you need is some collection guy scaring you into believing things that are not true, or talking you into making commitments that you can’t or don’t want to make. Thus, the smartest thing you can do is not speak or listen to them at all.

Instead, get online, at home if you can, or at the library or any other place you can get access, and find out what the rules are for collection agencies in your state. Most states now bar collection agencies from calling before 8am for example or after 9pm. Also many states now have rules that say collection agencies cannot call you at all if you send them a letter asking them to desist.

Another reason to not talk to them is because every time you do you reset a little clock that keeps your file active. Collection agencies can only try to collect from you within seven years of dealing with you about it. You want that clock to start the second you miss your first payment and then to keep on ticking. If you talk to the collection agency, you’ll be resetting that clock over and over again each time you do it, thus delaying the time that your seven years will expire.

Remember, there is no law or rule that says you have to speak to collection agencies; nor are there any penalties for not doing so, thus, no bad things will happen to you if you ignore their phone calls, but some bad things might happen to you if you do talk to them, so, just don’t do it.

Also, be on the lookout for information from the collection agency that comes via the U.S. postal service. Most states have laws that say a collection agency has to notify you by mail if they file a claim against you in court. And then, if the collection agency does sue you, do not under any circumstances miss that court date, because if the collection agency is there, and you’re not, the judge will likely give the agency most of what it’s asking for, such as a freeze on your bank account, garnishment of wages etc. If you go to that hearing on the other hand, and bring every scrap of evidence you have of your inability to pay, or how having your wages garnished or bank account frozen would destroy your life, you are likely to get a much better deal at court.

Finally, consider filing for bankruptcy. If you are in so deep that it is clear that you are never going to be able to climb out of your mountain of debt, bone up on bankruptcy rules and regulations in your state, and then find out where the court is that you would have to do it in. Then, collect all of your documentation, including copies of your credit report, and petition the court. If you’re truly in over your head, you will almost certainly be allowed to declare bankruptcy, and that will force all of those collection agencies to leave you alone.

How Often Do Creditors Report to the Credit Bureaus?

Credit reports provide great details about a person including name, birth date, Social security number, home address, how payments are made, income, employment history, home ownership, previous address, court cases, judgments, and bankruptcy and foreclosure records.

Above all it gives details about a person’s credit history. These include all the creditors with balances and accounts that are closed or in collections. It will also indicate if there are any late payments, and any other irregularity. In addition it will also list the requests for that credit report by creditors during the past year and requests for credit reports including those by employers for the past two years.

These reports are maintained by three nationwide credit bureaus which use slightly different sources to compile the information. Based on the information they have credit bureaus calculate a figure called the credit score. The three credit bureaus Equifax, Transunion, Experian use different formulas to arrive at their score. The credit score can be considered a mathematical way of determining the likelihood of the borrower paying back a loan.

This information can be accessed by creditors, insurers, employers, and others who have been legitimately allowed access subject to conditions through The Fair Credit Reporting Act (FCRA). It is clear that accurate information in the credit report is important to everyone concerned not only for the person about whom it is concerned but to anyone else who may want to rely on it for decision making. As such it is important to understand how the credit report is compiled and the accuracy of the information and sources on which that compilation is made.

It is important to know how and at what frequency credit information reaches the credit bureau. On examination of their procedure, it is clear that frequency of reporting varies depending on the creditor. While some creditors will report any changes in the customers’ balances every day, others will report once a month or at longer periods. This is mainly due to efficacy reasons, since with most people there will not be much of a change in credit balances. Because of that creditors will only report if there are any changes in the credit balances. This therefore means that for some people their credit report will get updated about once a month while others may not see any change in their credit reports for 3 or 6 months. On the other hand creditors will report late payments and other negative activities quite promptly.

Find out how to obtain your credit report online by visiting http://ncrcreditplus.com/service/obtain-credit-report.php. NCR Credit Plus website(www.ncrcreditplus.com) offers tips, advice and resources to help improve your credit score's.

Homeowners becoming renters after losing money in the housing market.

Brooke Zeringue became a homeowner in 2004, going in on a two-bedroom condo in Brea. Now her condo is on the market as a short sale, and Zeringue is about to become a renter.

Ideally, her new home will be private, homey, have an attached garage and rent for no more than $1,600 a month. There's plenty of rentals to choose from, but if you've got to act quickly because they go fast, she said.

"They're flying off the market," said Zeringue, 31, an interior designer. "If I thought about (a unit) too long, it was gone." Zeringue is part of the latest housing trend: Homeowners becoming renters after losing money in the housing market.The trend also is one of the main reasons why the biggest drop in rent in 70 years is now history.

According to apartment tracker RealFacts, Orange County apartment rents fell by $130, or 8.1 percent, over five consecutive quarters starting in late 2008. The Consumer Price Index likewise showed an extended period of rent cuts for the region that includes Orange County.

But these measures now show rent is rising again as empty apartments and rental homes start to fill up.
RealFacts reported that apartment rents here increased for a third straight quarter during the summer. The CPI shows rent rising in seven of the past nine months.

Falling rents are a rarity.Until this latest bout, the cost of rentals in the region dipped just one other time since 1940: During the housing slump of the early 1990s.Mark Schniepp, who co-wrote the UCLA economic forecast for Orange County, believes that the owner-to-renter trend is a huge reason why this latest episode is over.

For one thing, vacancy rates are dropping. After getting as high as 7.7 percent of all apartments at the height of the recession, vacancies are now down to 5.3 percent, according to both RealFacts and MPF Research, another national apartment tracker.

And homeowners going back to renting is a key reason, he said.
In addition to those losing their homes to foreclosure, many underwater homeowners either are selling their homes as short sales (at a price that's less than the mortgage balance) or are just walking away from delinquent mortgages.

In addition, Schniepp said, accidental landlords – those who rented out homes because they couldn't sell them – are finding that they can sell them now, booting their tenants out. That also increases demand since those renters now have to look elsewhere.

Landlords had to change their credit standards to deal with the number of owners who lost their homes, trashing their credit scores in the process.

"I'd say 70 percent of our applicants right now have all lost a home," Rick Foster, a landlord who manages about 30 rental units in Orange County, said of the rental shoppers he sees. "Their credit ratings have dropped."

Foster said his company had to lower its credit criteria. Whereas a score of 600 was the minimum before, Foster's company now accepts scores of 580. And a requirement that tenants have three months rent in the bank has been dropped, so long as they can provide paycheck stubs and employment verification.
Property manager Jerry L'Ecuyer, who also is president of the Apartment Association of Orange County, said landlords now look at more than just a credit score when dealing with former homeowners.
If their utilities, credit cards and car payments got paid, they likely will still be quality tenants – those who stay longer and take care of the property.

"Foreclosure is truly different than bad credit. It's a circumstance more than anything else," L'Ecuyer said. "If they stopped paying everything ... we're going to look at that a little differently."

Mark Terry of Terry Moving & Storage said a large number of his clients are homeowners putting household goods in storage while moving into rentals. Some are waiting for their next home purchase to go through, but others are becoming permanent renters.

"My storage warehouse is completely stuffed full," Terry said. "A lot of people are moving from a bigger house to a smaller house."

Two years ago, evictions soared as unemployment rates rose, Foster added. Rent dropped 20 percent.

Now, he's getting more applications for each vacancy, though only about a tenth of the number he got in the boom times. Units still can take up to three months to fill.

Among those joining the rental pool now are people who moved to Nevada and Arizona during the boom and are now moving back.

"They've lost their jobs, they've lost their homes, and now they're coming back to California," Foster said.

Mike Snow of Snow's Affordable Moving recalled how much of his business two years ago was moving renters from apartments back into their parents' homes. Early this summer, he said, many of them started renting apartments again.

Despite increased demand, landlords still are struggling.
MPF Research reported that out of 64 U.S. metro areas, Orange County had the nation's sixth-smallest increase in apartment revenue.

A two-bedroom unit in Garden Grove Foster is now trying to rent for $1,495 a month used to go for $1,650.

Renter Erika Escobedo said the market is working to her advantage.
For just $200 a month more, her family of six moved into a Fountain Valley house that's twice as big as the home they formerly rented in Huntington Beach.

"You can pretty much move wherever you want to right now," said Escobedo, 39, who works in reception for a hospital.
Economist Schniepp warned, however, that tenants should brace for higher rents in the near future.

Apartment construction is down, even though the population keeps growing. During the past three years, Orange County developers built less than half the number of the apartments they usually build.

"The rental market is going to continue to tighten," Schniepp said. "You're going to see rents starting to rise into 2011 and 2012. The train's left the station. There's no turning back."

Proven Ways to Improve Your Credit Score

Let’s face it, we’ve all been there. You’ve enjoyed a fun and indulgent spending spree, and yes, you charged everything to your credit card. One month and many blissful purchases later, you find yourself facing a huge credit card bill.



You don’t have the money to pay for it, so you pay the minimum balance due.
This is dangerous, and in many cases, can cost you your credit score – and ultimately your financial future.

Keeping a high balance on your credit card can incur a lot of interest. The longer you leave debt on your credit card, the higher interest charges become. And consequently, it becomes harder to pay off your credit cards completely. Because of this slippery slope – late payments, accounts slipping into collections and worse – you can get red marks on your credit report, which can hurt your ability to do just about anything.

Sadly, it’s true. Just about every aspect of your financial and professional lives is impacted by your credit history. When you apply for a job, the potential employer can check your credit history and decide whether or not to hire you based upon your credit report. Your ability to obtain a loan is also impacted by long-standing debt. When you give your Social Security Number to a lender, they have the ability to go through your financial records and decide whether it’s safe to give you a loan.

Unemployment, of course, also contributes to a dropping credit scores. Many people are turning to credit cards to pay for life’s necessities, such as groceries, when they lose their jobs. If you’ve gone years without paying off a credit card bill entirely, this debt can follow you and impact your credit score for many years. After seven years, in most cases, a negative mark will be removed from your credit report. In the meantime, though, you may be denied employment, a loan or other financing.

However, there is an opportunity for redemption. Pay off your credit cards gradually over time to improve your credit. Ultimately, the ideal situation would be to pay off everything completely, but that isn’t always an option. The best thing you can do – if your primary goal is to improve your credit score – is to start with the credit card with the highest utilization. Credit utilization is simply how much credit you use (balance) compared to how much credit is available to you (limit) – the lower, the better. A utilizations over 50 percent will hurt your credit score, so you will want to tackle the debts that have high balances compared to their limits first.

While you’re concentrating on a single debt, make sure you pay the minimum balance on your other cards. The more quickly you reduce your credit card debt and utilization, the easier it will be to improve your credit score. This could take months, and in some cases, years.

Either way, the point here is to pay off at least a little bit on each card’s balance. Once you’ve paid down your debts to below 50 percent of their limits, then you’ll want to focus on paying the credit cards with the highest interest rate first. This will ensure that you pay less in interest over time that can add to your debt, while also reducing the pressure of dealing with multiple cards with intimidating balances.

Resist the temptation to keeping charging to your credit cards, and refuse to accept new ones. Once you’ve gotten debt down to the point that you can breathe, make a vow not to use your credit cards until you’ve paid off every card in full.

Check your credit report often. Keep an eye on your score’s rise and fall, and keep spending to a minimum. Over time, you will find it easier to resist the urge to use that little plastic wonder.

A second “hard pull,” or formal, credit check, can adversely affect credit scores.

THE final weeks before a mortgage closing can be nerve-racking for any borrower, but new guidelines from Fannie Mae calling for an 11th-hour inspection of finances may mean even more headaches.

These new quality-control guidelines were rolled out this summer and call for a second credit review. They are designed to ferret out borrowers who, in the weeks between applying for a mortgage or refinancing and closing on it, might have changed jobs, taken out additional consumer loans or fallen behind on monthly bills. Such activities could affect their credit rating — and delay or torpedo a new loan.

Even having an informal credit inquiry before the purchase of a big-ticket item like a washer and dryer could affect the closing, or prompt the mortgage lender to change the loan terms.

Freddie Mac has similar new guidelines for lenders that go into effect in February.

“We’ve heard of many instances of a loan not closing or of having to be reunderwritten,” said Karen Deis, a real estate agent and mortgage broker in Hudson, Wis., who publishes Loan Officer Magazine, a trade publication.

Lenders have yet to assess how the new requirement might financially affect borrowers, who so far have not been hit with extra fees, Ms. Deis said. But she added that they could eventually face “processing” fees of hundreds of dollars.

Fannie Mae, the largest buyer of mortgages, instituted the guidelines in part to root out a type of mortgage fraud known as “shotgunning,” in which borrowers take out multiple loans on one or more properties, unbeknownst to the lenders. They often skip town with the cash and default on the loans.

The guidelines are also designed to uncover that fresh car loan or run-up on credit-card limits, all of which would appear on a credit report, or the fact that in recent weeks you lost your job or switched employers — changes that lenders now verify through phone calls. A salary cut in those final weeks also could prompt lenders, under the guidelines, to reunderwrite a loan.

“Fannie is looking for undisclosed liabilities,” said Matthew Cammarota, the senior vice president for consumer finance operations at Webster Bank in Waterbury, Conn.

It sounds clear enough, but lenders have taken different approaches to the guidelines, with varying impact for borrowers.

In August, Fannie Mae clarified that it was not suggesting the only option for banks was a second “hard pull,” or formal, credit check, which can adversely affect credit scores, just before closing. It outlined other ways to comply, including the use of credit monitoring services.

But Terry Clemans, the executive director of the National Credit Reporting Association, a trade group based in Bloomingdale, Ill., noted that “by definition of what Fannie is trying to accomplish, a ‘hard pull’ is really the only way.”

He said many banks were opting to use credit monitoring, a “soft pull” process in which banks hire third-party vendors to put red flags on a consumer’s credit report without depressing credit scores. But the cost of credit monitoring, which could run into the hundreds of dollars, could get passed on to the borrower, Mr. Clemans said.

Other banks are asking borrowers to sign consent forms stating that their debt-to-income ratios did not increase more than 3 percent in the final weeks, and did not total more than 45 percent. Increases of more than 3 percent that still keep the ratio below 45 percent are not permitted, according to Janis Smith, a Fannie Mae spokeswoman. (The ratio used by Fannie Mae measures the percentage of a borrower’s monthly gross income that goes toward debts.)

Thomas A. Kelley, a spokesman for JPMorgan Chase, said his bank did only soft credit checks, through credit monitoring. Mark C. Rodgers, a spokesman for Citibank, said that the bank complied with Fannie Mae guidelines but that the details of how it did so were “proprietary.”

NCR Credit Plus Affiliate Program

Do you have a list of clients that are Credit Challenged or have Poor Credit Scores?

Do you have new clients that you cannot get them a loan because of their low scores?

Do you have clients that you have to say “sorry we can’t help you”?

NCR Credit Plus will take your potential client’s enroll them into our program. Educated, counsel and get their scores loan worthy for you and your company. Our education information will
help your clients get past the fears and doubts he or she has about
Credit Restoration.

Every client asks the same kind of questions: “Will this work, how long does it take?”

Credit Restoration is hard work, time consuming, and an ongoing affair. It is against the law to guarantee a time frame it will take to improve or restore anyone’s credit. However, it’s also against the law
to not state an “average” time frame that it will take. Our “Average”
time frame is 6 months.


How much will my score increase?

Your credit score is compiled directly from both positive and negative entries in your credit report.

* If you have open accounts that you are currently paying on, you should not record a late payment.

* If you do not have accounts you are paying on, then we will help you get some credit established.

* Use of 35% or less of your credit line will boost your score’s.

* Avoid a “hard inquiry’s” which can bring about a potential score reduction of five points or more.

* Your credit history accounts for 35% of your score.

Here’s what we think you’ll particularly appreciate about our program, and what it offers you:


NCR Credit Plus’s allows you to incorporate our services with your existing and new clients.

If you have a web site (Your Web-Master must add link) you can add a link offering our services.

In-depth updates about all account activity and progress made: We provide specific day/dates.

Identifying all accounts that are being worked on Ex; To Do / In Progress / Deleted / No Change.

Client score’s can be monitor without creating an inquiry.

Our services not only helped your client’s get approved, but also helps them get “lower interest rates.”

NCR Credit Plus success is illustrated by a client retention and track record that speaks for itself.

Please explore our site (www.ncrcreditplus.com), and contact us to receive full details regarding the services offered by NCR Credit Plus, or to answer any questions or concerns you may have. E-mail us for a Affiliate Welcome Packet.(info@ncrcreditplus.com)

Unemployed hardest hit by restrictive credit card lending

Consumers who have good credit scores are being rewarded with some of the best offers industry experts have seen in awhile. On the other hand, those struggling through unemployment are being locked out of the credit system completely.

Even as credit card rates, rewards, and introductory APR offerings improved in recent months, many consumers have been unable to obtain any lines of credit at all, according to a report from the Christian Science Monitor. Unemployed Americans have been hardest hit by these recent restrictive lending practices.

Many consumers, especially those who no longer receive unemployment insurance payments, have been completely flushed from the credit system. In addition, the report said that while unemployment rates have held steady at around 9.6 percent many consider the actual number of jobless Americans to be closer to 17 percent.

Meanwhile, several lenders have reported significant drops in the amount of defaulted credit card debt they've written off in recent months, though some say this may be a sign that consumers are simply unable to get new credit card accounts, rather than overall improved credit health.

Credit Score Facts: Trick or Treat !

TRICK or TREAT: During the recession everyone's credit score has dropped.

TRICK: While it’s true that many people have experienced lower FICO scores during the recession, millions of others have managed their credit in ways that have increased their scores. By doing a few basic things, many folks can increase their scores over time. The most important are - paying your bills on time, keeping balances low, and applying for new credit only when necessary.

TRICK or TREAT: Credit scores are only one factor that determines whether you get credit.

TREAT: While your FICO score is an important piece of information that most lenders consider, lenders will also consider other information before making their decision. This can include information from your credit application (income, length of time on your job, own vs. rent, etc.), any prior credit experience you have had with that lender, and the value of the property (auto or mortgage loan) you want to buy.

TRICK or TREAT: Congress made a law that every consumer can receive a free credit score annually.

TRICK: Every consumer is entitled to receive one free credit report per year from each of the national credit bureaus via www.annualcreditreport.com. This report does not include your credit score.

If you are taking out a loan and may be on the edge of a scoring range so that a few points difference could force you to pay a higher interest rate, it might be a good idea to ask your lender which score they would use so you review the proper one. Credit bureaus may sell the FICO score and their own proprietary version.

If you recently had a lender or car dealer pull your credit score for a purchase, you can also see if they will share the score with you. I recently inquired about my credit score from a lender because we're considering a FHA streamline refinance. My middle credit score is 799, meaning that of the three bureaus, one was higher and one was lower. The 799 score is a few points lower than when I checked last year, but it's not enough of a drop to spook me. The FICO range is between 300 and 850.

Credit check for employment stirs debate

Applying for a job comes with a certain degree of anxiety: Will they like me? Is my resume spotless? Are my references strong?

A growing number of people affected by record joblessness and foreclosure rates in metro Atlanta and nationwide have a new worry: Will bad credit keep me from getting the job?

While the U.S. Equal Employment Opportunity Commission reviews testimony regarding the use of credit background checks for employment, supporters say the checks are a smart business tool for certain industries and critics counter that the reports unfairly discriminate against minorities and those affected by the recession.

Atlanta-based CredAbility has clients who fear they’ve been denied employment based on poor credit reports, including a woman who made it to the final interview stage with a mortgage brokerage firm and submitted to a credit report check, knowing she was behind on mortgage payments. The woman, who did not want to be identified, didn’t get the job.

“It’s hard to say because the potential employer didn’t say, ‘You lost the job because of something on your credit report,’” said John McCosh, CredAbility spokesman. “But with the timing of it, we can see why people reach that conclusion.”

Credit background checks are one of several topics up for EEOC debate in a series of commission hearings examining employment barriers, an EEOC spokeswoman said. Under the Fair Credit Reporting Act, employers are required to receive written authorization from an applicant to run the report and then must provide that person, or employee, with a copy of the information. Similar to the reports a consumer can obtain for free each year through credit reporting agencies, employers receive a report that lists debt. The reports do not, however, give an applicant’s credit score.

Sarah Crawford, senior counsel for the Washington, D.C.-based Lawyers’ Committee for Civil Rights Under Law, testified before the EEOC last week against the use of credit checks. Research indicates African-Americans and Hispanics tend to have poorer credit than whites, and credit background checks, while applied broadly, can have a second-hand effect of screening out minorities, she said.

“I think the assumption that is made is, if somebody is behind on their bills, then it tells something about their integrity or responsibility, but in many cases that assumption is flawed,” Crawford said. “You have somebody who has fallen behind on their bills because they’re out of their job in this economy, and because they’ve fallen behind on their bills, they can’t get a job.”

Credit check supporters say this is only one step of the hiring process for certain industries, such as financial institutions or retail and real estate firms, in which employees handle money or have access to confidential information. Nearly 60 percent of employers use credit background checks in some way, according to the Society of Human Resource Management.

Credit checks typically are performed during the final stages of interviewing, or when an offer has been made, because of the cost involved, said Mike Aitken, SHRM director of government affairs.

“It’s one piece of the puzzle; it’s not the over-riding factor,” Aitken said. “If somebody just lost their job and fell behind on bills, that’s not what they’re looking at. They’re looking at their track record for five or six years. They’re looking at a pattern and practice of not being able to meet their obligations.”

Only 13 percent of businesses use credit background checks on all job candidates in today’s market, compared with 19 percent in 2004, according to SHRM. Another 47 percent said they use credit background checks for selective job candidates, compared with 42 percent in 2004 that reported rarely or sometimes using the checks.

Aitken said credit reports should be applied only in specific instances. For example, a software company that conducted a credit background check on a chief financial officer candidate found that person had $35,000 in gambling debt.

“That was one of those things the employer didn’t want to take a risk with,” Aitken said.

SHRM, however, doesn’t believe credit report checks are necessary for all industries.

“You can’t really argue that a maintenance person or somebody who doesn’t have access to financial information should be having a credit report performed on them; it’s pretty hard to justify that,” Aitken said.

Heather Donnelly, director of operations for Atlanta’s Paces Staffing, said credit background checks aren’t as commonly requested as criminal or social security checks. Credit background checks are typically requested for mid-to-high level accounting or finance positions, she said.

“In certain positions they are looking for someone who is going to manage their money, and they are looking for someone who can show personal responsibility in their own life as well,” Donnelly said.

Crawford said there is little research, however, that demonstrates a correlation between credit and talent.

“To my knowledge there isn’t any research out there that makes the critical link between what shows up on a credit report and information that gets to whether someone will be able to perform the job,” Crawford said.

For that reason, SunTrust mortgage company does not conduct credit background checks, spokesman Hugh Suhr said.

“We researched the issue a number of years ago and did not find sufficient data to support a correlation between a score and job performance and risk,” Suhr said.

The federal government and some states are considering legislation that would prohibit employers from using credit background checks, with certain exceptions.

Congress last year considered House Resolution 3149, which was known as the Equal Employment for All Act and sponsored by Steve Cohen, D-Tenn. Among the co-sponsors, John Lewis, D-Georgia, said the legislation was written to halt what he called discrimination against people who were unemployed because of the bad economy, and had credit standings that suffered as a result. The resolution remains at committee level.

“If people cannot earn some money to pay their bills, they will be in a hole forever,” Lewis said.

Sarah Grathwohl of Roswell submitted to a credit and criminal background check for her former job with a development and real estate company in Athens. The company conducted checks for all job positions, and she didn’t think twice about it. She was hired as an assistant to the CEO and later helped with the company’s hiring process. She never knew of an applicant denied a job because of his or her credit.

Grathwohl, 29, supports the use of credit background checks in some instances, though she still isn’t sure why it was necessary for her former position.

“I think anytime you’re handling anyone else’s money or assets, it makes sense to me, and as a consumer it makes sense to me,” she said. “With my previous employer, it didn’t bother me, but I don’t see that it was extraordinarily necessary or related to what I did at all.”

New scoring model may help lenders better assess a consumer's credit risk.

The subprime mortgage crisis forced lenders to tighten their credit standards, putting a new set of rules, regulations and requirements in motion that have made it more difficult for prospective homeowners to secure financing. Although the Homebuyer Tax Credit, record low mortgage rates and special incentives have made homeownership more advantageous for home buyers, the strict credit requirements have not.

Efforts to help lenders determine the creditworthiness of potential borrowers have led the credit analysis company FICO to develop a new model for mortgage creditors. The FICO 8 Mortgage Score will be made available to the three credit reporting bureaus, allowing lenders to better assess the risk of a potential borrower.

The model works by analyzing an applicant's full credit history, providing a sharper analysis to lenders and mitigating the risk of future mortgage loan debt and foreclosure. The scoring range is the same used for traditional consumer credit scores - between 300 and 850 - but the model takes a number of variable factors into consideration when making its determination.

"To do the best job of evaluating risk and increasing profits, lenders need updated credit scoring analytics that incorporate mortgage credit performance since the subprime mortgage meltdown," TowerGroup senior research director Craig Focardi said. "The availability of mortgage credit scores across all three credit reporting agencies will enable lenders to upgrade their loan underwriting and account management practices."

Consumers considering purchasing a home in the near future should find out their credit score and contact their lender to determine their credit requirements. Individuals may also be required to provide two copies of their credit report to lenders, so financial professionals encourage consumers to review their reports for accuracy before submitting an application.

How 721 Became the New 680

Until recently, a credit score of 680 was something to be proud of. It meant you paid most of your bills on time, got dinged when you went shopping for a refi, but in general, had a solid enough record to get a loan at the best rates.

Not anymore. That 680 is firmly second-tier these days. Now, borrowers need at least 721 to get the biggest loans or the best terms, including a credit card with the longest 0% APR promotion or a jumbo mortgage. For millions of once-desirable consumers with scores between 680 and 720, that 40-point jump could cost thousands of dollars over the life of a typical loan.

Once that line has been drawn, there’s no wiggle room, either. Lenders place borrowers into brackets, which means someone with a score of 719 is lumped into a bracket that starts as low as 690. That one measly point could cost more than $600 over the life of an average 36-month car loan, or $2,500 over the life of a 15-year home equity loan, according to Informa Research Services. And that is “ludicrous on its face," says Ed Mierzwinski of the U.S. Public Interest Research Group. "Credit scores are a blunt tool being abused by creditors as if they were a sharp instrument.”

For their part, lenders say the credit scores aren’t arbitrary and that a score of 740 predicts the borrowers who are most likely to repay their debts and least likely to default. At the same time, they’re more profitable than people with a perfect score of 850, because they’re also likely to carry a balance or incur fees – and therefore, to generate profit for the lender.

As for 680, it’s become a casualty of the market crash. When Fannie Mae and Freddie Mac were backing mortgages after the crash, they settled on the 721 threshold for the best pricing, says Keith Gumbinger, a vice president at HSH Associates, a mortgage-data tracking firm. At the time, most borrowers were afraid of lending to anyone, so 721 seemed plenty low. Because most mortgages are backed by Fannie or Freddie, the major lenders kept the same threshold, and as banks have started to put loans on their books again, it’s stuck.

Of course, while earning a 680 wasn’t all that difficult before the recession, the new good-credit bar of 721 is harder to reach. With more people out of work and unable to pay their bills, even consumers with previously envious credit scores might not reach 721. To get there, a consumer would need low balances on credit cards and a 15-year credit history — but might have missed a couple payments over the last two years. Someone who regularly pays on time could drop from the mid-700s if he applied for several new credit cards recently. Other 720-scorers: Those who haven’t missed a payment but carry balances that are more than 30% of their credit line; or those who have a short credit history but pay on time.

For someone on the cusp, the differences could be as small as one extra credit inquiry like when a lender looks up your credit score before approving you for a loan, or if a prospective employer pulls your credit report without telling the credit bureaus it’s strictly for employment reasons. The same thing could happen if you’re suddenly using more of your available credit because you made a big purchase.

What’s a 680 to do? Sadly, not much beyond the regular steps to credit score maintenance, experts say. That means paying bills on time and keeping debts to a reasonable level. And be patient, says Ulzheimer: As lending picks up, lenders will be forced to relax their standards once again. Within as early as six months to a year, 680 could be back on top.

The American people are in pain and angry

The American people are in pain and angry. We've heard about the anger, but do we really get it?

I ask this because I've been exposed to raw venting — mixed with soul searching — from readers about "strategic default." That phrase is the clinical term for people refusing to make their monthly mortgage payment and walking away from the home because they can see no reason to keep paying for a house now worth far less than the value of the loan.

Jeff Horton, of Orlando, Fla., figured out the condo he bought in 2005 and house he bought in 2007 were worth about half the $400,000 he owed to Bank of America. Horton said "life is too short," and he stopped paying.

"Strategic default is a fancy term for walking away from your responsibilities," said G.S., an online commenter to the story. "It is becoming too easy to be irresponsible and blame it on everyone else."


But those kinds of comments were drowned out by others, expressing camaraderie with the Jeff Hortons of the world, angst about their own imperiled financial situations and disgust with a system they feel victimized them. Some said they also felt hopeless about saving their homes.

"Walking away becomes more of an option, "Bank of America isn't helping. I have applied for every program that has been introduced since the crisis and somehow I can never qualify."

In an unscientific poll readers were asked if it was acceptable for an individual to intentionally walk away from a mortgage they could afford to pay. Voting was divided almost exactly 50-50.

"What is the ethics of risking your family being homeless because you choose to pay on a mortgage that is a bad long-term investment?" a reader named Steve C. asked.

He added: "The banks that caused this economic mess spent lots of money for lobbyists to get their way in Congress, and have had Glass-Steagall repealed and have emasculated any attempt to add teeth to any regulations, and have been bailed out via TARP and dozens of other programs to the tune of trillions of dollars. They have continued to pay out massive bonuses, can borrow at almost zero percent from the Fed and buy Treasurys at 3 to 4 percent, and have actually gotten bigger, not smaller."

The question raised by bankers and ethicists is whether breaking the promise to pay a mortgage is a moral breach with long-standing implications for society.

Tom Donaldson, a business ethics professor at the Wharton School of the University of Pennsylvania, notes numerous studies show that when one party breaks a promise, the other party feels entitled to do the same. With a breakdown in trust, it's more difficult to do business or count on institutions to play by the rules.

But many people reacting to the question of strategic default and ethics aren't blaming homeowners. They blame the banks and government for not upholding the public's trust.

Jon Maddux, the chief executive of YouWalkAway, a Web site that advises people on strategic default for a fee, says many people who turn over keys accuse banks of causing the housing collapse by handing out loans "to anyone with a pulse," and then doing nothing for borrowers in distress, even though the banks survived on taxpayer bailout money.

"For bankers and business people to play the morality card is a joke," said a reader named Robert. Like many other readers, he questioned the array of broken promises to taxpayers and individuals by corporations, financial industry executives and others.

"I wonder if the new United Airlines will honor all those pensions they defaulted on now that they are going to be the world's biggest," Robert said. "Pensions are a contract between the company and their employees. Certainly that promise is as moral as the promise to pay a loan. When business is bad, they cut their losses. I don't remember morality ever being part of the conversation."


"Businesses are expected to do what's right for their shareholders," and walking away from a bad investment improves their credit rating, he said. "Individuals are told they have a moral responsibility not to walk away, and people are scared about the consequences."

Under contract law, he said, there is no issue of morality. The contracts simply state what the parties will do if there is a breach. In the case of a mortgage, the person gives up a house and could be required to pay the remainder of the mortgage if the sale price on the home is insufficient.

"Individuals should do what's best for their families," White said. "There is a lot of pain and suffering."

The anger out there, as far as I can tell, is equal opportunity. It comes from people attacking both Democrats and Republicans, feeling betrayed by the financial crisis, housing crisis and the 9.7 percent unemployment rate.

As for strategic default, many people wanted to know what risks they would be taking if they dared cross into such territory. For them, White offers these words of advice.

If you live in a state that is considered a "non-recourse" state, you can walk away from your mortgage and the bank can't keep chasing you for the money. In "recourse" states, such as Illinois, banks will recover as much money as they can through a foreclosure sale of your home, and then have the right to pursue a "deficiency judgment," attempting to collect what they couldn't recover when your home was sold.

Although they can do this, few banks do, White said.

Horton, 33, who is awaiting foreclosure, has been living in his home without paying the mortgage for 14 months. He's saving his payments to cover any possible deficiency judgment.

Other worries revolve around credit scores and the fact that a bad score can keep people from getting another mortgage or a car loan. According to NCR Credit Plus, a foreclosure can take about 140 points off your credit score turning a top-quality credit score into a subprime score. White said a default can stay on your credit report for seven years.

But White said that if a person pays attention to the rules of credit scoring, he or she can default on the mortgage and rebuild credit quickly. Much of the score depends on total debts, he said, so people who pay off their other debts can raise their score close to where it was before a foreclosure. In fact, for people deeply in debt, this approach can end up giving them a better credit score.

The trouble is no one can be sure just what will happen to a credit score, so White provides this advice: Talk to a lawyer before walking away, and don't do it if you will need to borrow soon.

7 Techniques To Enhance Your Credit Score Rating

Your credit rating accounts to the amount of awareness you could have to fork out for a loan or a credit card. Growing your credit score in just a few factors will make a large difference within the attention rate you’ll shell out for a purchase. If your credit history score is great enough, you’ll have no problem qualifying for the lender’s ideal rates and terms on auto financing, property loans and small organization loans.

The following are a handful of points about how you can protect and enhance your credit rating.

1.Order Your Credit rating Report.

Your credit score is depending on your credit score survey, so you need to begin by ordering your reviews and reviewing every one particular for accuracy. You can get your reviews from a service for instance MyFico.com, or order from Equifax, Experian and Trans Union separately on the net or by phone.

2.Check Your Credit Report Data for Inaccuracies.

Check out the identifying data for name, social security variety, birth date and incorrect address. Make certain that old negatives and paid-off debts are deleted. Check out for accounts and delinquencies that usually are not yours, late payments, charge offs, lawsuits, judgments or paid out tax liens older than seven years old. Also, paid for liens or judgments which are listed as unpaid, duplicate collections, bankruptcies that are older than ten many years and any negative data that is not yours.

3.Constantly Pay Your Debts on Time.

Payment history makes up much more than a third from the typical credit score score. If you paid costs late in the past, you possibly can increase your credit history credit score by starting to pay your bills on time. Lenders are looking for any sign that you simply may default, and a late payment is a very good indicator that you might be in financial difficulty.

4.Continue to keep Credit rating Credit cards Balances Low.

Carrying smaller balances could be the best strategy to boost your credit score score. The score measures how very much of your limit you use on each credit history card or other line of credit score, and how much of the combined credit rating limits you’re making use of on all your cards. Inside 60 days, paying down credit ratings card balances can improve your credit rating report by as very much as 20 points.

5.Try Not to Open In-Store Credit rating Cards.

Though your first credit score accounts can serve to build and enhance your credit history record, there comes a point when just about every subsequent credit ratings application can lessen your score. New credit rating charge cards cut down the age of your credit record, along with a department store credit ratings card isn’t great evidence of credit history worthiness. Every time you apply for the retailer’s credit rating card your credit history store gets dinged.

6.Be Conservative When Applying For Credit.

Having at least one credit ratings card that’s far more than a couple of many years old can enable your report by 15 percent. Make sure that your credit ratings record is checked only when necessary. Or, should you are shopping to get a home, try to apply for loans inside of a two-week period. By keeping the loan process inside of a two-week period, all of the credit history record lookups are seen as 1 single request.

7.Don’t Close Credit Cards or Other Revolving Accounts.

Shutting down unused accounts that have outstanding balances with no paying off the debt changes your “utilization ratio,” which would be the quantity of your total financial debt divided by your total available credit. It is going to lower the gap between the credit ratings you’re utilizing and also the total credit score obtainable to you, and that may hurt your credit rating score.

Shooting for FICO 850? Here’s Why You Shouldn’t

It’s been drilled in our heads for the last 36 months: “lender’s standards are going higher, while our FICO scores are headed lower.”

This divergence in underwriting standards and scores is bad news for a whole lot of people, roughly 70,000,000, who now score below 650. And those of you who are smart have made some effort to increase your scores so you can enjoy the most “shopper friendly” credit environment in 20 years.

If you’ve already found yourself in the land of the 780s, it’s time to take your foot off the accelerator because you’re good – really good. Any further efforts have you officially beating a dead horse and attempts to take the magic number any higher could land you back in the land of the 720s.

Here’s what you need to hear (though you may not want to):
There is no incremental value to being higher than 780

Other than bragging rights, there’s really no reason to stress out about your scores if they’re already over 780. Even in today’s credit environment a 780 puts you about 20 points to good and you’ve now found yourself squarely among the credit elite. You will likely get whatever you’re applying for at the best rates and terms the lender or insurance company has to offer.

As of September 2010, a 780 FICO score gets you a credit card at 7.9% (issued by a credit union). It also gets you auto financing from a captive lender (the manufacturer’s finance arm) for as low as 0% on selected models. And even if captive financing isn’t an option for you, a 780 gets you rates as low as 5.2% for a new car. And if you’re trying to buy a home, a 780 (along with satisfying other non-credit criteria) gets you a rate around 4%, which is crazy low.

The point is, your rates, premiums and terms will be no better at FICO 810, 830 or 850 than they are at 780.
You can do more harm than good

If I’ve said it once I’ve said it 1000 times…credit scores move like water. They’re going to take the path of least resistance. That means a score of 780 is easier to turn into a 680 than it is to turn it into an 800.

This is especially true for people with young (age) or thin (number of accounts) credit files. The good people at Mint.com have told me that many of their MintLife readers are in their 20s. And if you look at the comments to my student loan debt story, I kind of get that same idea.

Something that you won’t see from reading online stories about credit scoring models is the fact that young people generally have younger credit reports (duh). That’s determined by calculating the average age of the accounts on your credit reports by looking at the “date opened” of your accounts. And the younger the credit file the more volatile the score. In English this means your scores are going to react to changes in your credit data more significantly than someone who has had credit for decades. So this story is especially meaningful to Mint readers because of their age and their younger credit files.

If you apply for and open a new account, apply for a credit line increase, max out a credit card, miss a payment, have a collection show up on your credit report, or experience a variety of other credit incidents, your scores are likely to be damaged disproportionately to someone who has a well-aged credit report. This is because you don’t have as much positive compensatory information to offset the bad stuff.
Yes, your scores can actually be too high

Some lenders don’t want an abundance of customers whose scores are too high. Stratospheric scores, those well into the 800s, generally belong to people who don’t use credit. And those who don’t use credit don’t generate income.

For the first time ever there’s now a sweet spot, credit score wise. You really want to fall between 760 and 810, give or take a few points in either direction. The 760 means you’re a very good credit risk. It also means you’re probably using credit, have credit card balances, and have installment loans. This means you’re generating revenue for your lenders and credit card issuers.

If you score too high it means you are probably not using credit cards. You’re a very good credit risk but that’s not good enough in today’s credit environment. The lender wants and needs to make some dough and if your score indicates that you’re a great credit risk but have poor revenue potential then they might just decline you. Yes, you can get declined for having too high of a score. It’s called a “high side override”, meaning you scored higher than the lender’s low-end criteria but they still declined you.

So for those of you who are at 760-780, your journey has ended. Sit back and enjoy the view from atop the FICO score mountain!!
For The Haters

Save it. This isn’t score obsession. As long as lenders, insurance companies, utility companies and landlords use credit scoring to determine rates, premiums, deposit requirements and terms (and employers use credit reports as part of employment screening) it’s something we have to take seriously.

You can’t “choose” to not be under the influence of your credit reports and credit scores. That’s not possible. Having good credit reports and scores, and paying less for things (your mortgage, your car loan and your insurance) is a “Top 5” wealth building tool. Trying to earn a great FICO score is no different than checking the performance and allocation of your investments. The minute credit repor

Quest for the perfect credit score

A major league pitcher dreams of throwing a perfect game. High schoolers eyeing the Ivy League study furiously in hopes of earning 2400 on the SAT. Meanwhile, Chris Peplinski is pursuing his own brand of flawlessness: an 850 credit score.

The 37-year-old stay-at-home dad from Rogers, Ark., has nabbed 813 on the FICO scale, the credit scoring system most lenders use in sizing up potential borrowers.

That ranks him above more than 82 percent of Americans and comes with a big payoff: It entitles him to ultralow rates on loans, saving him tens of thousands of bucks over a lifetime.

Nevertheless, Peplinski won't be satisfied until he hits the maximum: 850. Why?

"Your credit score tells a lot about you," Peplinski said. "A high score means you're responsible and in control of your life. You're trustworthy."

To reach his goal, Peplinski voraciously reads up on every element that goes into a FICO score, checks his number every three months and tweaks his behavior to eke out every possible additional point.

Two years ago, he took out a car loan even though he and his wife, Chrissy, had the cash to buy their wheels outright. He figured that adding to his mix of credit might boost his score.

In spite of Chris' best efforts, landing an 850 may be a quixotic goal: Only about 0.5 percent of Americans manage it, FICO reports.

"The 850 score is kind of like a unicorn," said John Ulzheimer, a credit scoring expert with Credit.com who used to work for FICO. "Everybody talks about it, but nobody's seen it."

The reality is that you don't need to catch the unicorn to catch the best rates. But adopting some of the habits of members of the 800 club can help you improve your own score.

And that can translate into real money: On a $300,000, 30-year fixed-rate mortgage, the most creditworthy borrowers will pay $14,200 less than those one tier below; $25,600 less than those two tiers below.

But as for exactly how many points you'll gain or lose for, say, taking on a mortgage, being late on a bill or charging credit cards up to the max? That's proprietary information: "It's a black box," said FICO spokesman Craig Watts.

Mystery feeds obsession. Some credit score aficionados passionately debate their hypotheses on message boards like the FICO Forums at myfico.com. Others use themselves as guinea pigs to discover which moves will nudge a score up or down.

Some check their score obsessively, at least every few months, at a cost of $50 or more a year. They also fixate on their credit reports, upon which the scores are based.

Leland Lim, a 41-year-old doctor from northern California, is vigilant about scanning these for errors that might drag down his number.

"It took me three years to get a derogatory entry on one of them corrected," said Lim, who now earns an 806.

As for what makes an 800-plus score, these self-made experts basically say the same thing FICO does: Payment history is the single most important factor.

"I have this fetish about paying bills as soon as they come in the house," said Dick Husemann, 66, a retired Air Force officer from Wilmington, N.C. He and his wife, Brenda, 69, attribute their high scores, matching 818s, to the fact that they've never missed a credit payment.

The Husemanns also never charge more than 10 percent of their credit limit. They're not alone in that: Most score enthusiasts aim to keep a low "utilization ratio," or the amount they owe compared with the amount of credit available to them. FICO verifies that a low ratio can help your score.

With lenders routinely closing inactive accounts, Lim rotates all his credit cards into circulation so that he'll continue to have a lot of available credit to figure into his utilization ratio.

But because his charges also affect that ratio, a few months before applying for a loan he stops using the cards or pays them off before the statement is generated. That way, Lim said, "my score jumps a bit," just in time for the lender to see.

The 800 club members are also conscious of their mix of credit.

Lim became interested in the scoring process two years ago while refinancing a home-equity loan into a home-equity line of credit. Having heard that revolving debt could affect a score more than an installment loan, he studied up.

His research revealed that home-equity lines of credit are not considered revolving debt in the FICO model. (The scoring firm confirms this.) And remember that car loan Peplinski took out, even though he didn't have to? He did it because FICO favors those with a variety of credit types, such as mortgage, credit cards and auto loans.

"I probably paid $100 in interest," he said. "But it was worth it because we raised our credit scores by 15 points."