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By Fred Yancy, Broker | Broker in Woodstock, GA
  • The 6 Biggest Ways Bad Credit Can Mess Up Your Life

    Posted Under: General Area, Home Buying, Credit Score  |  January 30, 2013 4:48 AM  |  1,449 views  |  No comments

    The 6 Biggest Ways Bad Credit Can Mess Up Your Life

    By Alysha Beers 

    Bad credit is something you don’t want associated with your finances. Unfortunately, you may have less than stellar credit at some point in your life. Credit scores represent a person’s credit worthiness, designed to show a lending institution who is a good investment, and who is… not so much. Banks believe that credit scores — i.e. past financial behavior — are a good indication of an individual’s future financial behavior. Whether or not you agree with that statement, the negative effects of having bad credit are undeniable.

    Here’s a list of things that can get pricey or are unattainable if you have bad credit.

    1. Car insurance. Insurance carriers in 47 states check your credit score when arriving at a rate. They’re with the banks in assuming that your credit score will indicate how risky of an investment you are. This means that you may have higher than average rates for years or that you may not be approved for insurance coverage at all by a certain carrier, depending on how low your credit score is.

    2. Mortgage
    loans. If you’re trying to buy a home you will most likely apply for a loan. You can be certain that financial institutions look at your credit score during the process. Bad credit means possibly being denied a loan or can result in being charged higher interest rates. This is because the amount of interest you pay is based on your level of risk and the current market rate. The worse your credit is, the higher your level of risk is and the higher your interest rates will be. This difference can amount to tens of thousands of dollars over the course of a mortgage’s lifetime.

    3. Credit cards. If you are approved for a credit card, you can bet on having higher than average interest rates. Credit card interest rates range anywhere from 7 percent to 36 percent. With a good credit score you can expect to land somewhere between 10 percent and 19 percent. With a bad credit score, you can expect to be somewhere around 22 percent and up.

    4. Car loans. You’ll likely need a loan when purchasing a vehicle as well. And banks will check your credit score before approving your financing; interest rates on your loan will sway with the results; results could vary by up to 2 percentage points.

    5. Cell phone plans. Did you know that some cell phone carriers, like car insurance carriers, check your credit score? They do — another reason why it’s important to pay your bills.

    6. Job hunting. Under the Fair Credit Reporting Act it is legal for a future employer to review your credit report with your written approval (they don’t check your score, however). Hiring managers can use this information when making their decision. Some states do have laws that limit the use of credit information in the hiring process.

    To make sure that your credit does not interfere with your employment, interest rates, your ability to buy a cell phone or a vehicle, or your car insurance rates — make sure to take control of the situation by obtaining your free credit report from AnnualCreditReport.com, and checking your credit score, which you can do for free once a month using Credit.com’s Credit Report Card.

    Fred Yancy, Broker
    Crye-Leike Realtors
    (678) 799-4663

  • Improving Your Credit Score Without Gimmicks

    Posted Under: General Area, Financing, Credit Score  |  April 30, 2012 5:31 PM  |  1,436 views  |  No comments

    Improving Your Credit Score Without Gimmicks

    By Ray Martin

    Chat boards and web sites are filled with tricks and gimmicks to improve your credit score.

    One gimmick that gets a lot of attention is the practice called credit piggybacking. This is where one person, sometimes for a fee, agrees to add you as an approved user on their credit account. This is typically an account with a good history and lots of available credit. The result is that their credit account and history is added to your credit report. This increases your credit score and in some cases the increase can be dramatic. It amounts to buying another person's good reputation and posing that it is your own. While I'm sympathetic to the folks who want to improve their credit score, it's simply the wrong way to go about it.

    But what if you have a few late payments or other negative information on your credit report? First, get a free copy of your credit report. Don't assume your credit score is doomed. There are steps you can take that can boost your credit score. Some of these steps can increase your score by 20 points or more in a single month -- and best of all is that you don't need to hire some credit repair shop to do it.

    Pay Recent Past-Dues: The first thing to do is to pay the past due payments on the accounts that recently fell a month or two behind. That's because the more recent the late payment, the more it will lower your score.

    Request Credit Report Adjustment: After bringing past due accounts current, contact the creditors who report late payments on your credit report and ask them to make a good faith adjustment to remove the late payment information from your credit report files. Not all creditors will do this, but if you ask politely and remind them that you will continue to be a good customer, you may find a few that will work with you.

    Pay Collections that Vanish: Pay off accounts where the collection agencies agree to remove all references to the accounts from the credit bureau files. Make this a requirement of your offer to pay off the account.

    Spread Debt Evenly: Evenly spread your balances over your cards with the lowest interest rates and the highest credit limits. The objective is to not have more than 50 percent of the credit limit used on any one card. That's because having one credit account nearly maxed out can reduce your credit score. You can also request the creditors to increase your credit limits on your accounts which may help as well.

    Check Credit Limit Reporting: Some of your credit accounts may not report the credit limit to the credit bureaus. This reduces your score because when that information is missing, the score counts the account as being maxed out. Ask the creditor to provide this information to the credit bureaus. If they refuse, transfer the account balance to another account that reports credit limits and ask to increase the credit limit.

    Keep Good Credit Accounts: Major bank credit cards, held for a long time, with good payment histories help boost your credit score. Also, don't close down your cards that have the longest history and the highest credit limits available because these help boost your score. Instead, close down those department store charge cards. Revolving department store cards have the lowest credit limits and when used will have a higher debt to limit ratio, which detracts from your score.

    Fred Yancy, Broker
    Crye-Leike Realtors
    (678) 799-4663
  • Housing Crisis to End in 2012 as Banks Loosen Credit Standards

    Posted Under: General Area, Financing, Credit Score  |  March 1, 2012 6:43 AM  |  1,659 views  |  No comments
    Housing Crisis to End in 2012 as Banks Loosen Credit Standards   

    By: Krista Franks  

    Capital Economics expects the housing crisis to end this year, according to a report released Tuesday. One of the reasons: loosening credit.

    The analytics firm notes the average credit score required to attain a mortgage loan is 700. While this is higher than scores required prior to the crisis, it is constant with requirements one year ago.

    Additionally, a Fed Senior Loan Officer Survey found credit requirements in the fourth quarter were consistent with the past three quarters.

    However, other market indicators point not just to a stabilization of mortgage lending standards, but also a loosening of credit availability.

    Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings.

    Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes “the clearest sign yet of an improvement in mortgage credit conditions.”

    In contrast to a low of 74 percent reached in mid-2010, banks are now lending at 82 percent LTV.

    While credit conditions may have loosened slightly, some potential homebuyers are still struggling with credit requirements. In fact, Capital Economics points out that in November 8 percent of contract cancellations were the result of a potential buyer not qualifying for a loan.

    Additionally, Capital Economics says “any improvement in credit conditions won’t be significant enough to generation actual house price gains,” and potential ramifications from the euro-zone pose a threat to future credit availability.

    Fred Yancy, Broker
    Crye-Leike Realtors
    (678) 799-4663

  • Delinquent Debt Shrinks while Real Estate Debt Continues to Fall

    Posted Under: General Area, Market Conditions, Credit Score  |  February 28, 2012 5:19 AM  |  1,742 views  |  1 comment
    Delinquent Debt Shrinks while Real Estate Debt Continues to Fall

    NEW YORK—Aggregate consumer debt fell $126 billion to $11.53 trillion in the fourth quarter of 2011 according to the Federal Reserve Bank of New York’s latest Quarterly Report on Household Debt and Credit, a 1.1 percent decrease from the $11.66 trillion reported in the prior quarter’s findings. The report, which includes data on a variety of household debt levels, also revealed further declines in real estate debt and delinquencies, while showing that other forms of consumer indebtedness increased.

    Mortgage and home equity lines of credit (HELOC) balances fell a combined $146 billion, a sign that consumers continue to reduce housing related debt.

    After a mild uptick in the third quarter, total household delinquency rates resumed their downward trend in the fourth quarter. The report finds that $1.12 trillion of consumer debt (or 9.8 percent of outstanding debt) is currently delinquent, with $824 billion seriously delinquent (at least 90 days late). Meanwhile about 2.2 percent of mortgage balances transitioned into delinquency during the fourth quarter, resuming the recent trend of reductions in this measure. However, delinquency rates remain elevated compared to historical figures.

    "While we continue to see improvements in the delinquent balances and delinquency transition rates this quarter, there has been a noticeable decrease in the rate of improvement compared to 2009-2010," said Andrew Haughwout, vice president and economist at the New York Fed. "Overall it appears that delinquency rates are stabilizing at levels that remain significantly higher than pre-crisis levels."

    Other highlights from the report include:

    • Mortgage and HELOC balances on consumer credit reports fell $134 billion (1.6 percent) and $12 billion (1.9 percent) respectively.
    • Non-real estate indebtedness rose $20 billion (0.8 percent) during the quarter, resuming a trend of increases.
    • Aggregate credit card limits rose by $98 billion (3.6 percent), resuming the trend of increases observed in the first half of the year.
      • Open credit card accounts increased by 3 million to 386 million.
    • Credit account inquiries within six months, an indicator of consumer credit demand, increased (2.7 percent) for the third quarter in a row.
    • Roughly 289,000 individuals had a foreclosure notation added to their credit report in Q4, a
      9.5 percent increase from the third quarter.
    • Student loan indebtedness increased slightly, to $867 billion.

    Overall in 2011, the data show a continued decline in household debt driven by reductions in real estate-related debt, as well as a continued but slowing decline in delinquency, bankruptcy and foreclosure rates. Credit account inquiries and openings suggest an increased interest by consumers in obtaining access to credit. Also, in 2011, mortgage originations totaled $1.55 trillion, the lowest level of originations since 2000. However, auto loan originations in 2011 totaled $289 billion, the highest amount since 2007.

    About the New York Fed’s Quarterly Report on Household Debt and Credit
    The New York Fed’s Quarterly Report on Household Debt and Credit provides unique data and insight into the credit conditions and activity of U.S. consumers. The report, which is updated quarterly, includes information on various aspects of consumer debt, including bankruptcies, per capita debt levels, total debt levels and composition of debt, new originations of installment loans, total balance by delinquency status, foreclosures and new delinquencies by loan type for the U.S. and select states. The report is aimed at helping community groups, small businesses, state and local government agencies and the public to better understand, monitor and respond to trends in borrowing and indebtedness at the household level. The report is based on data from the New York Fed’s Consumer Credit Panel, which represents a nationally representative random sample drawn from Equifax credit report data. Sections of the report are presented as interactive graphs on the New York Fed’s Household Credit web page and the full report is available for download.

    Fred Yancy, Broker
    Crye-Leike Realtors
    (678) 799-4663
  • 7 Things You Didn't Know Affect Your Credit Score

    Posted Under: General Area, Financing, Credit Score  |  February 15, 2012 7:51 AM  |  1,600 views  |  No comments

    7 Things You Didn't Know Affect Your Credit Score

    By Jason Steele

    We all know to pay our bills on time and carry as little debt as possible, and most of the time, that is all that matters in your credit score. Yet, there are other, smaller factors that many people aren't aware of that can cause your score to suffer.

    Small Unpaid Private Debts
    Many people pay their mortgage, credit card and utility bills with unflappable consistency, yet neglect smaller debts. They may feel that these debts are illegitimate or that they will just go away if ignored. For example, municipalities have been known to report unpaid parking tickets and even library fines to credit bureaus. Unfortunately, any unpaid debt can weigh down your credit score.

    Tax Liens
    You might not think of the IRS as an agency that reports to credit bureaus, but Uncle Sam figured out long ago how to use your credit history as leverage. In fact, these records remain in your credit history for 15 years; even longer than a bankruptcy. If you have an unpaid tax lien, paying it off will certainly help your credit score, but it can't undo all the damage done by having there in the first place.

    Utility Bills
    Your electricity bill or gas bill is not a loan, but failing to pay it will hurt your credit score. While these companies won't normally report their customer's payment history, they will report delinquent accounts much more quickly than other institutions, so be careful.

    Too Many Recent Credit Applications
    It can be tempting to sign up for various credit cards that offer some bonus for your business. Banks can offer tens of thousands of points or miles, while retailers grant in-store discounts when you apply for their credit card. By themselves, these applications have an insignificant effect, but too many credit checks in too short of a time period can lower your credit score. To avoid this problem, limit the number of applications for credit, especially when you are shopping for a home, car or student loan.

    Long-Term Loan Shopping
    Consumers may know that too many credit inquiries will lower their credit score. Nevertheless, to allow consumers to shop around for the best rates on automobile, student and home loans, the FICO will not penalize borrowers who have multiple credit checks in a short period of time. Various FICO formulas negate multiple inquiries with either 14 or 45 days. Therefore, continuing to shop around for a loan over several months will fall outside of this safe harbor and will lower your score.

    Business Credit Cards
    Do you have a credit card in the name of your business? Nevertheless, almost all banks will still hold you personally responsible for your debts. Furthermore, your payment history is reported to the credit bureaus. Therefore, any late payments or unpaid debts in the name of your business will affect your personal credit, so long as you are the primary account holder on a business card.

    Any incorrect information in your credit history can hurt your score. For example, people with common names frequently find other people's information in their file. In other cases, typos and clerical errors result in adverse information affecting your score. This is one of the reasons why consumers are encouraged to complete soft inquires at least once a year and dispute any mistakes they find.

    The Bottom Line
    By paying close attention to the decisions they make, consumers can avoid taking actions that seem harmless, but can really hurt their credit.

    Fred Yancy, Broker
    Crye-Leike Realtors
    (678) 799-4663

  • Pros and cons of paying mortgage during short sale

    Posted Under: General Area, Market Conditions, Credit Score  |  November 30, 2011 7:59 PM  |  1,575 views  |  2 comments

    Pros and cons of paying mortgage during short sale

    REThink Real Estate

    By Tara-Nicholle Nelson
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    Q: We just got multiple offers on my "vacation" house listed as a short sale. And so far, we have begged and borrowed to keep our mortgage current so our credit scores will be less bruised. But now that our house is in contract, do I continue to pay the mortgage? Our debt exceeds our income due to job and benefit loss.

    Here's my bigger concern: Since we are current, I don't want the bank to reject the offers just because we have been current, although our financial papers will prove that our debt exceeds our income. --Cindy

    A: There are a number of schools of thought and approaches to deciding whether to continue making your mortgage payments while you're selling your home on a short sale, and your ultimate decision will require you to weigh a number of factors and see where your personal calculus of your own values and interests comes out:

    Legal: Legally speaking, you have an obligation to pay your mortgage and property taxes as long as you own your home. While you might very well make the decision not to for a number of reasons (see below), it's important to keep the legal contract you made to pay especially your mortgage in mind, as some lenders make efforts to reserve the right to come after you later for the deficiency (i.e., the difference between the sale price of your home and your mortgage balance). For this reason, it's not a bad idea to have a local real estate attorney involved in your short-sale transaction, to help you negotiate a complete release of liability for the mortgage.

    The moral/ethical perspective: Morally and ethically, some homeowners view themselves as having an obligation in line with their legal commitment to pay all these items. Others look at the various factors beyond their control that have forced them to short-sale their home, like the decline in property values and the weak employment market, and have made a decision that their personal moral imperative weighs in favor of protecting their family finances and children's education funds. In that vein, some make the conscious decision to stop paying once they're in a short-sale situation or on a clear path to foreclosure.

    Financial/business: Once you know 100 percent that you'll be divesting of your home in some way, shape or form, continued investments in the property can seem to easily fall into the "throwing good money after bad" bucket, looking at the situation from a strictly business and financial perspective. There is also a strong sentiment among many real estate professionals that if you keep your mortgage current, while applying for a short sale or loan modification of any sort, you decrease the chances that your lender will approve of the sale.

    The theory goes that if you are current on your payments, you can't possibly have the level of hardship you must claim (and the lender must believe you have) for them to agree to waive the deficiency amount and release you from the mortgage.

    I've seen very mixed feelings on this in the real estate industry; on this point specifically, you should definitely talk with your listing agent and your local attorney, and take their advice into account -- they might have worked with this bank in the past and be able to shed light on how staying current or falling behind may affect the success prospects of your short sale application.

    Credit/ability to buy again: Right now, you are probably fixated on getting out from under this onerous debt, as virtually every homeowner in your situation is as a matter of course. But I've worked with a number of folks through this entire experience of going upside down, losing a home through a foreclosure or short sale and financial recovery, and I know that before too terribly long, you could very well be looking to buy a home again. Just be aware that most lenders will impose a two- to three-year waiting period after you have a short sale, if you were in default on your mortgage at the time the short sale closed (sometimes the waiting period is as long as seven years, depending on what type of loan you're trying to use to buy your new home).

    However, if you do not default on your loan and are able to get your lender to green-light your short sale, you can qualify for an FHA mortgage immediately. I don't know your personal situation, and it's been my experience that the majority of homeowners who have a financial hardship severe enough to even attempt a short sale need a couple of years to get back on their feet, but if you think you'll want to buy another home anytime sooner than two years from now, you'll need to stay current on this mortgage.

    Just as there are many factors your bank will weigh in determining whether to allow your short sale to close, and on what terms, you have a lot of considerations to weigh in deciding whether to continue making your mortgage payments while you await their decision. I can't urge you strongly enough to include your real estate agent and an attorney in your decision-making process.

    Fred Yancy, Broker
    Crye-Leike Realtors
    (678) 799-4663

  • When a Co-Borrower Has Poor Credit

    Posted Under: Home Buying, Financing, Credit Score  |  November 26, 2011 1:38 PM  |  1,567 views  |  No comments
    When a Co-Borrower Has Poor Credit 
    The New York Times
    IN most cases it is easier to qualify for a home mortgage by applying with another person — be it a spouse or partner, or even a close friend or sibling. But problems may arise if the other person’s credit score is less than stellar.

    The federal agencies that oversee and buy mortgages from lenders, like Fannie Mae and Freddie Mac, require lenders making conventional loans to focus on the lower of the two FICO scores. (Scores generally range from 300 to 850, with the national median at 711, according to FICO.)

    But both scores may be factored into other loans. On a jumbo loan, for instance, the lender is likely to “put more weight on the credit score of the person with the higher income,” said Greg Gwizdz, an executive vice president of Wells Fargo Home Mortgage in Somerville, N.J.

    For some people, however, it may be necessary to hold off on a home purchase for a few months to allow the co-borrower with credit issues to clean up his or her report and raise the score.

    This can be done by being “hypervigilant on paying your bills on time” for a few months, said Tracy Becker, the president of North Shore Advisory, a credit restoration company in Tarrytown, N.Y., or by perusing the credit report and correcting any inaccuracies.

    Ms. Becker says that one way to raise a FICO score by 30 to 40 points in a few months is to be added as an authorized user to a well-established person’s credit card, even if you don’t use the card. Your score can rise, too, if you pay down credit-card balances so they are at least 10 percent of the maximum credit limit.

    Even if you cannot afford to pay down the cards that far, it can help even to reduce the balance to, say, 60 percent of the limit, said Joanne Gaskin, the director of product management global scoring at FICO. The closer your balance is to the credit limit, the more the score will increase when the balance is paid down.

    If the cards are “maxed out,” Ms. Gaskin said, “that’s going to be very negative.”

    Preparation is key, Ms. Becker said, suggesting that both parties review their credit reports and scores together early on in the home-search process.

    Alexander Arader, the owner of Arader & Associates, a mortgage broker in Stamford, Conn., said that a borrower with a credit score of 620 to 640 could pay as much as one percentage point more in interest than a borrower with good credit, say around 760 or higher.

    “Do whatever it takes to get your credit score up,” he said.

    If there is little time for a significant upgrade in a credit score — perhaps because you found your dream home and can’t wait to make an offer — borrowers should explain to the lender any issues that might have affected the credit report, said Mr. Gwizdz of Wells Fargo.

    “Take time to tell your story,” he said, and make sure you carefully document any major life issues that might have contributed to a score’s decline, like an illness, divorce or job loss.

    The borrowers also need to make it clear why a second person is on the mortgage, especially if that person is not living in the house, he said. A parent helping a child buy his first apartment in Manhattan will have less trouble explaining the connection than a friend who isn’t there full-time, he said.

    Sometimes it may make more sense to have just one person on the mortgage — provided, of course, that the person can afford the monthly payments alone. Some banks may allow two people to appear on the property’s deed with only one on the mortgage note.

    While the FICO credit score is important, it is only one part of what lenders evaluate in the application process, Mr. Gwizdz noted.

    Among other factors that underwriters examine: the size and source of the down payment (many are now requiring 20 percent); both applicants’ incomes and whether they have been rising; their debt-to-income ratios; and the property they are buying.

    Fred Yancy, Broker
    Crye-Leike Realtors
    (678) 799-4663
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