How a Credit Report Affects Your Ability to Buy a Home

Your credit report is requested by more than just your mortgage lender. Companies wanting to sell you something may want to look at it, even prospective employers. Credit card companies, car dealerships, land lords and perspective employers may all ask permission to look at your credit report. Issues on your credit report may affect interest points on your mortgage; it could even cost you a job. In order to protect consumers, Congress enacted the Fair Credit Reporting Act (FCRA) in 1996 to improve credit reporting practices.

Use of Credit Reports is Regulated by FCRA

FCRA regulations state those with your permission are allowed access to your credit reports. In fact, the law requires if you are denied a job due to information on the report, you must be informed of the specific reason. If you are denied a loan due to information on the report, you must be told which company produced this negative report. This gives you the opportunity to rectify any errors that may be on the report.

Consumers Have the Right to Challenge Mistakes or Errors

In order to correct the issue, you must go to the credit reporting agency and the company or person that is responsible for the negative report. It often takes a long time to get these corrections made. You will want to ensure that the other reporting agencies do not have the same mistake and then make sure they begin the process of correction as well. The credit reporting bureau will also examine the issue. Once they agree that there is a mistake, make sure that the item is removed from your credit report. Keep copies and dates of every step in the process, in case starting the process again becomes necessary.

What Can You Do About Negative Information on Your Report

Negative information can only be left on your credit report for seven years. If you find a forgotten debt, take the opportunity to pay it off, which will go a long way with lenders. Finally, keep tabs on how long negative information is left on your report. Once the seven years are up, you will find getting loans will come much easier. If you have too many credit cards but are not using them, that can give you a negative score. Close accounts of any cards that you don’t use. It is better to have a several credit cards with low balances than to have one or two that are maxed out. It may take a while for these changes to be reflected on your credit report.

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What Credit Card Debt Does - Slow Debt

If you are using your credit cards daily, or even weekly you could be racking up debt that you just can’t afford. Think about your credit cards, and how much you owe on your credit card debts right now. The interest on these accounts is adding to the amount you owe daily as well. Learning to be smart about your credit cards and your credit card debt is going to help you overcome the long term debts associated with credit cards.

How Much Are You Paying

If you don’t know how much the interest rate is on the credit cards you are using you could be losing out on a lot of money. Most credit cards average an interest rate of 18%. Yes, some are lower, and some interest rates are higher but you first need to know what your interest rates are. If you make a decision to use a credit card, you should also make the decision to pay off that credit card on a monthly basis.

How Much Are You Paying

If you are making just the minimum payment amount on your credit card, you aren’t paying enough. If you make a major purchase using your credit card, and you make just the minimum payment you could end up paying two or three times as much for that item than what you paid for it because of the interest. This really means you are just giving away your money to the banks and credit card companies when you make just the minimum amount payments.

How Long Have You Carried Your Balance

Think about the money you charge on your credit card, and then think about the interest you paid last year. If you paid minimum payments and the interest keeps building on that credit card, you haven’t paid off the item you purchased a year ago. You are wasting your money. Think about the debts you have, and how much money you would have if you didn’t have that big credit card payment every month. You could have more money in your savings, if you were to make that credit card debt ‘go away’.

There are people all across the nation and around the world that are wasting money on interest and late payment fees to credit card companies. Most households pay over a thousand dollars of interest in just one year on the credit card debts they are holding.

Do you want to be one of those families who has been paying on furniture for longer than the furniture is going to last, just because you put the purchase on a credit card, and then you are making the minimum payments? Think smart, and make your money work harder for you when you use a credit card to make a purchase of any type.

How to Get Ahead of Credit Card Debt

You can get ahead of the vicious circle of debt by paying more on your credit cards than the minimum payments. If you pay just ten more dollars than you have to, you are paying down on the principal balances, and that means you will pay even less interest next month. You can get out from under all that credit card debt, but it will mean not using your credit card to make small purchases or purchases that you could otherwise pay cash for. Think smart, pay down those cards, and get ahead of the credit card debt.

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Better Debt Relief Option - Know About Unsecured Loan For Debt Consolidation

Due to recent steep increase in the interest rates of credit cards and other financial interest rates, most individuals find it tough to pay off all their debts and hence financial irregularities have crept into their repayment record. Debtors are looking for easier ways which could relieve them off their credit woes and help them fix their financial problems.

Unsecured loan for debt consolidation does exactly that and has come as a relief to people who are in desperate need of help. This type of loan is not secured, that is you don't need a property or asset to get the loan as collateral. There is no risk of repossession of the property and you now have only one single consolidated loan with one lender to deal with. Since there is no security for the lender against his money, it is difficult to obtain unsecured loan especially for people who have poor credit history. Unsecured loan is mostly used to get small loans and is not the best choice when it comes to obtaining large amount of money.

Although there are various other loan facilities available, the unsecured loan for debt consolidation is a much better option for you if you have a good credit history as you wouldn't have to secure an asset as collateral. Unfortunately the decision to lend this type of loan lies entirely on the hands of the lending institution and banks but still companies do provide loans to people who don't have a very great credit history at a higher interest rate.

The lending institutions maintain a fixed set of rules and criteria when it comes to offering unsecured loan for debt consolidation. They look at good employment record and good credit history before approving the loan. They also look into the income details in order to be assured that you have the means to pay back the loan.

Unsecured loan for debt consolidation has become very popular in the recent few years. The interest rate charged against the loan has also come down. Since there is no collateral, documentation is minimal and hence the processing time for obtaining the unsecured loan is fast.

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What Does A HUD Reverse Mortgage Give You?

Peace of mind is what you get when you choose a HUD reverse mortgage. Over 90% of American seniors choose this government-backed, insured and regulated type of loan. Knowing whether or not it's right for you requires that you understand the 3 types of program on offer and how they differ.

The HUD reverse mortgage was first introduced by the Department of Housing and Urban Development and is insured by the Federal Housing Administration (FHA) and is often referred to as a Home Equity Conversion Mortgage or HECM.

This type of mortgage has been around since the 1960s but few seniors elected to use what was currently on offer. Many seniors feared that they could loose their homes or risked not receiving the money they were entitled to because the lender went broke or the loan payments they received might exceed the value of the equity in their home.

With many seniors facing inadequate funds for their retirement years, the government looked at this type of loan and realized its potential to afford many seniors a more financially secure retirement. In response it set up a program that was insured by the government: the borrower is guaranteed to receive all the money they're entitled to no matter what.

A HUD reverse mortgage allows seniors, to use the equity in their home to raise funds. A lender agrees to give the borrower a specified amount and that the amount plus interest is payable only when the homeowner no longer lives in the home as their principal residence, sells it or dies. This means that there are no monthly repayments and the borrower can remain living in their home for the rest of their lives without worrying about paying back the loan.

In order to be eligible, the homeowner(s) must be 62 or over, live a single family dwelling, two-to-four unit, townhouse or FHA-approved condominium. There must be no, or very little, debt (mortgage) remaining on the home. Unlike a traditional mortgage or home equity loan, there is no need to provide proof of income or to have health checks.

The amount you receive with a HECM depends of the value of your home, its location, current interest rate and your age. It is also capped. At time of writing the maximum amount that can be borrowed varies between $200,160 and $362,790 depending on your home's location.

A HUD differs from a Home Keeper inasmuch as a Home Keeper is a Fannie Mae program. A Fannie Mae program allows for more flexibility on types of home that are eligible and can pay out more for single homeowners. It's also the only program offering a reverse mortgage for home purchase allowing a borrower to purchase a retirement home with no monthly payments.

The third type is a jumbo reverse mortgage. There are a number of these and they are set up and administered by private companies. They are more flexible in what they offer, the biggest advantage being that there is no limit on the maximum amount that can be borrowed, which makes them better suited to those who live in homes valued at over $500,000. Unlike HECM and Fannie Mae, not all jumbo programs are available nationwide.

Before you select any of the 3 programs, you should talk to your local broker about which would best suit your requirements - third party counseling is also a requirement. But, chances are, a HUD reverse mortgage will be your best option.

Follow the links for more advice on a HUD reverse mortgage to decide if this type of reverse mortgage loan is the best reverse mortgage for you.

Student Debt Help

With the cost of education rising and the easy availability of credit, student debt help is something that more young people are seeking. Student debt relief is available, but as a student you will first want to take the time to understand what type of debt you have and your best option for eliminating that debt.

As a student, your most common types of debt are student loans and consumer accounts, better known as credit card debt. These debts are handled differently when it comes to getting debt help. Credit card debt must be repaid in full for it not to have a serious negative effect on your credit.

This gives you the option of increasing your income or decreasing your expenses. If you can do both, you will have your debt paid off that much sooner. This really is the best way for you to get out of debt, but not all students are in the position where they can use this alternative. Credit counseling is also a choice that you have, provided you are not more than 3 months behind and you are able to make a 2 percent payment on your balances each month.

However, if you have graduated and are having trouble paying your student loans, they cannot be placed in credit counseling. Credit card accounts, utilities and medical bills can be placed in CCCS. A credit counseling service will consolidate all of your unsecured debt and you will make a monthly payment to the credit counseling agency. Your debt counseling company will then disburse this payment to your creditors.

Credit counseling may affect your credit score at first, but as you begin to reduce your debt and make your payments on time, you will see it increase. The most important aspect of getting out of debt is addressing the problem early. So many people wait until the situation has become critical and as a result their options are limited.

As far as your student loans go, you will want to talk to your student loan company and see what kind of hardship programs they have available. They are normally willing to work with you as you try to get your finances stabilized. Ignoring student loan payments is one of the worst things you can do. This is actually true for any payment. Many companies have programs that can assist with student debt help, but you are going to have to talk to your creditors in order to know what debt relief options are available.

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Debt Consolidation Loan - Advantages and Disadvantages

A debt consolidation loan can be a benefit to the borrower or can create further problems. Used correctly, it can relieve stress and reduce record keeping.

People elect to take out a debt consolidation loan for many reasons. These should be carefully reviewed to determine if this financial choice is right for your situation. If you just want to be able to increase your credit availability, a debt consolidation loan is not a good way to go. A good procedure is to make a list of all the outstanding debts and the interest rates that apply to each one. Calculate how long it would take before the debts could be cleared using the existing minimum balances and terms. Compare that with the cost of a loan to clear the smaller amounts or to roll them into a larger loan.

One monthly payment to keep track of

When you select a debt consolidation loan, you have a better chance of ending the process with just one payment to make each month. You can usually structure the due date on the payment to take advantage of the pay dates in your household. It may even be possible to arrange for an electronic withdrawal from an account that you can manage online. In this way, you can transfer funds into the account just prior to the due date so that you will never be in danger of missing a payment or incurring overdraft fees.

Lower Interest rates

If you shop carefully for a debt consolidation loan, you may be able to get a loan that has a lower interest rate on the loan. This is not always possible, because credit card debt, for example tends to be very high interest and the consolidation loan may not gain much in the area of interest, particularly when there are often loan origination fees and closing costs on the loan. Make certain to carefully review the loan document so that you know exactly what you are agreeing to.

Tax benefits

If your debt consolidation loan is tied to the equity in your home, you may be able to gain tax benefits from the interest on the loan. Since this type of loan features interest rates that are typically lower than those of credit card debt, you can make a double savings. However, you should keep in mind that although the interest rate is lower, it may take longer to pay off the debt so your loan can actually end up costing you more. Again, the decision will depend on your particular situation.

Stress reduction

Probably the most commonly reported benefit after obtaining a debt consolidation loan is that of being able to reduce worry about how the bills are going to be paid. When you are faced with many minimum payments on numerous credit card bills, it can seem as if you will never be able to get ahead. When you have only one structured payment of a set amount, you can plan ahead, you know it will fit within your current budget so you no longer need be frantic about the danger of being unable to meet all your financial obligations.

Overwhelmed By Debt? Here Are Six Effective Solutions

Today, many Americans find themselves in a financial crisis.

Personal bankruptcies are being declared in record numbers with one out of every 100 families experiencing this tragic legal process, according to a survey conducted by American Express.

Although the stigma has lessened, the effects can be long-lasting. Finding employment or getting an insurance policy can be difficult if bankruptcy is part of a personal record.

Acquiring material possessions, taking trips to popular vacation destinations or dining out regularly at fine restaurants will eventually lead to faded memories. But the aftereffects of many credit card charges can linger for decades due to the power of compound interest. Paying three to four times the original purchase amount in fees and interest charges is a definite possibility. Making minimum payments on credit cards or other unsecured debt will eventually bury consumers in debt quicksand.

Here are six tips that can help to completely eliminate personal debt if individuals are willing to make some lifestyle changes:

Itemize debts from the smallest balance to the largest regardless of the interest rates. List the minimum amounts due on each bill. Make the largest payment possible on the smallest debt and make minimum payments on all other consumer debt. Once Debt #1 is fully paid, apply the payment from Debt #1 to Debt #2 (plus its minimum payment). Work through each debt obligation using this strategy until all debt is fully paid. Some financial planners would recommend reducing high interest rate balances first but the goal is to erase debt balances quickly and to gain momentum instead of focusing on interest rates. Attempting to pay-off a large, high interest rate balance first could lead to frustration and diffuse any good intentions to eliminate debt.

Cut up the credit cards. This will take some courage but it's necessary in order to get out of debt completely. If a plastic card is necessary, consider a debit card which acts like cash, not credit.

Don't borrow by establishing a home equity line of credit. The inability to make these loan payments, could eventually lead to a home going into foreclosure.

Develop a money spending plan based on the "10-10-80" formula. The first 10% goes to charitable organizations or to a place of worship. The next 10% goes to personal savings. The final 80% is used to pay for basic living expenses. Keep in mind, that these are ideal percentages. Consider lower percentages to start if it's difficult to give or save 10%. The importance is in the order, giving, saving, and spending.

PAY CASH for things. No cash, no purchase.

Get debt counseling but be cautious of credit counseling agencies, debt management plans (DMP), debt settlement or debt consolidation companies. There are too many predatory "debt counseling" companies looking to make a fast buck at someone's expense. The best approach is to consult with a financial planner, preferably a CERTIFIED FINANCIAL PLANNER™ professional (CFP®). These advisors have a client's welfare as a top priority. Their fee is a small price to pay if it means getting out of debt permanently.

Making the transition from a credit/debt lifestyle to cash-basis living takes time, effort and discipline but the rewards make it worthwhile.

Digging out of a debt hole requires a change in mindset. If financially distressed individuals are willing to commit to change, the road can eventually lead to financial freedom and peace of mind.

Rob Smith, CFP®, is President of Debt Mentors, LLC, a financial planning practice that assists and educates individuals in the areas of money management, debt elimination and wealth building. His 25-year career has served individuals, small business owners and financial institutions.
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