Author Archive: askcarolynwarren

Collections, Charge-offs, and Payment Mistakes

What happens when you don’t pay your credit card?

When a person doesn’t make payment on a credit card for six months, it becomes a “terminal delinquency.” At that point, the creditor may charge it off and try to collect money via their own bad debt department, or they can sell the account to a collection agency.

Depending on either of those actions, it becomes a charge-off or a collection on the credit report.

Points are deducted from your credit score based on the date the account went delinquent. The more recent the Date of Last Activity, the more it hurts your score.

Here’s what can happen.

If Visa sells a charged off account to Paradox Collections, Visa is supposed to change the balance to $0, because you now owe payment to Paradox. If Visa still shows an open balance of $1,500 (or whatever sum), that is a violation of the Fair and Accurate Credit Reporting Act. You no longer owe Visa; you now owe Paradox.

If Visa shows the charge-off with a $0 balance and Paradox shows the collection with a $1,500 balance, then it is posted properly. Your score is docked twice for the two negative entries on your report.

But hold on! Paradox might show your balance as $1,700, because they have added $200 in fees. They are within their legal rights to add interest rate charges and fees, per the state law.

The balance may keep increasing each month if state law allows it.

And it could get worse!

Paradox might file a motion in court to claw money right out of your bank account, or to garnish funds straight out of your paycheck.

For doing this legal work, they might add $500 in attorney fees. (Again, per state law. In Washington state, it happens all the time.)

As you can tell, the debt can snowball into a avalanche.

You must never ignore a bill or a debt that you owe.

If you move to another address and don’t receive the bill and forget all about it, that does not excuse you or exempt you. You are responsible to inform your creditors of your new address and to keep abreast of your financial obligations.

If you were on auto-pay and close the bank account and move to a credit union, so that the creditor doesn’t receive payment, the delinquency will be on your credit report. You don’t get to forget to make payments.

If you go on vacation or get married or sail off to Survivor Figi, you don’t get to skip payment.

The credit card companies are not your nice grandma. They won’t give you grace and forgiveness (except in rare circumstance, and don’t count on that).

If you want to get ahead in life, you must take responsibility for tracking all your debts and pay on time. Have a savings account as a safety net in case you’re out of work for a period of time.

Live within your means. Don’t use your credit card to buy stuff you can’t afford to pay with cash.

Don’t go on so-called retail therapy spending sprees if you get depressed. If you do, you will be digging yourself into a deeper depression later.

Dear Nice Person…

I hope this post doesn’t sound too harsh. Please take it as helpful advice from a licensed mortgage advocate who cares about helping people get ahead credit-wise. It’s a good feeling to have A+ credit and receive the respect from everyone you do business with.

Make that your goal, and you will get there. If you had mistakes in the past, dust yourself off and move forward. America loves a come-back!

Stage your own come-back and build the awesome credit report you deserve.

Pick up a copy of Build and Protect Your Credit Like the Pros here.

 

3 Surprising Things That Hurt Your Credit Score

Don’t cut up your credit card until you read this!

A lot of people, trying to do the right thing, end up hurting their own credit score.

Don’t make one of these common mistakes, because doing so will take points off your score.

Mistake #1

Closing a credit card that has a balance.

This reduces your score, because you have now lowered your debt-to-available credit ratio. If you don’t want to use the card any more because it has an annual fee, pay it off first, then close it. If the card has no annual fee, pay it off and lock it up. By keeping the available credit open, you help your score.

Mistake #2

Having a high balance.

If your credit card is close to the limit, your credit score is being severely docked. This is one of the worst things you can do to your score (besides paying late). Even if all payments are made on time, having a high balance-to-limit ratio hurts your score. Fortunately, this is an easy fix. Once you pay down the card, your score goes up. I recommend keeping your balance below 30 percent of the limit.

Mistake #3

Closing down old credit cards.

Don’t need those old cards anymore? That’s okay, just let them set unused. Cut them up if you like, but don’t close the account. 15% of your credit score comes from length of time you’ve had credit. Longevity is your friend.

How Much Credit Do You Need?

If you have three accounts, you have enough credit. That would be one auto loan, one student loan, and one major credit card. Or two major credit cards and one auto loan (paid off still counts). More about how much and what type of credit to get in another post.

Thank you for reading my blog. I help people increase their credit scores through education and smart strategy.

 

Need a New Car? How Much Will Having a Low Credit Score Cost You?

Having a low credit score hurts your bank account in more ways than you might have known.

National Credit Care did a study and discovered that people with low credit scores paid on average $200 more per month for auto financing than those with top tier credit.

Let’s look at how much more your car costs based on the financing terms:

$200 per month x 60 months = $12,000 more for the car

$200 per month x 36 months = $7,200 more for the car

How does that make you feel to pay $12,000 more than the last customer, all because of that three-digit score called FICO score or credit score?

What could you do with that extra $7,000 to $12,000 if you weren’t shelling it out in interest to the wealthy finance company?

But that’s not all!

On top of paying more in financing, you also pay a higher insurance premium for having a low score — even if you have a perfect driving record.

That’s right! Insurance companies also check credit scores as part of their determination on how much to charge you for insurance.

And don’t get me started on credit card interest rates…! I’ll save that for another article.

Take control of your credit! Review and repair. Even if you can’t fix everything, you can raise your score and keep more of your hard-earned money in your own pocket.

I don’t know about you, but I can think of a lot things to do with $7,200 to $12,000! Grab yourself a copy of Repair Your Credit Like the Pros here and get started today.

Available in paperback and on Kindle here.

If you know someone who is thinking of buying an automobile, please pass on this information to them, because no one needs to throw away good money on higher interest rates.

Thank you!

How to Shop For a Mortgage

Shopping for the best interest rate can be time-consuming and stressful. Have you ever wished for a Personal Shopper to do the work for you? I have good news!

You can have your own personal shopper for the best loan program and a low interest rate. And, it won’t cost you a thing!

A mortgage broker shops wholesale lenders — which is even better than paying retail at your local walk-in bank. It’s not uncommon for a mortgage broker to have a relationship with 40 to 50 different wholesalers.

A mortgage broker has an automated system for finding the best pricing. On top of that, a mortgage broker knows which lenders have simple requirements and which are difficult requiring a mountain of paperwork.

A mortgage broker knows which lenders process and approve loans quickly and which are slow-moving Behemoths.

A mortgage broker can pick up the phone and speak with the underwriter who sits behind closed doors. The broker can advocate on your behalf, challenge paperwork requirements that make no sense, and get an exception when warranted.

And again, for this stellar service, you do not pay a thing. In fact, you will pay less with a broker than you would with a direct lender the vast majority of the time. Why? Because you will be getting your loan wholesale rather than retail.

When you work with a broker, it’s like you’re getting white glove service at a bargain price.

Over the last year, mortgage brokers have been increasing in business while many banks and direct lenders have been declining in business. More and more people are becoming educated to the advantages of working with a mortgage broker.

This is precisely why I choose to work as a mortgage broker myself.

If you or someone you know would like to purchase a home in California or Washington state, I am licensed in those states (NMLS # 1284134) and would be most happy to help. Inquire online here.

 

New Credit Score Model is Being Tested: Will Your Banking Affect Your Credit Score?

Right now, your banking habits — how often you deposit money, your account balance, overdrafts — do not affect your credit score. In fact, the three big credit bureaus can’t see and don’t know about such things.

But all that might change this summer.

Experian is working with a data company called Finicity to test a new credit scoring system they call Ultra Credit Scores. If they like the results, then they may roll it out nationally as early as this summer.

How Ultra Credit Score Works

If you give Experian permission, it will access your bank account to collect additional data for credit scoring purposes. What they want to see is no overdrafts, at least $400 as an account balance average for three months, and consistent deposits going into your account.

For example, if your employer automatically deposits your check every two weeks, that’s good. On the other hand, if you deposit your own checks and do so sporadically because you keep cash out for spending and don’t always get to the bank right away, then that is deemed as inconsistent and won’t gain you points.

If you have a nice savings account, that is good. If you have an occasional overdraft, that will hurt your score.

This is all new. Right now, the credit bureaus do not have access to your bank records.

Invasive or a Good Idea?

The idea behind Ultra Credit Scores (so they say) is that it will help young people starting out who don’t have much credit established to gain a good score. But hold on!

If you turned 18 yesterday, you can build a top tier score simply by following best practices without letting the credit bureaus spy on your personal banking habits. The same principle applies to older adults who have thin credit. Start today and build a good credit profile for yourself. It’s not hard!

I suppose if you have thin (not much) credit and you’re in a super hurry to buy a house right now, then the Ultra Credit Score system could help you. Frankly, I think there are a whole lot of Americans who prefer to keep their privacy and will deem it invasive.

Don’t Worry: They Can’t Spy If You Don’t Give Them Permission

Experian cannot access your banking information if you don’t give them permission, so don’t freak out: you are still in control.

Also, Experian is the only one of the three credit bureaus who is testing Ultra Credit Scores. If it ends up bringing them more revenue, then Equifax and TransUnion might follow suit; at this point, we don’t know.

Do You Want to Ensure Yourself of Having Top Tier Credit?

All the information that the professionals know about getting that 740 to 800 credit score is revealed in Build and Protect Your Credit Like the Pros. You can take a look here.

With a top tier score, you will save money on insurance premiums, interest rates, and favorably impress employers. $8.99 ($5.99 Kindle) is a tiny amount to spend to save hundreds and even thousands of dollars.

Thank you for reading my post. I hope you will share it on social media so others can learn about the new credit scoring system.

Three Big Credit Bureaus Grilled By Congress For 6 Hours

This week the big three reporting agencies TransUnion, Equifax and

Mark Begor/Equifax, James M Peck/TransUnion, Craig Boundy/Experian

Experian spent six hours giving testimony to Congress. They were asked questions regarding every aspect of their companies ranging from dispute resolution practices, cyber-security and the fact they have no other competition in their space.

With Maxine Waters, a long time consumer advocate at the helm of the financial services committee, you can bet the farm that this is not going to be a comfortable year for the bureaus.

Waters has already introduced a bill that would require yet another overhaul of the credit reporting system as well as amendments to the Fair Credit Reporting Act. Subscribe for updated information as it becomes available.

Many thanks to Chad Kusner, Credit Repair Resources LLC, for this information. CCCR offers a credit report analysis and consultation service for people who need credit advice without a full credit repair. More info here.

Build and Protect Your Credit Like the Pros guides you to achieving A+ credit in the shortest time possible.

Having a top tier credit score saves you money on insurance premiums, interest rates, and gains you respect in the community.

“Must have” for every American. Available on Amazon here.

Using “Side Income” to Buy a Home

Do you have a part-time gig making money on the side? If so, you’re not alone.

44 million Americans and half of all Millennials (people born between 1982 and 2002) side hustle for extra income, according to a recent survey. 

Some of the ways people earn extra cash:

  • Delivery driver (for Amazon or another company)
    young woman walking with her dog on the beach

    Photo by Kaboompics .com on Pexels.com

  • Seller on Etsy
  • Dog walker
  • Household help
  • Photographer
  • Graphic design
  • Personal shopper
  • Uber driver
  • Proofreader, copy editor

Earning  money is fantastic, but if you’re applying for a home loan, here’s what you need to know about part-time income.

There are two components to getting approved:
Down payment and Income

MONEY FOR DOWN PAYMENT

You may use the funds for your down payment as long as they are in a bank account and can be “sourced,” meaning show where the money came from. 

You may not use cash from your home safe or hiding under your bed. That is called “mattress money” and must be deposited into a bank account for three months before it can be used for your home loan.

INCOME

To include side income or part-time income to qualify for the loan payment, you must have had the job/income for at least 24 months. Also, you must verify that income with a W2 or a 1099 and tax returns. As long as the proper time and verifications are in place, then your awesome side income can help you qualify for the loan you need.

I hope you found this information helpful. Thank you for reading! If you are buying a home in WA or CA, I am licensed in those two states and would be happy to help you. Online application here.

 

 

Plan Now to Buy a Home in Spring

If you plan to buy a home when the snow melts and the days turn to spring, now is the time to get ready. With a little forethought, you will qualify for a better loan and lower monthly payment.

Review Your Last Two Bank Statements

Ideally, your bank statement will be no longer than two or three pages. If your statement is longer, you can remedy that now before you are required to submit bank statements to the lender.

If you use debit for your purchases, use cash instead. Also, make sure you are not spending money on a daily basis.

Now is the time to go on a spending diet and save money for your new home. Here’s a good way to start…

Circle all charges related to eating out, including fast food, convenience stores, restaurants, and even  gourmet coffee. Now add up the total. Are you surprised? Should you and could you lower that amount by preparing more of your own meals and snacks? Can you save $50 per month? Some people can easily save $250 per month by altering their habits.

The sacrifice now to own a home is well worth the effort.

Next, look at other non-essential charges. Where could you cut back in the interest of getting into your own home? (Or your next step up home?)

Last, look at the ending balances. Is the balance trending upward? Underwriters like to see that you are living below your means, saving money, because the majority of the time, the house payment is higher than the rent payment. This is for your own sake as well, because owning a home comes with more expenses than renting.

Try the Home On for Size

What I mean by that is, set aside the amount of money that equals your new upcoming mortgage payment. Get used to living on less money now so that you don’t suffer payment shock later. Make sure you feel comfortable with the payment. If not, then you know now that you’ll need a smaller loan (and lower priced home) than what you might have imagined.

Avoid ALL Major Purchases

This is a big one, because it’s knocked out so many people from having their ideal home. You must not buy a new car, SUV, truck, or take on any new payment before closing on your house.

I’m thinking about one particular person who saved diligently for an entire  year and worked on repairing and improving her credit. She even hired a professional credit repair service. It worked and all was well until she “celebrated” by buying herself a brand new $40,000 vehicle. The next week when she applied for a home loan, she was stunned to learn she did not qualify. Tragically, she’d chosen to buy a vehicle (which  goes down in value) rather than real estate which increases in value. With the auto payment, she could no longer afford a home loan; thus, she sealed her fate as a renter for five more years.

Thank you for reading my blog.

For all the best tips on building a top tier credit score, see Build and Protect Your Credit Like the Pros here.

 

What You Need to Know Before Divorce

Although the following story seems like a joke someone would tell at a bar, it’s actually a true story. To protect their identity, let’s call them Bob and Mary.

Bob and Mary did not get along, and eventually Mary decided to call it quits after five years of marriage. In the courthouse going through the divorce proceedings, it almost seemed to Bob like the judge had a crush on Mary because things just weren’t going his way; after all, Mary was awarded the kids, the car and the house, and poor Bob seemed to be just left with the credit card debt.

Life moved on with old Bob though, and even though his was living at a Motel 6 and riding a skateboard to work, he decided not to wallow, but to better his attitude and his way of life. He saved every penny, paid off the credit cards and even put enough in savings for a down payment on a home.

After seeking out his trusted mortgage broker, Bob walked in to her office all ready to go. After listening to Bob explain his qualifications, the broker enthusiastically pulled Bob’s credit.

Lo and behold,  she saw that Bob had a 550 credit score with a string of late payments.

Bob dismissed this issue with wave of his hand as he said, “Don’t worry about those lates, because they don’t even belong to me. Those are my ex-wife’s.”

Then the mortgage broker explained that they can’t just ignore them. They are on his credit report and have affected his score.

Bob replied, “You don’t understand. I was there at the court house! My ex got everything, including the house and the car, so those don’t apply to me.”

No Bob, you don’t understand… and neither do most people…

When it comes to your credit report, the divorce decree is pretty much worthless. It does not protect you!

The creditors don’t care about it and the credit bureaus care even less. Why should they? They never agreed to the separation of debt, and they are much more likely to get their money if there are two people to go after instead of one.

Creditors are not party to a divorce. So regardless of the divorce decree, the creditors can still hold both parties responsible.

Sure, Bob could sue Mary for not holding up her end of the bargain, but suing someone who doesn’t have the money to pay their bills is relatively useless.

Bob should have separated his credit from Mary’s credit as soon as he knew she was filing for divorce.

If you know someone who is going through a divorce, make sure they see this message, because it is imperative that they separate their credit immediately. Close all joint accounts. For auto and mortgage loans, the loan will have to be refinanced to remove one person’s name from the obligation. There is no other way to do it.

A big thank you to Anthony Iacobucci, National Credit Care, for permission to post this client story. His contact info is below. He fixes credit for people like Bob–or anyone else who needs their credit restored. For DIY credit repair, this 5-star book is available on Amazon here.

Anthony Iacobucci
Regional Director and Manager
National Credit Care
Cell: (303)500-5052
Office: (866)595-6313 Ext. 410
Fax: (877)754-5724
Email: anthony@nationalcreditcare.com
http://www.nationalcreditcare.com/

News For Home Buyers! Bank Buster loan!

If you want to buy a home in 2019, this news is for you!

Earlier this week, the top wholesale mortgage lender in the United States announced that they are dropping their interest rates to unprecedented lows with the new Bank Buster program!

What does this mean?!!?

The insider secret is that they are giving mortgage brokers loans at $0 upfront profit to themselves in order to scoop up a bigger share of the market. That’s right…

They are at war with the banks! Perfect timing, too, because more and more people are discovering that they can get better interest rates, faster closing, and better service with much less stress when they go with a mortgage broker.

A mortgage broker shops wholesale lenders to get you the best loan.

A direct lender or a bank has only their own loans.

Banks are great for checking accounts. But come on, they cannot compete with a mortgage broker who specializes in only one thing: mortgage loans. Here’s what I’m talking about…

  • Mortgage brokers close loans faster. For example, as a broker, I closed loans that were a “rush request” in only two weeks — from application to closing! I’ve never heard of a bank doing that. They usually take a month or more to close.
  • A mortgage broker meticulously manages your loan from start to finish. They don’t pass it off to a team member and then focus on getting the next application in line.
  • Mortgage brokers have more loan choices and are not limited to the bank’s limited portfolio of loans.
  • Loan officers at banks are not required to take the 20-hour training and pass a vigorous test. Nor are they required to get a background check, fingerprinting, and get licensed. Therefore, they do not have the same expertise. Truth is, there are loan officers who are guilty of fraud hiding in banks.

If you want the best steak, go to a steak house.
If you want the best Chinese food, go to a Chinese restaurant.
If you want the best mortgage, go to a mortgage broker.

It makes sense! And now, with the new Bank Buster* program, watch out! Because if you’re not checking with your mortgage broker, you could very well be setting yourself up for higher pricing, more stress, and a longer closing time.

FACT: A mortgage broker is required by law to get you the best loan at the lowest interest rate they can. That is not true for direct lenders, credit unions, or banks.

* This new super low interest rate loan program requires a credit score of 640. If your score is 639 or lower, here are two resources for do-it-yourself credit improvement. Both books are available on Amazon.

Thank you for reading and passing on this information.

Feel free to re-blog and post on social media.

I am a licensed in Washington and California, NMLS # 1284134.

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