10 Surprising Ways You Could be Destroying Your Credit

Most of us don’t sit around thinking about our credit worthiness a whole lot. Generally, if you’re paying your bills mostly on time and no one’s chasing you down for money, you probably think your credit’s fine.  Surprisingly though, there are a whole host of seemingly innocuous ways that you could be screwing up your credit without even realizing it.

  1. Consolidating your debt – Taking advantage of lower interest rates is a sound financial decision because you ultimately end up with a lower monthly payment. However, transferring all of your debt onto one credit card means that you are going to be closer to the credit limit, which looks to lenders like you have no self control. Instead, try to keep several credit cards open with a balance of no more than 35% of the credit line on each.
  2. Closing out accounts – Instead of closing out credit accounts when you pay them off, keep the line of credit open so that lenders can see that in your credit history. Generally, lenders like to see three solid lines of credit for borrowers, so if you close out all of your accounts, lenders have no way of knowing your payment history.
  3. Opening a bunch of store cards – Saving 10 or 20% on your in-store purchase by applying for a store card can be tempting, but try not to go overboard. Too many store cards in a short period of time tells lenders that you might suddenly go on a spending spree. It makes you look riskier to them.
  4. Taking cash advances from your credit card – This can be a risky thing to do because it can seem like “free money” and you may be tempted not to pay it all off right away, only adding to your credit card balance.
  5. Perpetually returning library books late – Believe it or not, delinquent library fines can have a negative effect on your credit number, so always return your books on time!
  6. Forgetting to pay your parking tickets – Although it may seem like something small, even an unpaid parking ticket can be sent to collection agencies, who have the ability to trash your credit by 100 points or more. Yes, just for an unpaid parking ticket.
  7. Co-mingling your credit when you co-habitate – It feels good to share finances when you move in with a significant other, but it’s much smarter to keep your accounts separate. If one of you loses your job or cannot pay for another reason, only one person’s credit will be ruined – instead of both.
  8. Getting divorced – When you get married, you never think of the minute possibility of ruining your spouse’s credit somewhere in the distant future. However, if you end up divorced, your ex-spouse may not be paying his or her share of debts that are also in your name, dragging your credit into the ground.
  9. Checking your credit score too much – Every time you want to borrow money from someone, they are going to want to run a credit check on you. After a lot of credit checks in a short period of time, lenders are going to think you are scrambling to create a credit history. Instead, request one copy of your own credit report, and share it with multiple lenders before making a decision about who you borrow from.
  10. Being a nomad – Lenders look for stability in borrowers. Changing jobs frequently and moving around a lot suggests that you live a high risk lifestyle and can also result in unforwarded bills that go unpaid.

Of course, don’t do the obvious things either, like maxing out all of your credit cards or never paying your bills on time (even one late payment can drop your score!), and be sure to check your credit report at least once a year to check for any little surprises that you didn’t know about.  Be in the know now, so that when you need to look good to lenders, you’ll have nothing to worry about.

*Photo provided by The Digitel

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Renting an Apartment with Bad Credit

In today’s real estate market, more and more people are deciding to rent rather than apply for a mortgage. The reasons behind that are numerous, and they include: overpriced housing, divorcing couples, job loss, disability and bad credit. Because of the recent influx of former homeowners into the renting world, landlords are now able to be more particular about their renters. This is good for landlords, but can be quite difficult for those people who have lower credit scores. Naturally, a less-than-desirable credit report often excludes people from being approved for a home loan, and now it looks like it may make renting difficult as well.

Most landlords are going to require a credit check, so if you know that your credit score is quite low, give your prospective landlord a head’s up and offer to pay a designated portion of the rent up front -six months to a year’s worth – in order to put his mind at ease about your score. Reassure him that you are actively working to raise your credit score and that it is low due to events that are now in the past. You can also ask a friend or family member with good credit co-sign your lease with you, or get a letter of recommendation from someone you from in the past, providing proof as to your reliability. Remember though, if you fail to make your payments on time, a co-signer’s credit will suffer as well.

Also consider asking your potential landlord if you can provide your current credit report to them. By avoiding a “hard inquiry” ( when someone other than you requests your credit report), you can also give your landlord a written letter explaining any difficulties that you have had and what you are doing to remedy them.  Also, too many hard inquiries will actually make your credit score drop even lower.

Consider the possibility of getting a roommate who has excellent credit. Usually, if at least one tenant has good credit, a landlord will be more likely to rent to you. Also, steer clear of big apartment complexes, and look for individual landlords who are looking to rent out a home or part of a home.  Ask your real estate agent  if he knows of any mom-and-pop landlords in the area. Try looking on craigslist for rentals that appear to be offered by an individual rather than a management company.

Although renting an apartment with bad credit is no longer as easy as it used to be, it can be done, as long as you’re taking the appropriate steps to improve your credit report.  To ensure that you are doing all that you can to bring your credit score up, seek the advice of an attorney who specializes in credit repair.  There is no need to despair about your living prospects  as long as you are steadily moving in the right direction.

 

*Photo provided by Editor B

The Truth About Trial Loan Modifications

As more and more homeowners are facing financial hardships, the number of loan modification applications being processed by mortgage lenders continues to rise. In an effort to avoid foreclosure, many strapped homeowners are being granted trial loan modifications with the promise of approval for a permanent loan modification in three months.  Many mortgage lenders have been accused of giving false hope to many of these borrowers by offering them a trial loan modification with no intention of ever offering them a permanent modification.

There have been many cases recently in United States Court systems wherein homeowners have been granted trial loan modification periods by their lenders, went on to successfully make their three mandatory trial payments with no indication of ever being granted a permanent modification! Some of these homeowners have even been served with foreclosure notices in the middle of their trial periods while they were successfully paying their mortgages.

In some cases that have made it to bankruptcy court, it has been found that many lenders do not respond to homeowners’ attempts at contact during the three-month trial in an effort to get as much money as possible from the borrowers before finding a glitch in the application and foreclosing anyway.  Some lenders have also been caught manufacturing information, such as “missing paperwork” that caused a denial of a permanent loan modification, wherein the “missing paperwork” never even existed.

 If you are in loan modification hell, be persistent. Call your lender daily until you get the answers that you need to make your loan modification permanent.  If you continue to get the runaround or are being told false information (one homeowner was told that her application was denied because she is no longer living in the home – which was false), try calling the Treasury Department to complain about the lender’s actions. (If your lender is a state-chartered institution, contact your state banking regulator.)

 Individuals who have filed lawsuits against their lenders for bad-faith practices in small claims court have had the most success in being granted the permanent modification they desire. If you are not getting the answers that you need and you have been faithfully paying your mortgage every month with no response from your lender about a permanent modification, call the Veitengruber Law Firm to check over your mortgage agreement  language. Let us deal with your lender directly; sometimes just the threat of a lawsuit will spur them into action. Rest assured that by contacting a qualified attorney, you’ll get the help you need to avoid foreclosure.

Photo courtesy of Bogie Harmond

Can I Keep My House Without My Spouse?

Part Two of our series about The Financial Ramifications of Divorce addresses the issues surrounding real property, and things to consider when it comes to keeping the house or selling it.  There are, of course, many good reasons why one spouse might want to keep the home after the split – stability for the children, staying in the same school district, comfort, and a perceived inability to afford reasonable housing elsewhere. Regardless of your reasons, it is extremely important to do your research before deciding whether or not to keep the house after your spouse has moved out.

Things to consider include:

  • The current value of your home
    Fair market value is the amount that you can expect to get if you sell the home in the current market. You can then determine your equity by subtracting the debt owed against the home from the fair market value.
  • Your ability to qualify for refinancing
    You will have to refinance the mortgage into your name alone, and to do this, you must qualify for refinancing. Having someone co-sign for you is a good backup plan, if you don’t qualify alone.
  •  Tax effects
    Don’t forget about the mortgage interest deduction and the fact that it may decrease your tax burden, therefore increasing the amount of your income that is available to you, making it possible to keep the house.
  • Your monthly budget
    Many people who have been married for a number of years are out of touch with their own monthly budgets and financial responsibilities, simply because the other spouse handled all of the finances. Become familiar with all of your monthly obligations in order to determine your true ability to keep your house without your spouse.

As long as you can easily afford the mortgage payments, qualify for refinancing (with or without a co-signer), and have considered all potential taxes and monthly bill obligations, keeping the house and the associated stability should be well within your reach. However, if you determine that it looks like the payments will be uncomfortable for your budget, it may simply be a better idea to sell the house and look for something more affordable. It is important during this time of decision-making to consult with several professionals – your financial planner, an attorney experienced in handling loan modifications and refinances, and a trusted family member or friend.

Above photo courtesy of Mosman Council