Sunday, November 27, 2005

URGE Congress to Enact Tougher ID Theft Laws!

Our Congress is Proposing a New 'softer' ID Theft Law:

Considering that Identity Theft occurs19 times per minute in the United States, it seems incredible to me that our Congress would be considering softer ID theft Laws. Recently enacted tougher State laws (as in Washington State) would be undermined by this new US Bill.

Urge your congressperson to support a tougher law to:

1. Remove the loophole that lets any company who fails to my personal information decide whether or not to tell me about it(!) As citizens, we must demand to make that decision for ourselves. We can only do so if we are informed when a company has ANY breach of security regarding our identities and financial information.

2. Insist on stronger security standards for everyone who handles consumers' personal information with real penalties if they fail to protect consumers. Companies who fail to protect my personal information should be pay for the inconvenience caused by their failure, including legal fees and damages which are ongoing to a person's credit rating and subsequent higher fees for every service, including insurance rates, mortgage rates, and credit turn downs.

3. Give you the right to see and correct the files that information brokers have about me--and stop them from selling or sharing this information without your express permission.

Please urge your congressperson to strenthen the new H.R. 4127 law to protect us all against identity theft and fraud.

We deserve a Congress that is accountable to citizens first!

Wishing you every credit sanity! Loannetter

Tuesday, October 25, 2005

Genuine FREE Credit Reports!

How to order your FREE credit report once a year:

Online: (or download a mail-in form)
By phone: 877-322-8228
By mail: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348

NEVER order a credit report from a site that asks you for a credit card number before giving you your 'free report'. Several firms have been convicted of secretly charging yearly credit monitoring fees.

The best known good consumer site is which is the Fair Isaac Company site (they invented credit scoring). This site has some useful credit comparison tools showing how credit scores affect interest rates which in turn affects your payments. A Tri-Merge (3 bureau) report costs about $50.00. If you check your own credit, it does not affect your FICO score.

Be aware, you do not need to sign up for regular credit check services unless you are concerned that someone has been abusing your identitiy. If you have experienced identity theft and you are concerned that your are still at risk, you can  first make a police report, then send than information to all three Bureaus and they will 'lock' your file with a PIN code so no-one can attempt to check your credit without your code and permission.

When a lender pulls your credit, it can deduct up to 3 points from your FICO score, one for each bureau. Loan shopping beyond a 10 day period can impact your score significantly by going outside the 'de-duping period', so try to confine the number of lenders you allow to pull your credit within 2 weeks. Online lending firms have been known to 'shop out' your report to several agents (who each pull your score). The last 90 day period on your report shows the credit checks that were made and by whom. A responsible mortgage broker will only submit your loan application to a qualified lender they know can fund your loan given your specific requirements. Online shopping exposes you to agents seeking 'easy targets'.

Note: Free consumer reports may not show your FICO Score. You can opt to pay a fee for that information, which lenders require. The free reports are offered once a year. I charge the actual cost of approximately $20 for a Tri-Merge report in conjunction with a loan application, which shows your score. We give you a copy and discuss any issues to be aware of. 80% of credit reoports have errors on them!!

What's a good score?  300-850 is the score range, with 850 being perfect, 720 is excellent, 620 is the baseline with under 600 being considered poor. If you have applied for a mortgage your lender should provide you with a copy of your report which may or may not show your score (ours do).

If you are planning to get a mortgage within 3-6 months, it's a great idea to check your report to be sure everything is in order. Credit repair can be time consuming--even with sufficient proof.

Happy scoring! Loannetter
© copyright 2005 susan templeton loannetter

Monday, August 08, 2005

Handling Collections

Collections on your credit hurt your FICO score. However, don't pay them off without establishing the effect they are having on your credit report! Anything over two years old has less and less effect. Many lenders will overlook old collections as long as your recent record is good.

Note: Once you've paid a collection, it is virtually impossible to remove from your report and could actually hurt your score in the short term!

Removing Collections from your Credit Report
1. Contact each original creditor listing collections on your report. (They may refer you to their collection agency if they have 'sold' the debt.) If you can afford to settle the debt, negotiate how you will pay it off. Insist that you will ONLY pay the debt IF they agree to REMOVE the item from collections and show the Account "Paid as Agreed" on your credit rerport. You must do everything in writing.
2. Your letter from the creditor (assuming you hounded them into submission) should state the account number, the amount they agree to accept, and their agreement to remove it as a collection and show it as a Paid as Agreed account.
3. Wait until you have a letter agreeing to these terms. Do NOT pay until you have this letter in hand! Use faxes or the mail but get in in writing.
4. After you have the agreement letter, pay it off promptly or as scheduled and keep a copy of your checks and letter of agreement.
5. THEN if your report continues to show these items:

Dispute Items Directly to the Credit Bureaus:
If you've had the fun of trying to negotiate an inaccurate listing with a creditor (big banks can be the worst) as in the above scenario, I suggest you take the matter straight to the Credit Bureaus.

If you manage to get a letter or fax from the creditor agreeing to remove an item from your report (and they have not within 3 months), attach this to a letter of explanation and send it Certified Mail to all 3 Credit Bureaus listed at the bottom of your report: Equifax, Transunion and Experian. Each bureau will need their own letter and copy.
The Bureaus will respond within 30 days. Be sure to offer to fax documentary proof or sending letters again and again until they realize you are not going away.
In the first instance, any dispute will be temporarily removed or listed as a pending dispute on your credit report while they notify the original creditor of your claim. The creditor has 30 days to respond and if they don't voila, it will be removed. You can hope they were as lazy responding to Equifax and friends as they were to you and be done with it. Your FICO score will start recovering from the damage once items are either removed or listed as Paid as Agreed with zero balances owing. The recovery takes longer than the original damage, so plan on three to six months if matters were serious. I've seen clients raise their scores in 3 months over 40 points, but your success will depend on the number and heft of issues.

What's serious? Each Credit Bureau has a slightly different pirority list and that is also listed in order of importance on your Credit Disclosure which your lender should supply when they give you a copy of your credit report.
Credit Reporting Bureaus:
Equifax Information Services: 800 685 1111
TransUnion Customer Relations: 800 888 4213
Experian: 888 397 3742

Credit Bureaus are legally required to act on your behalf in the case of disputes. The Bureau will notify you of the action taken. If collections agents are really sneaky, they may send the item to another collection firm and the same collection could land on your report again...which is why you need that letter with the account number and amount due as well as the amount paid AND their agreement to remove it as a collection and show it as a PAID AS AGREED account.
Beware of firms offering Rapid Rescoring. This real service can also be real expensive. In some cases, your mortgage broker can remedy an inaccurate item or two by paying for a supplemental report (small fees here). We have the ability to report obvious duplications or inaccurate accounts to clear items from your report for a lender's review. This does NOT improve your score, but clarifies if such things as collections have been paid. You will need to provide your broker with any proof of such payments or Schedule F in the case of items discharged in a bankruptcy. Bankruptcy issues naturally take longer for your score to recover, so a very thorough lawyer is worth their salt here.
Don't freak if your Credit Report shows a mortgage late in the last year while you were on vacation. Most lenders will overlook one and if it's more than a year ago they are less concerned. It's when a pattern of irresponsible behaviour is shown that they get worried.
Professional credit counseling firms charge around $75 - $100 and upwards per item to remove derogatory items. Some charge a flat monthly fee. These firms vary tremendously in the results achieved. Some firms allow your credit to lapse--which causes your score to plummet while they negotiate your payments down. At that point, a creditor is probably sure you will never pay and may agree to pennies on the dollar. They make their cut on the difference in your settlement and what is actually paid.
If your problem is more serious than a few overdue collections, speak to a good accountant and consider your options.

Wishing you every credit sanity! Loannetter
©2005 susan templeton

Monday, June 27, 2005


Lenders first want to know your creditworthiness. To prepare yourself, it's a good idea to check your credit report to find out where you stand before you intend to buy your first home.

Credit History
Your credit history is a collection of records held by the national consumer credit reporting companies: Equifax, Experian and TransUnion. Your record comprises a list of all your relationships with lending institutions and credit card companies as well as tax and court records. Any outstanding fines or late payments will be noted in detail with the most recent issues carrying the most weight in terms of your 'score'.

Free Credit Reports
By law every U.S. citizen can now receive a Free Annual Credit Report. This report is designed for consumers, and gives you the same information your lender sees in an easily readable format:
If you find anything on your report that you don't believe is accurate, you are advised to contact the specific creditor (contact details are listed on the last page of the report usually). Check out our article titled Report Fraud and Credit Disputes on this blogspot. You don't need to sign up for monthly credit reporting (for a fee) unless you have some recent concerns about fraud or are currently monitoring your accounts. For ongoing reports visit

Alternative Credit
A lender will have concerns if you have ' no credit' i.e., no record of traditional 'trade lines' in the form of credit cards or loans. Alternative credit uses phone bills and receipts from regular accounts to build a credit picture.

Qualifying Factors
Your income is key to being a first time home buyer. Stable 2 year employment history is standard requirement for most mortgages. Your lender will want copies of your most recent three months pay stubs and two years W-2's. Self employed borrowers will be asked to submit two tax returns. Other sources must be documented. These help to establish your correct ratios for what you intend to purchase.

Debt to Income Ratios
Debt to Income or DTI literally means how much money you have going out every month for fixed expenses in direct ratio to your income. This helps establish how much money you can afford to borrow. Credit cards, mortgages, auto payments, student loans, and other outstanding debt payments are all part of the picture. If your credit card balances are high, then you can expect to be qualified for a lower mortgage amount than if you had no outstanding debt.

Add your monthly rent plus all your monthly credit card bills (student loans, auto payments, etc) to arrive at your current Debt to Income Ratio. Next, substitute your proposed monthly mortgage payment including property taxes and insurance for comparison. The new Debt to Income ratio will be what the bank will use to 'qualify you'.

Borrower and Co-Borrower Qualifying
If you intend to purchase a home with a partner or spouse, that person will also need to qualify. Some lenders may forgive a lack of credit or lower score for a spouse or partner. Your mortgage lender or bank will advise.

It's a good idea to be prequalified by a bank or broker prior to looking at homes. Your lender will provide a copy of your credit report and take your application in order to get the ball rolling. This process helps you establish your lending budget. This also you in a better position to negotiate with a seller if they know you are pre-approved. Your lender will provide a letter to your realtor (usually with your offer to purchase) to help prove you are serious.

Once you've conquered these topics, happy house shopping!
Wishing you every credit sanity!Loannetter

©2005 susan templeton loannetter

Thursday, April 28, 2005

Consumer Credit FREEZE in Washington

Washington Governor signs security freeze legislation!

May 10, 2005, Washington Governor Christine Gregoire signed SB 5418. This new law gives Washington state residents the right to place a security freeze to lock up their credit files so that new creditors can't check the consumer's credit file unless the consumer chooses to unfreeze, or unlock the file. The right to freeze the credit file applies to identity theft victims and to consumer who have been notified that the security of their personal information has been breached
published by the Consumers Union

Consumers Union is urging consumers to support tougher state laws that would increase your protection. Considering that 9.9 million Americans are vicitmized by Identity theft each year--your chances of experiencing loss through identity theft increases daily.
To support the freeze on credit information access without your permission in your state, visit:

This petition is being presented to state legislatures by Consumer's Union. It would mean that individual consumers could 'freeze' their reports preventing companies from issuing new credit accounts and having access to your credit report without your permission. The downside is that you would have to temporarily 'unfreeze' your credit if you were legitimately seeking new credit. Another upside would be no more unsolicited credit card offers in the mail!

Brokers Support Protections
The Mortgage Brokers Association and other advocacy groups are urging congress to enact stronger laws protecting consumers from the wave of new identity thefts. If you have good credit, you will be the primary target. It really pays to review your credit report at least once a year (and several months before applying for a new loan) to be sure your information is accurate.

Every day we read of new security breaches at universities, retail stores and payroll companies. The ability of online hackers to break into the databases of these firms is beyond comprehension. We all hope it won't happen to us. At the current rate of ID theft in the USA, 19 incidents occur every minute.

The FBI is also taking a very strong interest in these matters as they relate directly to the mortgage industry. According to the Washingon Mortgage Brokers Institute, 80% of victim fraud is committed by insiders in the financial industry...including lawyers, appraisers, title companies, brokers, loan originators, bank employees, processors, etc. The problem is compounded by lax rules and regulations. For example, if your broker doesn't shred all sensitive documents, their trash could be the source of a wealth of information for identity thieves. And believe me...thieves know where to look. Fortunately, tighter regulations are being proposed to enforce better security procedures throughout the mortgage industry. One such safeguard is the standard background check that lenders undertake before hiring people to work with secure information. Unfotunately, a really smart con will find some new way to outfox the the system is evolving to stop these new practices.

Acts before Congress and your local state legislatures are being debated to create better safeguards. While some Bills exist that require companies to tell you when your personal information security has been breached...they first have to know about it! Companies who have been caught out (DFW shoes is one) often don't know the extent of the seciurity breach and by the time they notify consumers it may be too late to stop an attack on your personal credit.

Contact your elected officials here:
Wishing you every credit sanity! Loannetter
(c) 2005 Susan Templeton

Wednesday, April 06, 2005

Avoid Loan Death!

If you are applying for a mortgage, here are a few specific rules to help you make it to closing alive:

NEVER respond to a bank online request for your passwords or identity information. These may be opportunists looking for access to your accounts and it could be a coincidence that you are applying for a loan (who isn't these days?). Legitimate Banks may mail disclosure documents about your loan prior to closing. If you are working with a mortgage broker it is possible that more than one bank is competing for your loan--so keep the documents but do not respond to them...that's your broker's job. This can be confusing as the documents the bank sends may not be up to date anyway...but is does alert you that someone has applied for a loan in your name.

NEVER co-sign a note with anyone for anything! (Unnless yo uare willing to accept their payment history on your credit)

NEVER give out your Social Security Number to a bank or lender who doesn't ask you to sign a Certification and Authorization form FIRST (informing you of your rights). Once this person has pulled your credit, you should be provided with a copy of the report showing your FICO scores.

NEVER shop online for a mortgage if you value your credit score (online lender 'hits' will lower your score because they farm out your application to multiple lenders at once). It's fine to check rates online but you should know that you may not qualify for a specific rate given your particular situation. Every bank has a specific set of guidelines....for example: self employed borrowers pay a higher rate unless their Schedule C tax documents prove a sufficient income after expenses.

NEVER fall for a voicemail or caller claiming to be a 'person from the mortgage company' offering a ridiculously low rate. Sure there are 1.25% rates but these things usually have a vrey complex structures and unless you recognize the caller--chances are they are just fishing.
NEVER be late on your mortgage payment just before your loan closes. Even one day late will hurt with some banks....and Home Equity lines are the worst...I've had a client be reported for a 30 day late for the $1.70 service charge! One 30 day late payment on your record may put you in a higher risk and higher interest rate bracket (banks will work with prior notice, not excuses).

NEVER be late on your credit card or student loan payments.

NEVER rack up your credit card balances (over 30% balance) before you apply for a mortgage.

NEVER move all your credit balances to one card just before you apply for a really want to keep your cards evenly balanced so none are maxed out. After your loan closes, move balances to the cheaper rate card and keep all your cards open (old is good).
NEVER apply for any new credit cards 90 days before you apply for a mortgage.
NEVER close credit card accounts even if you aren't using them (just lock them up). The FICO scoring system and many lenders look at available credit--so having open cards with zero balances actually adds that particular credit limit to your available credit.

NEVER EVER buy a car or major applicance while waiting for your mortgage to close!

NEVER open new credit cards while waiting for your mortgage to close!

NEVER listen to what a realtor, your brother-in-law or your boss has to say about interest rates or specific loans. These very nice helpful people have no business discussing rates or loans because they don't have the right to full disclosure about your financial circumstances.

NEVER EVER lie about your financial situation to your lender or mortgage broker because they will find out and eventually have to turn you down or scramble at the last minute to find a solution that you do qualify for. (You can say anything you like to your realtor, brother-in-law and boss - we won't tell.) 

Wishing you every credit sanity

Monday, April 04, 2005

Report Credit Fraud!

If someone has taken out a credit card in your name (without your permssion or knowledge) this is a fraudulent act, often involving forgery or impersonation and is a felony. Fraud is serious and Identity Theft can affect your credit indefinately!

Call your local police or sherrif's department. Tell them what happened and provide any evidence you have, for example, a card statement or unauthorized payment withdrawals from your bank account. Get a police file number and copy of the report. You can choose to press criminal charges if this person has caused financial loss. Good luck finding them!

Next: Go to your bank and stop any payments from going out of your account to a suspect card or account. They may reverse the charges unless they came from a debit card that is directly linked to your bank account. You can close the debit card immediately and get a new card with a new number to prevent further charges. Your bank will advise you on appropriate steps.

The problem with most credit card fraud is that you don't often know that this is occurring until the person who took out the card is long gone...usually after they have maxed out the card and left you holding the bill. Eventually the credit card company will find you of course (you aren't hiding after all). If the bill has been unpaid for a few months, you can expect very upsetting phone calls all hours of the day and night by credit collectors claiming to be 'lawyers'. These people are a subspecies of humanity that do not understand or appreciate the fact you might actually be an innocent victim.

Create a Paper Trail:
Most credit card companies will respond to your complaint if you have proof! So keep that police report and make copies for all who call! Ask to see the original credit application on file with the signature and address the person used to get the card...the card company should be willing to fax or mail you a copy. Then you can dispute it's veracity. Unfortunately, if you have a good credit score, predators may successfully apply for several cards in your name using another address and you may never see a bill or statement.Another form of Credit Fraud is someone gaining access to your debit card and using it as a credit card. Since many banks allow you to use your debit card to make credit can do so without a PIN number. One way to avoid this is to ask your bank to put your picture on your card...but not all banks offer this service. The best remedy is to keep your wallet and cards safe! Anyone signing for credit in your name is essentially committing Identity Theft. Unfortunately, unless you report your debit card stolen, it's very hard to get a bank to refund lost funds.

Consumer News:There are bills before state legislatures that would allow consumers to put a freeze on credit information without your permission. There is also a lobby being conducted by large consumer credit organizations to limit this protection, which is now before US Congress which suggests that a federal bill could over-rule individual state laws. You may want to write your congress member. Washington State passed a bill in 2005 allowing individuals who suspect they have been victims of fraud or theft to put a 'freeze' on their credit, preventing anyone from checking their credit without their full authorization.

Federal Trade Commission Site:Check out the FTC's excellent online articles about Identity Theft. You can also report a perpetrator of fraud on their system. Such a person will find it hard to work in the finance industry if they have been reported....and unfortunately some of them do hide out in legitimate organizations to gain access to victims:
Another Consumer Site is Fraud Watch:

To put a Fraud Alert on your Credit Report call all 3 Bureaus:

Equifax Information Services: 800 685 1111
TransUnion Customer Relations: 800 888 4213
Experian: 888 397 3742

Fraud alerts and reporting are free!

You don't need to pay someone a fee to handle this for you...just be vigilent and keep an eye on your report at least once a year to verify no new accounts have been opened. In some states, as in Washington, you can now put a freeze on your credit so no one can check your credit without your permission. Why didn't we think of that sooner?

Wishing you every credit sanity! Loannetter
©2005 susan templeton

Wednesday, March 16, 2005

Are You A Credit Fiasco Waiting to Happen?

How TRUSTING Are You? How well do you know the people who might have temporary access to your filing cabinet, check book or wallet? Now think: there's the guy who installed new cable outlets...your cleaning lady... the neighbor who feeds your cat when your away. Like most of us, you are probably pretty trusting until the precise moment you are either robbed or betrayed. Believe me, I've been there. Once the damage is done it is very costly and time consuming to have it undone.

The only way to protect yourself from identity theft is to keep your personal details behind a solid unrelenting wall of common sense. Don't carry your social security card in your wallet and DO have a locked filing cabinet or home safe where you store your check books, passport, un-used credit cards, bank statements, W-2's, pay stubs and anything with your social security number or account numbers that could be used to impersonate you. Sad but true--a very high percentage of people who use your good name are known personal or business acquaintances who had just enough information to forge a credit card or bank application behind your back. Once these folk are using your name you have two ways of finding out: 1. Checking your credit report or 2. The collector's dogs chase you down. By then things will look bad. Real bad.

And another thing: all those credit card companies who keep sending you 'pre-approved' credit applications are on fishing expeditions. They have retrieved your name and address from Public Tax Records and other databases. Shred any applications you receive from such sources.

If you are shopping for a mortgage, do so with trusted banks or personal brokers and confine your 'shopping' or application process to a 2 week period to limit the 'hits' on your credit score.

The NEVER Rules:
NEVER loan a credit card to a friend.
NEVER leave your wallet in your office when you go to a meeting.
NEVER shop on an unsecured online site.
NEVER let your passwords be known to anyone for anything.
NEVER email your passwords or account numbers (faxes are safe).
NEVER respond to a bank online request for your passwords or identity information.
NEVER co-sign a note with anyone for anything.
NEVER open a joint bank account with a friend or loved one.
NEVER give out your Social Security Number to a lender who doesn't ask you to sign a an Authorization form (informing you of your rights).
NEVER shop online for a mortgage if you value your credit score (online lender 'hits' will lower your score because they farm out your application to multiple lenders at once).
NEVER be late on your mortgage payment (banks will work with prior notice, not excuses).
NEVER be late on your credit card or other revolving account payments.
NEVER rack up your credit card balances (over 40% balance) before you apply for a mortgage.
NEVER apply for any new credit cards 90 days before you apply for a mortgage.
NEVER close credit card accounts even if you aren't using them (just lock them up).

NEVER open new credit accounts while waiting for your mortgage to close!

NEVER EVER buy a car or major applicance while waiting for your mortgage to close!

Always keep your PIN numbers, Social Security Card and Credit Cards safe. I will add to the Never list as they arise. Your additions and comments welcome. Every day somebody presents a situation inspiring another NEVER rule.

Wishing you every credit sanity

Credit Reports Defined

Your Credit Report Is A Record of Your Financial Behavior.
These records deonote patterns established over your borrowing lifetime You may be surprised to see records of employment and mortgages or credit card accounts over twenty years ago still reporting. Three national credit reporting bureaus maintain these records. These reporting bureaus: are Equifax, Experian, and Trans Union.

Credit reports (also known as your credit file, credit profile, or credit history) contain: Your identification, including your name, telephone number, and address, as well as your Social Security Number, birth date, and employer. (The information usually includes previous addresses and employers too.)

Your credit history, which details how you pay your bills to banks, credit unions, finance companies, mortgage companies, and retail stores. Also included are any existing public records, such as bankruptcies, judgments, and tax liens. Inquiries, or authorized credit checks by companies receiving your applications for credit, or your name for the purpose of offering you credit (usually within a 90 day period) are also reported and can affect your score negatively. Usually 1 to 3 points per 'hit'.

Your business accounts, medical history, purchases paid by cash or check, as well as your gender, national origin, race, and religion are not contained in a credit report.

How Credit Scores Work & What Lenders Look For:
When you apply for loans, credit cards, and/or leases, issuers review your credit report while evaluating your application, as well as your credit score(s). Today, some employers review the credit reports of applicants. Your credit also may be checked to qualify you for overdraft protection as well as to determine your ATM limit. Also, most insurance companies check their customer’s credit data when considering applicants or even setting premiums. The score information they receive helps establish the liklihood of claims filed for financial risk categories.

The information on your credit report detailing each of your accounts is sent to the credit bureaus by lenders. Also, information is obtained from public records, or provided by consumers themselves. Information usually remains on credit reports for seven to 10 years from the date the account is paid and/or closed, except for adverse information. Adverse information usually is recorded for seven years and generally includes late payments and other delinquencies as well as any civil judgments and bankruptcies. Foreclosures stay on you report 10 years but all these things have less and less effect as time goes on. Unsatisfied tax liens may remain on credit reports indefinitely and can be real show stoppers!

Credit Score Rating System: A Numbers Game
The FICO Score system was first invented by the Fair Issac Corporation. Lenders pull your credit report when taking a loan application. You should receive a copy of your report with your FICO Score and review from your lender or mortgage broker. Not all banks like to give you your report...I don't personally understand this approach to withholding information that you have every right to see. You can go to and order one free report every year.

Unfortunately, Free Credit Reports now offered to every US citizen (once a year) do not list you FICO Score. While the information provided in free reports is useful to verify that everything on your report is accurate, you still need to know your score to approach negotiating a rate for a mortgage or credit card. Your FICO Score puts you in a paticular 'risk category' and the better your score, the better interest rate you will be offered. It's the holy grail of credit risk. It's a great idea to order one Bureau (of the three) and see how that looks first. If anything is amiss you can dispute it...and then check again in a month or so with a 2nd request.

Your credit score is a numeric indication of how likely you are to repay debts such as loans or lines of credit. Credit scores also are designed to indicate your creditworthiness in comparison with other consumers. Credit scores are based on the data in your credit report and are generated by computers using artificial intelligence. The scoreing range is from 300 to 900. Because there are 3 bureaus, you will have 3 FICO Scores. The middle number is called your FICO Mid Score and that is the number most widely used to determine your risk category. Some lenders prefer a particular bureau's score and you can hope it's your higher score!

Many types of credit scores are used, including custom scores or Alternative Credit reporting for people who have not maintained credit accounts. In addition, each lender requires different score minimums for application evaluation and approval. Also, lenders may review several credit score reports before making a final decision during the course of an application. Underwriters have their preferred sources that report up to the minute information.

Because no one score is the definitive credit score, 720 and above is generally considered a high score, while scores below 600 are considered low. Still, cases always vary by lender. And, because so many different scoring methods are used, a score of 750 from one source may not indicate the same as a score of 750 from another. 700 seems to be a magic number for self employed people and 680 will suffice if you can document full employment for two years.

It seems frustrating, but the difference of one point..say 679 instead of 680..could mean the difference in a favorable interest rate. You may need to take some quick steps to improve your score! (Paying down a credit card under 30% balance is a good rule of thumb to improve your score within 30 days.) When you apply for a loan, your broker or banker should review any issues for you in person or over the phone after reviewing your Credit Report. They take into account other factors (including your current debt-to-income ratio) when you apply for a specific loan. Your broker or bank is legally required to give you a copy of your complete report and they should be able to explain the codes for you.

Lenders always obtain the most recent score whenever an applicant applies for credit because each person’s score changes every time information is added (reported) to credit bureau files. For example, your credit score may change when you pay a credit card bill, make a loan payment, or open a new line of credit.

Credit scoring is based on many factors that may include:
* Payment history
* Amount of available credit
* Amount of credit currently being used
* Length of credit history
* Recent requests for credit

Under the Equal Credit Opportunity Act, credit scoring may not use gender, martial status, national origin, race, or religion as factors.

Of course, lenders usually do not base credit decisions solely on credit scores. Lenders usually make other considerations, such as income and length of employment at current employer, when evaluating applications. Also, many consumers do not realize that achieving the best credit scores may take 20 to 30 years because lenders consider older credit histories optimal.

Become informed about the status of your business and personal partners credit scores before entering into any joint ventures. When you marry or enter into joint credit accounts such as bank or credit cards, the credit scores of your partner or spouse will automatically impact each other, often in a negative way if one party has lower scores.

You can assist another person in raising their score if they have minimal or no credit history. Tread carefully here! The reverse of the desired result can happen! Avoid this by keeping your finances appropriately separate. Discuss your concerns with your mortgage planner or banker before applying for joint credit of any kind. These days, the more time you have the better!

Wishing you every credit sanity,

©2005 susan templeton loannetter

Good Credit Scores=Good Behavior

Remember, your credit scores are based on your financial behavior, so good behavior is key to maintaining good credit scores as well as improving your current position.

The List below is a quick review of how responsible borrowers behave.

  1. Always pay all of your bills on time. This proves your reliability and demonstrates consistent behavior and responsibility.
  2. Check your credit reports regularly and correct inaccuracies. Verify that the information reported about you is correct. Dispute anything incorrect with each of the credit bureaus immediately. Some disputes may require contact with financial institutions too. While it is best to document your disputes in writing, to all three bureaus simultaneously. Some bureaus provide customer service by telephone with instructions on how to register for a fraud alert.
  3. Monitor your accounts closely for signs of identity theft. Simply review each statement and verify that all bills are authorized, accurate, and your own. Guard PINs and account numbers, and always report unauthorized activity immediately. It is a good idea to maintain a list of your account numbers and their corresponding toll-free, 24-hour customer service numbers in a handy, secure place separate from of your wallet in case it is stolen or lost.
  4. Control your debt. Generally speaking, keep balances below 30% percent of available credit lines.
  5. Manage your available Credit. Lenders may conclude that applicants with multiple accounts, all with high credit limits, may have too much access to excessive unused credit that could result in the sudden or gradual accumulation of too much debt.
  6. Don’t try to change a score overnight by suddenly closing or opening accounts. Scores are based on complex statistical models that could make such actions backfire.
  7. Avoid excessive inquiries. Inquires indicate applicants are submitting applications, generating multiple requests for their credit report. Creditors may view too many inquiries as a sign of financial trouble.
NOTE: Credit Repair takes longer than creating the damage. It's also a lot less fun.

Don't shop for a mortgage lender for 3 months and then be surprised to see you have a drop in your FICO score of 40 points or more. I've seen it happen. What online lenders don't tell you is that they 'job out' your loan application to a number of brokers and every bank they send it to also pulls a report so the number of 'hits' increases exponentially.

REFINANCE HINT: If you have taken out a short term loan, say a 1/1 ARM just to get into your home and build a better credit score with the intention to refinance, be extremely careful that you behave ultra responsibly about all your credit behavior. Don't max out your credit cards during the month (stay under 30% of available balance) and undo what your good mortgage payment history is doing for you. Also, keep your credit spread across all your cards so the balances all below 30% if possible. Otherwise, you will be stuck in the world of higher interest rates for a very long time.

When you close credit cards...a popular misconception to improve your actually LOWERS your available credit limit and your score.

Wishing you every credit sanity. Loannetter

©2005 susan templeton loannetter

HALT Identity Theft!

Most people find out they have been the victims of Identity Theft too late to prevent it. Watch your bank and credit card accounts every month for suspicious charges. Unexplained withdrawals should be reported to your bank immediately and investigated!

Early Signs:
Have you noticed any small suspicious charges on credit cards or bank accounts? This is an early warning sign of impending doom. If you have lost mail, bank statements, pay stubs, a wallet, credit card or check book--a thief or con may sell or hold them to use later.

If you suspect you have been exposed to Credit Fraud or Identity Theft, you should notify all three Credit Reporting Bureaus (details below) to put an alert on your file--even if you only suspect a person who had access to your personal details. Unfortunately, with the increase in online purchases, there is a substantial increase in intercepted information by hackers who put spyware onto your computer designed to seek out credit card and bank account numbers. Registering a Fraud Alert with the credit bureaus is done by phone (numbers below). The service is free.

Once your report is flagged, the Credit Bureaus will contact you before allowing a card or credit account to be issued in your name. I understand this can stay in place indefinitely--but it's a good idea to check in or repeat it every 90 days if you have ongoing issues. Unfortunately, once someone has your details they may 'hit' your accounts for small amounts to see if you notice for a few months before making major charges. It's always a good idea to report any suspicious charges to you bank and immediately close accounts that have been affected.

Federal Trade Commission Site:
Check out the FTC's excellent online articles about Identity Theft. You can also report a perpetrator of fraud on their system. Such a person will find it hard to work in the finance industry if they have been reported....and unfortunately some of them do hide out in legitimate organizations to gain access to victims:

To put a Fraud Alert on your Credit Report call all 3 Bureaus:

Equifax Information Services: 800 685 1111
Trans Union Customer Relations: 800 888 4213
Experian: 888 397 3742

If you have experienced Identity Theft, read my blog titled Reporting Fraud and follow each step. It is up to individual consumers to report and correct their credit. The process is time consuming with long term benefits and it's free if you do it yourself. Beware of Credit Repair and Credit Counselling firms that offer to do this for you for a big fat fee. Their actions can have the reverse effect. If you choose that route, do check out the firm with the Better Business Bureau. Unless you problem is related to your own bad habits, it's far better to handle this yourself.

Wishing you every credit sanity! Loannetter
©2005 susan templeton

To Bankrupt Or Not To Bankrupt?

Bankruptcy is a very important legal option open to U.S. Citizens who have serious financial problems from which they cannot reasonably recover given their current circumstances. There are two types open to individuals: Chapter 7, sometimes know as a 'straight' or 'liquidation' bankruptcy and Chapter 13, also called 'wage earner' or 'repayment plans'.

You can get a lot of bankruptcy information from your State Bar Association, some of whom publish informative articles online. Office supply stores also carry Do It Yourself Bankruptcy Kits. You have the right to represent yourself in court, however the complications of this area of law elude most of we mere mortals. It helps to read up on the implications for you personally before you make a decision that could affect the rest of your credit lifetime.

Credit Counseling: A Word of Warning:
There are a number of 'credit counseling agencies' and 'debt elimination firms' that may essentially allow you to lapse into a form of bankruptcy that does more harm than good to your credit. Several of these firms are being investigated for fraud and misinformation. They have been known to approach unsuspecting people with good credit scores and use scare tactics to take over their payment plans, thereby ruining their credit.

It pays to become informed of your options and while I don't personally recommend any firms, there are some very good sources for credit counseling. If you simply need help deciding which way to go...the best place to start would be with a good Certified Public Accountant! Lenders really don't like credit counselling agencies and will often treat this as a bankruptcy. They will insist that you are out of the counselling period before funding a mortgage. Not all credit counsellors register as a creditor on your credit ask if they do before you commit to working with them. Those that don't may be worth a try!

Seeking An Attorney's Advice:
Fortunately, a number of law firms specialize in bankruptcy for a flat fee and this is a popular option. Be sure to ask around--a local attorney who doesn't handle bankruptcies should know who has a good reputation in this field. Many offer a free first visit to discuss your options. I always suggest getting more than one opinion on a matter that is this important to your financial future. The difference in a thorough BK lawyer and a lackadaisical one will be reflected in the final result and could impact your future credit report. I have seen evidence of poor BK management with charges still reporting on a client's credit report that should have been removed in the BK process.

Every person and situation is different so your filing should be carefully considered. An attorney can advise you of the long term implications and prepare the necessary documents. They will also accompany you to court and help you make informed decisions.It's also very important that you feel comfortable with the lawyer you choose. Interview more than one! The emotional side of bankruptcy is hard enough so you deserve someone you feel is empathetic to your personal situation.

Chapter 7 is the option most people chose when their resources are not sufficient to cover their debts and attempts to manage them further would be fruitless. There are many rules regarding who can claim Chapter 7 and how.

Chapter 13 is essentially a court managed re-payment system. Chapter 13 gives an individual a specific time frame in which to make good on debts, to dispute debts and make efforts to repay those they feel are justified. This procedure stops creditors from continuing to rack up interest charges and legal fees as time progresses.

2005 News: The U.S. Congress voted in 2005 to enforce a 'means test' on individuals who claim bankruptcy to make the process harder for individuals to escape responsiblity for their valid debts. Any responsible lawyer will advise you on which option makes the most sense given your current economic situation. Most will advise that you work with a CPA (certified public accountant) before taking on your case. The Federal Bankruptcy laws changes have made it much more difficult to 'write off' your debts.

Even though you cannot claim bankruptcy for another 7 years, some people use this as an unfortunate form of 'financial planning' . One reason given for the motion before congress is to prevent gamblers, drug dealers and other criminals from avoiding responsibility for paying their court fines and legal fees. Of course, lawyers could choose themselves to be more stringent in whom they represent--but our system of rules seems to require rule enforcers.

A clean slate: Whatever decision you make, there is a point when it is time to draw the line and stop suffering from past financial mistakes or circumstances beyond your control. You deserve the opportunity to clear the slate in the manner that is most suitable to your circumstances. I have heard people say this is a very freeing experience after feeling overwhelmed for years. You can finally answer your phone without fearing who might be on the other end demanding payment.

Creditors View: Once you have satisfied a bankruptcy proceeding, you may be surprised to find creditors knocking on your door offering new credit cards! They know you can't claim bankruptcy for another seven years and are willing to risk getting you on the hook again for high interest rates. Banks that specialize in Bankruptcy Buyouts (for Chapter 13) and One Day out of Bankruptcy Loans offer some reasonable options to help you get back on your feet. Work with a trusted broker or lender who can explain and research your options.

Try to avoid Home Foreclosure if at all possible. A Foreclosure will most negatively impact your FICO Score and your ability to get another mortgage at a decent rate for at least two or more years. Most conventional lenders won't fund a Bankruptcy client for 7 years and a Foreclosure client for 10 years. Still, plenty of lenders are willing to give you a chance.

Just don't go down the same path again. Unfortunately, the truth behind the stigma of bankruptcy is that 50% of people who claim bankruptcy once do so again. The biggest question you must ask yourself is: "Have you learned sufficiently from the humbling experience of claiming bankruptcy to never go there again?" Or perhaps more aptly: "Can you forgive yourself for being human?" Hopefully, both answers are 'YES!"

Wishing you every credit sanity! Loannetter

© 2005 susan templeton loannetter