Monday, 21 April 2008 How many businesses have turned you away due to low credit scores? With RCS Credit Solutions personalized attorney owned and operated program, it is as easy as 1-2-3.. Know what affects your credit score. Know what affects your credit score. There are five primary factors that impact your credit score: Delinquent payments (35 percent of your score). Get a Free Credit Report/What Else Do You Need? Get a free credit report. Your credit history is crucial. Most small businesses - and all new businesses - get credit based on the owner's credit-worthiness. Lenders check credit scores whether you're applying for a line of credit, loan, credit card, mortgage, equipment loan, even a lease. Why North Texans struggle to pay bills 12:00 AM CST on Monday, November 3, 2008 By PAMELA YIP / The Dallas Morning News pyip@dallasnews.com Texans have long had a problem paying their bills on time, and I wanted to find out why. Of course, there's the obvious group of people who can't manage their money and keep up with their obligations. Some just don't care that they're late on their bills, while others have fallen on hard times, particularly recently. But something else is driving this. Experian, one of three national credit bureaus, calculates its national score index for both the U.S. as a whole and individual regions. The score is based on Experian's PLUS Score, which ranges from 330 to 830. As of the end of August, the average credit score for Texas was 669 -- the lowest nationally -- compared with 693 for the U.S. In the third quarter, the Dallas-Fort Worth area was above the national average in terms of credit card delinquencies by income, according to Experian. The North Texas area also was above the national average in terms of mortgage delinquencies. Late payments are a serious issue because they're a major component of your credit score, along with how much debt you carry and what kind of debt. Experian didn't conduct an analysis of why we have such problems with late payments. But the Federal Reserve Bank of Dallas cites some possible factors, although they're not causal: • Texas' lower median household income is lower than the national median: Data from the U.S. Census Bureau show a median income of $47,548 for Texas, compared with $50,740 for the U.S., according to the bureau's 2007 American Community Survey. Lower-income consumers don't have as much savings, so it's easier for them to fall behind in bills if a crunch occurrs. • A relatively younger population than the rest of the U.S., with a median age in Texas of 33.3 vs. 36.6 for the rest of the nation: That suggests less experience with credit. "They may not have had enough time to build savings," said Todd Mark, vice president of education at Consumer Credit Counseling Service of Greater Dallas. • Texas' large immigrant ! populati on: New immigrants may have short or no credit histories. "That also equals many first-generation credit users," Mr. Mark said. "If it's their first time, it's easier to not understand all the rules of how the American credit system works. They may not understand the dangers of racking up debt levels, and they may not understand the impact of delinquency on their credit." • Texas has the highest percentage of residents without health insurance, which could lead many consumers to put high medical expenses on credit or deplete their savings to pay health care bills. Texans with low credit scores also get loans with high interest rates -- if they get them at all -- which further increases their chances of being delinquent or defaulting, said Don E. Baylor Jr., senior policy analyst at the Center for Public Policy Priorities in Austin, a nonprofit research organization that aims to improve public policies to benefit low- and moderate-income consumers. "It's a vicious circle," he said. All this makes the case for continued efforts on the part of educators and community leaders to make financial literacy an integral part of Texans' lives. Despite Plea, Loan Officers Clamp Down American Banker | Tuesday, November 4, 2008 By Steven Sloan WASHINGTON — Despite a host of programs introduced by policymakers to unclog funding markets, a Federal Reserve Board survey released Monday found virtually no signs that bankers are loosening their grip on lending. Instead, the periodic survey of 55 senior loan officers at domestic banks found no institutions were willing to ease standards on commercial real estate, commercial and industrial, and most residential loans. The survey also confirmed that the clamping down that began this year in mortgages has spread to credit cards. A quarter of the bankers surveyed said they lowered credit limits slightly for prime borrowers, and 61.5% slashed limits for those considered nonprime. In many instances, the bankers said their decision had little connection to a cardholder's financial health. Only 26.7% of the respondents who cut limits cited a declining credit score. The same percentage of bankers cited missed payments on other loans, and a third cited unpaid credit card bills. In comparison, more than two-thirds of bankers who lowered credit limits said the uncertain economic outlook played a role; 37.5% who did so cited a "reduced tolerance for risk." The situation was no better in other sectors. More than 69% of bankers said they stiffened standards somewhat for C&I loans to large and middle-market firms; another 14.5% said the tightening was considerable. Most of the bankers — 94.6% — said they are doing so by raising the cost of credit lines. And 87.3% said they were charging higher premiums on riskier loans. Nearly two-thirds of the respondents said they were containing C&I lending because of negative expectations of the economy. Only 11.5% of the bankers said they were tightening because of concerns about their own liquidity position. In response to a special question the Fed tacked on to the survey, more than 47% of the bankers said the dollar amount of outstanding C&I loans drawn under preexisting commitments increased, while 43.6% said the level was unchanged. More than 42% said the dollar amount of outstanding C&I loans that were not drawn under preexisting commitments had increased, and 44.4% reported no change. Despite the pullback in C&I lending, demand for the loans was somewhat scattered. More than 27% of the bankers reported stronger demand from large and middle-market firms, while 44% reported weaker interest. Almost three-quarters of those finding higher demand attributed the rise to borrowing that shifted to their bank from other institutions "because these other sources became less attractive." Many of the bankers who reported a decline in demand said it was because either investment in equipment dropped (37.5%) or the need for merger or acquisition financing was lower (33.3%). In addition, 87% of the bankers said they tightened credit standards for applicants seeking commercial real estate loans. More than 40% of those respondents said the standards were "considerably" tighter. Demand for these loans weakened in recent months. Two-thirds of the bankers said interest in commercial real estate loans was off, and only 11.1% said demand was higher. Bankers remained particularly pessimistic about home loans. Credit standards on mortgages to prime borrowers tightened over the late summer and fall, according to 71.1% of the bankers. Only 1.9% of the respondents said they had eased credit standards on prime borrowers. The tightening was especially tough for nontraditional borrowers. Nearly 90% of the bankers said they were toughening their credit standards for these customers. Only four bankers who responded to the survey said they are still making loans categorized as subprime, and all four said their standards had tightened "considerably." Demand was weaker across the board. More than 72% of the respondents said interest in nontraditional residential mortgages was lower, and 57.7% of bankers said demand was off for prime loans. The story is much the same for several other types of loans. Nearly 79% of the bankers said credit standards have become tougher for home equity lines of credit. These lines have taken a hit in the past year as home prices have deteriorated. More than 42% of the bankers said demand for the lines had decreased. Over 47% of the respondents said they were less willing to make consumer installment loans than they were in July. Not a single banker reported increased willingness to make this type of loan. Credit standards for these products were tighter, according to 64.2% of the bankers. The majority of respondents who clamped down on installment loans — 60.6% — said they had done so by restricting credit limits. Nearly 56% of the bankers said demand for these loans were lower. The Fed takes a poll of contacts at domestic banks roughly every three months. It uses the information to draw a larger picture of the economic situation and the health of the banking system. Higher Fees the Flip Side to Lower Interest Rates. Thirty-year mortgage rates dipped below 5 percent this month, making this one of the best times ever to refinance a home loan. But only if your credit is solid enough. And if your house appraisal measures up. And if you have the cash or home equity to handle the higher closing costs. Blame it on the credit crunch, the housing bust and the meltdown in the financial markets, but the current era of cheap mortgages is not a bonanza for all. Loans are tougher to get and can cost thousands more in upfront money. Tack on higher bills for mortgage insurance, too. One mortgage insurer just downgraded the Fort Worth-Arlington area to a "moderately declining market," reflecting the view that home prices are likely to fall further here. As a result, prospective borrowers may need more equity and higher credit scores, in addition to paying more each month. Some mortgage products, including the no-documentation loans that were once all the rage, are gone completely. Borrowers generally need to show at least two years of steady employment to get approved. My favorite refi — a no-cost loan that charges a higher interest rate to cover all the closing costs — has also been put on the shelf. Lenders and investors fear that borrowers would quickly rework their loans if rates tumbled further; that’s not much of a risk if they pony up $5,000 the first time. Last month, Fannie Mae also adopted a range of extra premiums for cash-out refinances, interest-only loans and notes on condos. They’re riskier, the agency says, so now they cost more — adding anywhere from 0.5 to 3 percent of the loan, depending on loan-to-value ratios and credit scores. On a $150,000 mortgage, that’s an extra $750 to $4,500. And that’s on top of closing costs that could hit $4,500, including mortgage origination, title insurance and a long list of fees. "Some people are being locked out of the market, just because they can’t come up the cash and they don’t have the equity," says Judith O. Smith, whose mortgage company bears her name. "I try to weed them out early, because why put them through the agony? But everybody thinks their home is worth more." Significant savings are possible for those who meet the stricter standards. But unlike a few years ago, when borrowers could use a no-cost loan to immediately improve their finances, it will take a while to make back the upfront costs. "For a refi to make sense, most people should go back to the old benchmark" of seeking a rate that’s at least 2 percentage points lower than their current loan, says David Motley, president of Colonial National Mortgage in Fort Worth, one of the area’s largest home lenders. Convert a 7 percent loan to a 5 percent rate, and monthly payments on a $150,000 mortgage are cut by almost $200 a month. In this case, closing costs would be recouped early in the third year of the new mortgage. Larger loans generate more savings faster, while smaller loans take longer to justify. As in years past, the key consideration is how long an owner plans to hold the note. If the expected time frame is long enough, say 20 years, even a small cut in the interest rate may be worthwhile. Most borrowers prefer to add the closing costs to the loan principal, rather than come up with the money. But that locks out many borrowers, because they don’t have enough equity to absorb the additional expense and still meet new lending guidelines. A higher loan amount can also trigger mortgage insurance, and those costs have climbed after the housing bust. Then there’s the credit-score premium. Three years ago, Motley says, a borrower with a credit score of 619 could get a loan with a great interest rate and no additional fees. Today that same borrower must bring an additional 3 points to the closing table, or about $4,500 on a $150,000 loan. A credit score of 699, higher than the Texas average, has a premium of half the size. But the additional charge is still significant and lengthens the payoff period on a refinance. What kind of credit faces no additional premium? A score of at least 740, according to Fannie Mae. But many are seeing their credit damaged during the recession, sometimes because credit-card companies are simply trimming available lines of credit. That alone can hurt a credit score and raise the price of a loan. "There are so many new rules to deal with, and it’s a moving target," Smith says about trying to find the right loan for borrowers. "What worked yesterday doesn’t always work tomorrow." Motley says that refi applications poured into Colonial after the holidays, spiking locally in the same way they did nationwide. Loan officers scrambled to get papers together and lock in rates, but many applications were never submitted. "It’s really frustrating, because people are dragging their feet," he says. They’re either put off by the higher closing costs or they’re waiting for interest rates to fall further. Many believe that the federal stimulus package will lead to a steeper drop in mortgages, and they have reason to be hopeful. Historically, rates on 30-year mortgages were set about 1.5 to 1.75 percentage points higher than the yield on a 10-year Treasury note. These days, they’re about 2.5 points higher. "Investors are still scared off by mortgages," Motley says. After the housing bust, that’s understandable. But just about everybody who borrows will have to pay for it. One Fewer Credit Score Accessible to Consumers By TARA SIEGEL BERNARD Published: February 4, 2009 Skip to next paragraph Most consumers are about to lose access to one version of their all-important credit score. Fair Isaac, the company that conceived the score known as FICO, says Experian, one of the three major credit bureaus, will no longer allow it to sell scores based on Experian’s data. But Experian itself will continue to sell FICO scores based on its data to lenders, so some banks may make credit decisions, at least in part, on a score that consumers can no longer see. Consumers have three FICO scores, based on the data provided by each of the three national bureaus, including TransUnion and Equifax. Currently, individuals can visit a Fair Isaac site, myFICO.com, and purchase one or all of their FICO scores. As of Feb. 14, however, consumers will be able to see only the scores based on data provided by TransUnion and Equifax. The decision comes as lenders are raising their credit standards, making it more difficult to qualify for all types of credit, from credit cards and auto loans to mortgages. And as the economy has deteriorated, the definition of a good score has inched higher. Getting the best rate on a loan — or any loan, for that matter — can be a matter of a few points. The median FICO score is 720, while the scale ranges from 300 to 850. “We are surprised that Experian made such a decision, particularly given what’s going on in the national economy and with consumers being concerned about their credit standing,” said Tom Quinn, vice president for scoring at Fair Isaac. “Their decision means that consumers will no longer be able to see or manage their scores based on the Experian data.” Experian cannot distribute its FICO scores to consumers itself or through other outlets, Mr. Quinn said. Experian does produce another proprietary three-digit credit score and make it available to consumers, but it is not the one that lenders base their decisions on. Experian did not return several calls seeking comment, and it was not immediately clear what spurred Experian to cut ties with myFICO.com. But John Ulzheimer, president for consumer education for Credit.com, pointed out that Fair Isaac was ultimately one of Experian’s competitors. Moreover, Fair Isaac has a pending lawsuit against Experian: in 2006, Fair Isaac sued all three credit bureaus, along with VantageScore Solutions, a joint venture of the three agencies with its own credit-scoring model, alleging that they had engaged in unfair competitive practices that harmed the FICO brand. Fair Isaac agreed to drop Equifax as a defendant in June, but the lawsuit is still pending against the others. “The move isn’t unexpected, given the contentious nature of the lawsuit and the millions of dollars of credit score revenue that Fair Isaac recognizes each quarter from their partnership with Experian,” Mr. Ulzheimer said. Moreover, “Experian has made a significant monetary investment in the market for consumer credit reports and scores. Fair Isaac is a competitor of theirs, so this eliminates one component of the competition.” Mr. Ulzheimer noted that it was consumers who would suffer the most. “This isn’t hurting Experian at all, it hurts Fair Isaac a little bit, and it hurts consumers a ton,” he added. The majority of lenders use FICO scores to determine how risky a borrower will be, although many banks have added their own methods of verifying borrowers’ worthiness as the economy has weakened. FICO scores have become more widely available in recent years. Last month, members of the Pennsylvania State Employees Credit Union with online checking accounts gained access to their FICO scores, based on Experian’s data. That arrangement does not appear to be affected by the cutoff of Experian data to Fair Isaac itself. Holders of cards issued by Washington Mutual, which was recently acquired by JPMorgan Chase, have access to their scores, too. But Chase is considering taking this feature away and instead charging for a credit-building tool that includes the score. Without ready access to FICO scores based on Experian’s data, consumers can at least check their Experian credit reports periodically to be sure there are no errors. All consumers are entitled to a free copy of their credit report, once a year, from each of the three bureaus, but the reports must be requested through the Web site annualcreditreport.com. Consumers in the market for a loan might want to purchase the Experian-based FICO score before it goes away for good. Understand the criteria In the face of higher delinquencies, bankers have tightened lending standards for borrowers of all sorts. So while current mortgage rates are certainly attractive, only those borrowers who fit today's tighter credit profile will be able to access the cheapest financing. For a home purchase, those standards include a FICO score of around 720, a down payment of at least 3.5 percent, manageable levels of debt, and documented income verification. People looking to refinance, meanwhile, will need to document their income and must typically have an equity position of at least 10 percent in their home. June 1, 2009 USNews.com Congress Extends the Tax Credit for Home Buyers My realtor forwarded the following relating to the current/extended tax credit program…. New Legislation New legislation, the Worker, Homeownership and Business Assistance Act of 2009, which was signed into law on Nov. 6, 2009, extends and expands the first-time homebuyer credit allowed by previous Acts. The new law: · Extends deadlines for purchasing and closing on a home. · Authorizes the credit for long-time homeowners buying a replacement principal residence. · Raises the income limitations for homeowners claiming the credit. Under the new law, an eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2010 and close on the home by June 30, 2010. For qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 return. For the first time, long-time homeowners who buy a replacement principal residence may also claim a homebuyer credit of up to $6,500 (up to $3,250 for a married individual filing separately). They must have lived in the same principal residence for any five-consecutive year period during the eight-year period that ended on the date the replacement home is purchased. People with higher incomes can now qualify for the credit. The new law raises the income limits for homes purchased after Nov. 6, 2009. The credit phases out for individual taxpayers with modified adjusted gross income (MAGI) between $125,000 and $145,000 or between $225,000 and $245,000 for joint filers. The existing MAGI phase-outs of $75,000 to $95,000 or $150,000 to $170,000 for joint filers still apply to purchases on or before Nov. 6, 2009. Here is some bullet point information on the two tax credits that are now out there. $8,000 First-time Home Buyer Tax Credit at a Glance · The $8,000 tax credit is for first-time home buyers only. For the tax credit program, the IRS defines a first-time home buyer as someone who has not owned a principal residence during the three-year period prior to the purchase. · The tax credit does not have to be repaid. · The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000. · The tax credit applies only to homes priced at $800,000 or less. · The tax credit now applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify. · For homes purchased on or after January 1, 2009 and on or before November 6, 2009, the income limits are $75,000 for single taxpayers and $150,000 for married couples filing jointly. · For homes purchased after November 6, 2009 and on or before April 30, 2010, single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit. The $6,500 Move-Up / Repeat Home Buyer Tax Credit at a Glance · To be eligible to claim the tax credit, buyers must have owned and lived in their previous home for five consecutive years out of the last eight years. · The tax credit does not have to be repaid. · The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $6,500. · The tax credit applies only to homes priced at $800,000 or less. · The credit is available for homes purchased after November 6, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, the home purchase qualifies provided it is completed by June 30, 2010. · Single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit. Industry News Here is a list of the top 10 complaint generating industries for 2009. Where do we fall on this list? Industry Total Complaints Rank by number of complaints Percentage change over 2008 Percentage of resolved complaints Cellular phones service & equipment 37,477 1 2.1% 97.4% Television - Cable, CATV & Satellite 32,616 2 8.7% 97.2% Banks 29,920 3 42.3% 95.2% Auto Dealers - New Cars 26,888 4 -2.4% 84.1% Internet Shopping 21,494 5 9.4% 71.7% Collection Agencies 15,797 6 -3.3% 86.6% Auto Dealers - Used Cars 13,686 7 2.5% 70.8% Telephone Companies 13,470 8 11.2% 96.1% Furniture - Retail 13,158 9 -2.9% 78.3% Auto Repair & Service 12,736 10 9.5% 65.9% How about 189 on the list! That's right. The credit repair industry generated 993 complaints for the entire year of 2009.