Ok, I have good credit and I would assume that it would be easy for me to get a credit card. Remember all though stories about people who used their pet’s name and ID (I wonder what SSN# they used!)? Well, those times are apparently not past. I just read a humorous account of a 6 year old who successfully received a credit card though he stated his true age, said he was not a home owner and had $0 income. I decided to check it out, by sacrificing my credit a little by adding inquires to my report and applying for a few cards to test the environment. (One note: I looked around and found an article from last year on how Bank of America is reducing credit card requirements. I guess they are still pretty relaxed. )  I didn’t apply to B of A since I already have a card with them.

If you look at the various offers out there on the internet, there are still supposedly “instant decision” offers, where you apply and Presto! you get your card in the mail. I applied for one card which had a 0% APR teaser rate for 12 months, no annual fee and offered 0% balance transfers. The balance transfers still had a 3% fee, though. (The card? HSBC). Yep, sure enough, I got an instant approval, and the card should be in the mail. One note on this application: there was a place to add an authorized user to the account, but not a joint user.

I looked around for another credit card which had a no balance transfer fee and found it: Simmons Bank. However, I went all the way through the application process and at the end, before hitting “Apply for this Card”, there was a note which said I had to send in all of my 1040s tax returns if self employed (that would be me) or W2s if not self employed. Say what? Wow, now those are tight requirements.

I noticed there were other credit cards with “instant approval” whose only requirements were “good credit”. Can we be more specific, people? I didn’t have a friend with “good credit” available to use as a guinea pig. However, in the days when my credit wasn’t so stellar, I had applied online for credit cards with “good credit” requirements and did not get the credit card teaser advertised, but one at a higher rate and lower balance limit. I wonder if that still applies.

What have you all encountered when applying for credit cards online?

Popularity: 52% [?]

Under the Fair Debt Collection Practices Act (FDCPA), it’s your right to request that a collection agency cease communication with you; a right granted/protected by FDCPA Section 805(c). (It’s called a Cease and Desist Letter or C&D among us credit repair junkies) Basically, it does what it sounds like: forbids a collection agency to contact you once they receive your written request to cease communication. Lately, the question raised was whether a consumer can use the C&D letter to request only contact by letter, or request that the collection agency not contact you at work, etc., meaning the consumer could allow one form of communication, but not another. The answer is “no”.

If you exercise your right to use the C&D letter, you can’t say something like, “don’t contact me at work because I am not allowed to take phone calls and don’t contact me at home because it is inconvenient”. Many people are confused by what to ask for in a C&D letter because there is language in the FDCPA allowing the consumer to request a ceasing of communications; in a separate section of the FDCPA [Section 805(a)(3)], there is language about notifying a collection agency that they cannot contact a consumer at work because they’ve been informed that the consumer’s employer does not allow it. There is also language [FDCPA Section 805(a)(2)] stating that a collection agency cannot contact a consumer when they know it is inconvenient. Of course, the latter is very difficult to prove in court.

The bottom line is that if you send a cease communications letter to a collection agency, all communication, period, must stop. There is no need to spell out the situations in which communication is acceptable or send two separate communications.  The request to cease communication will handle all communication situations. There has been a lively discussion about this over on our discussion boards.

By the way, the FDCPA clearly recognizes telephone contact as a legitimate and legal tool for collectors to use to contact consumers about the accounts they are collecting. The FDCPA was not enacted to give consumers a way to avoid their obligations nor to allow consumers to avoid all telephone contact. It was enacted to prevent illegal harassment from collection agencies.

Popularity: 58% [?]

Just received this email, and thought it was interesting AND important to put out there.

My case was dismissed for lack of evidence on behalf of the collector who admitted they didn’t have anything. How do I go about removing this mark on my credit report?

You would dispute the tradeline with the credit bureaus as in a regular dispute.  Include all of the documentation.  Since the creditor reporting admitted they had nothing as far as evidence, they really cannot report under the Fair Credit Reporting Act (Refer to FCRA Section 623, reporting negative information without proof is not allowed.  Also, see Cushman v. TransUnion, No. 95-CV-01743, Third Circuit, 1997.)  If you were to apply for credit after the 30 days, and be denied because of those derogatory TL’s, then you could actually sue and win an award for actual damages!

If they refuse to remove the tradeline, speak to an attorney - you have a great case!

Popularity: 55% [?]

If you are new to the credit game, the initial limits on your credit cards can be low. A credit limit means the maximum amount of money you can charge to your credit card. This includes fees, balance transfers from other cards, and cash advances, as well as the purchases you make.

People rebuilding credit often turn to the excellent solution of getting a secured card. However, the limits are often only $300-$500. This can be quite limiting. In addition, it’s easy to charge up the entire credit line, which could be bad for your credit score (for the best credit scores, you need to keep your credit limits under 25% of maximum). It’s natural to want to increase your credit limit to allow you to just use one credit card for all of your household expenses (you are of course going to pay off your entire balance each month, right?) . If you are going on vacation, for instance, juggling several credit cards with low credit limit is just a hassle and you may want to raise this limit. Here are some ways you can accomplish this goal.

1. You need to work on improving your perceived worthiness to borrow money from your bank. This “credit score” is what shows lenders that you are not a risk for them, and tells banks that you are trustworthy and able to handle credit responsibly.
2. The easiest way to build your credit worthiness, and thus raise the amount of your line of credit, is to put everything you buy on your credit card (make sure you either pay off the balance each month or keep the balance below 25%). Don’t save your card for emergencies. Your credit card company wants to see that you have the ability to spend wisely and to pay back the amount you credit to your card. If you rarely use the card, the company will wonder why you would need a higher credit limit. Also, if they see you using your card, the potential for making money off of your account is higher due to potential interest and fees.
3. The second best way to improve your credit limit is to pay as much as possible on your outstanding balance every month. If you can, make every attempt to pay the entire amount; in any case, always pay more than the minimum required.
4. Some credit cards may require proof of income before they will grant you a higher credit limit. With others, you may find their website has an online feature with which you can request a raise in credit limit. If you use this feature judiciously, not more often than every four or five months, you may be able to increase your line of credit. Other companies will automatically extend your credit limit if they see you are spending up to your current limit – and paying it back regularly. That last phrase is most important!

If your credit card company does raise the limit on your credit, it means that you have shown them they can trust you as a borrower of their money. You should realize, however, that a higher credit level may incur more fees, as well as increased interest charges. Be very careful as you begin to operate within a higher limit, to make sure interest rates don’t spiral out of your comfort zone.

What has been the most effective method for you in increasing your credit limit? Tell us about it!

Popularity: 63% [?]

Many people are finding out they are “upside down” on their home these days if they bought during the real estate crazy years of 2005-2006.  In addition, many those are not able to afford the payments on their mortgages as interest rates rise. In the metro areas that saw the biggest run up, Phoenix, Las Vegas, Sacramento, San Diego and much of Florida, some homeowners owe $250K or more than what their homes are now worth. Many have made the painful decision to just walk away, figuring good credit is not worth $250K.

A foreclosure is obviously bad for your credit score, decreasing your chances for a new loan and unsecured credit. In addition, Fannie Mae, the government-sponsored mortgage underwriter, recently revised the amount of time borrowers with a foreclosure must wait to receive a home loan to five years from four.

Faced with the possibility of not being able to purchase a new home, but needing to get out of their old one, some homeowners are increasingly turning to “buy and bail”, a practice where the homeowner purchases a second home before they walk away from their old home, leaving their credit to go down the toilet. With the extremely slow market, desperate Realtors are actually encouraging and in some cases coaching people who want to engage in this questionable practice.

So how does a cash-strapped homeowner qualify for a new loan to buy a home when they still have their old loan? Fraudulent rental contracts. Under Fannie Mae guidelines, homeowners can count rental income to cover up to 75% of the mortgage payments on the first home. I’ve seen this practice first hand. When I worked in the mortgage industry, I had several colleagues who actually drafted the rental agreements for their clients so they could qualify income-wise for a new loan. To thwart “buy-and-bail”, changes in underwriting guidelines will soon take place. New FNMA guidelines will no longer allow rental income to offset mortgage payments on other properties.

Has anyone you know done this?  How easy was it to get a new loan for the new property?

Popularity: 56% [?]

 Ever lost sleep over your bills or money problems?  I know I have.   According to a study done by the Harvard Medical School, loss of sleep can cause the following problems:

1. Learning and memory: Sleep helps the brain commit new information to memory through a process called memory consolidation.
2. Metabolism and weight: Chronic sleep deprivation may cause weight gain by affecting the way our bodies process and store carbohydrates, and by altering levels of hormones that affect our appetite.
3. Mood: Sleep loss may result in irritability, impatience, inability to concentrate, and moodiness. Too little sleep can also leave you too tired to do the things you like to do.
4. Cardiovascular health: Serious sleep disorders have been linked to hypertension, increased stress hormone levels, and irregular heartbeat.
5. Disease: Sleep deprivation alters immune function, including the activity of the body’s killer cells. Keeping up with sleep may also help fight cancer.

Now there is a new poll conducted by joint effort of the Associated Press and America Online (AOL), which looks at all of the health issues reported by an anxiety-ridden public over mountains of debt.

From the Pittsburgh Post Gazette: 

When people are dealing with mountains of debt, they’re much more likely to report health problems, too, according to an Associated Press-AOL Health poll. And not just little stuff; this means ulcers, severe depression, even heart attacks.   That finding is supported by medical research that has linked chronic stress to a wide range of ailments.

And the current tough economic times and rising costs of living seem to be leading to increasing debt stress, 14 percent higher this year than in 2004, according to an index tied to the AP-AOL survey.

• 27 percent had ulcers or digestive tract problems, compared with 8 percent of those with low levels of debt stress.

• 44 percent had migraines or other headaches, compared with 15 percent.

• 29 percent suffered severe anxiety, compared with 4 percent.

• 23 percent had severe depression, compared with 4 percent.

• 6 percent reported heart attacks, double the rate for those with low debt stress.

• More than half, 51 percent, had muscle tension, including pain in the lower back. That compared with 31 percent of those with low levels of debt stress.

People who reported high stress also were much more likely to have trouble concentrating and sleeping, and were more prone to getting upset for no good reason.

Popularity: 52% [?]

In March, Dennis J. Herrera, San Francisco’s city attorney, sued National Arbitration Firm, (NAF), a for-profit company based in Minneapolis which specializes in resolving claims by banks, credit card companies, and major retailers that contend consumers owe them money. In the suit, Herrera accused the NAF, which handles many firms in California state court, of churning out awards for creditors without sufficient justification. The lawsuit cites state records showing that NAF handled 33,933 collection arbitrations in California from January, 2003, through March, 2007. Of the 18,075 that weren’t dropped by creditors, otherwise dismissed, or settled, consumers won just 30, or 0.2%, the suit alleges.

Specific allegations:

1. Some current and former NAF arbitrators say they make decisions in haste—sometimes in just a few minutes—based on scant information and rarely with debtor participation.
2. Consumers who have been through the process complain that NAF spews baffling paperwork and fails to provide the hearings that it promises.
3. Corporations seldom lose. In California, the one state where arbitration results are made public, creditors win 99.8% of the time in NAF cases that are decided by arbitrators on the merits, according to the above mentioned lawsuit.

In a BusinessWeek Article, one former arbiter interviewed stated some of the unsavory practices:

A current NAF arbitrator speaking on condition of anonymity explains that the presentation reflects the firm’s effort to attract companies, or “claimants,” by pointing out that they can use delays and dismissals to manipulate arbitration cases. “It allows the [creditor] to file an action even if they are not prepared,” the arbitrator says. “There doesn’t have to be much due diligence put into the complaint. If there is no response [from the debtor], you’re golden. If you get a problematic [debtor], then you can request a stay or dismissal.” When some creditors fear an arbitrator isn’t sympathetic, they drop the case and refile it, hoping to get one they like better, the arbitrator says.

Elizabeth Bartholet, a Harvard Law School professor and advocate for the poor, worked as an NAF arbitrator in 2003 and 2004 but resigned after handling 24 cases. NAF ran “an unfair, biased process,” she said in a deposition in September, 2006, in an Illinois state court lawsuit. NAF isn’t named as a defendant in the pending case, which challenges a computer maker’s use of an NAF arbitration clause. Bartholet said that after she awarded a consumer $48,000 in damages in a collections case, the firm removed her from 11 other cases. “NAF ran a process that systematically serviced the interests of credit-card companies,” she says in an interview.

In addition, the NAF convinces collection agency law firms to solicit credit card companies on its behalf in return for a percentage of the fees won in successful cases.

On some occasions, it tries to drum up business with the aid of law firms that represent creditors. Summaries of weekly NAF business development meetings from 2004 and 2005, which are labeled “confidential,” show it enlisted Wolpoff & Abramson and another prominent debt collection law firm, Mann Bracken, to help win the business of companies such as GE’s credit-card arm. When creditors succeed, the law firms seek fees of 15% or 20% of awards, which are added to judgments and billed to debtors. Atlanta-based Mann Bracken surfaces in a November, 2004, NAF document that states: “Work with Mann to begin its taking lead on GE as it relates to Mann running the program for it.”

Background for the whole arbitration Process:

1. A credit-card company or retailer files a claim with the National Arbitration Forum
2. The creditor notifies the consumer of the claim; 40% of all cases settle
3. Cases that don’t settle are assigned to arbitrators, who are lawyers and sometimes former judges
4. Consumers can respond in person or in writing, but for various reasons, the vast majority don’t
5. Arbitrators decide whether to make awards, which can include interest and creditors’ legal fees

So how about you - have you been involved in an arbitration suit? What kind of experiences have you had?

Popularity: 58% [?]

Among warnings of bank closures and construction and building loans in default, there comes the news of more homes in foreclosure. If I had to point fingers, I would say it’s the investors who drove prices up, mortgage brokers who only looked to their commissions, and the man or woman person who couldn’t afford a home, but still think it was a good time to buy. In Phoenix, there is one area small town in our metro area here named Queen Creek that has literally 1000s of homes for sale and hundreds of them empty. What were people thinking during that insane year (2005) - seeing the prices skyrocket and actually thinking things could keep going up? It’s all part of the same pattern with investors - they moved from tech stocks in the 90’s to the real estate market to stocks to commodities, mainly oil. I wonder what’s going to happen when the oil bubble breaks. The smart ones are early to the trough and leave nothing but a mess after they clear out with their profits.

One million homes - that’s scary! On the other hand, people who still have money to invest will be picking up some fantastic bargains next year.

From CNN Money….

More than one million homes are now in foreclosure, the highest rate ever recorded, according to a trade group which warned Thursday that number will continue to climb.

The Mortgage Bankers Association’s first quarter report showed that a record 2.5% of all loans being serviced by its members are now in foreclosure, which works out to about 1.1 million homes. That’s up from the 2% of loans, or about 938,000 homes, that were in foreclosure at the end of 2007.

The report also showed that 448,000 homes, or about 1% of loans being serviced, began the foreclosure process during the first quarter. That’s up from about 382,000 homes, or 0.83%, that entered foreclosure in the last three months of 2007.

The seasonally-adjusted rate of homeowners behind on their mortgage payments also hit a record high. Nearly 3 million home loans, or 6.4%, have missed at least one payment, while about 737,000 are at least three months past due, but not yet in foreclosure.

What’s happening in your area - are you seeing a glut of foreclosures on the market? Do you know of someone in foreclosure?

Popularity: 52% [?]

Credit Repair is not difficult, but you can shoot yourself in the foot if you don’t pay attention to a few little things. Here are common mistakes people make which can be easily avoided:

1. Failing to disputing with the credit bureaus FIRST. In credit repair, always dispute your negatives with the credit bureaus before doing anything else. 10-20% of all items disputed in an initial round of disputes fall off. Why not pick off the low hanging fruit in the beginning so you can concentrate on the tough stuff? In addition, you cannot take legal action as an individual against companies who are acting illegally by reporting you if you don’t dispute first.
2. Failing to document your efforts. You should ideally be keeping notes and dates of all your efforts. Make a note of anyone you speak to, when you send letter, and when you receive letters. You should all make sure you send your disputes certified mail, return receipt requested. How to organize is up to you. Putting everything in a notebook is ideal, but a plain ‘ole file folder will do if you just store bits of paper. You don’t have to get too fancy.

Documentation is especially important when you are disputing items with the credit bureaus. Under the Fair Credit Reporting Act (FCRA), credit bureaus have 30 days to get back to you with the results of an investigation on your dispute. If you do not hear from them, within 30 days, they must remove the item.

3. Disputing items online. Never do this! You will not have any written records of your dispute (the return receipt), plus, you are making it easy for them by disputing online. Your dispute will become a two letter code and will be sent (using eOscar) to an offshore computer for analysis. You will also not be able to dispute specific information within the listing, for instance, wrong high balance, wrong date account was opened, etc. You will not be able to send documentation. In addition, if your name, SSN or address is incorrect, you have to send your request in writing any way.
4. Being unrealistic. If your credit report is in bad shape, there isn’t a quick fix. The process takes time, usually from 6 months to a year. In addition, some items are extremely difficult, if not impossible, to remove: bankruptcies, tax liens, judgments and child support. If you have any of those listings, you may be in it for the long haul.
5. Giving up. The process seems overwhelming at first, especially if you are new to credit repair. Take one step at a time. You don’t have to do everything at once. I usually tell people to do things a few days or a week apart, and not to spend more than an hour at a stretch doing anything. After the first dispute letters are mailed, you really shouldn’t have to spend any more than 1 hour a month working on your credit. Isn’t it worth it?

Popularity: 100% [?]

I know several people with big gaz guzzling trucks and SUVs who are agonizing over whether they should dump their vechicle for a more economical car. But maybe they should do the math first. Not only are car values dropping like a stone, putting many people under water on their car loans, but new financing isn’t cheap either.

From the Wall Street Journal:

The incremental expense of driving a large SUV for another year — as opposed to buying a Ford Focus — is almost certainly less than the financial hit a consumer will take trading in a big SUV right now.

About 36% of the people who tried to trade in a large SUV in May owed more on the truck than it was worth, according to data from the Power Information Network. That’s up from just under 33% a year ago. (It’s worse for large pickups. Recent PIN data suggests 40% of large pickups traded during May fetched less than the loan balance.)

A three-year-old large SUV today is worth about $2,000 to $3,000 less at trade-in than a three-year-old large SUV would have been in 2007, before gas prices began to soar, according to Marc Cannon of AutoNation Inc., the largest U.S. auto retailer. A three-year-old Chevy Tahoe that might have fetched $19,700 in September 2007, he says. Today, a three-year-old Tahoe might be worth $16,400 at trade-in.

“If you’ve got one two- to three-years-old and you’re working on a five-year loan, you will be upside down,” says Jack Nerad of Kelley Blue Book/KBB.Com. “That’s exacerbated by the fact the dealer doesn’t want that vehicle right now. It’s going to be an ugly scene.”

A Toyota Sequoia costs about $1,700 more to drive for a year than a Ford Focus, based on the government’s mileage calculations and average gasoline prices of $3.79 per gallon. Even adjusting the calculation to $4 a gallon, you’d likely lose less in a year by keeping the big rig.

What do you think? Is it cheaper to keep your Ford F100 or dump it for a subcompact?

Popularity: 55% [?]