All Posts made by FreeScore

New Program May Help Unemployed Modify Their Loans

April 19, 2010, by FreeScore

mortgage loan modificationsBorrowers struggling to stay current on their mortgage may receive debt help from a new proposal by the Mortgage Bankers Association.

The proposal would allow homeowners who recently lost their job to apply for a nine-month forbearance. This would give them time to search for new employment before applying for a loan modification under the Obama administration’s Home Affordable Modification Program (HAMP). Their income and employment status would be reviewed every three months under the program.

“Recent statistics show that the average unemployed U.S. worker stays unemployed for between six and seven months,” John Courson, MBA president and CEO, said. “That is a long time for a borrower with a dramatic drop in income to stay current on their mortgage.”

During the forbearance period, borrowers would be required to apply for unemployment benefits and to make payments equivalent to 31 percent of household income, unless such a percentage is less than $300. After applying for a HAMP loan modification, borrowers would endure a three-month trial period, after which the loan may be permanently modified.

HAMP was designed as part of the Treasury’s Home Affordability and Stability Plan to help Americans who have fallen behind on their mortgage payments avoid foreclosure by refinancing their loans under more-favorable rates.

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A Poor Credit Score Isn’t Always a Dealbreaker

April 16, 2010, by FreeScore

credit scoresSecuring a home or car loan these days can be difficult enough even if you don’t have poor credit history. Unfortunately, many Americans saw their credit scores plummet as a result of the recession and the ensuing rise in unemployment figures, as well as the bursting of the real estate bubble.

However, options do exist for consumers who’d like to purchase a home or car despite poor credit scores. Increasing the down payment on a home or car can compensate for a poor credit score and instill confidence in the lender that payments will be made on time, reports Bankrate.com.

If you’ve seen your credit score fall for reasons unrelated to unpaid credit cards, such as a medical emergency or sudden family crisis, you can also add a note to your credit report that details the cause of your credit-score plunge.

“You can attach a 100-word explanation to your credit file that goes out with each credit inquiry, and some lenders might take that into consideration,” National Foundation of Credit Counseling spokeswoman Gail Cunningham, told Bankrate.com.

Asking a close friend or family member to co-sign a loan may also increase your chances of securing the funds to purchase a vehicle or a home, reports Bankrate.com.

Over time, consistent, timely payments will help improve your credit history and ensure that negative credit information is removed from your credit report after seven years, reports Housinghelpnow.org.

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Filing for an IRS Extension Can Avoid Tax Penalties

April 15, 2010, by FreeScore

tax extensionsMany Americans receive debt help from their tax refunds every year — but not if they don’t file on time.

Those who send in their tax returns late may face a 25-percent penalty, according to a recent report by MarketWatch, at a rate of five percent a month. Filing on time is one quick, obvious way to avoid this. Consumers who don’t have all the necessary paperwork to fill out their forms may consider filing for an extension from the Internal Revenue Service (IRS).

Business and trust returns can get an extension through Form 7004, while individual filers can use Form 4868. Tax software and online services like FileLater.com can help complete these forms quickly. Those who have received extensions can use the time to scour their records for transaction receipts and meet with their tax professional.

“Get to know the person that’s preparing your taxes and build a good working relationship so you know you’ll have someone looking out for you when the tax deadline rolls around next year,” the report said.

Tax returns filed so far this season have been almost 10 percent higher than those experienced last year, according to the IRS, largely due to federal tax credits offered to homebuyers, businesses and automobile purchasers.

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Credit CARD Act May Have Reduced Credit Card Use

April 13, 2010, by FreeScore

credit card useA recent study shows that consumers aren’t using their credit cards quite as regularly as they have in past years.

According to First Command’s Financial Behaviors Index, only 11 percent of those polled said they increased the use of their credit cards, while 32 percent said they’d reduced it.

The index also showed that awareness of new consumer credit rules may have influenced the decisions consumers made. The new Credit Card Accountability, Responsibility and Disclosure (CARD) Act has provisions, due to take effect in February, that put limitations on lenders’ abilities to increase interest rates.

Of those polled who said they were aware of the Credit CARD Act, 22 percent said they reduced the use of their credit cards.

“The consumer protections of the Credit CARD Act of 2009 are coming into existence at a time when many Americans have already taken positive steps to ensure their own financial well-being,” Terri Kallsen, executive vice president of strategic development at First Command Financial Services, said.

Some of the rules from the Credit CARD Act already took effect last year. One provision gave consumers the choice of opting out of increases in their interest rates, allowing them to pay off their debt at the old rate and then closing the account.

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The FreeScore.com Blog is Here!

April 12, 2010, by FreeScore

FreeScore Blog launchesThe FreeScore.com team is happy to launch our new blog.  Now we will be able to provide you with timely news and tips on an all things credit-related.  Bookmark us, subscribe to our RSS feed and come back daily!

Whether you need advice on paying off student loans, dealing with credit card debt or want to learn more about your credit score and its affect on your future, this is the place for all your credit concerns.

We are open to the dialogue, so feel free to add comments and suggest topics you’d like to see.

Don’t forget to share what you like on Facebook and Twitter!

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Couples Can Use One Partner’s Credit Score for Better Loans

April 12, 2010, by FreeScore

couples and credit scoresA poor credit score may prevent some consumers from getting the most favorable interest rates on their loans.

But it shouldn’t stop them from getting married, according to a recent column in South Carolina newspaper The Herald. Certified financial counselor Jennifer Panther suggested ways for couples to get past one partner’s low credit score.

They’re often able to take out a loan under one partner’s name. The one with the stronger credit history will usually receive more favorable interest rates, allowing him or her to reduce the overall cost of the loan. However, this may not be an option on larger investments, like a mortgage.

“It might take the combination of both incomes to justify a financial institution lending the funds for the purchase,” Panther wrote.

She suggested that couples improve their overall credit standing before committing to a sizable loan. That way, they’ll be able to secure the lowest interest rates and most affordable overall payments.

Payment history accounts for about 35 percent of a consumer’s credit score, according to FICO. Other factors include new credit, length of credit history, types of credit and amounts owed

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When Minimum Payments on Student Loans Can Work

April 9, 2010, by FreeScore

paying student loans vs. saving for retirementRarely are young adults encouraged to make the minimum payment on a credit card or loan, but in some instances, it may be financially advantageous.

The student loan industry consists of federally-funded student loans and private loans. A recent post by the New York Times examines the benefits and downfalls of making minimum loan payments. Because private loans tend to come with higher interest rates than their federally-funded counterparts, young adults may benefit from making more than the minimum payment on private loans to avoid paying out additional thousands of dollars in interest.

Federal student loans, on the other hand, come with lower interest rates. If a young adult has taken out more than one federal loan, they may be consolidated into one low rate. Making the minimum payment on a low-rate loan will allow young adults to dedicate more income to retirement savings while accomplishing their debt reduction goals.

The recession has impressed upon Americans the need for sufficient retirement savings. Young adults are at an advantage in building their nest eggs and may see higher payoffs by making smart financial planning decisions in their youth.

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Companies Team Up to Offer Students Pre-Paid Cards

April 9, 2010, by FreeScore

pre-paid cardsA new law aimed at protecting consumers may prevent many college students from gaining access to credit.

As part of the second wave of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009, people under 21 are banned from obtaining credit cards without a co-signer or sufficient funds to pay off debt. Three companies have teamed up to fill this void, according to a recent announcement.

The Campus Dough DebitSmart Visa Prepaid Card will allow students to receive discounts on purchases at various bookstores, fast-food chains, coffee shops and more. The reloadable cards will be launched in April by University Parent, Metabank and StorValue. Cardholders will also receive online financial literacy material through Visa, along with a tool to track their expenses.

“With our innovative card, students can take control of their spending and avoid credit card late fees or overdrafts on their checking accounts,”said Sarah Schupp, CEO of University Parent.

College students are often targeted by credit card companies because of their spending habits and tendency to fall behind on debt. In addition to limiting their access to cards, the Credit CARD Act is aimed at protecting college students from many of the aggressive recruiting tactics employed by lenders.

Learn more about college students and credit card offers to avoid future debt.

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Students Should Compare Size of Loan to Future Salary

April 7, 2010, by FreeScore

student loans and future salaryAs tough economic conditions take a toll on their personal finances, many students are turning to loans to finance their college careers.

But there are several factors to consider before committing to this kind of debt, according to a recent column by MoneyWatch.com.  Among these is the amount of debt a student will face upon graduation compared with the size of the income he or she can expect to earn.

Financial planner Ray Martin said that total debt shouldn’t exceed the average annual pay a graduate expects to make during the first decade after graduation. For example, if an individual expects to make $25,000 at his first job and $75,000 a decade after graduation, he shouldn’t graduate with more than $50,000 in debt. This ratio should enable students to comfortably pay off debt in 10 years, according to the report.

“A college education is typically a good investment in a student’s human capital, but over-investing can cause them to be hopelessly mired in debt, resulting in significant long-term financial damage,” the report said.

Saving early can also reduce the amount of debt college students face after graduation. A recent report by Sallie Mae showed that, on average, parents begin saving for college when their oldest child is three years old.

Finally, college students should also consider consolidating loans after graduation as another viable option to stay on top of personal finance and avoid debt.

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Senate committee approves bill for financial reform

April 1, 2010, by FreeScore

Senator DoddSince the onset of the Great Recession, the federal government has taken steps to protect big businesses, consumers and various parties in between.

This has included multibillion dollar bailouts of financially-strapped institutions like Bear Stearns and the American International Group. It also included the introduction of a series of laws aimed at prohibiting credit card companies from unfair lending practices.

Financial reform creates new consumer protection bureau

The Senate Committee on Banking, Housing and Urban Affairs is taking these protections even further by approving a set of financial reforms. Under the reforms, a Consumer Financial Protection Bureau would examine policies practiced by financial institutions, including banks and non-banks, with more than $10 billion in assets.

This would prevent such institutions from using deceptive practices, abusive terms and hidden fees. Heightened oversight could also stop financial fraud and conflicts of interest before they damage consumers’ credit. Additionally, the Consumer Financial Protection Bureau would eliminate confusion about which federal agency has which regulatory responsibilities by combining all such powers into one independent office.

Doing so will also allow the agency to act faster than it would under congressional oversight and provide consumers with a single toll-free number to report problems with financial services or products.

Bill also protects against too-big-to-fail institutions

Another part of the financial reform would eliminate too-big-to-fail bailouts by discouraging excessive growth and requiring large institutions to periodically submit information about how a rapid and orderly shutdown could be pursued. These “funeral plans” would protect taxpayers from the financial burden experienced under previous bailouts.

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