This is a great list to refer back to if you have collectors calling you, and you can also submit a complaint to the Consumer Financial Protection Bureau, which now regulates about 60% of the debt collection industry (all collectors with more than $10 million in annual receipts): http://www.consumerfinance.gov/pressreleases/consumer-financial-protection-bureau-to-oversee-debt-collectors/

What is a Credit Report and Why is it Important to You?

Why is a credit report important?Editor’s note: If you haven’t applied for the Independent Foreclosure Review yet, there is still time, but the deadline is December 31, 2012.  For more information, visit our blog: Independent Foreclosure Review Deadline is December 31, 2012. Learn How to Apply Here.  Spanish: La fecha límite para La Revisión Independiente de la Ejecución Hipotecaria es el 31 de diciembre 2012. Aprender a aplicar aquí!  Or visit the website: www.independentforeclosurereview.com, or call the program: 1-888-952-9105

By JoAnn Parrott, Housing Counselor at Project Sentinel, one of the members of ForeclosureHelpSCC.

A credit report is more than a collection of financial information and statistics. A credit report displays and represents your financial picture.   A credit report is an accounting of how you have handled your past finances and debt and is a gauge of how you will continue to do so in the future. The credit report determines if you are credit worthy or may be a credit risk to those who offer credit (also known as creditors).  The credit report helps creditors decide who gets credit or who does not.

If you have been financially responsible in the past and have good credit, you probably don’t think twice about credit.  It is just there for you whenever needed.    However, if you have no credit or poor credit, managing your daily financial life may be difficult.

WHAT IS IN A CREDIT REPORT?

If you have never applied for personal credit, you probably don’t have a credit report history.  But, if you have applied for and used credit in the past, a basic credit report consists of your name, current and recent addresses, Social Security Number, date of birth and current and previous employers.  The report also displays each credit account registered in your name,  the date the account was opened, the credit limit on a credit card or loan, the payment terms, the balance owed, the monthly payment amount, and a record of your payment history (i.e., how many times you paid on time or were late).  This information is contained in your credit report even if you personally have not applied for credit but have agreed to be a co-signer or authorized user on someone else’s credit account.

TIP:   If you are a co-signer on a credit card or loan account, you are responsible for the debt if the other party fails to keep the monthly payments current.  If you are an authorized user, you are not responsible for the monthly payments or the balance due if the account is not kept current.  So, be VERY careful about agreeing to be a co-signer on an application for credit.

A credit report also lists each time you have applied for credit – these are known as ‘inquiries.’  By viewing the ‘inquiries’, creditors can determine if you have applied for too much credit or have been recently approved for additional credit. If the number of applications or approvals is too high, creditors may deny you if it appears you are trying to acquire too much credit too quickly.

TIP:  This can happen to new homeowners or young adults when they want to decorate a new home or apartment.  If you apply for and are denied credit, this may have a negative impact on your credit report and credit score.

WHAT IS NOT IN A CREDIT REPORT?

Information NOT contained in a credit report consists of checking and saving account balances, bankruptcies that are more than 10 years old, charged-off debts or debts placed for collection that are more than seven years old, gender, ethnicity, religion, political affiliation, medical history or criminal records.  Judgments generally remain on a credit report for 7 years from the date filed, whether the debt was paid or not.  If paid, the judgment entry changes from UNSATISFIED to SATISFIED but still remains for the required length of time.  Unpaid tax liens remain indefinitely.

NO CREDIT?  WHAT SHOULD YOU DO?

In the everyday world of credit, there are two types of credit cards and loans – Secured and Unsecured.

SECURED CREDIT CARD If you have poor credit or no credit and know you will have a need, you may want to apply for a secured credit card.   A secured credit card is an account in which you deposit your own money (generally a minimum amount) to be used for future credit transactions.   A secured credit card gives you the ability to use the money (up to a certain amount) as a credit card – i.e. charge movie tickets or order a pizza – until you can apply for a less restrictive unsecured credit card.  Most secured credit cards do not allow the total amount of money deposited into the account to be consumed by charge transactions.

The creditor retains a portion of the money as a ‘cushion’ to cover unexpected events, such as non-payment.  If your charges exceed the allowed amount, there can be substantial fees and penalties applied.  If you don’t keep the account in good standing, the creditor can deny future credit transactions you attempt to do.  Not a happy thought if you want to treat a friend to lunch and your card is denied!  In some cases, if the past due amount becomes too high; the account may be closed or suspended.  The account will continue to accrue interest charges, fees and may even be subject to collection action.  Most secured credit cards also carry annual expense fees.

TIP:   Secured credit cards physically look the same as unsecured credit cards.  There is no way of telling that your card is a secured card.  After a period of time if you have established a positive payment history and adhered to the secured credit card terms, you may apply for an unsecured credit card or loan.  There is no specific time period to do this.  Just be cautious about applying for too many cards.

SECURED CREDIT LOAN: This type of loan is used for high dollar purchases that cannot be paid in full each month – i.e. the purchase of a car or house.  This type of loan is for a specific dollar amount and time period.  If the loan payments are not kept current, the owner of the loan can repossess or take back the item – i.e. the car.  In this case, the car is security for the debt.   Generally without exception, a mortgage loan is secured by the property.  If the mortgage payments are not made, the mortgage holder will take the property in a foreclosure sale.

UNSECURED CREDIT CARD:   An unsecured credit card is a line of credit that is available to you with no restrictions (up to the credit limit), as long as the account is in good standing.   For example, if you charge the purchase of clothing on your unsecured credit card and you don’t pay the full or minimum amount by the Due Date,  the creditor will not repossess or take back the clothes.  However, the account could still be assessed fees and penalties and may be closed or suspended if the matter is not resolved.  Any past due payments will be recorded on your credit report.

UNSECURED CREDIT LOAN:    This type of loan can be for any amount and time period, but is generally not a standard product offered by creditors for large loan amounts.   Creditors want their loans secured by an item of value if there is a default on the account.  The best use of this loan type would be for personal loans among family members or friends where, if payments are not made, no property is attached to the loan and therefore there is no repossession.

TIP:  For most secure and unsecured credit card accounts, it is recommended that the full amount charged be paid in full each month to avoid interest charges and to assist in building a good credit history.  Keeping  any loan in good standing is a good idea.

HOW TO GET A COPY OF YOUR CREDIT REPORT?

On November 22, 2003, through the Fair and Accurate Transaction (FACT) Act, consumers were given the right to obtain a free copy of their credit report every 12 months from each of the 3 major credit bureaus.  These credit bureaus collect and analyze credit transactions for their clients (AKA creditors) i.e., banks, credit unions, and retail establishments for example.    The 3 major bureaus are:  Experian (www.experian.com, 1-888-397-3742), TransUnion (www.transunion.com, 1-800-916-8800), and Equifax (www.equifax.com, 1-800-685-1111).

To obtain a copy of your credit report or reports, you can contact the credit bureaus directly, visit their websites, or use the website:  www.annualcreditreport.com .  This website provides access to each credit bureau report.  A consumer can apply online for a single report or for all 3 reports at the same time.  There are companies who will help you track the contact and accuracy of your credit report for a fee.

TIP:  It is recommended that a consumer stagger their credit report requests every 4 months between each bureau.  In most cases, the same credit information is on each bureau’s report, but sometimes in a slightly different format.  By staggering the reports, a consumer can track activity over the time period as well as the contact of each report.

TIP:  Each time YOU look at your own credit report, there is no ‘inquiry’ activity recorded. However, each time you apply for credit through a third party, there is an ‘inquiry’ recorded.  So, if you apply for too much credit, the next third party you apply to will see the ‘inquiry’ activity and possibly may deny the application for credit due to excessive applications.  Also, there is a chance that the volume of applications may affect your FICO score.  BE CREDIT SMART!

WHAT IS A FICO CREDIT SCORE AND WHY IS IT IMPORTANT TO YOU?

Attached to each report is a credit score known as a FICO (Fair Issac Corporation) score.  The FICO score can range from 300 to 850, but the majority of scores usually fall within the 600s and 700s.  Your goal is to have the highest number possible based on your use of credit and the history contained in your credit report.  Each one of the credit bureaus has their own FICO score criteria.  A FICO score may differ between the 3 credit bureaus because not all creditors submit to each bureau.

A FICO score is a combination of many credit associated items.  Based on the type of credit, a FICO score is made up of the following percentages:

  • 35% for history;
  • 15% for length of credit;
  • 10% for newly acquired credit;
  • 10% for types of credit; and
  • 30% for amount of debt owned on credit cards and loans.   A few examples of what can lower a FICO score are:  late payments, too high of credit used against credit limit, past due payments, too many credit cards, judgments, collections, or too many applications for credit.

It is possible to obtain your FICO score by contacting each credit bureau for their process or at the www.annualcreditreportcom website, but there is a fee.  However, if you pay a credit reporting and tracking agency, you may be able to obtain the FICO score free of charge.

If you discover errors within your credit report, you should contact the providing bureau directly.  If they don’t correct the errors, you can contact the Consumer Financial Protection Bureau (CFPB) at 1-855-411-2372 or TTY/TDD 1-855-729-2372 and/or file a complaint with the CFPB at  http://www.consumerfinance.gov/blog/headline-now-accepting-credit-reporting-complaints/ ; or send a letter to Consumer Financial Protection Bureau, P. O. Box 4503, Iowa City, Iowa 52244.

If you are a homeowner living in San Jose or Sunnyvale and are struggling with your mortgage, please contact ForeclosureHelpSCC, a program funded by the City of San Jose and the City of Sunnyvale at (408)-293-6000 or visit our website: www.foreclosurehelpscc.org.   Our HUD-approved counselors can help you evaluate your options, learn more about federal and state programs that may help you with your mortgage issues, and will help you create a plan forward.

Please note: All content included in the ForeclosureHelpSCC blog is provided for information only and should NOT be considered legal or tax advice. If you have any questions, please feel free to contact us on our hotline: (408)-293-6000, or visit our website: www.foreclosurehelpscc.org or send us an email: help@foreclosurehelpscc.org.

Si usted es dueño de una casa en San José o en Sunnyvale y están luchando con su hipoteca, por favor póngase en contacto con ForeclosureHelpSCC, un programa financiado por la ciudad de San José y la ciudad de Sunnyvale, al (408) -293- 6000, o visite nuestro sitio: www.foreclosurehelpscc.org. Nuestros consejeros aprobados por HUD puede ayudarle a evaluar sus opciones, aprender más acerca de los programas federales y estatales que pueden ayudarle con sus problemas de hipoteca, y le ayudará a crear un plan para seguir.

Por favor, tenga en cuenta: Todos los contenidos incluidos en el blog ForeclosureHelpSCC se proporciona únicamente a título informativo y no debe ser considerada como consejo legal o fiscal. Si usted tiene alguna pregunta, por favor no dude en contactarnos a nuestra línea directa: (408) -293-6000, o visite nuestro sitio: www.foreclosurehelpscc.org o envíenos un correo electrónico: help@foreclosurehelpscc.org.

Help with rental assistance after a foreclosure – What’s out there?

By Yvonne M. Castillo, Housing Counselor at SurePath Financial Solutions, one of the members of ForeclosureHelpSCC.

What’s out there for me to rent?” and “where to do I begin to research rentals?”With more people becoming displaced as a result of foreclosures, short sales or because of deeds-in-lieu of foreclosures, these questions are being asked by many, many people.

One place you can go to begin your search is at www.scchousingsearch.org. It is a very informative website to search for rental housing in Santa Clara County.  It provides information on various types of rentals including, apartments, townhomes etc. This website can help you find available rentals in different cities throughout Santa Clara County.  You can also call and speak with a live person who will assist you in looking for a rental- call Toll-Free: 1.877.428.8844.

Before you begin your search, it is a good idea to know what size rental you are looking for and how much you can afford to spend on rent. If you are looking to rent something larger such as a house, you can also check out websites such as www.zillow.com or www.craigslist.org. At www.craigslist.org you can tailor your search to different areas of the bay area.

Before you begin your search it is important that you review your credit history and score as a credit evaluation is required with most rental applications. You can order your credit reports from the three bureaus: Experian, Equifax and TransUnion through www.annualcreditreport.com.  Under the Fair Credit Reporting Act, each one of the three agencies (Experian, Equifax, and Transunion) is required to provide you a free copy of your report once a year.  While you are ordering your reports it is a good idea to purchase your credit score.  Your credit report is free but the scores have to be purchased- the fee is around $8.00 per score.

Check to see what is listed on your reports and also what your scores are before you submit a rental application to a landlord or property management company. You want to check for any unpaid debts or judgments within the last two years. If your credit report does have recent unpaid debts you can contact a HUD-approved credit counseling agency such as SurePath Financial Solutions to receive a free consultation to review options on improving your credit.

Note: If your report does show a foreclosure it will remain on your credit report for seven years but, the effects of the foreclosure will lessen with time – refer to the My FICO website.

With so many people seeking rental housing these days, landlords and property management companies can be very selective regarding whose applications they approve. Each landlord or property management company has their own set of guidelines to follow in order to approve an application. For example, a landlord or property management company may require a credit score of 650 or higher and your gross income to be two to three times the monthly rent. Some may require no recent bankruptcies and no convictions for specific criminal activity etc.

If you have a foreclosure or short sale on your credit report, it may be better to mention it to your potential landlord before they pull your credit report.  They may be willing to still rent to you if you put down a larger deposit, or if you have good references.  Or, if they tell you that they absolutely will not rent to somebody with a foreclosure or short sale, then you can save the fee that you will pay for them to pull your credit report.

Landlords will also check for recent unpaid debts or unresolved judgments and if you’ve been evicted from previous rentals or foreclosed homes. If you have recently paid some outstanding balances, it might not show on your credit report right away. If the updates are not reflected on the credit report, make sure to mention it with your application, so you can show proof of resolved debt issues and that may help you through the rental process.

Be prepared to pay a non-refundable fee of approximately $20-$35 per person in the application, for them to run your credit report.  If you are approved, you will be asked to pay a security deposit, first and/or last month’s rent. Some landlords or property management companies may consider a larger security deposit to allow for pets and they may request all adults over the age of 18 who will be living in the home to fill out an application.

If you do not qualify for a rental, some property management companies will send you a copy of your credit report they requested and will include the reasons why you did not qualify.

If you do not immediately qualify for a rental then another strategy is to see if you can possibly rent a room (www.craigslist.org also has listings from room rentals) or stay with family or friends for a short term while you find a more permanent housing. The qualification for renting a room might be simpler compared to an apartment, but you will still need to provide proof of income, a security deposit and possibly referrals from previous landlords. The option of renting a room will give you some time to increase your savings, pay off some debts and work on improving your credit so later you qualify to rent a place on your own.

One thing the rental application does not list but you will definitely need is a lot of is patience. You will need patience as you search for and apply for a rental because more people are looking to rent now. You will also need patience while working on improving your credit. As mentioned before, it may take up to 45 to 60 days for your credit report to reflect activity such as paying off debts. As stated above, if you would like information and assistance improving your credit, you can contact a HUD- approved credit counseling agency for a free consultation. Then, the next time you submit a rental application you will have a better chance of qualifying for the rental you are seeking.

If you are a homeowner living in San Jose or Sunnyvale and are struggling with your mortgage, please contact ForeclosureHelpSCC, a program funded by the City of San Jose and the City of Sunnyvale at (408)-293-6000 or visit our website: www.foreclosurehelpscc.org.  Our HUD-approved counselors can help you evaluate your options, learn more about federal and state programs that may help you with your mortgage issues, and will help you create a plan forward.

Please note: All content included in the ForeclosureHelpSCC blog is provided for information only and should NOT be considered legal or tax advice. If you have any questions, please feel free to contact us on our hotline: (408)-293-6000, or visit our website: www.foreclosurehelpscc.org or send us an email: help@foreclosurehelpscc.org.

Rebuilding credit after a Foreclosure or Short Sale

By Aurora Olivares, Housing Counselor at Project Sentinel, one of the members of ForeclosureHelpSCC

Building and maintaining credit is frequently on the minds of homeowners here in San Jose and Sunnyvale.  It’s no secret that your credit takes a hard hit during and after a foreclosure or short-sale.  Once you are more than 30 days late on your mortgage, it will be reported on your credit report, and your credit score will be impacted negatively. To learn more about how a foreclosure, a short sale without a deficiency, a short sale with a deficiency, and a bankruptcy impact three typical homeowners, read the FICO Banking Analytics blog posting: “Research looks at how mortgage delinquencies affect scores.

As homeowners are unable to pay their mortgage or secure a workout with their lenders, they may fall further behind on their payments, and their credit report will worsen.                 A homeowner’s credit is impacted throughout this progression until the entire delinquency is resolved.

Let’s fast forward.  What happens after someone goes through the foreclosure process? 

The foreclosure proceedings are reported to the credit bureau by your lender and will be noted on your credit report for the next 7 to 10 years.  However, this doesn’t mean that you can’t re-build your credit after a foreclosure or short sale and become a homeowner again.

Here are 5 tips on how to rebuild your credit so you can prepare yourself if you decide to purchase a home in the future or need to apply for other types of credit after going through the foreclosure process.

  1. Pay your debts on time.  Paying your minimum monthly payment on time will reflect positively on your credit report.
  2. Keep low balances on your credit cards.  If you have a credit card with a revolving balance, try to keep the balance at about 30% or less of the overall credit limit for that account.  For example, if your credit limit is $10,000, you should try to keep your balance below $3,000.
  3. Pay more than your minimum monthly payment.  By simply paying $1 more per month than your required minimum payment, it will register positively on your credit score.  It could be $1 or $100 more than minimum amount you are being billed.  Use this method to maximize your ability to pay off debt faster and start to rebuild your credit.
  4. Keep your older credit accounts open.  The longevity of an account plays a role on how your credit score is calculated because potential lenders like to see that you have a history of using credit and paying your bills.  Therefore, if you close an older account, it’s going to negatively impact your credit score.  If you need to close credit accounts, consider eliminating newer accounts first.
  5. Avoid quickfix schemes.  Claims to be able to fix your credit in less than 90 days may not be the most dependable outlets.  If it sounds too good to be true, it probably is.  If you decide to seek professional assistance to help resolve your credit issues, make sure they are a reputable organization.  One quick way to research if an organization is providing legitimate credit counseling assistance is to see if they belong to the National Foundation for Credit Counseling, a nonprofit, membership organization which holds its member agencies to high standards.  Visit their website: www.nfcc.org to learn more or to find a credit counseling agency close to you.

In conclusion, rebuilding your credit report and score after a foreclosure or short sale will take time and dedication and there are no “quick fix” schemes to fix your credit.

If you haven’t already, you may want to obtain your free credit report. And a reminder from the Federal Trade Commission: AnnualCreditReport.com is the ONLY authorized source for the free annual credit report that’s yours by law. The Fair Credit Reporting Act guarantees you access to your credit report for free from each of the three nationwide credit reporting companies — Experian, Equifax, and TransUnion — every 12 months.

If you are a homeowner living in San Jose or Sunnyvale and are struggling with your mortgage, please contact ForeclosureHelpSCC, a program funded by the City of San Jose and the City of Sunnyvale at (408)-293-6000 or visit our website www.foreclosurehelpscc.org.  Our HUD-approved counselors can help you evaluate your options, learn more about federal and state programs that may help you with your mortgage issues, and will help you create a plan forward.

Please note: All content included in the ForeclosureHelpSCC blog is provided for information only and should NOT be considered legal or tax advice. If you have any questions, please feel free to contact us on our hotline: (408)-293-6000, or visit our website: www.foreclosurehelpscc.org