Repair My Finances.com

Of all the factors that helped push the recent real estate boom of the last 5 years, low mortgage rates were perhaps the biggest. A recent climb in mortgage rates was also thought to be one of the big reasons the market can cooled so quickly. But with recent economic news showing a drop in rates, does that mean the bust is coming to a premature end?

Not so fast say the experts. Housing inventories are through the roof across the United States, and sales are down in most of those same markets. Recent rate news is good, however, with mortgage rates peeking in July of 2006 at 6.79 percent for a fixed mortgage (30-year), while rates in mid-October have slid to 6.40 percent. While that may be cause for relief on the surface, if you take a look at where rates were last year at the same time, they are up from 5.8 percent.

Rates were at their lowest in the last 5 years during June of 2003 when they sat at 5.2 percent.

The reason the mortgage rate has such an impact on housing sales is because the rate has direct bearing on how much a person’s mortgage payment is going to be. The higher the rate, the more the payment and vice versa. Most industry experts believe, however, that if the mortgage rate continues to fall and return to its 2003 lows, the housing market will recover nationwide sooner rather than later.

Many experts, however, point to the longer trend in mortgage rates and point out that while rates are up a bit over the last three years, they are still extremely low compared to trends in the last 50 years.

Adding to the pessimism is the absolute glut of inventory on the market right now. There is an increase of almost 40 percent in inventory available compared to last year, and while lower interest rates may persuade first-time buyers to take the leap, it’s convincing those that helped fuel the boom the last five years (people that bought homes for either investment purposes and people buying second homes) to re-enter the market. This, as they say, is easier said than done.

Taking a broad view, the mortgage rate is an essential part of a healthy real estate market. But its impact can be overstated. There any many other factors that would need to line up for the current housing slump to evaporate. If some of those other factors can line up, than a lower mortgage rate can help lead the real estate market back to the promise land.

Any credit repair consists of two phases: removing the negative listings from your credit report and adding new, positive listings.

Since just a couple of negative listings will earn a rejection from most creditors, repair of your negative credit should be the first priority. After bankruptcy, for example, the credit report will show many negative listings including the bankruptcy filing, discharge and numerous “included in bankruptcy” listings. While removing a bankruptcy from your credit report is no easy proposition, it is possible and definitely worth the effort.

It is important to note that you may be able to obtain much of the credit you need even without repairing your credit report.

Most home loan guidelines (including FHA guidelines) require that you have no negative credit appearing within the last two years. This means that you may have no late pays within the last two years and that any collection, lien or judgment has been paid more than two years ago. Even if you have some bad credit in the last two years, you can often find a mortgage amongst the “sub-prime” or “sub-A” lenders that will finance you even before you repair your credit. These loans will charge a higher interest rate and require more equity or a larger down payment before they will close. If you have good income and a reasonable debt to income ratio, a sub-prime loan may be the key to refinancing or getting a home while you repair your credit. In any case, if you are working on your credit repair, you may be able to refinance within a year at better terms.

Automotive financing will typically allow some negative credit before credit repair, but with less than optimal terms. If you have a few late pays, you may pay a little more in interest (but it adds up fast, to be sure.) If you have truly awful credit, you may still get an auto loan, but at very high rates (but you should definately repair your credit in the meantime.)

Standard rate credit cards seem to be the most difficult when it comes to credit that still needs credit repair. Most standard rate cards will reject you immediately for any negative credit whatsoever. Yet, there are many credit cards that work with bad credit and help you to repair your credit. Some require deposits and others require a significant annual fee. Most have low credit limits.

So, once your credit repair is underway, you can turn attention to adding positive credit. You may have to accept some of these less-than-standard credit options while you repair your credit. But, a word to the wise, there are many credit repair scams out there that prey upon the credit distressed. Even your local auto dealership may take advantage of your vulnerable position and your desire to repair your credit. Many phony credit card offers exist that allow you a card, but one that is only good for the company’s limited line of merchandise. Mortgage brokers often hide exorbitant fees in loans to borrowers who need credit repair. It is not uncommon to charge credit repair customers four to eight “points” on a sub-prime mortgage loan. These points amount to tens of thousands of dollars that you must pay over the life of the loan. Make sure that you read the fine print and compare your mortgage, auto loan or credit card to the typical terms of regular financing if you are applying before your credit repair is complete.

With that said, there are many good options for repairing and rebuilding credit that you can find on the internet or at your local credit union.

Maybe you’ve recently finished repairing your credit or maybe you’re young and haven’t used credit yet. In either case, here are a few tricks to credit repair and building a positive credit history quickly and cheaply. Most times you start building some good credit in just a couple of weeks. But, beware, if you stack too many open accounts, or too many credit inquiries, you will be denied based on debt to income ratio and excessive credit inquiries.

If you know someone (like a good friend or parent) who has good credit, you can “borrow” their good credit listings and begin to repair your credit. This friend must have credit cards, and must trust you enough to allow you to become an “authorized user” on his or her credit cards. Just have your friend call the credit card company and request that you be placed on his card as an authorized user. A copy of the card will be sent and you may simply return it to your friend. Your credit file should soon show an open account with all of the positive history that your friend has created over the years with that credit card. A small footnote will sometimes show that you are an authorized user of that card. Remember, though, when a new credit grantor goes to review your file, he may insist that the balance on the card appear on your debt to income ratio. That shouldn’t disqualify you for credit if your income is sufficient and you don’t have an excess of debt on your file.

There are a number of good secured and unsecured credit cards that advertise on the internet. These cards are designed to help you to repair your credit. Understand, however, that secured credit cards will appear on your credit report as “secured” and will not necessarily repair your credit history as much as an unsecured card.

There are a number of creditors who are traditionally more accepting of those with little credit history or who are in credit repair. For example, many college credit unions will extend low limit credit cards to students without a credit history. Many department stores, such as Sears, will extend a credit line to encourage you to shop at that store, even if your credit repair isn’t yet complete. Electronics stores, furniture stores and cosmetics shops are all usually open to extending credit to credit repair candidates.

As with any line of credit, you must make sure that you handle these new accounts responsibly. It is a temptation to use a department store credit card frivolously. Just remember that you have to pay back every dime, with interest.

Are you House Poor?

The great American Dream has always revolved around owning a home. Sure, having the 2.3 kids, the cushy corporate job and the stylish car to drive to work everyday are part of the myth, too, but nothing quite summed up Americana quite like the white picket fence. But if recent economic numbers are any clue, this dream is becoming a nightmare for many in the US.

According to date released by the United States Census Bureau, an increasing number of homeowners are spending a larger and larger amount of their incomes on housing than in previous years. People in 49 out of 50 states reported an increase. The only state that didn’t, Alaska, spent the same amount. The report showed that people are spending around 21 percent on their housing needs, up from 19 percent in 1999.

This is a huge problem for first-time buyers who may now be priced out of housing markets all across the country. Economists point to rises in home prices in the last 7 years, as well as higher interest rates, coupled with stagnant wages over the same period.

While everyone seems to be in agreement that the housing “bubble” is either bursting, or getting ready to burst depending on where you live, housing prices are still up a remarkable 32 percent since the beginning of the decade.

Household incomes, on the other hand, haven’t done a very good job of keeping up. The same Census report showed that income has actually dropped, not risen, over the past 7 years, down 2.8 percent.

Maybe the worst news in the report was the percent of people who allot more than 30% of their income for housing. The numbers are up almost 8%. National guidelines suggest that more than 30% of household income for housing is excessive and not financially healthy.

What does this mean in the long run?

Most experts agree that until income can catch up to housing, the real estate market will remain lifeless. And since real estate is one of the biggest drivers to the overall economy, a weak real estate market means a weak economy.

Things appear to be the worst in California. Not only do they have the most expensive real estate in the nation, 48 percent of California homeowners spend more than 30% of their income on housing related costs.

Until income can begin to grow as quickly as the real estate market, this trend shows no signs of slowing down. Which could mean that the upcoming real estate slump could last much longer than anyone predicted.

What is the truth about credit repair companies? Can they really do what they say they can do?

Many “credit repair” companies claim to remove negative credit with the flick of a wrist. Their advertisements make bold assertions and money’back guarantees; “Bankruptcy, tax liens, judgments, . . . no problem!! One hundred percent guaranteed!! Credit report 100% cleared in 30 days!!” Can they really make such sweeping guarantees?

While some credit repair companies are outright frauds, others are not frauds and they use the dispute process to obtain impressive results. In fact, they delete thousands of negative credit listings every day - regardless of whether or not the listings are technically accurate. In truth, credit repair fraud is less common today then five years ago. Vigorous regulatory sweeps by state and federal regulators have cleared away most of the illegitimate (and some of the legitimate) credit repair companies.

Unfortunately, it’s risky to trust anyone to help you repair your credit. It is estimated that credit repair companies have bilked Americans out of more than fifty million dollars. The majority of credit repair companies were started by entrepreneurs with a penchant for marketing. Consumers have flocked to these “credit doctors” only to discover that their advertisements proved far more impressive than their results. Hiring a credit repair company is like playing Russian roulette. Many of them are effective and legitimate, but it is difficult to tell a rip-off from the real article.

Working within the credit bureau maze requires substantial background knowledge; knowledge it takes credit repair companies years to learn. In fact, U.S. District Court Judge J. Wexler entered the following legal opinion in the Federal Supplement. “Since allowing third parties to assist consumers will likely lead to the expedited correction of credit reports, it will further the purposes of the [Fair Credit Reporting] Acts.”

So, can credit repair companies really guarantee results?

Not a chance! No credit repair company is so good that it can guarantee a specific outcome. It would be like a defense lawyer guaranteeing that the jury will find his client innocent. Guarantees are a sure sign of credit repair fraud. A warranty, where the credit repair company promises a refund if certain results don’t occur, is a better, more realistic claim.

Not surprisingly, the credit bureaus have declared war against the credit repair companies and those selling instruction on how to do-it-yourself. The bureaus lambaste credit repair companies in the media and send anti-credit repair literature to anyone whom they suspect of using credit repair services. The bureaus unflinchingly deny that accurate information can be removed from a credit report.

Some time ago, a couple in the Northwestern United States, who were using the services of a legitimate credit repair company, received a scathing letter of reproach from their local credit bureau. The letter chastened them for relying on the “unethical” methods of credit repair, and pointed out how all their efforts had come to nothing. “As you can see,” the letter chastened , “your credit reports remain unchanged.” The couple was bewildered because almost all of their many negative credit listings, including a bankruptcy, had long since been deleted.

The simple truth is that you don’t have to endure bad credit for seven to ten years. It is possible to repair your credit within a much shorter time.

However you decide to address your credit challenges, realize that regardless of what you may hear in the news media, thousands before you have sought help and repaired their credit. They can show you their homes, cars, and credit cards. Despite the newspaper articles, TV reports, and other credit bureau propaganda to the contrary, you can repair your credit.