Credit Repair Blog

A recent Washington Post article reported about some of the new risk based lending option happening with conventional and FHA loans.  Unfortunately very few borrowers are qualifying for home refinancing or bad credit debt consolidation loans.  Many debt loan applicants are migrating towards to bankruptcy and credit card debt settlement, because traditional home equity loans and consolidation mortgages are no longer available. 

According to US Debt Settlement Firm’s Jeff Morris said, “Thousands of Americans need to eliminate their debt and mortgage loans are no longer an option for consolidating debt unless the borrower has a ton of equity in their home.”  Morris suggests discussing your financial state with a trusted debt settlement company. After debt negotiations, credit repair becomes a viable option.

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If you have considered debt relief solutions like debt settlement or debt negotiations and still believe that a bankruptcy is your only option, then do research on what type of bankruptcy is available with your qualifications. There are basically two types of bankruptcy that consumers typically file. Chapter 13 bankruptcies are generally filed when able to continue your monthly obligations you will have what is called a “reorganization” which basically gives you three to five years to pay off the past balances without harassment from debt collectors. Chapter 7 bankruptcies are filed when you have no means to pay off or reorganize your debt. If you have any assets that are not exempt they will be sold or turned over to your creditors by a court appointed trustee.

When you file for bankruptcy you can expect the damage to your credit report to last for several years as this negative mark can show as long as a decade. Understand that in most cases you will be unable to get approved for any form of credit or loan during the first few years due to the perceived capability to repay a financial obligation. In short when it comes to your credit bankruptcy is by far the most damaging form of debt “relief” options available to you.

If your credit card debt has reached the point where bankruptcy is an option you have probably already traveled the road filled with harassing phone calls, messages and letters from debt collectors. While filing for bankruptcy will put a stop to that form of harassment you might feel a different backlash from the stigma of bankruptcy. As previously stated by reorganizing or discharging your debt you will have the opportunity to rebuild your credit while living debt free, however once you file for bankruptcy it stays with you forever. Having a BK on your credit report can may make it difficult to rent property or find a job as future mortgage lenders or employers can ask if you have every previously filed for bankruptcy. However, credit repair can help restore credit and boost credit scores a lot quicker than was possible just a few years ago. Read the original article.

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 The economy is tough, and there are crooks out there looking to make things a whole lot tougher.  In a recent article, the Chicago Tribune highlights the number of financial scams circulating is on the rise, some experts say, as criminals seize every opportunity to take advantage of the desperation many are feeling because of the economic downturn.  Credit repair is a huge business and with the good companies come the shams.  Debt settlement is another rising industry where you will find good and bad companies.

Stop Foreclosure

How it works: According to the FTC, you may get a personalized letter from a firm that found you by looking through foreclosure notices. Or maybe you saw an ad saying, “We guarantee to stop your foreclosure.” 

Once you’re on the hook, the firm uses various schemes to steal your money. One method is by phony negotiations on your behalf. They tell you that they can work a deal with your lender to stop foreclosure if you pay an upfront fee. They also may tell you to stop contacting your lender and to make your mortgage payments to them.  There are real foreclosure prevention companies that are attorney backed organizations who offer loan modification plans and there are companies that look good on paper but perform no backend fulfillment that is required to modify mortgage loans with revised interest rate and amortization schedules.  Make sure you get everything in writing.  Check with the FTC if you are unclear about shopping for a foreclosure prevention company.

“The attorney general says (consumers) should avoid these rescue schemes that ask for money upfront, because they’re just looking to swindle your cash,” said Natalie Bauer, spokeswoman for Illinois Attorney General Lisa Madigan. Another method is the bait-and-switch rescue loan. You are told you are signing papers for a new loan to get your mortgage up to date. But you’re really signing over the title of your home in exchange for the loan. Then there’s the rent-to-buy con, in which you surrender your title in a deal to stay in your home as a renter, with the goal of buying it back later. Tactics vary, but the result is the same: You lose your home.  How to avoid it: The FTC advises that you not use any firm that guarantees to stop foreclosures, tells you to stop talking to your mortgage lender, collects a fee before services or accepts payment only by cashier’s check or wire transfer. You also should see red flags if the firm persuades you to lease your home and buy it back later, or tells you to make your home loan payments to them instead of your lender.

Make Bad Credit Go Away

How it works: The companies claim to be able to erase your bad credit or, in some cases, create a new credit identity. You pay them and, you guessed it, you get nothing.

How to avoid it: The FTC warns not to use any company that wants you to pay upfront for credit repair. Under the Credit Repair Organizations Act, companies can’t require you to pay until they have performed the promised services. Other red flags: If a company doesn’t tell you what your free options are, recommends that you not contact the three major credit reporting agencies, tells you they can eliminate bad information on your report or suggests you create a new identity by applying for an employer identification number to use instead of your Social Security number.  Check with the FTC or visit the Credit Repair Blog for the latest news and insight.

Bottom line, there’s no quick fix to repairing your credit. It takes time and requires repayment of debts. Anything a credit repair company can do legally, you can do by yourself, the FTC says.

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