Credit Scores & What Risk Category They Fall Into

Consistently paying bills on time can increase an individual's credit score, higher Credit Scores can mean lower interest rates on loans and credit cards. Keeping balances close to account limits can also lower a person's Credit Score. Checking your own Credit Report will not lower your Credit Score.

Here is a breakdown of credit scores and what categories they generally fall into.

Low Risk (726 - 830): Lenders rest easier when they extend loans and credit to individuals with high Credit Scores. Plus, you may be able to save money by negotiating a lower interest rate or a better term on a new loan or credit card.

Low - Medium Risk (700 - 725): Lenders may be more willing to extend credit to individuals with Credit Scores in the low-to-medium risk range. In this range, you may get better-than-average rates and terms on new loans and credit cards.

Medium Risk (626 - 699): Lenders may still be willing to extend loans and credit to individuals with mid-range Credit Scores; however, you may only get average rates and terms.

Medium - High Risk (551 - 625): Lenders may be less willing to extend credit to individuals with Credit Scores in the medium-to-high risk range. In this range, you may not enjoy the best rates possible.

High Risk (330 - 550): Lenders may be wary about extending loans and credit to individuals with Credit Scores in the high-risk range. You may be denied credit, or pay higher rates.

3 Creative Ways to Build Your Credit Score

Become An Authorized User.

With the FICO score formula being recalculated last month, becoming an authorized user on a parent or spouse?s credit card will once again help raise your credit score. In the beginning of this year FICO changed the way that they calculate credit scores. After the change, being an authorized user on a credit card account no longer benefited you. The purpose of the change was to help stop companies that allowed you to pay to become an authorized user on someone else?s account to build your credit history. Many people felt that this was a dishonest way of adding positive trade lines to a credit report. Fico changed back the formula simply because the new equation was unfair to people who legitimately deserved to benefit from being an authorized user on a parent or spouses card. However, they say that the new formula will not help people who pay a stranger to be added.

Get a Reloadable Credit Card With A Credit Reporting Service.

If your credit is bad enough to the extent that you can no longer be approved for a credit card, it may be beneficial to look into a prepaid card. Most of them offer most of the benefits of a traditional credit card without the risk of getting yourself into some serious debt. Reloadable cards that offer a service to help build your credit, you pay a monthly fee (usually about $10) and they report to the credit bureaus about your on time payments. This puts an illusion of good credit on your reports because it shows that you are paying a credit card off in full and on time each month, but in reality you?re only paying a very small fee for this convenience.

Ask Your Current Creditors To Report Your Payment History To All Three Credit Bureaus.

Investigate every account that you have in good standing. Find out if the creditor is reporting that account to credit bureaus. If they aren?t, ask them in good faith to start reporting these accounts on your credit report. This will almost certainly boost your credit score if they are accounts that have always been in good standing. If they refuse to it might be a good idea to look into other companies that do report to credit bureaus. It will not benefit your credit score if you have a good account that?s not showing on your credit report. Usually a well placed threat that you are willing to open an account with a competitor will get them to comply.

IRS Debt

Debt owed to the Internal Revenue Service (IRS) is called IRS debt or tax debt. IRS debt may be a very stressful situation for a consumer to deal with. When tackling one?s IRS debt, the first step in doing so is deciding if one should do it alone or use a tax debt professional. It is recommended if one owes $10,000 or more in tax debt to utilize the services of an IRS debt professional. Qualified tax professionals to deal with IRS debt are Certified Public Accountants (CPAs), tax attorneys, and enrolled agents. Enrolled agents may practice in any state in the US whereas CPAs and tax attorneys may only practice in states in which they are licensed.

Secondly, the consumer facing tax debt should scrutinize his or her original tax returns in order to see if perhaps some applicable deductions have been overlooked when the tax returns were first filed. If the consumer finds some deductions that have indeed been overlooked, the consumer may amend the original tax returns and consequently, reduce the amount that he or she owes to the IRS in tax debt. However, there is a lot of paperwork that must be completed in order to amend a previous tax return and without the proper documentation and execution an IRS audit may be in the consumer?s future.

Once the decision has been made whether to use a tax professional or to file back taxes or to make an amendment to a prior tax return, there are five paths one may take in order to get out of debt from the IRS. The five different ways to get out of IRS debt is filing bankruptcy, installment agreement, not currently collectible, partial payment installment agreement, and offer in compromise.

Filing for bankruptcy under Chapter 7 or Chapter 13, if qualified to do so, is one way to discharge one?s IRS debt. However, it is important to understand the complete consequences of executing this action, mainly the long lasting, crippling effect on one?s credit history and credit score. Chapter 7 bankruptcy involves the full discharge of one?s debts, including IRS debt. On the other hand, Chapter 13 bankruptcy involves a Wage Earner Plan or a repayment plan to compensate for some of the allowable debt. Additionally, it is important to note that IRS debt that arises from the taxpayer?s simple failure to file a tax return is not capable of being discharged. There are five criteria that the IRS debt must meet in order to be discharged in either of the above mentioned bankruptcy chapters. They are:

1. The taxpayer filing for bankruptcy is not guilty of evasion of taxes.

2. The tax return was not false or fraudulent.

3. The tax return was filed at least 2 years before the taxpayer files for bankruptcy, measured from the date the taxpayer actually filed the tax return.

4. The due date for filing the tax return is at least 3 years ago, including any extensions.

5. The tax assessment of the IRS is at least 240 days old before the taxpayer files for bankruptcy.

A second way to get out of IRS debt is through setting up and making timely payments on an installment agreement. An installment agreement is an agreement to make a payment of the same amount every month, similar to a mortgage or auto payment. It is important to note that there is also a fee associated with setting up the installment plan or agreement with varying costs depending on whether a direct debit installment agreement is used or some other payment method is used for the IRS installment agreement. Furthermore, there are also fees associated with reinstating an installment agreement that has been defaulted and restructuring a current installment agreement. The Form 9465 is needed to request an installment agreement with the IRS or an online application tool from the IRS website may be used. It is advisable to consult with a tax professional if one owes $10,000 or more in IRS debt because an installment agreement request may not be automatically accepted, and thus, professional negotiations may be in order.

Another path to get out of IRS debt is through the IRS program called not currently collectible. This IRS program is where the IRS will agree not to currently collect a taxpayer?s IRS debt for a specified amount of time, typically a year or a little more. As a result, all collection activities such as garnishment of wages and levies will cease. Moreover, the statute of limitations on tax debt collection still accrues while a tax payer is in the not currently collectible program. This means that the taxpayer?s IRS debt will be eradicated if the IRS cannot collect what is owed to them in the given 10 year time period. In order to become a part of this program, a taxpayer must fill out and submit the Form 433-F to the IRS.

Yet another way of getting out of IRS debt is the partial payment installment agreement. This pathway of getting out of IRS debt is similar to the above mentioned installment agreement in that payments of the same amount are made every single month. However, the difference between the two lies in the fact with the partial payment installment agreement, the repayment plan does not pay off the IRS debt in full. The remainder of the IRS debt is in essence written off. This option is not only a relatively new option (implemented by the IRS on January 17, 2005) but highly involved in negotiations where lots of documentation is needed, including Form 433-A (Collection Information Statement) to support the negotiation tactics. Consequently, a tax professional is highly recommended to execute this particular method of getting out of IRS debt.

The last but certainly not least method of getting out of IRS debt is called offer in compromise. An offer in compromise with the IRS is essentially a request to settle with the IRS for less than what the taxpayer owes. Just as with debt settlement with other types of creditors, e.g. credit card companies, the IRS may deem it considerably more effective to settle with a taxpayer for less than the full balance. This method is highly recommended to be undergone with the assistance of an experienced tax professional. The forms needed for this method is Form 656 (Offer in Compromise), Form 433-A (Collection Information Statement), and Form 433-A Worksheet (in order to calculate the payment amount). Additionally, in the offer in compromise route to getting out of IRS debt, the taxpayer also agrees to forego any tax credits or refunds applied to the taxpayer?s IRS debt before the taxpayer submits his or her Form 656 or Offer in Compromise paperwork as well as pay his or her tax returns on time for the next 5 years. As with some of the other methods, there is a fee associated with this path of getting out of IRS debt.

In summary, IRS debt is a very important matter that should be attended to immediately to avoid any negative repercussions. Experienced tax professionals such as a tax attorney, CPA, or an enrolling agent may prove very useful to taxpayers trying to get out of IRS debt. The law office of Smith & Gromann, P.A. may be able to assist you. Please call the CreditLawGroup at 1-800-284-2548

Consider A Short Sale Before Foreclosure

Having one?s home foreclosed is a serious event with long lasting effects on one?s credit history and credit reports. Consequently, any consumer facing a foreclosure should consider if a short sale may be a better option.

Firstly, one should know the results of having a house foreclosed. One of the most dramatic, results of a foreclosed house is that the lender, who initially loaned money to the consumer to purchase a house, or the mortgage loan provider, will eventually take the house back. This obviously means that the consumer must move out and find another place to live. Additionally, a foreclosure has a devastating effect on one?s credit. Having one?s house foreclosed means that the borrower was not able to make the monthly mortgage payments initially agreed upon. Although the consumer may find his or herself facing foreclosure due to the accumulation of unforeseeable expenses, such as a death in the family, a job layoff, a tragic accident, or a serious illness, one?s financial obligations remain intact and future lenders may still view the foreclosed consumer as an irresponsible or risky borrower. Future extensions of credit may be nearly impossible even though desperately needed to get oneself out of his or her financial black-hole. To make matters worse, even after a consumer?s house has been foreclosed, the lender may still come after the consumer for the cost of executing the foreclosure actions. The lender may pursue the latter payment through the court system in the form of a judgment, which in itself will have a hampering affect on the consumer?s credit history. In summary, foreclosure is an event that consumers should try to avoid at any and all costs.

One option a consumer should consider prior to settling with a foreclosure is a short sale. A short sale is when a consumer sells his or her house to a third party buyer for less, or for short, than what is owed to the mortgage lender. Of course, in order to carry out a short sale, the consumer must have the mortgage lender?s permission to do so. Consequently, time is of the essence with short sales. A lender may be less and less likely to agree to a short sale the farther behind a consumer is on his or her mortgage payments. Therefore, it is recommended to seriously consider and pursue a short sale the second the consumer realizes that he or she will not be able to catch up on his or her mortgage payments.

Additionally, it is extremely advisable to not undergo this process alone. Consumers should immediately seek the advice of professionals once they realize that they are behind on their mortgage payments and most likely will not recover in the future. Consumers should utilize a real estate agent with plenty of short sale experience with ties to a reputable law firm to aid in his or her short sale negotiations. The law office of Smith & Gromann, P.A. works hand-in-hand with short-sale experienced real estate agents. If you are looking to stop your foreclosure and/or are seriously considering a short sale, you may call the Creditlawgroup toll free at 1-800-339-6701.

Mortgage Audits

A mortgage loan, for most consumers, accounts for a large proportion of one?s income. Therefore, it is imperative to ensure that the mortgage loan agreement has been drafted correctly in terms of both structure and validity. Even a minute error, on a lender?s behalf, in carrying out the mortgage agreement could potentially cost the consumer thousands upon thousands of dollars. Unfortunately, many Home Equity Loans, Fixed Rate Mortgages (that have been either refinanced, sold, or involve an escrow account), and Adjustable Rate Mortgages contain at least one error in its construction or calculations.

There are several acts set forth by the federal government in order to protect consumers from predatory lending practices. Such acts include the Truth in Lending Act (TILA), the Home Ownership and Equity Protection Act (HOEPA), and the Real Estate Settlement Procedures Act (RESPA).

The Truth in Lending Act (TILA) provides that the borrower be provided the key provisions of his or her mortgage terms in obvious, accurate, and clear language. Such key provisions include the total payments, the payment schedule, the annual percentage rate, the amount financed, and the finance charge. Furthermore, the TILA act provides that every charge on the loan must be accounted for in one of 2 categories, finance charge or amount financed. The finance charge refers to the dollar amount the credit will cost the consumer, whereas the amount financed refers to the amount of credit provided to the consumer or on the consumer?s behalf. The APR, or annual percentage rate, is the cost of the consumer?s credit as a yearly rate, and is the combination of additional prepaid, or up-front, finance charges and the interest rate. Moreover, TILA provides that certain up-front costs, such as the cost of obtaining the consumer?s credit report, may not be included in a consumer?s APR calculation. Additionally, TILA mandates the lender to furnish 2 copies of the 3-day notice of the consumer?s right to revoke the loan transaction, including the expiration date, effects of revoking the loan transaction, and how to go about revoking the loan transaction. According to TILA, failure to properly disclose any of the above information extends the time period that the consumer is legally allowed to rescind the mortgage loan agreement without penalty.

The Home Ownership and Equity Protection Act (HOEPA) is another act aimed at protecting consumers from predatory lending practices. HOEPA is an amendment act to TILA, described above. In the past, some mortgage lenders have offered residents in certain geographical areas mortgage loans with particularly high fees and or high interest rates. HOEPA covers first-lien loans and second-lien loans that have an APR exceeding the rates in Treasury securities of comparable maturity by more than 8 and 10 percentage points, respectively. HOEPA also covers loans that have fees and points (points being items paid to the lender or to a lender affiliate, prepaid finance charges, and compensation paid to mortgage brokers) that exceed 8% of the total loan amount. The 3 types of loans mentioned above may also be referred to as Section 32 mortgages because the rules pertaining to these types of mortgages are contained in Section 32 of the regulation that implements TILA. HOEPA provides that the consumer receives notification 3 days prior to the finalization of the mortgage loan agreement informing the consumer of his or her regular payment amount, loan amount, APR, and right to sign, or not to sign, the loan agreement. Additionally, if the loan has a variable rate, the consumer must be informed clearly that his or her rate, and consequently his or her monthly payment, may be subject to increase as well as his or her maximum monthly payment amount. HOEPA also outlines certain prohibitions in regards to default interest rates, negative amortization, balloon payments, and other specific conditions.

The Real Estate Settlement Procedures Act (RESPA) provides that the consumer is informed about the costs associated with his or her real estate mortgage transaction, or settlement, and prohibits kickbacks, referral fees, or any other thing of value for the referral of a settlement service. RESPA is an act that is aimed at protecting the consumer because it prohibits referral and kickback fees and thus, reduces the overall cost of settlement procedures to the consumer. RESPA further provides that any federally related mortgage loan may not accept a percentage, portion, or split of any charge made or received unless the service has actually been rendered. Additionally, although yield-spread premiums (a mortgage broker fee paid by a lender for setting up a loan with a higher than par interest rate) are allowed, the fee rendered must be reasonable related to service value.

The law firm of Smith & Gromann, P.A., works hand in hand with experienced mortgage auditor professionals to protect consumers from predatory lending and costly mistakes or errors in servicing mortgages. Our mortgage or loan auditors will scrutinize mortgage agreements in order to confirm that the mortgage agreement and all closing documents are in accordance with both state and federal lending laws. In addition to reverse engineering mortgage agreements to ensure compliance with statutes, our highly experienced loan or mortgage auditors will ensure that the rates contained in the mortgage agreement have been properly deduced and calculated. If you are interested in potentially saving yourself thousands of dollars and want the security of knowing that your mortgage loan is being serviced correctly, please call the CreditLawGroup at 1-800-293-1902

Foreclosure Timeline

Foreclosure Timeline

Here is a typical Foreclosure Process

1. Day 15: The usual grace period is over. Collection calls will begin and you are now subject to penalty fee?s

2. Day 30: The collection calls will begin to get more serious and collection letters will start to arrive in your mailbox. The lender will appoint someone to call you at your work or home.

3. Day 60: Your collection letters will now mention that your account is in default of the loan agreement. The demand letter will most likely ask for you two make two payments to bring your account current. In addition you may also be responsible for late fee?s.

4. Day 90: This is when the situation begins to get very serious. The collection letters will demand that you immediately pay three payments to bring your account current. The term ?Foreclosure? will probably be mentioned to you. A foreclosure attorney working for your lender will attempt to contact you and will also file foreclosure documents with the court house.

- Once you are served with the court documents you will typically have 20 days to respond. Make sure to check the document carefully to determine the exact date you need to respond by. This situation is now a matter of public record and it?s important to follow your states rules throughout this process. In addition many companies will contact you offering their ?Foreclosure services? . There?s nothing wrong with enlisting professional help (as this is a complicated legal process) however it?s important to do your research and only go with a reputable company (preferably an attorney).

5. Day 110: A court date is set for the Summary Judgment Hearing. (usually 30-60 days later)

6. At your hearing the date is set to auction your home on the courthouse steps (usually 30-45 days after the hearing)

7. At the auction the highest bidder will get your home. The highest bidder is usually the first mortgage holder. In the off chance that your home sells for more then you owe, you are entitled to the excess money (minus any fees owed)

8. Finally 24-48 hours after the auction all occupants must leave the residence and all belongings left behind, now belong to the new owner.

If you or someone you know is currently in the foreclosure proccess or is heading in that direction contact the CreditLawgroup today at 1-(800) 283-8421 for competent legal foreclosure defense.

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