Know Your Debt-To-Income Ratio
September 22, 2009
Not all debt is bad debt. A mortgage, student loan, or even a home-equity loan are considered good debt, because they create value.
To calculate your debt-to-income ratio, follow these steps:
- How much do you pay each month in bills-mortgage, credit cards, etc? Come up with a total for all bills, excluding utilities and taxes.
- What is your monthly income? Be sure to include investments and child support.
- Divide your monthly payments by your monthly income.
What does it all mean? What is a good debt-to-income ratio?
36% or less – This is the target area we should all aim for
37% – 42% – You need to start paying off some debt before it gets out of control
43% – 49% – The danger zone – a high DTI ratio. Immediate action is needed to pay down debt
Above 50% – A professional financial advisor can help get you back on track to reduce debt
Website Launched To Help With Credit Card Debt
September 17, 2009
As credit-card companies are dealing with increasing defaults on credit-card payments, a new website has been launched to assist those with mounting balances. The website, www.helpwithmycredit.org, is intended to offer assistance and options. Additionally, a toll-free number is available for callers and it will offer two options: they will be transferred to a customer service representative at their card issuer, or to a local credit counselor. The number is 866-941-1030.
“Zombie Debt” Invades Consumer Credit Files
November 6, 2008
Did you know that during the last 10 years, collectors and factoring companies have been using ‘blackmail tactics’ and making millions in profits by collecting on debt that is not legally collectible? (“Zombie Debt”). The very premise of this violates consumer protection laws, most notably the Fair Debt Collection Practices Act [FDCPA].
How can this be, you say… Here’s how this lucrative, dirty little secret works. Let’s say that someone filed a bankruptcy that was discharged five years ago with 15 creditor accounts such as medical collections, credit card balances, etc. Professional debt buying firms, and factoring companies purchase the rights to this discharged debt through a court process for literally pennies on the dollar (who would even think to sell this, right?). Then they use the credit bureaus’ systems and sophisticated skip trace software to try and match-up the “debt” to the “debtor.” In many cases people don’t know this is going on until they try to qualify for a loan, only to find that a firm like LVNV has reported an open collection on their credit files.
When challenged with the credit bureaus, the collector simply updates the notation in the bureau record, causing further damage to the person’s credit rating. In many cases the “debtor” doesn’t have the time or expertise to fight the entry and instead chooses to pay the collector as a “compromise” to have the debt settled; even without valid proof being offered that the debt was legally collectible.
Here’s where things get really troublesome. If this “Zombie” debt is not properly settled or proven to be invalid, the collector makes additional profit by selling the same account to another collector, who in turn attempts to do the same thing; and this terrible cycle repeats itself again while the “Zombie Debt,” if not handled properly, never dies.
Dave Sperline @ Eukopia Credit Solutions
Paying Collection Accounts
October 18, 2008
Did you know that paying-off overdue accounts, particularly collection accounts that have not reported to the credit bureaus for over 13 months can temporarily lower a credit score? There are three primary reasons to pay-off an aged collection account over 13 months old: 1) Because the mortgage lender requires it as a financing condition. 2) The collector is willing to settle the account with a “pay for delete” clause, meaning the account will be deleted from the credit report. 3) You know the debt is real and you run the risk of a default judgment being filed against you.
Paying Collections
October 18, 2008
On an overdue account that has been referred to collections, if you have the option of paying the original creditor instead of the collector, you are better off paying the creditor directly because the collection entry has to be removed from your credit report once the original creditor account has been settled – the collector then has no legal right to have their negative entry on your credit report.
Credit Scoring Occurs in Groups
October 18, 2008
Did you know that due to the way in which credit scoring is calculated, a person can have a higher credit score after a “seasoned” (4+ years) bankruptcy than someone that never filed?! This is due to what’s known “grouping.”
Essentially the FICO scoring model takes into account intrinsic (individualized) as well as extrinsic (grouped with others) factors when determining score. Someone that has a broad and deep credit history (5+ accounts, revolving and installment +1 or more mortgages), but has filed bankruptcy in the past, could have a significantly higher score than someone who has very little credit history (e.g., less than 4 active trade lines).
Because the person that filed bankruptcy is now “grouped” with other bankruptcy filers rather than non-bankruptcy filers, the criteria for having a higher score is lowered, thereby increasing the chance to have a higher score relative to this (BK filer) group.
“Did you know that getting a Rapid Rescore for a mortgage credit report usually reflects a change only with the credit agency itself and not at the credit bureau level?”
September 26, 2008
“The very item(s) that have been changed for scoring purposes are usually still in the bureau’s databases and still need to be disputed after the financing has closed in order to be permanent.”
HELOC – When should I request a Home Equity Line of Credit?
September 26, 2008
If you are applying for a new first mortgage and know that you will also need a home equity line of credit (HELOC), the best chance of getting the HELOC approved is simultaneously with the new first. By waiting six months to apply for the HELOC you may get declined if your score dropped because of the new mortgage debt now being reported.
Eukopia Credit Solutions
Are you a credit risk?
September 26, 2008
Did you know that credit card companies are now evaluating WHERE you use your credit card purchases and determining you as a credit risk which affects the amount of available limit you will be granted or whether your credit line could be closed without any logical explanation to you? Check out the following news clip: http://cosmos.bcst.yahoo.com/up/player/popup/index.php?cl=8482344
Eukopia Credit Solutions
Get the LowDown on the Rapid Rescore of Your Credit Score
July 28, 2008
“Did you know that getting a Rapid Rescore for a mortgage credit report usually reflects a change only with the credit agency itself and not at the credit bureau level?”
“The very item(s) that have been changed for scoring purposes are usually still in the bureau’s databases and still need to be disputed after the financing has closed in order to be permanent.”