Tuesday, May 29, 2012

Consumers Getting Savvier About Credit Scores


Consumers are getting savvier about credit scores, according to new findings from the nonprofit group Consumer Federation of America.
The federation and VantageScore, creator of a score that competes with the FICO score, contracted with ORC International to administer a quiz to more than 1,000 adults by phone in late April. The margin of sampling error is three percentage points. (The quiz is available on the federation’s Web site.)

The VantageScore, like the FICO score, is a three-digit number, but uses a range of 501 to 990.

Forty-two percent of those who participated in the survey said they had obtained at least one credit score in the past year, either from a lender or from a Web site using credit reports from the three main credit bureaus.
On almost all the questions, those who had recently obtained a score were more likely to know the right answers.

Consumers were more knowledgeable than they were when answering similar questions in January 2011, the federation found, and a “large majority” of consumers now know important facts about credit scores, including these:

• In addition to mortgage lenders and credit card issuers, landlords also use credit scores (73 percent of respondents knew this), as do home insurers (71 percent) and cellphone companies (66 percent).
• Consumers have more than one generic credit score (78 percent had this correct).

Somewhat surprising, the survey found, was that most consumers understand new, somewhat complicated rules about credit-score disclosures. When asked under what conditions lenders must inform borrowers of their credit scores, for instance, “large majorities” correctly identified three key conditions, including: after a consumer applies for a mortgage; whenever a consumer is turned down for a loan; and on all consumer loans, when the applicant does not get the best terms, including the lowest interest rate available.

Misunderstandings still remain, however. More than half, for instance, thought a person’s age and marital status were factors in calculating credit scores.

And few know how costly low scores can be. Only 29 percent were aware that on a $20,000, 60-month auto loan, a borrower with a low score is likely to pay at least $5,000 more than one with a high score.

How did you score on the quiz?

Tuesday, May 22, 2012


How to Pump Up Your Credit Score

The New York Times
A majority of banks are less likely to offer loans to people with a FICO credit score of 620 and a 10 percent down payment than they were in 2006, according to the report. Lenders were also less likely to do so even for those with a score of 720.

Such stricter standards have drawn the attention of Ben S. Bernanke, the chairman of the Federal Reserve, who last week told a bankers group that “current standards may be limiting or preventing lending to many creditworthy borrowers.”

For those with lower credit scores, the math is stark: A borrower with a credit score of 720 can expect a rate of 3.70 percent on a 30-year, $300,000 fixed-rate mortgage, according to, while someone with a score of 620 to 639 can expect a 5.07 percent rate — or an extra $242 per monthly payment.

“If you don’t have good credit, you’re not going to get that crazy low rate,” said Deborah MacKenzie, the director of counseling at the Housing Development Fund, a nonprofit group in Stamford, Conn. But she and other experts said there were tactics that consumers could use to raise their scores.

First, though, it is worth noting that median credit scores are rising, as people reduce debt and spend less in tight economic times, said Joanne Gaskin, the director of product management and global scoring at FICO, the provider of one of the most popular credit scores used by lenders. Some 18 percent of Americans now have scores of 800 to 850, while 15 percent are below 550, according to FICO data. Through “good behavior,” Ms. Gaskin said, you could raise your credit score by as much as 100 points in a year.

Often lenders will review your scores from the three big credit agencies, and they use the middle number to evaluate you. “That becomes your risk number,” said Tracy Becker, the founder of North Shore Advisory in Tarrytown, N.Y., a national credit score specialist.

Start by obtaining your three credit reports (available free once a year at, or call 1-877-322-8228), and study them carefully for errors or omissions. If you think your score labels you as a higher risk, Ms. MacKenzie suggests signing up for a first-time homeowners class through a counseling agency certified by the federal Department of Housing and Urban Development.

According to FICO, the two biggest factors in your credit score are your payment history, which accounts for 35 percent of the score, and the amounts owed, accounting for 30 percent.

Knowing that, Ms. Gaskin said, an effective way to raise your score is to reduce your balances on credit cards. She notes, however, that if an account is in collection, it is too late to improve your credit score by paying it off. The notation that an account is in collection is what lowers the score, she said, so consumers may get more mileage by paying down active credit-card balances and other debts first.

Though mistakes and bankruptcies may stay on your credit report for seven years, lenders will generally be more likely to overlook late payments that happened two or more years ago than more recent ones, Ms. MacKenzie said. “A late payment that occurs this month when you’re applying for a mortgage is deadly,” she said.

Another way to bolster your credit is by asking creditors with whom you have a good track record to report to a credit agency, Ms. Gaskin said. That could include a landlord or a utility.

Improving your credit could take three to four months, or it could take as long as 18 months. “It isn’t an easy fix,” said Carol Yopp, a program manager for the Long Island Housing Partnership and a former mortgage underwriter. “Don’t expect it to happen overnight.”

Friday, May 18, 2012

WASHINGTON – The U.S. Department of Housing and Urban Development (HUD) today released two reports on the impact of HUD-approved housing counseling has for those families who purchase their first homes and those struggling to prevent foreclosure.  In both studies, HUD found housing counseling significantly improved the likelihood homeowners remained in their homes.
Both the pre-purchase counseling and foreclosure counseling studies enrolled clients in the fall of 2009 and early 2010. HUD found that 35 percent of participants became homeowners within 18 months of pre-purchase counseling and only one of those buyers subsequently fell behind in their mortgage payments. The foreclosure counseling study reveals that with a counselor’s help, nearly 70 percent of those counseled obtained a mortgage remedy to retain their home, and 56 percent cured their defaults and became current on their mortgages.
“These two studies underscore the need to continue supporting housing counseling programs across this country, especially during this period when families need these services the most,” said Raphael Bostic, HUD’s Assistant Secretary for Policy Development and Research.  “The evidence is clear, with a little investment on the front end, we can go a long way toward improving the chances families will buy a home they can afford and sustain their homes in the long run.”
Pre-Purchase Counseling Outcome Study
The “Pre-Purchase Counseling Outcome Study” enrolled 573 individuals seeking pre-purchase counseling services in fall 2009 from 15 HUD-funded counseling agencies across the country.  The objectives of the study were to examine the characteristics of pre-purchase counseling clients, the types of services they received, and whether and under what circumstances they purchased housing in the 18 months after starting counseling.
While HUD cannot conclude that the study sample is representative of all pre-purchase counseling clients served by the study agencies, this study provides a snapshot of some pre-purchase counseling clients at 15 different housing counseling agencies across the country in the fall of 2009.
The key findings of the study include:
  • 35 percent of the study participants had become homeowners 18 months after seeking pre-purchase counseling. 
  • Most purchasers had a FICO score of 620 or higher (71 percent), and were reported as having completed counseling by their housing counselor (72 percent).
  • Only one of the purchasers had fallen at least 30 days behind on mortgage payments 12-18 months after receiving pre-purchase counseling services.
  • Most were motivated to seek counseling to identify homebuyer assistance programs (58 percent) or to obtain down payment or closing cost assistance or to qualify for a specific loan program (58 percent).
  • Study participants were racially and ethnically diverse (52 percent African American, 32 percent White, 16 percent of another race or multi-racial, and 19 percent Hispanic), were more likely to be young (51 percent were under age 35), female (72 percent), have dependents under the age of 18 living with them (57 percent).
These findings suggest that counseling helped a diverse group of low- to moderate-income individuals obtain useful information in connection with preparing to purchase a home and indicate that pre-purchase counseling assists clients make good decisions regarding homeownership and might help to make homeownership more sustainable. 
Foreclosure Counseling Outcome Study
HUD’s “Foreclosure Counseling Outcome Study” involved conducting baseline interviews with 824 foreclosure counseling clients, tracking the housing counseling services they received, and analyzing homebuyer outcomes through an analysis of credit report data.  A follow-up telephone survey was conducted approximately 18 months after the foreclosure counseling services were delivered.
About three-quarters of the homeowners who had fallen behind on their payments did so because of a loss of income, and very few had any savings to draw upon to pay missed mortgage payments.  The study finds that large shares of counseled homeowners were able to obtain a remedy, retain their home, and become current on their mortgages.  These outcomes were much more common among homeowners in the study who sought counseling before becoming delinquent or in the early stages of delinquency (1-3 months). 
This study provides information on who accesses counseling services when facing challenges in paying their mortgage loan, what services those clients obtain, and identifies the outcomes the clients experienced in the following 18 months (though it cannot assert that the counseling caused the outcomes).  The report’s findings include: 
  • Most study participants attempted to contact their servicer when they first fell behind but were unsuccessful in negotiating with their lenders on their own.
  • With a counselor’s help, 69 percent of counselees obtained a mortgage remedy, and 56 percent were able to become current on their mortgages.
  • Nearly 70 percent of clients who sought counseling before becoming delinquent were in their home and current on their mortgage payments at the 18-month follow-up period, whereas only 30 percent of clients who were six or more months behind at the time they entered counseling were in their home and current at follow-up.
The results suggest that counseling can help many homeowners at risk of foreclosure to negotiate and obtain mortgage remedies, and to become current on their mortgage payments.  In addition, homeowners in the study who were able to obtain mortgage remedies were more likely to stay in their homes.  The HUD study is also one of the few studies that documents housing outcomes in relation to specific counseling services received. 

Friday, May 11, 2012

10 Money Mistakes Everybody Makes

10 Money Mistakes Everybody Makes: Everyone makes mistakes, but when it comes to money, the fewer the better. Here are 10 bonehead moves nearly everyone makes, along with advice to avoid them.

Monday, May 7, 2012

Conservative spending helps keep bankruptcy filings on the decline
Buffalo, NY -- Consumers continued to be conservative in spending and using credit during the month of April, contributing to the ongoing trend of declining bankruptcy filings. According to the U.S. Court, Western District of New York (which includes the 18 counties surrounding Buffalo and Rochester), during the month of April filings were down 20.2 percent for the District, 25.1 percent for the Buffalo area, and 10.5 percent for the Rochester area.
"There have been reports that credit card companies are once again targeting high-risk consumers -- that is people who already have a lot of credit or who may be less sophisticated about managing their finances. The overwhelming trend, though, is that consumers are reducing their debt loads and are wary of taking on more credit," said Jeffrey Freedman, CEO, Jeffrey Freedman Attorneys, PLLC. "There are other trends, however, that could affect filings in the future."
Because of the poor job market students are staying in school longer and those who have lost jobs are retraining. While that particular segment of the population is not accumulating consumer debt, however, student loan debt is growing significantly. Last year student debt increased by more than $1 billion, Freedman said. Student loans are not dischargeable in 99.9 percent of bankruptcy cases, which could create serious problems for those who have large loans to pay off.
"Additionally, employers are keeping wages low, which has two effects. People are uncertain about the future so they aren’t spending on consumer goods, and students entering or re-entering the job market are finding it difficult to pay back student loan," he said.
An article in USA Today in March reported that mortgage debt has dropped more than 7 percent since early 2008, but there is concern banks and financial institutions are shifting lending to students and credit cards, which could result in economic issues just as serious as the mortgage loan crisis.
"Shifts in one area of the economy inevitably affect other areas," Freedman said. "Young people are putting off marriage and living at home longer, which means they are delaying forming their own households -- slowing home sales and sales of goods needed to set up a household. It all adds up to a plodding economic recovery."
Jeffrey Freedman Attorneys, PLLC has 13 offices in Western New York and Pennsylvania. The firm has represented consumers for more than 30 years and currently handles Bankruptcy, Social Security Disability, Personal Injury and Fair Debt Collection Practices Act cases.


For Further Information, contact Jeffrey M. Freedman at 716-725-1233,