Credit Secrets & Tips

For most people, their home is their biggest purchase, and they’ll do practically anything to protect it. Unfortunately, that’s the reason why fraud artists target homeowners with high-cost and often illegal mortgage offers.

In one common example, con artists promise to erase a bad credit history or make easy loans to people with bad credit histories. Most of these offers involve exorbitant fees, come with hidden terms or never provide the promised money.

Mortgage foreclosure fraud is on the rise, with thieves posing as lenders or housing counselors offering to “help” people at risk of losing their homes to foreclosure. More than likely, the consumer pays high upfront fees for questionable services, and in the worst cases, thieves have tricked people into signing over ownership of their homes.

How can you avoid these types of fraud? Try to deal only with businesses and other organizations you already know or that have been recommended.

It’s safe to assume that any offer that sounds too good to be true, especially one from a stranger or an unfamiliar company, is probably fraudulent.

Adjustable-rate mortgages has a very low payments in the early years of the loan that will sharply increase when interest rates reset.

Homeowners with ARMs who are not able to make their monthly payment when the interest rate goes up should contact the lenders as soon as possible to discuss their options.

Defaulting on a home loan means you can lose your home. The lender has the right to foreclose – to sell your home to raise money to pay off your debt if you default.

You would also severely damage your credit record, making it more difficult to borrow money or get a job or insurance in the future.

Consider following steps to avoid that result.

While many lenders and loan servicers (companies that accept borrower payments and help administer escrow accounts) are writing or calling customers who face big rate increases about the possibility of refinancing or restructuring their loans.

The borrowers who anticipate having difficulty making payments to take the initiative and
negotiate the lenders by modifying loan terms or changing from variable-rate loans to fixed-rate loans that may be available at a lower monthly cost.

The borrowers who are delinquent on their mortgage loans should consider getting help from a
housing counselor. These are public and private organizations that offer advice and assistance on everything from buying and financing a home to dealing with debt problems, including avoiding
foreclosure if the borrower misses loan payments.

Some counselors assist consumers by working with lenders on their behalf, but it’s always important for the borrower to be actively involved in this process.

I suggest consider these resources for finding a reputable housing counselor:

- The Department of Housing and Urban Development (HUD) maintains a list of approved housing
counselors who give advice free or at low cost.

To locate a HUD-approved counselor in your area, call 1-800-569-4287 or go to http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm.

- NeighborWorks America, a national nonprofit organization created by Congress, and HOPE for Homeowners, a service of the nonprofit Homeownership Preservation Foundation, have established a toll-free hotline at 1-888-995-HOPE (4673).

Callers can receive immediate free advice and support from nonprofit, HUD-certified organizations 24 hours a day, 7 days a week. Callers who need additional assistance will be referred to reputable local counselors. For more information, visit http://www.995hope.org.

Also be aware of credit-repair scams that target homeowners having serious problems making their mortgage payments. The Phony companies claiming to be housing counselors promise to help negotiate a new loan or perform other services for a hefty fee that is collected up-front.

The companies actually do nothing at all or perform services consumers can do for themselves at little or no cost. Turning to a HUD-approved counselor for assistance is one way to avoid these types of fraud.

The holiday shopping season is in full swing. Whether you’re shopping online, by phone or at the mall, chances are you’ll use a credit card for some of your purchases.

Here’s some tips to keep in mind when you shop:
 
1. Keep track of all your spending
 
Incidental and impulse purchases add up. Remember credit cards are just like loans -you have to pay what you owe.

Owing more than you can repay can damage your credit rating. That can make it hard to finance a car, rent an apartment, get insurance, a job – even send flowers.
 
Pay your bill on time, and in full, if possible. If you don’t, you’ll have to pay finance charges on the unpaid balance – and it takes forever to get caught up if you just pay the minimum. 

2. Keep an eye on your credit card and account number
 
* Never lend your credit card to anyone.

You’re responsible for paying the bill. Any problems with the bill can damage your credit rating.

* Don’t sign a blank charge slip.

Draw a line through blank spaces on charge slips above the total so the amount cannot be changed.
 
* Never put your account number on the outside of an envelope or a postcard.
 
* Be cautious about disclosing your account number over the phone unless you know you are dealing with a reputable company.
 
* Carry only the cards you anticipate using to help prevent loss or theft.
 
* Report your lost or stolen credit card or ATM card to the card issuers as quickly as possible.

Many companies have toll-free numbers and 24-hour service to deal with such emergencies.

Follow up with a letter, including your account number, when you noticed the card was missing, and the date you first reported the loss.

3. Keep good records
 
Save your receipts. Compare them with your monthly bill. Promptly report problems to the company that issued the card. Usually, your statement will provide instructions for
disputing a charge. 

If you order by mail, phone or online, keep copies or printouts with details about the transaction, including any warranties, or return and refund policies if you’re not satisfied.

You should have the company’s name, address, phone number, the date of your order, a copy of the order form you sent to the company or a list of the items ordered and their stock codes, the order confirmation codes and the ad or catalog from which
you ordered. 

Holiday sale ads: they blanket the airwaves, jam your mailbox, and add another pound to your Sunday paper.

Soon you’ll be bombarded with ads for pre-holiday sales, preferred customer specials, early bird sales, midnight madness events, coupon savings days, and, don’t forget, post-holiday sales.

Sure you want a good deal, but just how do you decide if the deal is real?

The following some tips can help you get the most for your money:

* Shop around

A “sale” price isn’t always the “best” price. Some merchants may offer the sale price on the item you want for a limited time.

Other merchants may discount the item you want everyday. Also, when you’re comparison shopping, make sure you have: the item’s manufacturer, model number, stock number or other identifying information.

* Read sale ads carefully

Some may say “quantities limited,” “no rain checks,” or “not available at all stores.”

Before you step out the door, call ahead to make sure the merchant has the item you want in stock. If you’re shopping for a popular or hard-to-find item, ask the merchant if he’d be willing to hold the item until you can get to the store.

* Take time and travel costs into consideration

If an item is on sale, but it’s all the way across town, how much are you really saving once you factor in your time and the costs of transportation and parking?

* Look for price-matching policies

Some merchants will match, or even beat, their competitors’ prices. Read the merchant’s pricing policy carefully. It may not apply to all items.

* Go online

Check out Internet sites that compare prices for items offered online. Some sites also may compare prices offered at stores in your area.

If you decide to buy online, keep shipping costs and delivery time in mind.

* Carefully consider bargain offers that are based on purchases of additional merchandise

For example, “buy one, get one free” or “free gift with purchase.” If you don’t really want or need the item, it’s not a deal.

* Ask about sale adjustments

If you buy an item at regular price and it goes on sale the next week, can you get a credit or refund for the discounted amount?  What documentation will you need?

* Ask about refund and return policies for sale items

Merchants may have different refund and return policies for sale items, especially clearance merchandise.

Advertisements for easy terms loans are tempting. They can be good deals, but you must read the fine print very carefully before you sign up.

1.  “Zero Percent Financing” on auto loans

Often these loans are for 12, 24 or 36 months, not the 48 or 60 months many people choose to keep monthly payments down.

If you opt for a shorter loan term, be sure you can make the monthly payments. Also look for any hidden fees.

2.  “Zero Percent Interest” on a credit card

These offers usually are for limited purposes and time periods, such as no interest charges for three months on new purchases or on any balance you transfer from another credit card.

This may be a good option, but you’ve got to read all the documentation and do the math.

For example, if you don’t pay the balance by the due date, you will incur interest. Also find out if there’s a balance transfer fee or an annual fee.

These charges could be so high, in fact, that the zero-percent offer may cost more than a card with a higher interest rate but not the other fees.

3.  “Add the Closing Costs” to your mortgage

You’re not getting out of paying the closing costs they’re added to the loan balance, so your monthly payments will increase plus you’ll be paying interest on the closing costs.

And, if adding the closing costs to the loan balance results in a down payment on the loan of less than 20 percent of the home’s value, you will have to purchase private mortgage
insurance (PMI), which protects the lender if you stop making mortgage payments.

PMI can cost $80 to $120 per month for the typical mortgage loan.

PMI be cancelled when built-up equity equals at least 20 percent of either the purchase price or the original appraised value, whichever is less.

4.  “No Payments on Merchandise Until Next Year”

Even though you won’t make payments for several months, if interest is being charged from the date of purchase, as is often the case, you can end up paying much more for an item than you expected.

Also, if you don’t pay for the merchandise in full by the end of the specified period, you may be charged interest from the date of purchase.

For most people, financial health doesn’t depend on how much they earn, but how much they spend.  To find out where your money is going, start carrying a pocket-size spiral notepad with you all the time, and write down every purchase you make, including the amount. 

Even if it’s a soft drink form the convenience store, or a trip to drive-thru at a fast-food restaurant, record it in your notepad. After two weeks, review your notes and ask yourself if you really need all the things you buy.

Upon close inspection, most people are surprised to find out where their hard-earned money is going.  If this is true for your case don’t dismay – almost everybody wastes moeny to some degree.  It’s important to understand that every purchase we make – excluding such absolute necessities as food, rent, and gas for the case – is a choice.

Consider the following examples of how changing some small habits can affect your wallet’s health:

(1).  If you smoke one pack of cigarettes each day, then consider quitting smoke. it would save you nearly $1,500 each year.

(2). If you make it a habit to take long, hot shower, then take a shoter shower.  Water heating is the third largest enrgy expense in your home.

(3). If you drink 64 oz. of bottle water each day, then why cann’t you purify your own water.  It could save $60 each month.

(4). If you have magazine subscriptions delivered to you home, the visit the library or read magazines online.  Do you know the average American family spends more than $100 every year on magazine.

(5). If you buy a snack from a vending machine each day from work, then consider bringing your own snack from home.  It could save you an average of $30 per month.

(6). If you leave the air conditioner or heater on all day, then turn it down when you away from home.  For each 1 degree, you’ll save up to 5% on your heating/cooling cost.

(7).  If you drive even short distances, then walking or biking instead.  According to AAA, mortorist pay an average 68.9 cents per mile.

Consider carefully before taking out a home equity loan.  Although This type of loan might let you take tax deductions you could not take with other types of loans, they can
reduce the equity that you built up in your house.  And if you are unable to make payment promptly, you could lose your house!
 
Home equity loans can either be a revolving line of credit or a one-time, closed-end loan.   Revolving credit let you choose when and how often to borrow against the equity in your home.  In closed-end loan, you receive a lump sum for a particular purpose, such as remodeling or education tuition.
 
Apply for a home equity loan through a bank first.  Bank loans are likely to cost less than the loans offered by finance companies.
 
When comparing loan offers, read all materials and ask following 7 specific
questions before you sign up:
 
 1. What is the minimum monthly payment?
 
 2. What is the annual percentage rage (APR)?
 
 3. If the interest rate is adjustable, how much can it increase at one time?
 
 4 What is the maximum interest rate?
 
 5. What are the annual and transaction fees?
 
 6. If the loan is for revolving credit, how large a credit line is available?
 
 7. What are the initiation fees for a closed end loan?

“Cash Advance” loan, often called “payday loan” comes with extremely high price.
Here is how it works: let’s say you wrote a $330 personal check to borrow $300 up to 14 days. The lender would agree to hold check until next payday. 

In this example, the cost of initial loan is $30 and interest rate for 14 days is 10% (=30/300), So APR is 260.7% (=10% * 365/14)!

Now multiply 260.7% by the $300 loan, 2.607 * 330 = $860.31.  That is total interest charges you pay for in one year. If you add this charge to the original loan amount $330:
$330 + 860.31 = 1190.31.  That is way TOO MUCH!

If you find yourself need extra cash from the lender, consider these possibilities as alternatives to the payday loan:

1.  When you need credit, shop carefully.

2.  Compare the APR and finance charge (which includes loan fee, interest and
other types of credit cost) of credit offer to get the lowest cost.

3.  Ask your creditor for more time to pay your bills. 

4.  Make a realistic budget, and figure your monthly and daily expenditures.

5.  Find out if you have, or can get, overdraft protection on your checking account. 

6.  Contact with your local credit counseling service, if you need help working out
a debt repayment plan with creditor. 

If you cannot avoid taking out a payday loan, borrow only as much as you can afford
to pay back. Payday loan roll-overs can lead to a vicious cycle unending debt. 
It could turn your temporary setback into major financial crisis.