According to an article in the LA Times, mortgage problems are becoming credit problems. While refinancing under making Home Affordable programs won’t hurt your credit and may even help it a little, the same can;t be said for short sales. Many holders of under water property assume that a short sale won’t harm their credit, or at least not much, but it really depends on how the lender chooses to handle the sale. Unless you live in a non-recourse state like California, your lender has the right to pursue a deficiency judgment against you. If it does, you could be liable for the difference between the sale proceeds and the loan balance. And even if you pay this in full, one large American bank still reports the transaction as a “charge off,” which is little better than a foreclosure. Continue reading ‘Mortgage Problems Hurting Americans’ Credit’
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Life is harder for those with no credit–and more expensive too. Talk about being kicked when you’re already down–you’re already young and broke–now you can’t buy a house, rent a car, or even reserve a hotel room. You’ve got to have credit to get credit, and it’s harder to earn a nice credit rating when you have less money but everything costs more.
Fair, Isaac, the company that compiles our FICO scores, has created an expansion score, which is derived from non-traditional credit, including utility payments, layaway charges, and bank deposit records. However, this doesn’t completely solve the problem because in many places it’s illegal to report utility records and it can be difficult getting nontraditional creditors to bother reporting credit data (there isn’t anything in it for them and it does entail an expense).
Today the system has been improved further, allowing you to get your rental history included in your credit rating. By paying a small fee and registering with Payment Reporting Builds Credit, you can get credit for your payment history including daycare, cell phone, rent, and insurance payments. Fair Isaac promised that it will include data from RentBureau and PBRC when compiling your score.
Registering with PBRC, opening a secured credit card, and piggybacking as an authorized user on a relative’s account are all strategies that can accelerate the acquisition of a usable credit history for a young borrower. Of course, all this reporting doesn’t do you any good if what’s being reported isn’t favorable. So if you go through the trouble of getting your payment history recorded for posterity, make sure it’s worth recording.
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Which should you make and which should you miss? A couple of decades ago one creditor was known for being so sloppy with it’s records that no one took delinquencies from them seriously. “Oh, don’t worry about that one; it’s just Sears” was heard in many trade groups and credit bureaus before the retail giant got its act together. But are there accounts you can pay late these days? Yes, and no.
First, if you are going to be late on anything DON’T let it be your mortgage. Next on the list is your car payment. Then look at the rest of your accounts–it’s better to miss a payment on one big account and pay all the little ones on time–the number of delinquencies is more important than the size of the debt.
And finally, missing a utility payment will get you a late charge and maybe your service turned off (if you let it go too long) but it won’t show up on your credit rating. If you are trying to repair your credit it might be worth taking a hit with late fees and preserving your history. Other bills that probably won’t get reported are medical bills, insurance payments, daycare fees, newspaper subscriptions, and layaway payments. Make sure these get paid before they end up in collection (ugly) and you’ll be fine as far as your credit report goes.
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