Short Sale or Foreclosure?

The decision to do a short sale or to let your home go to foreclosure, is not an easy one. While for some homeowners, it is easier to throw up your hands and let the bank take your home, that might not be the wisest thing to do.

Benefits of a Short Sale

• You are in control of the sale, not the bank.
• You may sleep better at night knowing who is buying your home.
• Your home sale will be handled like any other home sale.
• You will be eligible, under Fannie Mae Guidelines, to buy another home in 2 years instead of 5 years.
• If your credit report does not reflect a 60 day late pay, under Fanny Mae guidelines, you will be eligible to buy another home immediately.

Benefits of a Foreclosure

• No mortgage payments to make
• The home is yours until the foreclosure is final
• No strangers touring your home
• Some banks offer "cash for keys" after a public sale

How do Short Sales and Foreclosures affect your credit score?

A short sale may be considered to be a derogatory mark on your credit even though credit bureaus do not show the word "short sale" on your credit report. It may say "paid in full for less than agreed" or "settled for less," among other categories. Some clients have reported negative FICO score drops from 50 points to 130 points.  Major point drops are typically due to being in default, meaning you have fallen behind on your payments.

Alternatively, a foreclosure will generally remain on your credit report for 7-10 years and your credit score will drop by over 150 points.  If a prospective employer runs a credit check on you, your job application may be denied if you have a foreclosure on your record. 

Which one is better?

As you can see there are a lot of potential problems with both a short sale and foreclosure. So, which one is better? Short sale wins every time. In all aspects, a short sale is more beneficial to you, the home owner, as well as the bank. It saves them money from legal fees and paying for the foreclosure process, and it also saves your credit report, potential taxes, and deficiency judgments.

If you’re facing a financial hardship and think you may need to seek a short sale, talk to a Realtor ASAP to get the process started. The faster the better. Don’t wait until the sheriff is knocking on your door to repossess your home. 

There are only three states, Claifornia, Hawaii, and Massachusetts, that prohibit insurers from using credit information when calculating premiums.  If you live in one of the other 47 sates, your low credit score could affect your insurance premium. 

Why does your credit score affect your insurance premium?

The answer is simple.  Insurers have found a strong correlation between credit scores and insurance claims. It turns out, people with low scores are more likely than people with high scores to file claims. And when insurers looked more closely, they discovered that people who made late payments were the ones who tended to have more claims.

They didn't find as strong a correlation with other factors, such as taking on too much new credit, which other lenders care about because they worry that you won't be able to keep up with your payments.

Insurance companies use a different credit score to determine your premium

The version insurers use is slightly different from the one that lenders use. Both types of scores are based on information from your credit report, but insurers weigh the items differently. For example, insurers look a lot more closely at how you've managed credit over time rather than how much credit you've applied for recently.

Your insurance score can vary from insurer to insurer, based on the company's claims history. Insurance companies won't reveal all of the details of what goes into their scores, but you can get a version of your insurance score from TrueCredit, available through TransUnion for $9.95. The site provides separate scores for auto and homeowners coverage, which weigh the factors a bit differently, plus advice for improving your insurance score.

Even though your insurer may use its own calculation, the general advice can help anyone improve his or her score. Because each insuance company uses it's own calculation, it is important to shop around occasionally.  You can often find a better deal if you look.

Improving your score can make a big difference in your auto insurance premiums. If you need help eliminating your debt, there are several options available to you.  The Solutions Specialists at Debt Relief can discuss your situation with you and help you find the best option to get out of debt fast!

Give Us a Call --->>>   1-877-492-4109

What is a SECURED CREDIT CARD?

A secured credit card is one on which you don’t have to make monthly payments. It doesn’t add to your debt because you have to load money onto the card before you are able to use it. The amount you place on the card is your available credit. It is not a debt that you incur, but it does give you peace of mind in knowing that you do have a credit card to use for emergencies or while on vacation.

You can obtain a secure credit card from your bank even if this bank will not approve a regular credit card for you because it is not the bank’s money that you are borrowing – it is YOUR MONEY.

How will using a secured credit card RAISE MY CREDIT SCORE?

Even though you don't have to qualify to get a secured credit card, the bank does report your use of the card to at least one of the three credit reporting agencies (TransUnion, Experian, or Equifax). This card doesn’t show up on your credit report as a secured card, but is seen as a positive item on your report. The fact that you are not carrying a balance on the card means that you don’t have any debt on the card and you have available credit to use for your needs. It's a Win Win!

If you do decide to use a secured credit card to help raise your credit score, be sure to read the FINE PRINT! There are fees associated with the use of the card, so it is important to find the one with the lowest fees, thus giving you more of your money to spend.

Also important to make sure that the issuer of the card reports to all three credit agencies. If not, it is possible that it may report to one where your credit score is seen as being in good standing and this won’t help you.

When you load money onto your account every month and make sure you have enough there to cover the fees. Most of the time, after you have been using the card for a period of time, the bank will see that you are responsible with credit card usage and will then transfer the card to one that you don’t have to pre-pay.   In the majority of cases, it will take about 6 months to a year for this to happen, which is about the same amount of time it takes for you to see any improvement in your credit score.

Key Take Aways:

1. A Secured Credit Card is a card that you get from your bank and "load" with money.
2. The bank will report your credit card usage to one or all of the three credit reporting agencies.
3. When you "load" money onto the card, be sure to put enough to cover what you plan to purchase AND the bank's fees.
4. After 6-12 months you should start to see an increase in your credit score and may be offered a regular credit card by the bank!

Already have too much debt? 

We can help with that too. 

Give us a call or click on the link below!

1-877-492-4109

Beware of credit repair scams! 

Many so-called Credit Repair companies make claims like:

• "We can remove bad loans, bankruptcies, judgments and liens and improve your credit score!"
• "We can erase bad credit!"
• "Bad credit history?  We can improve your credit score in 30 days!"


Sound a little too good to be true?

Credit Repair companies target consumers with bad credit histories or low credit scores promising to clean up or eliminate negative items on their credit report...FOR A FEE!

You may have received a call or email and wondered..."How did they get my name and information?"

The credit reporting agencies sell information to companies! 

Nice to know!

Anyway, the truth is, these companies cannot provide an improved credit report by using methods or tactics that you could not do yourself!

Step 1:

If you haven't done so already, request a FREE copy of your credit report from each of the 3 major credit reporting agencies:

• Equifax
• Experian
• TransUnion

You can receive your FREE report by going to www.annualcreditreport.com

Step 2:

If you find inaccuracies and/or errors, you will dispute them by:

Write a simple dispute letter stating the dispute and provide copies of documents that support your dispute:

• Paid off statements
• Settlement agreement with copy of processed check
• copy of the error on the credit report

Step 3:

Mail your letter with supporting documents to the credit reporting agencies by CERTIFIED MAIL, return receipt requested so that you can document that the agency received it.

For addresses of the three major credit agencies, click here.

Credit reporting agencies must investigate your claims within 30 days.

They must forward all the relevant data that you provided to the company to the company.

Once the information provider receives notice of a dispute from the consumer reporting agency, it is required to:

• investigate
• review the relevant information
• report the results back to the credit reporting agency

If the investigation proves that your dispute is true, the information provider has to notify the credit reporting agency so that they can correct it in your file.

As you can see, this may take some time and effort, but you could certainly save yourself several hundred dollars by doing-it-yourself.

For a complete report from the Federal Trade commission, click below:  Credit Repair: How to Help Yourself

It is important to know what is not a factor in a credit score as well as what is included!

We get asked this all the time and it is important that you understand not only what is in your credit score, but also what is not.

According to FICO, they consider several different factors when to determine your credit score.  But, they do not consider:

Race, color, religion, national origin, sex or marital status.

This would also not include whether or not you receive public assistance or if you exercise your rights under the Consumer Credit Privacy Act.

Your occupation, title, employer or salary as well as the date you were employed or employment history.

But, although this may not be a factor in determining your credit score, lenders may consider this information.

Your age.

Even though some types of scores may consider your age, FICO scores do not.

Where you live.

Any items reported as child/family support obligations or rental agreements.

Certain types of inquiries or requests for your credit report.

There is a misunderstanding that if you make a personal request for your credit report that it will have a negative impact on your score.  NOT TRUE!

Your score does not count "promotional inquiries"or requests made by lenders in order to make you a "pre-approved" credit offer.

If a current lender makes an "administrative inquiry" - requests made by lenders to review your account with them, this is not a factor of your credit score.

Nor are inquiries from your employer.

For a more complete explanation about the effects of inquiries about your credit report, click here.

If you have enrolled in a credit counseling or debt management program of any kind. 

That's good news if you are enrolled in a DEBT MANAGEMENT PROGRAM OR If you are considering a DEBT MANAGEMENT PROGRAM.