Would you risk the negative impact of strategically defaulting on a mortgage if you didn’t really have to?

About 17 percent of Americans who defaulted on their mortgages in the second quarter of 2010 did exactly that, according to a study by Experian.

“Strategic default” – choosing to stop paying on your mortgage even if you can afford the monthly payments – peaked at the end of 2008 during the height of the Great Recession. At that time, strategic defaults accounted for 20 percent of all mortgage defaults 60 or more days overdue, according to Experian.

And while the percentage of Americans taking this option has steadily declined since then, the credit risks for strategic defaulters remain unchanged.  Anyone considering this option needs to get their Free Credit Score, which is available with enrollment in freecreditscore.com.

“Not paying your mortgage will have a far-reaching, long-lasting impact on your ability to secure future credit, regardless of the reason for your default,” says Charles Chung, Experian’s president of Decision Analytics. “Experian’s study indicates that many strategic defaulters continue to faithfully pay on their other debts. Some even purchase other homes for better terms before selectively defaulting on their upside-down mortgage.”

If you owe more on your home than its current market value, you may feel tempted to walk away from a bad investment, even if you can afford to make the monthly mortgage payment.

When considering strategic default, you should keep several factors in mind:

• Defaulting on your mortgage is the second most damaging thing you can do to your credit, even if you continue to pay your other bills. Only bankruptcy will affect your credit score more adversely than foreclosure.
• Foreclosure remains on your credit report for seven years. During that time, securing other credit at reasonable terms and rates will be very difficult, if not impossible.
• Potential employers are looking at credit reports. In fact, 60 percent now check applicants’ credit reports, according to an article in the Washington Times. By impacting your credit, a strategic default may affect your ability to get a job.
• Last year, Fannie Mae, the government-controlled mortgage giant, said it would implement a policy to prohibit strategic defaulters from getting a new Fannie Mae-backed mortgage for seven years from the date of foreclosure.
• Finally, in some cases, the debt that foreclosure “erases” may be recorded as income, which means you will have to pay taxes on it.

“Some may see strategic default as a way to get out of paying a bad debt,” Chung says. “But its associated costs like a lower credit score, higher interest rates and less ability to secure future credits, can wipe out the financial benefit of no longer having a mortgage payment.”

To learn more about credit management, credit reports, credit scores and the factors that affect them, visit the Credit Center at RateNerd.com.

Strategic Mortgage Default – What You Need To Know is a post from: RateNerd - unadvertised deals from banks.

                          

Related posts:

1. Mortgage Rates at 30 Year Low – Do You Qualify?

With a little discipline, raising your credit score and keeping it high does not have to be difficult.

You probably know the importance of a high credit score, as many companies – from lenders to insurers to cell phone service providers – use it to evaluate your credit risk.

In today’s tough economy, keeping your credit score high is as important as ever, as your ability to secure a loan or refinance your home for a better mortgage depends on it.

Following are some tips for people who want to raise their credit scores:

• Don’t Be Late With Your Payments. When it comes to raising or maintaining your credit score, the most important thing you can do is pay all your bills on time. The “pay by” date is the date by which your payment must be received. When you’re paying your bills, be sure to allow sufficient time for mailing to avoid a late fee. You may want to consider other payment options, such as online payments or pre-authorized debit, which are fast and free. Plus, you save money on postage.

• Avoid Carrying a Balance. If you can pay your bills in full and avoid carrying balances on your credit cards, your credit score is likely to increase. High balances are bad for your credit score. Even if you pay more than the minimum and all of your bills on time, high utilization of credit is typically a sign of financial stress and may lower your credit score. If you must revolve your balances, keep them to a small amount of your available credit.

• Minimize Inquiries. When you apply for credit, the lender pulls your file. That’s called an inquiry and it will be recorded on your credit history. Too many inquiries within a short period of time may have a negative effect on your credit history and score. So if you’re planning for a big purchase, like a home or a car, keep excess inquiries off your credit history by not applying for other loans or opening up credit accounts while you’re in the process of shopping for the loan for that purchase. And when you’re shopping for that home or car loan, make all your applications within a two-week period. Then all the inquiries will count as one (as opposed to multiple inquiries), with only a five-point hit to your credit score.

Want to know more?  Here are some free resources to help you monitor and maintain your credit score:

Free Score Estimator – Just answer a few questions in the Score Estimator and you’ll get a pretty close approximation of your actual credit score.  The benefit is that its free, and you dont have to put in any personal information like your social security number or credit card numbers.

Your Credit Sucks – Get our popular free credit guide on how to build, repair and maintain your credit rating.

Spending Analyzer – Use this free interactive tool to see where your money is going and to then make adjustments.  Provided for free by Discover Bank.

3 Simple Ways to Raise Your Credit Score is a post from: RateNerd - unadvertised deals from banks.

                          

Use this promotion code to get a free shredder and 10% off of LifeLock Identity Theft Protection.

Shredding documents with credit card numbers, account numbers, full names, social security numbers etc can help prevent identity theft.

LifeLock is offering 10% off its service and a free shredder through August 31, 2010.  To take advantage of this promotion, click on this link for LifeLock and use the promotion code “shreddercj” at checkout. You must put in this code to get the free shredder.

LifeLock provides a proactive identity theft service, specializing in the prevention of identity theft rather than the reporting of it. LifeLock was founded in 2005 and is considered the industry leader.

How LifeLock Works

LifeLock helps protect your identity – even if your information falls into the wrong hands. LifeLock provides you early notification of identity threats, searches the web for the illegal selling of your information, helps cancel and replace the contents of your lost or stolen wallet, verifies change of address requests and much, much more.

Free Shredder And 10% Off LifeLock Identity Theft Protection – Daily Deal is a post from: RateNerd - unadvertised deals from banks.

                          

What it means to “walk away” from an upside-down mortgage

Owing more on your mortgage than your house is worth may seem like a bad investment. But the alternative – choosing to default on your mortgage even if you can afford the monthly payments – will take a significant toll on your credit rating.

“Strategically defaulting – deciding to stop paying your mortgage regardless of your ability to actually carry the debt – will have a far-reaching, long-lasting impact on your ability to secure future credit,” says Maxine Sweet, vice president of public education for global information services company Experian, one of the three large credit reporting companies that receive and update consumer credit histories which are scored to help predict risk. “It’s by no means a move to be undertaken lightly.”

About 355,000 borrowers strategically defaulted in the first half of 2009, according to research conducted as part of the Experian-Oliver Wyman Market Intelligence Reports. Interestingly, Experian and Oliver Wyman found that the homeowners most likely to strategically default were also those with the highest credit scores.

While it may seem like a good move to simply stop paying and walk away from a bad investment, keep several factors in mind when you consider strategic default:

• It’s very final. Strategic default will lead to foreclosure by the lender. Foreclosure will negatively impact your credit report and scores. In fact, only bankruptcy will affect your scores more adversely than foreclosure.
• The default will remain on your credit report for seven years. Since credit scores are based on information in your credit report, the foreclosure will greatly impact your credit scores during those seven years. Securing other credit at reasonable terms and rates will be very difficult, if not impossible, during that time.  Even the best credit repair firms can’t erase this one.
• Potential lenders aren’t the only ones looking at credit reports these days. Insurers, employers and even cell phone companies are considering the creditworthiness of those who want to do business with them. By impacting your credit report, a strategic default may affect your ability to get a job, secure insurance and enter into important service contracts.
• No more loans for you. Fannie Mae, the government-controlled mortgage giant, announced on June 23 policy changes that will make you ineligible for a new Fannie-Mae-backed mortgage if you walk away from a current mortgage that you actually could afford to pay.  The ineligibility will last for seven years from the date of foreclosure.
• You may owe taxes. Finally, in some cases, the debt that foreclosure “erases” may be recorded as income, which means you will have to pay taxes on it.

“Strategic default may seem like ‘walking away’ from a bad debt, but it’s really anything but,” Sweet says. “While you will no longer have to pay the actual debt, you’ll almost certainly ‘pay’ in other ways, in the form of lowered credit scores and a drastically curtailed ability to secure future credit for the next seven years. Higher interest rates and unfavorable terms could end up costing you more in the long run than continuing to pay on an upside-down mortgage.”

What should you do if you cant pay your mortgage?

If you are having trouble and need help to pay your mortgage, you first need to contact your loan servicer. This is the company that you make your monthly payments to, not always the same place you got your mortgage home loan. Have your loan number and property address ready when you call, along with any other important documentation you may have. When you call, you will need to give them a brief explanation of your current circumstances, recent income documents (such as pay stubs; benefit statements from Social Security, Disability, Retirement, or Public Assistance and unemployment benefits), and bank statements and tax returns for past 2 years. If you are self-employed, have your tax returns or a year-to-date Profit and Loss statement available for reference.  To see all your options, read our article on What To Do If You Need Help To Pay Your Mortgage.

To learn more about credit management, credit repair, credit reports, credit scores and the factors that affect them, visit the Credit section of RateNerd.com, or find local credit repair companies at ConsumerCreditGuide.org.

– Article Courtesy of ARAcontent

Strategic Mortgage Default’s Long Term Impact is a post from: RateNerd - unadvertised deals from banks.

                          

Get your free estimated credit score in 60 seconds, with no SSN, credit card or other personal information required.

“The Score Estimator” is a simple question and answer tool that provides an estimated credit score based on your answers. Simply answer 10 questions about your credit history, and the estimator will provide your score.

Despite advertising claims, there’s only one way to get your credit report for free — through the web site provided by the credit bureaus called AnnualCreditReport.com.   But what you don’t get is your credit score, that vital three-digit number which lenders and employers use to make decisions on.

So, before shelling out $7.95 – $19.99 to get your credit score, use The Score Estimator to get an accurate estimate of your true credit score.  And since you don’t have to put in any personal information like your social security number or credit card, you can get your estimated credit score anonymously and without risking identity theft or being hounded by email solicitations.

Once you get your estimated credit score, The Score Estimator will give you tips on what to do next if your score is below par (for example, Credit Balance is 30% of your total credit score. By paying down your credit card balances, you can easily change your balance ratio which will in turn change your credit score).

The Score Estimator looks at the five factors that make up your credit score:

• Credit Inquiries – 10%
• Type of Credit – 10%
• Credit History – 15%
• Credit Balances – 30%
• Payment History – 35%

Here are the questions the Score Estimator asks – once you fill these out it will take about 60 seconds to get your free estimated credit score.

1. How many credit cards do you currently have?
2. How long ago did you receive your first loan?
3. How many loans or credit cards have you applied for in the last year?
4. How recently have you opened a new loan or credit card?
5. How many of your loans/credit cards currently have a balance?
6. Besides any mortgage loans, what are your total balances on all other loans and credit cards combined?
7. When did you last miss a loan or credit card payment?
8. How many of your loans and/or credit cards are currently past due?
9. What percent of your total credit card limits do your credit card balances represent?
10. Have you gone through any of the following negative financial events in the last 10 years: bankruptcy, tax lien, foreclosure, repossession, or account referred to collection agency?

Click here to try The Score Estimator and get your free estimated credit score.

Free Credit Score With No Credit Card Or SSN – Daily Deal is a post from: RateNerd - unadvertised deals from banks.

                          

More than ever, you and your spouse need to be on the same page when it comes to money.

Getting married generates no shortage of opportunities to have important conversations with your spouse-to-be.

Will you raise your kids with a particular religion, will you both register with the same political party and how will you arrange reception seating to ensure your new mother-in-law is content with who is at her table and where she will sit?

Maybe you can postpone or even dodge altogether some of those talks, but at least one potentially challenging conversation can actually help ensure your marital bliss down the road – the talk about finances. Numerous polls and studies have shown that money is one of the top reasons couples fight, that it generates more stress in a marriage than almost any topic other than children and is a deciding factor in a large percentage of breakups.

Making sure you’re both on the same financial page before the wedding can help ensure that post “I do” money talks will be less divisive and stressful. And, the good news is that establishing a sound financial footing for the future is not nearly as complicated as you might fear.

Here are some of the money basics you should start with:

Start with a budget

If you’ve lived alone as a single for a while, you may already have your own budget, but now you are balancing income and expenses for two people. If you combine your income and expenses, you’ll need to combine your budgets too.

Write down everything each of you spends every month, taking into account housing, food, utilities, transportation, student loans, credit card balances, car payments, taxes and nonessential spending. Next, consider what your financial goals are – do you want to save for a down payment on a house? Are you content to rent and instead focus on paying down revolving debt? Once you determine what your shared goals are, you can adjust your budget accordingly, reducing spending on nonessential items and focusing on spending that moves you toward your overall financial goal.

Establish an emergency fund

One reason so many families and couples suffered greatly in this recession was because they had little or no emergency funds set aside. An emergency fund helps ensure that you and your partner are secure should something happen, like one of you loses a job or experiences a serious health issue. Agree on how much you want to save for “a rainy day;” experts advise you should save 5 to 10 percent of your income in a joint savings account.

Pay yourself first by having cash for your emergency fund directly withdrawn from your paycheck or checking account and deposited in your savings account. Aim to accrue three to six months of living expenses in your emergency fund.

Check your Credit Score

Make sure you both have a current copy of your credit report and have verified it for accuracy.  Now that you are married you can leverage each others credit score to borrow at lower rates depending on who has the lower score.  Get your free credit report here, and learn how to maintain good credit reading our free credit guide “Your Credit Sucks”.

Life insurance is crucial

If you’re young, single, in good health and debt-free, you may not need life insurance. For virtually everyone else, and especially newlyweds who have taken on new responsibilities and often new debt, life insurance is a must, experts agree. Life insurance can give you peace of mind that your loved ones will have sufficient money to take care of themselves should anything happen to you – and it’s affordable.

Make a plan – together

Write down your mutual financial goals. Your plan should be specific and realistic, listing the actual steps you will take to achieve your goals, including buying a home, starting a family, taking vacations and saving for retirement. Decide what additional investments you’ll make apart from your regular savings, such as maximizing your 401(k) or IRA contributions.

Be sure to include tracking your expense and income, as well as your tax burden, in your overall plan. Decide what tax filing status will be best for you, and consult a tax advisor if you’re not sure.

Reduce debt

Credit card debt is the top obstacle to a secure financial future and a major stressor in a marriage. Knowing your credit scores is essential; check them annually with all three major credit bureaus. Scrutinize your reports and correct any errors that could affect your ability to get a loan at a desirable interest rate in the future.

Money talk doesn’t have to be difficult. With a little strategy and the right attitude, you can build the financial security you need to secure a successful, happy life together.

– Article courtesy of ARAcontent

Money and Marriage: How to Talk About Money With Your Future Spouse is a post from: RateNerd - unadvertised deals from banks.

                          

The change from one year to the next presents the perfect opportunity to reassess our lives – where we’ve been, where we are and where we intend to go next.

With signs the economy is slowly recovering, many people are likely to re-examine their financial health again as 2009 gives way to 2010.

How is your financial health? If you’re not sure where to begin in assessing your fiscal well-being, here’s a brief checklist you can review to generate some good ideas.

Item No. 1 – Know your credit score and what’s on your report.

The recession has probably changed forever how we access, use and monitor credit. With more companies and organizations – from potential employers and medical offices to mortgage companies and auto lenders – looking to credit scores and reports to get an idea of your reliability, checking your report more than once a year is extremely important.

More Americans are turning to Web sites like FreeCreditReport.com to enroll in credit monitoring products, like Triple Advantage, that allow them to gain instant access to their free credit report and score, and includes daily monitoring of their credit reports at the three credit reporting agencies. Members receive notification alerts if key changes are detected on any of their credit reports so they can take immediate action, if necessary.  If you’re not sure where to start, check out our free credit guide on RateNerd.com, aptly titled “Your Credit Sucks”.

Item No. 2 – Build your savings.

It’s been widely reported that Americans are saving more in an effort to build a financial safety net for themselves and their families. This is one trend it pays to follow. Depending on your level of debt and monthly expenses, you should have savings to cover three or four months worth of bills in the event that you lose your income, experts say. And with job searches stretching over many months while unemployment rates remain high, some experts are advising you should have savings in the bank to cover more than six months of living expenses.

Item No. 3 – Reassess your mortgage.

With steady low mortgage rates and plenty of federal aid available to assist homeowners trapped in dangerous mortgages, it may be the right time for you to re-examine your mortgage. Are you in an adjustable rate mortgage that’s reset or is about to go to a much higher rate? Are you in a conventional mortgage that’s at a rate higher than what you might be able to find through refinancing? If you can lower your monthly payment, interest rate or the overall amount you’ll pay in interest for the life of the loan, it may be worth considering refinancing.

For free mortgage advice, check out the federal government Web sites www.USA.gov and www.HUD.gov. Before you consider refinancing, be sure to check your credit report and score, as both may affect whether you qualify to refinance your mortgage.

Item No. 4 – Keep track of your identity through credit monitoring

Monitoring your credit report can help you spot some of the most common types of identity theft, including credit card and loan fraud. Web sites like FreeCreditReport.com allow you to enroll in a credit monitoring product that checks your credit report every day and alerts you right away if key changes are detected. If no new activity appears, you’ll receive an “all clear” notice every month. Monitoring allows you to spot suspicious or fraudulent activity, like the appearance of accounts you didn’t open or unpaid credit card charges you didn’t make.

With a little introspection and examination of your current finances, you can decide what steps you need to take to prepare to greet 2010 fiscally fit and financially confident.

– Article courtesy of ARAcontent

Fiscal Fitness Tips for 2010 is a post from: RateNerd - unadvertised deals from banks.

                          

New Year’s resolutions for 2010: Lose weight, stop smoking, start exercising, get out of debt….

Year in and year out, getting out of debt consistently ranks among New Year’s top 10 resolutions. If your household is like many American households struggling with the recession, or worse, unemployment, getting out of debt will be close to the top of your list again for 2010.

Unfortunately, like other tough habits to break, it can be difficult to get out of debt after developing spending habits that have heavily relied on borrowing from credit cards and home equity loans.

While some households can slowly work their way out of debt, others that have been affected by a recent job loss may have no choice. If you’re among the more than 70 percent of American workers who are living paycheck to paycheck or must immediately cut expenses due to sudden unemployment, here are seven tips from FindLaw.com, one of the world’s leading online sources for legal information, on how you can get your new year off to a great start by reducing and eliminating your debt.

Write down your goal. Give power and energy to your goal to get out of debt by writing it down on a piece of paper and taping it to your refrigerator. Be clear. Write down how much you’re in debt, your goal date for being debt-free and your determination to cut expenses and stop needless spending. In addition, write down what you dream of achieving – buying your own home, or paying for a child’s college education – to give you and your family added purpose as to why it’s so important to get out of debt now.

Get help now. Some households need expert help to get out of debt and create new spending and saving behaviors. Seek the assistance of a debt management or credit counselor, available through many social service agencies. Try visiting the United Way at www.liveunited.org. If you are at risk of going into foreclosure, call (888) 995-HOPE for a toll-free foreclosure prevention hotline sponsored by NeighborWorks America and the Homeownership Preservation Foundation. Beware of any debt management companies that demand payment up front for their services, which is a telltale sign of a scam.

Call your creditors. Don’t wait for your creditors to call you. Call them to negotiate a new payment plan that you can realistically handle, including lower interest rates on your credit cards. It’s not uncommon for many Americans who are deeply in debt to be strapped with interest rates as high as 30 percent. Don’t be afraid to ask a creditor to settle a debt for a lower amount than what you currently owe.

Cut back to the essentials. Cut your expenses to the essentials – food, clothing, shelter and transportation. Stop eating out. Cut out the afternoon candy bar and soda pop and start drinking more water. Stop buying lottery tickets. Start taking the bus or the train to work or, better yet, start biking or walking to and from work. Drop cable and your cell phone.

Don’t skip these expenses. Depending upon the laws in your state, there may be some expenses that you must incur, such as auto and medical insurance, student loan payments, child support payments, license fees and, of course, paying local taxes as well as state and federal income taxes, according to FindLaw.com. Skip any of these expenses and you may wind up with much bigger legal headaches.

Go automatic. Have your employer automatically deposit your paycheck into your bank account. But don’t stop there. Arrange for the most essential bill payments – mortgage, electricity, heat and water – to be automatically withdrawn from your checking account. If you have a mortgage, escrow property taxes to ensure that they’re automatically paid.

Make more money. At some point, you might realize that you can’t cut any more expenses to make enough headway on your goal of getting out of debt. You might need to make more money by either taking on another job or selling some of your household items. If you take on a second job, look for an opportunity to work for a retailer that offers benefits to part-time workers such as discounts on merchandise and health care benefits. For more information about getting out of debt and avoiding bankruptcy, visitwww.findlaw.com.

– Article courtesy of ARAcontent

Get Out Of Debt In 2010 is a post from: RateNerd - unadvertised deals from banks.

                          

If you love your car, but not your payments, refinancing your auto loan may be right for you.

When you refinance your auto loan you can lower your interest rate, which lowers your monthly payment. You may also be able to lengthen the term of your auto loan, which lowers your payments even more. You may also be eligible to skip a payment when you refinance your auto loan.

Auto loan refinancing is one of the best kept secrets around for saving you money, but most people never thought of refinancing their car. Auto refinancing of your car is the same as home refinancing. When refinancing auto loans, you pay off your current auto loan with a refinanced auto loan from a different lender that has a lower APR.  This is good for you because refinancing auto loans makes your monthly car loan payments lower, and your interest rate drops, which can allow you to pay off the balance of your car loan even quicker.

If you got talked into a high APR car loan, or even got a decent rate on your car loan, you can refinance your auto loan down to a lower rate and save money. Lenders now offer popular auto refinancing loans. They pay off your current auto loan and you pay them back at your new lower APR rate. Your auto loan can be completely refinanced within days after you apply.  If you had bad credit when you originally got the auto loan, it especially makes sense to refinance it if your bad credit has improved.

You don’t need an appraisal to refinance your auto loan

Many people erroneously believe an appraisal is required to refinance their auto loan. Unlike your home, which does require an appraisal because it is based on your equity in the home, auto refinancing is based on how much you need to pay off your current auto loan, not on the value of the car.

Who should refinance their auto loans?  What APR can you refinance a car at?

Anyone who did not get a subsidized 0% to 3% APR auto loan from the car manufacturer should consider an auto loan refinance. Even if you got a decent APR auto loan, you should consider auto refinancing.  Use the 1% rule – after you buy your car, start watching the auto refinancing interest rates  looking for refinancing auto loan rates at least 1% less than your current car loan interest rate.  Use the calculators on auto refinance lender sites to see how much it saves you to refinance your car. You’ll be astounded at how much money you can save, especially if you do it in the early years of the auto loan.

Where to start an auto loan refinance

First make sure you know the current interest rate on your auto loan, and the outstanding balance.  You can get these numbers by calling your current auto loan lender, or the dealer.  Then use the auto loan refinance calculator at RoadLoans.com and see if the current rates on auto loans can beat what you have now.  If approved, an auto refinance loan can be completed within a week to ten days, and in some cases you may actually skip a payment depending on how the dates fall – check with the lender.

RoadLoans – The Best Way To Find A Better Auto Loan!

Auto Loan Refinancing To Lower Your Car Payment is a post from: RateNerd - unadvertised deals from banks.

                          

Breaking the credit card habit is very difficult. You can do it, however, with a healthy dose of dedication and perseverance.

Instructions on breaking the credit card habit

STEP 1: Discard credit card offers received in the mail. Shred or tear up the offers – to keep them from being used fraudulently by anyone else – and throw them out.

STEP 2: Discern between luxury and necessity, then cut back on credit card use for luxuries.

STEP 3: Commit to paying bills in full each month or to not using credit cards at all.

STEP 4: Throw out one credit card a month until you’re down to a couple of manageable ones.

STEP 5: Use cash instead of plastic.

Tips for managing your money

• If you stop using a credit card, it won’t be canceled unless you call the company and request cancellation.

• Debtors Anonymous has local chapters all over the country for addicted overspenders.

• Get a prepaid debit or prepaid credit card to help limit your spending, and build your credit.

• Keep credit cards somewhere other than in your wallet.

• Resist the temptation to pay off one credit card with another.

• Avoid withdrawing cash using your credit card. The transaction fees are high, and interest begins accruing immediately.

• Avoid using the checks that are issued by credit card companies. These checks are treated just like cash withdrawals, meaning there are transaction fees and high interest rates.

How to Break the Credit Card Habit is a post from: RateNerd - unadvertised deals from banks.