Free Credit/Security Freezes All 3 Bureaus + Free Unfreezing

Thanks to a new federal law – the Economic Growth, Regulatory Relief, and Consumer Protection Act – consumers will be able to contact each of the three major credit reporting agencies and direct them to place a free freeze on the consumer’s credit file. By restricting access, a credit freeze makes it harder for identity thieves to open new accounts in consumers’ names.

Not only will it be free for consumers to freeze their credit, but they can lift that freeze for free, too. And the law requires the credit reporting agencies to do it in a hurry. If a consumer asks for a freeze online or by phone, the credit reporting agency has to put the freeze in place no later than the next business day. If the consumer wants to lift the freeze…that has to happen within an hour.

This new law is effective September 21, 2018. Click here for more.

The New York Times published good article on the subject. “Freezing Credit Will Now Be Free. Here’s Why You Should Go for It.” https://nyti.ms/2Mw01rU

Financially Speaking™ James Spray RMLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 | August 16, 2018 | Updated September 16, 2018

Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only. You may use this information in whole and not in part providing you give full attribution to James Spray.

The State of Lending: Debt Settlement | Center for Responsible Lending

Debt settlement companies offer the promise of settling a consumer’s debt for a fraction of what they owe. The idea is simple: debt settlement companies offer to negotiate down the outstanding debt (usually from credit cards) owed to a more manageable amount so that a consumer can become debt free. Unfortunately debt settlement carries significant risks that may result in consumers becoming even worse off.

Debt settlement is inherently a risky venture: in order to enroll into debt settlement programs, consumers are required to default on their debt which often results in fees, increased interest rates, and sometimes even lawsuits from creditors. Even after assuming all this risk, consumers are offered no guarantees; in fact, some creditors refuse to negotiate with debt settlement companies at all. Even if a settlement is reached, a consumer unable to keep up with the new settlement arrangement risks falling back into default – and now without the fees paid to the debt settlement company for negotiating the agreement. CRL finds that consumers must settle at least two-thirds of the debt they enroll in a debt settlement program to benefit, a result that many will not achieve.

This chapter examines the debt settlement industry, the risks to consumers, and recommends actions at both the federal and state levels to reduce the potential harm to consumers.

The chapter finds:

• Debt settlement is a risky strategy for debt reduction – and often leaves consumers more financially vulnerable.

• Consumers must settle two-thirds of their debt to be better off than they were before – and many consumers are unlikely to reach that level of success.

• Strong state and federal laws could curb risks associated with debt settlement.

Read Our Debt Settlement Chapter

Source: The State of Lending: Debt Settlement | Center for Responsible Lending

New Credit After Chapter 7 Bankruptcy

New Credit After Chapter 7 Bankruptcy

This post is written specifically for those who’ve recently been granted a Discharge from a Chapter 7 Bankruptcy. Chapter 7 is type of bankruptcy where the debtor does not make periodic payments to a bankruptcy trustee for 3 to 5 years.

The first step is to establish new credit in a strategic manner. Of course, you must also use your new credit in a responsible manner. In some cases, it is necessary to get your credit reports corrected to establish new credit. We’ll address both steps below.

Step One

First, when establishing new credit. Ignore well-meaning advice to get a $300/500 secured credit card from just any bank that will open an account for you. Start with joining a credit union. With most credit unions, there are no fees. Also, there are no annual fees and no-cost to use many ATMs all over the USA. Take a moment and read my post on credit unions.

In searching for the credit union (CU) to be the fit, do your homework. Call or stop in and ask about secured credit cards (this will lead you to someone that can answer or can get answers to your questions).

Now that you have found your CU, open your Share (savings) account. Save $1,000.00 or more. Secure this savings against a Visa or MasterCard issued by your credit union. To build good and excellent credit scores, use no more than 20% of your credit limit. Ever. For example, on your $1,000.00 credit limit, never have more than $200.00 in use. For best results, payoff the balance monthly. Your higher credit scores get you rewarded with lower interest rates on home and auto loans, insurance, credit cards and better employment opportunities.

Most credit unions will offer an unsecured card after you have established your good credit management practices for one-year. At this time, your savings securing your card will be released and another card issued. Your credit history will follow the new account.

Next, open 2 or 3 lower limit credit card or other revolving accounts (department stores, Internet stores, gas cards, etc.). The key is to have 3 to 4 revolving accounts open and in use occasionally. Do know that credit is a use it or lose it commodity.

On selecting the credit accounts, don’t bother applying to any creditors which were listed in your bankruptcy. Perform a Google Search such as this: “secured credit card + bankruptcy”. In your screening process, avoid those with an annual fee.

After about 9-12 months of opening the accounts as above discussed and using them as above discussed, you should have actual lending scores (FICO^® Scores) in the 700-720 range. These techniques have helped many clients over several decades.

Step two

Not everyone will need to take step two. All should read the info in step two.

In order to build new credit after bankruptcy, you may need to get corrections made to one or more of your three credit reports to reflect only accurate information. By accurate information what we mean is to make sure that all your bankrupted accounts reflect a zero-balance due.

Understand that a bankruptcy discharge does not remove your previous credit history from your credit reports. Time does. Seven years from the date of last activity (last use or last payment), the account will be removed from your credit report.

Keep in mind that the older a negative item on your credit report is the less it counts against your credit score. Also, the longer you have information reporting on your credit report, the better it counts for your credit history which results in a better credit score.

As a rule of thumb, by the time the case is Discharged, several months following the filing of the bankruptcy case, most creditors will have reported the accounts as included in bankruptcy. In some instances, a creditor fails to update their record with the credit reporting agencies (CRA).

So, in these instances, let’s talk about getting the incorrect items corrected. Often, the dispute process is neither quick or easy. Understand the CRAs are not your friends. Use caution with what you say or write to a CRA. For specifics on how to dispute information on your credit reports, I suggest you read my blog titled: Credit Repair/Dispute Basics.

A word on entering comments to clarify some situation or another; such comments do not do anything positive for your credit scores or your credit history. It is of no benefit to you to make comments. Everything you say can and will be used against you. This is one of those times to consider the Miranda Warning along with the idiom less is more. When and only if necessary, you may address individual items as requested by your loan officer for an underwriter. Open or unresolved disputes on your credit report(s) can keep you from gaining credit approval.

To begin correcting your reports, you need to get a copy of each of your credit reports. There are three credit reporting agencies: TransUnion, Equifax and Experian. You can get a copy of your three credit reports once a year for free via the Official Site authorized by Federal law: http://www.annualcreditreport.com. It does you no good to only review one or two reports. Review all three of them annually.

For mortgage approval (purchase or refinance), two (2) years following your Discharge, you will be eligible to apply for an FHA, VA or Rural mortgage loan. Four (4) years following your Discharge, you will be eligible to apply for a conventional mortgage loan.

Contact me below or via Quora with specific questions.

Success!

Financially Speaking™ James Spray RMLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 |April 6, 2018 | Copyright 2018

Notice: The information on this blog is opinion and information. While I have made every effort to post and link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct for your situation. This information is not legal advice and is for guidance only. You may reproduce this information in whole and not in part, providing you give full attribution to James Spray.

Changes to Credit Reporting

Credit Reporting Changes – Effective by June 8, 2018

Pursuant to a 2015 settlement between the New York Attorney General and the three credit reporting agencies, important changes are on the way to consumer credit reports.  An additional agreement between the three credit reporting agencies and another 31 state attorneys general ensure the changes will be nationwide. The changes are being made in three phases with the most significant and final phase which must be implemented by June 8, 2018.

The most momentous impact for the largest number of consumers concern medical collections:

• The credit bureaus – Experian, Trans Union and Equifax must reject any report of a collection that is not at least 180 days old. Thus, giving the insurance company or consumer time to pay the bill before it is reported as a collection account.
• Medical collections which are paid, or which are being paid through insurance will be removed or suppressed from credit reports.
• Collection accounts which have not been updated on the report for six months must be removed or not factored into the scores.
• The credit reporting agencies will remove any collection that did not arise from a contract or agreement to pay by the consumer. This includes, among other items, collections for traffic and parking tickets or library fines.

This will have a substantial impact on a consumer’s credit scores. Any collection account will negatively impact a consumer’s credit score by at least 100 points. Not having those collections factored in or having them removed provides opportunities for many consumers that could not previously qualify for home or vehicle loans as well as credit cards. This will also help consumers obtain lower insurance premiums, allow for greater employment opportunities* and possibly even better romantic matches.

Authorized user(AU) accounts are also affected. The credit bureaus will not allow AU accounts to be reported unless the date of birth of the AU is provided by the creditor. So, going forward, anyone adding an AU to their credit cards will need to supply the user’s date of birth before it will be reported on their credit report.

The bureaus must now communicate with each other regarding mixed files. If one of the credit reporting agencies receives a dispute from a consumer that their file is mixed, the credit bureaus must now use specially trained staff to communicate and globally correct the problem.

The credit reporting agencies can no longer reject a consumer’s second dispute of any account because they had a previous dispute of the account in the last three years. This does not apply to disputes made by credit repair organizations (CRO) on the behalf of a consumer. CROs are infamous for entering multiple disputes for consumers on the same accounts monthly.  All but the first dispute made by a CRO will be rejected.

All changes will be implemented on all scoring models and must be in place by June 8, 2018. These changes are long overdue and will have positive impact on thousands of consumer reports.

Observation from Realtor.com August 15, 2018: “…the [credit bureaus] agreed to remove some non-loan related items that were sent to collection firms, such as gym memberships, library fines, and traffic tickets. They also agreed to strike medical-debt collections that have been paid by a patient’s insurance company.”

*Colorado prohibits the use of credit reports in determining employment eligibility with certain exceptions.

UPDATE from the NY Federal Reserve

A Cleanup, Not a Purge
All in all, the changes in credit reporting prompted by the National Consumer Assistance Plan have resulted in an $11 billion reduction in the collections accounts balances being reported on credit reports. A total of 8 million people had collections accounts completely removed from their credit report. However, collections accounts do indeed align with other negative events and the cleanup of collections accounts had the largest impact on the borrowers with the lowest scores. These borrowers will certainly benefit in the long run from the cleanup of their credit reports, since higher scores are associated with better access to credit, to the job market, and even to the rental housing market. But the immediate impact of the removal of collections will be muted if the beneficiary’s credit record continues to be tarnished with other negative information.  Click here for the full report.

Image attribution

Financially Speaking™ James Spray RMLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 | February 19, 2018 | Update September 12, 2018 | Copyright 2018

Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only. You may use this information in whole and not in part providing you give full attribution to James Spray.

148,000,000 American ID’s at Risk – 9th UPDATE 02/10/2020

Credit Bureau Breached – 143,000,000 American ID’s at Risk – Use The Below Links

Equifax, one of the major credit reporting agencies in the United States discovered their security systems have been breached.

Social Security, Driver License, Dates of Birth, Addresses and other personal information has been stolen.

This effects about half the population of the USA.

See if your personal information is potentially impacted. Schedule now to see if your ID has been compromised. There is no cost to you. Register now, there is a lag time. Many others are also registering.

https://www.equifaxsecurity2017.com

Although it is a huge pain in the posterior (both to implement and to deal with when you apply for credit) I am now placing a freeze on my credit, too, with each of the four credit bureaus.

Equifax Freeze Link

TransUnion Credit Freeze

Experian Credit Freeze

Innovis

I have also frozen access to ChexSystems which is used by a majority of financial institutions when opening a checking account and by most credit unions upon joining. For good measure I have also frozen SageStream which is used by retailers, wireless phone and credit card providers.

The downside is having to remove the freeze whenever you wish to apply for new credit, open a new account with a financial institution, obtain insurance or in some cases get a new job. Another downside is having to pay to release the freeze for a specific purpose or to have it removed. And there are the new PIN numbers to keep safe. Aaarg.

It is actually rather easy to set up a freeze on your credit files with the three bureaus. I don’t think this can be said for the “free” credit report/free credit score sites. Frankly, I don’t think you can do anything to protect your information once it is provided to the “free” service provider.

Frankly, if Equifax cannot keep my information secure, I am not about to provide my personal information to sites that offer free credit and free scores. I have never forgotten what Robert Heinlein wrote in 1966: TANSTAFFL.

~~~~~~~~~~~~~

UPDATE: September 11, 2017

The following information was provided to me this morning by EQUIFAX pursuant to my registration to determine whether my ID had been compromised.

Cybersecurity Incident & Important Consumer Information

• Consumer Notice
• FAQs
• Potential Impact
• Enroll
• TrustedID Premier
• Contact Us

A Progress Update for Consumers

September 11, 2017

We are committed to keeping consumers updated on the steps we are taking to provide them with the support they need and address any issues they are facing in response to this incident. We recognize that some consumers continue to face challenges and in response we have made the following updates:

1) Adjusted our PIN Generation for Security Freezes
We understand and appreciate that consumers have questions about how a PIN is currently generated for a consumer initiating an Equifax security freeze solution. All consumers placing a security freeze will be provided a randomly generated PIN.

2) Call Center Support
When we recognized that Hurricane Irma could impact some of our call center wait times, we arranged to ramp up agents quickly to replace agents impacted by the storm and updated our website to make consumers aware of the situation.

3) Clarification Regarding Automatic Sign-Up to TrustedID Premier
We are not requesting consumers’ credit card information when they sign up for the free credit file monitoring and identity theft protection we are offering to all U.S. consumers. Consumers who sign up for TrustedID Premier will not be automatically enrolled or charged after the conclusion of the complimentary year of TrustedID Premier.

4) Obvious Link from Equifax.com
To make it easier for consumers to find the website dedicated to providing information about this incident, we have reconfigured our website, www.equifax.com, to feature the link more prominently.

5) Adjusted the TrustedID Premier and Clarified Equifax.com
We’ve added an FAQ to our website to confirm that enrolling in the free credit file monitoring and identity theft protection that we are offering as part of this cybersecurity incident does not waive any rights to take legal action. We removed that language from the Terms of Use on the website, http://www.equifaxsecurity2017.com. The Terms of Use on www.equifax.com do not apply to the TrustedID Premier product being offered to consumers as a result of the cybersecurity incident.

We are listening to issues consumers have experienced and their suggestions. These are helping to further inform our actions, and we are now sharing regular updates on this website. Thank you for your continued patience and feedback as we continue to improve this process.

Following are the snips I gathered while enrolling in the EQUIFAX Trusted ID this AM.

My ID has been impacted

For better or worse, this is what it is.

UPDATE: Here is an article from Mawlwarebytes, published on September 14, 2017, which offers additional insights into identity protection: Equifax aftermath: How to protect against identity theft 

UPDATE: 10/3/2017: Here is an article from HousingWire updating (increasing) the number of consumer files breached: EQUIFAX reveals data breach bigger than first thought. Fret not, Equifax won the NO BID contract to protect all IRS files from being hacked. Seriously. I can’t make this up. For more info you may read this from NPR.

Never too late to join the party, the FTC weighs in as of December 13, 2017 with this post: Fraud Alert, Freeze or Lock after Equifax? FAQs

UPDATE: February 5, 2018 – “The Trump administration has chosen to protect Equifax while denying Americans justice and accountability.”

February 6, 2018 – U.S. Treasury Secretary Steven Mnuchin on Tuesday said he wants to know how the Consumer Financial Protection Bureau is handling a probe into a hack of credit bureau Equifax Inc (EFX.N) after a report that the agency’s chief has pulled back from investigating the matter. Treasury’s Mnuchin says he wants answers on Equifax breach

February 6, 2018 – Consumer Affairs – Report claims CFPB is backing away from Equifax probe – Sources say the consumer agency shows little interest in the agency’s 2017 data breach

February 8, 2018 – Democratic senators demand answers on CFPB’s stalled Equifax data breach investigation

February 22, 2018 – Specifically, the [House] Democrats want Equifax to provide at least three years of credit protection and identity theft services to the breach victims, rather than the one year Equifax is currently providing.

UPDATE: March 1, 2018 – Oh Joy! <insert sarcasm font> BREAKING NEWS – Equifax reveals 2.4 million more people were victims of data breach Equifax revealed Thursday that an additional 2.4 million people are victims of the company’s 2017 data breach. Initially, the company said the personal information of approximately 143 million people was stolen. Now, it turns out that the number of victims is actually closer to 148 million. Click the headline to read more. Sadly,  Trump’s Budget Director, Mick Mulvaney, a/k/ the Dual-Hatted Acting Director of the CFPB will do nothing to help/direct Equifax protect our private information.

March 1, 2018 – Equifax’s bottom line not dented by data breach, profits rose 20% in 2017 – Net income up 40% in fourth quarter

UPDATE: May 11, 2018 – Equifax reveals how much information was really exposed in data breach – How Bad Was It? Bad.

The credit agency did not reveal any new, previously unknown victims of the breach, but it did detail the types of identifiable information, and how much of it, that was left exposed because of the breach.

In its letter, Equifax said that the names and dates of birth for approximately 146.6 million people were exposed, as well as 145.5 million Social Security numbers, the address information for 99 million people, the gender data for 27.3 million people, 20.3 million consumers’ phone numbers, 17.6 million driver’s license numbers, 1.8 million email addresses, 209,000 payment card numbers and expiration dates, 97,500 tax ID numbers, and the state information for 27,000 driver’s licenses. See the chart below for a full breakdown.

UPDATE: September 2, 2018 – Equifax extended their TrustedID program, which was offered for one year as amends for the egregious security breach they allowed, indefinitely. Below is a copy of  the email they just sent.

UUDATE: November 4, 2018 – “We recently sent you an email advising you that, until further notice, we would be extending the free TrustedID^® Premier subscription you enrolled in following the September 7, 2017 cybersecurity incident. We are now pleased to let you know that Equifax has chosen Experian^®, one of the three nationwide credit bureaus, to provide you with an additional year of free credit monitoring service. This extension is at no cost to you , and you will not be asked to provide a credit card number or other payment information. You have until January 31, 2019 to enroll in this extension of free credit monitoring through IDnotify™, a part of Experian.

Your new product, IDnotify, includes key features for your protection similar to those included in TrustedID Premier:

• 3-Bureau Credit File Monitoring
• $1M Identity Theft Insurance
• Enhanced Internet Scanning for Social Security numbers as well as your email, phone, medical ID, passport, credit card and other personal information
• Experian CreditLock

No action is required from you at this time to take advantage of the extended coverage. If for any reason you do not want to receive this extension, please click here or on the button below within 14 days to opt out”

UPDATE: July 26, 2019 – Each of these publications discuss the Equifax Breach Settlement at some length:

Equifax To Pay Up To $700 Million In Data Breach Settlement – NPR

Equifax Just Got Fined Up To $700 Million For That Massive 2017 Hack – Forbes

Equifax Settlement: What’s In It for Consumers – Consumer Reports

Equifax Data Breach Settlement: How to Claim Your Benefits – FTC

Finally, to determine if you are eligible to file a claim click here to go to the Equifax Breach Administrator (this is not administered by Equifax).

UPDATE: February 10, 2020 – Equifax: US charges four Chinese military officers over huge hack

Image attribution(top)

Financially Speaking™ James Spray RMLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 | September 8, 2017 | Most recent update: February 10, 2020

Notice: The information on this blog is opinion and information. When a business is named, it is not due to commercial purposes as I do not accept or solicit compensation from any individual or entity which may be mentioned. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only. You may use this information in whole and not in part providing you give full attribution to James Spray.

 

Obsessives Have Cracked the Perfect FICO Credit Score of 850 – Bloomberg

Kudos to Suzanne Woolley for authoring an article which accurately portrays how one can improve their credit.

Source: Obsessives Have Cracked the Perfect FICO Credit Score of 850 – Bloomberg

Don’t Risk Your Credit Score In Retirement – WBRC FOX6 News – Birmingham, AL

Cancelling infrequently used credit cards may seem like a good strategy, but your credit score may be adversely affected. Adam Carroll, Founder and Chief Education Officer of National Financial Educators, explains: “When you have a long-standing trade line, which is what a credit card is considered on your credit report, and you cancel that card for whatever reason, your score will actually go down as a result because one of the main impacts on your credit score is the length of credit history.” A shorter credit history translates to higher risk in the eyes of lenders.

Sean McQuay, Credit and Banking Expert at NerdWallet, agrees but includes another reason to keep older cards, noting that closing a card account results in “decreasing your overall credit line, which basically signals that a bank trusts you less.”

In addition to decreasing your overall credit line, closing an infrequently used account raises your credit utilization your total credit in use compared to your cumulative credit line. High credit utilization suggests a greater chance of falling behind on payments and/or defaulting on debts.

To avoid these pitfalls, make periodic small purchases on all your open credit cards to keep them active and pay the balances in full at the end of each billing period. By keeping credit spending low, you can still address debts while getting the full benefits of your credit account.

It’s okay to concentrate most of your credit spending in one account to maximize rewards. Just use alternate accounts often enough to keep them from being closed for lack of activity.

Source: Don’t Risk Your Credit Score In Retirement – WBRC FOX6 News – Birmingham, AL

The Secrets To Building An Awesome Score

Mom never told you as she didn’t know either

The not so  Secret Formula

Use your credit cards properly to build an awesome FICO^© Score. An awesome score will give you the best advantage for the best rates on insurance, credit cards, vehicle and other installment loans and home loans. As well, having a great score will give you a distinct advantage for certain employment opportunities. Having a great score will also help you to screen potential long-term partners to determine the likelihood of a successful relationship. Let’s face it, having a great score means you keep your commitments.

By way of proper use, let’s explore what it is that is rewarded by the scoring system. Two cardinal rules are never exceed using 30% of your available credit on any card in any month. Ever. Never maximize the usage of your credit limit on any card. Ever. Better is to not exceed using 20% of your credit limit. For example, the credit limit is $1,000.00. Do not exceed $300 in use and better do not exceed $200 in use. This accounts for about a third of your total credit score.

For best results, pay off the balance monthly. In addition to never maximizing the usage of your credit limit, never exceed the limit. Ever. For your best advantage do not ever close a credit card. The aging of your credit profile is essential to having a great score. The longer you have good credit, the better for your credit history and as a result your credit score. This accounts for a little more than a third of your score. In this and the previous paragraph we have discussed that which makes up about sixty-five percent of your total credit score. Such is illustrated in the following pie chart.

At each opportunity you get, or at each opportunity you can make, increase the amount your available credit. Once your credit card issuer sees you are managing your account well, they will offer to increase your credit limits so long as you have the ability to repay. Don’t be shy, after about 6 months, contact your card issuer and ask when you may qualify for an increase.

Keep in mind that a single 30-day late payment will ding your credit score by 90-115 points. Boom! The time it takes to recover from this one 30-day late payment will take from one to three years depending on your score at the time.

If you wish to take the time, the author of this article captured the reality of building a perfect score.

With all things, including credit cards, TANSTAFFL applies. TANSTAFFL was a term coined by Robert Heinlein in his 1961 novel Stranger in a Strange Land. There Ain’t No Such Thing As A Free Lunch.

Image attribution

Financially Speaking™ James Spray RMLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 | June 24, 2016

Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only. You may use this information in whole and not in part providing you give full attribution to James Spray.

Romance and Credit Scores

In addition to getting the best employment and the lowest interest rate on everything financed, including credit cards, home and auto loans, the prime potential partners in the dating pool are quickly thinned of those with inferior credit.

This is clearly highlighted in a post made by the Credit Slips summary of a Washington Post article which examines the working paper recently published by the Federal Reserve titled Credit Scores and Committed Relationships.

Barron’s Market Watch recently published an article titled, Nearly 40% of Americans want to know your credit score before dating. In part, this phenomena was summarized by University of Kansas Communications Professor Jeffrey Hall who stated,

By showing an interest in these three digits, people are probably being smart rather than shallow, says Jeffrey Hall, associate professor of communications at the University of Kansas. “Finances, education, and job prospects all factor into the value of a potential mate,” he says. “Assuming that people can actually interpret a credit score meaningfully, it makes sense they would think a credit score is useful in evaluating mate value.”

“…In fact, the higher your credit score, the less likely you’ll separate from your partner — and a lower score often means you’ll be less lucky in love, researchers at the Federal Reserve Board, the Brookings Institution and UCLA recently concluded.”

Your credit score has become such a popular character-meter that there are dating services based on them. A 2015 academic study found that “quality in credit scores, measured at the time of relationship formation, are highly predictive of subsequent separations.” The research suggested “credit scores reveal an individual’s relationship skill and level of commitment.” How More Americans Are Getting a Perfect Credit Score Bloomberg Suzanne Woolley, August 14, 2017.

I think it’s safe to predict that more and more people in the dating pool will become savvy to the benefit of checking one’s credit score before entertaining the possibility of a committed relationship.

ConsumerAffairs February 9, 2020: Improving your credit score might improve your love life “…Other nuggets from the survey reveal that four out of ten people — both men and women — say irresponsible spending is a bigger turnoff than bad breath. Forty-six percent of people would break up over irresponsible spending, the second biggest reason behind cheating.”

Image Attribution

Financially Speaking™ James Spray RMLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 | Published November 13, 2015 – Updated August 16, 2017 – Updated February 9, 2020

Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct for your situation. This information is not legal advice and is for guidance only. You may reproduce this information in whole and not in part, providing you give full attribution to James Spray.

Purchase or Refinance During a Chapter 13 Bankruptcy

Chapter 13 Plan

This post is written for folks currently in a Chapter 13 Plan. It is also helpful for those contemplating filing a Chapter 13 Bankruptcy Reorganization Plan. This post is also helpful for those recently Discharged from Chapter 13. A mortgage refinance or a home purchase, while still in a Chapter 13 bankruptcy, is possible; it is also a complicated financial and, legal transaction. To do this requires a highly specialized mortgage professional experienced with both FHA lending rules and Chapter 13 bankruptcy as well as local court rules.

The Chapter 13 Payment

One of the most important things to understand is the importance of on-time Chapter 13 Payments to the mortgage underwriting process. I strongly encourage you to read this: The Chapter 13 Payment. Your Chapter 13 Trustee payment is given the exact consideration as your housing (mortgage/rent) payment in underwriting. From the underwriting perspective, one thirty-day late payment of either the mortgage or Chapter 13 Trustee payment will sink your prospects of getting mortgage loan approval for at least a year. Mail your payment early or set your on-line bill pay or direct payment to the Trustee so that you always know your payment has had time to get to the Trustee’s office and be posted by the staff at that office. Too many times, on review of the Chapter 13 Payment history, we find a payment was posted on the 2nd day of the month. One day counts as a late payment. An experienced mortgage lender can help you check your Chapter 13 payment history in real time.

Mortgage Choices for Chapter 13 Debtors (purchase or refinance)

The only mortgages available, either for refinance or purchase, for those in a Chapter 13 Plan are those insured or guaranteed by the Federal government. These mortgages are either: insured by FHA,  guaranteed by VA or the USDA. Each

Any mortgage so long as it’s FHA, VA or USDA.

of these home loans are underwritten with the same guidelines as set forth in the FHA Handbook. How does a bankruptcy affect a borrower’s eligibility for an FHA mortgage? From the FHA Handbook:  “A Chapter 13 bankruptcy does not disqualify a borrower from obtaining an FHA mortgage provided the lender documents that one year of the payout period under the bankruptcy has elapsed and the borrower’s payment performance has been satisfactory (i.e., all required payments made on time). In addition, the borrower must receive permission from the court to enter into the mortgage transaction.*”  Most underwriters will consider the Chapter 13 Trustee’s approval as permission from the court.

Application to Incur New Debt

To get underwriting approval for a Chapter 13 Debtor to refinance the Chapter 13 Trustee (in Colorado) or the Judge must approve your application to incur new debt. Contact your attorney to determine how and when to best proceed, or not. There are situations when it may not be in your best interest to purchase or refinance while in Chapter 13. This is a process which you can only do with the advise and assistance of your attorney. Your attorney must prepare the financial statements to submit to the Trustee in order for authority to be granted for a lender to offer new credit. Your mortgage loan originator should be able to assist your attorney in completing the Application to Incur New Debt.

Mortgage Refinance After Chapter 13 Discharge?

Yes. One may refinance or purchase within 2 years following the Discharge. BUT, it is easier to get approved for a mortgage while still in Chapter 13. This is because, following Discharge, a manual underwrite is mandated. Few lenders are willing to take the risk of not having the safe harbor provided by Automated Underwriting. Begin reestablishing good credit as soon as your Chapter 13 Plan is confirmed and continue this discipline while your case is still open so by the time your Discharge enters, you have solidly reestablished good credit.

Two years following Discharge, with reestablished credit, one may qualify for a conventional or Qualified Residential Mortgages (QRM) to purchase or refinance a home loan.

Preliminary Requirements for Purchase or Refinance While in Chapter 13

• Twenty-four months of current housing payments with no 30-day late payments and, the likelihood of the income continuing for at least three years.
•  Two years IRS Returns showing your income is sufficient to pay the mortgage as well as your Chapter 13 payment and any debt not included in the bankruptcy payment.
• Minimum middle FICO Score of 620 . Most will need to practice what I’ve previously posted as FICO  101a, 101b and 101c for several months prior to making a successful application for mortgage credit.
• For anyone with a fear of having credit make time to read both Credit: Use It to Build It (Part 1) and Credit: Use It to Build It (Part 2).
• Begin rebuilding your credit as soon as your Chapter 13 Plan is Confirmed/Court Approved; this is when your property has been revested to you.
• The maximum limited-cash out loan to value on an FHA appraisal is presently 95% – Refinance.
• The minimum down payment is 3.5% of the purchase contract or appraised value whichever is less. – Purchase
• The maximum Debt to Income Ratio is 45%. This is pushing the envelope. While in Chapter 13, it is mandatory to have Court approval (in Colorado, the Trustee approval suffices) to obtain a mortgage.

There is more detail to this process than can reasonably be discussed herein but this is the essence of purchasing or refinancing while in Chapter 13.

*Reference: FHA Handbook 4000.1 II.A. 5.a.iii (H)(2)(3).

Disclaimer: This article does not represent that any of the information provided is approved by HUD or FHA or any US Government Agency.

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Financially Speaking™ James Spray, RMLO, CNE, FICO Pro |  CO LMO 100008715 | NMLS 257365 | November 1, 2010 – Revised May 2, 2018 | Copyright 2010-2018

Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only. You may use this information in whole and not in part providing you give full attribution to James Spray.