My Way Credit

Throughout this economic downturn, people in lower-income (or “subprime”) brackets have been catching a lot of flack for buying houses they could not afford.  But now the Los Angeles Times reports that even prime mortgage borrowers may be in trouble. A record high proportion of prime mortgages – 3.07 percent nationwide – were in foreclosure, or at least 60 days late on payment, during the second quarter of 2008, far ahead of the old record of 1.97 percent set in 1985, according to the Mortgage Bankers Association.

Some states fared even worse than the nationwide percentage. The foreclosure rate among prime mortgages in California is 4.15 percent, nearly double its record peaks during recessions in the 1980s and '90s.

"I've been a homeowner a long time – the last 10 years as a single mother – and I never missed a payment. Now look at me,” Judy Jones, a former code enforcer for the city of Corona, California, told the Los Angeles Times recently after being laid off and failing to make payments on her prime mortgage. “And it could be you – any middle-class person who goes to work today could be walking out the door of a foreclosed house in a couple of months.”

Foreclosures are up for all other types of housing-related loans, too, the Mortgage Bankers Association found (pdf). Commercial and multi-family foreclosure rates topped 2 percent for the first time since March 2002. Construction loans were hit hardest, skyrocketing from a foreclosure rate of close to zero to over 7 percent in just three months this spring.

Instead of multi-billion-dollar bailouts for big financial services companies, some experts now are suggesting that direct help to homeowners may be the best way to solve the crisis.

"The only practical help in sight is to get as many of these potential foreclosures modified as possible, so they come off the market," said Stephen Levy, director of the Center for the Continuing Study of the California Economy, a private research company.

If you’re afraid you might fall behind on your mortgage payments, talk to your bank as soon as possible about the possibility of refinancing. Some banks are refusing to refinance until economic conditions stabilize, but others are being more helpful.

Earlier in the year, I predicted that credit cards would be one of the last financial segments impacted by the credit crisis. It is traditionally such a stable business model, it didn't seem like they would be able to avoid most of the issues faced by mortgage lenders.

Now, months and many bank failures later, we're seeing a lot negative financial reports and strange behavior from the credit card industry.  Things I would have never imagined them doing. Here's what we've seen and heard from the credit card front lines:

1. Wild interest rate increases: Okay, this one isn't that surprising on the surface. Credit card companies always like to increase rates. But increasing rates by 10-20% on good account holders at a time that fed rates are plummeting? And increasing rates across the board on super-prime credit accounts?
2. Credit limit decreases: If you had told me any credit expert that they'd be doing this a year ago, we would have thought you were crazy. Credit card companies used to thrive on offering increasingly high credit limits. But those days are over now and being replaced by "balance chasing,"  where the limit is lowered each time you pay off your debt balances.  And it hurts the consumer's credit score to boot.
3. Canceling all direct mail: A couple of big credit card issuers have completely stopped their mail advertising programs. Are the days of receiving 4 or 5 pre-approved credit card offers in the mail each day over for good?
4. Strict underwriting criteria: Good luck getting a decent rate on a credit card unless you have perfect credit. Most credit card companies have made their acceptance criteria stricter and have also implemented "tiered" term offerings. You may apply for a card with a 11% APR, but get approved for an account with a 22% rate.
5. The return of universal default: We thought we were done with this baddie last year, now it's back with a vengeance. Credit card companies are especially wary of customers who are late on their mortgage payments.
6. Trigger happy account closures: Credit card companies are ready and willing to close your account at the first sign of trouble. One late payment? Closed. No activity this year? Closed. Car repossessed? Closed. It used to be that they never closed accounts unless specifically asked.

What should you do? Keep a close eye on your credit card accounts to make sure they're not changing. And be prepared to call your issuer to dispute a change that you want revoked. Also, dust off those old dormant accounts and use them once in a while to avoid closure.

Have you seen any other strange credit card company behavior recently? Share your story in the comments section below.

Emily Peters – Credit.com's personal finance expert and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.

Say Goodbye to Collectors

Credit repair is not hard. Take the time to learn your legal rights and you will see how easy it can be. Have you ever been bothered by a collector? Are there collections on your credit report? Let’s take a look at some powerful credit repair tools that can help you get collectors out of your life and off of your credit report. For real and forever.

Educate Yourself

The collection industry thrives on consumer ignorance. The less you know, the more money collectors make. A little credit repair education can save you thousands of dollars and free you from the fear of dealing with collectors. If you want to take control you need to know two things: 1) How statutes of limitation really work, and how you can use them to get collectors off of the phone and out of your life, and 2) How reporting period limits are so often violated, and what you can do to protect yourself and clean up your credit report. Let’s do some credit repair!

Credit Repair and Statutes of Limitation

Statutes of limitation (SOL) define the time limit legal action can be taken. In the case of a collection it defines the time limit that a collector can collect through the court system. Once the SOL has expired for a debt the collector cannot sue you or get a judgment. The SOL has nothing whatsoever to do with the reporting period limit for the derogatory information. And in most cases the SOL is significantly shorter than the reporting period limit. SOLs are state and debt type specific and can be easily located on the web. By the way, you need to check both the state in which you entered into the obligation and your current state of residence and apply the longer SOL. Let’s turn this info into credit repair gold.

Using Your Statute of Limitation

There are two credit repair advantages to be gained from understanding the SOL. If a collector contacts you about a debt after the SOL has expired you can tell them to stop bothering you with no fear of repercussion. Per the Fair Debt Collection Practices Act you can send a Cease Communication Letter and they are not allowed to contact you again. As a point of fact, you can send a Cease Communication Letter prior to the expiration of the SOL, but there is some risk that you would trigger a lawsuit, so do your homework before taking action. In addition, should you decide to negotiate the balance, you will be in the driver’s seat; once the collector understands you know your rights they should be grateful that you are offering them anything!

Credit Repair, Collections, and Your Credit Report

Let’s move on to the next phase of your credit repair assault against collections, understanding credit reporting limits. This is interesting and can pay quick dividends. Collectors regularly buy and sell debt; it’s the way the industry works. Most people are not aware that collectors are supposed to withdraw reporting as soon as they sell a debt. Unfortunately, they rarely do, and the darn collections linger for years dragging down your scores. Fortunately, a little credit repair will do the trick. If you dispute a collection that has been sold to another collector it will be removed.

The Credit Reporting Clock

But there is more to know about reporting period limits and collections. Many people are under the impression that derogatory information can stay on their credit report for seven years from the initial reporting date. This is not accurate and can needlessly depress your credit scores for many years. The reporting period clock starts on date of the original default with the original creditor. Collectors cannot reset the reporting period start date. Collectors have nothing to do with setting reporting periods. Don’t make the mistake of thinking a collection can report for seven years from the date it showed up! Figure out the original default date, which was the first time you missed a scheduled payment in the sequence that led to the charge-off or collection status, and count forward seven years and 180 days. This is the date it should fall off.

Get Credit Repair Help

There is credit repair help available. If you don’t have the time or inclination to figure all of this out for yourself just hire a reputable credit repair professional. It’s your credit and it’s important. Take the time to do it right and you will get the results you desire. Good luck!

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