Credit Score - Karen's Perspective

The IRS is Liening Hard

When times are good and cash is flowing, Congress tends to pick on the IRS. Times, like now, when the government is out of money, Congress prefers to ignore any IRS pursuit of the public.

Look out, here comes the IRS.

To give you an idea of their added zeal, in 1999, the IRS issued 168,000 liens. Last year, in 2009, they issued 966,000. Your odds of hearing from the Internal Revenue Service have improved.

Here in Greensboro, Uncle Sam just put 20 more agents in the field. Timothy Geitner said the government is going to spend $250 million for tax compliance to generate $2 billion worth of revenue this year.

Right. According to the US Treasury, the IRS is going to spend $250 million going after people who have under-paid on their taxes and believe they will be able to raise an additional $2 billion from their efforts.

Publicly filed tax liens can destroy your credit as well as wreck careers and businesses. They can attach to your car, home, other real estate, even accounts receivables if you own a business. The IRS is ahead of anyone else who may file a lien against you.

Many employers use credit histories to screen applicants, even though credit reports are meant to determine credit-worthiness, not job-worthiness. Repossessions, collections, high credit card balances could cost you the job you want.

Recorded tax liens can seriously hinder your ability to earn a living, pay off your debts, even stay off government assistance! Once you do the right thing and pay off your tax lien, it can stay on your credit for 7 years.

This is not the news any of us wants to hear, however, our growing monetary deficit is pressuring the IRS to get even tougher.

If I can make a suggestion, pay your tax bills before you pay anything else.

04 / 07 / 2010
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Caution: Your credit score may sink when you sign up for mortgage relief

Credit Drop

According to the Washington Associated Press, if you sign up for the government’s mortgage assistance programs, there’s a chance you may get something you don’t expect – a lower credit score.

What are these mortgage assistance programs?

Home Affordable Refinance: This option can help you refinance into a more affordable mortgage if you’re paying your mortgage on time but you’re unable to refinance to a lower rate because you owe more on your mortgage than your home is currently worth.
Home Affordable Modification: This option can help you get mortgage payments you can afford if you’re delinquent in making your monthly mortgage payments, in the foreclosure process, or current on your payments but have recently experienced hardship and you are about to miss a payment.

There are many pitfalls showing up with these programs. One very important one is this, if you are struggling to continue making your payments on time so you sign up for a government loan modification program,your credit score could immediately reduce by as much as 100 points! What? Why?

Raising Your Credit Score after a Short Sale

How does a short sale affect your credit report and is there anything you can do about it?

It depends on how the bank reports it to the credit reporting agencies and.. they have lots of options. Sometimes, if you’re lucky, they don’t report it at all. Or, it could even show up as a foreclosure.

They can also report it as settled. This usually happens when an agreement has been reached between the lender and the borrower to repay only a portion of the original debt. This does hurt your credit but not as much as multiple delinquencies, a charge-off, a foreclosure or a bankruptcy. (A charge-off is when the lender transfers non-collectibles to a category such as bad debt or loss.)

If you do have a short sale with your lender, request that they report it as unrated. The beauty of unrated is that it is neither credit-positive nor credit-negative.

And it is possible for the lender, as a condition of the short sale, to remove any derogatory reporting that has already taken place! The lender may tell you that they don’t have the ability to do this, but they do and they can.

Write to your lender and demand that one of these scenarios be a condition for your short sale. If they don’t respond to you and the short sale is completed, you can then challenge any derogatory credit reporting that occurs and may be able to get it removed based on your letter.

As you can see, there are options if you’re facing foreclosure or a short sale and want to protect your credit status. The situation may not end up as bad as you think.

Any other ideas or experiences with credit and short sales?

09 / 22 / 2009
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What is a Short Sale?

photo by myhomesave

A short sale is when a mortgage is being sold “short” of what is owed, so the bank is taking a loss. The proceeds from the sale will be used to repay the lender. The lender then accepts the less-than-full repayment of the mortgage (and the borrower is released from the mortgage obligation) in order to avoid what would amount to larger losses for the lender if it were to foreclose on the mortgage.

Most short sales arise when a seller owes more on their house than they can sell it for. The owner of the home then attempts to make an arrangement with their lender to sell the house for less than is owed. Despite popular belief, a seller does not have to be behind on their mortgage to request a short sale. They just have to demonstrate that the house can’t be sold for what is owed.

Is attempting a short sale a good idea for you?

How to Increase Your Credit Score

What is a Credit Score?

Your credit score is a numeric expression of your creditworthiness and it’s used by everyone from lenders to landlords to show them the likelihood that you will repay your debts.

A FICO score is the most widely used credit scoring system. FICO is an acronym for Fair Isaac Corporation, the company that provides the credit score model to financial institutions. There are other providers of credit scoring systems as well.

Credit scores, on the scale assigned by FICO, range from 300 to 850. Who has an 850 credit score and what can you do to get one? Well, less than 1 percent of the population has a credit score above 800, so it’s very unlikely that you will ever have an 850 credit score. However, if your credit score is above 720, you will still receive the best rates on anything you apply for.