These are some of the most frequently asked questions relating to consumer credit. In this article, we will address all of these topics and more. Let’s start with the title question:

1. What is a credit score, exactly?

Your FICO credit score is a number between 300 and 850. The higher the number, the better your credit. This score is based on your financial history, which is documented in your credit reports. (The data from the report gets put through a scoring model, which produces a score).

Lenders and creditors use this information to assess risk. If you have a bad score, it means you’re more of a risk. So the lender might not be willing to lend you money. Or if they do, they might charge a lot of interest on the loan. On the other hand, a good credit score will open up a lot more financial doors for you.

2. What is my credit score right now?

There’s only one way to find this out. You have to request your scores (you have three of them) to find out where you stand. I recommend using the MyFICO website, because it’s the easiest way to go straight to the source. This website is owned by the company that designed the credit-scoring model used by most lenders. I’ve included a link to their website below.

What is my credit score? You can find out below:
Check your FICO credit score & get mortgage relief at myFICO

3. My score is [fill in the blank]. Is this good or bad?

Numbers are meaningless until you put them into perspective. So let’s talk about what makes a good, bad or excellent score. According to Experian (one of the three credit-reporting companies), the average credit score in the United States is about 692. At least, it was when I wrote this article. So when you find out what your score is, you’ll know where you stand relative to the national average. Here is some more information you’ll find helpful…

• Most mortgage lenders use 620 as the minimum acceptable score.
• To qualify for the best interest rates, you’ll probably need a 750 or higher.
• It’s possible to qualify for an FHA home loan with a score below 620.
• If you have a 580 or above, you could put as little as 3.5% down on the FHA loan.
• If your FICO number is below 580, you’ll have to put at least 10% for an FHA loan.

Now you’ll be able to answer two of the FAQs: What is my credit score, and where do I stand? Let’s talk about some of the other things you can control.

4. What can I do if my score is low?

You can do plenty. Many people think that a bad credit score will follow them for years, and that there’s not much they can do about it. While it’s true that negative entries can stay on your reports for up to seven years, there’s still plenty you can do to improve your score. This article explains some of the steps you can take to boost your FICO numbers within months (instead of years).

5. What is the benefit of having good credit when buying a home?

To recap, we have answered the common question: What is my credit score, and how can I control it? Let’s talk about the benefits of having good credit. We’ve touched on some of these things above, but I want to compile them in one place for you.

There are actually several benefits of having a good FICO number. For one thing, you’ll have a much easier time getting approved for a home loan. Secondly, you’ll probably qualify for a lower interest rate on the loan (compared to a person with a lower score). This can save you thousands of dollars over the term of the mortgage. So the two biggest benefits are (1) an easier qualification process and (2) less interest paid over the life of the loan.

What is my credit score and why does it matter? Now you know the answers to these common home-buying questions. If you would like to learn more about this subject, just click the “credit” link in the main menu above. You’ll find plenty of related information on the site. Good luck .

So, what’s on the slate for this month? Here are some of the changes the new credit card laws for 2010 will bring about:

• Say goodbye to double-cycle billing. This was when the card company charged you interest on your current balance, as well as the average daily balance from the previous billing period. In other words, they charged you twice for the same thing. Surprisingly, there were no laws against this in the past. But there are now. As of February 22, 2010, this practice is illegal.
• Some people have more than one balance, with a different interest rate on each one. In the past, if you paid anything above the minimum amount due, the card company would apply it to the balance with the lowest rate. In other words, they would keep you paying the higher rate longer. This is no longer allowed, after February 22. The new credit card laws for 2010 require them to put the extra amount toward the higher-interest balance.
• In the past, the card company could increase your interest rate on existing balances whenever they wanted to. But now, during the first year of a new account, there are only four scenarios where they can increase the rate. You can learn more about those scenarios in the 2010 consumer’s guide to new credit card laws (recommended reading).
• If your card issuer does raise your interest rate after the first year, the new / higher rate can only be applied to new purchases (after the first year). It cannot be applied retroactively to older purchases.
• Here’s one of my favorites. The card companies can no longer play games with the payment due date. In the past, they were fond of moving the due date from one month to the next, in order to charge more penalty fees for late payments. According to the new credit card laws for 2010, the due date must occur on the same day each month. Additionally, the cutoff time must 5 PM local time — i.e., no more early-morning cutoffs to screw people over.

This is just a snapshot of the new laws for 2010. If you’re a regular card user, you should familiarize yourself with all of them. The Home Buying Institute has published a helpful guide to all of these laws (going back to 2009). It’s written in plain English, and not legalese. So I recommend take a look. Here’s the link:
http://www.homebuyinginstitute.com/laws.html

How to Become a Mortgage Broker

1. First, you need to realize that you’ll undergo a dramatic transformation in character. In fact, you might not even recognize the person you’ve become after you receive your license. You will be willing to do or say anything to sell mortgages, even if it goes against your core beliefs and morals. But you can ease this transition just by understanding it will take place. It’s the unsuspecting souls who suffer the greatest shock during this process.
2. You need to disconnect yourself from the long-term financial success of your customers. What happens to them two, five or ten years down the road is simply not your concern. Your sole mission in life is to put them into a mortgage. After that, you collect your commission and sever all ties. No long-term risk, no messy concerns or connections. It’s the way of the mortgage broker, so you just need to accept it.
3. You need to understand the difference between affordability and approval. It doesn’t matter if your customers can afford their mortgage in the long term, as long as they can get approved for the loan. Remember, you are not concerned with their long-term success. You are concerned with selling another mortgage loan. This removes the burden of financial responsibility from your shoulders. It’s actually quite liberating. It’s another good reason to become a mortgage broker in the first place.
4. You must never develop any form of affection or empathy for your customers. Think of them as numbers, or as walking dollar signs. This will help you distance yourself from them. If you feel any kind of kinship with your customers, you will not be able to do your job properly. This is especially important when working with subprime borrowers, because you will likely put them into risky loans you would never give to a friend or family member. So stuff those feelings down deep, where they cannot influence your decisions. Remember, their long-term financial success is not your concern.
5. If you want to become a mortgage broker, you also need to distance yourself from the idea of “economic prudence.” If you want to sell a lot of loans, you will have to take certain steps that could actually weaken our economy in the long run. You can seek inspiration from the warriors of the mid to late 90s, who planted the seeds for a subprime mortgage crisis. These brokers were able to “turn off” their economic concerns and find loans for people who clearly were not qualified for them. As an aspiring mortgage broker, you would do well to model yourself after these trailblazers.

This article explains how to become a mortgage broker in the United States. It should be viewed as satire (though a realistic one at that). This article is a “celebration” of the reckless lending practices that have become all too common in the United States. We hope you found it both entertaining and informative.

First, the good news. Yes, it’s possible to get a mortgage loan after a foreclosure on your last home. Plenty of people have done it, and so can you. But it may take time for your credit score to recover from the damage inflicted by this process. That’s the biggest variable in all of this — the “how long” side of things.

Fortunately, there’s plenty you can do to rebuild your credit after going through a foreclosure process. And that’s the first step to getting another mortgage loan down the road.

How Foreclosure Affects Your Credit

Here are some things to keep in mind about your credit, and how it’s affected by a foreclosure filing:

• When a lender forecloses on you for failure to pay, you can be sure they’ll report it to the three credit-reporting bureaus. These are Experian, Equifax and TransUnion. This is the primary way a foreclosure can “haunt” you later on.
• By law, a foreclosure can only stay on your credit report for a period of up to seven years. But the impact will lessen over time. In other words, you can improve your credit score in the years after the foreclosure, up until the seven-year mark when it gets removed from your report.
• Your FICO credit score is one of the key factors considered by mortgage lenders, and it’s based on the information found within your credit reports. After foreclosure, your score will certainly take a hit. I can’t tell you how much it will decrease, but you can be sure that it will. That’s the initial damage. After that happens, you need to focus on increasing your score steadily over time.
• You can get a mortgage loan after foreclosure if you do the following things: (A) increase your FICO score to a level that’s acceptable by one or more lenders; (B) pay down your debts until they equal less than 30% of your gross monthly income; and (C) save up for a 20-percent down payment on your next loan.
• If you do the three things listed above, there’s a very good chance you’ll be able to get another mortgage loan within the next few years.

Related Reading - If you’ve already been foreclosed upon, and you’re looking for ways to rebuild your credit, check out the helpful articles below:

How to Rebuild Your Credit After Bankruptcy (similar scenario)
How to Qualify for a Mortgage Loan in 2010

I hope this takes some of the mystery out of the process. You probably won’t be able to get a home loan right after the foreclosure process. But if you follow the advice outlined in this article, the day will come eventually.

To answer this question, you have to identity your primary goal for refinancing. If you’re able to achieve that goal through the refi process, then it might make sense to move forward. I know that’s a bit vague, so let me clarify it for you. Here’s the general rule that makes the most sense to me:

When to Refinance Rule-of-Thumb — If you can lower your interest rate and/or shorten the term of the loan, and you’ll stay in the home long enough to recover the cost of refinancing, then it makes financial sense to pursue it. Generally speaking, of course.

Analyzing the Rule of Thumb

Now that we’ve established a basic rule of thumb for when you should refinance, let’s take a closer look at what it means. The most common reasons for refinancing are to (A) secure a lower interest rate and/or (B) shorten the term of the loan. If you can do one or both of these things, you might be on the right track. But the rule of thumb doesn’t stop there. Achieving one of these two goals is not enough. You must also stay in the home (and keep the loan) long enough to recoup your refinancing costs.

Here’s an example of our when to refinance rule-of-thumb in action. Let’s say I apply for refinancing to get a lower rate, and the lender tells me I qualify for a 5.5% interest rate. This is lower than my current rate of 6.5%, so at first glance the refi seems to make sense. I’ll lower my monthly payment by reducing the amount of interest on my payments. That’s one of the objectives stated in the rule of thumb above.

So I should move forward with the process, right? Not yet. We haven’t addressed the second part of our rule. I must stay in the home long enough to recoup the money I spent to refinance.

Let’s say that my total closing costs on the new loan (including an interest point that I paid) come to around $3,800. By getting a lower rate on the new loan, I’ll save money with a smaller payment each month. But I have to carry those savings long enough to surpass the $3,800 I paid out of pocket. If I keep the mortgage for many more years, I’ll eventually accomplish this. But if I turn around and sell the home in a few years, my accumulated savings will be less than what I paid. In other words, if I sell the home too soon, I won’t even reach the break-even point (much less achieve any long-term savings).

We’ve just seen the when to refinance rule-of-thumb in action. I’ve depicted a refinancing scenario where the homeowner was able to secure a lower interest rate on the mortgage. But the homeowner must then calculate those savings over the remaining term of the loan, and that variable depends on how long they’re going to keep the new loan. If we add in the amount paid in closing costs, we have all of the variables needed to “crunch the numbers” … and to determine if it makes sense to refinance the home. That’s how the rule of thumb works.

If you want to learn more about this subject, check out this helpful article:
When Should I Refinance My Home?

FreeCreditReport.com has racked up more than 11,000 Better Business Bureau complaints over the last 36 months. I stumbled across this a couple of days ago and found it to be quite impressive. I screen the BBB records of companies all the time, but I’ve never seen such numbers as these.

This is the website you see on TV all the time. If you watch television, you’ve seen their commercial. It’s the one where the three scruffy guys dress up like pirates and sing catchy little tunes about free credit reports. The website is owned and operated by Experian, one of the three credit-reporting companies in the United States.

Here’s a snapshot of their Better Business Bureau complaint table, as of January 7, 2010:

In case you’re wondering, here is how the complaint-rate breaks down on a monthly and daily basis. This is based on 11,046 complaints filed over a 36-month period, which is what the BBB reports. I rounded down to the nearest tenth of a point:

• 306.8 complaints every month
• 10.2 complaints every day

This means that every day, on average, ten people are angry enough to stop what they are doing, visit the BBB website, and fill out a complaint form against the FreeCreditReport.com website. I don’t know how many total customers they have every day, but that’s a pretty impressive rate of complaints.

Can any other company beat these numbers?

I’m curious to know if there are other companies with a larger number of Better Business Bureau complaints. I checked a few companies I thought might be up there, but so far none have equaled this impressive feat. I’m sure they’re out there, though. So here’s my question to all of you:

Does anyone know of a company that has “earned” more than 11,000 complaints in a 36-month period? I’m just curious.

But that’s not what this article is about. I’m not going to talk to you about numbers and percentages. Instead, I want to explain what the current mortgage rates mean to a home buyer in the first place. Here’s some perspective for you:

The Truth About Mortgage Rates

• Mortgage lenders advertise their rates in a specific way. They generally promote the lowest rates they have available for different mortgage products. Obviously, they do this to attract customers. But these advertisements will always be followed by a disclaimer of some kind, and there’s a good chance that disclaimer will use the words “well qualified borrowers.”
• So, when you see the current mortgage rates listed on a particular website (or on TV, radio, etc.), you need to remember that magic phrase — for well qualified borrowers. Depending on your credit score and other factors, you may or may not qualify for the advertised rates. You might get a lower rate. You might get a higher one. It all depends.
• So what does it take to be a “well qualified borrower” these days? That depends on the lender. They all define it differently, because they all have their own unique guidelines for making loans. The most important factors are your credit score, your debt-to-income ratio, and the size of your down payment.
• To qualify for the best rate, you’ll probably need a credit score above 760 and a down payment of 20%, among other things. You might have to pay points on the loan, as well (this is money paid up front, during the closing process).
• Current mortgage rates are determined by a variety of economic factors. They are partly influenced by the interest rates set by the Federal Reserve (a.k.a., “The Fed”). The Fed has already stated that it will keep rates near zero for much of 2010. So it’s likely that mortgage loan rates will also hold steady for much of the year.
• What does all of this mean to home buyers? Here’s the important thing to remember. It can be helpful to keep an eye on current mortgage rates, because they affects the size of your monthly loan payment. But there is no guarantee you’ll qualify for the low rates a particular lender has advertised. You’ll have to apply for a loan and see what they’re willing to offer.
• You can increase your chances of getting a low rate by increasing your credit score, saving up for a down payment, and reducing your overall debt. The credit score has the largest impact.
• You can find current mortgage rates on a variety of websites. For starters, you can check out Bankrate.com, Interest.com and LendingTree.com. They all provide this kind of information.

So there you have it — a crash course in current mortgage rates and what they mean to you, as a home buyer. I hope you have found this article helpful in understanding the big picture. If you have additional questions about this topic, just type them into the search box at the top of this website.

On the surface, this seems like an easy question to answer. But unfortunately, there’s enough misinformation posted online to keep homeowners scratching their heads in dismay. So I’ve spent the last couple of hours gathering some information to help you. Here is how to request a loan modification under the Making Home Affordable program.

1. Check Your Eligibility for Loan Modification

If you’re trying to modify your home loan through the government’s Making Home Affordable program, you should start by researching their eligibility requirements. Here the are in a nutshell:

• The home in question must be your primary residence (not an investment property).
• The current balance owed on your first mortgage must be equal to, or less than, $729,750. If you used a jumbo loan to buy your home, and the balance is above this amount, you’re probably out of luck.
• You must be having serious trouble paying your mortgage. Maybe your payments increases as the result of an ARM loan resetting. Maybe you’ve lost your job. Or maybe you’ve suffered an illness that brought major medical expenses. (If you make enough money to cover your mortgage payments, but simply want to reduce your payment, you probably won’t qualify for this program.)
• You must have obtained your home loan prior to 1/1/09.
• The payment on your first mortgage must be more than 31% of your gross income (before taxes).

If you meet all or most of these criteria (particularly the first four), then you might get approved for a mortgage modification. This brings us to the next logical question: How do I apply for a home loan modification under this program?

The next step is to start talking to somebody about your situation — either a HUD-approved housing counselor, or your current mortgage lender / servicer. In order to prepare for this dialogue, you need to start rounding up some financial documents.

2. Gather Documents Needed to Apply

Here’s a video that explains the paperwork you’ll need. Below that, you’ll find a helpful checklist you can print out for future reference.

As the video explains, there are certain documents you’ll need to apply for a loan modification under the Making Home Affordable program. Here’s a checklist of items discussed in the video. It would be wise to print this out.

1. Your monthly mortgage statement. This will help the loan servicer locate your file.
2. Your most recent pay stubs (for the last few months).
3. Your most recent W-2 forms and tax-return statements. They will use this to measure your income level, and thus your eligibility for the program.
4. If you have a second mortgage, a home equity loan or HELOC, or any other type of loan secured by your house, you’ll need that paperwork as well.
5. Round up your most recent statements for other debts you are carrying, such as credit cards and student loans. They need this to measure your overall debt-to-income ratio.

These are the minimum documents needed to apply for a home loan modification, so it’s a good starting point. But it’s possible that the loan servicer will ask for other items as well. Be prepared for this, and take plenty of notes during the phone call. And speaking of notes…

3. Start a Loan Modification Journal

When you apply for a mortgage modification, you’ll probably end up speaking to several different people on many different occasions. You might speak to them on the phone, by email, or by sending documentation via postal mail. This is why I recommend starting a loan modification journal. It doesn’t have to be anything fancy — a small notebook will work fine. The point is to document every conversation you have, every document you have submitted, and each person you’ve spoken to. This will help you stay on track.

4. Be Persistent but Realistic

You need to be patient but persistent with this process. It might be frustrating, time-consuming and tedious. And there’s still no guarantee that you’ll be approved for a modification. But the fact that millions of homeowners have succeeded with this process should motivate you. You have nothing to lose by trying, and plenty to gain. Along the way, you’ll probably encounter some bitter homeowners who tried and failed with this process. In most cases, you’re better of ignoring these folks. They have nothing to give you but negative energy.

This article explains how to apply for a home loan modification the right way. If you have additional questions or want to learn more about the program, you’ll need to visit the Making Home Affordable website (the one mentioned in the video). The web address is www.MakingHomeAffordable.gov.

Before I answer your question (as best I can, at least), we need to go over some basic definitions. This is for the benefit of other readers who may not be familiar with this kind of terminology.

The Federal Student Loan Defined

This is a type of loan that students can use to pay for college. It is insured by the federal government. Because of this federal backing, borrowers can usually qualify for a lower interest rate than with a private loan.

There are two types: (1) The William D. Ford Federal Direct Loan Program, and (2) the Federal Family Education Loan Program, or FFEL. In the former scenario (the direct loan program), the federal government actually lends the money to borrowers. In the second scenario (FFEL), the student loan is made by a private bank but is insured by the federal government. Thus, they both fall under the “federal” category, because there is some form of government involvement.

Private Loans Defined

This is also a type of loan that students can use to pay for college. But in this case, there is no federal involvement. The loan is provided by a bank or credit union, and it does not receive any government backing / insurance. These loans are generally harder to qualify for, and they usually carry a higher interest rate (both resulting from the lack of federal support).

How the Interest Rates Stack Up

If you obtain a federal student loan through one of the programs described earlier, the interest rate will be based on a preset formula. The rate will remain fixed over the life of the loan. This means the rate will not change, no matter how long it takes to pay it back. These student loans have interest rate caps as well, which means they can never rise above a certain level.

Here is what Finaid.org has to say about the interest rate on Stafford loans (the FFEL program mentioned earlier):

-Source URL: http://www.finaid.org/loans/

With a federal loan, you also have more options for debt forgiveness later on. This means you could some or all of your balance forgiven (zeroed out) by participating in some form of community service.

If you get a private student loan, however, the rate will vary based on qualifying criteria (such as your credit score). The rate may adjust over time, which could potentially increase the size of your payments and prolong the payback period. The rate might even change on a monthly basis. This is why so many graduates have trouble paying back their private student loans — the rate increases, making it harder and harder to chip away at the principal amount borrowed.

Each year, millions of young men and women use student loans to pay for college. And many of them graduate with a new diploma … and mountains of debt. The effects can be far reaching. You’re just starting out in the world, and already you’re in a financial bind. But many graduates don’t realize there are ways to reduce or eliminate student loan debt by doing volunteer work.

In the financial world, it’s referred to as loan forgiveness. The student performs some kind of community or military service, and they have some (or all) of their student loan balance forgiven. There are several different paths you could take to eliminate your debt in this manner. You could qualify by (A) teaching in low-income communities, (B) performing certain types of community service, or (C) serving in the military. These aren’t the only paths to student loan forgiveness — just some of the most popular.

Of course, there are other stipulations as well. You probably knew that was coming. The federal government is usually the entity that forgives the debt, so you’ll have an easier time qualifying if you have a federal Perkins or Stafford loan. If you used one of these programs to pay for college, then you should consider yourself lucky. There’s a good chance you can eliminate your student loan debt through a forgiveness program, and you’ll have more ways to do it.

If you used a private student loan, then you’ll have fewer options for eliminating your debt. Sorry, but that’s just the reality of it.

Learn More About Eliminating Your Debt

If you want to learn more about these programs and find out if you qualify, I recommend starting at www.FinAid.org. Do a search for loan forgiveness, and you’ll find a lot of information about the various programs, eligibility requirements and more.

You can also learn more by visiting the Stafford Loan website (www.StaffordLoan.com), the Sallie Mae website, and the Federal Student Aid website.

Note: This is a long-term strategy to help you eliminate debts from student loans, and is by no means a “quick fix” solution to the problem. There are no quick fixes. Some of the service requirements for loan forgiveness are up to ten years in length. Of course, some people carry this kind of debt well beyond ten years, so it’s still a viable option worth considering.