Credit Information

The nonprofit National Bureau of Economic Research, which officially dates turning points in the economy, says it’s premature to mark the end of the contraction.

April 13, 2010|By Don Lee Los Angeles Times

Many consumers may know what makes up a credit score, but they may not have the knowhow to improve their score in actual practice.

The good news for consumers is that, if they know what makes up a credit score, then they’re already more knowledgeable than most about what steps to take to set themselves on the path to a score in the 800s. According to a report from CBS Moneywatch, taking a score from “good” to “great” is all about knowing how the system works.

About 13 percent of all consumers have credit scores of 800 or higher, the report said, and that’s because those people know the credit score system inside and out. They know, for example, that the combination of payment history and the amount of credit they owe versus what they have available accounts for about two-thirds of their credit score.

Payment history makes up 35 percent of a score, and something as simple as making on-time payments can provide a gigantic boost to any credit score. The report said the amount of money a consumer owes versus what they have available in credit makes up 30 percent of a score. The other 35 percent is made up of a combination of the amount of time a consumer has had credit, how much new credit they have (the less the better), and the different types of credit a consumer uses.

That 13 percent of consumers whose credit is superb all have roughly the same characteristics, the report said. When it comes to on-time payments, those people haven’t been late on one in the last seven years, and their debt levels are no higher than 35 percent of their overall limit per credit account.

As for the other third, the report said consumers with scores above 800 own four to six credit cards, and have one installment loan – like a car payment or mortgage – with an impeccable payment history. They’ve had no bankruptcies, foreclosures, charge-offs or collections at any point, and a very low number of credit inquiries in the last six months, usually fewer than three. Finally, they’ve had their credit accounts for an average of 10 years, with a small number of accounts showing 20 years of good history.

A recent Bankrate report said that “good debt” stays on a credit report longer than bad, typically an extra three years.

If you would like a free financial/debt evaluation, go to http://www.freeattorneyconsultation.info or call us directly at 866-868-2160.

As the American economy gradually pulls itself out of the recession, consumers are seeing their own financial health improving as well.

Many consumers may have found themselves under mountains of debt and late payments in the past few years, and while lenders may have been somewhat understanding given the financial climate of the time, granting consumers some leniency is no longer tenable, reports the St. Louis Post-Dispatch.

With lenders setting harsher standards for giving out loans, it is now more important for consumers to keep an eye on their credit score than it has been in years. While some aspects of their financial health are beyond their immediate control, the paper said there are a number of steps consumers can take to help themselves.

The paper said that it’s important for consumers to limit how much they must pay their creditors per month. The general rule of thumb is that monthly payments should never exceed more than 20 percent of a consumer’s net income.

It’s especially important to keep this in mind when considering that the median credit score across the country is above 700, one financial expert told the newspaper, and 700 isn’t even a good enough score to get the best rates on various loans. Those come with scores above 750, and a score between 710 and 750 will garner strong rates. Consumers will find mediocre rates if their score is between 650 and 710, and fairly tough rates if their score is between 580 and 610. If a consumer’s score is anything less than 580, the rates will be awful if the loan is approved at all.

The report also said that some banks are impacting their customers’ credit scores because of their own financial problems. Lenders are changing rates or cutting credit limits as a result of financial problems on their end. While this can be tough for some borrowers to deal with, it is a fact of life that borrowers and lenders alike should be more careful with their finances.

The paper advised that any consumer having problems paying their bills never duck their creditors, but rather contact them and explain their situation.

A report in the Salt Lake Tribune said that one new way to quickly repair a credit score is to make small payments on outstanding debts several times a month.

If you would like a free financial/debt evaluation, go to http://www.freeattorneyconsultation.info or call us directly at 866-868-2160.

by: Jeff Rauth

Perhaps you’re facing a ballooning loan, found an excellent property to purchase, or need to refinance your existing loan in hopes of reducing your payment. Whatever your goals are, most people at the beginning of the loan process want to know “is this really going to get done? Am I wasting my time even contemplating this?”

We all read the papers and watch the media reports how bad it is in the banking sector. And no doubt it is bad. The commercial secondary market is dead for example. It will likely be repaired, but it will take years to get it rolling again. Most loans have to fit the “portfolio” box. Meaning the bank that funds the loan, will most likely hold onto the debt, and not sell it to Wall Street.

SBA Financing

So yes, it is bad out there for small businesses to get financing, however there are a few sectors that are still viable, i.e. that continue to close. One of those areas is SBA financing. In fact, most banks that do SBA Business Loans are pushing most of their borrowers into the SBA box.

The reason? The 90% guarantee that the government provides for banks. I.e. in case of borrower default the SBA will pay back 90% of the bank’s losses. This is a huge incentive to SBA Lenders.

Of course SBA financing has been down as well. At approximately 45% in 2008 vs. 2007. 2009 has been down as well. This is due to a variety of issues, such as: many banks not wanting to lend, many others that simply cannot as they have their own problems and a major problem we see more of – business trends.

Virtually no bank in the nation will lend to a borrower that has sustained declining gross sales over the last few years. For example if your gross sales parallel the general economy you will likely not get a loan closed. Banks are looking for those businesses that were lucky enough or smart enough to figure out how to react to the economy and to continue to grow.

This alone kills probably 80% of the loan request we receive. We see many highly experienced entrepreneurs that want to increase cash flow by refinancing or get working capital to help marketing, but if they are not already in a strong position, they will likely not get their loan closed. This is often a painful and frustrating catch twenty-two for business owners.

If you would like a free financial/debt evaluation, go to http://www.freeattorneyconsultation.info or call us directly at 866-868-2160.

About The Author

Jeff Rauth is a Commercial Mortgage Broker and President of Commercial Finance Advisors, Inc. out of Birmingham, Michigan. He specializes in Commercial Real Estate Loans between $400,000 – $10,000,000. Offering unique loan programs such as Long Term Fixed Rate Loans for Owner-Users and Investors, SBA Loans and USDA B&I Loans, among many others. For more information call 248-885-8797 or visit http://www.cfa.commercial.com.

by: Jeff Rauth

Below is some real world advice on SBA business financing in this market. Specifically, advice on getting your loan closed.

SBA financing and general banking industry is what it is. You, nor I, can do anything about that. What you have to focus on is doing everything in your control to increase your chances of closing your SBA loan.

And it has never been more important to prepare yourself and your loan request for the realities of current small business loan climate. What this normally means is being totally upfront and dealing with your loans weaknesses head on. You have to build your argument of why your business is credit worthy – and most specifically dealing with the issues that have or likely will get you declined if you don’t deal with them.

Never, leave your issues to chance or ignore them hoping that the underwriters will not notice. They will notice! They will discover the issues and you will lose. Let me give you an example.

We recently where engaged by a small business in Rhode Island to refinance his existing conventional loan (i.e. a local bank mortgage). The borrower how is a great guy and an impressive 30 year veteran entrepreneur was facing a ballooning loan. It was due 10 weeks from the time that he initially contacted us. Though I was concerned about the timing and knew we couldn’t make any mistakes, I was confident that we could get the loan closed in the required time frame. In addition, it is not uncommon for the existing bank to extend the loan if you can prove to them that you have a viable new loan on the table.

We were taking his loan through a bank that specializes in SBA 7a loans. The guarantee from the government would put us in the best position of getting the loan funded. We had decent loan to value (for an SBA loan at 65%) great personal credit, low level of personal debt, great experience at 30 plus years, great personal and business liquidity at over $500,000 (cash) relative to a $830,000 loan request. In a normal market, these are some serious strength’s.

The weaknesses of the file where that the business gross sales had declined for the last three years and fell more even more rapidity year to date. This in itself is a huge issue. Banks and their underwriters want to know and want you to prove that you have fit “bottom” and that the situation has been turned around.

However, and this is a big however, the borrower had done a good job on eliminating his fixed costs and diversifying into other businesses. He was still very much in the black and his cash flow, despite the huge drop in gross sales had only dipped slightly. So my job and our argument to the underwriters was to highlight this. I.e. that despite the declining sales the borrower was in a solid position as he was still making great income.

Despite the well thought out and detail Letter of explanation that we put together the borrower failed to tell us the whole story – that he was served a foreclosure notice a week before he contacted us and that he stopped making payments on the loan, as the existing bank stopped sending him payment coupons.

Bad move. We had 45 days into the transition when we finally discover this. It was a bad situation for us, as we wasted almost 2 months, but he ended up losing his property and app. $600,000 in equity.

If you would like a free financial/debt evaluation, go to http://www.freeattorneyconsultation.info or call us directly at 866-868-2160.

About the Author

Jeff Rauth is a Commercial Mortgage Broker and President of Commercial Finance Advisors, Inc. They close SBA and other commercial real estate loans between $400,000 – $5,000,000 nationwide. Reach him at 248-885-8797 or by visiting http://www.cfa-commercial.com.

Do you have questions about what options are available for resolving your credit card debt or becoming debt free?

If you would like a free financial/debt evaluation, go to http://www.freeattorneyconsultation.info or call us directly at 866-868-2160.

Here is some optimistic news I found in the L.A. Times -

Consumer borrowing posted an unexpected increase in March, only the second gain in the last 14 months.  It could signal that U.S. households are more confident about spending more,  a key develoment needed to support a sustained economic recovery.

The Federal Reserve said consumer borrowing rose by $1.95 billion in March, better than the $3.85-billion drop that economists expected.

Consumer credit was also up in January, but aside from those thwo gains, it has been falling steadily since February of last year.

If you would like a free financial/debt evaluation, go to http://www.freeattorneyconsultation.info or call us directly at 866-868-2160.

The bank made loans it knew were likely to go bad, then packaged them into securites, a Senate panel says.

April 13, 2010|By Jim Puzzanghera and E. Scott Reckard

In some cases, the bank took loans in which it had discovered fraudulent activity — such as misstated income by borrowers — and rolled them into mortgage securities sold to investors without disclosing the fraud, according to the report released Monday by the Senate’s Permanent Subcommittee on Investigations.

The actions were driven in part by greed, according to the committee report, which pointed out that WaMu’s pay practices rewarded loan officers and processors based on how many mortgages they could churn out.

The new disclosures could give a boost to efforts by President Obama and congressional Democrats to pass sweeping overhaul of financial regulations, which the Senate is set to consider this spring, said Sen. Carl Levin (D-Mich.), the subcommittee’s chairman.

“Washington Mutual built a conveyor belt that dumped toxic mortgage assets into the financial system like a polluter dumping poison into a river,” Levin said. “Using a toxic mix of high-risk lending, lax controls and destructive compensation policies, Washington Mutual flooded the market with shoddy loans and securities that went bad. . . . It is critical to acknowledge that the financial crisis was not a natural disaster, it was a man-made economic assault.”

WaMu’s failure is also under investigation by the Justice Department. The Seattle-based thrift, which was seized by federal regulators in September 2008 and sold to JPMorgan Chase & Co. for $1.9 billion, had nearly a third of its 2,200 branches in California and was a major player, along with rival Countrywide Financial Corp., in helping fuel the state’s housing boom.

According to the Senate report, WaMu executives were aware in 2006 of problems at its Southern California subprime unit, Long Beach Mortgage Co. Excerpts of internal e-mails and reports offer a stark and unvarnished view of the warning signs that were dismissed as the bank tumbled toward failure.

The company’s chief risk officers called Long Beach Mortgage, the subprime subsidiary the firm used to stage its rapid growth in home lending, “a real problem for WaMu.” Stephen Rotella, WaMu’s former chief operating officer, described the unit as “terrible.”

If you would like a free financial/debt evaluation, go to http://www.freeattorneyconsultation.info or call us directly at 866-868-2160.