Most people know the importance of making at least minimum credit card payments on time, and avoiding financial no-nos like bankruptcy and foreclosure if possible. However, some less obvious factors can still make a negative impact on your credit rating. They may seem counterintuitive, and some may go against what you’ve been told in the past, but Tim Chen, CEO of the credit-card search website NerdWallet, will explain why these five practices can wreck your credit score.

1. Settling past-due debts with a creditor to pay less than you owe. Anyone who has amassed enough credit card debt has gotten the pitches in the mail, and sleepless fretting debtors see the ads on late-night TV: Pay Down Your Debt! It sounds too good to be true, and Chen confirms this. “Even though you’re getting rid of bad debt, it stays on your report as ’settled’ rather than ‘paid off,’ and is now updated on the payment date, making it look like it happened more recently than the original loan. Your credit score is weighted more heavily toward recent events than past events, so taking a bad debt from the past and moving it to the present will count against you.”

2. Transferring balances from a high-interest account to a low-interest account. Ahh, the old trick of debt-juggling from card to card. You get an offer for a new card with an enticing 0 percent annual percentage rate for a whole year. Who knows what might happen in that interest-free year—you could even pay off this debt for good, right? Balance transfers can seem like a good idea at the time, but Chen says, “While it’s better for your bottom line, opening new accounts works against your credit score. Plus moving all your debts to one card could negatively impact your credit utilization (your ratio of debt to available credit).”

3. Closing old credit cards. One school of thought holds that the more credit you have open, the more risk that it could be misused, or it could leave you more vulnerable to fraud, so you should close your unused cards. But closing cards hurts you two ways, says Chen, by increasing your debt utilization and shortening your credit history length. “Creditors like to see that you have a lot of unused, available credit, and that you have accounts that have been open for a long time without problems.”

4. Paying off your car or your mortgage. What? Paying off your mortgage can work against you? Chen steps in to explain the enigmatic concept of “credit mix.” “FICO reports that 10 percent of your credit score is determined by your ‘credit mix,’ and they like to see a variety of installment and revolving loans. If all you have is an auto loan and three credit cards, paying off the car will leave you with nothing but revolving credit.” However, Chen points out that in that case you might want to focus on paying off that debt.

5. Avoiding debt altogether won’t help you. So basically, no matter what, you’re doomed! (Kidding. See the conclusion below for a glimmer of hope.) “While eschewing debt is in vogue these days, your credit score is based on how well you can handle credit, and all of your score’s components are based on you having open debt accounts,” Chen says. That means that even if you are anti-credit cards, well-managed credit accounts will eventually help your case if you plan on getting a mortgage.

It may now seem like credit scores are a hopeless “damned if you do and damned if you don’t” situation. But there are ideals you can strive for to achieve a good credit rating. Chen points to Lending Club’s rate table, which has remarkably transparent disclosures, for some parameters to aim for.

Based on their data, you can draw the following conclusions:

• The ideal number of loans or credit lines open is 6-21. Therefore, it’s pretty difficult to get penalized for having too many accounts.
• The ideal number of credit inquiries is 0-3 in the last 6 months. Anyone who has had 6 or more will have a tough time getting a loan. This can be troublesome when shopping around for mortgage rates. “Soft pulls” of credit scores (such as when you check your own credit score, or when a potential employer does) are always better, when possible.
• A 5+ year credit history is ideal.
• 5% to 85% credit line utilization is ideal.

And don’t forget the basics: pay off at least the monthly minimum balance for many years running.

Alex Tse at the Frazzano Team has done it again - another homeowner saved from foreclosure. We were able to get this short sale approved with a $0 contribution from the seller - please visit our approval letters page & view the latest approval from Wells Fargo from December 7th 2010.

We have a proven track record for approving short sales - give us a call for a confidential interview if you are facing trouble keeping up with your mortgage payments - there is a way out! 925.735.7653 - ask for Alex or Joe!

It seems that more and more lenders are more interested in working with short sale sellers than ever before. They are finally realizing that it is much better to not have bank owned assets.  If you have been unsure about what your options are, please give us a call.  We have heard from many clients recently that taking money coming from their savings and retirement accounts is NOT the best option.

By James R. Hagerty

As he appeared before the House Financial Services Committee Tuesday to discuss the slow progress of government efforts to force lenders to ease payment terms on home mortgages, Anthony B. Sanders was reminded of the movie “Jurassic Park.”

It might be possible to bring dinosaurs back to life, but does that make it a good idea? Similarly, says Dr. Sanders, a professor of real estate finance at George Mason University, it might be possible to slash interest rates on millions of loans, but that doesn’t mean we should.

What if the government’s Home Affordable Modification Program somehow finally gains traction and manages to reduce interest rates to 2% on millions of loans and extend their terms to 40 years? That would just create fresh problems, Dr. Sanders says.

“Our banking industry, Fannie Mae, Freddie Mac and our Federal Reserve would now be sitting on trillions of dollars of mortgages, many at super-low interest rates and stretched maturities to 40 years,” he writes. Any rise in inflation and interest rates would then slash the value of those mortgages. “When one considers the precarious balance sheets of our lending institutions and our government agencies, we should think very, very carefully about loading up their balance sheets with these mortgages,” he warns, adding:

“Congress and the Administration should bear in mind that it is not just the banks that will suffer, but our pension funds, our own government agencies and the viability of the economy going forward.” Banks would be “stuck with low-interest, long-maturity loans on their books that will prevent them from lending to other borrowers or small businesses for a long, long time.”

The solution, he says, is to encourage financial institutions to sell distressed loans and mortgage securities at big discounts from face value to private investors, who could then restructure the loans on realistic terms related to today’s house prices. Such sales would force banks and other financial institutions to book big losses, but perhaps regulators could allow those losses to be absorbed in stages over five years.

If U.S. financial institutions don’t clean up their balance sheets by shedding dud assets soon, “we will make the Japanese zombie banks look the role model for a healthy financial system,” Dr. Sanders says.

But what about all those borrowers struggling to avoid foreclosure? “The (loan) servicers and financial institutions should be able to modify distressed loans as they see as economically appropriate,” Dr. Sanders says. “After all, these are private market contracts between borrowers and lenders.”

“What is a short sale?”

Simply put, a short sale is a real estate transaction where the homeowner owes their lender more than what their property is worth and they need to sell. In a short sale, the lender must approve and accept less than what they are owed as full payoff (this means they may settle for $600,000, even if you currently owe them $800,000…even if the loss is hundreds of thousands of dollars).

Are you facing a financial hardship that you know will decrease your income?

Are you getting behind on your mortgage and you’re not sure if you can catch up?

Or do you just need to sell quickly but your home is worth less now than when you bought it?

If you are facing any of the situations above, and you think a short sale might be your best option, then read on.

Don’t worry.  It’s not your fault…

You must remember, we’ve all had our ups and downs in life and a lot of other good people are also in the same tough spot as you. Life seems scary when you’re facing the reality of foreclosure and I know how you feel when you just don’t want to answer the phone any more…  

We all agree that we’re in the middle of a national mortgage and economic crisis and that, in many cases, homeowners who have bought or refinanced in the last few years have been seriously abused by unethical lending practices!!

You bought your home and hoped (like we all did) that it would increase in value (and some folks were even promised it would!), but most likely the harsh reality is that now your home is worth less than when you bought it and the value is still declining sharply.

We have helped many homeowners in this position get the help they deserve.  

It’s sad but true!

Did you know that nearly 90% of the homeowners nationwide who try to “short sale” their home will end up losing their home to foreclosure due to an uneducated or lazy Real Estate Agent?

Don’t allow this to happen to you!

I hate to say this about my fellow agents, but the majority of them that are “trying to help” have not been properly trained and sadly, they are misinformed as to how to even negotiate with lenders. Some even get so far as to submit your ’short sale packet’ and then just sit back and wait for a response! In the end, they simply don’t know how to help you and you will become one of those “90%” that were not helped.

“Short sales are not easy!”

…unless you seek the help of an expert agent with a proven track record. We have been personally trained by a former Chief Loss Mitigator who is a career loss mitigator and asset manager with 20 years in the business (he is ultimately the guy at the bank who accepts or declines short sales). We are now helping save even more folks from foreclosure.

We have successfully negotiated short sales for many families and as you can see from our recent approval letters on the tab above (we swap out some of our recent approvals every couple months, so you will notice these are up to date) we actually get the banks to say YES to our short sales. Before you agree to have an agent help you sell your home, ask him/her to show you just one short sale approval within the last 6 months… I doubt they can.

Now it’s up to you…

We are ready to go to battle for you. Are you ready to take a serious look at your options and see how a short sale can help you:

• Avoid paying TAXES on the money the bank loses at foreclosure! (Yes, you may have to pay taxes on the amount of loss to the bank if the home goes to foreclosure!)
• Save your credit from the “Foreclosure” ding
• Avoid Bankruptcy
• Avoid Foreclosure
• Relieve the stress that this financial burden has become
• WITH NO OUT OF POCKET FEES OR ANY UP FRONT COSTS OF ANY KIND!  …or in other words, you pay us nothing and if we do our job and save you from foreclosure, only then will we get paid by the lender!