So you want to pursue the American Dream and be a homeowner. You have spent countless weekends looking for homes and found the perfect home. You dream about it everyday and just can’t wait for the keys. Then you go find a loan officer and fill out the application for the loan and he pulls out your Credit Report. Then just when you thought every thing is well, the loan officer says that your application has been denied.
Let’s say that you just moved to the United States and you want to buy a new car. You see one of the zero down and no payments add in the newspaper and you head over to the dealer. You look through and find your dream car and take it out on a test drive. Everything goes well and your ready to sign the paperwork.
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A ’soft hit’ or a ‘hard hit’ is also known as a ’soft inquiry’ or a ‘hard inquiry’. When you pull out your own Credit Report it is known as a ’soft hit’ or a ’soft inquiry’. On the other hand when you apply for a loan or a mortgage, the lender or the bank will pull out your Credit Report. When the bank or lender pulls out your Credit Report it is know as a ‘hard hit’ or a ‘hard inquiry’.
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When a home owner fails to comply with and make the monthly payments on a mortgage, the bank can sell or repossess the real property to recover it’s debt. This is known as a foreclosure. A foreclosure is a very serious situation and should be taken very seriously. A foreclosure has very serious effect on the owner’s Credit Report. In most cases it will be very difficult for the owner to secure another loan if any of the owner’s properties were foreclosed.
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A debt collector or creditor usually contacts you to recover a debt that you owe. It might be a very embarrassing situation but there are some rights that a debtor has against a debt collector. A debt collector might be and usually is an independent company hired by the creditor to recover the debt. These are some of the rights
* A debt collector cannot call a debtor before 8:00 am and after 9:00 pm.
* A debt collector cannot contact a debtor’s employer nor can the collector threaten to do so.
* A debt collector cannot threaten a debtor with violence or use obscene or profane language.
* A debt collector cannot state that she/he is an attorney if she/he is not an attorney.
* A debt collector cannot discuss the debt with the debtor’s employer, neighbors, friends or family (unless they are are a co-signer).
A Credit card is a transaction settlement device which is usually in the form of a plastic card. Unlike a debit card a credit card money is loaned instead of directly taken out from a bank account. The balance on a credit card is revolved and the credit card issuer charges an interest on the amount loaned.
If you think you have become a victim of identity theft, immediately contact the Federal Trade Commission FTC at 1-877-438-4338. The FTC is responsible for processing and handling identity theft cases and informing the appropriate entities. The FTC usually does contact the major Credit Reporting agencies (Equifax, Experian and TransUnion) but it is usually better to contact them yourself too. Also contact your local FBI office and your local Police Station, file a report and keep a copy of the report in a safe place.
Then based on your case you might need to contact the following agencies too.
* Your local Post Office if you think your identity thief has submitted a change of address under your name.
* The Social Security Administration if the thief has used your social security.
* The Internal Revenue Service if the thief has used your identification information in violating tax laws
Check your Credit Report and make a list of all creditors with whom your information may have been used and inform them about the situation. If your checks have been stolen and used contact the merchant to whom the check was issued.
Finally keep a record of your correspondence with all the agencies in a safe place. You can use it later on to prove your innocence.
Note: Be careful of credit specialist who advertise that they can get your credit back up if you have been victimized by identity theft. Although there a handful of legitimate professional but a lot of them would suggest creating a new identity which is not right and completely illegal. Consult several credit professionals and legal advisors to make sure you do not get yourself into more problems.
What is Identity Theft?
Identity theft is no joke and for people who have been victims of identity theft know that very well. Identity theft is when some unauthorized person gathers information about a victim and uses that victim’s information for his fraudulent activities. These fraudulent activities can be stuff like withdrawing money out of a victim’s bank account, signing up for new credit cards or even getting a loan on a victim’s name. Identity theft is a very serious problem as the victims have to spend years straightening out everything and some have even been arrested for crimes not committed by them.
How to protect yourself from Identity Theft?
Protecting yourself from Identity theft is very important and being a little cautious can save you years of regret. Below are some of the steps you can take to protect identity theft.
* Make sure you know how your information will used when you are asked for it.
* Try to give the least amount of information needed.
* Your Social Security Number is very valuable and it is also the key to identity theft.
* Do not give out personal information over the phone or by unsecured mail.
* If you are asked to provide information over the web, then make sure the web page is secure.
* Always shred documents with personal information before disposing them. This also goes for the pre-approved junk mail that you get every now and then.
* Memorize you passwords/pins instead of writing them down in your wallet.
* And the most important of them all - check your Credit Report AT LEAST ONCE A YEAR to make sure that there are no unauthorized debts or activities.
Bankruptcy is a law to allow debtors to pay off their debts, which are due immediately, over a period of three to five years or even completely wipe off their debt by liquidating their non-exempt assets. A debtor should first try to negotiate with their creditors to come up with a payment plan or consult a debt consolidation service before filing for bankruptcy. A bankruptcy should always be the the last resort.
Personal bankruptcy does not eliminate child support, taxes, fines and student loans. There are two kinds of bankruptcy: Chapter 7 & Chapter 13
Chapter 7
In Chapter 7, all of the debtor’s non-exempt assets are liquidated to pay off the debt and all debts are discharged even if the debt could not be settled in full after liquidating the assets. Exempt assets differ from state to state but usually include a car, a house and work-related tools. Chapter 7 bankruptcy stays on your Credit Report for 10 years.
The new law which went into effect on October 17, 2005 makes the Chapter 7 bankruptcy law more stricter. Under the new law a debtor’s income must be below the median income of that state or the debtor will be required to go through a bankruptcy test, which will place severe restrictions on the debtors spendings.
Chapter 13
In Chapter 13, a debtor can retain his/her personal property that she/he might otherwise lose in a Chapter 7 bankruptcy. In this kind of bankruptcy a debtor follows a court approved repayment plan to pay off the default debt in a period of three to five years. Chapter 13 bankruptcy stays on your Credit Report for 7 years.
Credit score is a number that is looked at by lenders to find out the credit worthiness of an individual. A Credit Score is based entirely on the financial data in your Credit Report. Although a lender will come up with the same end results when going through your Credit Report, a Credit Score provides a much faster and non-biased way to do so.
There are several scoring methods with FICO being the most popular. FICO derived it’s name from it’s inventor Fair Isaac and Company. The three Credit Bureaus use their modified version of the FICO. Equifax uses the Beacon system, TranUnion uses the Empirica system and Experian uses the Experian/Fair Issac system.
Before 2001 only lenders had access to the Credit Score but now it’s widely available through a number of websites and through the Credit Bureaus. A Credit Score ranges anywhere from 300 to 900 with 900 being the king of the world score. A good Credit Score will not only help you get a loan quicker but will also save you money by reducing the interest on the loan.