{"appState":{"pageLoadApiCallsStatus":true},"categoryState":{"relatedCategories":{"headers":{"timestamp":"2022-05-17T12:31:23+00:00"},"categoryId":34301,"data":{"title":"Loans & Credit","slug":"loans-credit","image":{"src":null,"width":0,"height":0},"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Loans & Credit","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34301"},"slug":"loans-credit","categoryId":34301}],"parentCategory":{"categoryId":34273,"title":"Personal Finance","slug":"personal-finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"}},"childCategories":[{"categoryId":34302,"title":"Bankruptcy","slug":"bankruptcy","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34302"},"image":{"src":"/img/background-image-2.fabfbd5c.png","width":0,"height":0}},{"categoryId":34303,"title":"Credit Cards","slug":"credit-cards","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34303"},"image":{"src":"/img/background-image-1.daf74cf0.png","width":0,"height":0}},{"categoryId":34304,"title":"Credit Reports","slug":"credit-reports","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34304"},"image":{"src":"/img/background-image-2.fabfbd5c.png","width":0,"height":0}},{"categoryId":34305,"title":"Debt","slug":"debt","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34305"},"image":{"src":"/img/background-image-1.daf74cf0.png","width":0,"height":0}},{"categoryId":34306,"title":"Mortgages","slug":"mortgages","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34306"},"image":{"src":"/img/background-image-2.fabfbd5c.png","width":0,"height":0}},{"categoryId":34307,"title":"Personal Loans","slug":"personal-loans","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34307"},"image":{"src":"/img/background-image-1.daf74cf0.png","width":0,"height":0}}],"description":"Get a loan, pay off your debt, understand your credit score, and improve your financial situation, whatever it may be.","relatedArticles":{"self":"https://dummies-api.dummies.com/v2/articles?category=34301&offset=0&size=5"}},"_links":{"self":"https://dummies-api.dummies.com/v2/categories/34301"}},"relatedCategoriesLoadedStatus":"success"},"listState":{"list":{"count":10,"total":182,"items":[{"headers":{"creationTime":"2018-04-04T16:55:30+00:00","modifiedTime":"2022-05-12T21:38:23+00:00","timestamp":"2022-05-13T00:01:07+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Loans & Credit","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34301"},"slug":"loans-credit","categoryId":34301},{"name":"Mortgages","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34306"},"slug":"mortgages","categoryId":34306}],"title":"Paying Off a Mortgage Early vs. Investing","strippedTitle":"paying off a mortgage early vs. investing","slug":"paying-off-mortgage-early-vs-investing","canonicalUrl":"","seo":{"metaDescription":"Learn the key factors you should consider if you're weighing whether to put money into prepaying off your mortgage or investments.","noIndex":0,"noFollow":0},"content":"If you talk with others or read articles or books about prepaying your mortgage, you’ll come across those who think that paying off your mortgage early is the world’s greatest money-saving device. You’ll also find that some people consider it the most colossal mistake a mortgage holder can make. The reality is often somewhere between these two extremes.\r\n\r\nEveryone has pros and cons to weigh when they decide whether prepaying a mortgage makes sense. In some cases, the pros stand head and shoulders over the cons. For other people, the drawbacks tower over the advantages.\r\n\r\nAt the crux of the decision is the fact that you’re paying interest on the borrowed mortgage money, but if you use your savings to pay down the loan balance, you won’t then have that money working for you earning an investment return. More importantly, what happens if that rainy day comes along and you need those handy cash reserves?\r\n<h2 id=\"tab1\" >Interest savings: The benefit of paying off your mortgage early</h2>\r\nMortgage prepayment advocates focus on how much interest you <em>won’t</em> be charged. On a $100,000, 30-year mortgage at 7.5 percent interest, if you pay just an extra $100 of principal per month, you shorten the loan’s term significantly. Prepayment cheerleaders argue that you’ll save approximately $56,000 over the life of the loan.\r\n\r\nIt’s true that by making larger-than-required payments each month, you avoid paying some interest to the lender. In the preceding example, in fact, you’ll pay off your loan nearly ten years faster than required. But that’s only part of the story. Read on for more.\r\n<h2 id=\"tab2\" >Quantifying the missed opportunity to invest those extra payments</h2>\r\nWhen you mail an additional $100 monthly to your lender, you miss the opportunity to invest that money into something that could provide you with a return greater than the cost of the mortgage interest. Have you heard of the stock market, for example?\r\n\r\nOver the past two centuries, the U.S. stock market has produced an annual rate of return of about 9 percent. Thus, if instead of prepaying your mortgage, you put that $100 into some good stocks and earn 9 percent per year, you end up with more money over the long term than if you had prepaid your mortgage (assuming that your mortgage interest rate is below 9 percent).\r\n\r\nConversely, if instead of paying down your mortgage more rapidly, you put your extra cash in your bank savings account, you earn little interest. Because you’re surely paying more interest on your mortgage, you lose money with this investment strategy, although you make bankers happy.\r\n<p class=\"article-tips tip\">If you’re contemplating paying down your mortgage more aggressively than required or investing your extra cash, consider what rate of return you can reasonably expect from investing your money and compare that expected return to the interest rate you’re paying on your mortgage.</p>\r\nAs a first step, this simple comparison can help you begin to understand whether you’re better off paying down your mortgage or investing the money elsewhere. Over the long term, growth investments, such as stocks, investment real estate, and investing in small business, have provided higher returns than the current cost of mortgage money.\r\n<h2 id=\"tab3\" >Taxes matter but less than you think</h2>\r\nIn most cases, all of your mortgage interest is deductible on both your federal and state income tax returns. Thus, if you’re paying, say, a 6 percent annual interest rate on your mortgage, after deducting that interest cost on your federal and state income tax returns, perhaps the mortgage is really costing you only about 4 percent on an after-tax basis.\r\n\r\nFor most people, approximately one-third of the total interest cost of a mortgage is offset by their reduced income tax from writing off the mortgage interest on their federal and state income tax returns.\r\n\r\nHowever, don’t think that you can simply compare this relatively low after-tax mortgage cost of, say, 4 percent to the expected return on most investments. The flaw with that logic is that the return on most investments, such as stocks, is ultimately taxable. So, to be fair, if you’re going to examine the after-tax cost of your mortgage, you should be comparing that with the after-tax return on your investments.\r\n\r\nAlternatively, you could simplify matters for yourself and get a ballpark answer just by comparing the pretax mortgage cost to your expected pretax investment return. (Technically speaking, this comparison isn’t as precise as the after-tax analysis because income tax considerations generally don’t exactly equally reduce the cost of the mortgage and the investment return.)","description":"If you talk with others or read articles or books about prepaying your mortgage, you’ll come across those who think that paying off your mortgage early is the world’s greatest money-saving device. You’ll also find that some people consider it the most colossal mistake a mortgage holder can make. The reality is often somewhere between these two extremes.\r\n\r\nEveryone has pros and cons to weigh when they decide whether prepaying a mortgage makes sense. In some cases, the pros stand head and shoulders over the cons. For other people, the drawbacks tower over the advantages.\r\n\r\nAt the crux of the decision is the fact that you’re paying interest on the borrowed mortgage money, but if you use your savings to pay down the loan balance, you won’t then have that money working for you earning an investment return. More importantly, what happens if that rainy day comes along and you need those handy cash reserves?\r\n<h2 id=\"tab1\" >Interest savings: The benefit of paying off your mortgage early</h2>\r\nMortgage prepayment advocates focus on how much interest you <em>won’t</em> be charged. On a $100,000, 30-year mortgage at 7.5 percent interest, if you pay just an extra $100 of principal per month, you shorten the loan’s term significantly. Prepayment cheerleaders argue that you’ll save approximately $56,000 over the life of the loan.\r\n\r\nIt’s true that by making larger-than-required payments each month, you avoid paying some interest to the lender. In the preceding example, in fact, you’ll pay off your loan nearly ten years faster than required. But that’s only part of the story. Read on for more.\r\n<h2 id=\"tab2\" >Quantifying the missed opportunity to invest those extra payments</h2>\r\nWhen you mail an additional $100 monthly to your lender, you miss the opportunity to invest that money into something that could provide you with a return greater than the cost of the mortgage interest. Have you heard of the stock market, for example?\r\n\r\nOver the past two centuries, the U.S. stock market has produced an annual rate of return of about 9 percent. Thus, if instead of prepaying your mortgage, you put that $100 into some good stocks and earn 9 percent per year, you end up with more money over the long term than if you had prepaid your mortgage (assuming that your mortgage interest rate is below 9 percent).\r\n\r\nConversely, if instead of paying down your mortgage more rapidly, you put your extra cash in your bank savings account, you earn little interest. Because you’re surely paying more interest on your mortgage, you lose money with this investment strategy, although you make bankers happy.\r\n<p class=\"article-tips tip\">If you’re contemplating paying down your mortgage more aggressively than required or investing your extra cash, consider what rate of return you can reasonably expect from investing your money and compare that expected return to the interest rate you’re paying on your mortgage.</p>\r\nAs a first step, this simple comparison can help you begin to understand whether you’re better off paying down your mortgage or investing the money elsewhere. Over the long term, growth investments, such as stocks, investment real estate, and investing in small business, have provided higher returns than the current cost of mortgage money.\r\n<h2 id=\"tab3\" >Taxes matter but less than you think</h2>\r\nIn most cases, all of your mortgage interest is deductible on both your federal and state income tax returns. Thus, if you’re paying, say, a 6 percent annual interest rate on your mortgage, after deducting that interest cost on your federal and state income tax returns, perhaps the mortgage is really costing you only about 4 percent on an after-tax basis.\r\n\r\nFor most people, approximately one-third of the total interest cost of a mortgage is offset by their reduced income tax from writing off the mortgage interest on their federal and state income tax returns.\r\n\r\nHowever, don’t think that you can simply compare this relatively low after-tax mortgage cost of, say, 4 percent to the expected return on most investments. The flaw with that logic is that the return on most investments, such as stocks, is ultimately taxable. So, to be fair, if you’re going to examine the after-tax cost of your mortgage, you should be comparing that with the after-tax return on your investments.\r\n\r\nAlternatively, you could simplify matters for yourself and get a ballpark answer just by comparing the pretax mortgage cost to your expected pretax investment return. (Technically speaking, this comparison isn’t as precise as the after-tax analysis because income tax considerations generally don’t exactly equally reduce the cost of the mortgage and the investment return.)","blurb":"","authors":[{"authorId":8975,"name":"Eric Tyson","slug":"eric-tyson","description":" <p><b>Eric Tyson, MBA,</b> is the author of <i>Investing For Dummies, Personal Finance For Dummies,</i> and <i>Investing in Your 20s and 30s For Dummies</i>. <b>Ray Brown,</b> a real estate professional for more than 40 years, is the best&#45;selling co&#45;author of <i>Home Buying For Dummies</i>. 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He is the real estate expert for NBC San Diego, the lead columnist for the nationally syndicated columns Rental Roundtable and Rental Forum and coauthor of Real Estate Investing For Dummies.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9293"}}],"primaryCategoryTaxonomy":{"categoryId":34306,"title":"Mortgages","slug":"mortgages","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34306"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[{"label":"Interest savings: The benefit of paying off your mortgage early","target":"#tab1"},{"label":"Quantifying the missed opportunity to invest those extra payments","target":"#tab2"},{"label":"Taxes matter but less than you think","target":"#tab3"}],"relatedArticles":{"fromBook":[{"articleId":251554,"title":"How to Improve Your Fico Score","slug":"improve-fico-score","categoryList":["business-careers-money","personal-finance","loans-credit","mortgages"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/251554"}},{"articleId":251551,"title":"How Does A Reverse Mortgage Work?","slug":"reverse-mortgage-work","categoryList":["business-careers-money","personal-finance","loans-credit","mortgages"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/251551"}},{"articleId":251548,"title":"How to Pay Off Mortgage Faster","slug":"pay-off-mortgage-faster","categoryList":["business-careers-money","personal-finance","loans-credit","mortgages"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/251548"}},{"articleId":251545,"title":"Not All Mortgage Insurance is Tax Deductible","slug":"not-mortgage-insurance-tax-deductible","categoryList":["business-careers-money","personal-finance","loans-credit","mortgages"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/251545"}},{"articleId":251539,"title":"Cash Out Refinance Basics","slug":"cash-refinance-basics","categoryList":["business-careers-money","personal-finance","loans-credit","mortgages"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/251539"}}],"fromCategory":[{"articleId":251554,"title":"How to Improve Your Fico Score","slug":"improve-fico-score","categoryList":["business-careers-money","personal-finance","loans-credit","mortgages"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/251554"}},{"articleId":251551,"title":"How Does A Reverse Mortgage Work?","slug":"reverse-mortgage-work","categoryList":["business-careers-money","personal-finance","loans-credit","mortgages"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/251551"}},{"articleId":251548,"title":"How to Pay Off Mortgage Faster","slug":"pay-off-mortgage-faster","categoryList":["business-careers-money","personal-finance","loans-credit","mortgages"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/251548"}},{"articleId":251545,"title":"Not All Mortgage Insurance is Tax Deductible","slug":"not-mortgage-insurance-tax-deductible","categoryList":["business-careers-money","personal-finance","loans-credit","mortgages"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/251545"}},{"articleId":251539,"title":"Cash Out Refinance Basics","slug":"cash-refinance-basics","categoryList":["business-careers-money","personal-finance","loans-credit","mortgages"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/251539"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":282406,"slug":"mortgage-management-for-dummies","isbn":"9781119387794","categoryList":["business-careers-money","personal-finance","loans-credit","mortgages"],"amazon":{"default":"https://www.amazon.com/gp/product/1119387795/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/1119387795/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/1119387795-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/1119387795/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/1119387795/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/mortgage-management-for-dummies-cover-9781119387794-203x255.jpg","width":203,"height":255},"title":"Mortgage Management For Dummies","testBankPinActivationLink":"","bookOutOfPrint":false,"authorsInfo":"\n <p><b data-author-id=\"8975\">Eric Tyson, MBA,</b> is a financial counselor and the bestselling author of <i>Investing For Dummies</i>, <i>Personal Finance For Dummies</i>, and <i>Home Buying Kit For Dummies</i>.</p> <p><b data-author-id=\"9293\">Robert S. Griswold, MSBA,</b> is a successful real estate investor, hands-on property manager, and the author of <i>Property Management Kit For Dummies</i>.</p>","authors":[{"authorId":8975,"name":"Eric Tyson","slug":"eric-tyson","description":" <p><b>Eric Tyson, MBA,</b> is the author of <i>Investing For Dummies, Personal Finance For Dummies,</i> and <i>Investing in Your 20s and 30s For Dummies</i>. <b>Ray Brown,</b> a real estate professional for more than 40 years, is the best&#45;selling co&#45;author of <i>Home Buying For Dummies</i>. ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/8975"}},{"authorId":9293,"name":"Robert S. Griswold","slug":"robert-s-griswold","description":"Robert S. Griswold, MBA, is a successful real estate investor and property manager with a large portfolio of residential and commercial rental properties. 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Before you get started, you need to understand the benefits and disadvantages of getting a reverse mortgage. If you decide a reverse mortgage may be the right answer for you, follow some planning tips to help make the loan process easier.","description":"You've probably heard a lot about reverse mortgages, as they are a popular, safe, simple way to supplement seniors' retirement incomes. Before you get started, you need to understand the benefits and disadvantages of getting a reverse mortgage. If you decide a reverse mortgage may be the right answer for you, follow some planning tips to help make the loan process easier.","blurb":"","authors":[],"primaryCategoryTaxonomy":{"categoryId":34306,"title":"Mortgages","slug":"mortgages","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34306"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[],"fromCategory":[{"articleId":251554,"title":"How to Improve Your Fico Score","slug":"improve-fico-score","categoryList":["business-careers-money","personal-finance","loans-credit","mortgages"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/251554"}},{"articleId":251551,"title":"How Does A Reverse Mortgage Work?","slug":"reverse-mortgage-work","categoryList":["business-careers-money","personal-finance","loans-credit","mortgages"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/251551"}},{"articleId":251548,"title":"How to Pay Off Mortgage Faster","slug":"pay-off-mortgage-faster","categoryList":["business-careers-money","personal-finance","loans-credit","mortgages"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/251548"}},{"articleId":251545,"title":"Not All Mortgage Insurance is Tax Deductible","slug":"not-mortgage-insurance-tax-deductible","categoryList":["business-careers-money","personal-finance","loans-credit","mortgages"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/251545"}},{"articleId":251542,"title":"Paying Off Mortgage Early vs Investing","slug":"paying-off-mortgage-early-vs-investing","categoryList":["business-careers-money","personal-finance","loans-credit","mortgages"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/251542"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":0,"slug":null,"isbn":null,"categoryList":null,"amazon":null,"image":null,"title":null,"testBankPinActivationLink":null,"bookOutOfPrint":false,"authorsInfo":null,"authors":null,"_links":null},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;loans-credit&quot;,&quot;mortgages&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[null]}]\" id=\"du-slot-625dfbd9be073\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;loans-credit&quot;,&quot;mortgages&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[null]}]\" id=\"du-slot-625dfbd9be9ec\"></div></div>"},"articleType":{"articleType":"Cheat Sheet","articleList":[{"articleId":153287,"title":"Understand Reverse Mortgages","slug":"understand-reverse-mortgages","categoryList":["business-careers-money","personal-finance","loans-credit","mortgages"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/153287"}},{"articleId":153289,"title":"Know What a Reverse Mortgage Isn't","slug":"know-what-a-reverse-mortgage-isnt","categoryList":[],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/153289"}},{"articleId":153288,"title":"Quick Reverse Mortgage Planning Tips","slug":"quick-reverse-mortgage-planning-tips","categoryList":[],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/153288"}}],"content":[{"title":"Understand reverse mortgages","thumb":null,"image":null,"content":"<p>People tend to shy away from the very idea of reverse mortgages, in part because of their former bad rap, and in part because of all the scary terminology. When someone starts spouting off about how you can &#8220;utilize the equity in your home on deferred payments with a conversion mortgage,&#8221; chances are pretty good you&#8217;re going to tune it out.</p>\n<p>Reverse mortgages pay you to continue living in your home. You can think of your home as the Bank of You: You&#8217;re borrowing money that you would have earned had you sold your house. You can then use the money for whatever you want. Anything your heart desires (and your wallet can handle) is yours for the taking, whether it&#8217;s a vacation in Switzerland, moving your master bedroom to the first floor, or sending yourself to college!</p>\n<p>The concept is kind of abstract if you&#8217;ve been paying a lender for the past 30 years or so, and it may be difficult to grasp at first. Take a look at the quick reference points below:</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\">You&#8217;re a homeowner who owes little or nothing on your home. You decide you need more money to live the lifestyle you want, but your biggest asset is your home and you certainly don&#8217;t want to sell it to get the money you need.</p>\n</li>\n<li>\n<p class=\"first-para\">A reverse mortgage lender figures out how much it can lend you based on your home value, your age, and interest rates, and loans you some percentage of the money you would have gotten if you&#8217;d decided to sell your home.</p>\n</li>\n<li>\n<p class=\"first-para\">You still own your home and continue to live in it, but now you&#8217;re getting payments from the lender, so your cash flow problem is solved.</p>\n</li>\n<li>\n<p class=\"first-para\">You pay the loan back (with interest) only when you don&#8217;t live in the house full time anymore, usually due to moving out or death.</p>\n</li>\n<li>\n<p class=\"first-para\">You never owe more than your home is worth, no matter how much you&#8217;ve accumulated in debt.</p>\n</li>\n<li>\n<p class=\"first-para\">You keep any leftover equity after the sale of the house; if you owe the lender $67,000 and your home sells for $200,000, you put the difference in your pocket and walk away smiling.</p>\n</li>\n</ul>\n<p>A reverse mortgage is sometimes called a <i>deferred payment </i>loan, and for a very good reason. Instead of paying off the home loan as you borrow money, the payments are put off (deferred). This is why reverse mortgages can be such a good choice for seniors; when you&#8217;re on a fixed income or living off of your savings, it can help to have some extra cash in hand to supplement.</p>\n<p class=\"Remember\">Because payment is deferred, you are spending the equity in your home, rather than earning it (as you would with a traditional forward mortgage). Since equity is an intangible value, you never feel the effects of the equity going down, but you sure feel the money flowing steadily into your checking account.</p>\n"},{"title":"Know what a reverse mortgage isn't","thumb":null,"image":null,"content":"<p>A reverse mortgage can be a lot of things: a way to make ends meet, a nice chunk of change for a rainy day, a fabulous dream vacation, or a remodeled kitchen. But there&#8217;s one thing it&#8217;s definitely not — free money. There’s no free lunch here.</p>\n<p class=\"Warning\">While reverse mortgages allow homeowners (who are at least 62 years old) to borrow against their home&#8217;s equity and still maintain ownership of the home, your loan will need to be paid back, just like any other loan (whether it&#8217;s due when you move or upon your death).</p>\n<p>There are fees involved that can include payments to the originator, the appraiser, postage fees, recording fees . . . the list goes on and on. (These are the same sort of fees you paid for the mortgage that bought you the home you live in now.) You also have to pay interest on your loan, which is generally right around the interest rates on traditional mortgages.</p>\n<p class=\"Remember\">You only pay interest on what you borrow, so any money that you don&#8217;t use from your pool of reverse mortgage funds isn&#8217;t charged.</p>\n<p class=\"Warning\">A reverse mortgage is also not a direct value-to-dollar loan. You are loaned a percentage of your home value, based on age, interest rates, and area. Don&#8217;t expect the full value of your home, or you&#8217;ll be very disappointed.</p>\n<p>Lastly, a reverse mortgage is not an all-encompassing loan that&#8217;s right for everyone. Just because you qualify by being a 62-year-old homeowner doesn&#8217;t mean you&#8217;re an ideal candidate. To find out whether or not a reverse mortgage is right for you, here are a few of the basic questions you can ask yourself:</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\">Are you at least 62 and own your own home?</p>\n</li>\n<li>\n<p class=\"first-para\">Do you plan to be in your home for at least 5 years?</p>\n</li>\n<li>\n<p class=\"first-para\">If you&#8217;re getting the loan to purchase or pay off something specific, have you looked into other options for financing those expenses?</p>\n</li>\n<li>\n<p class=\"first-para\">Are you comfortable with the terms of the loan?</p>\n</li>\n</ul>\n<p>The more of these questions you can answer &#8220;yes&#8221; to, the more ready you are for a reverse mortgage.</p>\n"},{"title":"Quick reverse mortgage planning tips","thumb":null,"image":null,"content":"<p>Before you make up your mind about pursuing a reverse mortgage, take a minute to make sure you&#8217;re starting out on the right foot. Having a strong foundation will make your loan process much easier, both for you and for the professionals involved.</p>\n<p>For the best planning, follow these tips:</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\"><b>Know all you can about reverse mortgages before you walk into your counselor&#8217;s or originator&#8217;s office.</b> It pays to be well-informed, and you&#8217;ll be more relaxed when you know what to expect.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Make sure you qualify for the loan (you&#8217;re at least 62 and own your home).</b> When in doubt, just go for it. It never hurts to go talk to the counselor, and if you don&#8217;t qualify the counselor may know of another program that can solve your financial situation.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Get to know the loan options.</b> Read about each one, and consider which works best for you based on your home value, county, and age. Get your family&#8217;s input as well, but always do what feels right to you. After all, it&#8217;s your loan.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Plan your repayment carefully.</b> Don&#8217;t leave this important step to the last minute or unresolved for your heirs. Lay out a plan and be sure to record it in your will. Talk to your family about their future responsibilities.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>When you go to your counselor meeting, take along a friend or family member who can help you take notes, ask additional questions, and weigh in afterward.</b> Sometimes it helps to have someone there to bounce options off of, or just hold your hand while your counselor explains your choices.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Get your money&#8217;s worth out of your originator.</b> Ask as many questions as you can think of, call if anything comes up before or after the loan closes, and feel free to ask for help along the way. You&#8217;re paying for their services — make it count.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Before your appraiser arrives, spruce up your house (within reason).</b> Give everything a good scrubbing and fix the little things that are broken. Try to look at your home from an appraiser&#8217;s point of view and be realistic in your expectations of your home&#8217;s value.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>If you&#8217;re an adult child of someone who&#8217;s thinking of getting a reverse mortgage, find out all you can about the loan, and be a part of the process if your parent allows it.</b></p>\n</li>\n<li>\n<p class=\"first-para\"><b>If you&#8217;re a baby boomer, start planning now!</b> Pay off as much of your current mortgage as you can afford, and get your home ready to be a retirement paradise.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Most importantly, if you ever have questions or don&#8217;t feel comfortable with some part of the loan, stop!</b> Ask questions and get them resolved before you move on.</p>\n</li>\n</ul>\n"}],"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"Two years","lifeExpectancySetFrom":"2022-04-18T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":207693},{"headers":{"creationTime":"2016-03-27T16:57:28+00:00","modifiedTime":"2022-04-15T17:01:33+00:00","timestamp":"2022-04-15T18:01:06+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Loans & Credit","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34301"},"slug":"loans-credit","categoryId":34301},{"name":"Bankruptcy","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34302"},"slug":"bankruptcy","categoryId":34302}],"title":"Personal Bankruptcy Laws For Dummies Cheat Sheet","strippedTitle":"personal bankruptcy laws for dummies cheat sheet","slug":"personal-bankruptcy-laws-for-dummies-cheat-sheet","canonicalUrl":"","seo":{"metaDescription":"Filing for personal bankruptcy means answering questions about your finances, figuring out which bills to continue paying, and more.","noIndex":0,"noFollow":0},"content":"Going through the process of filing personal bankruptcy isn't fun, but it’s sometimes necessary and can be a huge relief. Filing for personal bankruptcy means you have to answer some tough questions about your finances, consider your situation in light of the new bankruptcy law, figure out which bills to continue paying, and probably deal with debt collectors.","description":"Going through the process of filing personal bankruptcy isn't fun, but it’s sometimes necessary and can be a huge relief. Filing for personal bankruptcy means you have to answer some tough questions about your finances, consider your situation in light of the new bankruptcy law, figure out which bills to continue paying, and probably deal with debt collectors.","blurb":"","authors":[{"authorId":10504,"name":"James P. Caher","slug":"james-p-caher","description":"James P. Caher, a practicing attorney with 30 years of experience, is a nationally recognized expert on consumer bankruptcies and authority on the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. He is the coauthor of Debt Free! Your Guide to Personal Bankruptcy Without Shame, Discharging Marital Obligations in Bankruptcy, and Discharging Credit Card Debts in Bankruptcy. Caher also serves on the editorial board of the American Bankruptcy Institute.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/10504"}},{"authorId":10505,"name":"John M. Caher","slug":"john-m-caher","description":"John M. Caher is a legal journalist who has written about law and the courts for over 25 years. Currently the Albany bureau chief for the New York Law Journal, Caher previously was state editor and legal affairs reporter for the Times Union of Albany. His legal reportage has won more than two dozen awards, including honors from the American Bar Association, the New York State Bar Association, and the Associated Press. He is the author of King of the Mountain: The Rise, Fall and Redemption of Chief Judge Sol Wachtler, and the principal writer assisting former U.S. Treasury Secretary William E. Simon with his autobiography, A Time for Reflection.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/10505"}}],"primaryCategoryTaxonomy":{"categoryId":34302,"title":"Bankruptcy","slug":"bankruptcy","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34302"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[{"articleId":202970,"title":"Filing for Personal Bankruptcy as Chapter 7 or Chapter 13","slug":"filing-for-personal-bankruptcy-as-chapter-7-or-chapter-13","categoryList":["business-careers-money","personal-finance","loans-credit","bankruptcy"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/202970"}},{"articleId":202868,"title":"Selecting a Broker for Your Personal Finance Transactions","slug":"selecting-a-broker-for-your-personal-finance-transactions","categoryList":["business-careers-money","personal-finance","loans-credit","bankruptcy"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/202868"}},{"articleId":194297,"title":"What Bills to Pay First when Considering Personal Bankruptcy","slug":"what-bills-to-pay-first-when-considering-personal-bankruptcy","categoryList":["business-careers-money","personal-finance","loans-credit","bankruptcy"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/194297"}},{"articleId":194293,"title":"How to Deal with Debt Collectors during Personal Bankruptcy","slug":"how-to-deal-with-debt-collectors-during-personal-bankruptcy","categoryList":["business-careers-money","personal-finance","loans-credit","bankruptcy"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/194293"}},{"articleId":194289,"title":"Questions to Answer when Considering Personal Bankruptcy","slug":"questions-to-answer-when-considering-personal-bankruptcy","categoryList":["business-careers-money","personal-finance","loans-credit","bankruptcy"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/194289"}}],"fromCategory":[{"articleId":202970,"title":"Filing for Personal Bankruptcy as Chapter 7 or Chapter 13","slug":"filing-for-personal-bankruptcy-as-chapter-7-or-chapter-13","categoryList":["business-careers-money","personal-finance","loans-credit","bankruptcy"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/202970"}},{"articleId":202868,"title":"Selecting a Broker for Your Personal Finance Transactions","slug":"selecting-a-broker-for-your-personal-finance-transactions","categoryList":["business-careers-money","personal-finance","loans-credit","bankruptcy"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/202868"}},{"articleId":194297,"title":"What Bills to Pay First when Considering Personal Bankruptcy","slug":"what-bills-to-pay-first-when-considering-personal-bankruptcy","categoryList":["business-careers-money","personal-finance","loans-credit","bankruptcy"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/194297"}},{"articleId":194293,"title":"How to Deal with Debt Collectors during Personal Bankruptcy","slug":"how-to-deal-with-debt-collectors-during-personal-bankruptcy","categoryList":["business-careers-money","personal-finance","loans-credit","bankruptcy"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/194293"}},{"articleId":194289,"title":"Questions to Answer when Considering Personal Bankruptcy","slug":"questions-to-answer-when-considering-personal-bankruptcy","categoryList":["business-careers-money","personal-finance","loans-credit","bankruptcy"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/194289"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":282454,"slug":"personal-bankruptcy-laws-for-dummies-2nd-edition","isbn":"9780471773801","categoryList":["business-careers-money","personal-finance","loans-credit","bankruptcy"],"amazon":{"default":"https://www.amazon.com/gp/product/0471773808/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/0471773808/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/0471773808-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/0471773808/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/0471773808/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/personal-bankruptcy-laws-for-dummies-2nd-edition-cover-9780471773801-201x255.jpg","width":201,"height":255},"title":"Personal Bankruptcy Laws For Dummies, 2nd Edition","testBankPinActivationLink":"","bookOutOfPrint":false,"authorsInfo":"\n <b data-author-id=\"10504\">James P. Caher,</b> a practicing attorney with 30 years of experience, is a nationally recognized expert on consumer bankruptcies and authority on the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.<br> Jim coauthored, with his brother John, <i>Debt Free! Your Guide to Personal Bankruptcy Without Shame</i> (Henry Holt, 1996) and two highly regarded books for lawyers: <i>Discharging Marital Obligations in Bankruptcy</i> (LRP, 1997) and <i>Discharging Credit Card Debts in Bankruptcy</i> (LRP, 1998).<br> In addition, Jim has published scores of articles for bankruptcy professionals and is frequently called upon to analyze and interpret the complicated provisions of the 2005 bankruptcy law. He was labeled the “online guru” by a national legal weekly because of his regular appearances on the Internet as an expert analyst on bankruptcy law. Jim also serves on the editorial board of the American Bankruptcy Institute.<br> Jim graduated from Niagara University and then earned his law degree from Memphis State University Law School, where he was a member of the Law Review and recipient of the American Jurisprudence Award for Excellence in the field of debtor-creditor relations. He filed his first consumer bankruptcy case shortly after graduating in 1975. Jim lives and practices in Eugene, Oregon. <p><b data-author-id=\"10505\">John M. Caher</b> is a legal journalist who has written about law and the courts for most of his 25-year career.<br> Currently the Albany bureau chief for the <i>New York Law Journal</i>, John previously was state editor and legal affairs reporter for the <i>Times Union</i> of Albany, New York. His legal reportage has won more than two dozen awards, including prestigious honors from the American Bar Association, the New York State Bar Association, the Erie County Bar Association, and the Associated Press.<br> John coauthored, with his brother Jim, <i>Debt Free! Your Guide to Personal Bankruptcy Without Shame</i> (Henry Holt, 1996). He is the author of <i>King of the Mountain: The Rise, Fall and Redemption of Chief Judge Sol Wachtler</i> (Prometheus Books, 1998). In addition, John was the principal writer assisting former U.S. Treasury Secretary William E. Simon in preparation of his memoirs. Mr. Simon’s autobiography, <i>A Time for Reflection,</i> was published in 2003 by Regnery.<br> John is a 1980 graduate of Utica College of Syracuse University, where he received his bachelor’s degree in journalism, and a 1993 graduate of Rensselaer Polytechnic Institute, where he earned a master’s degree in technical communications/graphics. John lives in Clifton Park, New York.</p> ","authors":[{"authorId":10504,"name":"James P. Caher","slug":"james-p-caher","description":"James P. Caher, a practicing attorney with 30 years of experience, is a nationally recognized expert on consumer bankruptcies and authority on the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. He is the coauthor of Debt Free! Your Guide to Personal Bankruptcy Without Shame, Discharging Marital Obligations in Bankruptcy, and Discharging Credit Card Debts in Bankruptcy. Caher also serves on the editorial board of the American Bankruptcy Institute.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/10504"}},{"authorId":10505,"name":"John M. Caher","slug":"john-m-caher","description":"John M. Caher is a legal journalist who has written about law and the courts for over 25 years. Currently the Albany bureau chief for the New York Law Journal, Caher previously was state editor and legal affairs reporter for the Times Union of Albany. His legal reportage has won more than two dozen awards, including honors from the American Bar Association, the New York State Bar Association, and the Associated Press. He is the author of King of the Mountain: The Rise, Fall and Redemption of Chief Judge Sol Wachtler, and the principal writer assisting former U.S. Treasury Secretary William E. Simon with his autobiography, A Time for Reflection.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/10505"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;loans-credit&quot;,&quot;bankruptcy&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9780471773801&quot;]}]\" id=\"du-slot-6259b2e21aebf\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;loans-credit&quot;,&quot;bankruptcy&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9780471773801&quot;]}]\" id=\"du-slot-6259b2e21b3ee\"></div></div>"},"articleType":{"articleType":"Cheat Sheet","articleList":[{"articleId":194278,"title":"What the Newest Bankruptcy Law Means to You","slug":"what-the-newest-bankruptcy-law-means-to-you","categoryList":["business-careers-money","personal-finance","loans-credit","bankruptcy"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/194278"}},{"articleId":194289,"title":"Questions to Answer when Considering Personal Bankruptcy","slug":"questions-to-answer-when-considering-personal-bankruptcy","categoryList":["business-careers-money","personal-finance","loans-credit","bankruptcy"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/194289"}},{"articleId":194297,"title":"What Bills to Pay First when Considering Personal Bankruptcy","slug":"what-bills-to-pay-first-when-considering-personal-bankruptcy","categoryList":["business-careers-money","personal-finance","loans-credit","bankruptcy"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/194297"}},{"articleId":194293,"title":"How to Deal with Debt Collectors during Personal Bankruptcy","slug":"how-to-deal-with-debt-collectors-during-personal-bankruptcy","categoryList":["business-careers-money","personal-finance","loans-credit","bankruptcy"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/194293"}}],"content":[{"title":"Questions to answer when considering personal bankruptcy","thumb":null,"image":null,"content":"<p>If you&#8217;re thinking about personal bankruptcy, you&#8217;re looking at some hard questions and harder choices. Answer the questions in the following list to figure out whether you should consider bankruptcy and what type:</p>\n<ol class=\"level-one\">\n<li>\n<p class=\"first-para\">Can you pay off your debts (except mortgages) within three years while maintaining an objectively tolerable standard of living?</p>\n<p class=\"child-para\"><b>YES:</b> Congratulations! You&#8217;re probably on fairly solid financial footing.</p>\n<p class=\"child-para\"><b>NO:</b> Consider bankruptcy. Depending on your circumstances, your options may be</p>\n<ol class=\"level-two\">\n<li>\n<p class=\"first-para\">Chapter 7, in which many of your debts are forgiven immediately and you surrender nonexempt property (96 percent of filers don&#8217;t lose any of their assets).</p>\n</li>\n<li>\n<p class=\"first-para\">Chapter 13, where you pay a portion of your debts over three to five years.</p>\n</li>\n</ol>\n</li>\n<li>\n<p class=\"first-para\"><b>Is your median income greater than the median income for your state?</b></p>\n<p class=\"child-para\"><b>YES:</b> Your repayment plan must run for five years if you go the Chapter 13 route. Your Chapter 7 may be dismissed if your debts are primarily consumer debts <i>and</i> you flunk the Means Test (see Step 5).</p>\n<p class=\"child-para\"><b>NO:</b> You automatically pass the Means Test. If you choose Chapter 13, your repayment plan can span only three years. The five-year repayment plan is not required (meaning that you&#8217;re not get stuck committing all of your disposable income to a repayment plan for five years).</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Do you have nonexempt property that you want to keep? Do you need time to catch up on your mortgage? Do you owe taxes or support obligations that you want to pay off over </b>time<b> without being hassled? </b></p>\n<p class=\"child-para\">It varies by state, but generally homesteads, pensions, cars, and household goods are exempt.</p>\n<p class=\"child-para\"><b>YES:</b> Consider Chapter 13 bankruptcy. If your income is greater than the median, you have to pay for five years. Otherwise, a three-plan is an option.</p>\n<p class=\"child-para\"><b>NO:</b> Consider Chapter 7 bankruptcy.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Are your </b>debts<b> primarily consumer debts and your income greater than the median?</b></p>\n<p class=\"child-para\"><b>YES:</b> Take the Means Test, outlined in Step 5.</p>\n<p class=\"child-para\"><b>NO:</b> Choose either Chapter 7 or Chapter 13 — whichever is more beneficial to you. See Chapter 4.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Do you pass </b>the<b> Means Test? </b></p>\n<p class=\"child-para\">Deduct the following monthly expenses from your gross monthly income:</p>\n<ol class=\"level-two\">\n<li>\n<p class=\"first-para\">IRS living, housing, and transportation expenses (excluding mortgage and car payments)</p>\n</li>\n<li>\n<p class=\"first-para\">Mandatory payroll deductions (taxes, FICA, and repayments on pension loan) and future support obligations</p>\n</li>\n<li>\n<p class=\"first-para\">Health insurance premiums</p>\n</li>\n<li>\n<p class=\"first-para\">Debt payments, such as regular mortgage and car payments, 1/60 of past due mortgage and car payments, and 1/60 of past due support obligations</p>\n</li>\n</ol>\n</li>\n<li>\n<p class=\"first-para\"><b>Is the difference between your monthly expenses and gross monthly income less than $100? (If the difference is more, proceed to Step 7.)</b></p>\n<p class=\"child-para\"><b>YES:</b> You pass the Means Test and may choose between Chapter 7 and Chapter 13.</p>\n<p class=\"child-para\"><b>NO:</b> You <i>may</i> be restricted to Chapter 13.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Is the difference between your monthly expenses and gross monthly income between $100 </b>and<b> $166.66 per month and less than 25 percent of your unsecured nonpriority debts (regular obligations such as credit cards and medical bills divided by 60)?</b></p>\n<p class=\"child-para\"><b>YES:</b> You pass the Means Test.</p>\n<p class=\"child-para\"><b>NO:</b> You&#8217;re limited to Chapter 13.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Is the </b>difference<b> between your monthly expenses and gross monthly income more than $166.67 per month? </b></p>\n<p class=\"child-para\"><b>YES:</b> You&#8217;re limited to Chapter 13.</p>\n<p class=\"child-para\"><b>NO:</b> Choose between Chapter 7 or Chapter 13 — whichever is more beneficial to you.</p>\n</li>\n</ol>\n"},{"title":"What bills to pay first when considering personal bankruptcy","thumb":null,"image":null,"content":"<p>If filing for personal bankruptcy is on your radar, continue paying whatever bills you can to stay within the law. Prioritize bill payments with the help of this list:</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\">Rent (unless you plan to move)</p>\n</li>\n<li>\n<p class=\"first-para\">Utilities</p>\n</li>\n<li>\n<p class=\"first-para\">Car (if you want to keep it)</p>\n</li>\n<li>\n<p class=\"first-para\">Mortgage (if you want to keep your home)</p>\n</li>\n<li>\n<p class=\"first-para\">Fines</p>\n</li>\n<li>\n<p class=\"first-para\">Child support and spousal support</p>\n</li>\n<li>\n<p class=\"first-para\">Income taxes</p>\n</li>\n</ul>\n"},{"title":"How to deal with debt collectors during personal bankruptcy","thumb":null,"image":null,"content":"<p>If you&#8217;re facing personal bankruptcy, you&#8217;ve probably heard from debt collectors. A debt collector&#8217;s job is to get you to pay their client&#8217;s debt, and they can be very inventive in finding ways to motivate you to do that. Debt collectors, however, are bound by laws, just as you are. What debt collectors can&#8217;t do include the following:</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\">Call you early in the morning, late at night, or at any other unreasonable time or place.</p>\n</li>\n<li>\n<p class=\"first-para\">Harass you.</p>\n</li>\n<li>\n<p class=\"first-para\">Contact you at work if your employer prohibits personal calls.</p>\n</li>\n<li>\n<p class=\"first-para\">Threaten you.</p>\n</li>\n<li>\n<p class=\"first-para\">Tell anyone (other than your spouse, lawyer, or cosigner) that you&#8217;re in debt.</p>\n</li>\n<li>\n<p class=\"first-para\">Bug you once you&#8217;ve told them to bug off.</p>\n</li>\n</ul>\n<p class=\"Remember\">If a debt collector breaks the rules, you have options: First, tell them you know what the Fair Debt Collection Practices Act is and how to use it. Then, use it by filing a complaint with the Federal Trade Commission, Correspondence Branch, 600 Pennsylvania NW, Washington, D.C., 20580.</p>\n"}],"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Solve","lifeExpectancy":"One year","lifeExpectancySetFrom":"2022-04-15T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":209274},{"headers":{"creationTime":"2016-03-27T16:56:28+00:00","modifiedTime":"2022-02-15T19:38:28+00:00","timestamp":"2022-02-24T17:07:32+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Loans & Credit","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34301"},"slug":"loans-credit","categoryId":34301},{"name":"Mortgages","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34306"},"slug":"mortgages","categoryId":34306}],"title":"Mortgages For Dummies Cheat Sheet","strippedTitle":"mortgages for dummies cheat sheet","slug":"mortgages-for-dummies-cheat-sheet","canonicalUrl":"","seo":{"metaDescription":"Owning real estate requires knowing about mortgages. Dig into the world of what's usually a homeowner's largest expense.","noIndex":0,"noFollow":0},"content":"If you own or want to own real estate, you need to understand mortgages. Unfortunately, for most of us, the mortgage field is jammed with jargon and fraught with fiscal pitfalls. For typical homeowners, the monthly mortgage payment is either their largest or, after income taxes, second-largest expense item.\r\n\r\nWhen you’re shopping for a mortgage, you could easily waste many hours and suffer financial losses by not getting the best loan possible. With the tips below, you can strive to become as knowledgeable as possible <i>before</i> you commit to a particular mortgage.","description":"If you own or want to own real estate, you need to understand mortgages. Unfortunately, for most of us, the mortgage field is jammed with jargon and fraught with fiscal pitfalls. For typical homeowners, the monthly mortgage payment is either their largest or, after income taxes, second-largest expense item.\r\n\r\nWhen you’re shopping for a mortgage, you could easily waste many hours and suffer financial losses by not getting the best loan possible. With the tips below, you can strive to become as knowledgeable as possible <i>before</i> you commit to a particular mortgage.","blurb":"","authors":[{"authorId":8975,"name":"Eric Tyson","slug":"eric-tyson","description":"Eric Tyson, MBA, is a personal finance writer, lecturer, and former management consultant to Fortune 500 financial service firms. He is the author or coauthor of more than 20 Dummies books on personal finance.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/8975"}},{"authorId":8976,"name":"Ray Brown","slug":"ray-brown","description":"Ray Brown is a real estate professional with more than four decades of hands-on experience and a public speaker on residential real estate topics.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/8976"}}],"primaryCategoryTaxonomy":{"categoryId":34306,"title":"Mortgages","slug":"mortgages","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34306"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[],"fromCategory":[{"articleId":251554,"title":"How to Improve Your Fico Score","slug":"improve-fico-score","categoryList":["business-careers-money","personal-finance","loans-credit","mortgages"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/251554"}},{"articleId":251551,"title":"How Does A Reverse Mortgage Work?","slug":"reverse-mortgage-work","categoryList":["business-careers-money","personal-finance","loans-credit","mortgages"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/251551"}},{"articleId":251548,"title":"How to Pay Off Mortgage Faster","slug":"pay-off-mortgage-faster","categoryList":["business-careers-money","personal-finance","loans-credit","mortgages"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/251548"}},{"articleId":251545,"title":"Not All Mortgage Insurance is Tax Deductible","slug":"not-mortgage-insurance-tax-deductible","categoryList":["business-careers-money","personal-finance","loans-credit","mortgages"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/251545"}},{"articleId":251542,"title":"Paying Off Mortgage Early vs Investing","slug":"paying-off-mortgage-early-vs-investing","categoryList":["business-careers-money","personal-finance","loans-credit","mortgages"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/251542"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":0,"slug":null,"isbn":null,"categoryList":null,"amazon":null,"image":null,"title":null,"testBankPinActivationLink":null,"bookOutOfPrint":false,"authorsInfo":null,"authors":null,"_links":null},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;loans-credit&quot;,&quot;mortgages&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[null]}]\" id=\"du-slot-6217bb54ac5a9\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;loans-credit&quot;,&quot;mortgages&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[null]}]\" id=\"du-slot-6217bb54acff0\"></div></div>"},"articleType":{"articleType":"Cheat Sheet","articleList":[{"articleId":192828,"title":"Mortgage Payment Calculator","slug":"mortgage-payment-calculator","categoryList":["business-careers-money","personal-finance","loans-credit","mortgages"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/192828"}},{"articleId":0,"title":"","slug":null,"categoryList":[],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/"}}],"content":[{"title":"Mortgage payment calculator","thumb":null,"image":null,"content":"<p>To calculate your monthly mortgage payment, simply multiply the relevant number from the table below by the size of your mortgage expressed in (divided by) thousands of dollars.</p>\n<p>For example, on a 30-year mortgage of $125,000 at 7.5 percent, you multiply 125 by 7.00 (from the table) to come up with an $875 monthly payment.</p>\n<table>\n<tbody>\n<tr>\n<th>Interest Rate (%)</th>\n<th>Term of Mortgage</th>\n<th></th>\n</tr>\n<tr>\n<td></td>\n<td><b>15 years</b></td>\n<td><b>30 years</b></td>\n</tr>\n<tr>\n<td>4</td>\n<td>7.40</td>\n<td>4.77</td>\n</tr>\n<tr>\n<td>4-1/8</td>\n<td>7.46</td>\n<td>4.85</td>\n</tr>\n<tr>\n<td>4-1/4</td>\n<td>7.52</td>\n<td>4.92</td>\n</tr>\n<tr>\n<td>4-3/8</td>\n<td>7.59</td>\n<td>4.99</td>\n</tr>\n<tr>\n<td>4-1/2</td>\n<td>7.65</td>\n<td>5.07</td>\n</tr>\n<tr>\n<td>4-5/8</td>\n<td>7.71</td>\n<td>5.14</td>\n</tr>\n<tr>\n<td>4-3/4</td>\n<td>7.78</td>\n<td>5.22</td>\n</tr>\n<tr>\n<td>4-7/8</td>\n<td>7.84</td>\n<td>5.29</td>\n</tr>\n<tr>\n<td>5</td>\n<td>7.91</td>\n<td>5.37</td>\n</tr>\n<tr>\n<td>5-1/8</td>\n<td>7.98</td>\n<td>5.45</td>\n</tr>\n<tr>\n<td>5-1/4</td>\n<td>8.04</td>\n<td>5.53</td>\n</tr>\n<tr>\n<td>5-3/8</td>\n<td>8.11</td>\n<td>5.60</td>\n</tr>\n<tr>\n<td>5-1/2</td>\n<td>8.18</td>\n<td>5.68</td>\n</tr>\n<tr>\n<td>5-5/8</td>\n<td>8.24</td>\n<td>5.76</td>\n</tr>\n<tr>\n<td>5-3/4</td>\n<td>8.31</td>\n<td>5.84</td>\n</tr>\n<tr>\n<td>5-7/8</td>\n<td>8.38</td>\n<td>5.92</td>\n</tr>\n<tr>\n<td>6</td>\n<td>8.44</td>\n<td>6.00</td>\n</tr>\n<tr>\n<td>6-1/8</td>\n<td>8.51</td>\n<td>6.08</td>\n</tr>\n<tr>\n<td>6-1/4</td>\n<td>8.58</td>\n<td>6.16</td>\n</tr>\n<tr>\n<td>6-3/8</td>\n<td>8.65</td>\n<td>6.24</td>\n</tr>\n<tr>\n<td>6-1/2</td>\n<td>8.72</td>\n<td>6.33</td>\n</tr>\n<tr>\n<td>6-5/8</td>\n<td>8.78</td>\n<td>6.41</td>\n</tr>\n<tr>\n<td>6-3/4</td>\n<td>8.85</td>\n<td>6.49</td>\n</tr>\n<tr>\n<td>6 -/8</td>\n<td>8.92</td>\n<td>6.57</td>\n</tr>\n<tr>\n<td>7</td>\n<td>8.99</td>\n<td>6.66</td>\n</tr>\n<tr>\n<td>7-1/8</td>\n<td>9.06</td>\n<td>6.74</td>\n</tr>\n<tr>\n<td>7-1/4</td>\n<td>9.13</td>\n<td>6.83</td>\n</tr>\n<tr>\n<td>7-3/8</td>\n<td>9.20</td>\n<td>6.91</td>\n</tr>\n<tr>\n<td>7-1/2</td>\n<td>9.28</td>\n<td>7.00</td>\n</tr>\n<tr>\n<td>7-5/8</td>\n<td>9.35</td>\n<td>7.08</td>\n</tr>\n<tr>\n<td>7-3/4</td>\n<td>9.42</td>\n<td>7.17</td>\n</tr>\n<tr>\n<td>7-7/8</td>\n<td>9.49</td>\n<td>7.26</td>\n</tr>\n<tr>\n<td>8</td>\n<td>9.56</td>\n<td>7.34</td>\n</tr>\n<tr>\n<td>8-1/8</td>\n<td>9.63</td>\n<td>7.43</td>\n</tr>\n<tr>\n<td>8-1/4</td>\n<td>9.71</td>\n<td>7.52</td>\n</tr>\n<tr>\n<td>8-3/8</td>\n<td>9.78</td>\n<td>7.61</td>\n</tr>\n<tr>\n<td>8-1/2</td>\n<td>9.85</td>\n<td>7.69</td>\n</tr>\n<tr>\n<td>8-5/8</td>\n<td>9.93</td>\n<td>7.78</td>\n</tr>\n<tr>\n<td>8-3/4</td>\n<td>10.00</td>\n<td>7.87</td>\n</tr>\n<tr>\n<td>8-7/8</td>\n<td>10.07</td>\n<td>7.96</td>\n</tr>\n<tr>\n<td>9</td>\n<td>10.15</td>\n<td>8.05</td>\n</tr>\n<tr>\n<td>9-1/8</td>\n<td>10.22</td>\n<td>8.14</td>\n</tr>\n<tr>\n<td>9-1/4</td>\n<td>10.30</td>\n<td>8.23</td>\n</tr>\n<tr>\n<td>9-3/8</td>\n<td>10.37</td>\n<td>8.32</td>\n</tr>\n<tr>\n<td>9-1/2</td>\n<td>10.45</td>\n<td>8.41</td>\n</tr>\n<tr>\n<td>9-5/8</td>\n<td>10.52</td>\n<td>8.50</td>\n</tr>\n<tr>\n<td>9-3/4</td>\n<td>10.60</td>\n<td>8.60</td>\n</tr>\n<tr>\n<td>9-7/8</td>\n<td>10.67</td>\n<td>8.69</td>\n</tr>\n<tr>\n<td>10</td>\n<td>10.75</td>\n<td>8.78</td>\n</tr>\n<tr>\n<td>10-1/8</td>\n<td>10.83</td>\n<td>8.87</td>\n</tr>\n<tr>\n<td>10-1/4</td>\n<td>10.90</td>\n<td>8.97</td>\n</tr>\n<tr>\n<td>10-3/8</td>\n<td>10.98</td>\n<td>9.06</td>\n</tr>\n<tr>\n<td>10-1/2</td>\n<td>11.06</td>\n<td>9.15</td>\n</tr>\n<tr>\n<td>10-5/8</td>\n<td>11.14</td>\n<td>9.25</td>\n</tr>\n<tr>\n<td>10-3/4</td>\n<td>11.21</td>\n<td>9.34</td>\n</tr>\n<tr>\n<td>10-7/8</td>\n<td>11.29</td>\n<td>9.43</td>\n</tr>\n<tr>\n<td>11</td>\n<td>11.37</td>\n<td>9.53</td>\n</tr>\n<tr>\n<td>11-1/4</td>\n<td>11.53</td>\n<td>9.72</td>\n</tr>\n<tr>\n<td>11-1/2</td>\n<td>11.69</td>\n<td>9.91</td>\n</tr>\n<tr>\n<td>11-3/4</td>\n<td>11.85</td>\n<td>10.10</td>\n</tr>\n<tr>\n<td>12</td>\n<td>12.01</td>\n<td>10.29</td>\n</tr>\n<tr>\n<td>12-1/4</td>\n<td>12.17</td>\n<td>10.48</td>\n</tr>\n<tr>\n<td>12-1/2</td>\n<td>12.17</td>\n<td>10.48</td>\n</tr>\n</tbody>\n</table>\n<p class=\"article-tips warning\">Mortgage payments are only a portion of the costs of owning a home.</p>\n"},{"title":"Top tips for borrowers","thumb":null,"image":null,"content":"<ul class=\"level-one\">\n<li>\n<p class=\"first-para\">Before you get a mortgage, be sure you understand your personal financial situation. The amount of money a banker is willing to lend you isn’t necessarily the amount you can “afford” to borrow given your financial goals and current situation.</p>\n</li>\n<li>\n<p class=\"first-para\">Maximize your chances for getting the mortgage you want the first time you apply by understanding how lenders evaluate your creditworthiness. Don’t waste time and money on loans that end up rejected. Most obstacles to mortgage qualification can and should be overcome prior to submitting a loan application.</p>\n</li>\n<li>\n<p class=\"first-para\">Because the ocean of mortgage programs is bordered with reefs of jargon, learn loan lingo before you begin your mortgage-shopping voyage. This will enable you to hook the best loan and avoid being taken in by loan sharks.</p>\n</li>\n<li>\n<p class=\"first-para\">To select the best type of fixed-rate or adjustable-rate mortgage for your situation, clarify two important issues. How long do you expect to keep the loan? How much financial risk are you able to accept?</p>\n</li>\n<li>\n<p class=\"first-para\">Special situation loans — such as a home equity loan or 80-10-10 financing — could be just what you need. However, some “special” loans, such as 100 percent loans and balloon loans, can be toxic.</p>\n</li>\n<li>\n<p class=\"first-para\">Whether you do it yourself or hire a mortgage broker to shop for you, canvas a variety of lenders when seeking the best mortgage. Be sure to shop not only for a low-cost loan but also for lenders that provide a high level of service.</p>\n</li>\n<li>\n<p class=\"first-para\">Investigate when shopping for a mortgage on the internet. Be cautious. You may save time and money. Or you could end up with aggravation and a worse loan.</p>\n</li>\n<li>\n<p class=\"first-para\">Compare various lenders’ mortgage programs and understand the myriad costs and features associated with each loan.</p>\n</li>\n<li>\n<p class=\"first-para\">Just as you must prepare a compelling resume as the first step to securing a job you want, crafting a positive, truthful mortgage application is a key to getting the loan you want.</p>\n</li>\n<li>\n<p class=\"first-para\">After you get a mortgage to purchase a home, stay informed about interest rates, because a drop in rates could provide a money-saving opportunity. Refinancing — that is, obtaining a new mortgage to replace an existing one — can save you big money. Assess how long it will take you to recoup your out-of-pocket refinance costs.</p>\n</li>\n<li>\n<p class=\"first-para\">If you’re among the increasing number of homeowners who reach retirement with insufficient assets for their golden years, carefully consider a reverse mortgage, which enables older homeowners to tap their home’s equity. Reverse mortgages are more complicated to understand than traditional mortgages, so explore them with caution.</p>\n</li>\n<li>\n<p class=\"first-para\">If you fall on tough economic times and get behind on your housing payments, don’t resign yourself to foreclosure. Take stock of the situation. Review your spending and debts and begin a dialogue with your lender to find a solution. Make use of low-cost counseling approved by the United States Department of Housing and Urban Development.</p>\n</li>\n</ul>\n"}],"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"One year","lifeExpectancySetFrom":"2022-02-14T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":209068},{"headers":{"creationTime":"2016-03-26T23:10:53+00:00","modifiedTime":"2021-10-21T14:42:47+00:00","timestamp":"2022-02-24T17:07:04+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Loans & Credit","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34301"},"slug":"loans-credit","categoryId":34301},{"name":"Debt","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34305"},"slug":"debt","categoryId":34305}],"title":"Comparing Credit Card Terms before Accepting Card Offers","strippedTitle":"comparing credit card terms before accepting card offers","slug":"comparing-credit-card-terms-before-accepting-card-offers","canonicalUrl":"","seo":{"metaDescription":"Credit cards can be confusing, sometimes by design! Learn the basics of fees, grace periods, and APRs before you commit.","noIndex":0,"noFollow":0},"content":"<p class=\"ReviewDate\">The federal Truth in Lending Act makes it easy to compare credit card offers, because it requires credit card companies to provide written information about the credit card terms. Do a comparison of credit cards fees, rates, APRs, and balance calculation methods before you accept even a preapproved credit card.</p>\r\n\r\n\r\n[caption id=\"attachment_288935\" align=\"alignnone\" width=\"630\"]<img class=\"wp-image-288935 size-full\" src=\"https://www.dummies.com/wp-content/uploads/CreditCards.png\" alt=\"Hand holding multiple credit cards\" width=\"630\" height=\"354\" /> © Avery Evans / Unsplash.com[/caption]\r\n\r\nHere are some of the terms of credit that creditors must provide:\r\n<ul class=\"level-one\">\r\n \t<li>\r\n<p class=\"first-para\"><b>Annual percentage rate (APR):</b> This is the cost of the credit expressed as an annual rate. Pay close attention to a card’s default APR — the rate you end up paying if you make a payment late (or pay some other creditor late), you exceed your credit limit, or your credit score drops below a certain amount. Your APR could triple depending on the terms of the credit offer!</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>Balance calculation method: </b>When you carry a balance on your credit card, the credit card company figures out how much interest to add to that balance by using one of several different methods. Some methods cost you more in interest than others. The least expensive balance calculation methods are<i> </i>adjusted balance and average daily balance excluding new purchases. The most expensive are two-cycle average daily balance including new purchases and two-cycle average daily balance excluding new purchases.</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>Fees:</b> Credit card fees can be really costly, so look for cards that have few and low fees. Examples of common fees include an annual or membership fee, a late fee, a bounced check fee, a fee for exceeding your credit card limit, and a balance transfer fee. Believe it or not, some cards charge you a fee every time you use them or because you don’t use them often enough!</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>Grace period:</b> This is the amount of time you have to pay the full amount of your card balance after the end of the last billing cycle before you’re charged interest on the balance.<b> </b>The longer the grace period, the better; a 25-day grace period is probably the best you’ll do. Some cards have no grace period; avoid them if you expect to carry a balance on your credit card.</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>Periodic rate:</b> This is the rate of interest you’re charged each day on your card’s outstanding balance. If you expect that you may carry a balance on your credit card, get the lowest rate you can. The rate may be fixed or variable, but even a fixed rate isn’t truly fixed because a creditor can raise it at any time after it gives you 15 days notice. Also, pay attention to the interest rates that apply to balance transfers, cash advances, and other transactions you may make with a credit card. These rates won’t be the same as the periodic rate.</p>\r\n</li>\r\n</ul>","description":"<p class=\"ReviewDate\">The federal Truth in Lending Act makes it easy to compare credit card offers, because it requires credit card companies to provide written information about the credit card terms. Do a comparison of credit cards fees, rates, APRs, and balance calculation methods before you accept even a preapproved credit card.</p>\r\n\r\n\r\n[caption id=\"attachment_288935\" align=\"alignnone\" width=\"630\"]<img class=\"wp-image-288935 size-full\" src=\"https://www.dummies.com/wp-content/uploads/CreditCards.png\" alt=\"Hand holding multiple credit cards\" width=\"630\" height=\"354\" /> © Avery Evans / Unsplash.com[/caption]\r\n\r\nHere are some of the terms of credit that creditors must provide:\r\n<ul class=\"level-one\">\r\n \t<li>\r\n<p class=\"first-para\"><b>Annual percentage rate (APR):</b> This is the cost of the credit expressed as an annual rate. Pay close attention to a card’s default APR — the rate you end up paying if you make a payment late (or pay some other creditor late), you exceed your credit limit, or your credit score drops below a certain amount. Your APR could triple depending on the terms of the credit offer!</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>Balance calculation method: </b>When you carry a balance on your credit card, the credit card company figures out how much interest to add to that balance by using one of several different methods. Some methods cost you more in interest than others. The least expensive balance calculation methods are<i> </i>adjusted balance and average daily balance excluding new purchases. The most expensive are two-cycle average daily balance including new purchases and two-cycle average daily balance excluding new purchases.</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>Fees:</b> Credit card fees can be really costly, so look for cards that have few and low fees. Examples of common fees include an annual or membership fee, a late fee, a bounced check fee, a fee for exceeding your credit card limit, and a balance transfer fee. Believe it or not, some cards charge you a fee every time you use them or because you don’t use them often enough!</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>Grace period:</b> This is the amount of time you have to pay the full amount of your card balance after the end of the last billing cycle before you’re charged interest on the balance.<b> </b>The longer the grace period, the better; a 25-day grace period is probably the best you’ll do. Some cards have no grace period; avoid them if you expect to carry a balance on your credit card.</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>Periodic rate:</b> This is the rate of interest you’re charged each day on your card’s outstanding balance. If you expect that you may carry a balance on your credit card, get the lowest rate you can. The rate may be fixed or variable, but even a fixed rate isn’t truly fixed because a creditor can raise it at any time after it gives you 15 days notice. Also, pay attention to the interest rates that apply to balance transfers, cash advances, and other transactions you may make with a credit card. These rates won’t be the same as the periodic rate.</p>\r\n</li>\r\n</ul>","blurb":"","authors":[{"authorId":9148,"name":"John Ventura","slug":"john-ventura","description":"John Ventura was a small business owner, bestselling author, and board-certified bankruptcy attorney. He was also a national authority on consumer and small business financial and legal problems. He died in 2008.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9148"}},{"authorId":9149,"name":"Mary Reed","slug":"mary-reed","description":"Mary Reed is an author and journalist who has ghostwritten and coauthored several books on consumer law and money matters. She has also written for numerous publications.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9149"}}],"primaryCategoryTaxonomy":{"categoryId":34305,"title":"Debt","slug":"debt","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34305"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[{"articleId":208782,"title":"Managing Debt For Dummies Cheat Sheet","slug":"managing-debt-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","loans-credit","debt"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/208782"}},{"articleId":202971,"title":"Get Copies of Your Credit Reports","slug":"get-copies-of-your-credit-reports","categoryList":["business-careers-money","personal-finance","loans-credit","debt"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/202971"}},{"articleId":202964,"title":"Debt Collectors May Try to Cash In on Old Debts","slug":"debt-collectors-may-try-to-cash-in-on-old-debts","categoryList":["business-careers-money","personal-finance","loans-credit","debt"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/202964"}},{"articleId":202954,"title":"Ask Debt Collectors for Proof of Your Debt","slug":"ask-debt-collectors-for-proof-of-your-debt","categoryList":["business-careers-money","personal-finance","loans-credit","debt"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/202954"}},{"articleId":202952,"title":"Actively Oversee Your Debt Management Plan","slug":"actively-oversee-your-debt-management-plan","categoryList":["business-careers-money","personal-finance","loans-credit","debt"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/202952"}}],"fromCategory":[{"articleId":208782,"title":"Managing Debt For Dummies Cheat Sheet","slug":"managing-debt-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","loans-credit","debt"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/208782"}},{"articleId":207755,"title":"Debt Repair Kit For Dummies Cheat Sheet","slug":"debt-repair-kit-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","loans-credit","debt"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/207755"}},{"articleId":202971,"title":"Get Copies of Your Credit Reports","slug":"get-copies-of-your-credit-reports","categoryList":["business-careers-money","personal-finance","loans-credit","debt"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/202971"}},{"articleId":202964,"title":"Debt Collectors May Try to Cash In on Old Debts","slug":"debt-collectors-may-try-to-cash-in-on-old-debts","categoryList":["business-careers-money","personal-finance","loans-credit","debt"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/202964"}},{"articleId":202954,"title":"Ask Debt Collectors for Proof of Your Debt","slug":"ask-debt-collectors-for-proof-of-your-debt","categoryList":["business-careers-money","personal-finance","loans-credit","debt"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/202954"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":282374,"slug":"managing-debt-for-dummies","isbn":"9780470084861","categoryList":["business-careers-money","personal-finance","loans-credit","debt"],"amazon":{"default":"https://www.amazon.com/gp/product/0470084863/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/0470084863/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/0470084863-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/0470084863/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/0470084863/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/managing-debt-for-dummies-cover-9780470084861-168x255.jpg","width":168,"height":255},"title":"Managing Debt For Dummies","testBankPinActivationLink":"","bookOutOfPrint":false,"authorsInfo":"\n <b data-author-id=\"9148\">John Ventura:</b> John is a best-selling author and a nationally boardcertified bankruptcy attorney. He is also an adjunct professor at the University of Houston Law School and the director of the Texas Consumer Complaint Center at the Law School.<br> As a young boy, John dreamed of becoming a Catholic priest so he could help everyday people, and he spent his high school years in a Catholic seminary. After graduating, however, John decided to achieve his dream by combining journalism with the law. Therefore, he earned an undergraduate degree in journalism and a law degree from the University of Houston Law School. Later, he and a partner established a law firm in Texas, building it into one of the most successful consumer bankruptcy firms in the state. He subsequently began a successful consumer law firm in South Texas.<br> Today, as Director of the Texas Consumer Complaint Center, he supervises law students as they help consumers with their legal problems. He is also a regular speaker at law conferences around the country and serves on the Bankruptcy Council for the Texas Bar Association.<br> John is the author of 13 books on consumer and small business legal matters, including <i>Law For Dummies,</i> 2nd edition; <i>The Everyday Law Kit For Dummies; Divorce For Dummies,</i> 2nd edition; and <i>Good Advice for a Bad Economy</i> (Berkeley Books). John has been interviewed about consumer money matters by numerous national media including CNN, NBC, NPR, Bloomberg Television &amp; Radio, <i>The Wall Street Journal, USA Today, Newsweek, Kiplinger’s Personal Finance, Money, Inc. Martha Stewart’s Living, Bottomline, Entrepreneur,</i> Bankrate.com, CBSMarketWatch.com, and MSNMoney.com. In addition, his comments and advice have appeared in major newspapers around the country, and he has been a frequent guest on local radio programs. <p><b data-author-id=\"9149\">Mary Reed:</b> Mary Reed is a personal finance writer who has coauthored or ghostwritten numerous books on topics related to consumer money matters and legal rights. The books she has coauthored with John Ventura include <i>The Everyday Law Kit for Dummies, Divorce For Dummies,</i> and <i>Good Advice for a Bad Economy</i> (Berkeley Books). Mary has also written for the magazines <i>Good Housekeeping, Home Office Computing,</i> and <i>Small Business Computing,</i> and she has ghostwritten numerous articles that have appeared in national and local publications.<br> Mary is also the owner of Mary Reed Public Relations (MR•PR), an Austin, Texas-based firm that provides public relations services to a wide variety of clients, including authors, publishers, attorneys, financial planners, healthcare professionals, retailers, hotels, restaurants, and nonprofits.<br> Prior to starting her public relations business and writing career 20 years ago, she was vice president of marketing for a national market research firm, marketing director for a women’s healthcare organization, and public relations manager for <i>Texas Monthly,</i> a national award-winning magazine. She received her MBA from Boston University and her BA from Trinity University in Washington, DC.<br> In her free time, Mary serves on the board of a community development corporation in her neighborhood. She also enjoys long morning bike rides, road trips with her husband, gardening, working her way through the stack of books by her bed, taking care of her six cats, and spending time with her family and many friends.</p> ","authors":[{"authorId":9148,"name":"John Ventura","slug":"john-ventura","description":"John Ventura was a small business owner, bestselling author, and board-certified bankruptcy attorney. He was also a national authority on consumer and small business financial and legal problems. He died in 2008.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9148"}},{"authorId":9149,"name":"Mary Reed","slug":"mary-reed","description":"Mary Reed is an author and journalist who has ghostwritten and coauthored several books on consumer law and money matters. She has also written for numerous publications.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9149"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;loans-credit&quot;,&quot;debt&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9780470084861&quot;]}]\" id=\"du-slot-6217bb3891890\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;loans-credit&quot;,&quot;debt&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9780470084861&quot;]}]\" id=\"du-slot-6217bb3892241\"></div></div>"},"articleType":{"articleType":"Articles","articleList":null,"content":null,"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Solve","lifeExpectancy":"One year","lifeExpectancySetFrom":"2021-10-14T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":202961},{"headers":{"creationTime":"2016-03-27T16:48:14+00:00","modifiedTime":"2021-10-21T14:28:44+00:00","timestamp":"2022-02-24T17:07:04+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Loans & Credit","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34301"},"slug":"loans-credit","categoryId":34301},{"name":"Credit Reports","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34304"},"slug":"credit-reports","categoryId":34304}],"title":"Credit Repair Kit For Dummies Cheat Sheet","strippedTitle":"credit repair kit for dummies cheat sheet","slug":"credit-repair-kit-for-dummies-cheat-sheet","canonicalUrl":"","seo":{"metaDescription":"Learn how to get free copies of each of your credit reports, how to correct errors, and use some strategies to improve your credit score.","noIndex":0,"noFollow":0},"content":"Repairing your credit and keeping it in good standing is easier if you know what’s in your credit reports. Get a free copy of each of your credit reports every year and promptly correct any errors.\r\n\r\nImproving your credit also involves understanding how your credit score is calculated and how you can increase your score. If your credit is in trouble because you’re overextended or behind on payments, you have strategies at your disposal to help you get back on track.\r\n\r\n[caption id=\"attachment_288932\" align=\"alignnone\" width=\"630\"]<img class=\"wp-image-288932 size-full\" src=\"https://www.dummies.com/wp-content/uploads/CreditRepairKit.png\" alt=\"Man holding credit card typing on laptop\" width=\"630\" height=\"420\" /> © rupixen.com / Unsplash.com[/caption]","description":"Repairing your credit and keeping it in good standing is easier if you know what’s in your credit reports. Get a free copy of each of your credit reports every year and promptly correct any errors.\r\n\r\nImproving your credit also involves understanding how your credit score is calculated and how you can increase your score. If your credit is in trouble because you’re overextended or behind on payments, you have strategies at your disposal to help you get back on track.\r\n\r\n[caption id=\"attachment_288932\" align=\"alignnone\" width=\"630\"]<img class=\"wp-image-288932 size-full\" src=\"https://www.dummies.com/wp-content/uploads/CreditRepairKit.png\" alt=\"Man holding credit card typing on laptop\" width=\"630\" height=\"420\" /> © rupixen.com / Unsplash.com[/caption]","blurb":"","authors":[{"authorId":9218,"name":"Steve Bucci","slug":"steve-bucci","description":"","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9218"}}],"primaryCategoryTaxonomy":{"categoryId":34304,"title":"Credit Reports","slug":"credit-reports","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34304"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[],"fromCategory":[{"articleId":275982,"title":"The CARD Act: Shielding You from Credit Card Abuse","slug":"the-card-act-shielding-you-from-credit-card-abuse","categoryList":["business-careers-money","personal-finance","loans-credit","credit-reports"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/275982"}},{"articleId":275979,"title":"10 Consumer Credit Protections Everyone Needs to Know","slug":"10-consumer-credit-protections-everyone-needs-to-know","categoryList":["business-careers-money","personal-finance","loans-credit","credit-reports"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/275979"}},{"articleId":275976,"title":"10 Ways to Deal with a Mortgage Meltdown","slug":"10-ways-to-deal-with-a-mortgage-meltdown","categoryList":["business-careers-money","personal-finance","loans-credit","credit-reports"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/275976"}},{"articleId":275970,"title":"How Your Actions Impact Your Credit Score","slug":"how-your-actions-impact-your-credit-score","categoryList":["business-careers-money","personal-finance","loans-credit","credit-reports"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/275970"}},{"articleId":275965,"title":"Going Green: Treating Credit as a Renewable Resource","slug":"going-green-treating-credit-as-a-renewable-resource","categoryList":["business-careers-money","personal-finance","loans-credit","credit-reports"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/275965"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":282702,"slug":"credit-repair-kit-for-dummies-5th-edition","isbn":"9781119771067","categoryList":["business-careers-money","personal-finance","loans-credit","credit-reports"],"amazon":{"default":"https://www.amazon.com/gp/product/1119771064/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/1119771064/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/1119771064-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/1119771064/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/1119771064/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/credit-repair-kit-for-dummies-5th-edition-cover-9781119771067-203x255.jpg","width":203,"height":255},"title":"Credit Repair Kit For Dummies, 5th Edition","testBankPinActivationLink":"","bookOutOfPrint":true,"authorsInfo":"\n <p><b data-author-id=\"33476\">Melyssa Barrett</b> is vice president of identity solutions at Visa, Inc., where she creates products to detect and predict fraud within consumer credit, debit, and prepaid products. Steve Bucci, BA, MA, is a personal finance expert and a nationally syndicated columnist whose column is carried by the financial megasite Bankrate.com. Bucci served as president of several nonprofit organizations dedicated to helping the consumer wisely use credit. These include the Consumer Credit Counseling Service (CCCS) of Rhode Island, the CCCS of Southern New England, and the Money Management International Financial Education Foundation. <b data-author-id=\"33477\">Rod Griffin</b> is senior director of consumer education and advocacy for Experian, responsible for the company's national consumer education programs and outreach.</p>","authors":[{"authorId":33476,"name":"Melyssa Barrett","slug":"melyssa-barrett","description":"Melyssa Barrett is vice president of identity solutions at Visa, Inc., where she creates products to detect and predict fraud within consumer credit, debit, and prepaid products. ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/33476"}},{"authorId":10481,"name":"Stephen R. Bucci","slug":"stephen-r-bucci","description":"Steve Bucci, BA, MA, is a personal finance expert and a nationally syndicated columnist whose column is carried by the financial megasite Bankrate.com. Bucci served as president of several nonprofit organizations dedicated to helping the consumer wisely use credit. These include the Consumer Credit Counseling Service (CCCS) of Rhode Island, the CCCS of Southern New England, and the Money Management International Financial Education Foundation.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/10481"}},{"authorId":33477,"name":"Rod Griffin","slug":"rod-griffin","description":"Rod Griffin is senior director of consumer education and advocacy for Experian, responsible for the company's national consumer education programs and outreach.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/33477"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[{"title":"Make a Commitment to Better Yourself","slug":"make-a-commitment-to-better-yourself","collectionId":290164}],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;loans-credit&quot;,&quot;credit-reports&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119771067&quot;]}]\" id=\"du-slot-6217bb388906e\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;loans-credit&quot;,&quot;credit-reports&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119771067&quot;]}]\" id=\"du-slot-6217bb3889a31\"></div></div>"},"articleType":{"articleType":"Cheat Sheet","articleList":[{"articleId":155082,"title":"Contacting the Big-Three Credit Bureaus for Your Credit Report","slug":"contacting-the-big-three-credit-bureaus-for-your-credit-report","categoryList":["business-careers-money","personal-finance","loans-credit","credit-reports"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/155082"}},{"articleId":155124,"title":"How to Handle an Overdue Mortgage","slug":"how-to-handle-an-overdue-mortgage","categoryList":["business-careers-money","personal-finance","loans-credit","credit-reports"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/155124"}},{"articleId":155126,"title":"What Makes Up Your Credit Score","slug":"what-makes-up-your-credit-score","categoryList":["business-careers-money","personal-finance","loans-credit","credit-reports"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/155126"}},{"articleId":155125,"title":"8 Tips for a Top Credit Score","slug":"8-tips-for-a-top-credit-score","categoryList":["business-careers-money","personal-finance","loans-credit","credit-reports"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/155125"}}],"content":[{"title":"How to get your credit report from the big three credit bureaus","thumb":null,"image":null,"content":"<p>Examining your credit reports closely is important because the reports may contain errors, and those errors can affect what interest rates you receive, what jobs or promotions you get, and how much you pay for insurance. You want to correct any erroneous, incomplete, or out-of-date information as quickly as possible. Reviewing your credit reports regularly also helps you spot identity theft early. Here’s the contact info for the big three credit bureaus:</p>\n<ul>\n<li><a href=\"https://www.equifax.com/\" target=\"_blank\" rel=\"noopener\"><strong>Equifax</strong></a><strong>, </strong>P.O. Box 740241, Atlanta, GA, 30374 (phone: 800-685-1111)</li>\n<li><a href=\"https://www.experian.com/\" target=\"_blank\" rel=\"noopener\"><strong>Experian</strong></a><strong>, </strong>P.O. Box 2104, Allen, TX, 75013-2104 (phone: 866-200-6020)</li>\n<li><a href=\"https://www.transunion.com/\" target=\"_blank\" rel=\"noopener\"><strong>TransUnion</strong></a><strong>, </strong>2 Baldwin Place, P.O. Box 1000, Chester, PA, 19022-1000 (phone: 800-888-4213)</li>\n</ul>\n<p>You’re entitled to at least one free copy of your credit report each year from each of the three bureaus — more than one if you’re unemployed. Whether you get a copy from one bureau every four months or all three at once, you can order your free annual reports from the <a href=\"https://www.annualcreditreport.com/\" target=\"_blank\" rel=\"noopener\">Annual Credit Report Request Service</a>, P.O. Box 105283, Atlanta, GA, 30348-5283 (phone: 877-322-8228).</p>\n"},{"title":"How to handle an overdue mortgage","thumb":null,"image":null,"content":"<p>Falling behind on your mortgage payments can put you in a financial bind and, in the worst-case scenario, lead to foreclosure. It’s essential to act quickly, even if you’re uncomfortable doing so. Fortunately, you do have options to help you if your mortgage is past due. Here are some ideas to consider:</p>\n<ul>\n<li><strong>Call your lender or mortgage servicer immediately if you’re going to be late with a payment.</strong> The worst thing you can do is nothing. After you’re late, your grace period disappears, so a foreclosure action may be two weeks closer than you think.</li>\n<li><strong>Contact a HUD-certified counseling agency for more options.</strong> Contact the <a href=\"https://www.hud.gov/topics/avoiding_foreclosure\" target=\"_blank\" rel=\"noopener\">Department of Housing and Urban Development (HUD)</a>, <a href=\"https://995hope.org/\" target=\"_blank\" rel=\"noopener\">995Hope</a>, or <a href=\"https://www.moneymanagement.org/housing\" target=\"_blank\" rel=\"noopener\">Money Management International</a>. A HUD-certified counselor can advise you for free, help you work with your mortgage servicer, and refer you to local resources that you may not know about.</li>\n<li><strong>Don’t allow your mortgage to become 90 days past due.</strong> Partial payments may not be accepted after 90 days.</li>\n<li><strong>Think twice about strategic default. </strong>If you owe a great deal more on your mortgage than your home is worth and you’re considering walking away from your home, research the many negatives before mailing in your keys.</li>\n<li><strong>Find out your alternatives to foreclosure.</strong> Find options at the <a href=\"http://www.ftc.gov/bcp/edu/pubs/consumer/homes/rea04.shtm\" target=\"_blank\" rel=\"noopener\">Federal Trade Commission</a> or <a href=\"https://www.hud.gov/\" target=\"_blank\" rel=\"noopener\">HUD</a>.</li>\n</ul>\n<p>The Further Consolidated Appropriations Act of 2020 included tax relief when a lender forgives mortgage debt. It replaced the Mortgage Forgiveness Debt Relief Act. In brief, taxes may be forgiven on mortgage debt that is discharged in 2021, provided a written agreement was entered into in 2020.</p>\n<p>Although not everyone is eligible, if you qualify, you and your spouse can avoid taxes on up to $2 million of forgiven mortgage debt. No one wants to pay taxes if they don’t have to! The <a href=\"https://www.irs.gov/newsroom/home-foreclosure-and-debt-cancellation\" target=\"_blank\" rel=\"noopener\">Internal Revenue Service</a> offers more information on this important act for homeowners.</p>\n"},{"title":"What makes up your credit score","thumb":null,"image":null,"content":"<p>The two major credit scoring models are <a href=\"https://www.myfico.com/\" target=\"_blank\" rel=\"noopener\">FICO</a> and <a href=\"https://www.vantagescore.com/\" target=\"_blank\" rel=\"noopener\">VantageScore</a>. The FICO score is better known, but VantageScore is gaining in usage every year. The components and weightings that are used to calculate credit scores are different for each model. Knowing how the scores are computed enables you to take actions to maximize your score.</p>\n<ul>\n<li><strong>FICO</strong>\n<ul>\n<li>Payment history (35 percent)</li>\n<li>Amount and type of debt (30 percent)</li>\n<li>Length of time you’ve been using credit (15 percent)</li>\n<li>Variety of accounts (10 percent)</li>\n<li>Number and types of new accounts and credit increase requests (generally in the last six months or so) (10 percent)</li>\n</ul>\n</li>\n<li><strong>VantageScore</strong>\n<ul>\n<li>Total credit usage, balance, and available credit (extremely influential)</li>\n<li>Credit mix and experience (highly influential)</li>\n<li>Payment history (moderately influential)</li>\n<li>Age of credit history (less influential)</li>\n<li>New accounts (less influential)</li>\n</ul>\n</li>\n</ul>\n"},{"title":"How to earn a top credit score","thumb":null,"image":null,"content":"<p>Building good credit takes time. Follow these tips to get a great credit score the first time around or, if you’ve made some mistakes, to recover in the shortest time possible.</p>\n<ul>\n<li><strong>Clean up your credit reports every year.</strong> Use the <a href=\"https://www.annualcreditreport.com/\" target=\"_blank\" rel=\"noopener\">Annual Credit Report Request Service</a> to access your report and dispute errors and out-of-date data to boost your score. Credit reports have errors; yours may, too.</li>\n<li><strong>Keep balances below 30 percent of your credit limits.</strong> High credit balances mean lower scores.</li>\n<li><strong>Pay your bills on time.</strong> It’s that simple.</li>\n<li><strong>Keep accounts open longer.</strong> Older accounts score higher because they establish the length and stability of your credit history.</li>\n<li><strong>Limit new credit because it lowers your score.</strong> New credit and more inquiries on your account increase your risk profile and lower your score, especially if you don’t have a long credit history. Add new credit only when it makes sense, not just to have another card or to get an incentive gift.</li>\n<li><strong>Use more than one type of credit.</strong> Doing so shows that you can manage different types of credit and different types of payments (fixed or variable). Have a variety of credit cards, retail accounts, installment loans, and other types of credit.</li>\n<li><strong>Use secured cards to help establish or reestablish credit.</strong> Secured cards are accepted by merchants and scored like regular credit cards, and the balance is guaranteed by a bank deposit. This makes credit easier to get and builds or rebuilds your score faster.</li>\n<li><strong>Avoid cosigning; it’s dangerous to your credit score.</strong> If the person for whom you cosign defaults, you may not know about it for months. As a cosigner, you’re 100 percent responsible for the debt, including any penalties, and your credit score suffers as well.</li>\n</ul>\n"}],"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Solve","lifeExpectancy":"One year","lifeExpectancySetFrom":"2021-10-14T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":207725},{"headers":{"creationTime":"2021-01-30T00:39:20+00:00","modifiedTime":"2021-03-24T20:57:42+00:00","timestamp":"2022-02-24T17:06:17+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Loans & Credit","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34301"},"slug":"loans-credit","categoryId":34301},{"name":"Credit Reports","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34304"},"slug":"credit-reports","categoryId":34304}],"title":"The CARD Act: Shielding You from Credit Card Abuse","strippedTitle":"the card act: shielding you from credit card abuse","slug":"the-card-act-shielding-you-from-credit-card-abuse","canonicalUrl":"","seo":{"metaDescription":"Explore protections provided by the Credit Card Accountability, Responsibility, and Disclosure Act, which shields you from unfair practices.","noIndex":0,"noFollow":0},"content":"The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 focuses on your protections from credit card industry practices that have been deemed to be either unfair or just plain tricky. Among the key protections are easier-to-understand terms, fewer retroactive interest rate increases on existing card balances, more time to pay your monthly bills, more notice of changes to your credit card terms, and the right to opt out of many changes in terms on your accounts.\r\n\r\n[caption id=\"attachment_276168\" align=\"alignnone\" width=\"556\"]<img class=\"size-full wp-image-276168\" src=\"https://www.dummies.com/wp-content/uploads/credit-card-act.jpg\" alt=\"Credit CARD Act\" width=\"556\" height=\"417\" /> © Andrea Danti / Shutterstock.com[/caption]\r\n\r\nHere’s a list of the top protections that consumers are due:\r\n<ul>\r\n \t<li><strong>No more bait and switch:</strong> Card issuers can’t hike interest rates on existing balances except under certain conditions. Consequently, interest rates on new card charges can’t change in the first year, major terms of the agreement can’t change overnight, and you get 45 days’ advance notice of any big changes.</li>\r\n \t<li><strong>No more universal default:</strong> You may have heard of people having their rates raised on one card when they have a problem with another one (known as <em>universal default</em>). This practice has been severely curtailed. Card issuers may use universal default only on future credit card balances that exist at the time of the default, and they must give you at least 45 days’ notice of the change. You now have time to change cards, get other financing, or pay off the balance.</li>\r\n</ul>\r\n<ul>\r\n \t<li><strong>Limits on interest rate increases:</strong> Card issuers may raise your interest rate on existing balances only if:\r\n<ul>\r\n \t<li>The rate was part of a promotional period that ended.</li>\r\n \t<li>The index used to set your variable interest rate rises.</li>\r\n \t<li>You’re at the end of a hardship or special payment agreement.</li>\r\n \t<li>You have late payments of 60 days or more.</li>\r\n</ul>\r\n</li>\r\n \t<li><strong>Credit-granting restrictions for young adults:</strong> Creditors can’t give credit cards to young adults with no income. People under 21 must show that they have enough income to repay the card debt or have a cosigner who does. Additionally, credit card companies must stay at least 1,000 feet away from colleges if they offer incentives to entice students to apply for credit cards. No more signing up for credit cards to get free pizza and T-shirts your first day on campus!</li>\r\n</ul>\r\n<p class=\"article-tips tip\">Be very careful about cosigning for anyone, including your kids. If one of your kids misses a payment for any reason, that missed payment not only damages his or her credit, but also hurts your credit as well (not to mention your relationship). Instead of cosigning for your kids, add them as authorized users on your account. You don’t even have to hand over a credit card or allow them to spend money. This way, you’re helping them build positive credit while remaining in control of their credit (and yours!).</p>\r\n<p class=\"article-tips tip\">Alternatively, get your kids prepaid cards (only one per kid) that you can add to as they need funds. If you want to help them build credit and savings, help them set up secured credit card accounts with your bank or credit union — that can help them save money and build credit at the same time. Just be sure they understand that abusing a secured credit card can wipe out their savings and their credit history just as quickly.</p>\r\n\r\n<ul>\r\n \t<li><strong>Graceful grace periods:</strong> Card issuers must give you “a reasonable amount of time” (at least 21 days after the bill is mailed) to pay monthly bills. More time to get your payment in should result in fewer late fees.</li>\r\n \t<li><strong>No tricky due dates or times:</strong> Card issuers can no longer set early-morning deadlines (before the mail is delivered) for payments. Cutoff times must be 5 p.m. or later on the date due, and due dates can’t be on a weekend, a holiday, or a day when the card issuer is closed for business.</li>\r\n \t<li><strong>Payments applied fairly:</strong> If you owe money at different rates on the same card (many cards have different rates for regular purchases versus cash advances and balance transfers), payments over the minimum due must go to the balance with the highest interest rate first. Consequently, your payment will reduce more of your balance faster.</li>\r\n \t<li><strong>Easy on the over-limit fees:</strong> Card issuers can’t charge you over-limit fees without your permission. If you opt out or say no, transactions exceeding your credit limit are rejected. Opting out of over-limit fees is a good idea. If you decide to opt in, though, no fees can be larger than the amount of the overage. For example, going $10 over your limit can’t incur a fee of $39; the limit is $10. Better just to say no to those fees and face the potential embarrassment of having your card declined if you go over the limit.</li>\r\n \t<li><strong>No double-dealing double-cycle billing:</strong> Interest on outstanding balances must end in the billing month in which you pay off the balance. For example, your statement runs from June 1 to June 30, but the payment is due on July 20. The interest from June 30 to the payment due date of July 20 can no longer be charged if you pay off the balance in full, even though the card issuer didn’t get your payment until July 20.</li>\r\n \t<li><strong>Disclosing how making minimum payments can keep you mired in debt:</strong> Card issuers must indicate how long paying off the entire balance will take if you make only the minimum monthly payment. They must also indicate how much you need to pay each month to pay off a balance in 36 months, including interest. Seeing the high cost of minimum payments enables you to make better-informed decisions about how you pay for the use of credit.</li>\r\n \t<li><strong>Restricted late fees:</strong> Late fees are limited to $25 unless you’re late more than once in a six-month period. Your late payment is not reported to the credit bureau until your account is a full 30 days past due. This restriction results in fewer and lower fees charged to your account and gives you time to resolve issues before they hit your credit report.</li>\r\n \t<li><strong>Right to opt out of changes:</strong> Card issuers must give you advance notice of changes to the terms of use for your credit cards. You now have the right to reject many significant changes in terms to your credit card accounts.</li>\r\n</ul>\r\n<p class=\"article-tips warning\">If you opt out of some changes, you may be required to close your account and pay off any balance under the old terms and conditions.</p>\r\n<p class=\"article-tips remember\">Although the CARD Act provides a lot of <a href=\"https://www.dummies.com/personal-finance/credit/10-consumer-credit-protections-everyone-needs-to-know/\">consumer protections</a>, it’s not all-encompassing. It doesn’t cover business and corporate accounts or interest rates on future purchases. Cards with variable or floating interest rates (which includes most cards) are subject to interest rate increases as the prime rate goes up. And a card issuer can still close your account or lower your limit without warning.</p>\r\nIf you believe that a card issuer has violated any of the provisions of the <a href=\"http://www.ftc.gov/sites/default/files/documents/statutes/credit-card-accountability-responsibility-and-disclosure-act-2009-credit-card-act/credit-card-pub-l-111-24_0.pdf\">CARD Act</a>, contact customer service and ask for an explanation or a rebate. If you disagree with the answer, you can contact the <a href=\"http://www.ftc.gov/sites/default/files/documents/statutes/credit-card-accountability-responsibility-and-disclosure-act-2009-credit-card-act/credit-card-pub-l-111-24_0.pdf\">Federal Trade Commission</a>, your state’s attorney general or consumer protection department, or the <a href=\"http://www.consumerfinance.gov/complaint/\">Consumer Financial Protection Bureau’s Consumer Response Center</a>.","description":"The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 focuses on your protections from credit card industry practices that have been deemed to be either unfair or just plain tricky. Among the key protections are easier-to-understand terms, fewer retroactive interest rate increases on existing card balances, more time to pay your monthly bills, more notice of changes to your credit card terms, and the right to opt out of many changes in terms on your accounts.\r\n\r\n[caption id=\"attachment_276168\" align=\"alignnone\" width=\"556\"]<img class=\"size-full wp-image-276168\" src=\"https://www.dummies.com/wp-content/uploads/credit-card-act.jpg\" alt=\"Credit CARD Act\" width=\"556\" height=\"417\" /> © Andrea Danti / Shutterstock.com[/caption]\r\n\r\nHere’s a list of the top protections that consumers are due:\r\n<ul>\r\n \t<li><strong>No more bait and switch:</strong> Card issuers can’t hike interest rates on existing balances except under certain conditions. Consequently, interest rates on new card charges can’t change in the first year, major terms of the agreement can’t change overnight, and you get 45 days’ advance notice of any big changes.</li>\r\n \t<li><strong>No more universal default:</strong> You may have heard of people having their rates raised on one card when they have a problem with another one (known as <em>universal default</em>). This practice has been severely curtailed. Card issuers may use universal default only on future credit card balances that exist at the time of the default, and they must give you at least 45 days’ notice of the change. You now have time to change cards, get other financing, or pay off the balance.</li>\r\n</ul>\r\n<ul>\r\n \t<li><strong>Limits on interest rate increases:</strong> Card issuers may raise your interest rate on existing balances only if:\r\n<ul>\r\n \t<li>The rate was part of a promotional period that ended.</li>\r\n \t<li>The index used to set your variable interest rate rises.</li>\r\n \t<li>You’re at the end of a hardship or special payment agreement.</li>\r\n \t<li>You have late payments of 60 days or more.</li>\r\n</ul>\r\n</li>\r\n \t<li><strong>Credit-granting restrictions for young adults:</strong> Creditors can’t give credit cards to young adults with no income. People under 21 must show that they have enough income to repay the card debt or have a cosigner who does. Additionally, credit card companies must stay at least 1,000 feet away from colleges if they offer incentives to entice students to apply for credit cards. No more signing up for credit cards to get free pizza and T-shirts your first day on campus!</li>\r\n</ul>\r\n<p class=\"article-tips tip\">Be very careful about cosigning for anyone, including your kids. If one of your kids misses a payment for any reason, that missed payment not only damages his or her credit, but also hurts your credit as well (not to mention your relationship). Instead of cosigning for your kids, add them as authorized users on your account. You don’t even have to hand over a credit card or allow them to spend money. This way, you’re helping them build positive credit while remaining in control of their credit (and yours!).</p>\r\n<p class=\"article-tips tip\">Alternatively, get your kids prepaid cards (only one per kid) that you can add to as they need funds. If you want to help them build credit and savings, help them set up secured credit card accounts with your bank or credit union — that can help them save money and build credit at the same time. Just be sure they understand that abusing a secured credit card can wipe out their savings and their credit history just as quickly.</p>\r\n\r\n<ul>\r\n \t<li><strong>Graceful grace periods:</strong> Card issuers must give you “a reasonable amount of time” (at least 21 days after the bill is mailed) to pay monthly bills. More time to get your payment in should result in fewer late fees.</li>\r\n \t<li><strong>No tricky due dates or times:</strong> Card issuers can no longer set early-morning deadlines (before the mail is delivered) for payments. Cutoff times must be 5 p.m. or later on the date due, and due dates can’t be on a weekend, a holiday, or a day when the card issuer is closed for business.</li>\r\n \t<li><strong>Payments applied fairly:</strong> If you owe money at different rates on the same card (many cards have different rates for regular purchases versus cash advances and balance transfers), payments over the minimum due must go to the balance with the highest interest rate first. Consequently, your payment will reduce more of your balance faster.</li>\r\n \t<li><strong>Easy on the over-limit fees:</strong> Card issuers can’t charge you over-limit fees without your permission. If you opt out or say no, transactions exceeding your credit limit are rejected. Opting out of over-limit fees is a good idea. If you decide to opt in, though, no fees can be larger than the amount of the overage. For example, going $10 over your limit can’t incur a fee of $39; the limit is $10. Better just to say no to those fees and face the potential embarrassment of having your card declined if you go over the limit.</li>\r\n \t<li><strong>No double-dealing double-cycle billing:</strong> Interest on outstanding balances must end in the billing month in which you pay off the balance. For example, your statement runs from June 1 to June 30, but the payment is due on July 20. The interest from June 30 to the payment due date of July 20 can no longer be charged if you pay off the balance in full, even though the card issuer didn’t get your payment until July 20.</li>\r\n \t<li><strong>Disclosing how making minimum payments can keep you mired in debt:</strong> Card issuers must indicate how long paying off the entire balance will take if you make only the minimum monthly payment. They must also indicate how much you need to pay each month to pay off a balance in 36 months, including interest. Seeing the high cost of minimum payments enables you to make better-informed decisions about how you pay for the use of credit.</li>\r\n \t<li><strong>Restricted late fees:</strong> Late fees are limited to $25 unless you’re late more than once in a six-month period. Your late payment is not reported to the credit bureau until your account is a full 30 days past due. This restriction results in fewer and lower fees charged to your account and gives you time to resolve issues before they hit your credit report.</li>\r\n \t<li><strong>Right to opt out of changes:</strong> Card issuers must give you advance notice of changes to the terms of use for your credit cards. You now have the right to reject many significant changes in terms to your credit card accounts.</li>\r\n</ul>\r\n<p class=\"article-tips warning\">If you opt out of some changes, you may be required to close your account and pay off any balance under the old terms and conditions.</p>\r\n<p class=\"article-tips remember\">Although the CARD Act provides a lot of <a href=\"https://www.dummies.com/personal-finance/credit/10-consumer-credit-protections-everyone-needs-to-know/\">consumer protections</a>, it’s not all-encompassing. It doesn’t cover business and corporate accounts or interest rates on future purchases. Cards with variable or floating interest rates (which includes most cards) are subject to interest rate increases as the prime rate goes up. And a card issuer can still close your account or lower your limit without warning.</p>\r\nIf you believe that a card issuer has violated any of the provisions of the <a href=\"http://www.ftc.gov/sites/default/files/documents/statutes/credit-card-accountability-responsibility-and-disclosure-act-2009-credit-card-act/credit-card-pub-l-111-24_0.pdf\">CARD Act</a>, contact customer service and ask for an explanation or a rebate. If you disagree with the answer, you can contact the <a href=\"http://www.ftc.gov/sites/default/files/documents/statutes/credit-card-accountability-responsibility-and-disclosure-act-2009-credit-card-act/credit-card-pub-l-111-24_0.pdf\">Federal Trade Commission</a>, your state’s attorney general or consumer protection department, or the <a href=\"http://www.consumerfinance.gov/complaint/\">Consumer Financial Protection Bureau’s Consumer Response Center</a>.","blurb":"","authors":[{"authorId":9218,"name":"Steve Bucci","slug":"steve-bucci","description":"","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9218"}},{"authorId":33476,"name":"Melyssa Barrett","slug":"melyssa-barrett","description":"Melyssa Barrett is vice president of identity solutions at Visa, Inc., where she creates products to detect and predict fraud within consumer credit, debit, and prepaid products. ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/33476"}},{"authorId":33477,"name":"Rod Griffin","slug":"rod-griffin","description":"Rod Griffin is senior director of consumer education and advocacy for Experian, responsible for the company's national consumer education programs and outreach.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/33477"}}],"primaryCategoryTaxonomy":{"categoryId":34304,"title":"Credit Reports","slug":"credit-reports","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34304"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[],"fromCategory":[{"articleId":275979,"title":"10 Consumer Credit Protections Everyone Needs to 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id=\"du-slot-6217bb09960f5\"></div></div>"},"articleType":{"articleType":"Articles","articleList":null,"content":null,"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Solve","lifeExpectancy":"Two years","lifeExpectancySetFrom":null,"dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":275982},{"headers":{"creationTime":"2021-01-30T00:33:49+00:00","modifiedTime":"2021-03-24T20:39:16+00:00","timestamp":"2022-02-24T17:06:17+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Loans & Credit","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34301"},"slug":"loans-credit","categoryId":34301},{"name":"Credit Reports","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34304"},"slug":"credit-reports","categoryId":34304}],"title":"10 Consumer Credit Protections Everyone Needs to Know","strippedTitle":"10 consumer credit protections everyone needs to know","slug":"10-consumer-credit-protections-everyone-needs-to-know","canonicalUrl":"","seo":{"metaDescription":"Explore the top 10 legal protection resources you have to guide you in dealing with the world of consumer credit.","noIndex":0,"noFollow":0},"content":"It has been said that a person can’t be too good-looking or have too many friends. This has never been truer than in the world of credit — at least the part about friends. The world of credit can be complex, unforgiving, and very expensive! The credit-granting, credit-reporting, and credit-scoring industries have become increasingly complex and powerful to the point where they are used for everything from issuing credit cards to getting jobs.\r\n\r\nConsumer advocates recognized that we need effective ways to keep errors, both yours and theirs, from seriously complicating your life. The result is a series of laws, protections, and agencies whose purpose is to keep the credit game honest and give consumers a fair opportunity to access the American financial system. These protections may not always work as you’d like, but if they didn’t exist, you’d be at the mercy of big business, and that’s no place you want to be.\r\n\r\nIn this article, we cover the top ten legal protection resources you have to guide you in dealing with the world of consumer <a href=\"https://www.dummies.com/personal-finance/credit/8-tips-for-a-top-credit-score/\">credit</a>.\r\n<h2 id=\"tab1\" >The Fair Debt Collection Practices Act</h2>\r\nBeing protected is especially important when a debt collector comes a-calling. The Fair Debt Collection Practices Act (FDCPA) limits debt collectors’ activities and spells out your rights. Highlights include:\r\n<ul>\r\n \t<li>Prohibiting collectors from abusing you, being unfair, and trying to trick you into paying.</li>\r\n \t<li>Applying the law to most personal debts, including credit cards, auto loans, medical debts, and debts secured by your home.</li>\r\n \t<li>Defining when and where a debt can be collected — for example, between 8 a.m. and 9 p.m., or not at work.</li>\r\n \t<li>Requiring a validation notice that specifies how much you owe and what you should do if the debt isn’t yours or has been paid already.</li>\r\n \t<li>Allowing you to just say no. If you don’t want to hear from a collector, you can write to the collection agency and demand that it not contact you again. Doing so doesn’t satisfy a legitimate debt, but it ends collector contact. It may, however, begin legal contact to sue you for the debt.</li>\r\n \t<li>Giving you the right to sue for breach of the rules. You have a year to bring action for violations.</li>\r\n</ul>\r\n<h2 id=\"tab2\" >The Bankruptcy Abuse Prevention and Consumer Protection Act</h2>\r\nThe Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) revised the process of getting a fresh start when you are overwhelmed by debt. The major provisions in this law include\r\n<ul>\r\n \t<li>Mandatory credit counseling before filing</li>\r\n \t<li>Stricter eligibility for Chapter 7 filing to encourage Chapter 13</li>\r\n \t<li>Fewer debts discharged and fewer state exemptions</li>\r\n \t<li>Tax returns and proof of income required for means test</li>\r\n \t<li>Mandatory five-year Chapter 13 plan if over your state’s median income</li>\r\n \t<li>Mandatory financial management education after filing</li>\r\n \t<li>Time between Chapter 7 filings increased to eight years</li>\r\n</ul>\r\nBankruptcy was designed to give you the ultimate protection of the courts from your creditors. The process can be as effective as it is damaging to your credit, and you should use it with great care, and only if you’ve already considered less-damaging courses of action.\r\n\r\nIn some states, you can file your own bankruptcy petition (called <em>pro se</em>); in others, you need an attorney. Regardless, we recommend that you use an attorney who does this for a living. A poorly thought out or executed bankruptcy can leave you with unresolved debts and deprive you of the opportunity to use this protection again for several years. A good bankruptcy attorney will spend a significant amount of time with you to compare bankruptcy with other possible ways of handling financial problems.\r\n<h2 id=\"tab3\" >Your lawyer</h2>\r\nLawyers often get a bad rap, but if you want an effective weapon in providing consumer protection, you need look no further. Whether your issue is a debt collector, a retailer who won’t step up to resolve a problem, or a contract with unsuspected gotcha clauses, a knowledgeable and persistent attorney is hard to beat.\r\n\r\nYes, we know, lawyers are expensive, but there are times when only the best will do. Using a second-rate attorney is like showing up at a gunfight with the second-fastest gunslinger. Better not to show up at all!\r\n\r\nHere are some points to consider when looking for a consumer attorney:\r\n<ul>\r\n \t<li>Nothing is better than a referral from a satisfied friend, colleague, or relative. Ask someone in whom you have confidence. You may get a great referral or a solution you hadn’t thought of.</li>\r\n \t<li>Look for someone who does a lot of what you need. Like picking a heart surgeon, you want lots of experience here.</li>\r\n \t<li>If you already have a lawyer, ask for a specialist recommendation.</li>\r\n \t<li>Check your local American Bar Association affiliate or attorney association. They often maintain lawyer referral services.</li>\r\n \t<li>Look for someone your gut says you can work with. Is the lawyer concerned about you and your problem? Always interview more than one attorney. This situation is important.</li>\r\n \t<li>Don’t be deterred by hourly rates. A good attorney who charges more can be a bargain if you get resolution quickly and permanently.</li>\r\n \t<li>Get all agreements in writing to avoid miscommunication. Be sure to read the agreement before you sign it, and ask about anything that’s not clear to you.</li>\r\n</ul>\r\n<h2 id=\"tab4\" >Coronavirus Aid, Relief, and Economic Security (CARES) Act</h2>\r\nIn March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act to help minimize the impact of the COVID-19 pandemic. The CARES Act provides a number of important financial safeguards intended to last until the crisis is over or for a set period of time afterward. Given Congress’s penchant for keeping laws on the books long after originally intended, and because no one at this time can tell when or if the crisis will be resolved, here are some relevant highlights of the CARES Act:\r\n<ul>\r\n \t<li><strong>Protections for renters:</strong> If you rent in federally subsidized housing or are renting from an owner who has a federally or government-sponsored enterprise (GSE)–backed mortgage (for example, Federal Housing Administration [FHA], Veterans Affairs [VA], U.S. Department of Agriculture [USDA], Fannie Mae, or Freddie Mac), the CARES Act may provide for a suspension or moratorium on evictions.</li>\r\n \t<li><strong>Protections for homeowners:</strong> If you have a federally or GSE-backed mortgage and had a hardship caused by COVID-19, you have the right to request and obtain a forbearance extension for up to another 180 days (for a total of up to 360 days), without additional fees, penalties, or additional interest (beyond scheduled amounts). The law prohibits GSE lenders and servicers from beginning or finalizing a judicial or nonjudicial foreclosure or sale against you.</li>\r\n \t<li><strong>Protections for those with student loans:</strong> You get automatic suspension of principal and interest payments on federally held student loans through September 30, 2020. And what’s more, suspended payments count toward any student loan forgiveness program, as long as all other requirements of the loan forgiveness program are met.</li>\r\n</ul>\r\n<p style=\"padding-left: 40px;\">Lenders must report any current loans on which they offer forbearance to the credit bureaus as being current as long as the terms of the agreement are observed.</p>\r\n<p class=\"article-tips tip\">Although not part of the law, the three main credit bureaus are allowing free weekly credit reports at least through April 2021.</p>\r\n\r\n<h2 id=\"tab5\" >Statute of limitations laws</h2>\r\nThis protection is worthy of Perry Mason: “I object, Your Honor, for this charge is too old.” Well, maybe Perry didn’t say exactly that, but he’d be happy to see that each state has a law called a <em>statute of limitations (SOL)</em> that sets a limit on how long a debt collector can sue you in court, depending on the type of loan you allegedly owe. This is only fair, because after several years, who keeps all those receipts and slips of paper? Either hurry up and sue or forget about it!\r\n\r\nThis protection isn’t automatic; you have to ask for it. What do you need to know and do? Read on.\r\n<ul>\r\n \t<li>If a debt is past the SOL, the creditor can’t successfully sue you in court to collect it. But you must show up and prove that the debt is too old.</li>\r\n \t<li>Credit reports show a delinquency for seven years. This has nothing to do with the time a debt is collectible.</li>\r\n \t<li>The period used to figure how old your debt is starts when you miss a payment and never make another one. A payment may restart the SOL clock, depending on the state in which you live.</li>\r\n</ul>\r\n<h2 id=\"tab6\" >Your state attorney general</h2>\r\nEvery state has an attorney general. All attorneys general have at least one thing in common: One of their primary responsibilities is to enforce their states’ consumer protection laws. Every state has a consumer protection statute prohibiting deceptive acts and practices. These statutes include laws that address specific industries or practices. For example, many FACT Act protections, especially for credit reporting, have stricter state regulations, giving you more rights and a local resource for help.\r\n\r\nState attorneys general love to go after abuses and illegalities in the marketplace, including deceptive trade practices, telemarketing and internet fraud, fake charities, ID theft, and false or misleading advertising. It’s good press for them and good protection for you. Generally, these public officials have a low tolerance for financial shenanigans. So, if you think you’re being abused, taken advantage of, or scammed in a credit or personal finance transaction, this is the office to call.\r\n\r\nI’ve had good luck working with the consumer protection sections of several state attorneys general. If you decide to ask them for help, we suggest that you be organized and to the point, and have the pertinent information at hand. Attorneys general are no-nonsense law enforcement officials who appreciate you calling for their help but not wasting their time.\r\n<h2 id=\"tab7\" >The Consumer Financial Protection Bureau</h2>\r\nReforming our financial system isn’t easy, and the Feds know it, so they formed a new agency — the Consumer Financial Protection Bureau, or CFPB — to carry on the fight of protecting you long after the ink dried on the Dodd-Frank Wall Street Reform and Consumer Protection Act (the legislation that created the CFPB). Not since J. Edgar Hoover headed up the FBI has a federal agency had such far-reaching powers. The CFPB sets rules for payday lenders, credit card issuers, and all the players in between. Here are the major protections this agency delivers:\r\n<ul>\r\n \t<li>Need information? Use the <a href=\"http://www.consumerfinance.gov/askcfpb/\">question-and-answer service</a> for inquiries about mortgages, student loans, debt collections, credit reports, and more.</li>\r\n \t<li>Have a complaint? <a href=\"http://www.consumerfinance.gov/complaint/\">Let ‘em have it</a>. Bank accounts, credit cards, credit reporting, debt collections, money transfers, mortgages, student loans, and consumer loans are among the topics you can get help with. You complain, and the CFPB forwards your beef to the company and works to get an answer. It reviews the response and shares it with other agencies to identify patterns of abuse and write better regulations. It also sends you e-mail updates and has a secure consumer portal that you can use to track your complaint and give feedback about company responses to help the CFPB prioritize complaints. Just like the <em>Dragnet</em> guys: dum-ta-dum dum!</li>\r\n \t<li>It requires anyone who issues credit or prepaid cards to give you better, more easily understandable terms-and-cost disclosures.</li>\r\n \t<li>If you have to sign it, you should be able to understand it. The CPFB assures that paperwork is understandable.</li>\r\n \t<li>It helps set rules on transaction fees for interchange activity, like on your Visa or MasterCard.</li>\r\n \t<li>It closely regulates consumer credit counseling, debt settlement, and debt collectors to keep you from being victimized.</li>\r\n</ul>\r\n<h2 id=\"tab8\" >The Credit Card Accountability, Responsibility, and Disclosure Act</h2>\r\nFed up with tricky terms, excessive penalties, fees, and unfair banking practices, Congress enacted the Credit Card Accountability, Responsibility, and Disclosure Act (CARD Act) to give you a fair playing field in the area of credit cards. Here are your major protections:\r\n<ul>\r\n \t<li>Credit card companies can’t raise card interest rates except under specific circumstances, such as at the end of a promotional rate, or when a variable interest rate index to which your card is tied rises, or if you’re 60 days late on a payment. Also, double cycle interest billing, which used your average daily balance for the current and previous billing cycles to charge you more, is no longer allowed.</li>\r\n \t<li>If your rate or terms change, you get 45 days’ notice to plan what to do.</li>\r\n \t<li>You can opt out of changes you don’t like. Doing so may cause your account to be closed, but you can pay off the debt under the old terms.</li>\r\n \t<li>Card companies can’t issue cards to people under 21 who have no income. This sounds like a no-brainer, but for years creditors had been giving students credit despite their having no income to repay their charges.</li>\r\n \t<li>Creditors must give you at least 21 days after a bill is mailed to make your payment. The due date can’t be before the mail is delivered or on a weekend, a holiday, or a day when the creditor is closed for business. If you’re late, fees are limited to a maximum of $25.</li>\r\n \t<li>All payment amounts above the minimum payment due must be applied to the balance with the highest interest rate, not the lowest.</li>\r\n \t<li>If you exceed your credit limit, the card company must ask you whether you want that transaction to be processed and incur an over-limit fee. Saying “no thank you” results in the purchase being denied but also saves you the over-limit fee. Even if you say yes, the fee can’t exceed the amount by which you exceed the credit limit. So if you exceed your limit by $10, the fee can’t be more than $10.</li>\r\n</ul>\r\n<h2 id=\"tab9\" >The Fair and Accurate Credit Transactions Act</h2>\r\nFairness is something you can hope for in your dealings with the credit bureaus and those other consumer-reporting bureaus that are increasingly in the news. But before the protections afforded in the Fair and Accurate Credit Transactions Act (FACT Act or FACTA) became effective, fairness was strictly in the eye of the beholder. And the beholder wasn’t you! Congress acted to end a number of perceived and real abuses.\r\n\r\nCongress understood that the nation’s banking system was becoming increasingly dependent on credit reporting, that inaccurate reports resulted in unfair and inefficient banking, and that you have a right to privacy. The result is that you now have more control over what’s said about you in credit bureau files and who can access your information. You also have the right to dispute errors or out-of-date information and to get a free copy of your credit report from each bureau every year. Not bad for the crowd from Washington, D.C.! Here are your main protections:\r\n<ul>\r\n \t<li>You must be told about any negative action taken as a result of information contained in your credit report, and you must be given free access to the same information. If the interest rate on your favorite credit card goes up, for example, you get to see a copy of the report that contains the data that led to that increase.</li>\r\n \t<li>You can find out what information is in your personal file. No more secrets! It’s your information and your file, so you can look at it.</li>\r\n \t<li>You can get a free copy of your credit report at least every 12 months if you ask for one. You can also get a free report whenever you’re the object of identity theft or fraud, you’re on public assistance, or you’re unemployed but expect to apply for employment within 60 days.</li>\r\n \t<li>You have the right to know your credit score. This score used to be as big a secret as what was in your bureau files. Score watching has become a favorite pastime for many and a profitable business for others.</li>\r\n \t<li>The data in your file must be accurate, verifiable, and current. If data is incorrect or too old, you need only to ask, and it will be verified or removed pronto.</li>\r\n \t<li>Only those who have a legitimate business purpose can see your file, and you can stop everyone from accessing your file without your express permission if you like. Usually only creditors, insurers, employers, landlords, and others with whom you do business get to see what’s in your file. You can slam the door on everyone with a credit freeze.</li>\r\n</ul>\r\n<h2 id=\"tab10\" >The Federal Trade Commission</h2>\r\nThe Federal Trade Commission (FTC) is the alter ego of the Bureau of Consumer Protection (BCP). Although it doesn’t deal with individual consumer complaints, it does protect consumers by accumulating and analyzing complaints and then taking industry-wide action to address issues that you bring to it. Some examples of BCP protections are your ability to get a free annual credit report, the National Do Not Call Registry to block unwanted telemarketing calls, and appliance disclosure stickers that show the energy costs of home appliances, to name just a few.\r\n\r\nThe BCP looks out for unfair, deceptive, or fraudulent practices in the marketplace. It investigates and sues companies and people who violate the law. It also develops rules to protect you and requires businesses to give you better disclosure of your costs, rights, and dispute-resolution options. It also collects complaints about consumer fraud and identity theft and makes them available to law enforcement agencies across the country.\r\n\r\nOf the bureau’s seven divisions, here are the five that you may find useful:\r\n<ul>\r\n \t<li><strong>Advertising practices:</strong> Enforces truth-in-advertising laws. If an offer seems too good to be true and it is, complain to the FTC.</li>\r\n \t<li><strong>Financial practices:</strong> Protects you from deceptive and unfair practices in the financial services industry, including predatory or discriminatory lending practices, deceptive or unfair loan servicing and debt collection, and fraudulent credit counseling and debt settlement companies.</li>\r\n \t<li><strong>Marketing practices:</strong> Responds to internet, telecommunications, and direct-mail fraud; spam; fraudulent work-at-home schemes; and violations of the Do Not Call provisions of the Telemarketing Sales Rule.</li>\r\n \t<li><strong>Privacy and identity protection:</strong> Protects your financial privacy, investigates data breaches, helps consumers whose identities have been stolen, and implements laws and regulations for the credit reporting industry, including the FACT Act.</li>\r\n \t<li><strong>Enforcement:</strong> Sues to address issues on these practices.</li>\r\n</ul>\r\n<p class=\"article-tips remember\">Your complaint, comment, or inquiry may help identify a pattern of violations requiring law enforcement action, but the FTC doesn’t resolve individual consumer disputes.</p>","description":"It has been said that a person can’t be too good-looking or have too many friends. This has never been truer than in the world of credit — at least the part about friends. The world of credit can be complex, unforgiving, and very expensive! The credit-granting, credit-reporting, and credit-scoring industries have become increasingly complex and powerful to the point where they are used for everything from issuing credit cards to getting jobs.\r\n\r\nConsumer advocates recognized that we need effective ways to keep errors, both yours and theirs, from seriously complicating your life. The result is a series of laws, protections, and agencies whose purpose is to keep the credit game honest and give consumers a fair opportunity to access the American financial system. These protections may not always work as you’d like, but if they didn’t exist, you’d be at the mercy of big business, and that’s no place you want to be.\r\n\r\nIn this article, we cover the top ten legal protection resources you have to guide you in dealing with the world of consumer <a href=\"https://www.dummies.com/personal-finance/credit/8-tips-for-a-top-credit-score/\">credit</a>.\r\n<h2 id=\"tab1\" >The Fair Debt Collection Practices Act</h2>\r\nBeing protected is especially important when a debt collector comes a-calling. The Fair Debt Collection Practices Act (FDCPA) limits debt collectors’ activities and spells out your rights. Highlights include:\r\n<ul>\r\n \t<li>Prohibiting collectors from abusing you, being unfair, and trying to trick you into paying.</li>\r\n \t<li>Applying the law to most personal debts, including credit cards, auto loans, medical debts, and debts secured by your home.</li>\r\n \t<li>Defining when and where a debt can be collected — for example, between 8 a.m. and 9 p.m., or not at work.</li>\r\n \t<li>Requiring a validation notice that specifies how much you owe and what you should do if the debt isn’t yours or has been paid already.</li>\r\n \t<li>Allowing you to just say no. If you don’t want to hear from a collector, you can write to the collection agency and demand that it not contact you again. Doing so doesn’t satisfy a legitimate debt, but it ends collector contact. It may, however, begin legal contact to sue you for the debt.</li>\r\n \t<li>Giving you the right to sue for breach of the rules. You have a year to bring action for violations.</li>\r\n</ul>\r\n<h2 id=\"tab2\" >The Bankruptcy Abuse Prevention and Consumer Protection Act</h2>\r\nThe Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) revised the process of getting a fresh start when you are overwhelmed by debt. The major provisions in this law include\r\n<ul>\r\n \t<li>Mandatory credit counseling before filing</li>\r\n \t<li>Stricter eligibility for Chapter 7 filing to encourage Chapter 13</li>\r\n \t<li>Fewer debts discharged and fewer state exemptions</li>\r\n \t<li>Tax returns and proof of income required for means test</li>\r\n \t<li>Mandatory five-year Chapter 13 plan if over your state’s median income</li>\r\n \t<li>Mandatory financial management education after filing</li>\r\n \t<li>Time between Chapter 7 filings increased to eight years</li>\r\n</ul>\r\nBankruptcy was designed to give you the ultimate protection of the courts from your creditors. The process can be as effective as it is damaging to your credit, and you should use it with great care, and only if you’ve already considered less-damaging courses of action.\r\n\r\nIn some states, you can file your own bankruptcy petition (called <em>pro se</em>); in others, you need an attorney. Regardless, we recommend that you use an attorney who does this for a living. A poorly thought out or executed bankruptcy can leave you with unresolved debts and deprive you of the opportunity to use this protection again for several years. A good bankruptcy attorney will spend a significant amount of time with you to compare bankruptcy with other possible ways of handling financial problems.\r\n<h2 id=\"tab3\" >Your lawyer</h2>\r\nLawyers often get a bad rap, but if you want an effective weapon in providing consumer protection, you need look no further. Whether your issue is a debt collector, a retailer who won’t step up to resolve a problem, or a contract with unsuspected gotcha clauses, a knowledgeable and persistent attorney is hard to beat.\r\n\r\nYes, we know, lawyers are expensive, but there are times when only the best will do. Using a second-rate attorney is like showing up at a gunfight with the second-fastest gunslinger. Better not to show up at all!\r\n\r\nHere are some points to consider when looking for a consumer attorney:\r\n<ul>\r\n \t<li>Nothing is better than a referral from a satisfied friend, colleague, or relative. Ask someone in whom you have confidence. You may get a great referral or a solution you hadn’t thought of.</li>\r\n \t<li>Look for someone who does a lot of what you need. Like picking a heart surgeon, you want lots of experience here.</li>\r\n \t<li>If you already have a lawyer, ask for a specialist recommendation.</li>\r\n \t<li>Check your local American Bar Association affiliate or attorney association. They often maintain lawyer referral services.</li>\r\n \t<li>Look for someone your gut says you can work with. Is the lawyer concerned about you and your problem? Always interview more than one attorney. This situation is important.</li>\r\n \t<li>Don’t be deterred by hourly rates. A good attorney who charges more can be a bargain if you get resolution quickly and permanently.</li>\r\n \t<li>Get all agreements in writing to avoid miscommunication. Be sure to read the agreement before you sign it, and ask about anything that’s not clear to you.</li>\r\n</ul>\r\n<h2 id=\"tab4\" >Coronavirus Aid, Relief, and Economic Security (CARES) Act</h2>\r\nIn March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act to help minimize the impact of the COVID-19 pandemic. The CARES Act provides a number of important financial safeguards intended to last until the crisis is over or for a set period of time afterward. Given Congress’s penchant for keeping laws on the books long after originally intended, and because no one at this time can tell when or if the crisis will be resolved, here are some relevant highlights of the CARES Act:\r\n<ul>\r\n \t<li><strong>Protections for renters:</strong> If you rent in federally subsidized housing or are renting from an owner who has a federally or government-sponsored enterprise (GSE)–backed mortgage (for example, Federal Housing Administration [FHA], Veterans Affairs [VA], U.S. Department of Agriculture [USDA], Fannie Mae, or Freddie Mac), the CARES Act may provide for a suspension or moratorium on evictions.</li>\r\n \t<li><strong>Protections for homeowners:</strong> If you have a federally or GSE-backed mortgage and had a hardship caused by COVID-19, you have the right to request and obtain a forbearance extension for up to another 180 days (for a total of up to 360 days), without additional fees, penalties, or additional interest (beyond scheduled amounts). The law prohibits GSE lenders and servicers from beginning or finalizing a judicial or nonjudicial foreclosure or sale against you.</li>\r\n \t<li><strong>Protections for those with student loans:</strong> You get automatic suspension of principal and interest payments on federally held student loans through September 30, 2020. And what’s more, suspended payments count toward any student loan forgiveness program, as long as all other requirements of the loan forgiveness program are met.</li>\r\n</ul>\r\n<p style=\"padding-left: 40px;\">Lenders must report any current loans on which they offer forbearance to the credit bureaus as being current as long as the terms of the agreement are observed.</p>\r\n<p class=\"article-tips tip\">Although not part of the law, the three main credit bureaus are allowing free weekly credit reports at least through April 2021.</p>\r\n\r\n<h2 id=\"tab5\" >Statute of limitations laws</h2>\r\nThis protection is worthy of Perry Mason: “I object, Your Honor, for this charge is too old.” Well, maybe Perry didn’t say exactly that, but he’d be happy to see that each state has a law called a <em>statute of limitations (SOL)</em> that sets a limit on how long a debt collector can sue you in court, depending on the type of loan you allegedly owe. This is only fair, because after several years, who keeps all those receipts and slips of paper? Either hurry up and sue or forget about it!\r\n\r\nThis protection isn’t automatic; you have to ask for it. What do you need to know and do? Read on.\r\n<ul>\r\n \t<li>If a debt is past the SOL, the creditor can’t successfully sue you in court to collect it. But you must show up and prove that the debt is too old.</li>\r\n \t<li>Credit reports show a delinquency for seven years. This has nothing to do with the time a debt is collectible.</li>\r\n \t<li>The period used to figure how old your debt is starts when you miss a payment and never make another one. A payment may restart the SOL clock, depending on the state in which you live.</li>\r\n</ul>\r\n<h2 id=\"tab6\" >Your state attorney general</h2>\r\nEvery state has an attorney general. All attorneys general have at least one thing in common: One of their primary responsibilities is to enforce their states’ consumer protection laws. Every state has a consumer protection statute prohibiting deceptive acts and practices. These statutes include laws that address specific industries or practices. For example, many FACT Act protections, especially for credit reporting, have stricter state regulations, giving you more rights and a local resource for help.\r\n\r\nState attorneys general love to go after abuses and illegalities in the marketplace, including deceptive trade practices, telemarketing and internet fraud, fake charities, ID theft, and false or misleading advertising. It’s good press for them and good protection for you. Generally, these public officials have a low tolerance for financial shenanigans. So, if you think you’re being abused, taken advantage of, or scammed in a credit or personal finance transaction, this is the office to call.\r\n\r\nI’ve had good luck working with the consumer protection sections of several state attorneys general. If you decide to ask them for help, we suggest that you be organized and to the point, and have the pertinent information at hand. Attorneys general are no-nonsense law enforcement officials who appreciate you calling for their help but not wasting their time.\r\n<h2 id=\"tab7\" >The Consumer Financial Protection Bureau</h2>\r\nReforming our financial system isn’t easy, and the Feds know it, so they formed a new agency — the Consumer Financial Protection Bureau, or CFPB — to carry on the fight of protecting you long after the ink dried on the Dodd-Frank Wall Street Reform and Consumer Protection Act (the legislation that created the CFPB). Not since J. Edgar Hoover headed up the FBI has a federal agency had such far-reaching powers. The CFPB sets rules for payday lenders, credit card issuers, and all the players in between. Here are the major protections this agency delivers:\r\n<ul>\r\n \t<li>Need information? Use the <a href=\"http://www.consumerfinance.gov/askcfpb/\">question-and-answer service</a> for inquiries about mortgages, student loans, debt collections, credit reports, and more.</li>\r\n \t<li>Have a complaint? <a href=\"http://www.consumerfinance.gov/complaint/\">Let ‘em have it</a>. Bank accounts, credit cards, credit reporting, debt collections, money transfers, mortgages, student loans, and consumer loans are among the topics you can get help with. You complain, and the CFPB forwards your beef to the company and works to get an answer. It reviews the response and shares it with other agencies to identify patterns of abuse and write better regulations. It also sends you e-mail updates and has a secure consumer portal that you can use to track your complaint and give feedback about company responses to help the CFPB prioritize complaints. Just like the <em>Dragnet</em> guys: dum-ta-dum dum!</li>\r\n \t<li>It requires anyone who issues credit or prepaid cards to give you better, more easily understandable terms-and-cost disclosures.</li>\r\n \t<li>If you have to sign it, you should be able to understand it. The CPFB assures that paperwork is understandable.</li>\r\n \t<li>It helps set rules on transaction fees for interchange activity, like on your Visa or MasterCard.</li>\r\n \t<li>It closely regulates consumer credit counseling, debt settlement, and debt collectors to keep you from being victimized.</li>\r\n</ul>\r\n<h2 id=\"tab8\" >The Credit Card Accountability, Responsibility, and Disclosure Act</h2>\r\nFed up with tricky terms, excessive penalties, fees, and unfair banking practices, Congress enacted the Credit Card Accountability, Responsibility, and Disclosure Act (CARD Act) to give you a fair playing field in the area of credit cards. Here are your major protections:\r\n<ul>\r\n \t<li>Credit card companies can’t raise card interest rates except under specific circumstances, such as at the end of a promotional rate, or when a variable interest rate index to which your card is tied rises, or if you’re 60 days late on a payment. Also, double cycle interest billing, which used your average daily balance for the current and previous billing cycles to charge you more, is no longer allowed.</li>\r\n \t<li>If your rate or terms change, you get 45 days’ notice to plan what to do.</li>\r\n \t<li>You can opt out of changes you don’t like. Doing so may cause your account to be closed, but you can pay off the debt under the old terms.</li>\r\n \t<li>Card companies can’t issue cards to people under 21 who have no income. This sounds like a no-brainer, but for years creditors had been giving students credit despite their having no income to repay their charges.</li>\r\n \t<li>Creditors must give you at least 21 days after a bill is mailed to make your payment. The due date can’t be before the mail is delivered or on a weekend, a holiday, or a day when the creditor is closed for business. If you’re late, fees are limited to a maximum of $25.</li>\r\n \t<li>All payment amounts above the minimum payment due must be applied to the balance with the highest interest rate, not the lowest.</li>\r\n \t<li>If you exceed your credit limit, the card company must ask you whether you want that transaction to be processed and incur an over-limit fee. Saying “no thank you” results in the purchase being denied but also saves you the over-limit fee. Even if you say yes, the fee can’t exceed the amount by which you exceed the credit limit. So if you exceed your limit by $10, the fee can’t be more than $10.</li>\r\n</ul>\r\n<h2 id=\"tab9\" >The Fair and Accurate Credit Transactions Act</h2>\r\nFairness is something you can hope for in your dealings with the credit bureaus and those other consumer-reporting bureaus that are increasingly in the news. But before the protections afforded in the Fair and Accurate Credit Transactions Act (FACT Act or FACTA) became effective, fairness was strictly in the eye of the beholder. And the beholder wasn’t you! Congress acted to end a number of perceived and real abuses.\r\n\r\nCongress understood that the nation’s banking system was becoming increasingly dependent on credit reporting, that inaccurate reports resulted in unfair and inefficient banking, and that you have a right to privacy. The result is that you now have more control over what’s said about you in credit bureau files and who can access your information. You also have the right to dispute errors or out-of-date information and to get a free copy of your credit report from each bureau every year. Not bad for the crowd from Washington, D.C.! Here are your main protections:\r\n<ul>\r\n \t<li>You must be told about any negative action taken as a result of information contained in your credit report, and you must be given free access to the same information. If the interest rate on your favorite credit card goes up, for example, you get to see a copy of the report that contains the data that led to that increase.</li>\r\n \t<li>You can find out what information is in your personal file. No more secrets! It’s your information and your file, so you can look at it.</li>\r\n \t<li>You can get a free copy of your credit report at least every 12 months if you ask for one. You can also get a free report whenever you’re the object of identity theft or fraud, you’re on public assistance, or you’re unemployed but expect to apply for employment within 60 days.</li>\r\n \t<li>You have the right to know your credit score. This score used to be as big a secret as what was in your bureau files. Score watching has become a favorite pastime for many and a profitable business for others.</li>\r\n \t<li>The data in your file must be accurate, verifiable, and current. If data is incorrect or too old, you need only to ask, and it will be verified or removed pronto.</li>\r\n \t<li>Only those who have a legitimate business purpose can see your file, and you can stop everyone from accessing your file without your express permission if you like. Usually only creditors, insurers, employers, landlords, and others with whom you do business get to see what’s in your file. You can slam the door on everyone with a credit freeze.</li>\r\n</ul>\r\n<h2 id=\"tab10\" >The Federal Trade Commission</h2>\r\nThe Federal Trade Commission (FTC) is the alter ego of the Bureau of Consumer Protection (BCP). Although it doesn’t deal with individual consumer complaints, it does protect consumers by accumulating and analyzing complaints and then taking industry-wide action to address issues that you bring to it. Some examples of BCP protections are your ability to get a free annual credit report, the National Do Not Call Registry to block unwanted telemarketing calls, and appliance disclosure stickers that show the energy costs of home appliances, to name just a few.\r\n\r\nThe BCP looks out for unfair, deceptive, or fraudulent practices in the marketplace. It investigates and sues companies and people who violate the law. It also develops rules to protect you and requires businesses to give you better disclosure of your costs, rights, and dispute-resolution options. It also collects complaints about consumer fraud and identity theft and makes them available to law enforcement agencies across the country.\r\n\r\nOf the bureau’s seven divisions, here are the five that you may find useful:\r\n<ul>\r\n \t<li><strong>Advertising practices:</strong> Enforces truth-in-advertising laws. If an offer seems too good to be true and it is, complain to the FTC.</li>\r\n \t<li><strong>Financial practices:</strong> Protects you from deceptive and unfair practices in the financial services industry, including predatory or discriminatory lending practices, deceptive or unfair loan servicing and debt collection, and fraudulent credit counseling and debt settlement companies.</li>\r\n \t<li><strong>Marketing practices:</strong> Responds to internet, telecommunications, and direct-mail fraud; spam; fraudulent work-at-home schemes; and violations of the Do Not Call provisions of the Telemarketing Sales Rule.</li>\r\n \t<li><strong>Privacy and identity protection:</strong> Protects your financial privacy, investigates data breaches, helps consumers whose identities have been stolen, and implements laws and regulations for the credit reporting industry, including the FACT Act.</li>\r\n \t<li><strong>Enforcement:</strong> Sues to address issues on these practices.</li>\r\n</ul>\r\n<p class=\"article-tips remember\">Your complaint, comment, or inquiry may help identify a pattern of violations requiring law enforcement action, but the FTC doesn’t resolve individual consumer disputes.</p>","blurb":"","authors":[{"authorId":9218,"name":"Steve Bucci","slug":"steve-bucci","description":"","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9218"}},{"authorId":33476,"name":"Melyssa Barrett","slug":"melyssa-barrett","description":"Melyssa Barrett is vice president of identity solutions at Visa, Inc., where she creates products to detect and predict fraud within consumer credit, debit, and prepaid products. ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/33476"}},{"authorId":33477,"name":"Rod Griffin","slug":"rod-griffin","description":"Rod Griffin is senior director of consumer education and advocacy for Experian, responsible for the company's national consumer education programs and outreach.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/33477"}}],"primaryCategoryTaxonomy":{"categoryId":34304,"title":"Credit Reports","slug":"credit-reports","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34304"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[{"label":"The Fair Debt Collection Practices Act","target":"#tab1"},{"label":"The Bankruptcy Abuse Prevention and Consumer Protection Act","target":"#tab2"},{"label":"Your lawyer","target":"#tab3"},{"label":"Coronavirus Aid, Relief, and Economic Security (CARES) Act","target":"#tab4"},{"label":"Statute of limitations laws","target":"#tab5"},{"label":"Your state attorney general","target":"#tab6"},{"label":"The Consumer Financial Protection Bureau","target":"#tab7"},{"label":"The Credit Card Accountability, Responsibility, and Disclosure Act","target":"#tab8"},{"label":"The Fair and Accurate Credit Transactions Act","target":"#tab9"},{"label":"The Federal Trade Commission","target":"#tab10"}],"relatedArticles":{"fromBook":[],"fromCategory":[{"articleId":275982,"title":"The CARD Act: Shielding You from Credit Card Abuse","slug":"the-card-act-shielding-you-from-credit-card-abuse","categoryList":["business-careers-money","personal-finance","loans-credit","credit-reports"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/275982"}},{"articleId":275976,"title":"10 Ways to Deal with a Mortgage Meltdown","slug":"10-ways-to-deal-with-a-mortgage-meltdown","categoryList":["business-careers-money","personal-finance","loans-credit","credit-reports"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/275976"}},{"articleId":275970,"title":"How Your Actions Impact Your Credit Score","slug":"how-your-actions-impact-your-credit-score","categoryList":["business-careers-money","personal-finance","loans-credit","credit-reports"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/275970"}},{"articleId":275965,"title":"Going Green: Treating Credit as a Renewable Resource","slug":"going-green-treating-credit-as-a-renewable-resource","categoryList":["business-careers-money","personal-finance","loans-credit","credit-reports"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/275965"}},{"articleId":207725,"title":"Credit Repair Kit For Dummies Cheat Sheet","slug":"credit-repair-kit-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","loans-credit","credit-reports"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/207725"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":0,"slug":null,"isbn":null,"categoryList":null,"amazon":null,"image":null,"title":null,"testBankPinActivationLink":null,"bookOutOfPrint":false,"authorsInfo":null,"authors":null,"_links":null},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;loans-credit&quot;,&quot;credit-reports&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[null]}]\" id=\"du-slot-6217bb098dc60\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;loans-credit&quot;,&quot;credit-reports&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[null]}]\" id=\"du-slot-6217bb098e62d\"></div></div>"},"articleType":{"articleType":"Articles","articleList":null,"content":null,"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Solve","lifeExpectancy":"Two years","lifeExpectancySetFrom":null,"dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":275979},{"headers":{"creationTime":"2021-01-30T00:29:03+00:00","modifiedTime":"2021-03-24T19:44:31+00:00","timestamp":"2022-02-24T17:06:17+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Loans & Credit","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34301"},"slug":"loans-credit","categoryId":34301},{"name":"Credit Reports","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34304"},"slug":"credit-reports","categoryId":34304}],"title":"10 Ways to Deal with a Mortgage Meltdown","strippedTitle":"10 ways to deal with a mortgage meltdown","slug":"10-ways-to-deal-with-a-mortgage-meltdown","canonicalUrl":"","seo":{"metaDescription":"Learn what you need to know and do after you realize you aren’t going to be able to pay back a mortgage but before you lose your home.","noIndex":0,"noFollow":0},"content":"For most people, a house is more than just a building you live in. It’s a place you worked hard to earn, plan a life, grow a family, and make memories. It’s a home. Sometimes those dreams don’t come true, and that mortgage can become unsustainable. But misinformation, stress, and denial can make it hard to accept the writing on the wall when you’re in trouble with your mortgage. Learn what you can do before you <a href=\"https://www.dummies.com/personal-finance/credit/8-tips-for-a-top-credit-score/\">damage your credit</a> irreparably.\r\n\r\n[caption id=\"attachment_276171\" align=\"alignnone\" width=\"556\"]<img class=\"size-full wp-image-276171\" src=\"https://www.dummies.com/wp-content/uploads/credit-foreclosure.jpg\" alt=\"credit repair mortgage\" width=\"556\" height=\"370\" /> © Andy Dean Photography / Shutterstock.com[/caption]\r\n\r\nLenders may take a soft approach to early mortgage delinquencies, hoping you can get back on track. Unfortunately, when you can’t get back on track, they can take a hard line on foreclosures. If you owe a past-due balance on a credit card, you’ll get phone calls and letters that feel like harassment. Mortgage holders aren’t nearly as aggressive when you’re late on your payments. After all, they have security for their loan: your home. To them, that dwelling you live in is collateral that can be sold to recoup their losses.\r\n\r\nThis article outlines ten things you need to know and do after you realize you aren’t going to be able to pay back the mortgage but before you leave or are asked to leave your home.\r\n<h2 id=\"tab1\" >Know when you’re in trouble</h2>\r\nYou aren’t in trouble if you owe more than the value of your home. You aren’t in trouble if your roof leaks and you can’t afford to fix it (although that may be an early warning sign). You may be in trouble if you can’t pay your real estate taxes, but chances are, your unpaid taxes won’t result in the bank calling. But you are <em>definitely in trouble</em> if you are late on your mortgage payments and have a feeling you’re on the edge of a cliff and at any moment could fall off and into the foreclosure abyss.\r\n\r\nIf you’re late on a single payment, you can probably just catch up. There may be a late fee, a hike in interest rate, or a penalty. At that point, it’s financially advantageous for your lender to say, “Thank you, but this fee is a reminder to not be late again.”\r\n\r\nOn the other hand, if you’ve fallen several months behind, your mortgage lender might say, “No thank you!”\r\n\r\nWhy would they do that? It’s complicated, but basically, here’s how it works: Because most mortgages are packaged into securities and sold in bulk to investors, the default terms for all the mortgages in the “package” must be spelled out in great detail and generally be the same. The result is a rigid set of rules that were made up in advance and have very little flexibility when applied.\r\n\r\nIt’s not that your lender is an unfeeling automaton. As people, they do care. But legal agreements and contracts spell out what they must do. If you’re more than 90 days late and you try to make a payment or even two, there is an excellent chance that your money will be refused and returned to you. You may need to make up <em>all your payments at once</em> to get any payment applied to your mortgage. A day late is indeed a dollar short when it comes to home mortgages. To further complicate matters as only bankers and lawyers can, the 90-day payment cliff does not include your grace period (typically 15 days).\r\n<p class=\"article-tips remember\">If you’re late on your mortgage, it’s vital that you open and answer your mail. The notices you receive generally offer good information about your options. The sooner you seek help, the more options you’ll have to save your home.</p>\r\n\r\n<h2 id=\"tab2\" >Know how your state’s laws treat foreclosures</h2>\r\nEvery state has its own foreclosure laws. It is important to know how your state’s laws work so that you don’t inadvertently cross a line or miss an important date. You can find summaries of the laws for all states at <a href=\"http://http:/www.foreclosurelaw.org/\">www.foreclosurelaw.org</a>. The following sections outline a few critical differences.\r\n<h3>Nonrecourse or recourse</h3>\r\nIf your lender is foreclosing on your mortgage, whether you live in a “recourse” state or a “nonrecourse” state makes a big difference. In general, if you live in a nonrecourse state, you can’t be held liable for any deficiency between the amount you owe and the amount your home sells for in the foreclosure. If you live in a recourse state, the lender may get a deficiency judgment against you in court. For example, if you owe $200,000 on your mortgage but your home nets only $150,000 at the foreclosure sale, the deficiency is $50,000. You would then be responsible for paying that “deficiency” of $50,000.\r\n\r\nBut knowing which states are nonrecourse states isn’t enough. Some states define certain loans as nonrecourse if, for example, they were used only to purchase a home; but, if part of the proceeds of the loan were used for some other purpose, like paying off credit card debt, they define it as recourse. Other states limit the amount of the deficiency to the fair value of the property versus the sale price. Still other states have a one-action limit. For example, New York makes lenders choose between the acts of foreclosing on the property and suing to collect the debt.\r\n\r\nConsult a housing counselor certified by the U.S. Department of Housing and Urban Development (HUD) or an attorney to get definitive information about the rules for your state.\r\n<p class=\"article-tips warning\">State nonrecourse rules don’t apply to the IRS. If you lived in your home for less than two years, you may not qualify for the $250,000 individual home sale exclusion, so you may have a capital gain or phantom income from a foreclosure. See your tax professional for advice.</p>\r\n\r\n<h3>Judicial or nonjudicial</h3>\r\nIt is important to know whether your state handles foreclosures on a judicial or nonjudicial basis. If you live in a nonjudicial foreclosure state, your lender does not have to go to court in order to foreclose on your home. This means that the foreclosure can proceed more quickly. In judicial states, foreclosures go through a court. These are called <em>judicial foreclosures</em> and may take longer to finalize<em>.</em>\r\n\r\nThe nonjudicial states include Alabama, Alaska, Arizona, Arkansas, California, Colorado, District of Columbia (sometimes), Georgia, Idaho, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Mexico (sometimes), North Carolina, Oklahoma (unless the homeowner requests a judicial foreclosure), Oregon, Rhode Island, South Dakota (unless the homeowner requests a judicial foreclosure), Tennessee, Texas, Utah, Virginia, Washington, West Virginia, and Wyoming.\r\n<p class=\"article-tips remember\">Time is your enemy in a nonjudicial state. Lenders are required to give very little notice of foreclosure sales, and once the foreclosure process begins, you may have no further options.</p>\r\n\r\n<h2 id=\"tab3\" >Decide whether to stay or go</h2>\r\nThis decision used to be a no-brainer. It was a matter of pride. People would do everything they could to keep their house. The stigma of losing the roof over your head was a big one. Today, though, the decision is often less about emotion and more about the math. Faced with seemingly unrecoverable deficits, some homeowners crunch the numbers and decide to save time, money, and stress by letting the foreclosure process run its course. Some move out, and others stay until the home sells to a new owner or the bank forces them to leave. The following sections describe your options.\r\n<h3>Walking away</h3>\r\n<em>Strategic default</em> is a new term in the language of mortgages. When the housing bubble burst in 2008, some properties went so far <em>underwater</em> (more is owed than the home is worth) that it seemed that it would take years or even decades for the home to regain the value of its mortgage — or it never would. Some borrowers choose to stop making payments, even if they can afford to make them, because they see their house as just another investment, and a bad one at that. Walking away is known as a strategic default.\r\n\r\nPotential drawbacks to strategic default include deficiency judgments, significant credit score damage, problems buying or renting in the future, the personal impact of a major life failure, and to a much lesser degree these days, stigma in the eyes of others.\r\n<h3>Working with the lender to exit</h3>\r\nA more lender-friendly version of a strategic default is the deed-in-lieu of foreclosure option. Rather than go through a long and expensive foreclosure process in order to obtain title, the lender agrees to accept the deed to the property. This option may also incur a deficiency judgment for the difference between the fair market value of the property and the total debt owed. You’ll still see damage to your credit scores and possibly a “deed-in-lieu” notation on your credit reports.\r\n\r\nAnother option in this category is a <em>short sale,</em> which involves selling your home for less than what you owe. If you choose this option, you may be subject to a deficiency judgment, depending on the terms you work out with your lender and the laws in your state. A short sale will have an equally serious effect on your credit scores, but don’t look for the term <em>short sale</em> on your credit report. It’s an unofficial phrase that was created to more gently describe settling your loan, and your lender will report the mortgage as “settled.”\r\n<p class=\"article-tips tip\">In March 2013, Fannie Mae and Freddie Mac began letting some borrowers who are current on their payments give up their underwater properties and cancel the debt under their Mortgage Release and Standard Deed-in-Lieu of Foreclosure programs. If this option is of interest to you and you have a <a href=\"https://sf.freddiemac.com/content/_assets/resources/pdf/fact-sheet/deed_in_lieu_fact_sheet.pdf\">Freddie Mac mortgage</a>, the website has more information. If you have a <a href=\"http://www.knowyouroptions.com/avoid-foreclosure-overview\">Fannie Mae mortgage</a>, go to its website for more info.</p>\r\n\r\n<h3>Staying the course</h3>\r\nIf you decide to do all you can to stay in your home, several courses of action are open to you. The major ones include the following:\r\n<ul>\r\n \t<li><strong>FHA Short Refinance:</strong> If you owe more than your home is worth and you want to refinance, the lender can reduce the amount you owe on your first mortgage to no more than 97.75 percent of your home’s current market value.</li>\r\n \t<li><strong>Loan modification/refinancing:</strong> The two main types are the Home Affordable Modification Program (HAMP) for Freddie Mac and Fannie Mae mortgages and conventional refinancing for others. A conventional mortgage servicer or lender may modify your loan to make it more affordable, but each one has its own programs and guidelines. Speak to your servicer about HAMP. If your loan is owned or guaranteed by Freddie or Fannie and you are ineligible for conventional refinancing, HAMP can change the type of your loan from adjustable to fixed, to a longer fixed term, or to a lower interest rate and can add past-due payments to the principal balance to be repaid over the full mortgage term.</li>\r\n \t<li><strong>HUD Foreclosure Avoidance Counseling:</strong> HUD offers free counseling to anyone who may be faced with foreclosure. They may be able to help you find alternatives to losing your home, or help with special loan programs to modify or refinance your mortgage or reduce your monthly payments to help you keep your house. Find a <a href=\"https://apps.hud.gov/offices/hsg/sfh/hcc/fc/index.cfm\">HUD counselor</a> near you.</li>\r\n \t<li><strong>Assistance because of a natural or declared disaster:</strong> Hurricanes, fires, earthquakes, tornadoes, volcanoes, and global pandemics can put lots of people in situations beyond their control. During times of disaster, federal and state governments, lenders, and credit reporting agencies may offer special relief programs. If you’ve been affected by a disaster, check with your lender about payment accommodations, such as forbearance or deferment, to help you maintain your mortgage payments through a period that is beyond your control.</li>\r\n</ul>\r\n<h2 id=\"tab4\" >Tighten your spending to stay in your home</h2>\r\nWhether your financial life has a ding or two or is upside-down, tightening your budget can help you free up sorely needed cash and get back in control of your situation. If you don’t have a budget, now is the perfect time to make one.\r\n\r\nMaking a budget is basic but effective. Begin by listing all your expenses and then list your income. Look carefully at both sides of the equation, make some cuts to expenses, and look for ways to add to your take-home pay (like reducing your tax withholding) or increase your income with a part time job. For example, if the bank forecloses, you’ll lose your cable TV anyway. Cutting cable now may give you the extra cash that helps keep you in your home.\r\n\r\nTechnically it’s not a spending cut, but you can also try to sell some stuff to raise cash for a mortgage payment. We’ve all seen the “Cash for gold!” signs. Selling old and unused gold or jewelry is something you may want to consider. Having a yard or garage sale, downsizing to one car, and selling your violin should also be on your list. You get the idea. Lightening your load of stuff may buy you the time you need to catch up.\r\n<h2 id=\"tab5\" >Prioritize your spending to build cash</h2>\r\nNo matter what you choose to do in the event of a mortgage crisis, you’re going to need some cash. It may be to pay an arrearage. It may be to come up with first and last month’s rent and a damage deposit on a new apartment. Either way, you need to tighten your budget (or create one; see the preceding section). Yes, this step is basic, but as with everything in life, you have to start at the beginning. As described in the preceding section, list all your expenses and then list your income. Take a look at both sides of the equation and determine where you can make changes — by cutting expenses and/or increasing income.\r\n<p class=\"article-tips remember\">Car repossessions can happen within weeks — not months — of missing a payment. So, if you need your car to get to work, keeping up on your car payment is critically important.</p>\r\nIf you can’t make your mortgage payment, it’s important to save as much of the money you’re not sending to your lender as possible. If your payment is $1,000 and you can only scrape together $800, don’t spend it on something else. Put the money aside to help ease your transition into a new place.\r\n<p class=\"article-tips tip\">Want some help with creating a spending plan? Try a nonprofit consumer credit counseling agency member of the National Foundation for <a href=\"http://www.nfcc.org/\">Credit Counseling</a>. Organizations like Operation Hope also offer money management programs. There may be a <a href=\"https://operationhope.org/credit-and-money-management\">Hope Inside center</a> near you.</p>\r\n\r\n<h2 id=\"tab6\" >Lessen the damage to your credit</h2>\r\nIn a nutshell, if you stiff your mortgage lender with a loss in the form of a short sale or foreclosure, your credit will take a much bigger hit than if you come to an agreement to repay or forgive any deficiency.\r\n\r\nFor a person with decent credit and a FICO score in the 720 range, the difference in credit score deduction between a short sale with a deficiency and one without can be more than 50 points.\r\n<h2 id=\"tab7\" >Know who to call</h2>\r\nYou know that you have the right to remain silent, and remaining silent can be wise in some situations, but not when you’re facing a mortgage crisis. If you’re behind on your payments, your lender will communicate with you by mail. The worst thing you can do is to remain silent, which could leave the bank no other option than to take legal action.\r\n\r\nThe best thing you can do is to open your mail and speak to your mortgage servicer at once. I also strongly recommend that you contact an independent HUD-approved <a href=\"http://www.hud.gov/i_want_to/talk_to_a_housing_counselor\">mortgage counselor</a> or your state housing agency. Avoid foreclosure-prevention companies like the plague they are. The best help is easy to find and available for free.\r\n<h2 id=\"tab8\" >Beware of scams</h2>\r\nIt’s easy to forget a lifetime of wisdom when the pressure is on and you are desperate for a solution. Knowing that you’re vulnerable during a mortgage crisis, scammers will try to charge you money or even trick you into signing your deed over to them. Keep in mind that not everyone out there wants to help you; many just want to help themselves.\r\n\r\nHere are some tips to avoid being scammed:\r\n<ul>\r\n \t<li>Never pay a fee in advance. The best help is free.</li>\r\n \t<li>Never believe someone who guarantees that they can stop your foreclosure.</li>\r\n \t<li>Be wary of anyone who contacts you and offers to help. Always get a second opinion from a person or an organization you trust.</li>\r\n \t<li>Never hand your mortgage money over to anyone other than your mortgage servicer.</li>\r\n</ul>\r\n<h2 id=\"tab9\" >Beef up your credit</h2>\r\nAs soon as you default on your mortgage, your credit scores will take a nosedive. You likely won’t be able to qualify for new accounts for quite a long time. Now is the time to take steps to improve your credit as much as possible so you can be in a position to move forward.\r\n\r\nPay down as much debt as you can, especially on your credit cards. If you’re not making the mortgage payments, put the money toward your credit card balances. Lower credit card balances will help you bump up your scores and reduce your debt burden after the foreclosure proceedings have completed.\r\n\r\nTry not to take on any more debt. Any purchases you make should be essentials. It’s why having a budget it so important. Digging yourself deeper into debt when you can’t pay what you already owe will only make things worse.\r\n\r\nTake advantage of other new tools that can help bolster your credit scores, as well. Having things like your on-time cellphone, utility and video streaming payments added can help bolster your credit scores. Services like <a href=\"http://www.experianboost.com/\">Experian Boost</a> can be worth looking into. Just be sure you understand what you’re signing up for. Although these kinds of services are free from a cash point of view, you’ll likely get marketing offers to tempt you to open your wallet. Be prepared to say no thank you. You may sign up for alternative scoring systems like <a href=\"http://www.fico.com/ultrafico\">UltraFICO</a>, that incorporate information not included in credit reports. Lenders may consider that information in addition to the traditional scores to approve your application.\r\n\r\nIf you lose your house, you may find yourself renting. Studies have shown that doing so almost always helps build your credit. Talk to your landlord about having your positive rent payments reported or sign up with a rent payment service yourself. Here are a few options:\r\n<ul>\r\n \t<li><strong><a href=\"http://www.clearnow.com/creditreporting\">ClearNow</a></strong></li>\r\n \t<li><strong><a href=\"http://www.erentpayment.com/\">eRentPayment</a></strong></li>\r\n \t<li><strong><a href=\"http://www.payyourrent.com/residents\">PayYourRent</a></strong></li>\r\n \t<li><strong><a href=\"http://www.renttrack.com/\">Rent Track</a></strong></li>\r\n</ul>\r\nYou should know that there may be a nominal fee for these services to report your rent payments, so compare their offers to find the one that’s right for your situation.\r\n<h2 id=\"tab10\" >Consult an attorney</h2>\r\nYou have rights and you have legal options. Only an attorney can give you sound legal advice, so before your mortgage crisis gets too far along, spend the money to get a competent assessment of where you stand and what the law can do to help.\r\n\r\nFor example, a bankruptcy filing can stop a foreclosure in its tracks — probably not forever, but maybe long enough. A Chapter 7 or 13 bankruptcy may be a way to reduce other debt or the amount of your mortgage that exceeds the value of your home. It may be enough to get you back on track with your mortgage payments. Also, not all mortgage documents are properly drawn and executed. Have a lawyer review your files to see if they are unenforceable or flawed in any way.\r\n<p class=\"article-tips remember\">Bankruptcy is a last resort. It’s the most serious financial decision you can make related to your debts. It’s there for a reason, but that reason is that there is no other financial option.</p>\r\n<p class=\"article-tips tip\">A good lawyer who does a lot of foreclosure-prevention work can sometimes work minor miracles, maybe even delaying foreclosure for years, which can help you begin to build your savings account to pay for your next move, or maybe even keep your house.</p>","description":"For most people, a house is more than just a building you live in. It’s a place you worked hard to earn, plan a life, grow a family, and make memories. It’s a home. Sometimes those dreams don’t come true, and that mortgage can become unsustainable. But misinformation, stress, and denial can make it hard to accept the writing on the wall when you’re in trouble with your mortgage. Learn what you can do before you <a href=\"https://www.dummies.com/personal-finance/credit/8-tips-for-a-top-credit-score/\">damage your credit</a> irreparably.\r\n\r\n[caption id=\"attachment_276171\" align=\"alignnone\" width=\"556\"]<img class=\"size-full wp-image-276171\" src=\"https://www.dummies.com/wp-content/uploads/credit-foreclosure.jpg\" alt=\"credit repair mortgage\" width=\"556\" height=\"370\" /> © Andy Dean Photography / Shutterstock.com[/caption]\r\n\r\nLenders may take a soft approach to early mortgage delinquencies, hoping you can get back on track. Unfortunately, when you can’t get back on track, they can take a hard line on foreclosures. If you owe a past-due balance on a credit card, you’ll get phone calls and letters that feel like harassment. Mortgage holders aren’t nearly as aggressive when you’re late on your payments. After all, they have security for their loan: your home. To them, that dwelling you live in is collateral that can be sold to recoup their losses.\r\n\r\nThis article outlines ten things you need to know and do after you realize you aren’t going to be able to pay back the mortgage but before you leave or are asked to leave your home.\r\n<h2 id=\"tab1\" >Know when you’re in trouble</h2>\r\nYou aren’t in trouble if you owe more than the value of your home. You aren’t in trouble if your roof leaks and you can’t afford to fix it (although that may be an early warning sign). You may be in trouble if you can’t pay your real estate taxes, but chances are, your unpaid taxes won’t result in the bank calling. But you are <em>definitely in trouble</em> if you are late on your mortgage payments and have a feeling you’re on the edge of a cliff and at any moment could fall off and into the foreclosure abyss.\r\n\r\nIf you’re late on a single payment, you can probably just catch up. There may be a late fee, a hike in interest rate, or a penalty. At that point, it’s financially advantageous for your lender to say, “Thank you, but this fee is a reminder to not be late again.”\r\n\r\nOn the other hand, if you’ve fallen several months behind, your mortgage lender might say, “No thank you!”\r\n\r\nWhy would they do that? It’s complicated, but basically, here’s how it works: Because most mortgages are packaged into securities and sold in bulk to investors, the default terms for all the mortgages in the “package” must be spelled out in great detail and generally be the same. The result is a rigid set of rules that were made up in advance and have very little flexibility when applied.\r\n\r\nIt’s not that your lender is an unfeeling automaton. As people, they do care. But legal agreements and contracts spell out what they must do. If you’re more than 90 days late and you try to make a payment or even two, there is an excellent chance that your money will be refused and returned to you. You may need to make up <em>all your payments at once</em> to get any payment applied to your mortgage. A day late is indeed a dollar short when it comes to home mortgages. To further complicate matters as only bankers and lawyers can, the 90-day payment cliff does not include your grace period (typically 15 days).\r\n<p class=\"article-tips remember\">If you’re late on your mortgage, it’s vital that you open and answer your mail. The notices you receive generally offer good information about your options. The sooner you seek help, the more options you’ll have to save your home.</p>\r\n\r\n<h2 id=\"tab2\" >Know how your state’s laws treat foreclosures</h2>\r\nEvery state has its own foreclosure laws. It is important to know how your state’s laws work so that you don’t inadvertently cross a line or miss an important date. You can find summaries of the laws for all states at <a href=\"http://http:/www.foreclosurelaw.org/\">www.foreclosurelaw.org</a>. The following sections outline a few critical differences.\r\n<h3>Nonrecourse or recourse</h3>\r\nIf your lender is foreclosing on your mortgage, whether you live in a “recourse” state or a “nonrecourse” state makes a big difference. In general, if you live in a nonrecourse state, you can’t be held liable for any deficiency between the amount you owe and the amount your home sells for in the foreclosure. If you live in a recourse state, the lender may get a deficiency judgment against you in court. For example, if you owe $200,000 on your mortgage but your home nets only $150,000 at the foreclosure sale, the deficiency is $50,000. You would then be responsible for paying that “deficiency” of $50,000.\r\n\r\nBut knowing which states are nonrecourse states isn’t enough. Some states define certain loans as nonrecourse if, for example, they were used only to purchase a home; but, if part of the proceeds of the loan were used for some other purpose, like paying off credit card debt, they define it as recourse. Other states limit the amount of the deficiency to the fair value of the property versus the sale price. Still other states have a one-action limit. For example, New York makes lenders choose between the acts of foreclosing on the property and suing to collect the debt.\r\n\r\nConsult a housing counselor certified by the U.S. Department of Housing and Urban Development (HUD) or an attorney to get definitive information about the rules for your state.\r\n<p class=\"article-tips warning\">State nonrecourse rules don’t apply to the IRS. If you lived in your home for less than two years, you may not qualify for the $250,000 individual home sale exclusion, so you may have a capital gain or phantom income from a foreclosure. See your tax professional for advice.</p>\r\n\r\n<h3>Judicial or nonjudicial</h3>\r\nIt is important to know whether your state handles foreclosures on a judicial or nonjudicial basis. If you live in a nonjudicial foreclosure state, your lender does not have to go to court in order to foreclose on your home. This means that the foreclosure can proceed more quickly. In judicial states, foreclosures go through a court. These are called <em>judicial foreclosures</em> and may take longer to finalize<em>.</em>\r\n\r\nThe nonjudicial states include Alabama, Alaska, Arizona, Arkansas, California, Colorado, District of Columbia (sometimes), Georgia, Idaho, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Mexico (sometimes), North Carolina, Oklahoma (unless the homeowner requests a judicial foreclosure), Oregon, Rhode Island, South Dakota (unless the homeowner requests a judicial foreclosure), Tennessee, Texas, Utah, Virginia, Washington, West Virginia, and Wyoming.\r\n<p class=\"article-tips remember\">Time is your enemy in a nonjudicial state. Lenders are required to give very little notice of foreclosure sales, and once the foreclosure process begins, you may have no further options.</p>\r\n\r\n<h2 id=\"tab3\" >Decide whether to stay or go</h2>\r\nThis decision used to be a no-brainer. It was a matter of pride. People would do everything they could to keep their house. The stigma of losing the roof over your head was a big one. Today, though, the decision is often less about emotion and more about the math. Faced with seemingly unrecoverable deficits, some homeowners crunch the numbers and decide to save time, money, and stress by letting the foreclosure process run its course. Some move out, and others stay until the home sells to a new owner or the bank forces them to leave. The following sections describe your options.\r\n<h3>Walking away</h3>\r\n<em>Strategic default</em> is a new term in the language of mortgages. When the housing bubble burst in 2008, some properties went so far <em>underwater</em> (more is owed than the home is worth) that it seemed that it would take years or even decades for the home to regain the value of its mortgage — or it never would. Some borrowers choose to stop making payments, even if they can afford to make them, because they see their house as just another investment, and a bad one at that. Walking away is known as a strategic default.\r\n\r\nPotential drawbacks to strategic default include deficiency judgments, significant credit score damage, problems buying or renting in the future, the personal impact of a major life failure, and to a much lesser degree these days, stigma in the eyes of others.\r\n<h3>Working with the lender to exit</h3>\r\nA more lender-friendly version of a strategic default is the deed-in-lieu of foreclosure option. Rather than go through a long and expensive foreclosure process in order to obtain title, the lender agrees to accept the deed to the property. This option may also incur a deficiency judgment for the difference between the fair market value of the property and the total debt owed. You’ll still see damage to your credit scores and possibly a “deed-in-lieu” notation on your credit reports.\r\n\r\nAnother option in this category is a <em>short sale,</em> which involves selling your home for less than what you owe. If you choose this option, you may be subject to a deficiency judgment, depending on the terms you work out with your lender and the laws in your state. A short sale will have an equally serious effect on your credit scores, but don’t look for the term <em>short sale</em> on your credit report. It’s an unofficial phrase that was created to more gently describe settling your loan, and your lender will report the mortgage as “settled.”\r\n<p class=\"article-tips tip\">In March 2013, Fannie Mae and Freddie Mac began letting some borrowers who are current on their payments give up their underwater properties and cancel the debt under their Mortgage Release and Standard Deed-in-Lieu of Foreclosure programs. If this option is of interest to you and you have a <a href=\"https://sf.freddiemac.com/content/_assets/resources/pdf/fact-sheet/deed_in_lieu_fact_sheet.pdf\">Freddie Mac mortgage</a>, the website has more information. If you have a <a href=\"http://www.knowyouroptions.com/avoid-foreclosure-overview\">Fannie Mae mortgage</a>, go to its website for more info.</p>\r\n\r\n<h3>Staying the course</h3>\r\nIf you decide to do all you can to stay in your home, several courses of action are open to you. The major ones include the following:\r\n<ul>\r\n \t<li><strong>FHA Short Refinance:</strong> If you owe more than your home is worth and you want to refinance, the lender can reduce the amount you owe on your first mortgage to no more than 97.75 percent of your home’s current market value.</li>\r\n \t<li><strong>Loan modification/refinancing:</strong> The two main types are the Home Affordable Modification Program (HAMP) for Freddie Mac and Fannie Mae mortgages and conventional refinancing for others. A conventional mortgage servicer or lender may modify your loan to make it more affordable, but each one has its own programs and guidelines. Speak to your servicer about HAMP. If your loan is owned or guaranteed by Freddie or Fannie and you are ineligible for conventional refinancing, HAMP can change the type of your loan from adjustable to fixed, to a longer fixed term, or to a lower interest rate and can add past-due payments to the principal balance to be repaid over the full mortgage term.</li>\r\n \t<li><strong>HUD Foreclosure Avoidance Counseling:</strong> HUD offers free counseling to anyone who may be faced with foreclosure. They may be able to help you find alternatives to losing your home, or help with special loan programs to modify or refinance your mortgage or reduce your monthly payments to help you keep your house. Find a <a href=\"https://apps.hud.gov/offices/hsg/sfh/hcc/fc/index.cfm\">HUD counselor</a> near you.</li>\r\n \t<li><strong>Assistance because of a natural or declared disaster:</strong> Hurricanes, fires, earthquakes, tornadoes, volcanoes, and global pandemics can put lots of people in situations beyond their control. During times of disaster, federal and state governments, lenders, and credit reporting agencies may offer special relief programs. If you’ve been affected by a disaster, check with your lender about payment accommodations, such as forbearance or deferment, to help you maintain your mortgage payments through a period that is beyond your control.</li>\r\n</ul>\r\n<h2 id=\"tab4\" >Tighten your spending to stay in your home</h2>\r\nWhether your financial life has a ding or two or is upside-down, tightening your budget can help you free up sorely needed cash and get back in control of your situation. If you don’t have a budget, now is the perfect time to make one.\r\n\r\nMaking a budget is basic but effective. Begin by listing all your expenses and then list your income. Look carefully at both sides of the equation, make some cuts to expenses, and look for ways to add to your take-home pay (like reducing your tax withholding) or increase your income with a part time job. For example, if the bank forecloses, you’ll lose your cable TV anyway. Cutting cable now may give you the extra cash that helps keep you in your home.\r\n\r\nTechnically it’s not a spending cut, but you can also try to sell some stuff to raise cash for a mortgage payment. We’ve all seen the “Cash for gold!” signs. Selling old and unused gold or jewelry is something you may want to consider. Having a yard or garage sale, downsizing to one car, and selling your violin should also be on your list. You get the idea. Lightening your load of stuff may buy you the time you need to catch up.\r\n<h2 id=\"tab5\" >Prioritize your spending to build cash</h2>\r\nNo matter what you choose to do in the event of a mortgage crisis, you’re going to need some cash. It may be to pay an arrearage. It may be to come up with first and last month’s rent and a damage deposit on a new apartment. Either way, you need to tighten your budget (or create one; see the preceding section). Yes, this step is basic, but as with everything in life, you have to start at the beginning. As described in the preceding section, list all your expenses and then list your income. Take a look at both sides of the equation and determine where you can make changes — by cutting expenses and/or increasing income.\r\n<p class=\"article-tips remember\">Car repossessions can happen within weeks — not months — of missing a payment. So, if you need your car to get to work, keeping up on your car payment is critically important.</p>\r\nIf you can’t make your mortgage payment, it’s important to save as much of the money you’re not sending to your lender as possible. If your payment is $1,000 and you can only scrape together $800, don’t spend it on something else. Put the money aside to help ease your transition into a new place.\r\n<p class=\"article-tips tip\">Want some help with creating a spending plan? Try a nonprofit consumer credit counseling agency member of the National Foundation for <a href=\"http://www.nfcc.org/\">Credit Counseling</a>. Organizations like Operation Hope also offer money management programs. There may be a <a href=\"https://operationhope.org/credit-and-money-management\">Hope Inside center</a> near you.</p>\r\n\r\n<h2 id=\"tab6\" >Lessen the damage to your credit</h2>\r\nIn a nutshell, if you stiff your mortgage lender with a loss in the form of a short sale or foreclosure, your credit will take a much bigger hit than if you come to an agreement to repay or forgive any deficiency.\r\n\r\nFor a person with decent credit and a FICO score in the 720 range, the difference in credit score deduction between a short sale with a deficiency and one without can be more than 50 points.\r\n<h2 id=\"tab7\" >Know who to call</h2>\r\nYou know that you have the right to remain silent, and remaining silent can be wise in some situations, but not when you’re facing a mortgage crisis. If you’re behind on your payments, your lender will communicate with you by mail. The worst thing you can do is to remain silent, which could leave the bank no other option than to take legal action.\r\n\r\nThe best thing you can do is to open your mail and speak to your mortgage servicer at once. I also strongly recommend that you contact an independent HUD-approved <a href=\"http://www.hud.gov/i_want_to/talk_to_a_housing_counselor\">mortgage counselor</a> or your state housing agency. Avoid foreclosure-prevention companies like the plague they are. The best help is easy to find and available for free.\r\n<h2 id=\"tab8\" >Beware of scams</h2>\r\nIt’s easy to forget a lifetime of wisdom when the pressure is on and you are desperate for a solution. Knowing that you’re vulnerable during a mortgage crisis, scammers will try to charge you money or even trick you into signing your deed over to them. Keep in mind that not everyone out there wants to help you; many just want to help themselves.\r\n\r\nHere are some tips to avoid being scammed:\r\n<ul>\r\n \t<li>Never pay a fee in advance. The best help is free.</li>\r\n \t<li>Never believe someone who guarantees that they can stop your foreclosure.</li>\r\n \t<li>Be wary of anyone who contacts you and offers to help. Always get a second opinion from a person or an organization you trust.</li>\r\n \t<li>Never hand your mortgage money over to anyone other than your mortgage servicer.</li>\r\n</ul>\r\n<h2 id=\"tab9\" >Beef up your credit</h2>\r\nAs soon as you default on your mortgage, your credit scores will take a nosedive. You likely won’t be able to qualify for new accounts for quite a long time. Now is the time to take steps to improve your credit as much as possible so you can be in a position to move forward.\r\n\r\nPay down as much debt as you can, especially on your credit cards. If you’re not making the mortgage payments, put the money toward your credit card balances. Lower credit card balances will help you bump up your scores and reduce your debt burden after the foreclosure proceedings have completed.\r\n\r\nTry not to take on any more debt. Any purchases you make should be essentials. It’s why having a budget it so important. Digging yourself deeper into debt when you can’t pay what you already owe will only make things worse.\r\n\r\nTake advantage of other new tools that can help bolster your credit scores, as well. Having things like your on-time cellphone, utility and video streaming payments added can help bolster your credit scores. Services like <a href=\"http://www.experianboost.com/\">Experian Boost</a> can be worth looking into. Just be sure you understand what you’re signing up for. Although these kinds of services are free from a cash point of view, you’ll likely get marketing offers to tempt you to open your wallet. Be prepared to say no thank you. You may sign up for alternative scoring systems like <a href=\"http://www.fico.com/ultrafico\">UltraFICO</a>, that incorporate information not included in credit reports. Lenders may consider that information in addition to the traditional scores to approve your application.\r\n\r\nIf you lose your house, you may find yourself renting. Studies have shown that doing so almost always helps build your credit. Talk to your landlord about having your positive rent payments reported or sign up with a rent payment service yourself. Here are a few options:\r\n<ul>\r\n \t<li><strong><a href=\"http://www.clearnow.com/creditreporting\">ClearNow</a></strong></li>\r\n \t<li><strong><a href=\"http://www.erentpayment.com/\">eRentPayment</a></strong></li>\r\n \t<li><strong><a href=\"http://www.payyourrent.com/residents\">PayYourRent</a></strong></li>\r\n \t<li><strong><a href=\"http://www.renttrack.com/\">Rent Track</a></strong></li>\r\n</ul>\r\nYou should know that there may be a nominal fee for these services to report your rent payments, so compare their offers to find the one that’s right for your situation.\r\n<h2 id=\"tab10\" >Consult an attorney</h2>\r\nYou have rights and you have legal options. Only an attorney can give you sound legal advice, so before your mortgage crisis gets too far along, spend the money to get a competent assessment of where you stand and what the law can do to help.\r\n\r\nFor example, a bankruptcy filing can stop a foreclosure in its tracks — probably not forever, but maybe long enough. A Chapter 7 or 13 bankruptcy may be a way to reduce other debt or the amount of your mortgage that exceeds the value of your home. It may be enough to get you back on track with your mortgage payments. Also, not all mortgage documents are properly drawn and executed. Have a lawyer review your files to see if they are unenforceable or flawed in any way.\r\n<p class=\"article-tips remember\">Bankruptcy is a last resort. It’s the most serious financial decision you can make related to your debts. It’s there for a reason, but that reason is that there is no other financial option.</p>\r\n<p class=\"article-tips tip\">A good lawyer who does a lot of foreclosure-prevention work can sometimes work minor miracles, maybe even delaying foreclosure for years, which can help you begin to build your savings account to pay for your next move, or maybe even keep your house.</p>","blurb":"","authors":[{"authorId":9218,"name":"Steve Bucci","slug":"steve-bucci","description":"","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9218"}},{"authorId":33476,"name":"Melyssa Barrett","slug":"melyssa-barrett","description":"Melyssa Barrett is vice president of identity solutions at Visa, Inc., where she creates products to detect and predict fraud within consumer credit, debit, and prepaid products. ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/33476"}},{"authorId":33477,"name":"Rod Griffin","slug":"rod-griffin","description":"Rod Griffin is senior director of consumer education and advocacy for Experian, responsible for the company's national consumer education programs and outreach.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/33477"}}],"primaryCategoryTaxonomy":{"categoryId":34304,"title":"Credit Reports","slug":"credit-reports","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34304"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[{"label":"Know when you’re in trouble","target":"#tab1"},{"label":"Know how your state’s laws treat foreclosures","target":"#tab2"},{"label":"Decide whether to stay or go","target":"#tab3"},{"label":"Tighten your spending to stay in your home","target":"#tab4"},{"label":"Prioritize your spending to build cash","target":"#tab5"},{"label":"Lessen the damage to your credit","target":"#tab6"},{"label":"Know who to call","target":"#tab7"},{"label":"Beware of scams","target":"#tab8"},{"label":"Beef up your credit","target":"#tab9"},{"label":"Consult an attorney","target":"#tab10"}],"relatedArticles":{"fromBook":[],"fromCategory":[{"articleId":275982,"title":"The CARD Act: Shielding You from Credit Card Abuse","slug":"the-card-act-shielding-you-from-credit-card-abuse","categoryList":["business-careers-money","personal-finance","loans-credit","credit-reports"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/275982"}},{"articleId":275979,"title":"10 Consumer Credit Protections Everyone Needs to Know","slug":"10-consumer-credit-protections-everyone-needs-to-know","categoryList":["business-careers-money","personal-finance","loans-credit","credit-reports"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/275979"}},{"articleId":275970,"title":"How Your Actions Impact Your Credit Score","slug":"how-your-actions-impact-your-credit-score","categoryList":["business-careers-money","personal-finance","loans-credit","credit-reports"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/275970"}},{"articleId":275965,"title":"Going Green: Treating Credit as a Renewable Resource","slug":"going-green-treating-credit-as-a-renewable-resource","categoryList":["business-careers-money","personal-finance","loans-credit","credit-reports"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/275965"}},{"articleId":207725,"title":"Credit Repair Kit For Dummies Cheat Sheet","slug":"credit-repair-kit-for-dummies-cheat-sheet","categoryList":["business-careers-money","personal-finance","loans-credit","credit-reports"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/207725"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":0,"slug":null,"isbn":null,"categoryList":null,"amazon":null,"image":null,"title":null,"testBankPinActivationLink":null,"bookOutOfPrint":false,"authorsInfo":null,"authors":null,"_links":null},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;loans-credit&quot;,&quot;credit-reports&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[null]}]\" id=\"du-slot-6217bb098418b\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;personal-finance&quot;,&quot;loans-credit&quot;,&quot;credit-reports&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[null]}]\" id=\"du-slot-6217bb0984b25\"></div></div>"},"articleType":{"articleType":"Articles","articleList":null,"content":null,"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Solve","lifeExpectancy":"Two years","lifeExpectancySetFrom":null,"dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":275976},{"headers":{"creationTime":"2021-01-30T00:22:11+00:00","modifiedTime":"2021-03-24T19:22:29+00:00","timestamp":"2022-02-24T17:06:17+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Personal Finance","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34273"},"slug":"personal-finance","categoryId":34273},{"name":"Loans & Credit","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34301"},"slug":"loans-credit","categoryId":34301},{"name":"Credit Reports","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34304"},"slug":"credit-reports","categoryId":34304}],"title":"How Your Actions Impact Your Credit Score","strippedTitle":"how your actions impact your credit score","slug":"how-your-actions-impact-your-credit-score","canonicalUrl":"","seo":{"metaDescription":"Every time you use or abuse credit, it affects your credit score. Small purchases, major expenses, and even credit inquiries have an impact.","noIndex":0,"noFollow":0},"content":"Every time you use or abuse your credit, it has an effect on your <a href=\"https://www.dummies.com/personal-finance/credit/8-tips-for-a-top-credit-score/\">credit score</a>. The impact varies with the type of action. Positive actions, like paying bills on time, raise your score and lower your risk in the eyes of a lender, insurer, or landlord. Negative actions do the opposite and, depending on what the damaging action was, could be a big deal or a minor and temporary inconvenience.\r\n\r\nWhat factors impact your credit score? Payment history, credit utilization ratio, age of credit history, your credit mix, and new credit inquiries. For example, items in the “small drop” category in the following figure are minimal and can be offset quickly with other positive actions or even the passage of time. Think of them as small meteors that harmlessly burn up in the Earth’s atmosphere. The major and maximum impact items are more like dinosaur-killer meteors!\r\n\r\n[caption id=\"attachment_275972\" align=\"alignnone\" width=\"556\"]<img class=\"size-full wp-image-275972\" src=\"https://www.dummies.com/wp-content/uploads/credit-repair-actions-impacts.jpg\" alt=\"actions and impacts chart\" width=\"556\" height=\"407\" /> Courtesy of VantageScore<br /><br />The actions and impacts chart shows the relative impact of positive and negative actions on your credit score.[/caption]\r\n\r\nThis figure helps illustrate the recovery time for five different impacts to your credit score.\r\n\r\n[caption id=\"attachment_275971\" align=\"alignnone\" width=\"556\"]<img class=\"size-full wp-image-275971\" src=\"https://www.dummies.com/wp-content/uploads/credit-repair-score-recovery.jpg\" alt=\"Score recovery chart\" width=\"556\" height=\"291\" /> Courtesy of VantageScore<br /><br />Score recovery chart[/caption]\r\n<h2 id=\"tab1\" >Turn small purchases into big credit</h2>\r\nBecause a lot of your credit score is based on using credit and making payments on time, I recommend using small purchases to get back into good standing quickly. Why does making small purchases work so well? Because each item costs less, so more purchases are reported to the credit bureaus faster. My rule is that if it costs more than $10, charge it (and pay it off each month).\r\n<p class=\"article-tips remember\">Major bank cards certainly report your activity to the credit bureaus. Some store cards may report to only one bureau, or they may not report at all. To find out whether your credit card purchases are being reported and scored, call your card’s customer service number and ask.</p>\r\nIf your score is less than stellar, don’t despair. Practicing good credit habits will raise your score over time. Scoring models look at how much of your limit you use. The more you use above a certain percentage, the higher the risk they believe you to be.\r\n\r\nTo maximize your credit score, spread purchases over more than one card to keep your balance on each card as small a percentage of your maximum limit as possible There is no magic number, but staying under 20 percent to 30 percent of your maximum limit or less is a good goal.\r\n\r\nSay you have two cards, one with a $10,000 limit and one with a $20,000 limit. Simply charge twice as much on the higher-limit card to maximize your score. When your balance exceeds 20 percent of your limit, you begin to lose points. So, even if you’re making lots of small purchases, do your best to either pay off the balance each month or keep it under 20 percent utilization. This is one of the fastest ways to see improvement to your credit score.\r\n\r\nPick up some extra points on your credit score by following a simple plan:\r\n<ul>\r\n \t<li><strong>Always pay on time.</strong> Your payment history makes up the largest chunk of your credit score.</li>\r\n \t<li><strong>Reduce your debt load.</strong> Only use credit to the extent that you can pay it off every month or keep your total balance below 20 percent of your credit limit.</li>\r\n \t<li><strong>Check your credit report for errors.</strong> You can get free credit reports from the credit bureaus by <a href=\"http://www.annualcreditreport.com/\">requesting it</a> online or calling 877-322-8228. Send a dispute letter to the relevant credit bureau if you find mistakes.</li>\r\n \t<li><strong>Keep your old accounts.</strong> Long credit history indicates stability.</li>\r\n \t<li><strong>Be patient.</strong> It may feel like credit mistakes will haunt you forever, but your payment history from the past two years is more important than your payment history prior to that.</li>\r\n</ul>\r\nAre you less concerned about your score than about paying down your balances? Some experts suggest that you pay down balances based on the interest rate (that is, pay them in descending order starting with the highest interest rate) to save money on overall payments. Others say that paying off smaller accounts first gives you a feeling of accomplishment, and therefore, you’re more likely to achieve your overall goal. My suggestion is that you choose the approach you find more satisfying. Just be sure that <em>you</em> make the choice; don’t let the first bill that shows up get the extra payment by chance.\r\n<p class=\"article-tips tip\">Make a list of each credit card, its balance, and its credit limit. Then allocate your payments to reduce your percentage of credit used to 45 percent or less of the limit on as many accounts as possible. Doing so creates some great positive data in your credit report. This approach not only enables you to regain control of your accounts but also helps you maximize your credit score, because accounts that exceed 50 percent of the limit count more heavily against you. When all your cards are at 45 percent of your limit or below, you may want to allocate more money to the highest-interest-rate cards.</p>\r\nIf you don’t have a major bank credit card, you may want to try a secured card. You can get one without a fee if you shop around. A secured card differs from a regular Visa or MasterCard in that you maintain a balance in a savings account equal to your credit limit (some cards may allow you more credit than you have on deposit) to guarantee your payment. Secured-card activity is reported just as any other credit card activity is reported, and it affects your credit score in the same way, so it can be a great option if you’re trying to build credit.\r\n<p class=\"article-tips tip\">You can find great card comparisons at <a href=\"http://www.bankrate.com/\">Bankrate</a> or <a href=\"http://www.creditcards.com/\">creditcards.com</a>. The latter has two sections to help you find the right card depending on your circumstance. One <a href=\"http://www.creditcards.com/bad-credit.php\">section</a> is helpful for those with bad or damaged credit. The <a href=\"http://www.creditcards.com/no-credit-history.php\">other section</a> is for those who have little or no experience with credit or who need to start a U.S. credit history (credit from overseas doesn’t follow you).</p>\r\nGenerally, in a typical credit market, if you make all your payments on time for a year you should have enough of a positive payment history to get an unsecured credit card.\r\n<h2 id=\"tab2\" >Maximize your credit score with major expenditures</h2>\r\n<em>Big-ticket creditors </em>— those that specialize in expensive products or services — typically report to the credit bureaus. The reason is simple: They have a lot more to lose if they lend based on inaccurate information, so they want to see as complete and accurate a file as possible.\r\n\r\nExamples of big-ticket items that may enhance credit activity are home mortgages, cars, boats, student loans, furniture, and appliances. Major credit purchases may give your credit score a boost for two reasons:\r\n<ul>\r\n \t<li><strong>A major purchase is more likely to be in the form of a secured installment loan. </strong><em>Secured</em> means that you pledge collateral on the item you purchase as security for the loan. If you default on the loan, the lender repossesses the security you pledged — in other words, you don’t get to keep the item you purchased. Adding secured credit to the other types of credit you use, such as revolving credit (cards), helps raise your credit score.</li>\r\n \t<li><strong>You make the same payment each month.</strong> When it comes to credit scoring, making set monthly payments enables the people who figure your score to discover more about your creditworthiness. Making a set monthly payment is a measure of your stability. This is different from paying on a credit card, where you can vary your payments depending on your cash flow. Adhering to a regular payment schedule also indicates that you can handle a higher limit than you may have on a store, gas, or credit card account.</li>\r\n</ul>","description":"Every time you use or abuse your credit, it has an effect on your <a href=\"https://www.dummies.com/personal-finance/credit/8-tips-for-a-top-credit-score/\">credit score</a>. The impact varies with the type of action. Positive actions, like paying bills on time, raise your score and lower your risk in the eyes of a lender, insurer, or landlord. Negative actions do the opposite and, depending on what the damaging action was, could be a big deal or a minor and temporary inconvenience.\r\n\r\nWhat factors impact your credit score? Payment history, credit utilization ratio, age of credit history, your credit mix, and new credit inquiries. For example, items in the “small drop” category in the following figure are minimal and can be offset quickly with other positive actions or even the passage of time. Think of them as small meteors that harmlessly burn up in the Earth’s atmosphere. The major and maximum impact items are more like dinosaur-killer meteors!\r\n\r\n[caption id=\"attachment_275972\" align=\"alignnone\" width=\"556\"]<img class=\"size-full wp-image-275972\" src=\"https://www.dummies.com/wp-content/uploads/credit-repair-actions-impacts.jpg\" alt=\"actions and impacts chart\" width=\"556\" height=\"407\" /> Courtesy of VantageScore<br /><br />The actions and impacts chart shows the relative impact of positive and negative actions on your credit score.[/caption]\r\n\r\nThis figure helps illustrate the recovery time for five different impacts to your credit score.\r\n\r\n[caption id=\"attachment_275971\" align=\"alignnone\" width=\"556\"]<img class=\"size-full wp-image-275971\" src=\"https://www.dummies.com/wp-content/uploads/credit-repair-score-recovery.jpg\" alt=\"Score recovery chart\" width=\"556\" height=\"291\" /> Courtesy of VantageScore<br /><br />Score recovery chart[/caption]\r\n<h2 id=\"tab1\" >Turn small purchases into big credit</h2>\r\nBecause a lot of your credit score is based on using credit and making payments on time, I recommend using small purchases to get back into good standing quickly. Why does making small purchases work so well? Because each item costs less, so more purchases are reported to the credit bureaus faster. My rule is that if it costs more than $10, charge it (and pay it off each month).\r\n<p class=\"article-tips remember\">Major bank cards certainly report your activity to the credit bureaus. Some store cards may report to only one bureau, or they may not report at all. To find out whether your credit card purchases are being reported and scored, call your card’s customer service number and ask.</p>\r\nIf your score is less than stellar, don’t despair. Practicing good credit habits will raise your score over time. Scoring models look at how much of your limit you use. The more you use above a certain percentage, the higher the risk they believe you to be.\r\n\r\nTo maximize your credit score, spread purchases over more than one card to keep your balance on each card as small a percentage of your maximum limit as possible There is no magic number, but staying under 20 percent to 30 percent of your maximum limit or less is a good goal.\r\n\r\nSay you have two cards, one with a $10,000 limit and one with a $20,000 limit. Simply charge twice as much on the higher-limit card to maximize your score. When your balance exceeds 20 percent of your limit, you begin to lose points. So, even if you’re making lots of small purchases, do your best to either pay off the balance each month or keep it under 20 percent utilization. This is one of the fastest ways to see improvement to your credit score.\r\n\r\nPick up some extra points on your credit score by following a simple plan:\r\n<ul>\r\n \t<li><strong>Always pay on time.</strong> Your payment history makes up the largest chunk of your credit score.</li>\r\n \t<li><strong>Reduce your debt load.</strong> Only use credit to the extent that you can pay it off every month or keep your total balance below 20 percent of your credit limit.</li>\r\n \t<li><strong>Check your credit report for errors.</strong> You can get free credit reports from the credit bureaus by <a href=\"http://www.annualcreditreport.com/\">requesting it</a> online or calling 877-322-8228. Send a dispute letter to the relevant credit bureau if you find mistakes.</li>\r\n \t<li><strong>Keep your old accounts.</strong> Long credit history indicates stability.</li>\r\n \t<li><strong>Be patient.</strong> It may feel like credit mistakes will haunt you forever, but your payment history from the past two years is more important than your payment history prior to that.</li>\r\n</ul>\r\nAre you less concerned about your score than about paying down your balances? Some experts suggest that you pay down balances based on the interest rate (that is, pay them in descending order starting with the highest interest rate) to save money on overall payments. Others say that paying off smaller accounts first gives you a feeling of accomplishment, and therefore, you’re more likely to achieve your overall goal. My suggestion is that you choose the approach you find more satisfying. Just be sure that <em>you</em> make the choice; don’t let the first bill that shows up get the extra payment by chance.\r\n<p class=\"article-tips tip\">Make a list of each credit card, its balance, and its credit limit. Then allocate your payments to reduce your percentage of credit used to 45 percent or less of the limit on as many accounts as possible. Doing so creates some great positive data in your credit report. This approach not only enables you to regain control of your accounts but also helps you maximize your credit score, because accounts that exceed 50 percent of the limit count more heavily against you. When all your cards are at 45 percent of your limit or below, you may want to allocate more money to the highest-interest-rate cards.</p>\r\nIf you don’t have a major bank credit card, you may want to try a secured card. You can get one without a fee if you shop around. A secured card differs from a regular Visa or MasterCard in that you maintain a balance in a savings account equal to your credit limit (some cards may allow you more credit than you have on deposit) to guarantee your payment. Secured-card activity is reported just as any other credit card activity is reported, and it affects your credit score in the same way, so it can be a great option if you’re trying to build credit.\r\n<p class=\"article-tips tip\">You can find great card comparisons at <a href=\"http://www.bankrate.com/\">Bankrate</a> or <a href=\"http://www.creditcards.com/\">creditcards.com</a>. The latter has two sections to help you find the right card depending on your circumstance. One <a href=\"http://www.creditcards.com/bad-credit.php\">section</a> is helpful for those with bad or damaged credit. The <a href=\"http://www.creditcards.com/no-credit-history.php\">other section</a> is for those who have little or no experience with credit or who need to start a U.S. credit history (credit from overseas doesn’t follow you).</p>\r\nGenerally, in a typical credit market, if you make all your payments on time for a year you should have enough of a positive payment history to get an unsecured credit card.\r\n<h2 id=\"tab2\" >Maximize your credit score with major expenditures</h2>\r\n<em>Big-ticket creditors </em>— those that specialize in expensive products or services — typically report to the credit bureaus. The reason is simple: They have a lot more to lose if they lend based on inaccurate information, so they want to see as complete and accurate a file as possible.\r\n\r\nExamples of big-ticket items that may enhance credit activity are home mortgages, cars, boats, student loans, furniture, and appliances. Major credit purchases may give your credit score a boost for two reasons:\r\n<ul>\r\n \t<li><strong>A major purchase is more likely to be in the form of a secured installment loan. </strong><em>Secured</em> means that you pledge collateral on the item you purchase as security for the loan. If you default on the loan, the lender repossesses the security you pledged — in other words, you don’t get to keep the item you purchased. Adding secured credit to the other types of credit you use, such as revolving credit (cards), helps raise your credit score.</li>\r\n \t<li><strong>You make the same payment each month.</strong> When it comes to credit scoring, making set monthly payments enables the people who figure your score to discover more about your creditworthiness. Making a set monthly payment is a measure of your stability. This is different from paying on a credit card, where you can vary your payments depending on your cash flow. Adhering to a regular payment schedule also indicates that you can handle a higher limit than you may have on a store, gas, or credit card account.</li>\r\n</ul>","blurb":"","authors":[{"authorId":9218,"name":"Steve Bucci","slug":"steve-bucci","description":"","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9218"}},{"authorId":33476,"name":"Melyssa Barrett","slug":"melyssa-barrett","description":"Melyssa Barrett is vice president of identity solutions at Visa, Inc., where she creates products to detect and predict fraud within consumer credit, debit, and prepaid products. ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/33476"}},{"authorId":33477,"name":"Rod Griffin","slug":"rod-griffin","description":"Rod Griffin is senior director of consumer education and advocacy for Experian, responsible for the company's national consumer education programs and outreach.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/33477"}}],"primaryCategoryTaxonomy":{"categoryId":34304,"title":"Credit Reports","slug":"credit-reports","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34304"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[{"label":"Turn small purchases into big credit","target":"#tab1"},{"label":"Maximize your credit score with major expenditures","target":"#tab2"}],"relatedArticles":{"fromBook":[],"fromCategory":[{"articleId":275982,"title":"The CARD Act: 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Mortgages Paying Off a Mortgage Early vs. Investing

Article / Updated 05-12-2022

If you talk with others or read articles or books about prepaying your mortgage, you’ll come across those who think that paying off your mortgage early is the world’s greatest money-saving device. You’ll also find that some people consider it the most colossal mistake a mortgage holder can make. The reality is often somewhere between these two extremes. Everyone has pros and cons to weigh when they decide whether prepaying a mortgage makes sense. In some cases, the pros stand head and shoulders over the cons. For other people, the drawbacks tower over the advantages. At the crux of the decision is the fact that you’re paying interest on the borrowed mortgage money, but if you use your savings to pay down the loan balance, you won’t then have that money working for you earning an investment return. More importantly, what happens if that rainy day comes along and you need those handy cash reserves? Interest savings: The benefit of paying off your mortgage early Mortgage prepayment advocates focus on how much interest you won’t be charged. On a $100,000, 30-year mortgage at 7.5 percent interest, if you pay just an extra $100 of principal per month, you shorten the loan’s term significantly. Prepayment cheerleaders argue that you’ll save approximately $56,000 over the life of the loan. It’s true that by making larger-than-required payments each month, you avoid paying some interest to the lender. In the preceding example, in fact, you’ll pay off your loan nearly ten years faster than required. But that’s only part of the story. Read on for more. Quantifying the missed opportunity to invest those extra payments When you mail an additional $100 monthly to your lender, you miss the opportunity to invest that money into something that could provide you with a return greater than the cost of the mortgage interest. Have you heard of the stock market, for example? Over the past two centuries, the U.S. stock market has produced an annual rate of return of about 9 percent. Thus, if instead of prepaying your mortgage, you put that $100 into some good stocks and earn 9 percent per year, you end up with more money over the long term than if you had prepaid your mortgage (assuming that your mortgage interest rate is below 9 percent). Conversely, if instead of paying down your mortgage more rapidly, you put your extra cash in your bank savings account, you earn little interest. Because you’re surely paying more interest on your mortgage, you lose money with this investment strategy, although you make bankers happy. If you’re contemplating paying down your mortgage more aggressively than required or investing your extra cash, consider what rate of return you can reasonably expect from investing your money and compare that expected return to the interest rate you’re paying on your mortgage. As a first step, this simple comparison can help you begin to understand whether you’re better off paying down your mortgage or investing the money elsewhere. Over the long term, growth investments, such as stocks, investment real estate, and investing in small business, have provided higher returns than the current cost of mortgage money. Taxes matter but less than you think In most cases, all of your mortgage interest is deductible on both your federal and state income tax returns. Thus, if you’re paying, say, a 6 percent annual interest rate on your mortgage, after deducting that interest cost on your federal and state income tax returns, perhaps the mortgage is really costing you only about 4 percent on an after-tax basis. For most people, approximately one-third of the total interest cost of a mortgage is offset by their reduced income tax from writing off the mortgage interest on their federal and state income tax returns. However, don’t think that you can simply compare this relatively low after-tax mortgage cost of, say, 4 percent to the expected return on most investments. The flaw with that logic is that the return on most investments, such as stocks, is ultimately taxable. So, to be fair, if you’re going to examine the after-tax cost of your mortgage, you should be comparing that with the after-tax return on your investments. Alternatively, you could simplify matters for yourself and get a ballpark answer just by comparing the pretax mortgage cost to your expected pretax investment return. (Technically speaking, this comparison isn’t as precise as the after-tax analysis because income tax considerations generally don’t exactly equally reduce the cost of the mortgage and the investment return.)

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Mortgages Reverse Mortgages For Dummies Cheat Sheet

Cheat Sheet / Updated 04-18-2022

You've probably heard a lot about reverse mortgages, as they are a popular, safe, simple way to supplement seniors' retirement incomes. Before you get started, you need to understand the benefits and disadvantages of getting a reverse mortgage. If you decide a reverse mortgage may be the right answer for you, follow some planning tips to help make the loan process easier.

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Bankruptcy Personal Bankruptcy Laws For Dummies Cheat Sheet

Cheat Sheet / Updated 04-15-2022

Going through the process of filing personal bankruptcy isn't fun, but it’s sometimes necessary and can be a huge relief. Filing for personal bankruptcy means you have to answer some tough questions about your finances, consider your situation in light of the new bankruptcy law, figure out which bills to continue paying, and probably deal with debt collectors.

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Mortgages Mortgages For Dummies Cheat Sheet

Cheat Sheet / Updated 02-15-2022

If you own or want to own real estate, you need to understand mortgages. Unfortunately, for most of us, the mortgage field is jammed with jargon and fraught with fiscal pitfalls. For typical homeowners, the monthly mortgage payment is either their largest or, after income taxes, second-largest expense item. When you’re shopping for a mortgage, you could easily waste many hours and suffer financial losses by not getting the best loan possible. With the tips below, you can strive to become as knowledgeable as possible before you commit to a particular mortgage.

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Debt Comparing Credit Card Terms before Accepting Card Offers

Article / Updated 10-21-2021

The federal Truth in Lending Act makes it easy to compare credit card offers, because it requires credit card companies to provide written information about the credit card terms. Do a comparison of credit cards fees, rates, APRs, and balance calculation methods before you accept even a preapproved credit card. Here are some of the terms of credit that creditors must provide: Annual percentage rate (APR): This is the cost of the credit expressed as an annual rate. Pay close attention to a card’s default APR — the rate you end up paying if you make a payment late (or pay some other creditor late), you exceed your credit limit, or your credit score drops below a certain amount. Your APR could triple depending on the terms of the credit offer! Balance calculation method: When you carry a balance on your credit card, the credit card company figures out how much interest to add to that balance by using one of several different methods. Some methods cost you more in interest than others. The least expensive balance calculation methods are adjusted balance and average daily balance excluding new purchases. The most expensive are two-cycle average daily balance including new purchases and two-cycle average daily balance excluding new purchases. Fees: Credit card fees can be really costly, so look for cards that have few and low fees. Examples of common fees include an annual or membership fee, a late fee, a bounced check fee, a fee for exceeding your credit card limit, and a balance transfer fee. Believe it or not, some cards charge you a fee every time you use them or because you don’t use them often enough! Grace period: This is the amount of time you have to pay the full amount of your card balance after the end of the last billing cycle before you’re charged interest on the balance. The longer the grace period, the better; a 25-day grace period is probably the best you’ll do. Some cards have no grace period; avoid them if you expect to carry a balance on your credit card. Periodic rate: This is the rate of interest you’re charged each day on your card’s outstanding balance. If you expect that you may carry a balance on your credit card, get the lowest rate you can. The rate may be fixed or variable, but even a fixed rate isn’t truly fixed because a creditor can raise it at any time after it gives you 15 days notice. Also, pay attention to the interest rates that apply to balance transfers, cash advances, and other transactions you may make with a credit card. These rates won’t be the same as the periodic rate.

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Credit Reports Credit Repair Kit For Dummies Cheat Sheet

Cheat Sheet / Updated 10-21-2021

Repairing your credit and keeping it in good standing is easier if you know what’s in your credit reports. Get a free copy of each of your credit reports every year and promptly correct any errors. Improving your credit also involves understanding how your credit score is calculated and how you can increase your score. If your credit is in trouble because you’re overextended or behind on payments, you have strategies at your disposal to help you get back on track.

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Credit Reports The CARD Act: Shielding You from Credit Card Abuse

Article / Updated 03-24-2021

The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 focuses on your protections from credit card industry practices that have been deemed to be either unfair or just plain tricky. Among the key protections are easier-to-understand terms, fewer retroactive interest rate increases on existing card balances, more time to pay your monthly bills, more notice of changes to your credit card terms, and the right to opt out of many changes in terms on your accounts. Here’s a list of the top protections that consumers are due: No more bait and switch: Card issuers can’t hike interest rates on existing balances except under certain conditions. Consequently, interest rates on new card charges can’t change in the first year, major terms of the agreement can’t change overnight, and you get 45 days’ advance notice of any big changes. No more universal default: You may have heard of people having their rates raised on one card when they have a problem with another one (known as universal default). This practice has been severely curtailed. Card issuers may use universal default only on future credit card balances that exist at the time of the default, and they must give you at least 45 days’ notice of the change. You now have time to change cards, get other financing, or pay off the balance. Limits on interest rate increases: Card issuers may raise your interest rate on existing balances only if: The rate was part of a promotional period that ended. The index used to set your variable interest rate rises. You’re at the end of a hardship or special payment agreement. You have late payments of 60 days or more. Credit-granting restrictions for young adults: Creditors can’t give credit cards to young adults with no income. People under 21 must show that they have enough income to repay the card debt or have a cosigner who does. Additionally, credit card companies must stay at least 1,000 feet away from colleges if they offer incentives to entice students to apply for credit cards. No more signing up for credit cards to get free pizza and T-shirts your first day on campus! Be very careful about cosigning for anyone, including your kids. If one of your kids misses a payment for any reason, that missed payment not only damages his or her credit, but also hurts your credit as well (not to mention your relationship). Instead of cosigning for your kids, add them as authorized users on your account. You don’t even have to hand over a credit card or allow them to spend money. This way, you’re helping them build positive credit while remaining in control of their credit (and yours!). Alternatively, get your kids prepaid cards (only one per kid) that you can add to as they need funds. If you want to help them build credit and savings, help them set up secured credit card accounts with your bank or credit union — that can help them save money and build credit at the same time. Just be sure they understand that abusing a secured credit card can wipe out their savings and their credit history just as quickly. Graceful grace periods: Card issuers must give you “a reasonable amount of time” (at least 21 days after the bill is mailed) to pay monthly bills. More time to get your payment in should result in fewer late fees. No tricky due dates or times: Card issuers can no longer set early-morning deadlines (before the mail is delivered) for payments. Cutoff times must be 5 p.m. or later on the date due, and due dates can’t be on a weekend, a holiday, or a day when the card issuer is closed for business. Payments applied fairly: If you owe money at different rates on the same card (many cards have different rates for regular purchases versus cash advances and balance transfers), payments over the minimum due must go to the balance with the highest interest rate first. Consequently, your payment will reduce more of your balance faster. Easy on the over-limit fees: Card issuers can’t charge you over-limit fees without your permission. If you opt out or say no, transactions exceeding your credit limit are rejected. Opting out of over-limit fees is a good idea. If you decide to opt in, though, no fees can be larger than the amount of the overage. For example, going $10 over your limit can’t incur a fee of $39; the limit is $10. Better just to say no to those fees and face the potential embarrassment of having your card declined if you go over the limit. No double-dealing double-cycle billing: Interest on outstanding balances must end in the billing month in which you pay off the balance. For example, your statement runs from June 1 to June 30, but the payment is due on July 20. The interest from June 30 to the payment due date of July 20 can no longer be charged if you pay off the balance in full, even though the card issuer didn’t get your payment until July 20. Disclosing how making minimum payments can keep you mired in debt: Card issuers must indicate how long paying off the entire balance will take if you make only the minimum monthly payment. They must also indicate how much you need to pay each month to pay off a balance in 36 months, including interest. Seeing the high cost of minimum payments enables you to make better-informed decisions about how you pay for the use of credit. Restricted late fees: Late fees are limited to $25 unless you’re late more than once in a six-month period. Your late payment is not reported to the credit bureau until your account is a full 30 days past due. This restriction results in fewer and lower fees charged to your account and gives you time to resolve issues before they hit your credit report. Right to opt out of changes: Card issuers must give you advance notice of changes to the terms of use for your credit cards. You now have the right to reject many significant changes in terms to your credit card accounts. If you opt out of some changes, you may be required to close your account and pay off any balance under the old terms and conditions. Although the CARD Act provides a lot of consumer protections, it’s not all-encompassing. It doesn’t cover business and corporate accounts or interest rates on future purchases. Cards with variable or floating interest rates (which includes most cards) are subject to interest rate increases as the prime rate goes up. And a card issuer can still close your account or lower your limit without warning. If you believe that a card issuer has violated any of the provisions of the CARD Act, contact customer service and ask for an explanation or a rebate. If you disagree with the answer, you can contact the Federal Trade Commission, your state’s attorney general or consumer protection department, or the Consumer Financial Protection Bureau’s Consumer Response Center.

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Credit Reports 10 Consumer Credit Protections Everyone Needs to Know

Article / Updated 03-24-2021

It has been said that a person can’t be too good-looking or have too many friends. This has never been truer than in the world of credit — at least the part about friends. The world of credit can be complex, unforgiving, and very expensive! The credit-granting, credit-reporting, and credit-scoring industries have become increasingly complex and powerful to the point where they are used for everything from issuing credit cards to getting jobs. Consumer advocates recognized that we need effective ways to keep errors, both yours and theirs, from seriously complicating your life. The result is a series of laws, protections, and agencies whose purpose is to keep the credit game honest and give consumers a fair opportunity to access the American financial system. These protections may not always work as you’d like, but if they didn’t exist, you’d be at the mercy of big business, and that’s no place you want to be. In this article, we cover the top ten legal protection resources you have to guide you in dealing with the world of consumer credit. The Fair Debt Collection Practices Act Being protected is especially important when a debt collector comes a-calling. The Fair Debt Collection Practices Act (FDCPA) limits debt collectors’ activities and spells out your rights. Highlights include: Prohibiting collectors from abusing you, being unfair, and trying to trick you into paying. Applying the law to most personal debts, including credit cards, auto loans, medical debts, and debts secured by your home. Defining when and where a debt can be collected — for example, between 8 a.m. and 9 p.m., or not at work. Requiring a validation notice that specifies how much you owe and what you should do if the debt isn’t yours or has been paid already. Allowing you to just say no. If you don’t want to hear from a collector, you can write to the collection agency and demand that it not contact you again. Doing so doesn’t satisfy a legitimate debt, but it ends collector contact. It may, however, begin legal contact to sue you for the debt. Giving you the right to sue for breach of the rules. You have a year to bring action for violations. The Bankruptcy Abuse Prevention and Consumer Protection Act The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) revised the process of getting a fresh start when you are overwhelmed by debt. The major provisions in this law include Mandatory credit counseling before filing Stricter eligibility for Chapter 7 filing to encourage Chapter 13 Fewer debts discharged and fewer state exemptions Tax returns and proof of income required for means test Mandatory five-year Chapter 13 plan if over your state’s median income Mandatory financial management education after filing Time between Chapter 7 filings increased to eight years Bankruptcy was designed to give you the ultimate protection of the courts from your creditors. The process can be as effective as it is damaging to your credit, and you should use it with great care, and only if you’ve already considered less-damaging courses of action. In some states, you can file your own bankruptcy petition (called pro se); in others, you need an attorney. Regardless, we recommend that you use an attorney who does this for a living. A poorly thought out or executed bankruptcy can leave you with unresolved debts and deprive you of the opportunity to use this protection again for several years. A good bankruptcy attorney will spend a significant amount of time with you to compare bankruptcy with other possible ways of handling financial problems. Your lawyer Lawyers often get a bad rap, but if you want an effective weapon in providing consumer protection, you need look no further. Whether your issue is a debt collector, a retailer who won’t step up to resolve a problem, or a contract with unsuspected gotcha clauses, a knowledgeable and persistent attorney is hard to beat. Yes, we know, lawyers are expensive, but there are times when only the best will do. Using a second-rate attorney is like showing up at a gunfight with the second-fastest gunslinger. Better not to show up at all! Here are some points to consider when looking for a consumer attorney: Nothing is better than a referral from a satisfied friend, colleague, or relative. Ask someone in whom you have confidence. You may get a great referral or a solution you hadn’t thought of. Look for someone who does a lot of what you need. Like picking a heart surgeon, you want lots of experience here. If you already have a lawyer, ask for a specialist recommendation. Check your local American Bar Association affiliate or attorney association. They often maintain lawyer referral services. Look for someone your gut says you can work with. Is the lawyer concerned about you and your problem? Always interview more than one attorney. This situation is important. Don’t be deterred by hourly rates. A good attorney who charges more can be a bargain if you get resolution quickly and permanently. Get all agreements in writing to avoid miscommunication. Be sure to read the agreement before you sign it, and ask about anything that’s not clear to you. Coronavirus Aid, Relief, and Economic Security (CARES) Act In March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act to help minimize the impact of the COVID-19 pandemic. The CARES Act provides a number of important financial safeguards intended to last until the crisis is over or for a set period of time afterward. Given Congress’s penchant for keeping laws on the books long after originally intended, and because no one at this time can tell when or if the crisis will be resolved, here are some relevant highlights of the CARES Act: Protections for renters: If you rent in federally subsidized housing or are renting from an owner who has a federally or government-sponsored enterprise (GSE)–backed mortgage (for example, Federal Housing Administration [FHA], Veterans Affairs [VA], U.S. Department of Agriculture [USDA], Fannie Mae, or Freddie Mac), the CARES Act may provide for a suspension or moratorium on evictions. Protections for homeowners: If you have a federally or GSE-backed mortgage and had a hardship caused by COVID-19, you have the right to request and obtain a forbearance extension for up to another 180 days (for a total of up to 360 days), without additional fees, penalties, or additional interest (beyond scheduled amounts). The law prohibits GSE lenders and servicers from beginning or finalizing a judicial or nonjudicial foreclosure or sale against you. Protections for those with student loans: You get automatic suspension of principal and interest payments on federally held student loans through September 30, 2020. And what’s more, suspended payments count toward any student loan forgiveness program, as long as all other requirements of the loan forgiveness program are met. Lenders must report any current loans on which they offer forbearance to the credit bureaus as being current as long as the terms of the agreement are observed. Although not part of the law, the three main credit bureaus are allowing free weekly credit reports at least through April 2021. Statute of limitations laws This protection is worthy of Perry Mason: “I object, Your Honor, for this charge is too old.” Well, maybe Perry didn’t say exactly that, but he’d be happy to see that each state has a law called a statute of limitations (SOL) that sets a limit on how long a debt collector can sue you in court, depending on the type of loan you allegedly owe. This is only fair, because after several years, who keeps all those receipts and slips of paper? Either hurry up and sue or forget about it! This protection isn’t automatic; you have to ask for it. What do you need to know and do? Read on. If a debt is past the SOL, the creditor can’t successfully sue you in court to collect it. But you must show up and prove that the debt is too old. Credit reports show a delinquency for seven years. This has nothing to do with the time a debt is collectible. The period used to figure how old your debt is starts when you miss a payment and never make another one. A payment may restart the SOL clock, depending on the state in which you live. Your state attorney general Every state has an attorney general. All attorneys general have at least one thing in common: One of their primary responsibilities is to enforce their states’ consumer protection laws. Every state has a consumer protection statute prohibiting deceptive acts and practices. These statutes include laws that address specific industries or practices. For example, many FACT Act protections, especially for credit reporting, have stricter state regulations, giving you more rights and a local resource for help. State attorneys general love to go after abuses and illegalities in the marketplace, including deceptive trade practices, telemarketing and internet fraud, fake charities, ID theft, and false or misleading advertising. It’s good press for them and good protection for you. Generally, these public officials have a low tolerance for financial shenanigans. So, if you think you’re being abused, taken advantage of, or scammed in a credit or personal finance transaction, this is the office to call. I’ve had good luck working with the consumer protection sections of several state attorneys general. If you decide to ask them for help, we suggest that you be organized and to the point, and have the pertinent information at hand. Attorneys general are no-nonsense law enforcement officials who appreciate you calling for their help but not wasting their time. The Consumer Financial Protection Bureau Reforming our financial system isn’t easy, and the Feds know it, so they formed a new agency — the Consumer Financial Protection Bureau, or CFPB — to carry on the fight of protecting you long after the ink dried on the Dodd-Frank Wall Street Reform and Consumer Protection Act (the legislation that created the CFPB). Not since J. Edgar Hoover headed up the FBI has a federal agency had such far-reaching powers. The CFPB sets rules for payday lenders, credit card issuers, and all the players in between. Here are the major protections this agency delivers: Need information? Use the question-and-answer service for inquiries about mortgages, student loans, debt collections, credit reports, and more. Have a complaint? Let ‘em have it. Bank accounts, credit cards, credit reporting, debt collections, money transfers, mortgages, student loans, and consumer loans are among the topics you can get help with. You complain, and the CFPB forwards your beef to the company and works to get an answer. It reviews the response and shares it with other agencies to identify patterns of abuse and write better regulations. It also sends you e-mail updates and has a secure consumer portal that you can use to track your complaint and give feedback about company responses to help the CFPB prioritize complaints. Just like the Dragnet guys: dum-ta-dum dum! It requires anyone who issues credit or prepaid cards to give you better, more easily understandable terms-and-cost disclosures. If you have to sign it, you should be able to understand it. The CPFB assures that paperwork is understandable. It helps set rules on transaction fees for interchange activity, like on your Visa or MasterCard. It closely regulates consumer credit counseling, debt settlement, and debt collectors to keep you from being victimized. The Credit Card Accountability, Responsibility, and Disclosure Act Fed up with tricky terms, excessive penalties, fees, and unfair banking practices, Congress enacted the Credit Card Accountability, Responsibility, and Disclosure Act (CARD Act) to give you a fair playing field in the area of credit cards. Here are your major protections: Credit card companies can’t raise card interest rates except under specific circumstances, such as at the end of a promotional rate, or when a variable interest rate index to which your card is tied rises, or if you’re 60 days late on a payment. Also, double cycle interest billing, which used your average daily balance for the current and previous billing cycles to charge you more, is no longer allowed. If your rate or terms change, you get 45 days’ notice to plan what to do. You can opt out of changes you don’t like. Doing so may cause your account to be closed, but you can pay off the debt under the old terms. Card companies can’t issue cards to people under 21 who have no income. This sounds like a no-brainer, but for years creditors had been giving students credit despite their having no income to repay their charges. Creditors must give you at least 21 days after a bill is mailed to make your payment. The due date can’t be before the mail is delivered or on a weekend, a holiday, or a day when the creditor is closed for business. If you’re late, fees are limited to a maximum of $25. All payment amounts above the minimum payment due must be applied to the balance with the highest interest rate, not the lowest. If you exceed your credit limit, the card company must ask you whether you want that transaction to be processed and incur an over-limit fee. Saying “no thank you” results in the purchase being denied but also saves you the over-limit fee. Even if you say yes, the fee can’t exceed the amount by which you exceed the credit limit. So if you exceed your limit by $10, the fee can’t be more than $10. The Fair and Accurate Credit Transactions Act Fairness is something you can hope for in your dealings with the credit bureaus and those other consumer-reporting bureaus that are increasingly in the news. But before the protections afforded in the Fair and Accurate Credit Transactions Act (FACT Act or FACTA) became effective, fairness was strictly in the eye of the beholder. And the beholder wasn’t you! Congress acted to end a number of perceived and real abuses. Congress understood that the nation’s banking system was becoming increasingly dependent on credit reporting, that inaccurate reports resulted in unfair and inefficient banking, and that you have a right to privacy. The result is that you now have more control over what’s said about you in credit bureau files and who can access your information. You also have the right to dispute errors or out-of-date information and to get a free copy of your credit report from each bureau every year. Not bad for the crowd from Washington, D.C.! Here are your main protections: You must be told about any negative action taken as a result of information contained in your credit report, and you must be given free access to the same information. If the interest rate on your favorite credit card goes up, for example, you get to see a copy of the report that contains the data that led to that increase. You can find out what information is in your personal file. No more secrets! It’s your information and your file, so you can look at it. You can get a free copy of your credit report at least every 12 months if you ask for one. You can also get a free report whenever you’re the object of identity theft or fraud, you’re on public assistance, or you’re unemployed but expect to apply for employment within 60 days. You have the right to know your credit score. This score used to be as big a secret as what was in your bureau files. Score watching has become a favorite pastime for many and a profitable business for others. The data in your file must be accurate, verifiable, and current. If data is incorrect or too old, you need only to ask, and it will be verified or removed pronto. Only those who have a legitimate business purpose can see your file, and you can stop everyone from accessing your file without your express permission if you like. Usually only creditors, insurers, employers, landlords, and others with whom you do business get to see what’s in your file. You can slam the door on everyone with a credit freeze. The Federal Trade Commission The Federal Trade Commission (FTC) is the alter ego of the Bureau of Consumer Protection (BCP). Although it doesn’t deal with individual consumer complaints, it does protect consumers by accumulating and analyzing complaints and then taking industry-wide action to address issues that you bring to it. Some examples of BCP protections are your ability to get a free annual credit report, the National Do Not Call Registry to block unwanted telemarketing calls, and appliance disclosure stickers that show the energy costs of home appliances, to name just a few. The BCP looks out for unfair, deceptive, or fraudulent practices in the marketplace. It investigates and sues companies and people who violate the law. It also develops rules to protect you and requires businesses to give you better disclosure of your costs, rights, and dispute-resolution options. It also collects complaints about consumer fraud and identity theft and makes them available to law enforcement agencies across the country. Of the bureau’s seven divisions, here are the five that you may find useful: Advertising practices: Enforces truth-in-advertising laws. If an offer seems too good to be true and it is, complain to the FTC. Financial practices: Protects you from deceptive and unfair practices in the financial services industry, including predatory or discriminatory lending practices, deceptive or unfair loan servicing and debt collection, and fraudulent credit counseling and debt settlement companies. Marketing practices: Responds to internet, telecommunications, and direct-mail fraud; spam; fraudulent work-at-home schemes; and violations of the Do Not Call provisions of the Telemarketing Sales Rule. Privacy and identity protection: Protects your financial privacy, investigates data breaches, helps consumers whose identities have been stolen, and implements laws and regulations for the credit reporting industry, including the FACT Act. Enforcement: Sues to address issues on these practices. Your complaint, comment, or inquiry may help identify a pattern of violations requiring law enforcement action, but the FTC doesn’t resolve individual consumer disputes.

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Credit Reports 10 Ways to Deal with a Mortgage Meltdown

Article / Updated 03-24-2021

For most people, a house is more than just a building you live in. It’s a place you worked hard to earn, plan a life, grow a family, and make memories. It’s a home. Sometimes those dreams don’t come true, and that mortgage can become unsustainable. But misinformation, stress, and denial can make it hard to accept the writing on the wall when you’re in trouble with your mortgage. Learn what you can do before you damage your credit irreparably. Lenders may take a soft approach to early mortgage delinquencies, hoping you can get back on track. Unfortunately, when you can’t get back on track, they can take a hard line on foreclosures. If you owe a past-due balance on a credit card, you’ll get phone calls and letters that feel like harassment. Mortgage holders aren’t nearly as aggressive when you’re late on your payments. After all, they have security for their loan: your home. To them, that dwelling you live in is collateral that can be sold to recoup their losses. This article outlines ten things you need to know and do after you realize you aren’t going to be able to pay back the mortgage but before you leave or are asked to leave your home. Know when you’re in trouble You aren’t in trouble if you owe more than the value of your home. You aren’t in trouble if your roof leaks and you can’t afford to fix it (although that may be an early warning sign). You may be in trouble if you can’t pay your real estate taxes, but chances are, your unpaid taxes won’t result in the bank calling. But you are definitely in trouble if you are late on your mortgage payments and have a feeling you’re on the edge of a cliff and at any moment could fall off and into the foreclosure abyss. If you’re late on a single payment, you can probably just catch up. There may be a late fee, a hike in interest rate, or a penalty. At that point, it’s financially advantageous for your lender to say, “Thank you, but this fee is a reminder to not be late again.” On the other hand, if you’ve fallen several months behind, your mortgage lender might say, “No thank you!” Why would they do that? It’s complicated, but basically, here’s how it works: Because most mortgages are packaged into securities and sold in bulk to investors, the default terms for all the mortgages in the “package” must be spelled out in great detail and generally be the same. The result is a rigid set of rules that were made up in advance and have very little flexibility when applied. It’s not that your lender is an unfeeling automaton. As people, they do care. But legal agreements and contracts spell out what they must do. If you’re more than 90 days late and you try to make a payment or even two, there is an excellent chance that your money will be refused and returned to you. You may need to make up all your payments at once to get any payment applied to your mortgage. A day late is indeed a dollar short when it comes to home mortgages. To further complicate matters as only bankers and lawyers can, the 90-day payment cliff does not include your grace period (typically 15 days). If you’re late on your mortgage, it’s vital that you open and answer your mail. The notices you receive generally offer good information about your options. The sooner you seek help, the more options you’ll have to save your home. Know how your state’s laws treat foreclosures Every state has its own foreclosure laws. It is important to know how your state’s laws work so that you don’t inadvertently cross a line or miss an important date. You can find summaries of the laws for all states at www.foreclosurelaw.org. The following sections outline a few critical differences. Nonrecourse or recourse If your lender is foreclosing on your mortgage, whether you live in a “recourse” state or a “nonrecourse” state makes a big difference. In general, if you live in a nonrecourse state, you can’t be held liable for any deficiency between the amount you owe and the amount your home sells for in the foreclosure. If you live in a recourse state, the lender may get a deficiency judgment against you in court. For example, if you owe $200,000 on your mortgage but your home nets only $150,000 at the foreclosure sale, the deficiency is $50,000. You would then be responsible for paying that “deficiency” of $50,000. But knowing which states are nonrecourse states isn’t enough. Some states define certain loans as nonrecourse if, for example, they were used only to purchase a home; but, if part of the proceeds of the loan were used for some other purpose, like paying off credit card debt, they define it as recourse. Other states limit the amount of the deficiency to the fair value of the property versus the sale price. Still other states have a one-action limit. For example, New York makes lenders choose between the acts of foreclosing on the property and suing to collect the debt. Consult a housing counselor certified by the U.S. Department of Housing and Urban Development (HUD) or an attorney to get definitive information about the rules for your state. State nonrecourse rules don’t apply to the IRS. If you lived in your home for less than two years, you may not qualify for the $250,000 individual home sale exclusion, so you may have a capital gain or phantom income from a foreclosure. See your tax professional for advice. Judicial or nonjudicial It is important to know whether your state handles foreclosures on a judicial or nonjudicial basis. If you live in a nonjudicial foreclosure state, your lender does not have to go to court in order to foreclose on your home. This means that the foreclosure can proceed more quickly. In judicial states, foreclosures go through a court. These are called judicial foreclosures and may take longer to finalize. The nonjudicial states include Alabama, Alaska, Arizona, Arkansas, California, Colorado, District of Columbia (sometimes), Georgia, Idaho, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Mexico (sometimes), North Carolina, Oklahoma (unless the homeowner requests a judicial foreclosure), Oregon, Rhode Island, South Dakota (unless the homeowner requests a judicial foreclosure), Tennessee, Texas, Utah, Virginia, Washington, West Virginia, and Wyoming. Time is your enemy in a nonjudicial state. Lenders are required to give very little notice of foreclosure sales, and once the foreclosure process begins, you may have no further options. Decide whether to stay or go This decision used to be a no-brainer. It was a matter of pride. People would do everything they could to keep their house. The stigma of losing the roof over your head was a big one. Today, though, the decision is often less about emotion and more about the math. Faced with seemingly unrecoverable deficits, some homeowners crunch the numbers and decide to save time, money, and stress by letting the foreclosure process run its course. Some move out, and others stay until the home sells to a new owner or the bank forces them to leave. The following sections describe your options. Walking away Strategic default is a new term in the language of mortgages. When the housing bubble burst in 2008, some properties went so far underwater (more is owed than the home is worth) that it seemed that it would take years or even decades for the home to regain the value of its mortgage — or it never would. Some borrowers choose to stop making payments, even if they can afford to make them, because they see their house as just another investment, and a bad one at that. Walking away is known as a strategic default. Potential drawbacks to strategic default include deficiency judgments, significant credit score damage, problems buying or renting in the future, the personal impact of a major life failure, and to a much lesser degree these days, stigma in the eyes of others. Working with the lender to exit A more lender-friendly version of a strategic default is the deed-in-lieu of foreclosure option. Rather than go through a long and expensive foreclosure process in order to obtain title, the lender agrees to accept the deed to the property. This option may also incur a deficiency judgment for the difference between the fair market value of the property and the total debt owed. You’ll still see damage to your credit scores and possibly a “deed-in-lieu” notation on your credit reports. Another option in this category is a short sale, which involves selling your home for less than what you owe. If you choose this option, you may be subject to a deficiency judgment, depending on the terms you work out with your lender and the laws in your state. A short sale will have an equally serious effect on your credit scores, but don’t look for the term short sale on your credit report. It’s an unofficial phrase that was created to more gently describe settling your loan, and your lender will report the mortgage as “settled.” In March 2013, Fannie Mae and Freddie Mac began letting some borrowers who are current on their payments give up their underwater properties and cancel the debt under their Mortgage Release and Standard Deed-in-Lieu of Foreclosure programs. If this option is of interest to you and you have a Freddie Mac mortgage, the website has more information. If you have a Fannie Mae mortgage, go to its website for more info. Staying the course If you decide to do all you can to stay in your home, several courses of action are open to you. The major ones include the following: FHA Short Refinance: If you owe more than your home is worth and you want to refinance, the lender can reduce the amount you owe on your first mortgage to no more than 97.75 percent of your home’s current market value. Loan modification/refinancing: The two main types are the Home Affordable Modification Program (HAMP) for Freddie Mac and Fannie Mae mortgages and conventional refinancing for others. A conventional mortgage servicer or lender may modify your loan to make it more affordable, but each one has its own programs and guidelines. Speak to your servicer about HAMP. If your loan is owned or guaranteed by Freddie or Fannie and you are ineligible for conventional refinancing, HAMP can change the type of your loan from adjustable to fixed, to a longer fixed term, or to a lower interest rate and can add past-due payments to the principal balance to be repaid over the full mortgage term. HUD Foreclosure Avoidance Counseling: HUD offers free counseling to anyone who may be faced with foreclosure. They may be able to help you find alternatives to losing your home, or help with special loan programs to modify or refinance your mortgage or reduce your monthly payments to help you keep your house. Find a HUD counselor near you. Assistance because of a natural or declared disaster: Hurricanes, fires, earthquakes, tornadoes, volcanoes, and global pandemics can put lots of people in situations beyond their control. During times of disaster, federal and state governments, lenders, and credit reporting agencies may offer special relief programs. If you’ve been affected by a disaster, check with your lender about payment accommodations, such as forbearance or deferment, to help you maintain your mortgage payments through a period that is beyond your control. Tighten your spending to stay in your home Whether your financial life has a ding or two or is upside-down, tightening your budget can help you free up sorely needed cash and get back in control of your situation. If you don’t have a budget, now is the perfect time to make one. Making a budget is basic but effective. Begin by listing all your expenses and then list your income. Look carefully at both sides of the equation, make some cuts to expenses, and look for ways to add to your take-home pay (like reducing your tax withholding) or increase your income with a part time job. For example, if the bank forecloses, you’ll lose your cable TV anyway. Cutting cable now may give you the extra cash that helps keep you in your home. Technically it’s not a spending cut, but you can also try to sell some stuff to raise cash for a mortgage payment. We’ve all seen the “Cash for gold!” signs. Selling old and unused gold or jewelry is something you may want to consider. Having a yard or garage sale, downsizing to one car, and selling your violin should also be on your list. You get the idea. Lightening your load of stuff may buy you the time you need to catch up. Prioritize your spending to build cash No matter what you choose to do in the event of a mortgage crisis, you’re going to need some cash. It may be to pay an arrearage. It may be to come up with first and last month’s rent and a damage deposit on a new apartment. Either way, you need to tighten your budget (or create one; see the preceding section). Yes, this step is basic, but as with everything in life, you have to start at the beginning. As described in the preceding section, list all your expenses and then list your income. Take a look at both sides of the equation and determine where you can make changes — by cutting expenses and/or increasing income. Car repossessions can happen within weeks — not months — of missing a payment. So, if you need your car to get to work, keeping up on your car payment is critically important. If you can’t make your mortgage payment, it’s important to save as much of the money you’re not sending to your lender as possible. If your payment is $1,000 and you can only scrape together $800, don’t spend it on something else. Put the money aside to help ease your transition into a new place. Want some help with creating a spending plan? Try a nonprofit consumer credit counseling agency member of the National Foundation for Credit Counseling. Organizations like Operation Hope also offer money management programs. There may be a Hope Inside center near you. Lessen the damage to your credit In a nutshell, if you stiff your mortgage lender with a loss in the form of a short sale or foreclosure, your credit will take a much bigger hit than if you come to an agreement to repay or forgive any deficiency. For a person with decent credit and a FICO score in the 720 range, the difference in credit score deduction between a short sale with a deficiency and one without can be more than 50 points. Know who to call You know that you have the right to remain silent, and remaining silent can be wise in some situations, but not when you’re facing a mortgage crisis. If you’re behind on your payments, your lender will communicate with you by mail. The worst thing you can do is to remain silent, which could leave the bank no other option than to take legal action. The best thing you can do is to open your mail and speak to your mortgage servicer at once. I also strongly recommend that you contact an independent HUD-approved mortgage counselor or your state housing agency. Avoid foreclosure-prevention companies like the plague they are. The best help is easy to find and available for free. Beware of scams It’s easy to forget a lifetime of wisdom when the pressure is on and you are desperate for a solution. Knowing that you’re vulnerable during a mortgage crisis, scammers will try to charge you money or even trick you into signing your deed over to them. Keep in mind that not everyone out there wants to help you; many just want to help themselves. Here are some tips to avoid being scammed: Never pay a fee in advance. The best help is free. Never believe someone who guarantees that they can stop your foreclosure. Be wary of anyone who contacts you and offers to help. Always get a second opinion from a person or an organization you trust. Never hand your mortgage money over to anyone other than your mortgage servicer. Beef up your credit As soon as you default on your mortgage, your credit scores will take a nosedive. You likely won’t be able to qualify for new accounts for quite a long time. Now is the time to take steps to improve your credit as much as possible so you can be in a position to move forward. Pay down as much debt as you can, especially on your credit cards. If you’re not making the mortgage payments, put the money toward your credit card balances. Lower credit card balances will help you bump up your scores and reduce your debt burden after the foreclosure proceedings have completed. Try not to take on any more debt. Any purchases you make should be essentials. It’s why having a budget it so important. Digging yourself deeper into debt when you can’t pay what you already owe will only make things worse. Take advantage of other new tools that can help bolster your credit scores, as well. Having things like your on-time cellphone, utility and video streaming payments added can help bolster your credit scores. Services like Experian Boost can be worth looking into. Just be sure you understand what you’re signing up for. Although these kinds of services are free from a cash point of view, you’ll likely get marketing offers to tempt you to open your wallet. Be prepared to say no thank you. You may sign up for alternative scoring systems like UltraFICO, that incorporate information not included in credit reports. Lenders may consider that information in addition to the traditional scores to approve your application. If you lose your house, you may find yourself renting. Studies have shown that doing so almost always helps build your credit. Talk to your landlord about having your positive rent payments reported or sign up with a rent payment service yourself. Here are a few options: ClearNow eRentPayment PayYourRent Rent Track You should know that there may be a nominal fee for these services to report your rent payments, so compare their offers to find the one that’s right for your situation. Consult an attorney You have rights and you have legal options. Only an attorney can give you sound legal advice, so before your mortgage crisis gets too far along, spend the money to get a competent assessment of where you stand and what the law can do to help. For example, a bankruptcy filing can stop a foreclosure in its tracks — probably not forever, but maybe long enough. A Chapter 7 or 13 bankruptcy may be a way to reduce other debt or the amount of your mortgage that exceeds the value of your home. It may be enough to get you back on track with your mortgage payments. Also, not all mortgage documents are properly drawn and executed. Have a lawyer review your files to see if they are unenforceable or flawed in any way. Bankruptcy is a last resort. It’s the most serious financial decision you can make related to your debts. It’s there for a reason, but that reason is that there is no other financial option. A good lawyer who does a lot of foreclosure-prevention work can sometimes work minor miracles, maybe even delaying foreclosure for years, which can help you begin to build your savings account to pay for your next move, or maybe even keep your house.

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Credit Reports How Your Actions Impact Your Credit Score

Article / Updated 03-24-2021

Every time you use or abuse your credit, it has an effect on your credit score. The impact varies with the type of action. Positive actions, like paying bills on time, raise your score and lower your risk in the eyes of a lender, insurer, or landlord. Negative actions do the opposite and, depending on what the damaging action was, could be a big deal or a minor and temporary inconvenience. What factors impact your credit score? Payment history, credit utilization ratio, age of credit history, your credit mix, and new credit inquiries. For example, items in the “small drop” category in the following figure are minimal and can be offset quickly with other positive actions or even the passage of time. Think of them as small meteors that harmlessly burn up in the Earth’s atmosphere. The major and maximum impact items are more like dinosaur-killer meteors! This figure helps illustrate the recovery time for five different impacts to your credit score. Turn small purchases into big credit Because a lot of your credit score is based on using credit and making payments on time, I recommend using small purchases to get back into good standing quickly. Why does making small purchases work so well? Because each item costs less, so more purchases are reported to the credit bureaus faster. My rule is that if it costs more than $10, charge it (and pay it off each month). Major bank cards certainly report your activity to the credit bureaus. Some store cards may report to only one bureau, or they may not report at all. To find out whether your credit card purchases are being reported and scored, call your card’s customer service number and ask. If your score is less than stellar, don’t despair. Practicing good credit habits will raise your score over time. Scoring models look at how much of your limit you use. The more you use above a certain percentage, the higher the risk they believe you to be. To maximize your credit score, spread purchases over more than one card to keep your balance on each card as small a percentage of your maximum limit as possible There is no magic number, but staying under 20 percent to 30 percent of your maximum limit or less is a good goal. Say you have two cards, one with a $10,000 limit and one with a $20,000 limit. Simply charge twice as much on the higher-limit card to maximize your score. When your balance exceeds 20 percent of your limit, you begin to lose points. So, even if you’re making lots of small purchases, do your best to either pay off the balance each month or keep it under 20 percent utilization. This is one of the fastest ways to see improvement to your credit score. Pick up some extra points on your credit score by following a simple plan: Always pay on time. Your payment history makes up the largest chunk of your credit score. Reduce your debt load. Only use credit to the extent that you can pay it off every month or keep your total balance below 20 percent of your credit limit. Check your credit report for errors. You can get free credit reports from the credit bureaus by requesting it online or calling 877-322-8228. Send a dispute letter to the relevant credit bureau if you find mistakes. Keep your old accounts. Long credit history indicates stability. Be patient. It may feel like credit mistakes will haunt you forever, but your payment history from the past two years is more important than your payment history prior to that. Are you less concerned about your score than about paying down your balances? Some experts suggest that you pay down balances based on the interest rate (that is, pay them in descending order starting with the highest interest rate) to save money on overall payments. Others say that paying off smaller accounts first gives you a feeling of accomplishment, and therefore, you’re more likely to achieve your overall goal. My suggestion is that you choose the approach you find more satisfying. Just be sure that you make the choice; don’t let the first bill that shows up get the extra payment by chance. Make a list of each credit card, its balance, and its credit limit. Then allocate your payments to reduce your percentage of credit used to 45 percent or less of the limit on as many accounts as possible. Doing so creates some great positive data in your credit report. This approach not only enables you to regain control of your accounts but also helps you maximize your credit score, because accounts that exceed 50 percent of the limit count more heavily against you. When all your cards are at 45 percent of your limit or below, you may want to allocate more money to the highest-interest-rate cards. If you don’t have a major bank credit card, you may want to try a secured card. You can get one without a fee if you shop around. A secured card differs from a regular Visa or MasterCard in that you maintain a balance in a savings account equal to your credit limit (some cards may allow you more credit than you have on deposit) to guarantee your payment. Secured-card activity is reported just as any other credit card activity is reported, and it affects your credit score in the same way, so it can be a great option if you’re trying to build credit. You can find great card comparisons at Bankrate or creditcards.com. The latter has two sections to help you find the right card depending on your circumstance. One section is helpful for those with bad or damaged credit. The other section is for those who have little or no experience with credit or who need to start a U.S. credit history (credit from overseas doesn’t follow you). Generally, in a typical credit market, if you make all your payments on time for a year you should have enough of a positive payment history to get an unsecured credit card. Maximize your credit score with major expenditures Big-ticket creditors — those that specialize in expensive products or services — typically report to the credit bureaus. The reason is simple: They have a lot more to lose if they lend based on inaccurate information, so they want to see as complete and accurate a file as possible. Examples of big-ticket items that may enhance credit activity are home mortgages, cars, boats, student loans, furniture, and appliances. Major credit purchases may give your credit score a boost for two reasons: A major purchase is more likely to be in the form of a secured installment loan. Secured means that you pledge collateral on the item you purchase as security for the loan. If you default on the loan, the lender repossesses the security you pledged — in other words, you don’t get to keep the item you purchased. Adding secured credit to the other types of credit you use, such as revolving credit (cards), helps raise your credit score. You make the same payment each month. When it comes to credit scoring, making set monthly payments enables the people who figure your score to discover more about your creditworthiness. Making a set monthly payment is a measure of your stability. This is different from paying on a credit card, where you can vary your payments depending on your cash flow. Adhering to a regular payment schedule also indicates that you can handle a higher limit than you may have on a store, gas, or credit card account.

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