Credit Questions? Just Ask Nicole

Do you give Tithes and Offerings to your Church with a Credit or Debit Card?

I just read an article from The Dallas Morning News entitled "Plastic Replaces Passing the Plate," which explores a fairly new phenomenon sweeping across the nation's religious institutions.

More and more churches are now accepting credit and debit cards as a method of payment for tithes and offerings.

Some places of worship accept online payments and/or even have an ATM-like "Giving Kiosk."

Cool idea, huh? Wish I had thought of it. :)

Now granted, this method of giving definitely keeps up with the changing times, where more people are paying bills online and using credit cards to accumulate frequent flyer miles, cash back, or points, and less and less people are carrying any significant amount of cash on them.

But does this ease of whipping out the plastic at a kiosk or scheduling regular contributions online further contribute to our country's credit card debt problem?

Are churches that are reaping the huge benefits of using these collection methods also providing some sort of financial direction and education to their members?

The mere fact that Americans owe $880 billion in credit card debt is a sign that something is really wrong.

As consumers, we rely too heavily on the plastic and repeatedly spend more than we have. And that's a BIG problem.

To avoid getting in over your head, follow these tips if you use a credit or debit card for your tithes and offerings:

1. Budget, budget, budget! And don't get carried away. Know exactly what you can afford to give, and stick to that amount.
2. Pay off in full each month the amount you give to avoid carrying a balance and paying hefty finance charges.
3. Don't let your giving get out of hand by allowing your credit card balances to max out or your debit card charges to bounce.
4. Be responsible. As soon as you notice a problem, immediately go back to cash-only giving.
5. Remember that your tithes and offerings should be based on your income and what you have, not on what you borrow.

To your spiritual and financial betterment,

Federal Agencies Issue Guidance on Subprime Mortgage Lending

Today, big news emerged on the scene for the subprime mortgage market when a collective group of federal agencies issued a "Statement on Subprime Mortgage Lending."

These federal agencies are:

- Office of the Comptroller of the Currency (OCC)
- Board of Governors of the Federal Reserve System (Board)
- Federal Deposit Insurance Corporation (FDIC)
- Office of Thrift Supervision (OTS)
- National Credit Union Administration (NCUA)

The statement provides guidance on how lending institutions should offer adjustable rate mortgages (ARMS) to borrowers in a "safe and sound manner," and how information about these mortgages, and the risks associated with them, should be disclosed.

These agencies issued this statement because they are concerned with the growing number of ARMS being issued to subprime borrowers, which has subsequently posed a BIG risk to lenders and to the borrowers who don't really understand how ARMS work.

Hmmm... Can anyone say subprime mortgage lending fallout? Or national foreclosure boom crisis?

The problem with ARMS gets even worse when the loans are approved based on limited or no income documentation, low credit scores, the low initial payment, and no property taxes and insurance being escrowed.

Borrowers end up with a false sense of security because the ARM allows them to purchase a home they otherwise would not have been able to afford.

ARMS were being used as the mortgage "product of choice" for less-than-perfect credit borrowers because they offer a lower initial fixed payment for a nice period of time, and then adjust to a variable rate at a later date.

And who really thinks about later when all you want is your new house NOW?

Often times when the loan adjustment occurs, the payment increases dramatically and the borrower experiences payment shock.

And then you know what's next. The borrower can no longer afford their monthly mortgage payments and they end up losing their home to foreclosure.

But before any of that happens, let's say for the first 2, 3, or maybe even 5 years of the ARM, the borrower thinks they're on easy street with their nice little fixed monthly mortgage payment. Things are going good and they don't bother to refinance before the loan adjusts.

Why? Well, reasons vary.

Some people just flat out forget, some put it off, and some haven't cleaned up or improved their credit so they can refinance into a different mortgage.

So before you know it... BOOM! They have a gigantic monthly mortgage payment that they can't afford.

And this is what "the Agencies" don't like. They don't like how ARMS have gotten popular for their affordability and credit repair (building a good credit history) uses when the borrower doesn't fully understand what they're getting into.

So what does all of this mean for you?

It means that it will be a little more difficult to get a mortgage than it used to be. Understandably so, with all of the chaos going on in the mortgage industry right now. Gone are all of those fancy, hard-to-believe-they-even-exist, no income, no asset, sub-500 FICO score, 100% loans.

"The Agencies" have advised that lenders:

1. qualify borrowers on the maximum possible monthly payment
2. include an estimate of property taxes and insurance into the borrower's debt-to-income ratios, regardless of whether or not they're escrowed
3. get rid of stated income and reduced documentation guidelines, unless there are mitigating factors that would cause the lender to allow it
4. document income with pay stubs, W-2's, and/or tax returns
5. do not impose excessive pre-payment penalties that go beyond the initial fixed interest rate period and if any is imposed, it should allow the borrower to refinance at least 60 days before their loan adjusts without penalty
6. "provide clear, detailed information about the costs, terms, features, and risks of the loan to the borrower" in any of their mortgage advertisements, promotional materials, oral statements, and product descriptions, which includes info on payment shock, pre-payment penalties, balloon payments, the additional cost of reduced documentation loans (if allowed), and the borrower's responsibility for taxes and insurance

Without question, the real estate game is changing. And I'm sure we haven't seen the last of it yet.

At the top of the foreclosure boom, mortgage lenders were tightening their purse strings. And as things have heated up, some have even closed up shop. And now we have some big brass federal agencies stepping in issuing new "guidelines" for subprime mortgage lending.

This is a perfect case in point of why it's so important to "get smart about your credit." You don't want to be behind the eight ball when it comes to your credit and finances. And you don't want to be confused and uninformed and undereducated about things that can so greatly affect you and your family's life.

When you have your financial affairs in good order, have a little cash stashed, and have good credit scores, life can be so much easier. And it's not that hard to do!

I teach you how to do it in a simple, laid back, easy to understand way in my Credit Smart 101 course.

It's not just a cliche - education is key!

You need to be prepared as the real estate, mortgage lending, and credit game continues to change. And you can't possibly win the game if you're not even in it and you don't understand how to play it. So if you want to play, I'm here to help. All you have to do is enroll in an upcoming class.

Big 3 Credit Bureaus Fight Against Credit Report Freezes

Consumer credit report freezes allow you to literally place a security "freeze" on your credit reports. This freeze actually blocks all access to your credit reports and any information they contain, including your credit scores.

Arguably, this provides you with greater protection against identity theft because your credit file is totally locked, which makes it harder for ID thieves to open new fraudulent accounts in your name. If you place a security freeze on your credit reports, no one will be able to have access to them until you lift the freeze.

Security freeze laws are enacted at the state level, and currently, not all states have such a law. For those states that do, you can find the laws here. Each state has their own law with regard to how the freeze is placed, how it's removed, the cost (if any), and whether anyone, or just victims of identity theft, can initiate a freeze.

More and more states are jumping on the bandwagon to adopt security freeze laws for credit reports as the incidence of identity theft continues to rise, and remain an ever-growing concern of the American public. The idea is to give consumers added protection for their personal information when it comes to identity theft, beyond what's already afforded to them under federal law (more on that in second).

All of this new law making action among the states seems to have the britches of the big 3 credit bureaus in a tight-wedged bunch.

You see, they're trying to keep any remaining states from adopting security freeze laws under the notion that:

1. security freezes haven't been proven as an effective tool against identity theft (how do they know?)
2. the protections for victims of identity theft under federal law are enough (who are they to say?)
3. these laws are an expensive burden to them (say what?!)

Expensive burden? Give me a break!

The big 3 credit bureaus, Equifax, Experian, and TransUnion, together generate annual revenues over $4 billion! You mean to tell me they can't afford to allow consumers to place a freeze on their own personal information to protect themselves from identity theft? The very same personal information that earns them $4 billion a year?

Yeah, right!

The truth of the matter is that if consumers put freezes on their credit reports, the big 3 credit bureaus are going to take a big hit in the pocket because it will prevent them from selling those credit reports to the parties trying to buy them.

They're frozen, remember?

But under current federal law, which allows consumers to place a fraud alert on their credit files, the credit bureaus can still sell your credit reports. Check it out...

There's 2 types of fraud alerts:

There's an initial fraud alert that you can place on your credit files, which will be in effect for 90 days, if you suspect you have been, or will be, a victim of ID theft. Under this alert, creditors must use "reasonable policies and procedures" to verify your identity before granting you credit. Yeah, whatever that means. The credit bureaus still get to sell your credit reports, and it's left up to the creditor that buys it to make sure they address the fraud alert.

Then there's also an extended fraud alert that you can place on your credit files, which will be in effect for 7 years, if you have actually been a victim of ID theft and you file an Identity Theft Report with the credit bureaus. Under this alert, creditors must actually contact you or meet you in person before granting you credit. Still, the credit bureaus get to sell your credit reports without hassle, and again leave it up to the creditor to address the fraud alert.

What's happening with all of these new state credit report security freeze laws popping up is that the vice-grip control the credit bureaus have on consumer credit information is being weakened.

It's about doggone time!

Hopefully, it won't be too long before all states enact some sort of law for credit report freezes.

We should be able to put a freeze on our personal credit reports, that these private companies sell for profit, any time we want!

Especially when it can protect us from a crime of identity theft which could potentially cost us thousands of dollars and hundred of hours trying to straighten out.

But what do they care? It's no sweat off their brow, right?

Well unfortunately, the battle won't soon be over. The Consumer Data Industry Association (CDIA), which has lobbied on behalf of the Big 3 credit bureaus since the 1970's, will continue to fight and spend big money trying to convince federal lawmakers to see things their way.

They don't want credit report security freezes. They don't like the onslaught of states trying to enact these new security freeze laws and they want the federal government to address it. They want a new federal law that would trump all the state laws, and consequently put more restrictions on consumers across the board with regard to placing security freezes on their credit reports.

The CDIA's representative, Eric Ellman, travels all over the country, going from state to state to testify on behalf of the big 3 credit bureaus against these credit report security freezes.

I wonder if he would rack up just as many frequent flier miles if he were to suddenly become a victim of identity theft?

Hmmm, just a thought...

"Since you updated your blog, your old posts went away. What happened to them?"

Thank you to Fred W. from Monroe, MI for asking this question.

Well, for those of you who don't know, I started out blogging about issues related to consumer credit and business credit on a different blogging platform, using a slightly different domain name, and so forth and so on.

And then I decided to switch over to this new blogging platform because it was just better all the way around. But as it turns out, the transition hasn't been the smoothest. It's been a nightmare trying to extract my old posts from the old platform and import them to this new one.

Hopefully the person I have working on it will come up with some sort of easy fix, and soon.

I'm just glad to know that you still care about the old stuff I wrote! :-)

But seriously, I hope to have that old content loaded here on this blog sometime in the near future. Some of those posts contained some really useful information. So stay tuned!

Thanks for reading,

Blue Cross Blue Shield of Michigan is trying to Gouge Senior Citizens

A couple of days ago, Michigan Attorney General Michael Cox announced that his office filed a request for a hearing to prevent Blue Cross Blue Shield of Michigan from raising the rates on their Medigap health insurance coverage program for seniors by 50%.

According to the announcement,

"The rate increase affects over 215,000 seniors or 17% of Michigan's population more than 65 years of age. Seniors already have to pay the costs for dental, drugs, eyeglasses, and hearing aids that are not covered by regular Medicare or the BCBSM Medigap insurance."

Can you believe that??? They're trying to raise the rates by 50%?!?

Come on, give me a break!

They claim they've been losing money for years on this particular program, and that could be true, but you can't tell me that they aren't making up for it in other areas.

Matter of fact, just a couple of weeks ago I was completing my father's open enrollment forms for health insurance, and I specifically ignored all of the choices offered by Blue Cross Blue Shield after I realized that they all came with higher rates and out-of-pocket costs and so forth.

And I also recall steering clear of them when shopping for my own health insurance plan because their rates were quite higher than other insurance companies that offered comparable plans, deductibles and services.

Now, out of the 215,000+ seniors that could be affected by this rate increase, about 90,000 of them who fall within 136% to 200% of the poverty level and who don't qualify for any type of government assistance to help them pay for their regular Medicare premiums, deductibles or co-pays, will be hit the hardest.

That's just not fair.

It's ridiculous to force seniors on low fixed incomes into a tight spot by imposing such a drastic health insurance rate increase all at once. Blue Cross Blue Shield of Michigan has to know what type of big impact this will make on their lives and the financial strain it will cause.

Do they not care at all???

I hope our AG Mike Cox and all of the senior advocacy groups that rally with him stop BCBSM cold in their tracks.

Don't pick on or harm our seniors.

Free City of Detroit Home Ownership Workshops

Detroit Mayor Kwame Kilpatrick and the Detroit Home Ownership Preservation Enterprise (Detroit HOPE) are hosting 2 free home ownership workshops this week aimed at current and future Detroit home owners.

Detroit HOPE, by the way, is a non-profit organization whose main initiative is to address the foreclosure problem in Detroit.

The workshops are being held on Tuesday, June 26th at the Northwest Activities Center (18100 Meyers, Detroit 48235) and on Thursday, June 28th at the Samaritan Center (5555 Conner, Detroit 48214). Both are from 2 pm - 7 pm.

Topics said to be discussed at these workshops include:

1. financial and credit management
2. predatory lending
3. foreclosure prevention
4. home preservation
5. landlord and tenant rights and responsibilities
6. taxes and insurance
7. creative mortgage products
8. home ownership tips

They also plan to feature homes for sale in the City of Detroit, and some lenders are supposed to be on hand to answer questions.

Should be pretty interesting to see what type of information is given to the attendees and how it turns out. I just hope they give out some good, useful info and not a bunch of fluff.

If you'd like to attend, you'll find more details here.

According to the flyer download, you can register by calling (313) 224-4415.

ABC News 20/20 Story on "Real Estate, the New Rules"

Tonight on 20/20, the topic of discussion was real estate. They had a few different segments on the show, but what I found most interesting was the first segment, which talked about home ownership.

The show opened with David Bach, author of the Automatic Millionaire Homeowner. He says that homeownership is what separates the rich from the poor. I agree that this is one characteristic that sticks out like a sore thumb when it comes to drawing the line between the haves and the have-nots in our country, but it is not, by far, the only one. More on that in another post...

Anyway, David Bach is touring the country promoting home ownership, trying to turn renters into home owners. Not such a bad idea. In fact, it's a great idea. 20/20 challenged him to help 2 families buy their first home, one of which lives right here in Michigan, in metro Detroit.

The wife was scared about getting in over their heads because she still had hang ups about her parents losing their home when she was a child. Understandably so, especially with the state of the Michigan real estate market right now and the high rate of foreclosures. But after reviewing their finances, David Bach determined that they were in pretty good financial shape. They had a pretty good income, a nice little savings and guess what else? Good credit! They were able to purchase a home, no problem.

The second couple from California, however, who had less income, less savings, some excess spending habits and a weak credit history, were going to have a little bit more of a challenge buying their first home. No surprise there. But they still got the job done - good for them. Let's just hope that they're able to keep it. They were already struggling to pay their bills as renters.

Bottom line is... in today's economic climate, you're pretty much going to need good credit to buy a home. With the bottom falling out of the subprime mortgage industry, there's hardly any mortgage companies left willing to loan to high risk home buyers. Especially here in Michigan. Lenders have been running from here as if their socks were on fire.

If you have a poor credit history and you want to buy a home, you should work on getting your financial affairs in order, and whipping your credit into shape, so that when you end up buying a home, you'll be able to keep it.

Plus, you don't want to have to put down a huge chunk of money for a down payment and/or get screwed with a really high interest rate, jut because your credit is poor. Improving your credit as much as possible before buying a home is your best bet.

You can read more about the story that aired tonight on ABC News 20/20 by clicking here.

You'll see after this jump that the article is titled "Is Buying a Home the Ticket to Financial Freedom?"

Well, my answer is, buying a home can help achieve financial freedom if you play it smart and maintain a strong financial position. There's no guaranteed wealth or financial freedom that comes with home ownership. Just ask the loads of folks facing foreclosure right now.