Friday, January 30, 2009

New FICO Score System

By: Alcides Hoy Jr.

Fair Isaac - they're the company that develops the formula that determines your FICO credit score - is rolling out a new version FICO 08 with the credit bureau TransUnion.

Now this new FICO score is supposed to be an improvement and we really welcome any improvements to credit scoring since there are so many mistakes that can be made with credit scores.

Here's what this score will mean for folks: The new FICO '08 scoring model will really target folks in the subprime category of scores in the 600s. These are the people that lenders are really struggling to predict how well they might pay their bills.

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Tips & Tricks: Credit Cards


By: Alcides Hoy Jr.

So I was thinking of ideas fro the first blog and I couldnt think of anything. Then I thought at a time like this what is more informative for my classmates than ways to find and maintain a proper credit card. As students the one thing we should look for is a credit card with a good rate. Many times since we are just turning the eligble age to have our own credit card, these companies try to send us credit cards. Not just CREDIT CARDS but the ones with the the highest rates. They will sometimes tell you things like YOU CANT BEAT THIS RATE thinking that as young adults we dont know how the rates are. Here is a video I think everyone should take a look at about Predatory credit card lending to college students.

The Credit Score Blues

By: Alcides Hoy Jr.

I found this video that's pretty funny but also interesting to many of us who don't know much about credit scores. Click to view video

Wednesday, January 28, 2009

Let's Get It!!!

by D. Babbs

Everyone knows that having a “good” credit score is important. But what is a “good” credit score? What type of information determines that magic number, which can have a huge impact on one’s life?

A credit score is nothing but a number computed from a statistical analysis to determine the creditworthiness of an individual. Here in the US, we mainly rely on the FICO (Fair Isaac Corporation) model to calculate credit scores. Such scores range from 300 to 850, with an average score being around 680. A good credit score is one that is above 650. Any score lower than 620 will cause individuals to have a harder time finding financing and/or a higher cost of financing.

FICO scores are made up of various data, which fall within the following areas:
Payment history – about 35% of a FICO score
Outstanding balances – about 30% of a FICO score
Length of credit history – about 15% of a FICO score
Type of credit – about 10% of a FICO score
New credit – about 10% of a FICO score

As new information becomes available by creditors, credit scores will change so your score can improve over time if you begin to manage your credit responsibly. Paying bills on time, keeping balances low, checking your credit report regularly, and limiting the number of open credit accounts are just a few tips to raise scores. Having good credit scores makes your financial dealings a lot easier and can save you money in lower interest rates.

Fake A Credit Card

by D. Babbs

This is a YouTube video showing how fraudsters reproduce fake credit cards with valid numbers in order to get merchandise at the expense of others. I thought this was an interesting video being that millions of people are often victims of such crimes. (Disclaimer: Please do not make any fake credit cards.)

Subprime mortgages fueled today's economic crisis

by Katherine Mejia

Subprime Mortgage lending is a major part of the reason why the American economy is in such turmoil today. This crisis has been coming for a long time, maybe because of new laws that were passed when new presidents came in, or maybe the crisis is at the hands of the lenders. People took advantage of the incredibly low interest rates and borrowed money for homes they could not afford. But it might have been the fact that lenders did not worry or care about the effects that this might have on the economy in the future.

We know now that it is too late to prevent the negative effects of subprime mortgage lending. Now it is up to us to get out of this crisis. Many obstacles lie ahead and the economy will eventuall turn around. The time it takes to turn around completely depends on us. A new president or bailouts will not alleviate the situation all on their own. It is up to the average American to learn from this crisis so that in the future such a predicament can be prevented.

There were many early warning signs that this would happen. Those who spoke about it were listened to but were not paid as much attention as they are now that were are waist deep in debt and there is no way to run away from this crisis. As early as 2004 many professionals were warning subprime lenders that in a not so distant future, borrowers were going to default on their loans. The fact that Fannie Mae and Freddie Mac, who were the biggest lenders until they were taken over by the treasury, were handing out loans to people with insufficient credit fueled this crisis as well as where the money was coming from. Both lenders were lending money with borrowed money creating a massive amount of debt that caused some of the biggest names in finance ( Lehman Brothers, Bear Sterns) to come crumbling down.

But it is not the lenders who will suffer the most from what has happened. It is the borrowers who are losing their homes all around the country the ones that are paying the consequences. Tax payers are also paying the consequences unfairly. While wall street calls itself the “biggest loser” it is a system that will recuperate when investors feel safe enough to take risks. But the average citizen is left hanging paying for bailouts and becoming homeless because of the situation they were put in due to greed and irresponsibility.


Subprime: The "new" homeless in the US

A BBC News report on how the subprime mortgage crisis has left many americans homeless.

Provided by Katherine Mejia

Sectors to Watch: Industrials, Consumer Staples, Technology

By Andrew Cho

Consumer Confidence

As the economy continues to struggle, consumer's are losing more and more confidence in the nation's ability to rebound from the recession. Economists believe Americans will remain in a financial funk until they start seeing fundamental improvements in the economy. But that is not the case as the 2008 Consumer Confidence Index reports 37.7 - less than half its level of January 2007. Lynn Franco, director of The COnference Board Consumer Research Center says, "it appears that consumers have begun the new year with the same degree of pessimism that they exhibited in the final months of 2008."

The low index score is especially bad becasue until considerable imporvement in consumer confidence is accoplished, the wrost of times are not behind us. Economists closely watch consumer confidence since consumer spending accounts for more than two-thirds of economic activity. As economic activity continues to slump, more companies are forced to layoff its employees in order to decrease expenses. Accordingly, the Labor Department announced that state unemployment rates show up nationwide in December.

President Obama's plan for a $825 billion package of increased federal spending may encourage Americans to spend more, but the proposed plan would only be a temporary relief. But without the help of consumer spedning, the economy faces a slow recovery. With that said, I feel that no matter how temporary the relief, it is a necessary step for future stability and economic growth.
By Andrew Cho


Average Mortgage Rate Falls to Under 5%

By Candace Brown
This is an article I read that deals with interest rates falling for the housing market. Even though interest rates are falling, it is still hard for consumers to refinance their home with the new interest rates.
The benchmark 30-year home mortgage fell below 5% for the first time ever in Freddie Mac's weekly rate survey, as economic weakness continued to push interest rates lower.
The national average rate on the 30-year loan fell to 4.96% in the week ended Jan. 15, from 5.01% a week ago. It was the 11th consecutive weekly decline and the lowest rate on record. The mortgage agency began its rate survey in 1971. A year ago the loan averaged 5.69%.
Adjustable-rate loans also fell. The five-year, Treasury-indexed hybrid mortgage averaged 5.25%, down from 5.49% a week ago and 5.40% a year earlier. It hasn't been this low since September 2005. The one-year, Treasury-indexed ARM averaged 4.89%, down from 4.95%. A year ago that loan was at 5.26%.
The 15-year fixed-rate mortgage, a popular refinancing choice, edged up to 4.65% from 4.62% a week ago. Last year at this time the loan averaged 5.21%. Refinancing activity has been strong as mortgage rates have plumbed historic lows.

Click here to read more

Banks, loans, and refinancing, how it affects the consumer!!!

By Candace Brown
J.P Morgan Chase Bank is trying to lower its’ interest rates on its loans so consumers can afford to repay the loans. Banks can’t afford their loans to be defaulted on, they can’t afford to seize houses and properties and foreclose them for a small percentage of it market value. People aren’t saving and banks aren’t loaning money. Lower interest rates seem great now and the lengthening of terms seems even better, but, it’s just as hard to acquire a loan now and almost impossible to refinance your house at the lower interest rates that are now being offered. Portfolios with investments are going down the drain as well. From colleges, to big business, to individual consumers, no matter how big or small an investor you are you should review your portfolio to see how quick you can liquidate your assets. Students are having a harder time taking out student loans at a decent interest rate, or they are being forced to take out private loans that accrue interest while you are in school. Schools have less funding, students have less money to pay for school and therefore more students aren’t applying to college or finishing college. Consumers are borrowing money from their credit cards to pay for the mortgages, student loans, and or any other bills/loans that they may have, which makes the interest rate go sky high and the minimum payments increase. Overall, loans have gone from helping middle class and low income individuals and families whether it be a loan for a house, car or school, to ruining the life’s of people by seizing assets, forcing people into bankruptcy and putting a halt on loaning people money who actually need it.

The Wall Street Journal

J.P. Morgan Expands Loan Effort by Robin Sidel
Rates Fall, but Refinancings Are Limited by James R. Hagerty & Ruth Simon
Smart Money Takes a Dive on Alternative Assets by Jason Zweig

Don't Get Fooled by Creditors

by Lionel Creech

This video shows how credit card companies can take advantage of you.

How Credit Scores Impact Mortgage Applications

This video shows Victor Benoun, President of The Mortgage Source explaining how credit scores impact mortgage applications, and how to improve your credit worthiness.

Posted by Andrew Moran

Car Title Loans Dangerous for Consumers

by Lionel Creech

Despite bad credit and a worrying economy, car dealerships are still in the business of selling you a car no matter what. Pressure to perform has driven the car industry in to a bargaining game that puts salesman and consumers in a tricky spot. Cash would be ideal for anyone yet more often than not auto loans are given in order to finance car purchases. Two types of simple auto loans exist. A direct auto loan is where a bank gives the loan directly to a consumer. An indirect auto loan is where a car dealership acts as an intermediary between the bank or financial institution and the consumer. Many dealerships will claim, “I own the bank” which is a red flag for consumers to get out. Car title loans have become a phenomenon that puts consumers at risk. By using the value of the car to back up their purchase, they can sign themselves in to a contract issuing crazy interest with an APR in the triple digits like 250% (as opposed to 25% for credit cards). In the past year, the economic woes have minimally affected the payment of auto loans. However 2009 brings worries to the table as unemployment rises, borrowing becomes more difficult, and car dealers become more ruthless. Title loans are not only for cars, they are also given in exchange for ‘pawning’ an asset of yours. One example of this process is a $2000 loan by Scott Oden (which ended up having 300% APR) in exchange for the title to his wife’s 2004 Ford Expedition valued at $13,000. After two missed payments, the creditor repossessed the car and sold it at $13,000 and he or she is legally entitled to keep the difference. Thousands of Americans face the same dilemma when it comes to financing their lives. Many adults are now facing times in their lives where they can’t afford cars, their houses, and even the money to pay their electric bills. It is not hard to believe that these title loans are only legal in 18 states and that consumers must be weary and vigilant when it comes to their consumer financing.





Credit Scores: What You Need to Know

Posted by: Andrew Moran

Many of us use credit cards on a daily basis as a means of convenience in order to purchase the goods we need without carrying large amounts of cash on-hand. In order to be approved for a credit card, or any other type of loan, consideration must first be given to the individuals credit score. A credit score is also known as a FICO score, moreover, it is the score derived from the Fair Isaac Corporation. The credit score that they develop ranges from 300-850, and takes all types of credit, mortgages, and loans into account. 30% is determined by your payment history; 30% is based on the amounts you owe each of your creditors, and how that compares with the total credit available to you; 15% is based on the length of your credit history, how long you have had accounts, and how long it has been since there was any activity; 10% is based on the number of accounts you have recently opened compared with the total number of accounts you have; finally, 10% is determined by the types of credit you have used.

This FICO score can have significant implications regarding future home loans, auto loans, college loans, etc. In order to receive the best loans with the best rates a score of 700 or better is generally needed. Since FICO scores are extremely volatile, it is important to make sure you avoid falling into credit traps. Five things that everyone must try and avoid are:

1. Late Payments

2. High Card Balances

3. Closing Credit Card Accounts

4. Having Too Many In-Store Credit Cards

5. Fines

Avoiding all of these things is sure to provide a consumer with a relatively good credit score. Having a good credit score is essential for obtaining future loans, and without a good FICO score, it is nearly impossible to get loans. For instance, merely applying for a home loan will make your FICO score drop an average of 5 points. The score will drop because creditors will request a copy of your credit report in order to make a decision. This inquiry goes down on your report, and will affect your FICO score for a year. In this regard, it is extremely important to manage your credit. If you wish to view your credit score, reports are available online


Sunday, January 25, 2009

Consumer Finance during the Recession

By: Corey Mutterperl

During this recession, consumer finance has come under a lot of scrutiny. One area of concern is people’s use of credit cards. Is it possible for consumers to live by only spending cash and not using their credit cards? It seems that many consumers are voluntarily putting themselves on a credit card using freeze and just using a debit card as a form of cash only spending. Some are actually having their credit lines reduced by the banks and the credit card companies. It has been shown that people tend to spend less when they do not have a credit card available, and are not financing a lifestyle that is more than they can afford.
Many consumers are also having great difficulty maintaining the mortgages on their homes. They are going to their banks for mortgage modifications or refinancing only to find the banks unwilling to help them. The banks need to open up the credit markets in order to keep people in their homes. President Obama’s administration is telling banks that if they want bailout money, they must lend it out. Instead many banks are using the bailout money for acquisitions and to help their own bottom line. Many economists however, feel that banks must get healthy again for the economy to turn around. They also feel that banks cannot be reckless again in making loans to people who can’t afford to pay them back.


Branson On Business: The Economy

By: Evan Lustig

This video shows Richard Branson Founder of Virgin Group discussing how to handle business in the bad economy

Ford CEO: 'No more money' needed

By: Evan Lustig


The majority of US industries have needed significant help in order to remain in business. The one industry that has faced a large amount of turmoil is the Automobile industry. With consumers being unable to afford new cars American automobile manufacturers have needed billions of dollars from the government bailouts so they don’t have to file for bankruptcy or cause many Americans to lose their jobs. However, Ford Motor Co told the government that they don’t need any more money from this round of bailouts unlike GM and Chrysler who desperately need the money. Ford was able to steer clear of trouble by securing a $23 billion dollar loan in 2006 using most of its assets as security even its blue logo. Chief executive Alan Mulally said, “We don't want to borrow any more money. We have sufficient liquidity to fund our transformation plan, which means our business is in a relatively good shape." With President Obama’s stimulus plan hopefully being passed early in the year the chief executive believes that sales will rebound by the middle of 2009 bringing hope back to the auto industry. Industry wide auto sales fell by 36% in December and the January sales matched the December numbers. With an industry in dramatic decline and its competitors barely able to remain in business Ford looks to be the only automaker that has figured out how to handle the current economic recession effectively.

For more info:

Credit Card Changes to Help Consumers

By: Corey Mutterperl

Judgment day for credit card companies has come and gone.  The federal government announced that the purveyors of plastic have been too harsh on their customers.  A crackdown looms in 2010, one that will have severe consequences for credit card companies and consumers alike.

Compare Debt Consolidation Rates

Compare rates from up to 4 lenders for debt management

History may prove that bad credit led to the unraveling of the economy in late 2008.  The U.S. has been too lenient on people with heavy consumer debt, and this "bad debt" has led to the poisoning of the overall economy.That argument may have some merit, but some of the blame ultimately lies with the credit card companies.  Charging steep late fees, increasing interest rates without proper notice, and other fine-print shenanigans have made a bad thing-credit debt-even worse for consumers. The federal government has responded by passing a series of regulations that will affect all credit card companies in 2010.


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