Orlando Real Estate - CENTURY 21 Solutions Realty

Orlando Real Estate - CENTURY 21 Solutions Realty

A large part of a consumers credit score (30%) is based on the amount of credit available as compared to the outstanding balances on accounts, known as the credit utilization ratio. This ratio can be easily manipulated by banks and credit card issuers. For instance, if you have a credit line of $10,000 and a balance of $4,000 this equates to a ratio of 40%. Consumers with credit utilization ratios less than 50% are considered more desireable and therefore are given a much higher credit score. If the credit issuer reduces the credit line to $5,000 this increases the credit utilization ratio to 80% which in turn, lowers the credit score.

Over the last year credit card issuers have been reducing and closing consumer’s lines of credit. Many consumers are now seeing these same issuers ask for rate increases because the consumers credit score has fallen. Credit issuers cite, the credit score indicates a higher risk and therefore a rate increase is justified. In actuality, the risk has not increased at all, it is simply a byproduct of the issuers credit line reductions.

The question that comes to mind is whether or not the credit issuers have reduced credit lines to in turn increase rates. If this is an intentional act to manipulate the credit system is this not a fraud perpetrated on the American consumer.

Orlando Real Estate - CENTURY 21 Solutions Realty

Repayment Plan: Your servicer gives you a fixed amount of time to repay the amount you are behind by adding a portion of what is past due to your regular payment. This option may be appropriate if you’ve missed only a small number of payments.

Reinstatement: You pay the loan servicer the entire past-due amount, plus any late fees or penalties, by a date you both agree to. This option may be appropriate if your problem paying your mortgage is temporary.

Forbearance: Your mortgage payments are reduced or suspended for a period you and your servicer agree to. At the end of that time, you resume making your regular payments as well as a lump sum payment or additional partial payments for a number of months to bring the loan current. Forbearance may be an option if your income is reduced temporarily (for example, you are on disability leave from a job, and you expect to go back to your full time position shortly). Forbearance isn’t going to help you if you’re in a home that you can’t afford.

Loan Modification: You and your loan servicer agree to permanently change one or more of the terms of the mortgage contract to make your payments more manageable for you. Modifications can include lowering the interest rate, extending the term of the loan, or adding missed payments to the loan balance. A loan modification may be necessary if you are facing a long-term reduction in your income.

Selling Your House: Depending on the market value of your property, your home may provide the funds you need to pay off your current mortgage debt in full, plus the expenses connected to selling the home (such as real estate agent fees). Servicers might postpone foreclosure proceedings if you decide to sell your home. Such a sale would also allow you to avoid late and legal fees and damage to your credit rating, and protect your equity in the property.

Short Sale: Your servicer may allow you to sell the home before it forecloses on the property, agreeing to forgive any shortfall between the sale price and the mortgage balance. This approach avoids a damaging foreclosure entry on your credit report. You still may face a tax liability on the amount of debt forgiven. Consider consulting a financial advisor, accountant or attorney for more information.

Deed in Lieu of Foreclosure: You voluntarily transfer your property title to the servicers (with the servicer’s agreement) in exchange for cancellation of the remainder of your debt. Though you lose the home, a deed in lieu of foreclosure can be less damaging to your credit than a foreclosure. You will lose any equity in the property, and you may face an income tax liability on the amount of debt forgiven. A deed in lieu may not be an option for you if other loans or obligations are secured by the property on your home.

Orlando Real Estate - CENTURY 21 Solutions Realty

If you are behind on your monthly credit payments including mortgages, there is help for you. The National Foundation for Credit Counseling provides credit counseling, debt management services, mortgage work-outs (modifications) and homebuyer counseling through it’s network of member agencies. Visit http://www.nfcc.org for details about programs. This is a national non-profit and charges little or no fees for most services.