How Can Individuals Dispute Information on Their Credit Report?
It is usually possible to get a free copy of your credit report annually or if you have recently been denied credit for any reason. The appropriate starting point in the United States is to obtain the most recent credit report from each of the three major credit bureaus (TransUnion, Experian and Equifax).
When you obtain your free credit report from the three sources, each one will outline the procedures for disputing something on the report. You will typically be asked to provide a narrative explanation of why you think something is being reported in error as well as providing some required identification to establish that you are who you say you are.
It is quite common to have an error with some of the consumer reporting companies but not the others. Because you will need to communicate separately with each one, it is absolutely critical to start by knowing if you have a problem with more than one of the credit reporting companies.
Not all entries on a credit report can be changed with this procedure. One exception is a legal judgment that will typically remain on your credit file for seven years after it was issued by a court even if it has been fully paid by you. Judgments that are less than seven years old cannot usually be disputed and removed. You can, of course, try anyway, but your outcome is not likely to be favorable.
The credit bureau will ask the financial institution in question about their version of events. Very few of them respond to requests like this, and it is common for the consumer reporting company to remove the item after a specified waiting period if no response is made or if they cannot document why the transaction should remain as it is currently reported.
After a Real Estate Short Sale, How Is the Mortgage Shortfall Reported?
One of the key financial problems for banks and other lenders with mortgage loans during the current banking crisis has been the declining value of real estate investments on their balance sheet. In most cases they were given permission to essentially ignore the depressed real property values and carry them at their original face value. The exception to this is when properties are sold as they are in a short sale, the bank must now realize and report a loss for accounting purposes.
Most banks are in more precarious financial condition than the general public currently realizes. While a short sale fixes a problem for a homeowner, it does not help mortgage companies other than avoiding the need for foreclosure. As long as a property stays on the accounting books at its original price, a bank will often feel that it is better off by dragging their feet in completing a sale at a loss.
One of the key provisions of a short sale is that the lender agrees to accept a selling price that is less than the mortgage balance and that this will satisfy the mortgage debt in full. Under some circumstances, the lender will report the shortfall to the Internal Revenue Service and this can result in a tax obligation. Under recent tax law interpretations, however, this should not occur for homes through the end of 2013. For short sales completed during 2014 and beyond, check with your tax attorney or accountant for legal and tax updates.
While you might not have to pay any shortfall in the real estate loan, many lenders do get cold feet and change their minds about letting the sale actually close at a reduced selling price. This is why there is a poor track record for short sales in general and why they take so long even when they are finalized.
What Is a Stated Income Mortgage?
A stated income mortgage loan is one in which the borrower is not required to produce income tax returns or other documentation of actual income. In such cases, they are simply asked to “state” what their income is and the lender does not verify this in any way to see if this information is true or not.
The original theory behind this approach was to make the loan process simpler and quicker while also reducing the amount of paperwork for a mortgage company to review during underwriting. Many borrowers also frequently objected to submitting their tax records for examination.
Stated income financing was used for both residential and commercial mortgage loans. Lehman Brothers, one of the largest investment banking firms to fail during the banking crisis, used stated income commercial mortgages extensively in their small business financing department. Countrywide Mortgage (purchased by Bank of America at the height of the bank crisis) also included stated income home loans among their financial products. In both cases, the loan default rate proved to be much higher than mortgages in which borrowers were required to provide detailed income verification.
As with many aspects of the recent real estate and banking crisis, stated income loans did not become a serious problem until property values declined and many borrowers started missing their monthly loan payments. As the foreclosure problem developed, it became apparent that many homeowners had received mortgage loans that they could barely afford to pay. With a stated income underwriting process, this problem did not become apparent until it was too late.
What Is an I Plan?
An I Plan (also referred to as Plan I) is an individual planning strategy and a personal business plan often used to develop specialized and advanced career plans. An individual approach to life and careers is increasingly necessary because of a changing environment for employment, jobs, investments and retirement planning. Most employers have eliminated a serious commitment to long-term positions. While this might be in the best financial interest for a company, it is certainly not conducive to personal financial planning and stable career plans for each individual.
What Is Microfinance?
While some variations have existed since the 1700s, the primary credit for adapting the concept of micro financing to modern times generally goes to Dr. Mohammad Yunus for his micro-loans work in Bangladesh during the 1970s. He was awarded the Nobel Peace Prize in 2006.
Microfinancing or microfinance is designed to provide financial help to individuals who are poor and unemployed and therefore unable to qualify for traditional loan services from banks. The primary focus is generally in Third World countries. A prominent example of a micro financing organization is Kiva.
Loans are frequently for small (micro) amounts and include interest costs. Amounts loaned have repayment terms, and micro finance programs generally have a low default rate of less than 10 percent.
Is Seller Financing Permitted for FHA Residential Loans?
The mortgage crisis that begin in the 2005-2006 period and led to a massive bank bailout in 2008 resulted in significant loan defaults and foreclosures due in part to excessive leverage (lack of equity ownership interest). The FHA discovered that there was a much higher rate of default on mortgages involving owner financing and the Housing and Economic Recovery Act imposed a permanent ban on seller financed loans.
Since 2007, the Federal Housing Administration (FHA) has banned the use of seller financing for all FHA home loans. This federal agency has been assisting homebuyers since 1934, and a major part of their effort has been to help buyers with the down payment process since this is frequently one of the major obstacles when buying a home. Prior to 2007, the Federal Housing Administration made a practice of allowing sellers to provide the buyer's down payment.
The FHA does permit a number of sources to provide donor gifts to the buyer as another method of assisting with down payment requirements. The FHA continues to allow second mortgages and other secondary financing so long as the lender is not related to the seller.
Which Are Better: Credit Unions or Banks?
Both credit unions and banks provide deposit insurance. For a bank this is through the Federal Deposit Insurance Corporation (FDIC) and for a credit union it is the National Credit Union Insurance Fund (NCUSIF). I would not characterize either approach to insuring deposits as better or worse. They both do what they were designed to do: provide protection to depositors.
Credit unions are better in many ways when compared to banks in the current financial environment. Over the years credit unions have been much more prudent and financially responsible than most traditional banking institutions.
Too Big to Jail and Too Big to Fail are two of the final answers to the question: Why should consumers move their bank account to a credit union? Since the bank bailout of 2008, there has been a growing movement for individuals to close accounts with big banks and open accounts with community banks and credit unions. Such trends are likely to gain much momentum by the reckless behavior of the biggest banks. In the news recently was coverage of JP Morgan Chase negotiating a financial legal settlement with the government for several billion dollars. We can only guess how large the illegal profits were that were generated by these actions if the bank is willing to pay a penalty of billions of dollars. Apparently the good news for JP Morgan Chase is keeping their executives out of jail with this payoff.
What Is Credit Card Processing?
Most small businesses often deal with their bank or a company recommended by their bank for this service. They often are charged excessive fees for the services received. This industry is more competitive than small business owners typically realize. When companies start looking around at the other alternatives for processing their credit card transactions, they are usually surprised by how much money they can save by changing to another credit card processor.
Credit card processing companies are the "under the hood" part of any credit card transaction. Each merchant typically chooses a credit card processing company to handle all customer transactions. Charges are processed and then credited to the merchant's account. In exchange the processor gets a percentage of the transaction.
One of the most common circumstances for realizing how expensive some processing companies are is when a commercial borrower arranges a credit card cash advance based on their credit card receivables transactions. This usually is the ideal time for a small business to change to a low-cost provider for their credit card services.
Should I Use “Free” or “Paid” Websites for Business, Marketing and Internet Publishing?
“Free” options to do anything on the internet are increasingly coming with one form or another of “costs” such as ads (some annoying and some less so), various limitations about content and lack of total control about appearance. “You get what you pay for” is a time-tested piece of wisdom that still applies well on the internet.
Whether you should use more than one site depends on how you want people to find you. If you plan to primarily market to people that you know, you can provide the website address via email and/or business cards. In that case, one site is likely to be a better way to go. It will be cheaper and easier to manage. If your goal is to generate most of your sales from people that you don’t know on the internet, everything gets a bit more complicated but not necessarily more costly (except for additional time).
The most cost-effective solution might involve the use of more than one site. Even when starting out with limited financial resources, it is highly advisable to include at least one site over which you have total editorial control. If you want your own domain (highly recommended), there will be at least some costs, but these can be kept at extremely limited levels by purchasing the domain through GoDaddy.com (or similar sites) and then hosting your website at a quality location (Weebly is one preferred choice) that can be free in some cases.
In the second approach (internet marketing to people you don’t know), the search engines have to find you and these results are usually improved by having your name and business show up in multiple locations. For example, you can announce updates on Twitter, Google and Facebook (free), publish lengthy and detailed articles at quality sites like EzineArticles (free), produce videos to include on YouTube (free), publish images on Pinterest (free), and issue some free or low-cost press releases. Each of these websites have different rules and restrictions, but each will add to your internet presence.
If you are using a free publishing site, be prepared for the possibility that they will suddenly go out of business, change their publishing guidelines or transfer content to another site with little or no notice. Recent examples include Squidoo, Zujava and Seekyt.
Finally, if you plan to prepare business cards with an email and website address, choose both of these carefully to avoid the need to buy new business cards later with revised information. By planning ahead, your business cards can still be accurate for years to come even if you move. If you think that moving is a possibility, you can choose an email and phone service (both can often still be free) that does not need to change if you move.
What Is the Difference Between MasterCard and VISA Credit Cards?
In my view, the existence of these two is like Hertz and Avis or having three consumer credit reporting companies. Do we need more than one? (No.) Do the banks want to give consumers what appears to be a "choice?" (Yes.) As always, the banks win.
Here are just a few differences between MasterCard and VISA.
(1) MasterCard is based in New York. VISA is a California company.
(2) VISA is the larger of the two in terms of sales and employees.
(3) MasterCard was founded in 1966 while VISA was started in 1970.
(4) Approximately 10% of all merchants accept only the two combined (in other words, either credit card).
(5) The advertising slogan for MasterCard is "Priceless" while the slogan for VISA is "Life Takes VISA."
(6) For several years, Costco did not accept either VISA or MasterCard credit cards (debit cards for both could be used). Their primary credit card of choice during this time was American Express. Starting in 2016, they changed their "preferred" credit card to VISA. (An interesting story waiting to be told?)
(7) Sam's Club is one visible example of a company that has made a practice of accepting only MasterCard credit cards while still taking VISA debit cards. I'm sure there is another interesting story behind that particular practice.
What Is the “Prime Rate?”
The Wall Street Journal is often used as a source for determining the current prime rate. Before the 2008 banking crisis, the Journal changed their published prime rate when 23 of the top 30 banks changed their rates. In a tip of their hat to the new banking world in which 10 big banks hold most of the banking assets, the Wall Street Journal now adjusts their printed numbers when seven of these ten banks adjust the prime rate.
As of August 6, 2015, the Journal's current prime rate stood at 3.25 percent. That happens to be the same as 24 months prior to that date. It was also 3 percent above the federal funds rate of 0.25 percent. This rate remained at 0.25 percent from 2008 until December 2015. Yes, the banks charge each other next to nothing when they lend to themselves. This is just one example of why William K. Black wrote a best-selling book that was appropriately titled, "The Best Way to Rob a Bank Is to Own One."
Reflecting recent interest rate increases, the prime rate is 4.25 percent as of October 7, 2017. The federal funds rate has also increased — to 1.25 percent. The Federal Reserve currently expects to increase the federal funds rate to 1.5 percent during the final quarter of 2017, with further increases projected for 2018 and 2019 (2 percent and 3 percent).
Like many financial terms, the prime rate no longer means what it once did. For many decades, the prime lending rate referred to the interest rate charged to the best customers of a bank.
In contemporary banking, those borrowers more typically now pay a loan cost that is based on a specified amount above another index rate such as LIBOR (London Interbank Offered Rate) or the federal funds rate (the rate charged to each other for overnight loans).
Stephen Bush has expertise in the following areas: specialized business writing, small businesses, business financing, business negotiating, business training, business proposal writing, career training, business management, military career transition to business, real estate finance, business psychology, adult education, military service, U.S. Navy, government agencies, banks and banking, consulting, business consultants, search engine optimization, business blogs and websites, solving problems, contingency planning, business plans, public relations, small business finance, risk management and business communication.
Stephen Bush has been a small business finance consultant for over 25 years. He works with small business owners throughout the United States and Canada. Steve received his undergraduate degree in Business Psychology from Miami University in Oxford, Ohio and a graduate degree in Real Estate Finance from the University of California, Los Angeles. He is the CEO and Founder of AEX Commercial Financing Group. Steve is a U.S. Navy veteran who provides a career mentoring and training program for military personnel transitioning from military service to civilian business careers.