How Will Foreclosure, Short-Sale, Deed-In-Lieu of Foreclosure, and Bankruptcy Affect A Credit Score?

Every day we have more and more clients ask us the question of how foreclosure affects their credit score vs. bankruptcy, or whether it may be more beneficial to short-sale a house rather than a bankruptcy, and the answer is always, "It Depends." This may seem like an evasive lawyer-like answer, but it is true. The answer always varies depending on each particular person's individual situation. No two people's credit situation is exactly alike; therefore, the answers will tend to change depending on the person's spending habits.

There are many different factors in the determination of your credit score, including things such as how long you have had credit, if you make monthly payments on time, how much credit you have available to spend, how many different credit accounts you have. How a foreclosure, short-sale, deed-in-lieu of foreclosure, or bankruptcy affects your credit score depends on what your credit score was prior to the foreclosure, short-sale, deed-in-lieu of foreclosure or bankruptcy.

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A foreclosure occurs when you are unable to pay your mortgage for a long period of time. The mortgage lender takes back your home to sell to someone else. A short-sale is when you sell your home for less than what you owe on the mortgage. You would need your mortgage lender's approval prior to the short-sale of the home. A deed-in-lieu of foreclosure is essentially giving title of your home back to your mortgage lender in exchange for having the debt forgiven and not having a foreclosure on your credit report.

A bankruptcy is when you receive a discharge of all your debts, and your personal liability for all of the debt is wiped out. For secured debt, like houses or cars, you can keep the property if you continue to make payments, but the lenders will not be able to pursue you for any deficiency if you choose to surrender the property in the bankruptcy.

Most people are surprised to know that foreclosure, short-sale, and deed-in-lieu of foreclosure have approximately the same impact on a credit score. All three of these ways to lose a home are reported to the credit bureaus as having the account settled for less than what was owed. People have always been under the impression that a short-sale may be better than a foreclosure, or signing a deed-in-lieu of foreclosure is better than either a foreclosure or a short-sale. However, the important factor in determining a credit score is how long an account has been delinquent, such as 30 days, 90 days or 120 days. Most of the time people that have a foreclosure, short-sale, or deed-in-lieu of foreclosure on their credit report have been delinquent on their mortgages for a long time. By the time the foreclosure, short-sale, or deed-in-lieu of foreclosure actually take place, the damage to their credit score has already been done. The higher your credit score is, the steeper the fall. The opposite is also true. If your credit score is already low, having a foreclosure, short-sale, or deed-in-lieu of foreclosure will not affect it as much. There is no such thing as having a negative credit score, so there's a limit to how low your credit score can go.

Filing bankruptcy generally lowers a credit score the most, because you are receiving a discharge of all your debts, so it has a bigger impact. However, if you are struggling under a mountain of bills and a mortgage you cannot afford, bankruptcy may be the best option for you, regardless of how it impacts your credit score.

How Will Foreclosure, Short-Sale, Deed-In-Lieu of Foreclosure, and Bankruptcy Affect A Credit Score?

Bank of America Credit Cards: A Look At The Top 3

You probably know Bank of America from its commercials on better banking. They are one of the major players in commercial banking and lending. Well, you know you can enjoy their "Higher Standards" through a variety of products, including mortgages and checking/savings accounts, but did you know they have an uncommonly large pool of credit card options? "B of A" is one of the countries top credit card providers, and their Higher Standards certainly extends to this product line as well. This article takes a quick peek at the Bank of America Platinum Visa, the Bank of America Visa Signature with WorldPoints, and the TripRewards MasterCard by Bank of America.

A Look at the Top Three

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The Bank of America Platinum Visa - The B of A Platinum Visa is a solid all around card. Categorized by Bank of America as an "everyday credit card," it is chock full of useful features and reasons to consider it. The Platinum Visa offers a six month interest free introductory period, and accepts initial and subsequent balance transfers with no additional fees. So, if you are on the market for an all around solid card with cheap and easy balance transfer options, this could be the way to go.

The Bank of America Visa Signature with WorldPoints - What on earth are WorldPoints? We're glad you've asked. WorldPoints is one of Bank of America's great incentive programs for cardholders. WorldPoints is a flexible incentive program that lets you apply your purchases to a number of categories: cash back, travel, merchandise, or personal services. In addition to this powerful rewards program, you will receive an introductory 0% APR for the first twelve months of membership. B of A offers a handsome black and silver design that really instills the impression that this is one of their top-of-the-line cards.

TripRewards MasterCard Credit Card - With its uniquely redundant name, the TripRewards MasterCard Credit Card has become a favorite for travelers. The 0% introductory APR on balance transfers is a nice feature (and a theme for B of A), but most users are attracted to its high powered rewards plan. Earn 2 points for every in net retail purchases and earn 13 points for every spent for qualifying TripRewards hotel stays, and that can add up quickly.

All Bank of America cards come with the same great 24 hour customer service, online account management, and fraud protection. Opting into a B of A card gives you all of the benefits and security of one of America's largest financial institutions. So, if you are considering a general use card, check out the Platinum Visa; if you want flexible incentives, make sure to apply for the Visa Signature with World Points; and, of course, if you're out to see the world, the TripRewards MasterCard Credit Card is the way to go.

Copyright Ed Vegliante. Free online reprints of this article are allowed provided the resource box remains intact with a live link back to www.credit-card-surplus.com.

Bank of America Credit Cards: A Look At The Top 3

The Pros and Cons of Credit Card Balance Transfers

Credit card balance transfers can save you a lot of money if you consolidate your debts from other credit cards with high balances.

If used wisely, low interest credit card balance transfers can be an excellent way to reduce your interest payments. If used poorly, a balance transfer could cost you even more in interest and fees.

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As always, you need to read the fine print in any balance transfer agreement before you sign the dotted line. There are a number of things you need to look out for.

The first thing you need to look for is the length of time the low interest rate on your transfer will be upheld. Some of the best offer the same low interest rate on the transferred balance for the life of the balance. Other cards will offer a low rate for a set period of time and then revert to the credit card's regular interest rate if the transferred balance is not paid off in full before the interest rate change. If you've transferred a large balance and don't pay it off in time you could wind up paying even larger interest payments than before you transferred the balance.

You also need to find out if you'll be charged a fee for a balance transfer. The fee could either be a flat sum or percentage of the debt you plan to consolidate. If you have time to shop around you may be able to find a credit card that offers free balance transfers.

The last thing you'll want to look for is a listing of the penalties for late or missed payments. Some companies will immediately cancel your low interest rate, jack up your rates as high as 20+ percent and charge you a hefty late fee if your payment is even minutes late getting to the payment processing center. If the credit card you want to transfer a balance onto has a "universal default" clause your interest rate could increase drastically if you are late paying any bill whatsoever. Pay your electric bill late and your interest rate could skyrocket!

As long as you make all your required payments on time you don't have to worry about the penalties for a late or missed payment. Being aware of the penalties should provide all the encouragement you'll ever need to try to pay all your bills on time.

You also need to keep in mind that any additional balance or purchases you make with the credit card will be paid for after your low balance transfer is paid off. If you have a ,000 transfer with a 2.9 percent interest rate and spend an additional ,000 in purchases on your credit card at a 12.9 percent rate, your balance transfer will be paid off first. Rack up too many additional purchases and you won't be saving as much money in interest as you originally anticipated.

A credit card balance transfer could be an excellent idea or a very bad idea depending on your circumstances and how long it may take you to pay off the transfer. Only careful planning and a full understanding of the potential pros and cons will help you maximize the usefulness of a balance transfer.

The Pros and Cons of Credit Card Balance Transfers

Virginia Home Equity Line of Credit (HELOC) Loans

If you're shopping around for new credit and you own a home, a home equity line of credit, or HELOC, is an option. Using the equity in your home, you can qualify for a large amount of credit at a fairly low interest rate.

A home equity line of credit is a revolving credit account that uses your home as collateral. Depending on the amount of equity you have in your home, it's possible to obtain a large credit limit, much larger than most credit cards allow.

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With most HELOCs, your credit limit is calculated by using a percentage of the home's value and subtracting the balance of the mortgage. So, your HELOC limit might not equal the full amount of equity you have in your home. Even so, it's possible to have a credit limit of ,000 or more, depending on your home's equity.

The application process and fees associated with an HELOC are very similar to those of a mortgage. As such, it's common for initial fees to total several hundreds of dollars. So, when you're choosing a HELOC it's important that you shop around for the best terms, the same way you'd shop around for a mortgage. Because interest rate and fees vary from one lender to the next, getting a few loan quotes is important to minimize your cost in terms of interest rate and fees.

Shopping around for an HELOC by getting free loan quotes is a more effective way of finding a loan than simply choosing a lender through other arbitrary means. When you compare loan quotes from several different lenders, it's likely that you'll find lower interest rate and fees with a lender that you didn't first consider.

Get free loan quotes for different lenders before you make an application for a home equity line of credit.

Virginia Home Equity Line of Credit (HELOC) Loans

Home Equity - What You Can Do With It

Home Equity

Home equity is the value of your home above the total amount of the liens against your home. For example if you owe 0,000.00 on your house but it's worth 5,000.00, you have ,000.00 of home equity.

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What You Can Do with It

Simple, you can borrow against it! You can either apply for a home equity line of credit (HELOC) - a form of revolving credit - or, obtain a traditional second mortgage. In both scenarios, your home will serve as collateral.

Naturally, you will have to qualify for this loan. The lender will evaluate your ability to repay the loan by looking at your financials. Lenders will approve a specific amount of credit. This amount is generally based on a percentage of your home's appraised value.

For example, if you were to apply for a HELOC using the numbers above, here is how it would look: your home appraises for 5,000.00 and the lender qualifies you for a line of credit of up to 80% of the home's appraised value or 6,000.00. Subtract the 0,000.00 that you owe on your first mortgage and you have ,000.00 left, thus your HELOC will be for ,000.00.

There are many different home equity plans and they change all the time; do your homework before signing on the dotted line.

A word of Caution

Just as with a first mortgage, you will lose your home if you don't pay back your line of credit. If you were to default on your payments, the lender will start the foreclosure process in an effort to recuperate the outstanding monies owed.

Conclusion

Borrowing against your equity can be a great source of extra capital, just make sure you do so responsibly. Before entering into a commitment, consider how you will pay back the money you are about to borrow.

Good Luck!

Dimitri Larno
Designated Broker - Realtor®

Home Equity - What You Can Do With It

Buying a Home afterwards Foreclosure - Ways to Get Approved

Before attempting to buy a home after foreclosure, it is important to educate yourself on the necessary steps, and improve your odds of getting approved. Certain situations are extremely damaging to your credit report. These include bankruptcy, foreclosure, repossession, etc. Fortunately, you can rise from a bad credit situation. Here are a few tips to help you get approved for a mortgage after a foreclosure.

Negative Effects of a Home Foreclosure

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Aside from embarrassment and shame, having a home foreclosure will significantly decrease your credit score. Immediately following a foreclosure, it is difficult to obtain any type of credit, especially a home loan. Because many factors contribute to the inability to repay a mortgage loan, those who experience a foreclosure may be able to afford a new home loan.

For example, if foreclosure was due to loss of employment, once the previous homeowner finds work, they may be able to handle a new mortgage. The problem lies in getting approved. Lenders could careless about the circumstances surrounding bad credit. Their main concern is determining whether you are a good candidate for a loan. Thus, it is essential to improve credit before applying.

Maintain Regular Payments with Existing Creditors

The best approach for improving your credit score following a foreclosure is to keep up with regular payments to your other creditors. For example, if you have three credit cards, make an effort to pay the bills on time. If possible, payoff the credit card balances. This will increase your available credit, which is perfect for quickly boosting credit rating.

If you do not have a credit card, another tactic involves applying for a new line of credit. This might consist of an auto loan or secured credit card. Likewise, maintain on-time payments. Be aware that late payments or skipped payments will cause further damage to your credit rating.

Choose a High Risk Mortgage Lender

If applying for a mortgage after a foreclosure, many traditional lenders will not approve a loan request. For this matter, request quotes from several sub prime or high risk mortgage lenders. These lenders approve loans to people who have a difficult time securing financing.

Buying a Home afterwards Foreclosure - Ways to Get Approved

How Do HELOC's (Home Equity Lines of Credit) Work?

A home equity line of credit, or HELOC, is a secondary mortgage loan set up as a line of credit that lets homeowners withdraw funds for a variety of purposes. These mortgage loans are used to fund sporadic needs such as debt reduction, home improvements, college expenses, etc.

HELOC's have a withdraw period, wherein the borrower can draw on the line, and a repayment period, in which the funds must be repaid. Standard withdrawal periods are five to ten years. On the other hand, repayment periods are extended - usually ten to twenty years. The distinction between the two periods is that borrowers are only obligated to pay interest in the withdrawal period, whereas the repayment period includes a payment of interest and principle. Home equity lines of credits vary, and some require repayment of the entire balance once the initial withdrawal period ends.

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How to Qualify for a Home Equity Line of Credit

To qualify for a HELOC, mortgage lenders look at the loan-to-value ratio. The majority of home equity lines of credit require a LTV less than 75%. In other words, if your mortgage balance is 5,000, and your home is worth 0,000, the loan-to-value is 50%, and you are eligible for the loan.

What's more, mortgage lenders have to ascertain that an applicant can pay back the withdrawal money. To meet the criteria for a home equity line of credit, the borrower's debt-to-income ratio, which includes payment for the HELOC, must be less than 55%.

Home Equity Line of Credit Disclosures

Disclosure statements contain important information about HELOC's. Terms vary according to plan, and each borrower should set aside time and review disclosure contents. The home equity line of credit terms are subject to change. For example, the interest rate can increase. Additionally, the mortgage lender can terminate the line if the following occurs:

1. If borrower defaults on repayment

2. If borrower's financial circumstances change

3. If borrower falsified loan documents

4. If the property's value decreases

How Do HELOC's (Home Equity Lines of Credit) Work?