Many people, many more than usual and many more than in past years, have recently experienced the trauma of not being able to make the house payment, not being able to catch up after delinquencies and the horror of foreclosure, not to mention the people who never really missed a payment but were completely unable to sell the home for as much as they owed when they needed to move, thereby resulting in a “short sale” on their credit report.

And all of these problems affect your credit scores and your credit reports. The question is how much? And how long? And what can I do to improve now that the crisis has past?

Well the people at FICO, the credit score people, have long been tight-lipped about how much these types and even other types of problems can affect you. You can check out this article on Mintlife, “How Mortgage Delinquencies Affect Your Credit Scores” to see some of the worst details.

Apparently, it has much to do with how high your credit score was in the first place. If you had a score of 680 there is no difference between a 30 day late and a 90 day late (except of course, it is much easier to pull out of a 30 day late and if you haven’t been able to make payments for as long as 90 days, you may find that nasty foreclosure to be inevitable).

But if you had a 780 score to start there is a difference between the 30 and 90 day delinquency.

An interesting note is that if you had a 680 score, a short sale would negatively affect your score as much as a foreclosure. Rather seems extremely unfair for those millions of folks who just got unlucky in the market and couldn’t sell their home. You know, if you haven’t missed a payment that ought to count for something, don’t you think? Is the typical homeowner in the typical town in the USA actually responsible for the fact that real estate prices have plummeted since they purchase their home? See, these credit scores are not always reasonable and very often not really fair.

And no matter what your score was to start with, any one of these problems can make it much, much worse. It will take time to recover.

Approximately, 3 years for a short sale or a foreclosure, 5 years for a bankruptcy.

But one consideration is the fact that until mortgages are more readily available, even to the people who have struggled in the past recession the housing crisis will not really end.

And that is a boon for you if you had these types of problems in the past because the price of housing in coming down. By the time your credit has recovered the prices will probably be even lower.

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Many problems with credit can be caused by going through a divorce. Many times, regardless of what the court order may say, the lenders just want their money and so they will harass you for payment and report bad credit on your report even if your ex-spouse is supposed to be the one responsible. Divorce is frequently a cause of bad credit.

But what if you are still married? In this article, someone wrote in asking about identity theft by a spouse and what they can do. The person answering the question gave three scenarios with the last one including “file for divorce”. This was supposedly the last resort according to the advice.

But really? If you can’t trust your spouse not to steal your identity and make you responsible for paying for things that you never consented to and essentially threatening your own credit and the livelihood of both of you, should you really stay married to this person?

Bad credit for either party in a marriage affects both parties. It is often difficult to qualify for a home mortgage with just one income. And credit card payments and car payments and food, lodging and everything else typically comes out of a combined income. Surely, you’re not going to let your spouse starve if they make less money than you do and they don’t have any money for groceries. And splitting all expenses straight down the middle isn’t exactly teamwork.

So, I tend to disagree with the advice that in this case divorce is the last option. Of course, it does depend upon other things in the relationship and extenuating circumstances, of course, but marriage needs to be a partnership. You need to work as a team. And if you can’t trust your partner in a business you call it quits. If you can’t trust your partner in a marriage, you should also call it quits. Your choice.

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Today is April 4, leaving just 11 days until tax day 2011. And while your financial mind may be on other things at this point, tax day can serve as another reminder that if you haven’t checked your credit report lately, you need to do it. If you haven’t checked your credit report yet for the year 2011, you have another reminder, another chance to do it now. You can do it later but you will be better off if you do it now.

You need to do it. At least one time per year, more often if you have bad credit or if you are consciously trying to improve your credit you need to check out your credit report.

You are entitled to one free credit report each year from each of the three main credit reporting agencies. Do not go to the sites that are advertised on the TV unless of course they are for the right one!

The right place and only place to actually get a completely free, no strings attached, nothing further to purchase and nobody to sell you anything additional is annualcreditreport.com

You need to check your report. The fact is that it has been estimated that over 75% of all credit reports contain errors. You need to check your report and make sure that all of the information belongs to you personally rather than the deadbeat two states over who has a similar name. You also need to make sure all the information is up-to-date. Many banks have changed names and hands in the past little while, make sure that what is being reported is accurate.

And check your report to see what you can improve on. Credit repair is very possible and often necessary in today’s cruel world . If you need to do some credit repair, get your report, get a plan and take some action.

The credit you repair today may very well be the credit you need tomorrow.

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There are a lot of valid reasons for avoiding credit. However, there are also some reasons you should have credit.

Many mortgage companies are now requiring 3 open lines of credit along with a good down payment and a 750 plus credit score in order to qualify for a new mortgage to purchase a home. And with the mortgage crisis that is going on and the millions of foreclosures out there, this practice is just prolonging the agony of the bad market.

If there is a glut of inventory, which there is, and it is exceptionally difficult to qualify for a mortgage to purchase a home, how can the housing market get better?

And if you are an owner, who needs to move, but is likely upside down in your mortgage, meaning that you owe more than you could ever possibly sell the house for in the near future (remember, mortgages are hard to come by and there are probably hundreds of homes out there competing with yours) what do you do? Corporations in the same situation walk. Some people are starting to walk away, which of course, makes the market even worse. But what is the answer if you must move for whatever reason?

So if you want to buy a house with a mortgage in the future, you may need credit, good credit. And if you have had any difficulties in the past you may need to complete some credit repair.

So get a prepaid credit card. Use it regularly and pay it off. Then use it regularly and pay it off. And slowly expand, get a few more lines of credit, be careful of the type, however, as department store credit is not given as much value as a credit card or an automobile loan, but most importantly of all, pay all of your bills on time, do not charge more than 20% or so of your total credit limit, don’t shop for credit and get financially responsible.

If being financially responsible means avoiding credit, then avoid what you can but do what you have to do to get your house.

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Remember Catch-22 and that “damned if you do, damned if you don’t” mentality? Well that is exactly how credit works these days.

If you are responsible, pay off all your debts on time and live a relatively debt-free, all cash life, you can be penalized by mortgage companies when you want to purchase a home. Even though, you are financially responsible and living completely within your means.

Oftentimes, mortgage companies penalize a person for having too little credit and of course, you get penalized if you have too much credit or if your credit is less than stellar.

Mortgage companies like to see at least 3 open lines of credit to make sure that you are credit-worthy.
So if you would like to live a relatively debt-free life and the only reason you want to get a mortgage at all is because you didn’t have the large pile of money that it would cost you to buy a house just sitting around in your bank account waiting for you to find the perfect home, you may be in for a big shocker. You can be penalized for having too little credit as much (or maybe even more) than for having too much credit or too poor credit.

Yes, it’s a Catch-22, you’re “damned if you do and you’re damned if you don’t.”

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The mortgages that are at least 30 days late decreased more last month than it has in over a year.

Delinquencies in February 2011 were down 1.2 percent from January 2011 and 18.4 percent from last year at this same time.

But the foreclosure inventories are still quite high and significantly higher than last year at this time. Right now there are approximately 2,196,000 foreclosures in the market and there is a total of 6.865,000 that are 30 delinquent or already in the foreclosure process.

The states with the highest numbers of foreclosures are Florida, Nevada, Mississippi, New Jersey and Georgia. The states with the lowest numbers are Montana, Wyoming, Alaska and North Dakota.

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According to a new study from the credit bureau, TransUnion, there are as many as eight million credit card accounts that are deemed “incactive” today. The inactive accounts are believed to have contributed to the 24.6% decrease in U.S. Credit card delinquency rates.

The majority of the inactive cards were in the “high risk” category but consumers in every category have been cutting back and using credit cards less.

Cash and debit card use has increased while the use of credit cards has declined contributing to softer profits for the credit card industry.

Read about it at “TransUnion: Eight Million Credit Cards “Inactive”.

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While it seems that the majority of American’s are familiar enough with credit scores to realize how important they can be for their financial lives many still have confusion about the different aspects of credit scores.

From a new article on CreditCardGuide the information obtained from a recent survey jointly released survey by the Consumer Federation of America (CFA) and VantageScore solutions revealed that when it comes to credit many American’s are misinformed. On a 22-question credit score quiz the consumers only scored an average of about 60% of the questions correctly.

It is interesting to note that different demographic groups scored differently on the quiz. For example, the people earning over $100,000.00 a year scored high with 66% of the answers correct. Younger people, ages 35-45 also scored well with 67% of the answers correct. Consumers in the lower income groups of $25000.00 a year or less performed poorly with only 58% of the answers correct. But the group that scored the lowest of all was consumers ages 65 and above with only 53% of the questions answered correctly.

It is interesting to note that if a consumer had recently received a copy of their own credit report they scored higher. Another reminder there for you to obtain the free yearly copy of your credit report today if you haven’t done so recently. Go to annualcreditreport.com, they won’t try to sell you anything and you will be able to get your credit report completely free, no charge whatsoever.

There were some interesting gaps in the credit knowledge among the groups. For example, more than six out of ten consumers actually thought that age and marital status were used to determine a person’s credit score (no, neither one of these things are considered). Only six in ten were aware of the fact that credit scores are often used by cell phone companies and landlords. Unfortunately, credit scores are also often used to determine rates for insurance and also for employment applications, which is really important to know.

Anyway you have the opportunity to take an interactive web quiz about your own knowledge of credit scores at CreditScoreQuiz.org. See how you do and then compare yourself with other people taking the quiz.

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In case you haven’t been thinking about such things as ‘Caveat Emptor”, buyer beware or looking after your rights as a consumer, you are invited to do so this week as it is “Consumer Protection Week”.

Consumers across the country are being advised to know and take full advantage of their rights as consumers and to make better, more informed decisions.

So that is a great reminder to get your free credit report if you haven’t got one for the past year. Go to Annualcreditreport.com

And check it out. Look for errors, mistakes, mis-reportings and under-reportings. There are things you can fix and repair to help you to get better credit. Of course, there are also things that you can’t repair but time can and will help you on those.

And while you’re at this effort of making better decisions look at your financial situation. Are there some things you can do to improve it? What interest rates are you paying on your debts? Do you have a ballpark idea of when they can be paid off? No, not at the minimum payment but paid off, out of your hair, paid in full….my money is mine again, paid off? Figure it out, make a plan. You are the only one who will look out for your own financial future. Take this reminder to do it now.

And here is a helpful website you should check out before you get involved with any type of Loan Modification. www.loanscamalert.org. Unfortunately in these times of economic uncertainty there are always some who will try to scam and take advantage of people who are feeling desperate. So if you are upside down on your mortgage or behind on your payments and you are considering a modification find out what you should expect. Find out what is appropriate and know your rights as a consumer because again, no one else will look out for you.

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Your job and your income have absolutely no effect on your credit score. In fact, you could have an almost perfect credit score with no job, no income or reliable source of income provided you were able to always make your payments on time (yeah, you might have to be independently wealthy or something to always have the money…but…). Contrary to what some people may think, it is not essential to have a job or income to have great credit as both of those things are deemed irrelevant and are not even part of your credit reports and scores.

And a 30-day late payment in 2011 may be more detrimental to your score than a bankruptcy in 2010. The most pressing factor of how much impact something has on your credit is how recently it occurred. With credit, time heals all wounds, no matter how brutal they were at the time. So keep your payments current and if something bad happened in your past, time will pass and you’ll get over it. But if you are frequently late on your payments, that is over 30 days late….one or two days usually doesn’t count much towards reporting, your credit will suffer, over and over again.

Pay off your balance every month or keep a small balance, the experts are divided on this. Economically it is better to pay off the balance, keeps you from paying interest, however, having an unused credit card does not help your credit much. So if you’ve got it, use it periodically.

And don’t close out your old accounts. As we have mentioned here about a bazillion times the debt to available credit ratio on your credit report is crucial. Try to keep your debt at about 20% or less of your available credit and don’t close out available credit as that reduces it on the other side. The trick to good credit is having it available but barely using it!!

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