The Fair Credit Reporting Act forms the base of consumer credit rights in the United States. Inaccurate, incomplete, disputed or outdated information is considered a violation of the fair credit reporting laws. A study released by the U.S Public Interest Research Group in June 2004 found that 79% of the consumer credit reports surveyed contained some kind of error or mistake.

Credit errors may be disputed by notifying in writing the credit bureaus of the inaccuracy.  The credit bureau then has 30 business days for an investigation.  If the credit bureau cannot verify the negative information, it must be deleted from your file.  At which point you are entitled to receive a free copy of your corrected report.  

If you disagree with the result of the investigation, you have the right to submit a 100 word explanation.  The credit bureau must maintain this explanation in your file even if the negative item isn’t removed.  

Negative information cannot be reinserted into your file unless the credit bureau has the source of the information certify their debt reporting is complete and accurate.   Credit bureaus are then required to notify the consumer within five days of reinserting the information.  
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If you have some credit cards you never use, should you cancel them? Does it help or hurt your credit to keep cards you don't use. The answer is not a simple black and white issue and actually depends on your situation.

Why Not to Cancel
Keeping your credit cards you don't use can help you in two ways. First, the credit is available to you if you ever have an emergency in which you need to have financial resources. Second, one of the main components of your credit score is made up of the amount of credit you have versus the amount of credit you use on a monthly basis. Your credit score is hurt if you use more than roughly 40 percent of your available credit. So keeping those cards can boost the amount of credit you have available and are not using.

Why to Cancel
Your credit score is not the same as a mortgage score. A mortgage score is like a credit score in that it examines your credit history quite thoroughly. However, it looks at potential unused credit as a problem. You might go out, incur more debt with these cards and then not be able to pay your mortgage they fear. Another reason to cancel might be just to pull in the financial reigns. You might want to cancel cards you're trying to stick to a budget and want to eliminate the temptation of credit.

How to Cancel
If you are preparing for a mortgage, then it can help you to close accounts of credit cards you're not using. The way to do this is to call your credit card company and request that the card be canceled . Be forewarned. Telephone reps for the credit cards have scripts in front of them prompting them to offer you better terms (lower interest rate, no annual fee) in exchange for keeping your account open. If the offer is really good, then perhaps you're better off keeping that card and canceling another. Either way, expect the credit card company to fight to keep you as a customer. You want to make sure of two things. Do not close an account that you are still paying off. And make sure the account you close is reported to the credit bureaus as "closed by customer," not "closed by creditor." In addition to your phone call, you can back yourself up by sending a registered letter to the credit card company stating your name, that you want the account closed, your address and your account number.

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Your credit score is a vital indicator of your financial health.  May things are taken into consideration to determine your score.  Including but not limited to:

•    Payment history
•    Outstanding debt
•    Length of credit history
•    Number of bankruptcies, charge offs, collections and judgments
•    Current available credit

Lending institutions utilize these scores to determine someone’s credit worthiness, as well as what interest rate to charge based on their level of risk.  

A good credit score will help you obtain prime rates that will save you money in the interest paid back to the lender.  Adversely, a poor credit score will cost you money by adding interest percentage points to your loan or credit line costing you a lot more money over the length of the account.  

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In years past, a 20% down payment was commonly required by lenders in order to purchase a property.  Mortgage lending has come a long way since that time.  One major change was the advent of mortgage insurance.   This allowed banks to extend their mortgage financing further without any additional risk.  Any mortgage for more than 80% of the purchase price will require mortgage insurance. 

In the past several years there have been a number of mortgage programs that would allow up to 100% financing on a piece of property, however there has been a dramatic decrease of these programs in the past year.  The question of how much money to put down is going to become a personal one.  One factor is how much the bank will lend on the particular property. 

Another factor is of course how much you have saved to put towards the property.  The more money you are able to put down on the purchase, the lower your mortgage payment will be.  Many borrowers that have the funds for larger down payments opt not to do so in order to keep their money working in their investments rather than tied up in a piece of real estate.  It’s going to come down to a personal choice based on what’s the best for your future.

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There are a number of factors to be considered in order to calculate the size of a mortgage you would be able to afford.  A simple internet search will uncover a number of different mortgage calculators that factor in different figures in order to come up with a mortgage payment that you can afford.  These mortgage calculators factor in your income, monthly debt, down payment provided, estimated closing costs as well as loan specifics such as the rate and term of the loan. 

The calculator evaluates your input and comes up with a mortgage payment as well as a purchase price you will be able to afford. Mortgage qualification is based on debt-to-income ratios as well as your credit worthiness.   This is typically based on a formula that your housing expenses should not exceed 28% of your gross monthly income.  Housing expenses include your mortgage payment, taxes, and insurance.  This is called your front-end ratio.  This is calculated by multiplying your gross annual income by 28% and dividing that figure by 12 months.  (Gross annual income x 0.28 / 12 = front-end ratio)  This will determine your maximum housing expense. 

Additionally your total debt should not exceed 36% of your gross monthly income.  This would include the housing expenses as well as car payments, credit cards, personal loans, child support, alimony etc. This is called your back-end ratio. To calculate your back-end ratio, multiply your gross annual income by 36% and divide by 12 months. (Gross annual income x 0.36 / 12 = back-end ratio). This figure is your maximum debt-to-income ratio. 

Conventional loans typically allow between 26-28% front-end ratios and 33-36% on the back-end.   Your interest rate will also be derived from your credit worthiness which is measured by your FICO score.  Because of this, it’s extremely important to keep track of your FICO score, particularly when you are intending on applying for a mortgage.

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The amount of interest paid on a particular mortgage is going to vary based on a few criteria.  The first of which is your credit worthiness which is measured by a FICO score.  The higher your score, the more likely you will be to qualify for lower rate lending.  There are a number of different mortgage products so you will need to determine if you are willing to assume the risks of an adjustable rate mortgage (ARM) or if you feel more compelled to go with a fixed rate mortgage. 

There are countless sources for mortgage rates and programs on the internet and in print form, so many that it can be a bit confusing and overwhelming.  One way to compare different mortgage products is through their Annual Percentage Rate (APR).  The Federal Truth in Lending Law requires mortgage companies to disclose the true cost of a mortgage in the form of a yearly rate.  This is to help consumers more accurately compare mortgage products by including fees associated with the mortgage that may be otherwise hidden. 

There may be a number of factors within a mortgage that aren’t necessarily factored into the APR such as balloon payments, indexes in the case of  adjustable rate mortgages, or possible prepayment penalties.  Loans with lower APR’s aren’t necessarily better loans, so it’s best to do as much research as possible to get the mortgage that best meets your needs.  

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As you probably already know from news reports, you’re not alone in being unable to sell your home. Home sales have been down all over the country for well over a year. In many areas of the country, home sales have been down for two years. It may be another year before home sales start to pick up again. In the meantime, there are some things you can do to help you sell your home.

If your home needs any major repairs, including the roof, furnace, air conditioning or electrical updates, it might be a good idea to get the work done now. Buyers are turned off by homes that need major upgrades and during a recession, every little bit can help. Start by working on the items that will mean the most to your family, so you can make your stay in your home more comfortable while you wait for the house to sell.

You might also consider a house swap. Home swaps allow you to “exchange” houses, actually just a mutual home sale agreement, with someone else that is looking for a home in your area. People looking for home swaps advertise on specialty websites and a real estate agent can help finalize the deal and protect your interests, usually at a reduced rate.

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