Why The Credit Scores You Purchase Aren't Accurate

Mortgage by Randy

monthly update to our clients, colleagues, family & friends

By: Randy Mitchelson, September 2012

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In Issue 54 We Touch On:

Fed Extends Fake Rates
Purchased Credit Scores Problems

Home Refinancing To Expand Business

After meeting so many bloggers who share the same passion about personal finance as I do, I am reinvigorared and look forward to introducing some of them through my daily newsletter, DailyDollar. If you haven't checked it out yet, we have over 1,000 articles, videos and podcasts available for you to learn about money saving ideas on a variety of topics.
 

The current newsletter and all prior newsletters are archived at the Mortgage by Randy blog. Bookmark it and share with your friends and family.  You can make your own comments and feedback as well.  Time for the news…

Mortgage Market: Federal Reserve Fabricates Ongoing Low Interest Rates
Mortgage rates will be low for the forseeable future thanks to artificial meddling by the Federal Reserve. Interest rates were declining naturally due to weak economic data. Then the Federal Reserve announced they will buy bonds backed by mortgages which keep the mortgage rates suppressed even further. In addition, the Fed also indicated that it plans to keep short-term interest rates at  "exceptionally low levels" until mid-2015. Their main objective with this announcement is to stimulate new home sales, more spending and eventually more hiring. 

Regardless of your opinion about the Fed's action and whether it will contribute toward new job creation, no one can argue that the cost to finance a home and fix your housing payment for the next 30 years has never been lower. 

Personal Credit: Why The Credit Scores You Purchase Aren't Accurate

As I wrote about in the DailyDollar, there is a dirty little secret about purchasing your credit scores. Now, the Consumer Financial Protection Bureau (CFPB) is weighing in on the subject after a study they conducted.

The study found that 1 out of 5 consumers would likely receive a meaningfully different credit score than would a lender. "When consumers buy a credit score, they should be aware that a lender many be using a very different score in making a credit decision," said CFPB director Richard Cordray.

This is why I am not a fan of people purchasing their credit scores. If you pay your bills on time every month, chances are you have a good credit score. The credit bureaus don't need your hard earned money to tell you that. The scores you purchase are "ballpark" scores and you can get essentially the same approximate score for free from services like Credit Sesame.

Ask Me Your Credit Score Questions

Have you been given credit score advice that you are not sure about or read an article that has conflicting credit score information from what you believe to be true?  I am here to help.  Submit your question and I will be happy to respond. For more free and easy to read credit score tips visit the DailyDollar and click on the Credit Score and Credit Monitoring sections.

Economy & Financial Insights: Critical Obamacare Deadline Approaching
It is estimated by the U.S. Census Bureau that 49 million Americans are without health insurance. Obamacare will cover approximately 30 million of those people. Just 10 days after the Presidential election in November, the states face a critical deadline.

On November 16, the states are due to have their private insurance exchange marketplaces in place. For individual Americans who do not have health insurance, the private exchanges will be where subsidized private insurance can be purchased so they can comply with the individual mandate section of the Affordable Care Act. The law stipulates that those who do not acquire health coverage will face a penalty. Right now that penalty is projected to be at least $695 in 2016.
 

Expect to hear stories abot some states failing to roll-out these exchanges by the deadline. Already, Obama's home state of Illinois is "crying uncle" and seeking federal assistance to launch and operate the private insurance exchange.

You can keep track of the roll-out of Obamacare at healthcare.gov.
 

Question of the Month: Can I Refinance My Home To Fund My Business Expansion?

I received a phone call from a prospective client this week with this very question. They own their primary home outright which is a blessing in this economy. No mortgage hanging over their head. Naturally, it can be tempting to tap into that equity in order to access cash for other purposes.

The short answer to the question is yes. A lot of mortgage professionals wouldn't even think twice about initiating a loan application. It's almost a slam dunk deal. However, I asked the client to take time to think about the potential repercussions.

The homeowner owns their business. Sales are good and they want to expand into a new market. No matter how confident you are in the growth prospects of your business, you never know what might happen in the future. By refinancing your home to access capital  to expand a business, you put your home on the line and your ability to pay the mortgage becomes tied to the fortunes of the business.

If business slows down or the expansion turns out to be less than successful, you still have to make that mortgage payment every month. If the business needs to be contracted in the future, and your cash flow is tight, your home, which was once completely free and clear of debt, is at risk of late payments or foreclosure.

Giving Back: Support Tracy Norton's Ride In Bike MS NYC
The Bike MS NYC event is on October 21, 2012. One of our internet marketing colleagues, Tracy Norton, will be riding and we ask that you to join us in supporting her ride. 

Today, there is no cure for multiple sclerosis, and with a diagnosis occurring most frequently between the ages of 20 and 50, many individuals face a lifetime filled with unpredictability.
 

Please Donate a few dollars through Tracy's personal, secure online Bike MS NYC page today.

 

Need volunteers? Do you have a fundraising event upcoming?   Do you have a personal web site where you are raising donations for your cause?  Submit the information to randy@mortgagebyrandy.com by the 5th day of each month and we will do our best to include your information in the next issue.
 

With so many homeowners underwater and unable to sell for a profit, the remodeling industry is booming. Stores like Lowe's and Home Depot are enjoying sales activity from homeowners investing in their property. At home, we've been contributing to this trend this month and in the coming weeks will be investing in our property, partially because we have to (repairs) and partially because we want to. Homeownership in this day and age has been tarnished for many people, especially those who lost their home or are stuck in difficult financial situations. But if you can survive the challenges and put sweat equity into a property, the rewards can be be very enjoyable.
 

Randy
 

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Mortgage by Randy newsletter, Copyright 2008-2012 Randy Mitchelson.  All Rights Reserved.

Randy Mitchelson is a licensed mortgage professional. All material presented herein is believed to be reliable but we cannot attest to its accuracy. All material represents the opinions of Randy Mitchelson.  Recommendations may change and readers are urged to check with their financial advisors before making any decisions. Opinions expressed in these reports may change without prior notice. Mitchelson can be reached at 239-851-6738.

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You have permission to publish this article electronically or in print as long as the following is included:

Randy Mitchelson is an entrepreneur, author and community activist with almost 20 years experience in financial services.  Mitchelson has served in leadership roles for Fortune 500 firms Bank of America, KeyBank and CIBC.

As a licensed mortgage professional and member of National Association of Mortgage Brokers, Mitchelson educates both individuals and groups about credit scoring by conducting personalized credit report reviews, action plans and one on one consultations. He is author of the free monthly newsletter, Mortgage by Randy.

He founded of Estero, Florida based National Web Leads, LLC, (NWL) in 2005, an internet marketing and lead generation services company. NWL merged with Reach Media Group in 2012 where Mitchelson is co-owner and CMO. Reach drives new customer acquisition through email, web display, social media, keyword search strategies, mobile devices and more.

Reach distributes customers' marketing campaigns via it's network of publishing partners. Clients include payday lenders, auto loan lenders, educational institutions, legal services, health and beauty product distributors and more. Lead generation companies utilize end-to-end lead generation software solutions provided by Reach's technology affiliate company Applied Cognetics.

Mitchelson also writes the DailyDollar™ personal finance newsletter. U.S. News and World Report named DailyDollar to its list of 8 Savvy Personal Financial Podcasts.

Mitchelson earned his BS and MBA at Rensselaer Polytechnic Institute in Troy, NY.  He is a founding member of the Southwest Florida Regional Technology Partnership Inc. and Vice President for the Michelle’s Angels Foundation Inc.  He is married to Susan, a Pharmacy Supervisor in the Lee Memorial Health System in Fort Myers, Florida.