Funny Money Friday: Suprime Song

Money doesn't have to be boring! Each week, CreditBloggers.com takes a look at the lighter side of the personal finance world in a series called Funny Money Friday.

Still feeling bad about the credit crunch? You're not alone. The Fed rate cut last week has made things a little more stable but investors seem to be waiting to see if they're willing to go even lower with their next announcement in October before making a move.

One economic consultant has gone so far to compose a song about the current woes. With no further ado, here's his lyrics set to John Lennon's Imagine:

Imagine There's No Subprime

Imagine there's no subprime,
It isn't hard to do.
No Alt-A either, all documentation true.
Imagine all the people, living affordably.

Imagine there's no Countrywide,
It isn't hard to do.
No Angelo Mozilo, no rating agencies, too.
Imagine all the people, living life in peace.

You may say I'm a dreamer,
But I'm not like Option One.
New Century is now an old one,
And Ameriquest is done.

Imagine no repossessions,
I wonder if you can.
No rates to reset, repayment penalties banned.
Imagine all the people, sleeping well at night.

You may say I'm a dreamer,
Or that I've just got an Itch.
But Moody's and S.& P. look pretty bad,
Except compared to Fitch."

Authored by Thomas Lawler of Lawler Economic and Housing Consultants. Have a great weekend!

Emily Davidson – Credit.com's Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.

 

Reader Question: Understanding Credit Card Utilization

I received two excellent questions about how exactly credit card utilization impacts credit scores. I'm impressed! A couple of years ago, I don't know that anyone actually knew that their debt-to-limit ratio had an impact on their credit scores. Here's the first question from Debbi:

1. What is the formula for credit card utilization (i.e., credit limit to account balance) to positively affect FICO score?

2. I recently became an authorized user on a credit card with a 40% utilization rate. I also have a personal revolving account that is now $30 below the credit limit of $1700. My credit scores today were slightly less than they were 2 months ago. Which of these accounts could have caused the 10 point decline in my FICO scores?

3. I understand that there are changes in the works to no longer include authorized user accounts in the FICO score. Is there anyway a lender can take advantage of this or get access to this new formula even though the change is not completely rolled out so that my FICO score would be better?

And here are my answers: 1. A total debt to total limit ratio of under 10% (but not 0%) is ideal for your credit score. 2. The high utilization on both those accounts would have impacted her credit score negatively. Remember, total utilization across all cards is the key figure. 3.  Many lenders have already started discounting authorized user accounts from their underwriting. The FICO rollout has just started, but other scoring models also offer the same no-auth formulas.

I also received a related, but different question this morning from Sam:

I have 2 Bank of America cards that are maxed out. I have other credit cards with zero balances totaling about $50k in credit limits. I am under the impression that if I spread the balances out from the 2 maxed cards across 5 cards in order to have my balances at under 50%, that will help my FICO score.

Spreading credit card debts out across multiple cards doesn't change your total credit card utilization ratio and will not help improve your credit score. It's all about the total debt vs. the total credit limit. Paying off your debts or increasing your credit limits are the only options for improvement in this category.

Any other questions about credit card utilization ratio? Send your questions by email!

Emily Davidson – Credit.com's Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.

Reader Question: Can I Pay Principal Only?

It's not often that I get a question from a reader that I haven't heard before. The email I received this morning was a real first:

Hi Emily. A friend of mine recently told me something bizarre that she was told by a credit counselor.  He told her that when she made her monthly payments to her accounts, she should write "Apply to Principal Only" on the check.  Is this legal and and correct? If so, what happens to the finance charges that are due? I greatly appreciate your time and response on this matter.

Absolutely not true. Creditors and lenders will not pay any attention to what you write on your check's memo line. They will apply your payment toward the blend of interest and principal set for your debt at that specific time.

Imagine if you wrote "paid in full" on your check. Do you think that the lender would accept your $200 payment to pay off a $2,000 debt just because you wrote it down? Writing a note on your check is meaningless.

This is a good example of why you need to be so careful when working with credit counselors. Remember, these counselors often have little to no training and usually not one whit of experience in the credit industry.

Working with a counselor to come up with a budget or a debt management plan makes sense. But please take their credit advice with a grain of salt. If you have a credit or personal finance question, feel free to email our team of experts for a straight answer.

Emily Davidson – Credit.com's Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.

Signs of the Credit Crunch's Impact on Consumers

The financial news from the past few months has been quite scary. Stock market taking big dives, mortgage foreclosures on the rise, housing prices on the decline. The direct consumer impact of these shift is now starting to surface in two key measures: eating out and holiday shopping.

First, a recent survey revealed that 54% of Americans are planning to eat out at restaurants less over the next three months. 63% of those with incomes under $25,000 said they would eat out less compared to 35% of those with incomes over $50,000. And 40% acknowledged that they are already dining out less now than 6 months ago.

"Volatile stock markets, declining home values, higher energy costs and overall concern about the economy are reducing Americans' appetite for dining out," said RBC Capital Markets equity analyst Larry Miller.

Retailers are also predicting a slower holiday shopping season this year. The National Association of Retailers cited "economic concerns" in announcing slower that usual growth in holiday spending. They expect a 4% increase over last year, down from an average 4.8% annual growth.

"Retailers are in for a somewhat challenging holiday season as consumers are faced with numerous economic obstacles," said NRF Chief Economist Rosalind Wells. "With the weak housing market and current credit crunch, consumers will be forced to be more prudent with their holiday spending."

Our team of personal finance experts have already spoken with several reporters about the "economic grinch" looming over this year's holiday season. This "belt-tightening" topic really seems to have legs for the next few months.

What about you? Are you cutting back on restaurants and shopping sprees? Share your feedback in the comments section below.

Emily Davidson – Credit.com's Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.

Will opting out boost your credit score? The truth revealed!

A question came into me last week from "Ray":

I was talking with a (major bank rep) yesterday doing a little research about their business services and he said something interesting but I am skeptical about. Maybe you know about this. We were talking about personal credit and he said that a person could improve their FICO by 20-30 points just by opting out of credit offers. Now I have known about the national opt out at www.optoutprescreen.com and there are a few other sites you can do the same thing. I think even the FTC has a site or a phone number.

Have you ever heard that by doing this you could increase your credit score? The bank rep was saying that because a person does not want credit offers that factors in to the credit score. I am skeptical about this because every thing that I have read about that factors in to a FICO had never mentioned the opt out. I opted out just to see what happens as well as my wife. So I am testing this and I thought I would ask you if you knew any thing or have heard any thing like this before.

The question seemed vaguely familiar, and it likely was something I had heard before, because when I checked with Craig Watts, spokesperson at MyFICO, he told me they have received the same question recently as well. Clearly it's one of those credit boosting gimmicks that is floating around.

First, OptOutPrescreen.com is the official government mandated site for blocking your files from marketing offers, including credit cards, and those highly annoying mortgage trigger lead lists. I do recommend opting out as a good safety precaution, and to save a few trees. Craig confirmed my understanding, however, that opting out in and of itself will not help your credit score. The FICO score doesn't even know, much less take into account, the fact that you have opted out.

Craig did point out that the highest scores tend to go to consumers who use credit, but do so conservatively and responsibly. So in that sense, opting out means you get fewer offers, and in turn, may mean you open fewer account, which can help your score in the long run.

I have heard so many stories of bank reps, mortgage lenders and others giving out wrong credit advice, it's word to the wise to be careful whom you listen to!

What credit myths are you curious about? If you don't find the answers here, the experts at Creditbloggers.com would love to sleuth out the truth for you!

Gerri Detweiler – Personal finance author, radio host and credit expert. Gerri contributes budgeting, debt recovery and savings information online.

Funny Money Friday: The Dollar's Low, Eh?

Money doesn't have to be boring! Each week, CreditBloggers.com takes a look at the lighter side of the personal finance world in a series called Funny Money Friday.

News reports yesterday announced that the US Dollar was traded equally to the Canadian Dollar for the first time in 31 years. In 2002, the Canadian Dollar (also called a "loonie" because the coin depicts a loon) was equal to 61 US cents. Over the past five years, our neighbor to the north's currency has crept increasingly upward. This Globe and Mail article includes a chart of the price of Canadian dollars over the last few decades.

What does this mean? That trip to Vancouver you had planned is going to be a little more expensive than you thought. Also, imported maple syrup and Labatt Blue prices are going to be higher. Investors with stocks in Canada (for example: me) will be pleased with the performance of their funds.

Best of all, the golden age of the Canada joke may return! I haven't seen news that they're remaking Strange Brew just yet. In the meantime, here are a couple very cheesy Canadian jokes to kick off the weekend:

Q: How many Canadians does it take to change a light bulb?
A: None. Canadians don't change light bulbs, we accept them as they are.

Here's a joke about how Canada got its name: When J. MacDonald and Friends were trying to figure out the name of this great place, someone had a great idea. Let's stick all the letters into a hat and draw 3 of them - That will be the new name of this place.. So they did so.. 1st letter is pulled and the guy shouts - "C" eh!? 2nd letter is pulled and the guy shouts - "N" eh!? 3rd letter is pulled and the guy shouts - "D" eh!?

A Canadian is walking down the street with a case of beer under his arm. His friend Doug stops him and asks, "Hey Bob! Whacha get the case of beer for?"
"I got it for my wife, eh." answers Bob.
"Oh!" exclaims Doug, "Good trade."

Have a great weekend, eh!

Emily Davidson – Credit.com's Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.

Reader Question: Should I Close Old Credit Cards?

Some of the most innocuous changes can result in major credit score damages. Today's question involves a very common misstep:

I have  7 or 8 credit cards and I am paying them down pretty quick.  I don't owe more than $1,500 per card.  Some balances are a lot less but none over the $1,500.  My original plan was to pay them all off, cancel the ones I don't use and only keep a couple ones open.  So my question is, would it be better to leave all of them open with a $0 balance versus closing all of them but a couple? 

Closing a credit account will always be a negative when it comes to credit. There is no situation really where closing a credit card will help improve your score.

Why? Because credit scores place a lot of value in having older, established credit accounts and in having a high credit limit in relation to your debts.

Let's tackle the first point: account age. The "age" of your credit report is established by the date that your oldest account on record was opened. For example: say you have a credit card opened 10 years ago and four other cards opened last year. Your credit age will be 10 years. If you close that oldest account, your credit age drops to only one year. That decrease in age will translate to a decrease in your credit score.

Now the second point: debt utilization. A major factor in your credit score is the ratio between your total credit limits and your total credit use.  Ideally, you want this ratio to be around 10% (Only having charged $500 if you have $5,000 in credit limits). If you close credit accounts, you lower your total available credit limit and skew this ratio higher.

There is no negative score damage that comes from having 7-8 credit card accounts on your report. Also, there is no negative score damage that will come from having these cards open with a $0 balance.

Only if our reader was being charged an expensive annual fee on one of the cards, should he consider closing the account. Otherwise, paying the debts off and leaving the accounts open is going to be the right move for his credit.

Have a credit or money question? Send it to the CreditBloggers team of financial experts at tidbits@credit.com.

Emily Davidson – Credit.com's Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.

HELOC Warning

Millions of Americans have Home Equity Lines of Credit. Properly used they can play a meaningful role in a family's financial life. Many families bought their home using a piggyback loan, getting an 80% Loan-to-Value (LTV) 1st combined with a HELOC to provide the balance of the financing.

They are also frequently used to buy a car in lieu of bank financing or to finance a home improvement like an addition or a re-modeling project. Another good use is to pay off high rate credit card debt and replace it with debt on which the rate is lower and the interest tax deductible.

The rate on virtually all HELOCs is tied to the Prime Rate, just lowered to 7.75%. For the first ten years, typically, the required monthly payment is the interest that accrued during the month. However, on all HELOCs it is equally important to have a repayment plan whereby the principal is re-paid so that the balance is ultimately zero.

If you paid off credit cards with a HELOC, for example, when you just pay the interest, there you are after ten years having paid $6.00 per gallon for gas if you include the interest you paid. Or the cost of that $50 dinner turns into $100.  For that reason, these are not loans for the people who have no discipline.

There is another danger, having you account frozen if you don't make a payment on time. A client of mine got a $75,000 HELOC as part of his financing when he bought his home. Being a diligent person, he had paid it down to $25,000 in the few years he has owned the home. But when his vacation was unexpectedly lengthened due to unforeseen circumstances, he missed making his monthly payment on time. It was made on the 25th of the month, past the 15 day grace period.

He was just expecting to pay a late charge but found that his lender had frozen his account and he was no longer able to take advances, ever. Wow! I talked with other HELOC lenders and they have similar policies. One institutes a soft-freeze after the 15th day. That can be removed when payment is received. But they institute a hard freeze after 30 days and you need to tell a convincing story to a supervisor to get it re-instated. I suppose of they don't like your story, it will be frozen forever.

This is very harsh treatment when you consider that these same institutions were falling all over themselves a few years ago to get everyone in America to get a HELOC. 

With this knowledge if you have a HELOC it is important that you understand the lender's policy.  First check your loan document, sometimes called a Credit Agreement. Then, with that in hand, call your lender's 800 number and talk with Customer Service to find out their policy. Then be sure you don't get cross-wise with them.  It could be painful.

Randy Johnson – Author of How to Save Thousands of Dollars on your Home Mortgage and Savvy Borrower articles. Randy is a mortgage broker who has financed over $1 billion in properties. He writes about home buying and real estate finance topics for CreditBloggers.com.

What the Fed Rate Cut Means for You

After facing stock market turmoil, rumors of recession, and a hollering Jim Cramer, the Federal Reserve Board has issued rate cuts this afternoon.

Overnight interest rates were lowered a half a point to 4.75%. Discount rates were cut by half a point to 5.25%. These changes were made to "promote the restoration of orderly conditions in financial markets."

The  move is one of the larger rate changes we've seen in the past few years. Usually Fed rates are adjusted by quarter points at a time. Today's drop brings Fed rates back to early 2006 levels.

What does this rate change mean to you?   

• A more solid stock market. The stock markets have already surged up about 2% based on this news. The rate decrease is largely designed to counteract instability that has surfaced the last few months due to the mortgage and credit crisis news. the move is largely aimed at stopping the growing economic "panic."
• Lower credit card rates. Mortgage rates aren't directly tied to the fed rates, but credit cards are. Banks set credit card rates based off the prime rate, which is based off the fed rate. You may see your APR decrease along with your rates on home equity loans.
• A few other lower loan rates. Home equity rates and auto loan rates are also keyed off the fed rate and may see some decreases. Car buyers may be especially happy to see auto rates drop back from their recent increase.

What does this rate change mean for the credit crisis? Probably not much. We're just at the start of the ARM mortgage reset cycle and there's likely still plenty of foreclosures and housing issues lurking in the future. The rate cut could also potentially have a negative impact on growing inflation concerns.

Emily Davidson – Credit.com's Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.

Experian's New Logo

The big three credit bureaus change very infrequently. Even a small product shift is a big deal for these mammoth companies. I was working at TransUnion during their big branding shift a few years ago. They went from this blue and white logo to this green and gray number. Very traumatic!

Experian is the latest credit bureau to go through a make-over. At the beginning of the month, they revealed a new logo and tag line featuring blue and red dots:

This replaces their old logo and tagline, I believe it was "Your global information solutions partner," and is believed to be a symbolic step as the company is now free of their GUS parent. According to their press release the new look "conveys Experian's dynamic growth, global reach and position as the global leader in providing information services." The logo hasn't yet changed on their flagship consumer site, FreeCreditReport.com.

The new logo uses a friendly, more modern font and replaces the red dash with a series of dots. I'm not sure exactly what the dots signify. Since they're used by both the TransUnion and Experian logos, I'm guessing that designers feel that they represent points of data, targeting customers and maybe even the old computer punch cards the bureaus used to use.

Equifax, really the first bureau to take on a modern, web redesign,  now has the oldest of the credit bureau brands. I wonder if they'll be the next to change.

What do you think of Experian's new look?

Emily Davidson – Credit.com's Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.

Win-Win Credit Card Solutions for the Unbanked or Underbanked and Lenders

I was honored to speak at this summer’s meeting of the Responsible Credit Roundtable, organized by the Center for Financial Services Innovation. The Center brings credit card industry execs and non-profit leaders together to come up with ways that the public can be better served … without hurting the creditors’ bottom line … of course! Members include major players, such as: Experian, FairIsaac, Wells Fargo, Visa, USBank, National Foundation for Credit Counseling, Federal Reserve of Minneapolis, Take Charge America, and Target.

I spoke about the benefit to lenders in lowering and/or ditching nuisance fees as a revenue source and instead, offering responsible cardholders better incentives. We all have a pocketful of plastic, so the card issuers who dangle the juiciest carrots are the ones that’ll get our business. The cardholder wins by getting cash back, for example, and the lender wins by increasing business.

One of the most interesting win-win situations that I learned about through the Roundtable was a study conducted by Wells Fargo, which sent out a mailing to almost 78,000 randomly selected new college cardholders, offering a 60-minute phone card in exchange for completing an online credit education program. The good news is that the students who completed the program had much better payment records than the control group --  despite using their credit cards more. Moreover, they were less likely to carry a balance. Those who did, had lower balances and paid off more of them. In short, they used their cards more responsibly than the control group, so teaching people about credit early on seems to benefit both the students and the bank.

Despite the fact that only 6.65% of the experimental group completed the online education (this is a very good response rate for a study like this believe it or not), Wells Fargo sees the possibilities in this win-win situation and is now offering online education to all new student accounts. I think that’s great!

These days, the incentive is free song downloads, which I hope will appeal more to college kids than the phone cards. I think they will – which did you prefer way back when -- phoning home or listening to your fav music?!

The Center for Financial Services Innovation is a pretty interesting place, by the way. It develops and distributes research aimed at finding win-win situations for “underbanked” consumers and lenders. The Center is an affiliate of the innovative  ShoreBank, which is the country’s first community development and environmental bank. Both of these sites are well worth perusing. Please  let us know what win-win situations they bring to mind for you!

Curtis Arnold - Curtis is the CEO/Founder of CardRatings.com, a website that provides credit card ratings and reviews of over 20,000 offers.

Funny Money Friday: Risky Business

Money doesn't have to be boring! Each week, CreditBloggers.com takes a look at the lighter side of the personal finance world in a series called Funny Money Friday.

The credit crisis has forced many homeowners to get creative with their finances. People might be taking on second jobs, selling things on eBay or even renting a room as a way to cope with a rising mortgage payment.

One couple in New York took this to the extreme. Mortgage brokers, Robert Wener and Meather Mazzenga, got creative when they were unable to sell their house even after dropping the price $175,000. They were unsuccessful in trying to rent it out as well.

Until the couple turned their unsold three-bedroom home into a brothel.

How's that for an innovative way to make the mortgage! The couple were arrested this week and charged with promoting prostitution. Have a great Friday!

Emily Davidson – Credit.com's Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.

Celebrity Cybertheft - Oprah's Identity Stolen!

What do you have in common with Michael Jordan? Paris Hilton? Oprah? If you have been an identity theft victim, you may share quite a bit with these famous names. Identity theft is a fairly common problem for celebrities, actors, musicians, CEO's, athletes and politicians. Living in the public eye makes you an easy target for identity thieves. Here are some of the most famous identity theft victims:

• Oprah Winfrey (read about Oprah's identity theft case)
• Paris Hilton (read about Paris' identity theft case)
• Michael Jordan (read about Michael's identity theft case)
• Tiger Woods (read about Tiger's identity theft case)
• Franklin Delano Roosevelt (read about FDR's identity theft case)
• Steven Spielberg (read about Steven's identity theft case)
• Barry Bonds (read about Barry's identity theft case)
• Ted Turner (read about Ted's identity theft case)
• Warren Buffet (read about Warren's identity theft case)
• Mayor Michael Bloomberg (read about Michael's identity theft case)
• Robert De Niro (read about Robert's identity theft case)
• Martha Stewart (read about Martha's identity theft case)
• Will Smith (read about Will's identity theft case)
• Ross Perot (read about Ross' identity theft case)
• Football star Ty Law (read about Ty's identity theft case)
• Disney CEO Michael Eisner (read about Michael's identity theft case)
• Law & Order star Jerry Orbach (read about Jerry's identity theft case)
• Novelist Grahame Greene (read about Grahame's identity theft case)
• Oracle boss Larry Ellison (read about Larry's identity theft case)
• Motown star Martha Reeves (read about Martha's identity theft case)
• American Idol Ruben Studdard (read about Ruben's identity theft case)

Celebrities really are "just like us" apparently! Even the rich and famous struggle with identity theft, credit card fraud and con artists. Identity theft has become so common for professional athletes that NFL Security now provides incoming rookies with fraud prevention training.

Know of any other celebrity identity theft victims? Add them to our "Walk of Fame." Share your tips and feedback in the comments section below. We'd love to hear from you!

• Oprah Winfrey (read about Oprah's identity theft case)
• Paris Hilton (read about Paris' identity theft case)
• Michael Jordan (read about Michael's identity theft case)
• Tiger Woods (read about Tiger's identity theft case)
• Franklin Delano Roosevelt (read about FDR's identity theft case)
• Steven Spielberg (read about Steven's identity theft case)
• Barry Bonds (read about Barry's identity theft case)
• Ted Turner (read about Ted's identity theft case)
• Warren Buffet (read about Warren's identity theft case)
• Mayor Michael Bloomberg (read about Michael's identity theft case)
• Robert De Niro (read about Robert's identity theft case)
• Martha Stewart (read about Martha's identity theft case)
• Will Smith (read about Will's identity theft case)
• Ross Perot (read about Ross' identity theft case)
• Football star Ty Law (read about Ty's identity theft case)
• Disney CEO Michael Eisner (read about Michael's identity theft case)
• Law & Order star Jerry Orbach (read about Jerry's identity theft case)
• Novelist Grahame Greene (read about Grahame's identity theft case)
• Oracle boss Larry Ellison (read about Larry's identity theft case)
• Motown star Martha Reeves (read about Martha's identity theft case)
• American Idol Ruben Studdard (read about Ruben's identity theft case)

Celebrities really are "just like us" apparently! Even the rich and famous struggle with identity theft, credit card fraud and con artists. Identity theft has become so common for professional athletes that NFL Security now provides incoming rookies with fraud prevention training.

Know of any other celebrity identity theft victims? Add them to our "Walk of Fame." Share your tips and feedback in the comments section below. We'd love to hear from you!

The First National Decline in Housing Prices Since the Great Depression?

The National Association of Realtors has a reputation for putting a positive spin on housing trends. After all, it's in their interest to promote the real estate market as a strong investment opportunity.

That's why today's NAR forecast news is so surprising. They are estimating drops in home sales and prices for the end of 2007:

"The median resale price probably will slip 1.7 percent to $218,200 this year, the Realtors' said. That would be the first national decline since the Great Depression in the 1930s, according to Yun. The new-home median selling price probably will fall 2.2 percent to $241,100, the report said."

The NAR predictions are still more upbeat that other analysts however, the group still fees that sales and prices will continue to rise in 2008. You can read more about the Realtor forecast and response from the mortgage industry online here.

Emily Davidson – Credit.com's Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.

Discover Card Consumer Survey Shows we're Upbeat about our Personal Finances, but…

In May, Discover launched a new research program, the “Discover Consumer Spending Confidence Monitor,” with Rasmussen Reports, a well-known, independent survey research firm. Together, they’re planning to survey lots of us every month – they interviewed 500 consumers daily (15,000 total) in August alone – to find out what we think we’ll spend in the future, what shape our finances are in now, and what our opinions are on the economy.

Granted, our expectations certainly can change unexpectedly for various reasons. However, as time goes on, I think Discover’s monthly surveys will become very insightful for what they tell us about people’s current situation – and what the trends may be. Right now, here’s how I read Discover’s key findings from the May, June and July surveys:

1. No money. The number of families that had no money left over after paying their monthly bills rose from 38% in May … to 50% in July. (There’s only a 1% margin of error.) About 45% of younger adults (18-29) in July reported having money left over after paying their monthly bills.

2. No cushion. Two-thirds in June said they could support their current lifestyle for a month if they were faced with an unexpected loss of income. But 29% in July said they wouldn’t be able to do even that, which is up from a quarter in May.

3. No hope. With credit tight, the housing market soft, gas prices high, and a war going on, it’s no surprise that about 63% in July told Discover that they rated the economy as fair or poor.

If “no money, no cushion, and no hope” is how you’d describe your current situation, as Discover shows, you’re not alone! About half of us – or more – seem to be in the same boat. So don’t beat yourself up about it. Instead, tell us what’s up and we’ll try to steer you to people who can help.

Please note that the August survey was just released (click for details) a few days agao and I haven’t had time to completely digest the numbers yet. However, after a cursory glance, I did find it very interesting that the August survey reveals that consumer confidence in the U.S. economy rose and fell week-to-week. This rise and fall seems to reflect fluctuating concerns about the economy, housing market and sub-prime mortgage challenges.

More importantly, though, despite such fluctuations, consumers were relatively upbeat about their personal finances in August, rating them much higher than they rated the economy. With that, I will end this article on a positive note!

Curtis Arnold - Curtis is the CEO/Founder of CardRatings.com, a website that provides credit card ratings and reviews of over 20,000 offers.

Funny Money Friday: The Plagues of August

Money doesn't have to be boring! Each week, CreditBloggers.com takes a look at the lighter side of the personal finance world in a series called Funny Money Friday.

Wow...this has been one wild week for personal finance. The news simply will not stop coming. The stock market is bouncing up and down like a crazed toddler. The housing statistics keep getting worse and worse. The Labor Department delivered bad news about payrolls this morning. And a soon-to-be-signed college financing bill is putting student lenders out of business. There aren't enough implode-o-meters to keep up.

There's not much to joke about this week. Every idea I had this morning was more "depressing" than "funny." So let's keep it simple with a few jokes from Jay Leno:

"Do you have any idea how cheap stocks are now? Wall Street is now being called Wal-Mart Street."

"The United States have developed a new weapon that destroys people but it leaves buildings standing. It's called the stock market."

"Things do not look good. The economy's gone south, we're at war, people are out of work. In fact, George Bush Sr. picked up the newspaper and thought, 'Hey, I must still be president.'"

Have a great weekend!

Emily Davidson – Credit.com's Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.

Update: Requirements for President's Mortgage Refinance Plan

It's been tricky trying to find details about the FHA insured refinance plan President Bush announced last Friday. All we knew was that the plan could help 80,000 homebuyers who struggled with an ARM reset to refinance into lower terms.

An online Q&A session with HUD Secretary Alphonso Jackson cleared up a few points. The refinance program is being called FHASecure and to qualify a borrower must have:

 1. A history of on-time mortgage payments before the borrower's teaser rates expired and loans reset
2. Interest rates must have or will reset between June 2005 and December 2008
3. Three percent cash or equity in the home
4. A sustained history of employment
5. Sufficient income to make the mortgage payment

Borrowers must also be occupants of the house they are trying to refinance and have a mortgage below the insured loan limit for your area ($362,790 in CA).

Emily Davidson – Credit.com's Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.

Yet Another Reason to Worry About the Mortgage Market

This job connects me to a lot of interesting people. I get a handful of questions from consumers, reporters and industry insiders each day.  Just yesterday, I had a great conversation with an Attorney General investigator about piggybacking.

The email I opened this morning was more than a little worrisome. It was from a high-level risk management executive from one of the nation's largest mortgage lenders. The question: Tell me more about this FICO score change? When will it take effect?

Uh oh. Consider the danger of a mortgage risk management executive not knowing that FICO is going to stop counting authorized user accounts in their credit scores starting this month. That some 3 million credit scores are set to drop because of this change. Right when we hit the peak of the ARM resets. A change that was announced way back in June.

I guess I should just be glad that they came to us now, right?

Emily Davidson – Credit.com's Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.

Who is Going to Buy One Million Foreclosures?

I do not know if there are going to be a million foreclosures or not, but the statistics that we see in mid –August indicate that about 300,000 people have already lost their homes this year.

If things keep up at that pace, we're on track for about 500,000 people losing their homes this year. Could it double?  I'd like to think not, but, depending on whom you believe, it sure could happen! The question is how many of the tsunami of loans that are resetting between now and the end of 2008 will result in foreclosure.

We also now know that the home sales in the last few years have been artificially inflated as the real estate industry took a bunch of unqualified people off the streets and used sub-primes loans to stuff them into homes. I think that we were also borrowing from the future, taking the 2007 buyers and selling them homes in 2005. The 2008 buyers bought in 2006. Who buys in 2008?

We know that sub-prime is dead so buyers are going to need to be A-paper qualified buyers.  Based on what I see, I just don't see where we are going to find 1,000,000 of them to buy those foreclosed homes in 2008. They sure don't seem to be showing up looking for Pre-Approval letters from the mortgage lenders.

I always like to look for the silver-lining and I think that a good bit of the slack is going to be taken up by people who decide to buy a home for investment purposes. I think that rental units bought now will look like great buys in a few years. If you are financially confortable in your home, give that investment thought some serious consideration.

Randy Johnson – Author of How to Save Thousands of Dollars on your Home Mortgage and Savvy Borrower articles. Randy is a mortgage broker who has financed over $1 billion in properties. He writes about home buying and real estate finance topics for CreditBloggers.com.

Survey: Medical Debts

Even a simple visit to the doctor can be expensive. And if you're one of the 45 million Americans without health insurance...brace yourself. Medical procedures like MRI's and blood tests can cost into the thousands if you're not covered.

In fact, medical bills are the leading cause of personal bankruptcy filings in the US. Shockingly 75% of those bankruptcy filers had health insurance coverage when they became sick.

If you have a medical debt that you can't afford to pay right away, some health care offices will set up a payment plan, transfer your debt to an outside financial institution or sell the debt to a collections agency. Has this ever happened to you?

Opinion Polls & Market Research

We want to hear your story of dealing with medical debts. If you had health care debt sold or transferred, email us today.

Must-Read: Understanding Mortgage Industry Changes

The current mortgage crisis reflects many larger changes in the way Americans buy and finance their homes. Increased real estate ties to the stock market have made home loans more available and at the same time more volatile.

Explaining exactly how the real estate industry evolved from a private deal with local banks to a multi-national series of loans, securities and hedge funds is challenging. An article in last Sunday's New York Times Magazine called "Subprime Time" does an excellent job of explaining the shift:

"The absence of scrutiny on Wall Street had a profound effect on mortgage origination. As mortgage bankers discovered that investors would buy virtually any loan whatsoever, they naturally lowered their standards. What difference whether a loan was sound if you could flip it in 48 hours? The market thus corrupted, it only wanted for the right circumstances to implode.

"And over the last few years, as Robert Barbera, the chief economist at the investment advisory firm ITG, observed, the Federal Reserve took short-term interest rates from 1 percent to 5 1/4 percent. This raised mortgage rates and put home buyers at risk of being priced out of the market. But bankers lent to them anyway, offering, in effect, “junk mortgages” — risky loans with low teaser rates (and much higher rates later), as well as other deviations from sound finance.

"Lenders and borrowers alike knew that such loans were dicey; they were counting on the borrowers to refinance — which, as long as home prices kept rising, was a cinch. Naturally, when prices stopped rising, the music stopped."

Click here to read the complete article on how the mortgage industry has changed.

Emily Davidson – Credit.com's Communication Director and former TransUnion credit expert. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com moderator.