In ideal scenario, primary borrower has higher income and higher or close to that of the co-borrower average FICO credit score. But that is not often the case, so what happens when the co-borrower spouse has higher credit score?

If the above conditions are not met, than a spouse with higher average FICO should become primary and the other becomes co-borrower. The only condition is that the income of the new primary borrower is not lower by a lot. If this condition can not be met, than, the borrower with lower average FICO credit score and higher income remains primary borrower and interest rates and fees of the mortgage are likely to be higher.

By how much the income of the lower-earning spouse can be less than that of the higher-earning to become a primary borrower? A lot depends on the mortgage amount, assets and sizes of the salaries, but in general, the difference should not exceed $15,000 to $20,000. If the higher-earning spouse has average FICO score low enough for interest rate and fees to go too high, he or she must work to establish credit prior to applying.

The reason you have different credit scores among the three credit agencies is because each uses slightly different scoring algorithm, gets somewhat different data and weighs that data a bit differently from the others. The credit scores can be as close as few points or as far as 50 or 60 from each other. Again, the only one that really matters is the credit score in-between.

And if you apply for something less significant than home mortgage, a car loan for example, one credit score is all a dealership financial person typically looks at. No need to worry about average credit score here.

Getting mortgage after bankruptcy - FHA is the way
FHA loans are backed by the Federal Housing Administration, so a lender is more comfortable lending money, knowing that your mortgage will be paid off in full if you default. To secure an FHA loan Chapter 7 bankruptcy must be discharged for 24 months, while Chapter 13 must be discharged for 12 months.

While time is huge factor, there are other things you have to accomplish. You need to get a decent credit score for FHA loan, because the minimum needed is 640. Then you must have a down payment and sizable liquid assets. Still, that doesn't guarantee you will be getting mortgage, but chances are you will. Those are the three things you can hopefully control and need to concentrate on. However, lending rules and regulations may change in a blink, so getting mortgage loan after bankruptcy harder or easier.

Q: My credit scores were around 780, but that was before I had two 30 day late payments in 5 months on the credit card with Chase which I am currently settling. I had to take a much lower paying position and don't have other options but to settle. The debt settlement deal is quite good, Chase accepted $3,500 for $12,800 balance. Wells Fargo and Capital One will be next. My main concern is how debt settlement affects credit score? Where would the scores be and how long it would take for them to recover?

A: Before we dive into debt settlement, the obvious point is that two 30 day late payments already lowered the credit scores by probably 170 points, so your score is at 610 to 620 range. With these late payments alone, it would take over 2 years for credit scores to recover may be 50 points or so, because you were late twice on the same credit card, as was mentioned in 30 day and 60 day late payments.

Once you reach debt settlement with Chase and it gets recorded on your credit report as such, and affects the credit score further, dropping it by another 25 to 40 points. The reason is obvious - settling a credit card debt means that the lender agrees to accept less than the amount owed on the account, thus indicating a higher level of risk. Since your credit score had already lost quite a few points, the debt settlement impact would be less severe. Remember, the higher the scores, the lower they fall when derogatory information is reported.

Thus by the time you finish, 3 debt settlements combined with 2 late payments will affect your credit score by around 250 points, and you will be looking at 530. And it may take up to 3 years of impeccable credit history to recover the scores to the mid 600s level.

The important thing is that most of the damage to scores was done by the missed payments. At this point, the impact of debt settlement on your credit score is rather secondary. You managed to settle for 27% with Chase and getting similar or even lower percentages with Wells Fargo and Capital One should take precedent over any other concerns.

The other crucial element is that by settling debt before it is assigned to a collection agency, you can eliminate potential future problems,
- having two negative records reported on the same debt - one with original creditor, the second with collection agency
- dealing with debt reaging issue, practised by many collection agencies
- seeing you credit score dropping very significantly after debt settlement with collection agency should you achieve it

Of course, before paying off the negotiated settlement amount, you can try to convenience creditors to stop reporting previous late payments and report account status as Paid As Agreed / Closed by Consumer Request. You can also get debt collection agency to drop the collection from the credit report. Those would affect your credit score very positively, boosting it at no time. Read
Negotiate credit card debt yourself for useful tips.

The bottom line is while typical debt settlement affects credit score negatively, in addition to preceding late payments, you can always try to minimize the damage. The most important task is to liquidate excessive debt. You can establish credit anew after you settle.

In less than 8 months, both cards were maxed out. Citibank raised his credit limit to $36,000 after 2 years, but also raised the interest to 12.99% which if you think for a minute was quite decent. But when you owe $36,000 which he did at 12.99%, and your wife owes $40,000 at 14.99%, plus you have a fat $600,000 mortgage, 2 luxury cars, property taxes, lush landscaping that needs to be properly maintained and all the expenses of well-off family, even $400,000 a year combined gross income is not enough. And that was their situation.

Debt settlement with Citibank - here comes salary cut
The real fun however started when he was laid off and had to take a less paying but still very decent position, most of us can only dream about. They got smart in a hurry and manage to sell the house, basically breaking even. I do not know how but they did it. They bought a smaller one and then decided to pay off their credit card debt. But 2 months after they bought the other house, the wife lost her job. They went to some non profit debt settlement agency which told them they would not qualify. They missed a few payments on both Citibank credit cards, but at that point, they really did not care about their credit histories.

Settling debt - what they did
As he put it, the only thing they wanted to do is to settle the debt with Citibank. If debt settlement counselor said they couldn't, they would offer much less than they thought to offer before. His biggest worry was like - I am not really a confrontational character, can I pull this off, can I negotiate credit card debt and achieve a debt settlement on my own?

So after receiving a few more calls from a collection department with various threats which were rather mild and pleadings to pay, they offered 2 very low settlements. According to him, he offered $5,000 on his Citi MasterCard and $7,500 his wife's ... on the phone. He said that he was afraid to be yelled or laughed at, but instead he was asked to submit the offers in writing. Then in 2 weeks he got counter offers on both credit cards. To make long story short, in less than 6 weeks, he and his wife did what they thought would be almost impossible to achieve - get a debt settlement with Citibank. The final amounts are 10,000 on $36,000 balance and $11,300 on $40,000.

I congratulated him with a successful settlement, and here are main points that everyone with debt problems should understand,

1. They managed to sell their biggest burden, the house. It was tough decision as they loved it, the neighborhood, the schools, etc. They, however, did not lose any money which was rather remarkable considering the second mortgage and already bad housing market, and managed to buy a smaller home in the area. Had they waited a bit more, they would have lost money on the sale, and worst yet, could have foreclosed.

2. They managed to make all the payments to keep their credit histories nice and clean. Sure those maxed out revolving accounts hurt their scores, but that was nothing compare to the damage late payments would have caused. Once they closed on that new house with 30 year fixed mortgage, they did miss credit card payments, but at this point, credit scores and ratings were not that important.

3. Realizing that they would not qualify for Chapter 7 Bankruptcy, they managed to negotiate credit card settlement and settle with both creditors for very reasonable amounts. It took guts and a little courage to go through some uncomfortable moments while negotiating, but by the end such a debt settlement was totally worth it.

A: I know of a few people settling for less 25% of the outstanding balances with different credit card issuers, but most of them were late on payments. Your offer would be just short of 17%, and could be a good starting point. I would say, a settlement offer closer to $3,600 is more realistic.

You don't want to be late to keep the good credit score intact, but as soon as you settle with a credit card company, you are entering into a debt settlement agreement which is recorded on your credit record, so the scores will drop and quite a bit. Still, may not drop as bad as if you miss a few payments before hand.

Call your creditor and try to settle while you still have no late payments, but it is almost unheard of to successfully negotiate credit card debt settlement without being late. If they refuse, you will have to miss a couple payments within next 4 to 5 months to show financial hardship and hopefully, convince them to settle. As far as mentioning Chapter 7 bankruptcy, you sure can do that.

By completing this payment plan, your account will be considered settled and you will not be obligated to pay the remaining balance, provided no additional charges appears on this account after the date of this letter.

Settling for anything under $4,000 would be great. The most important things is to get the ball rolling, and then you can always try to push back and try for a lower amount. Hopefully, the credit card company settles before it is too late and things really get tough. You will have to likely make 6 to 12 monthly installment payments under any debt settlement agreement.

If you have several credit cards and carry balances on more than one, it is important to stay proactive and pay attention to each card limit. Lowered credit limit on a card with balance increases the credit utilization rate and often makes credit score go down. If two or three issuers have your credit card limits lowered, the scores will likely go down quite significantly.

Check credit card limit often
Every time you login into the account, look at it carefully. Often, bank send neither timely letters nor emails. On many occasions, consumers learn their credit card limit lowered to the point the utilization rate is over 90%. I know it sounds too far fetched, but if you look at the numbers, it is not so. Suppose you transfer $3,000 on the credit card with $10,000 limit. 30% credit utilization rate is just fine. Then for one reason or another, the bank lowers the credit limit to $3,300, giving you a very bad 91%.

Now imagine someone with more than one credit card, where balances are just $100 under the limits. The good credit score will not just go down, it will drop like a rock. Worst situation is when a credit limit matches balance, putting you at 100% credit utilization rate.

If your credit card limit is lowered, what can you do
Unfortunately not much. You can try to ask the bank or banks very politely what can be done to fix it. Never close credit cards which you don't use, to placate the issuers of the ones with balances. If you do, there is no guarantee, your credit limits will be raised and you will loose not only use the just-in-case credit lines, but lower credit scores even more.

Don't think of transferring balances on other credit cards, unused or with higher limits as some advise. First, it will cost you 3% to 4% of a transferred balance, which is a typical transfer fee all 0% interest offers now come with. Second, if you leave a balance on credit card which causes your grief, it likely lower the limit again. Here is to clarify -
credit card 'A' has $4,000 balance, $4,200 limit, 95% utilization rate - very bad
credit card 'B' has $0 balance, $3,000 limit, 0% utilization rate - excellent
your combined credit utilization rate is sum of balances ($4,000) divided by sum of limits ($7,200), yielding 55% - quite bad but somewhat bearable

You transferred $1,000 from credit card 'A' to credit card 'B', so now you have -
credit card 'A' has $3,000 balance, $4,200 limit, 71% utilization rate - slightly better
credit card 'B' has $1,000 balance, $3,000 limit, 33% utilization rate - good
your combined credit utilization rate is still the same 55% - $4,000 divided by $7,200

But the issuer of credit card 'A' is not done, as it lowers its limit to $3,200. You are now back to 94% utilization rate on this card and your combined rate is 64% - $4,000 divided by $6,200.

What you can do
Log into your account and look at the Alerts. You will certainly have one like Credit card balance within $_____ of card limit. Put a $ amount that makes sense and activate it. Of course, having an alert stating something like Credit card limit is lowered would be much better.

You should watch credit card balances carefully, especially if credit limit is equal to or only slightly higher than balance, because monthly interest may very well put you over the credit limit, and then you have over-the-limit fees added. That will force your credit score go down even more.

The chart looks good and so are underlying reasons that will help gold price rise further. The main drive is the world wide growing demand for gold as an alternative to the paper currencies. According to the World Gold Council recently released quarterly Gold Demand Trends report, the strength of the global gold market is incredible. During the first quarter of 2011, gold demand grew 11% to just over 981 tons, which amounted to $43.7 billion US dollars at end-of-the-quarter prices.

Gold price will continue to rise because of fewer restrictions and high liquidity
If you look carefully at the relatively short-lived gold bull market of the 1970s when price went over $800, one thing stands out - just around 10% of the world population could own gold because of legal restrictions or lack of money. Some 40 years later, you can barely find a country that prohibits gold ownership, while the available liquid capital in hands of investors have reached levels never seen before. Brazil, Vietnam, Nigeria and Russia have now millions of buyers and India population is as passionate about gold as ever.

But it is China that emerges as the fastest growing market for gold investment. Chinese government not simply legalized private gold and silver ownership in 2004, but has been strongly encouraging its citizens to purchase gold bullion, especially in the last 2 years. So in the first quarter, private investors in China bought nearly 91 tons of bars and coins, more than doubling the tonnage from a year ago. Supporting the price trend, Indian buyers purchased 85.6 tons of yellow metal.

Gold demand in China - plenty of room to rise
In 2010 for the first time, the yearly demand for gold in China outpaced the combined total of the United States and European Union. That happened in spite of triple-digit increases in demand from France, Germany and Switzerland.

The important fact that can not be underestimated is that from 2001, the year the Chinese government eliminated last controls on the gold market, to 2010, annual buying of gold grew at a 7.5% compounded annual growth rate. The ongoing concern about inflation combined with huge total wealth of Chinese citizens will continue to ensure the enormous demand and rising prices.

Gold price rise doesn't dampen demand for jewelry
Demand for gold jewelry in China in the end of 2010 stood at over 12 million ounces, despite gold price reaching $1,400 an ounce. Globally, the first quarter of 2011 saw gold closing on $1,475 USD per ounce, while demand for jewelry reached almost 557 tons, which was a 7% rise over 521 tons in first quarter of 2010. Main culprits were India and China. Indian buyers purchased just over 206 tons while Chinese consumers bought additional 143 tons, both figures representing significant increases over the same period in 2010.

ETF holdings declined, but Asian demand is strong and central banks continue buying
Gold ETFs traded on U.S. and U.K.markets, sold plenty of gold in the first quarter. Meanwhile as discussed above, markets in China and India have remained incredibly robust.

Most importantly, central banks of several countries have been buying physical gold, totaling 129 tons in the first quarter of 2011, with Mexico purchasing 93 tons in February and March. That is more than was bought during the first three quarters of 2010, when central banks became net purchasers of gold for the first time in 21 years. Central banks of Bolivia, Russia, and Thailand bought another 39 tons in the first quarter of 2011. Largely because of central banks, total gold supply decreased 4% compared with the first quarter of 2010.

Interestingly enough, People's Bank of China is the 6th largest holder of gold. However, these holdings constitute only 1.6% of its total reserves - a rather low number according to international standards. Thus we can expect several very sizable purchases from PBOC.

So the gold price will rise as it has nowhere to go but up. Global instability, fear of hyperinflation and problems with paper currencies from Dollar to Euro and everything in between, will continue to fuel demand. For more information see Gold Demand Trends.

My friends daughter got her Bachelor of Psychology 5 months ago. 4 years of college and with a few scholarships, she now owes $70,000 in student loans, works in Best Buy for $10.50 in hour and lives with her parents. Has not had a single job interview in her chosen field. As every other student with loans, she must start repaying them 6 months after graduation, or go back to school which is what she is going to do. Not sure how many courses / credit hours she must take to get excused from paying, but she is certainly getting additional loan. By the way, the best way to judge a job market is to go to Macy's, Target, Kohl's or another large retailer in the area and see how many college grads are working cashier and other jobs.

As economy is getting nowhere, the job market is still very bad and the average salaries for newly minted graduates with bachelor degrees are lower than a year before. The delinquent loans of course, continue to grow, with unpaid interest, penalties, etc. being diligently added on a monthly basis. So if you want to get a college degree, choose carefully and don't count on economic recovery. Most importantly, don't blindly buy into general statistics that claim that unemployment among college graduates are much lower and incomes are much higher than those among less-educated. Such statistics are used to get more impressionable high schoolers into colleges to generate even more student debt, in my opinion. You will be 100 times better off working as a licenced plumber than an elementary school teacher.

If you are in school, think in advance and see if there are ways to get at least some of your loans taken care of. Here are several links that could be helpful,

Loan Repayment Programs - US Department of Health & Human Services
New Jersey Student Loan Forgiveness Plan For Mental Health And Social Service Workers
Iowa Student Loan Nursing Education Loan Forgiveness Program
Teacher Loan Forgiveness Application
Loan Forgiveness for Social Workers
NYS Licensed Social Worker Loan Forgiveness Program
Cancellation/Deferment Options for Teachers

And while you can contact credit reporting agencies and request them to remove you from the defaulted credit card account, the issuer will likely demand that you would repay the debt. And if one spouse is an authorized user on the other's credit card, he or she will be treated just as a joint account holder in many of the Community Property States.

Derived from Spanish law, the community property system is enforced one way or the other in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. It dictates that whatever you earn or acquire during the marriage is co owned by both spouses, regardless of who earned it or whose name is on the title. If you live in one of these states, the whole joint account holder vs. authorized user dilemma may matters very little, since as a spouse, you are liable for the debt you accumulate as a married couple, even after divorce.

As I mentioned in December 2010 in Economy is improving? I don't think so, any economy two-thirds of which based on consumer spending has problems and big ones. And the US consumers will buy much less now as Chinese-made goods will get more expensive and gas prices are about to reach $5 per gallon. Both charts clearly show the Chinese yuan rising drastically in value against the US dollar in the last two to three weeks. The price of everything made in China will be going higher. And Walmart which caters to a huge number of US consumers and sells more of Chinese made goods than other retailers, seeing the problem.

CEO of Walmart, Mike Duke noticed something rather unsettling - Walmart shoppers, most of whom live quite literally paycheck to paycheck and shop in bulk at the beginning of the month when the paychecks come in, frequent the stores less and buying less. Mr. Duke blames high gas prices for claiming much bigger portion of his shoppers' paychecks, and he is right. And while the obvious bad news for Walmart and overall US economy are rising yuan and falling dollar, today's almost unnoticed prediction by Goldman Sachs that oil could surpass its recent highs by 2012 because of lower global oil supplies, is the last thing you want to hear.

And now just imagine if the dollar will be falling further. How low the dollar can go will depend on a several things. But looking at this chart, I can clearly imagine it going much lower, in spite of a 2-day bounce.

The home prices went down again, and smart people call it what it is - an official nationwide double dip. Sales of bank-owned properties known as REO were smashing 34.5% of the housing market. A national price drop stood at 4.9% quarterly and 5% year-over-year. All said, national home prices went south 11.5% in the past 9 months. That means more bad news for economy based on consumer spending.

Q: Do I have to pay tax after a short sale? I am selling my house short and the neighbor told me that the IRS requires lenders issue form 1099C for all debt that was forgiven. In my case, it is almost $70,000 and paying taxes on that much will be impossible.

A: Is this short sale on your primary residence? If yes, you should be fine, because The Mortgage Debt Relief Act of 2007 does not consider forgiven debt on your principal residence as a taxable income for either short sale or foreclosure. It also applies for debt reduced through mortgage restructuring. This provision is valid for up to $2 million in debt for a married couple, forgiven from 2007 through 2012. If you are single or married filing separately, it is $1 million.

You can find plenty of advise and instruction, some good and some not so, on how to establish credit. The other question that a lot people ask these days is what time is needed to establish credit history to be able to get loans. Interest rates have been low for a long time and seemingly everyone expects them to go higher. Home prices have been going lower every day and just as well, everyone thinks that they are bottoming and will bounce back. So every new college grad with a job or a fresh of the boat immigrant is in a hurry to establish credit history, get the credit score and score that house.

For the record, I think that interest rate will stay low for quite a while, while home prices will be going down, albeit slower. But then, you still will listen to CNBC and Bernanke. That does not change the fact that time to establish credit is at least 6 months. However to qualify for a home loan, you need more time, at least 24 months and a couple of trade lines.

Once you have a credit card, use regularly it and pay off the balance if you wish monthly or carry a balance. It does not really matter as long as you meet minimum monthly payment requirements. Your initial credit score will be around 680. You then should get a second credit card and as long as your debt utilization is around 10% to 15%, your FICO credit score may well reach 720 in another 6 months.

To obtain a mortgage, you may want to wait for another 18 months. That will give you a good 24 months of at least two credit trade lines and a nice credit score. You can always try applying for a mortgage before that, and as long as you have a bigger down payment, you may well qualify.

Investing in an IRA is quite easy. Your IRA investment offers tax advantages on retirement savings so you can potentially accumulate more money. But before you start thinking about how to invest, understand the following risks and limitations,
1. an IRA as any investment can decrease in value
2. withdrawing from a Traditional IRA before age 59½, will most likely force you to pay ordinary income tax plus a 10% federal penalty tax on withdrawal amounts unless an exception applies
3. while any amount converted from a Traditional IRA to a Roth IRA is not subject to the 10% federal penalty, you will have to pay ordinary income tax - converted taxable amount is added to your income taxes and your regular income rate is applied to your total income
4. with a Roth IRA, distributions of contributions are tax and penalty free, however, withdrawals of earnings before age 59½ may be subject to a 10% federal penalty tax and income taxes unless an exception applies
5. remember that your goal is to pay as little taxes as possible, legally of course, so you may want to talk to a tax advisor before you are to invest in an IRA
6. always consider investing in an IRA as a vital part of your long-term investment strategy

2. Investing in a Roth IRA or a Traditional IRA
You must know the difference and a few implications, then decide if you want to pay taxes now or later. With a Traditional IRA, your contributions may be tax deductible if you meet certain eligibility requirements. And frankly again, if you are not eligible, you may want to forget about investing in an IRA because it makes no sense for you.

Under a Traditional IRA, your earnings grow tax deferred until you begin taking withdrawals, at which point you would be taxed at whatever rate you are subject to at the time. And that tax rate could be higher or lower than your current rate, and the whole idea has been that once you retire and your income falls, it should be lower, but with everything going on, no one knows.

With a Roth IRA you are contributing after-tax money, so you don't get an immediate tax deduction, but your earnings grow tax-free, assuming they meet certain requirements. For many investors, the appeal of a Roth IRA is obvious - tax-free growth, no lifetime requirements for required minimum distributions and the opportunity for tax diversification. This is the good comparison chart between the two IRA types.

3. How to invest in an IRA if your income exceeds limitations
If you make too much money to be eligible for a Roth IRA, you may consider a little trick. Fund a nondeductible traditional IRA and then immediately convert it to a Roth. Doing so, you are essentially contributing to a Roth IRA, and hopefully with little or no tax impact from the conversion.

A word of caution - if you have other Traditional IRA assets, federal law requires you to aggregate all your IRA assets - regardless of which assets you actually convert for tax purposes. So, if you have significant Traditional IRA assets funded with pretax contributions, carefully consider the potential income tax hit before doing this.

4. IRA investment and maintenance costs matter
Market performance is not the only thing that affects your IRA bottom line. Investment and maintenance costs take bits and pieces of your money a year after a year. If you pay even 1.0% of assets per year over 30 years, you will end up giving away nearly 30%. Of course, if an IRA investment returns 10% a year after a year, you may tolerate it, but when your funds / stocks perform badly, being hit by additional expenses is like adding insult to injury.

So before you decide on when and how to invest in an IRA, educate yourself and consider all consequences. Don't think that everyone should have an IRA - mantra which is repeated by too many financial advisers way too often.

A mortgage prequalification is the very first step of home loan application process. Typical prequalification is issued by a loan officer and more than often based on ball park numbers which you provide, including salary and recurring expenses to estimate approximate maximum loan amount you may eventually be approved for. Your credit report is normally not pulled at this stage and no cost or obligation on behalf of either party is involved. So while a mortgage prequalification helps determine the dollar value of a potential loan, it is not by any stretch, a commitment to lend you money. A loan officer can't make an approval in any shape or form, but give you a prequalification letter which you can use when making an offer on a property. Often such letters are called a conditional preapproval. It states something along these lines,

This letter is to prequalify Mr. and Mrs. Smith for a home loan not to exceed $200,000 at 5% mortgage interest rated based on 30-year amortization. Final approval depends on buyers credit, down payment, property appraisal and other factors.

A mortgage loan preapproval is done by an underwriter upon verification of your credit, down payment, work history, salary and liquid assets. Preapproval basically means that you are fully qualified to buy a property as long as the appraisal of its value meets a lender criteria and nothing drastically changes with your situation. If your loan is preapproved, you will get a preapproval certificate. It helps you to close much faster on the purchase once you find a property. Some lenders allow locking your interest rate once you are preapproved. In today housing market, mortgage preapproval could help you negotiate the price down.