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?

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.

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.

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.

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.

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.

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.

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

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.