A mortgage can provide a strong, positive reference on credit reports and boost your credit scores. But sometimes lenders refuse to report those payments. What do consumers do then? Our reader Omar wrote on the Credit.com blog:

“When my wife and I went bankrupt two years ago our attorney failed to recommit to our mortgage lender. Our problem is that our lender will not report our current payments to the credit bureau. I do not want or cannot afford any new credit, I would like for our lender to report our current payments to them to the credit bureaus.”

Apparently, Omar did not “reaffirm” his mortgage after his bankruptcy and, as a result, the lender is not reporting any payment history after he filed. But this problem is probably not due to a failure on the part of his bankruptcy attorney; in fact, his attorney may be acting in his best interest. Instead, the lender may be using the credit reporting issue as leverage to get the borrower to give up valuable protection he gained by filing.

[Related Article: The First Thing to Do Before Buying a Home]

That’s because when consumers file Chapter 7 bankruptcy and wipe out most or all of their debts, their personal liability for the remaining debt on the home loan is discharged as well, unless they “reaffirm” the debt.

Bankrupt debtors who don’t reaffirm don’t automatically lose their home. They can continue to make their payments on their loans and stay in their homes as long as they remain current. When they pay off their loans, the lender’s lien against the property will be satisfied and they will own their homes free and clear.

The advantage of not reaffirming mortgages is that homeowners who can’t keep up with the payments in the future won’t be personally responsible for the remaining debt. In other words, they can walk away, if necessary. This is an important protection for the many homeowners who, when they file, have very little equity in their homes or remain underwater.

What does this have to do with whether the loan is reported after bankruptcy? While lenders claim that reporting payments to the credit reporting agencies may cause them to run afoul of bankruptcy laws, California bankruptcy attorney Cathy Moran believes that’s a smokescreen, and that lenders are just trying to get debtors to agree to liability for the debt: ”There are two clubs they hold over debtors’ heads to get them to reaffirm: 1. We won’t report post bankruptcy payments if you don’t reaffirm, and 2. We won’t refinance your loan because you didn’t reaffirm it. I can’t find any logic or law that supports those (positions).”

Mortgage reaffirmations are not an issue in Chapter 13 cases, says Moran, because long-term obligations are not discharged.

[Credit Score Tool: Get your free credit score and report card from Credit.com]

Another problem facing consumers who file Chapter 7 bankruptcy and fail to reaffirm is the fact that some lenders will no longer send statements to those borrowers, and/or will suspend their access to online account management tools. Our reader Mary shared her experience:

“We filed bankruptcy and was discharged 4 years ago. I got to keep the house and my car. I signed a reaffirmation agreement for the car but never received one for the mortgage. My mortgage was sold shortly after and now the new company will not give me access to their website to make payments or even see anything having to do with my mortgage. I have asked for statements to be sent and they are not doing that along with not reporting any of my payments for 4 years … What can I do?”

This is not an isolated problem, according to Moran. Again, lenders generally say they are unable to report the debt without violating the discharge injunction, the provision in bankruptcy that prevents creditors from trying to collect a debt that has been discharged.

To get around this problem, Moran says that sometimes the borrower will “enter into a stipulation with the creditor agreeing that (sending statements) does not violate the automatic stay. Sometimes we send them a letter saying they want to receive statements. Absent that, the borrower may just have to write down the payment information and take responsibility for making the payment.” The latter approach can be especially problematic in situations where a borrower has an adjustable-rate mortgage and the terms change.

Going back to Omar’s original concern that he wants his mortgage to be reported, he may be better off forfeiting that credit reference in exchange for shielding him from the potential liability that reaffirming the debt would expose. While he doesn’t want to take on additional credit, it would be smart for him to get a secured credit card to help rebuild his credit instead.

Debtors experiencing this problem may also want to complain to the Consumer Financial Protection Bureau, which Moran says may address this issue in the future by issuing guidance to lenders.

[Featured Products: Research and Compare Mortgage Rates at Credit.com]

Image: Top Photo Group

Bikini season is just around the corner. For many of us who plan to wear fun and flattering swimwear at the beach this summer, it means putting in a few extra minutes on the treadmill or saying no to the second helping of chocolate cheesecake. Looking great in a bikini doesn’t start the moment you put the bikini on, it starts a few months before with careful choices.

Your credit is exactly the same. Credit isn’t something that can’t be “fixed” overnight and you should run in the opposite direction of any “expert” who tells you that it can be. It takes careful choices, and a bit of time, to make positive changes to your credit.

A beach-ready body is partly improved by diet — by choosing the right foods and limiting the wrong foods.

Just as you are careful with the food you take in, you also need to be careful with your credit: Avoid making too many inquiries for credit if you don’t need it. Like empty calories, excessive credit inquiries can count against your credit score making you appear as though you’re desperate for credit, which according to credit scoring models is indicative of higher risk. Instead, only apply for credit when you actually need it.

A beach-ready body is partly improved by exercise — by actively burning calories and building muscle.

Just as you exercise your body, you also need to exercise your credit: Make sure that you are paying off (on time!) any bills you have, and make sure that you are regularly using your credit so that it doesn’t become stale. Like a nice healthy whole-body workout, making sure your credit gets paid off on time will go a long way toward helping you achieve healthy credit.

Diet and exercise will help you get that swimsuit figure you want for summer.

Similarly, it will help your credit get fit as well. Many of us already know that these factors can help but they still struggle anyway. For some, that beach body isn’t quite ready for summer and that credit score never really hits the high number we’re hoping for.

The reasons are habits and monitoring. The people who get that bikini body do so because they adopt good habits (not just occasionally healthy practices) and they monitor their progress with a mirror and a weight scale.

Your credit is exactly the same. Occasional healthy credit practices won’t have as much of an impact as good, consistent credit habits. One of the biggest impacts you can have on your credit score is by regularly paying off your credit on time and in full.

And, you should also monitor your credit regularly by pulling your credit reports from each of the credit reporting bureaus (you can get a free report yearly from each bureau using AnnualCreditReport.com), and monitoring your credit scores (which you can do for free using Credit.com’s Credit Report Card). Use these reports just as if you stepped on a scale — to monitor your progress and figure out where you need to put a little more focus.

This is the season when we start thinking about how we’ll look on the beach. Use that as inspiration to take a closer look at your credit. And while you get your beach body ready, why not make sure that your credit will also look good in a bikini, too!

Image: iStockphoto

The housing market has made notable strides in the last year, with prices rising appreciably and more consumers attempting to buy homes as a result of low interest rates, but some demographics appear to still be sitting on the sidelines.

Baby boomers and millennials have largely stayed out of the housing market despite all the steps forward it has taken, and this is likely due to significant financial difficulties they suffered during and following the recession. The Great Recession may have set them back in many of the major life plans other generations may have been able to tackle at their ages, according to a report from the National Association of Realtors. For instance, young people who were unable to find full-time employment or even lost the jobs they had during the recession likely saw their savings decline or their debts tick up, during that time, and as a result are now unable to meet down payment requirements their parents might have been able to achieve at the same age.

[Credit Score Tool: Get your free credit score and report card from Credit.com]

Meanwhile, baby boomers likely saw their retirement savings dwindle appreciably during this time, either as a result of their not being able to contribute as much to them, or because they were forced to dip into them, the report said. That, in turn, might lead many older workers who might have considered moving after they called it a career to either not do so or put off such a decision while they stayed in their jobs. As a consequence, these people are both not selling their homes and not buying new properties that are coming onto the market.

However, experts believe these trends likely won’t last for much longer given the improving market and economy, the report said.

“Homeownership rates have declined fastest for millennials, most likely the result of fewer job opportunities and higher student debt; however, I believe they still want to become owners and will eventually make their way into the housing market,” said Sturtevant. “When they do enter the market they’ll care about different things than previous generations too; I foresee more single people buying smaller homes in urban areas.”

[Featured Products: Research and Compare Mortgage Rates at Credit.com]

Housing affordability is expected to remain quite high for some time, as low interest rates will likely keep rising prices from pricing many consumers who would like to buy homes out of doing so.

Image: iStockphoto

The student loan crisis deserves all the attention it has attracted — and more — especially if we’re serious about tackling this trillion-dollar tragedy in a comprehensive way. But let’s not make the mistake of focusing all our good efforts on outcomes without addressing causes as well.

I’m referring to colleges and universities so under the gun to cover their bloated cost structures without jacking up tuition and fees even further that it’s a wonder how they maintain minimum admission standards. It’s also remarkable that as enrollment declines, demand for financial aid increases and endowment funds shrink, the higher education sector isn’t confronting the institutional redundancies that are at the heart of this problem.

For example, in my home state alone, there are a half dozen medium-size private colleges and universities. To be sure, each has unique qualities and areas of specialty, which explains why they’re able to attract 5,000 to 7,000 students each.

[Related Article: The Big Profits Behind Student Loan Interest Rates]

However, these institutions also have their own administrative frameworks — from ordering supplies and processing payrolls to managing IT platforms capable of wirelessly streaming online courses and the latest movies. And, of course, there are the duplicative organizational hierarchies that incorporate a half dozen presidents, chief financial officers and provosts each, not to mention, copious numbers of deans and legions of faculty and administrative staff.

If this isn’t an example of an industry consolidation waiting to happen, I don’t know what is — except that there are two big obstacles standing in the way: the college presidents and the boards they’ve recruited.

Facing Reality

Publicly held companies are accountable to their shareholders. To whom are the privately held educational nonprofits beholden? Perhaps it should be to those who write the checks: the students, their parents and the companies that offer tuition reimbursement to employee-learners.

For example, wouldn’t it make sense for the business schools to collaborate with commerce in this regard? After all, they are the check writers, either directly through their tuition-reimbursement programs or indirectly as a portion of the salaries they pay make it possible for employees to meet their financial obligations. But that dialogue between academia and commerce has yet to take place in a meaningful way.

What of the needs, preferences and economic capabilities of the schools’ consumer-learners? Their requirements are inexorably tied to their prospective employability and their preferences are not only culturally inspired, they’re also focused on practicality – as in the flexibility that online and hybrid-learning offers to full- and part-time students. In terms of their economic capabilities, must the costly, time-consuming, soup-to-nuts degrees be the only way to go?

[Related Article: Can You Really Get Your Credit Score for Free?]

Why not then also consider deconstructing the graduate degrees into a series of stackable credentials? Students (supported by their tuition-reimbursing employers) would then have the option of pursuing targeted areas of study that may at some later time evolve into formal degrees. In fact, this flexibility can also lead to a broadening of the revenue base as more students take advantage of a more affordable form of higher education, driving down prices in the process.

But what about the investment that’ll be required to pull this off — the mix of traditional, hybrid  and online classroom settings, and the production and technological resources that will be required to accomplish all these changes? Where will the funding come from when pricing is under attack, revenue dollars are already spoken for and outside investors view higher education as a sector without a future?

If the business of higher education is education, then it should get out of the businesses of providing bunk beds, cookies, rock concerts and treadmills and put to better use the capital that would be derived from these divestitures.

The Campus, Reinvented

Dump the dorms. When my kids graduated college, they each chose to live near a school campus. That’s because most suburban-based institutions are, in effect, quasi-gated communities with easy access to park-like grounds, sports facilities, libraries and cafeterias.

Why not sell the buildings to entities such as real estate investment trusts that will reconfigure these structures into independent living space, and lease the underlying land to create an annuity that, along with the proceeds from the sale, may be invested in upgraded educational content and modernized delivery?

Franchise the food courts. As the delivery of educational content moves from the classroom to the living room, why not also help students become more independent in the process? Transforming the cafeterias into grocery stores and franchised food outlets will not only teach students to care for themselves, it’ll also enhance institutional cash-flow.

Convert the classrooms. Shared office space for small businesses, entrepreneurial incubators, corporate conference centers — these are only a few of the income-producing uses for the buildings that once housed the students who are today combining in-class with on-sofa learning.

Subscription to the sports centers. As part-time faculty, I enjoy low-cost membership to my university’s sports facility, along with my full-time colleagues, alumni and students. Young people like living on or near school campuses because of the amenities. Why not invite more of them into the one that is at the heart of the infrastructural warfare that’s waged by the schools as they compete for students?

Here’s the tricky part, though: Resisting the temptation to use this trove of cash to plug today’s operating shortfalls, which would be akin to burning the furniture to stay warm. Instead, the schools should consider these actions only after settling on a strategic plan that speaks to the disciplined use of this precious, repatriated capital.

So how does this get done in such an insular culture where self-interest often trumps much-needed innovation? All it will take are a few forward-thinking schools to get the ball rolling.

[Credit Score Tool: Get your free credit score and report card from Credit.com]

This is an Op/Ed contribution to Credit.com and does not necessarily reflect the views of the company.

Image: Photo.com

Many consumers have made significant efforts to get their finances back on track in the last few years, and that trend continued into the first quarter of the year, as average balances on credit cards, and rates of late payments on them, both declined once again.

The national delinquency rate on credit card accounts — defined as accounts 90 days or more behind on payments – slipped to 0.69 percent through the end of March, down from 0.73 percent in the same period the year before and 0.85 percent from just three months prior, according to the latest statistics from the credit monitoring bureau TransUnion. Meanwhile, the average amount of debt held by all consumers on these accounts slipped to $4,878, down 4.75 percent on a quarterly basis (from $5,122) and 1.69 percent annually (from $4,962).

[Free Resource: Check your credit score and report card for free before applying for a credit card]

“We traditionally see credit card delinquencies and balances decline during the first three months of the year as many people pay down their holiday shopping balances or use their tax refunds to pay off their debts,” said Ezra Becker, vice president of research and consulting in TransUnion’s financial services business unit. “In addition to the seasonal quarter-over-quarter drop, the year-over year improvement in credit card delinquencies is indicative of how consumers continue to value their credit card relationships.”

The states with the highest average credit card balances were Alaska, Colorado, North Carolina and Connecticut, ranging from $5,498 to $6,789 per borrower, the report said. Meanwhile, Iowa, at $3,810, led the nation in lowest balances, while North and South Dakota and Wisconsin rounded out the top four.

South and North Dakota also finished tied for first, with Montana, in national lows for delinquency rates at just 0.43 percent, the report said. Minnesota was close behind at 0.44 percent. Meanwhile, Mississippi came in with the highest such rate, at 1.11 percent, but was the only one in the country with late payments above 1 percent. Alabama (0.94 percent), Arkansas (0.89 percent) and Georgia (0.87 percent) were also among the highest nationwide.

[Credit Cards: Research and compare credit cards at Credit.com]

Many consumers may be concentrating on shedding debts and also keeping them down going forward as a result of financial hardships suffered during and following the recession. This may be particularly true of younger adults who were discouraged from getting involved in credit card use in the first place because of these difficulties.

Image: Hemera

All consumers are at risk for identity theft every year, often without knowing it, but now it seems that many details of their personal information are available online as a result of a government-related program.

The government program Lifeline, which helps low-income consumers afford wireless and landline phone service, may have a serious data breach issue on its hands, according to a report from Scripps News. In all, more than 170,000 records for people enrolled in the program through TerraCom and the subsidiary YourTel America may have been exposed as a result of these companies posting large amounts of information online.

[Credit Check Tool: Monitor your credit score and activity for free with Credit.com]

The number of potential victims is spread across at least 26 states — with Texas and Indiana being the most at-risk with 17,419 and 10,799 potential victims, respectively — and the exposed information for those people includes their Social Security numbers, dates of birth, and data about their participation in these assistance programs, the report said. Currently, the company knows 343 such records were viewed by unknown and possibly unauthorized people, who would have been able to view them with a simple Web search.

Though the program mandates that companies are not supposed to collect any personal documentation on the people who enroll in it, data on these people collected by workers for the companies dating back several months were posted online through Call Centers India, which was contracted to help determine applicants’ eligibility, the report said. A spokesman for the Federal Trade Commission said the agency was aware of the incident but would not confirm or deny whether it was investigating the companies. However, he did note that if there was even one violation of privacy, they could be on the hook for fines of as much as $1.5 million.

[Featured Products: Research and compare Identity theft protection plans at Credit.com]

Consumers who might be at risk for this type of identity theft may want to take the time to order copies of their credit reports to determine whether someone has opened any fraudulent accounts with their personal information. Often, all a criminal needs to do obtain such a bogus line of credit is a name, date of birth, and Social Security number, and it can take a long time for victims who do not check their credit reports to discover any such incidents. Another great way of monitoring your credit is to use the free Credit Report Card, which updates your score on a monthly basis.

Image: iStockphoto

Remember that first week of college or university, when you wondered how you’d ever make it through? If you’re like most students, simply trying to map out your course schedule probably felt overwhelming. There there were forms to fill out, books to buy, and lots (and we mean lots) of coursework.

Hopefully, you had a good adviser to help give you through the process.

Similarly, if you are out of school, trying to navigate your options for paying back your student loans may seem just as daunting. You probably have several loans with different repayment terms. Some may be federal loans and others may be private loans. How do you prioritize them, along with all the other financial demands — housing, food, transportation, etc. — you are facing?

When it comes to your student loan debt, think of your credit reports and scores as your adviser. They are there to provide some necessary context for your emerging financial life. As you begin to pay back your student loans, refinance them, defer them or opt for forbearance, you’ll need to understand the impact of your choices over time.

[Related Article: Can You Really Get Your Credit Score for Free?]

So the first thing you should do, then, even before starting to pay off your student loans, is begin to monitor your credit reports and credit scores. There are a few ways you can do this. First, each year you can get a free copy of each of your three credit reports from AnnualCreditReport.com. In addition, Credit.com provides users with a free credit tool that breaks down the information in your credit report using letter grades, and provides you with free credit scores too.

The information you find here can help guide you in three ways:

See the big picture. In school, you couldn’t just pick any class that sounded interesting. Unless you wanted to stay in school forever, you also had to make sure you fulfilled your requirements for your major and for graduation.

When it comes to your student loans, you can’t just look at each loan individually; you also must get a handle on your total student loan debt, which is likely made up of multiple loans. Your credit report will likely list all of these loans, so you can see how much you owe in total. You can also check the National Student Loan Data System to make sure you haven’t missed any of your federal loans.

But that’s just the start. You likely have other debts, and those are important to include in your debt repayment plan as well.

You should find most, if not all, of your debts — including your car payment, credit card balances, and your mortgage if you have one — listed on your credit reports. This will give you a much more complete picture of your overall debt situation.

If you discover your debt is more than you can manage, you may want to talk with a credit counseling agency or find out if you are eligible for the Income Based Repayment program.

[Credit Score Tool: Get your free credit score and report card from Credit.com]

Prioritize your payments. You may want nothing more than to pay off your student loans fast. But in some cases it makes sense to pay off other debts more aggressively first. This is where your credit score comes in handy. Along with your score, you should get information about which factors are most influencing your score.

For example, let’s say you get your free Credit Report Card from Credit.com and you see that you’re not getting a good grade for the category that includes the debt you are carrying. (Your debt makes up nearly one third of your credit score.)

Now let’s say you have a credit card with a small limit; say $500, and your balance is $400. It’s likely that relatively small balance is having a much greater impact on your score than your much larger student loan balances.

Why? Because you are close to the limit on that card and the high balance is affecting your “utilization.” (Student loans are installment loans, not revolving accounts, and that factor is not a concern there.) Pay it down as fast as you can and you may see your score go up. But if you put that same amount of money toward your student loan, your score may not budge.

You didn’t learn that in school, did you?

Monitor your credit. If you pay them on time, your student loans should help your credit scores, even if the amounts are relatively large. But if you miss a payment on one of these loans — or any other — your credit scores will suffer. Even one late payment can drop your credit scores by 50 points or more. And if you’re taking on more debt, you’ll probably see that reflected in a lower score.

By reviewing your free credit score each month, you’ll see whether your credit is improving. If it is, keep doing what you’re doing, and if it’s not, you know you’ve got your homework cut out for you!

[Free Resource: Check your credit score and report card for free with Credit.com]

Image: iStockphoto

Securing a mortgage today requires careful consideration of all the figures associated with the transaction. The biggest figures most homebuyers pay attention to include loan amount, interest rate, closing costs and the one most benign to consumers, the annual percentage rate (APR for short), which is a disclosure item required in loan advertisements and loan disclosures.

Set forth by TILA (Truth In Lending Act) and overseen by the Fed, APR is touted as most accurate barometer to compare mortgage offers from one offer to another. In comparing mortgages, there is oftentimes inaccurate distinctions made with regard to disclosures between APR and interest rate, and what consumers are actually borrowing that creates confusion around the numbers. Here are some terms you need to understand to cut through the confusion.

[Related Article: The First Thing to Do Before Buying a Home]

Annual Percentage Rate (APR): A function of blending the closing costs associated with the loan transaction and re-amortizing that figure over the term of the loan.

Interest Rate: The actual interest rate tied to the amount of money being borrowed. Also called a “note rate,” it is what determines the amount of interest you’ll pay over the life of the loan on an amortization schedule.

The Facts About Mortgage Annual Percentage Rate

Fact: The annual percentage rate does not determine the monthly mortgage payment. The note rate is what determines the monthly mortgage payment.

Fact: Lenders must disclose the annual percentage rate on their loan disclosures after you submit a mortgage application.

Fact: The APR is usually within a .125% range above the note rate. This is positive because it indicates your closing costs are very small in relationship to the amount being borrowed and the interest rate (note rate) you are receiving.

Fact: If the APR is substantially over the .125% range above the note rate, this is an indicator of higher fees (closing costs) associated with the amount borrowed.

Fact: The APR is higher than the note rate because the APR takes into consideration a “blending” of the interest rate and closing costs over the life of the loan.

Fact: APR is not paid over the term of the loan — for example, 360 months representing a 30-year fixed rate mortgage. The note rate is the interest rate paid over the term of the loan.

Fact: The APR is a measuring tool used upfront to compare mortgage offers only, usually during the initial application process in comparing different loans.

Fact: APR represents the total cost picture in securing a mortgage, not the total interest paid over the life of the loan.

[Credit Score Tool: Get your free credit score and report card from Credit.com]

While APR is the standard used to compare mortgages, it is not the only way to compare mortgages. Rather than trying to figure out the intricacies of APR, consumers could also be served by comparing the following items to determine what mortgage choice is ideal.

These include:

• Loan term
• Interest rate
• Closing costs
• One loan term versus another
• Closing costs recapture (determined by taking amount of closing costs divided by payment savings)

One last takeaway: The mortgage with the financing terms most consistent with your long-term goals and objectives is the ideal direction to take.

[Featured Products: Research and Compare Mortgage Rates at Credit.com]

Image: iStockphoto

It’s a good time to be an aspiring property baron.

Mortgage rates are still hovering near record lows. And, for most parts of the country, it’s cheaper to purchase than rent, which means you can buy low and rent high. (Curious to see if your region is a hot rental market? Check out our map of the the best and worst places to be a landlord.

The time is also ripe right now for would-be landlords because the recovery in the housing market is accelerating. Real estate research firm CoreLogic reports that nationwide home prices were up 10.5% year-over-year in March, according to the latest data available. “While some former bust markets are experiencing rapid new home sales demand, due to the decline in distressed supply, the rebound in other markets is due to economic improvements, such as employment growth,” notes CoreLogic senior economist Sam Khater.

A rental property has a ton of financial advantages. It can appreciate in value over time, and provide you with income once expenses are paid. Rental property ownership also offers many tax benefits, including the ability to sell the property and buy a similar one without paying capital gains tax on the transaction.

But there’s more to being a landlord than simply purchasing property. ”Finding the right tenant, coordinating lease documents, handling maintenance … all of these things take time, energy and money,” says Ellen Derrick, a CFP® with LearnVest Planning Services.

[Credit Score Tool: Get your free credit score and report card from Credit.com]

She should know: Derrick and her husband, John, own three duplexes, and they’re about to buy a single-family house to rent. Her husband also co-owns a property management company. “A lot of my knowledge comes from watching him over the last 13 years,” she says.

Dabbling with the idea of picking up a rental property of your own? Here are five key things you need to know well before you hand over the keys to that new tenant.

Hone in on the Right Neighborhood

Location, location, location may be the most common refrain you’ll hear while real estate shopping. But Pierre Calzadilla, manager of apartment industry relations at online real estate marketplace Trulia, has more specific advice: Purchase property near universities, vacation areas and large workplaces. Basically, popular locales where renters tend to live.

His other tip: Avoid pricier spots that will cut into your profits as a landlord. “You’re not going to find great deals in a place like San Francisco, where buyers are paying 20% above asking price,” says Calzadilla.

But if you do live in a high-cost region, you can still find neighborhoods or nearby cities that provide value to landlords, Calzadilla notes. For example, Oakland, which has a median home sales price of $557,000, offers relatively reasonable prices for rental properties close to San Francisco, which has a much higher median home sales price of $815,000.

You can find a heat map of current property prices by neighborhood for free on several websites, including Trulia and Zillow.

Boost Your Reserves

Owning rental property is a cash-intensive business. Even with the best maintenance, unexpected repairs can occur that cost thousands of dollars.

Banks can’t be relied upon to bail you out if you do get into a cash crunch. Eric Brown, owner of Urbane Apartments in Detroit, recalls, in particular, when loans were hard to come by in the aftermath of the financial crisis. “You can bootstrap it for a while,” he says. “But it takes capital to run a real business.”

The solution: You need to create an emergency fund for your rental property. “I would have about 1% of the property’s value set aside for routine maintenance each year, and another $5,000 or so in reserve for major emergencies,” says Derrick.

So if your property is generating income, put a portion of that rent in the fund each month to bolster your savings in a painless way.

[Featured Products: Research and Compare Mortgage Rates at Credit.com]

Choose Your Tenants Carefully

“Renting to the wrong person is the biggest mistake new landlords make,” says Calzadilla. It’s that simple.

Bottom line: Do more than a basic background check. Not only should you contact a prospective tenant’s current landlord, but you should also reach out to that person’sprevious landlord. Why? Because the previous landlord has no incentive to lie, says Portman. “You are turning over something very valuable to someone who could completely wreck it,” she adds.
Don’t have time to play detective with applicants? Use a tenant screening company, such as LeaseRunner or TVS. Many vendors charge less than $40 per screen—and it’s money well spent. These companies can access databases to check a tenant’s credit history, criminal record and past evictions.

Know Local Fair Housing Laws

The rules that govern tenants’ rights and fair housing aren’t always straightforward. You could have the best of intentions and still violate the law, says Janet Portman, author of “Every Landlord’s Legal Guide.”

Something as innocent as not showing a family of four a one-bedroom rental because you think it’s too small for them could be construed as discriminatory. ”It’s up to the prospective tenants to determine what housing is most appropriate for them, not a landlord,” says Portman.

Under federal fair housing law, you can’t discriminate on the basis of race, religion, national origin, gender, age, familial status and physical or mental disability, including past drug and alcohol addiction. Many states and cities also prohibit discrimination based on marital status or sexual orientation.

You can, however, reject applicants for legitimate business reasons. Bad credit, income that you think is insufficient to pay the rent or a history of missed payments are reasonable grounds to reject an applicant.

And your application standards must be consistent for everyone. “One of the common areas where people get into trouble is renting their place to a friend or a friend of a friend who doesn’t meet the standards that the landlord has set for other applicants,” says Portman.

Additionally, more than a dozen major metropolitan markets have some form of rent control. If you plan to own rental properties in one of these cities, check with your local rent control board about rules that apply to screening tenants and setting fair rental prices. You can also join a local landlord’s association to get a feel for the rules and potential pitfalls in your area.

[Related Article: 19 Confusing Mortgage Terms Deciphered]

Find Your Niche

As a new landlord, you can get lost in the crowd. Brown’s advice: “Create a brand and set yourself apart from your competitors.”

When Brown bought his first building in 2002, he had a very loose policy on dogs because he knew that most apartment building owners in the vicinity had breed restrictions and size limits. ”Really good residents tend to have really good pets and take care of them,” says Brown. “My company now owns the local market for pet owners in Detroit.”

The moral of this story? Happy tenants mean there’s less turnover, which keeps the costs of being a landlord low.

Timely repairs also go a long way. “Your tenants don’t care what else is going on in your life or whether you have a full-time day job,” says Derrick. “When something is broken, they want it fixed quickly. So if a toilet is stopped up on Christmas morning, you’re on call!”

WANT MORE FROM LEARNVEST?

Your Guide to Rental Property Investing

Want More From Your Rental Agreement?

7 Top Home-Buying Mistakes People Often Make

Image: iStockphoto

One of the most common questions I hear from clients is whether they should invest in a traditional IRA or a Roth IRA.

Let’s start with an understanding of the difference between the two. The biggest difference between a traditional IRA and a Roth IRA is when you pay taxes.  I like to think of it as “pay me now or pay me later” and with the IRS, there is no free lunch. Generally, contributions to a traditional IRA are deductible in the year they are made, but you must pay regular income tax upon distribution.  Contributions to a Roth IRA are not tax deductible when the contribution is made and you don’t pay taxes upon distribution.

In 2013 you can make an IRA contribution of up to $5,500 plus a $1,000 catch-up contribution if you are over 50. You have until your tax filing date, not including extensions, to make a contribution for the previous year. You can contribute to a combination of both a Roth IRA and a traditional IRA as long as the total does not exceed the limit. IRA contributions must come from earned income.  A non-working spouse can make an IRA contribution of up to $5,500 ($6,500 if over 50) if the working spouse earns enough to cover the contribution and a joint return is filed.

[Related Article: Can You Really Get Your Credit Score for Free?]

There are some restrictions on when you and your spouse can contribute to an IRA. If you are eligible for an employer-sponsored retirement plan and your modified adjusted gross income is over a set limit, you cannot contribute to a tax-deferred, traditional IRA. In 2013, your eligibility for a tax-deferred IRA begins to phase out at $59,000 if you are single, and at $95,000 if you are married filing jointly. The phase-out for a non-working spouse begins at $178,000. However, if you earn too much for a deductible IRA, you can contribute to a non-deductible IRA. There are also income limits on Roth IRAs. In 2013, your eligibility to contribute to a Roth IRA begins to phase-out at a modified adjusted gross income of $112,000 if you are single, and $178,000 if you are married filing jointly.

IRAs are designed to encourage saving for retirement, so there are restrictions on when you can take distributions. Generally, you cannot take distributions from a traditional IRA before age 59½ without a 10% penalty. Roth IRA contributions can be withdrawn any time, tax free. Earnings on Roth IRAs can be withdrawn tax free after you reach age 59 ½, and the money has been invested for a least five years. There are some exceptions to the rules on early withdrawal penalties. The most commonly used exceptions are to purchase your first home or to pay for qualified education expenses. With a traditional IRA, you must begin taking a required minimum distribution (RMD) at age 70½. There is no RMD for Roth IRAs.

[Credit Score Tool: Get your free credit score and report card from Credit.com]

Choosing the right IRA starts with your eligibility to make a contribution, given your income and access to an employer-sponsored plan. If you pass this hurdle, the next consideration is your current tax rate, your anticipated tax rate in retirement and your investment timeframe.  If you are in a high tax bracket now, and anticipate being in a lower tax bracket in retirement, a traditional IRA may be your best option. If you are currently in a lower tax bracket, and you have long time horizon, a Roth IRA may be your best option. Additionally, a Roth is the best choice if you want easy access to your money before retirement.  You can withdraw your entire Roth contribution anytime, tax free. However, you may find the 10% penalty to be beneficial in discouraging you from spending your IRA before retirement. A Roth can also be advantageous if you already have a lot of money in a traditional IRA or 401k and you need some tax diversification.

A Roth IRA can be a good choice if you plan to bequeath the IRA to your family.  No RMD is required, so the account can continue growing throughout your retirement years. Upon inheritance, your heirs will not owe income tax on your contribution or on earnings, if the Roth was held for at least five years. However, the Roth IRA is part of your estate and estate tax may be due if your total estate exceeds $5.25 million.

[Free Resource: Check your credit score and report card for free with Credit.com]

Image: Hemera

Student loan debt is a huge problem these days. The total amount of U.S. student loan debt has reached about $1 trillion and the average amount owed is $25,000. Surprisingly, the majority of student loan holders are over 30 years old — which means a lot of people (not just 20-somethings) are being limited by their student loan debt. For those reasons, many students who are graduating right now are rightly concerned about their own student loans and how they will pay them off.

Does that include you? If so, don’t worry — I’m going to give you some steps you need to pay off your student loan debt as fast as possible, and avoid letting it crush you. These tips come from my own life and from working at ReadyForZero, which helps people manage and pay off debt on their own. With these tips, you can be proactive and take control of your student loan debt.

[Related Article: The First Thing You Must Do Before Paying Off Debt]

1. Understand Your Student Loan Situation

One of the hardest things about student loans is how complicated they are. Do you know what type of loan you have? There are two main types of student loans: federal (borrowed from the government) and private (borrowed from a private company). You can find out which type you have by checking the National Student Loan Data System. And keep in mind, you may have both federal and private student loans.

You also need to know what interest rates you’re paying. Some federal loans have rates as low as 2-3%, while others have rates of 7%, 8% or even higher. You should be paying off the highest-interest debt as fast as possible, while paying the minimum payments on all other debts. Make a plan for how much you can pay each month and dedicate all the extra to your target account.

As an example of how this kind of plan can help you get on track, Nick has paid off $21,000 in debt, including student loan debt and credit card debt. Before he made a plan, his efforts weren’t focused. He said, “it was one of those things where I was making all my payments… But I was scared to look at [the total].” Once he had a plan in place, he started making more progress toward his goal.

2. Figure Out Which Student Loan Programs Can Help You

Before you even make your plan, you should know about some really good programs that can help you manage your student loans and perhaps even get rid of them. If you need more breathing room in your monthly budget, then you should definitely look at the Income Based Repayment (IBR) program, which can cap all your student loan payments at 15% of your income.

While you will end up paying more interest in the long run, the IBR program has been a lifesaver for some people. And although this program only applies to federal loans, you can ask your private lenders for an adjusted repayment plan similar to IBR that will work with your budget — and in many cases they will give you one.

Another important program is Public Service Loan Forgiveness. Anyone who works at a qualifying job (including teachers, civil servants, some military service jobs, public safety officers, non-profit workers, and others) and makes monthly payments for 10 years can have their remaining balance forgiven by the government.

[Credit Score Tool: Get your free credit score and report card from Credit.com]

3. Boost Your Finances While Staying Focused on Student Loans

If you want to ease the monthly burden of student loan debt and pay off your loans faster (which you probably do), here are some things to keep in mind about your overall financial picture. You can boost your finances by making extra money and saving more money. I know that sounds obvious, but bear with me.

In order to make a little extra money on the side, you can make use of some of the new websites that have cropped up online — sites like Elance.com and Odesk.com — which allow anyone to find freelance jobs. You can spend a few hours a week doing any number of freelance jobs, from graphic design to writing, accounting and even transcribing, and then use that extra money to pay off your debt faster.

You can also take a hard look at your budget and see if there are areas where you are spending more than you need to. For example, are you eating out regularly? Commit to making dinner at home in order to save some cash. Do you have a problem with shopping too often? Cut up your credit card or lock it away somewhere safe, and vow to avoid any more trips to the mall. Most importantly, be sure to track your spending every month so that you know exactly where each dollar is going. This way, you’ll avoid losing money that could go toward paying off your student loans.

For Nick, a renewed focus on his spending helped him a lot. He said, “There are things I want, and there are things I can buy right now, but I know I don’t need them. Like an iPad… but then the logical side comes out and says ‘No, you don’t need it.’” And it’s that kind of mentality that has helped him make great progress on his student loans.

4. Keep Your Motivation Strong Over the Long Run

The last piece of advice I have for you is to take certain measures to stay motivated for the long run. Start by sharing your debt-free goal with your loved ones and close friends who you can count on to support you. Tell them what you’re working on and the strategies you’re going to use. This way, when you talk with them over the coming months and years, they will be able to offer encouragement during the rough patches and cheer you on when you’re doing well. They can also help you avoid spending more money if they know that is a priority for you.

It’s also a good idea to write down your goal and even put some kind of photo on the same piece of paper with it, to symbolize your motivation. Keep it on your desk or bedside table and it will keep you focused every day on where you’re trying to get.

Hopefully these tips are helpful as you grapple with how to pay off your student loan debt. No matter how big the amount is, just know that you can pay it off. Good luck!

[Student Loans: Research and compare options for student loans at Credit.com]

Image: James Woodson

A judgment can suck the life out of your credit scores for years and make it difficult, if not impossible, to rebuild your credit. So settling or paying off a judgment is crucial if you want to get your credit back on track. But what happens when you can’t? La Recia wrote on the Credit.com blog:

Can a judgment be removed from my credit if the collection agency has gone out of business? They filed the judgment in 2008 and filed bankruptcy in 2012. They are no longer in business. Please Help!!

And she’s not alone. Another reader, Jen, shared her dilemma:

I have a judgment that was placed against me in 2011. I contacted them today to make a deal of some sort. The law firm had gone out of business! What do I have to do now?

To help our readers understand what they can do if they are haunted by zombie judgments, I spoke with Atlanta bankruptcy attorney Jonathan Ginsberg on Talk Credit Radio. He’s been in private practice for more than 23 years, publishes the Atlanta Bankruptcy Law Blog, and contributes to the Bankruptcy Law Network blog. What follows is an edited excerpt from our conversation:

Gerri: First, I want to start at the very beginning and describe what a judgment is and how these things end up on your credit.

Jonathan: A judgment is basically when a court has a mandated decision that you owe money. In other words, if you owe money to somebody and they file a lawsuit against you, you’re supposed to be served with papers. If you answer those papers and you go to court, (and) a judge finds against you, then a judgment will be issued. It’s a formal filing by the court that you owe something or something has been decided. If you don’t answer, it’s a “default judgment.” But either way, a judgment is where a court made a finding of law that you owe money.

[Related Article: The First Thing You Must Do Before Paying Off Debt]

When They Never Really Disappear

Gerri: One of the big problems right now is judgments from collection agencies. They’re either collectors who are trying to collect from them or maybe debt buyers, which are a type of collection agency that buys old debts. (Let’s take La Recia’s situation.) She asks, “Can a judgment be removed from my credit if the collection agency has gone out of business?”

Jonathan: The main thing to remember here is there are two separate systems in play. One of them is of course the credit reporting system, which is private — that is where you have companies like Equifax or Transunion, or Experian. They report credit for private business. These are not government agencies. They’re private companies, they’re governed by a number of laws but they’re not government agencies.

A judgment, on the other hand, is where a creditor has gone to the court and gotten an official judgment from a court, which again has the power of law. In this particular case, the problem we’ve got is that the judgment creditor — that’s the person who got the judgment — filed a lawsuit, let’s say it was a default judgment, judgment was issued, now they’ve gone out of business.

The problem is that the judgment itself is on the public record. The very fact that the judgment creditor has gone out of business does not automatically remove it from the public records. Essentially, you have a judgment creditor that is long gone but the judgment remains out there and obviously it’s damaging your credit. I suggest a couple of things: One is that since the judgment creditor is in bankruptcy, there is a record of that bankruptcy. So one thing that she could do would be to look on the Pacer system, that’s Pacer.gov, and look up the bankruptcy filing of the judgment creditor. There will be a trustee in that bankruptcy case. Contact the trustee and see if they can negotiate a settlement for pennies on the dollar on that judgment and get it released. That’s one way to deal with it.

[Credit Score Tool: Get your free credit score and report card from Credit.com]

Going On the Attack

The second way, which is a little more complicated, would be to file what is called a “collateral attack” on the actual judgment. Assuming the judgment creditor is no longer in business, they won’t respond to it. She could go back to court and say, “I want this removed because there was some mistake of fact” or “I wasn’t properly served,” or any number of things.

The debtor can also file a challenge with the credit bureaus. But again, the problem you’ve got is that since the judgment itself is public record, it will be confirmed by the credit bureau as a matter of law because it’s still a judgment there.

Gerri: Exactly. The credit bureau is not going to investigate the individual circumstances of this consumer’s situation. They’re just going to go back to the court, confirm that this judgment is there and then say it’s correct, and leave it on a consumer’s credit report.

Let’s talk about that second strategy that you mentioned moment ago, you called it the collateral attack. Would that also apply in a case in which the person who got the judgment or the company that got the judgment didn’t necessarily file for bankruptcy but just isn’t around anymore? Because we do get those questions where people say, “I just can’t contact the company anymore, I can’t find them.”

Jonathan: Again, what I mean with collateral attack is it’s already too late to contest the substance of the claim. That’s where the creditor says you owe money, they’ve got their judgment, it’s no longer an issue of whether or not you owe them money. A judge has decided that you do.

What you’re doing in that collateral attack is you’re saying there was some problem with the procedure. They didn’t properly sue me. I didn’t get notice and so we want the court to undo this judgment and give me another bite at the apple.

Again, in order to do that you’ve got to convince a judge that you’ve made a diligent effort to find the creditor or the creditor’s lawyer and that you’ve made every effort. And then you have to convince the judge that there was some mistake made, that you never got served or that there was some error in the procedure. But when there’s nobody on the other side, it’s a lot easier to win this type of cases than it is when you have somebody contesting it.

[Related Article: 11 Ways A Debt Collector May Be Breaking the Law]

Hunting Down Zombies

Gerri: Before we talk about settling and resolving judgments, I want to follow up on the question we were talking about, which involved someone who has a judgment on the credit report and they want to pay it but they can’t find the company. It’s old, and they simply cannot find the company to pay. What do you recommend they do?

Jonathan: Again, that’s a tough one and this is something that happens a lot because these judgments are sold, they’re commodities. Debt buyers buy them and sell them, and sometimes it’s difficult to figure out who actually owns them. Obviously, the credit report’s a good place to start, but sometimes it’s very difficult to do that.

Other than to really track it down, as we were talking about, one way to do it would be to file some sort of action in the court where the judgment was issued, assert that there was something improper and then serve everybody you can think of and then try to get them in front of the judge and say, “We want this undone.”

But that’s a real problem. I see this a lot where people have judgments, they want to pay them, they want to settle, but they can’t find who to pay.

Gerri: Can bankruptcy help you?

Jonathan: Yes, in a bankruptcy we can get rid of judgments by following a motion to avoid a judgment lien. And basically, it allows us to strip out the judgment to make it an unsecured debt and therefore the debt is treated like any other unsecured debt. Since unsecured debt is eliminated or paid at pennies on the dollar in a bankruptcy, you can effectively get rid of that judgment debt.

Gerri: If you have a judgment on your credit report and you’re having some problems, at what point does it make sense to get an attorney involved? And is it expensive? Because if you owe this money, you don’t have a lot of money to spare.

Jonathan: In my practice, I find sometimes people turn to bankruptcy because it’s a cheaper alternative to fighting these judgments. If you have three or four judgments and they’re all over the country and you’re trying to track people down, that can get real expensive. You’re going to be paying a lawyer by the hour to do that.

Of course, you can do a lot of it on your own but at some point getting a lawyer involved can get expensive. If you have several judgments and the amount is very high, sometimes bankruptcy — although you’ve got to grit your teeth to do it — can sometimes make more sense economically because generally bankruptcy attorneys will charge a flat fee for all the bankruptcy. Everything gets taken care of and it’s done, as opposed to chasing around five or six judgment creditors.

[Related Article: 7 Ways to Defend a Debt Collection Lawsuit]

Ignore Them at Your Own Peril

Gerri: What’s the most important piece of advice you want to offer in terms of consumers who have judgments on their credit reports and are trying to figure what to do next?

Jonathan: I would say don’t ignore it. What happens sometimes is that a judgment is rendered, nothing happens for two or three years. I got a call from a guy about two/three months ago, he had a judgment here in Georgia, about 11 or 12 years ago, and he heard nothing. Eleven or 12 years passed, he’s moved to a different city in South Georgia. All of a sudden, a debt buyer pops up and garnished his wages. And then what happened was that the judgment had been renewed.

You mentioned before that judgments stay on (credit reports) seven years but they can be renewed in court. And so now, the seven years was renewed for another seven years. Now we’re year 11. We have a debt buyer who has bought this (judgment debt) and they found him. Of course, in this computer age anybody can be found. His wages are being garnished and he’s scrambling.

Gerri: And that’s the other important warning: if you get a judgment against you, whether it’s on your credit report or not, it opens up new avenues for collection for the folks who got the judgment against you. It could be pretty serious.

Jonathan: Never ignore that. That’s really when it would make sense to talk to an attorney — whether your family attorney or a bankruptcy attorney — just to get a sense of what could happen; the timing of it, how fast you need to take action, when maybe you can negotiate. But yes, don’t ignore it because it does not go away.

Listen to the entire interview with Jonathan Ginsberg online, download to your smartphone or mp3 player or listen on iTunes.

[Free Resource: Check your credit score and report card for free with Credit.com]

Image: iStockphoto

Though many Americans are struggling financially even years after the end of the recent recession, one group that may be having particular difficulties in gaining the kind of independence they may need these days.

Recent college graduates are often at a significant disadvantage when it comes to finding employment soon after they leave school, which in turn can make it far more difficult for them to achieve financial independence and even pay off the many obligations they may be carrying as a result of credit card bills, student loans and more, according to a report from the Federal Reserve Bank of New York. This may be especially true for college graduates who do not live in big cities, where it may be a little easier to come by at least some sort of gainful employment.

[Credit Score Tool: Get your free credit score and report card from Credit.com]

Today, some 62.1 percent of workers have jobs related to their college degrees, but just slightly more than one-quarter are actually in positions that relate to their college majors, the report said. However, a greater percentage of workers with either degree or major matches are finding them in larger urban areas, as opposed to smaller areas. For example, college graduates working in jobs that match their degree make up 64.5 percent in the largest urban areas, compared with just 61.1 percent of those working even in areas that fall into the 50th percentile.

This is true of those working jobs related to their majors, as 29.1 percent of workers are doing so in largest cities, as opposed to just 26.7 percent of those even average-sized urban areas, the report said. As a consequence, people living in the larger metro areas will be in a better position to cash in on their specific areas of expertise or training if they move to larger urban areas where more companies may be hiring.

[Student Loans: Research and compare options for student loans at Credit.com]

Today, the average college senior graduates with tens of thousands of dollars in debts not only on student loans, but also credit cards and auto loans. As such, these obligations can create significant difficulties for people trying to achieve the sort of financial independence they might want, and could also put them at risk for credit troubles if they can’t find pay high enough to help them cover all these ongoing obligations.

Image: iStockphoto

by Paul Kiel, ProPublica, and Mitchell Hartman, Marketplace, May 15, 2013, 5:50 a.m.

This story was co-produced with Marketplace. Listen to their coverage.

Seven years after Congress banned payday-loan companies from charging exorbitant interest rates to service members, many of the nation’s military bases are surrounded by storefront lenders who charge high annual percentage rates, sometimes exceeding 400 percent.

The Military Lending Act sought to protect service members and their families from predatory loans. But in practice, the law has defined the types of covered loans so narrowly that it’s been all too easy for lenders to circumvent it.

“We have to revisit this,” said Sen. Dick Durbin, D-Ill., who chairs the defense appropriations subcommittee and is the Senate’s second-ranking Democrat. “If we’re serious about protecting military families from exploitation, this law has to be a lot tighter.”

[Related Article: Can You Really Get Your Credit Score for Free?]

Members of the military can lose their security clearances for falling into debt. As a result, experts say, service members often avoid taking financial problems to their superior officers and instead resort to high-cost loans they don’t fully understand.

The Department of Defense, which defines which loans the Military Lending Act covers, has begun a process to review the law, said Marcus Beauregard, chief of the Pentagon’s state liaison office.

The act mainly targets two products: payday loans, usually two-week loans with annual percentage rates often above 400 percent, and auto-title loans, typically one-month loans with rates above 100 percent and secured by the borrower’s vehicle. The law caps all covered loans at a 36 percent annual rate.

That limit “did do a great deal of good on the products that it covered,” Holly Petraeus, the Consumer Financial Protection Bureau’s head of service member affairs, said in an interview. “But there are a lot of products that it doesn’t cover.”

Representatives from payday and other high-cost lenders said they follow the law. Some defended the proliferation of new products as helpful to consumers.

A 400 Percent Loan

In June 2011, when Levon Tyler, a 37-year-old staff sergeant in the Marines, walked into Smart Choice Title Loans in Columbia, S.C., it was the first time he’d ever gone to such a place, he said. But his bills were mounting. He needed cash right away.

Smart Choice agreed to lend him $1,600. In return, Tyler handed over the title to his 1998 Ford SUV and a copy of his keys. Tyler recalled the saleswoman telling him he’d probably be able to pay off the loan in a year. He said he did not scrutinize the contract he signed that day.

If he had, Tyler would have seen that in exchange for that $1,600, he’d agreed to pay a total of $17,228 over two and a half years. The loan’s annual percentage rate, which includes interest and fees, was 400 percent.

Tyler said he provided his military ID when he got the loan. But even with an annual rate as high as a typical payday loan, the Military Lending Act didn’t apply. The law limits the interest rate of title loans — but only those that have a term of six months or less.

In South Carolina, almost no loans fit that definition, said Sue Berkowitz, director of the nonprofit South Carolina Appleseed Legal Justice Center. The reason? Ten years ago, the state legislature passed consumer protections for short-term auto-title loans. In response, lenders simply lengthened the duration of their loans.

Today, plenty of payday and auto-title lenders cluster near Fort Jackson, an army base in Columbia, legally peddling high-cost loans to the more than 36,000 soldiers who receive basic training there each year.

Tyler’s loan showcases other examples of lenders’ ingenuity. Attached to his contract was an addendum that offered a “Summer Fun Program Payoff.” While the loan’s official term was 32 months, putting it outside both South Carolina’s regulations and the Military Lending Act, the “Summer Fun” option allowed Tyler to pay off the loan in a single month. If he did so, he’d pay an annual rate of 110 percent, the addendum said.

Michael Agostinelli, the chief executive of Smart Choice’s parent company, American Life Enterprises, told ProPublica he wants his customers to pay off their loans early. “They’re meant to be short-term loans,” he said. He also said that customers who pay on time get “a big discount.” In Tyler’s case, he would have paid an annual rate of 192 percent if he had made all his payments on time.

But Tyler fell behind after only a couple of payments. Less than five months after he took out the loan, a repo company came in the middle of the night to take his car. Three weeks later, it was sold at auction.

“This was something new, and I will never do it again,” Tyler said. “I don’t care what type of spot I get in.”

American Life Enterprises companies operate nine title-lending branches in Nevada and South Carolina. Agostinelli said loans to members of the military are rare for his companies but that service members might go to a title lender for the same reason anybody else does: They need money immediately and discreetly.

Loans similar to the one Tyler took out are broadly and legally available from stores and over the Internet. QC Holdings, Advance America, Cash America and Ace Cash Express — all among the country’s largest payday lenders — offer loans that fall outside the definitions of the Military Lending Act, which defined a payday loan as lasting three months or less.

The annual rates can be sky high, such as those offered by Ace Cash Express in Texas, where a five-month loan for $400 comes with an annual rate of 585 percent, according to the company’s website.

Ace Cash is among a number of payday lenders just outside the gates of Lackland Air Force Base in San Antonio, and it has four stores within three miles of Fort Hood in Texas.

A 2012 report on the Military Lending Act by the Consumer Federation of America found there had been no drop in the number of payday lenders around Fort Hood since the 2006 law went into effect.

Amy Cantu of the Community Financial Services Association of America, which represents the payday industry, said payday lenders are careful to screen out service members for their short-term products. But she acknowledged that payday companies may provide soldiers and their families with other types of loans. “We welcome more products in the market,” she said of the trend of payday lenders increasingly offering longer-term loans. “Options are good for consumers.”

[Credit Score Tool: Get your free credit report card and credit score from Credit.com]

Earned a Purple Heart, Lost a Car

Some lenders apparently haven’t bothered to change their loan products in response to the law.

A 2011 federal class-action suit filed in Georgia’s Middle District alleges that one of the largest auto-title lenders in the country, Community Loans of America, has been flouting the law. The suit names among its plaintiffs three soldiers who took out what appeared to be classic title loans. All agreed to pay an annual rate of around 150 percent for a 30-day loan. All had trouble repaying, according to the suit. One, an Army staff sergeant and Purple Heart recipient, lost his car. The other two managed to pay interest but almost none of the principal on their loans for several months.

The company was fully aware that its customers were soldiers, because they presented their military identifications, said Roy Barnes, a former governor of Georgia who is representing the plaintiffs.

Community Loans, which boasts more than 900 locations nationwide, argued in court that the transactions were not covered by the Military Lending Act because they weren’t loans but sales. Here’s how Community Loans said the transaction worked: The soldiers sold their vehicles to the company while retaining the option to buy back the cars — for a higher price. In early 2012, the judge rejected that argument. The case is ongoing.

Community Loans, which did not respond to numerous calls and emails, has been making loans to service members through businesses with various names.

Leading up to the gates of Fort Benning in Columbus, Ga., Victory Drive is crowded with lenders. Among them is Georgia Auto Pawn, a Community Loans of America storefront where one of the plaintiffs in the class action, an Army master sergeant, took out his loan.

Just another half-mile down the road is a lender advertising “Signature Loans for the Military.” The lender goes by the name of Title Credit Finance, but the parent company is Community Finance and Loans, which shares the same corporate address as Community Loans of America.

A billboard for Title Credit Finance promises to rescue borrowers: Showing a picture of a hamster on a wheel, it says, “Avoid the title pawn treadmill,” referring to customers who get caught paying only interest month after month.

Title Credit Finance offers installment loans, a product which, as the company advertises, does seem to provide “CASH NOW The Smart Way” — at least when compared to a title loan. Interest rates tend to be lower — though still typically well above 36 percent. And instead of simply paying interest month upon month, the borrower pays down the loan’s principal over time.

But the product comes with traps of its own. Installment lenders often load the loans with insurance products that can double the cost, and the companies thrive by persuading borrowers to use the product like a credit card. Customers can refinance the loan after only a few payments and borrow a little more. But those extra dollars typically come at a far higher cost than the annual rate listed on the contract.

At TitleMax, a title-lender with more than 700 stores in 12 states, soldiers who inquire about a title loan are directed to InstaLoan, TitleMax’s sister company, which provides installment loans, said Suzanne Donovan of the nonprofit Step Up Savannah. A $2,475 installment loan made to a soldier at Fort Stewart near Savannah, Ga., in 2011 and reviewed by ProPublica, for example, carried a 43 percent annual rate over 14 months — but that rate effectively soared to 80 percent when the insurance products were included. To get the loan, the soldier surrendered the title to his car. TMX Finance, the parent company of both TitleMax and InstaLoan, did not respond to multiple calls and emails seeking comment.

Another lender on Victory Drive is the publicly traded World Finance, one of the country’s largest installment lenders, with a market capitalization of about $1 billion and more than 1,000 stores around the country. World was the subject of an investigation by ProPublica and Marketplace earlier this week. Of World’s loans, about 5 percent, approximately 40,000 loans, are made to service members or their families, according to the company. Active-duty military personnel and their dependents comprise less than 1 percent of the U.S. population, according to the Defense Department.

Bill Himpler, the executive vice president of the American Financial Services Association, which represents installment lenders, said the industry’s products had been rightfully excluded from the Military Lending Act. The Pentagon had done a good job preserving soldiers’ access to affordable credit, he said, and only “tweaking the regulations here or there to tighten them up” was necessary.

[Related Article: CFPB Study: Payday Loans Create Cycle of Debt]

The Commander and the Collectors

It’s not known how many service members have high-priced loans. The Pentagon says it intends to conduct a survey on the matter soon and issue a report by the end of the year.

But some commanders, such as Capt. Brandon Archuleta, say that dealing with soldiers’ financial problems is simply part of being an officer. Archuleta, who has commanded soldiers in Iraq and Afghanistan, recalled fielding numerous calls from lenders trying to track down soldiers who were delinquent on debts.

“In the last 12 years we’ve seen military officers as war fighters, we’ve seen them as diplomats, we’ve seen them as scholars,” Archuleta said. “But what we don’t see is the officer as social worker, financial adviser and personal caregiver.”

While some soldiers seek help from their superior officers, many don’t. That’s because debt troubles can result in soldiers losing their security clearance.

“Instead of trying to negotiate this with their command structure, the service member will typically end up refinancing,” said Michael Hayden, director of government relations for the Military Officers Association of America and a retired Air Force colonel. “It’ll typically start out with some type of small crisis. And then the real crisis is just how you get that loan paid off.”

Soldiers who hide their debt often forego the military’s special aid options. Army Emergency Relief and the Navy-Marine Corps Relief Society offer zero-interest loans. But in seeking that help, a soldier risks alerting the commanding officer to his or her troubles, particularly if the sum needed is a large one.

Russell Putnam, a legal-assistance attorney at Fort Stewart, says he often finds himself making a simple argument to soldiers: “A zero percent loan sure as heck beats a 36 percent plus or a 25 percent plus loan.”

[Free Resource: Check your credit score and report card for free with Credit.com]

Image: iStockphoto

While it’s no secret just how problematic it can be to fall victim to identity theft, a recent study shows that people may be more exposed to the crime than they realize.

In all, the study counted more than 24 million Americans that have sensitive personal information about themselves listed online, at a total number of 290 million records, according to a new study by the online security firm Safe Shepherd. That comes to about 12 records per person nationwide. And unfortunately for those exposed, the information can be extremely easy to come by.

[Credit Check Tool: Monitor your credit score and activity for free with Credit.com]

“For $10, anyone is able to buy the personal information of another person, and this data is the tip of the iceberg,” said Robert Leshner, CEO of Safe Shepherd. “We estimate there [are] over 4 billion records available — these are just the ones we’ve found in private using our API. People have no idea how vulnerable their personal information is, and we want this to be a call to action. People need to know what’s out there about them, and we’re here to help.”

Texas residents were the most affected by this problem, with 22 million records exposed for 1.8 million people, the report said. Tennessee, Alabama, Kentucky and Ohio rounded out the top five for having the most exposed records. On the other hand, Hawaii topped the list for fewest records available on a per-person basis, while Montana and Wyoming tied for second, and South and North Dakota finished fourth and fifth, respectively.

Meanwhile, though California was actually fairly low on the list of affected states, the number of available records there, and the total number of exposed people, was actually the highest in the country, at nearly 46.7 million for close to 4.1 million people, the report said. Wyoming had the smallest number of files available (about 524,000), while North Dakota had the fewest affected residents (less than 48,000).

[Featured Products: Research and compare Identity theft protection plans at Credit.com]

For this reason, it’s vital that consumers keep a close eye on their financial accounts to ensure that their bank accounts and credit cards don’t get hit by thieves, and to check their credit reports and credit scores to be sure that criminals aren’t opening fraudulent lines of credit in their name.

“It’s imperative that each of us commit ourselves to a culture of monitoring,” said Credit.com’s Chairman and Co-Founder Adam Levin. “You can do everything right, but if you’re on the wrong database, at the wrong time, when the wrong person gains unauthorized access, then you’re done. It’s really no longer a question of if you get hit with identity theft, but rather when.”

Consumers can check their credit reports from each of the three major credit reporting agencies — Experian, Equifax and TransUnion — for free each year through AnnualCreditReport.com. And they can monitor their credit score for free once per month using Credit.com’s Credit Report Card. And should any questionable accounts be discovered, they should be reported to the institution that issued the account as soon as possible.

Image: iStockphoto

American college students tend to have a rough time with credit cards. Without much real-world personal finance experience, many spend beyond their means and graduate with credit card debt. And even for those who are lucky enough to complete school without debt, the threat continues to loom after graduation.

So how can recent graduates enjoy the convenience and security of credit cards without getting into trouble with debt? Here are a few tips:

1. Keep it simple. It is easy to get caught up in the hype promoting credit card perks and rewards, but these benefits are not worth it if they lead to debt. Instead, recent graduates should focus on finding cards with the fewest fees and the simplest terms.

[Related: Join Us for a Twitter Chat: Conquering Student Loan Debt]

2. Always pay your entire balance in full. This is the single most important piece of advice that can be offered. Those who pay their entire statement balance each month avoid costly interest charges, and there isn’t a better time to get in this habit than after graduation. And the lesson of living within your means, instead of on hoped-for future earning, applies well beyond credit cards.

3. Get a card where you bank. The easiest way for new grads to manage their credit card account is to open an account at the same institution where they keep their checking and savings accounts. Since most retail banks and credit unions offer credit cards, customers are able to manage all of their accounts from one website. Living within your means then becomes a simple matter of ensuring that the outstanding credit card balance is less than the funds in their checking account. In addition, paying bills is just a transfer of funds between two accounts within the the same institution.

4. Don’t get too many credit cards. Recent graduates should focus on managing their money responsibly, not acquiring new accounts. Therefore, limiting yourself to one or two credit cards is the best strategy until you’ve gotten in the habit of making sound personal finance decisions.

[Related Article: The First Thing to Do Before Applying for a Credit Card]

5. Start saving now. It’s a tough job market out there for new graduates, but many are still finding great jobs through their own perseverance. And when paychecks start coming in that dwarf their pre-college earnings, it is easy to get excited. But what many successful grads fail to appreciate is that a first job is likely just a stepping stone along your career. A once-promising position can disappear overnight due to myriad reasons, many of which will be out of their control. Graduates need to save their money for the time that they may be between jobs for several months. And if all goes well, those savings can eventually fund a retirement plan, or a down payment on a home mortgage.

New college graduates need to step into the world of credit cards with extreme caution. By taking a conservative path for now, they will build the high credit scores necessary to take advantage of the fancy reward cards later.

Image: iStockphoto

One of the world’s best-known tech companies has been working hard to broaden the scope of its mobile payment program for the past few years, and now will allow users to send money through the system, or their own bank accounts, via email.

Consumers will now have the option to attach money to messages sent through Gmail using Google Wallet, according to a recent announcement from Google. The payment system will work just like any other attachment — a picture, document, video, or more — they might affix to such a message, with users being able to click the “Attach money” option in the standard Gmail toolbar to send money to friends.

[Free Resource: Check your credit score and report card for free before applying for a credit card]

The system will allow users to send money with no fee at all as long as the funds come from either Google Wallet, or their existing bank accounts, the report said. However, they can also send money from debit or credit cards with a small fee — 2.9 percent of the transaction’s value, with a minimum charge of 30 cents — attached. Those receiving the funds, though, will never have to pay anything to do so. Moreover, those receiving the funds can do so even if they themselves don’t have a Gmail account of their own.

“This feature will be rolling out to Gmail users ages 18-plus in the U.S. over the next few months,” the report said. “Look for the ‘$’ icon in your attachment options. You can also get earlier access if your friends have the feature and send money to you.”

This is just the latest way in which Google will allow consumers to integrate their finances into the online accounts they use every day, as the company has also been trying to gain more traction with its mobile option for some time. Users are also able to send money to friends using the Wallet app on their mobile phones, the report said.

[Credit Cards: Research and compare credit cards at Credit.com]

In general, it’s believed that consumers will start to adopt these types of mobile wallet programs more heavily in the future, when near-field communications technology becomes more readily available in smartphones.

Currently, the iPhone does not support this type of technology, and only some Android-capable handsets are set up to enable the payments. However, experts believe the programs will be worth tens of billions of dollars annually within just a few years.

Image: iStockphoto

Hurricane season officially begins June 1, which makes the following question from a reader all the more timely. We thought it would also serve as a warning to other consumers who may face the same situation in the future.

I was living in southern Louisiana in 2008 and had to evacuate for Hurricanes Gustav and Ike, which both occurred back-to-back. During that time I had a bill from Progressive Insurance that I either never got or was lost in the chaos and it went to collections. I noticed this on my credit report in 2010 (I was deployed to Iraq throughout 2009) and paid the bill immediately. Is there anything that I can do to try to get this off of my report now? I tried to contact the collection company about the issue and they were very rude and offered no assistance.

[Related Article: Can You Really Get Your Credit Score for Free?]

Depending on the magnitude of the disaster, many victims may end up facing power loss, flooding or worse — for days or weeks at a time. This can often lead to mail delays, missing statements or lost payments. If the damage is severe enough, it can take months for disaster victims to recover — and in cases like Hurricane Katrina, many victims may even lose their lives. Understandably, your first priority is to make sure you and your family are safe and out of harm’s way.

If you’ve been a victim of a natural disaster, it’s important that you contact your creditors as soon as you’re safe and out of harm’s way. Creditors are often willing to work with you but only if you’re proactive and contact them when the disaster occurs, or shortly thereafter. Because the incident occurred more than two years ago, it’s unlikely that the creditor will work with you to remove the late payment from your credit report.

Many banks, creditors and service providers have special natural disaster policies and procedures designed to help their customers with account issues and payment delays. The key to getting help is to act quickly. Never assume that your creditors automatically know that you’ve been hit by a natural disaster and you’re stuck in the thick of it.

Lastly, it’s also important, if you’ve had a natural disaster disrupt your life, to check your credit reports regularly in case you did miss an important bill.  You can check your credit reports for free from each of the three major credit reporting agencies once a year through AnnualCreditReport.com. It’s also good to monitor your credit score for changes — and you can do that for free once a month using Credit.com’s Credit Report Card.

For more information on natural disaster preparedness and credit related issues:

• Don’t Let a Natural Disaster Hurt Your Credit Score
• Seven Solid Disaster Preparation Tips
• How Your Credit Card Can Help You In a Disaster
• A Credit Card Checklist for Natural Disasters

[Credit Score Tool: Get your free credit score and report card from Credit.com]

Image: Purestock

Millions of Americans have been working to reduce their debt loads since the end of the recession, and have largely been successful. That trend also continued into the first quarter of this year.

The total amount of household debt carried nationwide slipped $110 billion in the first three months of the year, largely due to major reductions in mortgages and credit card balances, according to the latest Household Debt and Credit Report issued quarterly by the Federal Reserve Bank of New York.

In all, Americans now owe $11.23 trillion, down 1 percent from the previous quarter and still well below the all-time record high of $12.68 trillion observed in the third quarter of 2008, indicating that many consumers nationwide are now trying harder to keep their obligations down and even cut into them more deeply.

[Related Article: The First Thing You Must Do Before Paying Off Debt]

Moreover, the rates of late payments on all loan types also fell across the country, and those 90 days or more behind on payments dropped to an overall average of 6 percent, from the previous 6.3 percent, the report said. That, too, was a substantial drop from the all-time peak of 8.7 percent observed in the first quarter three years ago.

“After a temporary deceleration in the previous quarter, the data suggest that household deleveraging has resumed its previous trajectory,” said Wilbert van der Klaauw, senior vice president and economist at the New York Fed. “We’ll look to see if this pace of debt reduction and delinquency improvements will persist in upcoming quarters.”

Only two types of debt saw increases in the first quarter, the report said. Student loan debt rose some $20 billion to a total of $986 billion, while auto lending jumped $11 billion to $794 billion. However, at the same time, the value of mortgage originations — that is, the funds given to people applying for home loans — rose for the sixth straight quarter to $577 billion. Nonetheless, balances on mortgages nationwide slipped some $10 billion.

[Credit Score Tool: Get your free credit score and report card from Credit.com]

Consumers trying to cut their debt obligations may want to first focus on reducing their credit card balances, which tend to carry far higher interest rates than other types of loans. They therefore can more quickly add to their balances if these debts are not addressed.

Image: iStockphoto

Mark Twain once said “Everybody talks about the weather, but nobody does anything about it.” But when it comes to credit card fees, there is actually a lot that credit card users can do to reduce or eliminate them. In fact, conscientious cardholders can avoid paying these fees altogether when they choose the right cards and use them wisely.

Here are the top five credit card fees, and how to avoid them.

1. Annual fee. It is true that many credit card issuers now charge an annual fee, but there are still plenty of free products available. And even when a card does have an annual fee, there are several clever ways to avoid paying it.

[Related Article: The First Thing to Do Before Applying for a Credit Card]

2. Foreign transaction fees. Of all the credit card fees, this might be among the more controversial ones. Credit card issuers exchange currency at interbank exchange rate, which is the best possible rate. And actually, they impose these charges on any transaction processed outside the U.S., even if it’s in U.S. dollars. Nevertheless, most banks choose to tack on a 3% foreign transaction fee to all of these charges. Thankfully there are now many cards without this fee, and several banks that never charge it. For example, Capital One, Discover, and the Pentagon Federal Credit Union (PenFed) have eliminated this fee on all of their products. All you need is just one of these cards to use in foreign countries, and you are good to go.

3. Late fees. In most cases, cardholders must take responsibility to make their payments on time in order to avoid this fee. Setting up automatic payments makes it impossible to forget a payment while paying electronically avoids the risk of having a check lost in the mail. In addition, there are a few cards that boast of no late payment fees. But be careful, it is important to know that ‘No Late Fees’ isn’t an excuse to pay late.

[Related Article: 5 Ways Your Credit Card Can Ruin Your Credit]

4. Cash advance fees. Most cards have a cash advance fee of 3% with a minimum of $5 or $10. And beyond cash advance fees, a higher APR will be charged on the cash withdrawal, and there is no grace period. To avoid paying this fee, never use a credit card for a cash advance. In fact, it is best to avoid this possibility by not creating a PIN code with your credit card.

5. Balance transfer fee. Most credit cards that feature 0% APR promotional financing on cash advances also have a 3% balance transfer fee. There are two ways to avoid this fee. First, consider the Chase Slate, the only card from a major issuer that has a promotional balance transfer offer and no balance transfer fee. But most of these offers also feature interest-free financing on new purchases. If you absolutely must finance a purchases with a credit card, use a 0% offer on new purchases before you do, and not a balance transfer offer afterwards.

Credit card fees may always be with us, but we don’t have to pay them. By taking the right steps to avoid paying unnecessary fees, you can enjoy these powerful financial instruments for free.

[Free Resource: Check your credit score and report card for free before applying for a credit card]

Image: iStockphoto