What Generation Faces the Most Financial Hurdles?

A recent Experian study finds that, among millennials (ages 19-34), generation Xers (35-49), and baby boomers, and the greatest generation (ages 50-87), generation Y has the biggest job ahead of them in terms of repairing their credit. They also have the worst credit scores of all groups combined.

“Given the significance millennials play in financial services and the credit marketplace, it is crucial to understand this influential consumer segment and how they use credit as a tool,” says Michele Raneri, vice president of analytics and business development at Experian. “While this generation may not look like they are on the right track financially, it’s important to keep in mind that credit scores are built on credit experiences, and while this generation has been slower to use credit, they have plenty of opportunities to build a positive credit history.”

Source: Experian

 

26 Million Consumers Are ‘Credit Invisible’

The Consumer Financial Protection Bureau finds that one in every 10 adults – or 26 million people – do not have any credit history with a nationwide consumer reporting agency, according to their new report. Black consumers, Hispanics, and consumers in low-income neighborhoods are more likely to have no credit history with a national consumer reporting agency or have enough credit history to produce a credit score.

Consumers with a limited or nonexistent credit history face greater challenges in getting credit, such as in being able to qualify for a mortgage to buy a home, according to CFPB. Credit histories help consumer reporting agencies determine how likely consumers are to repay their debts and the information is used to produce credit reports and scores.

“Today’s report sheds light on the millions of Americans who are credit invisible,” says CFPB Director Richard Cordray. “A limited credit history can create real barriers for consumers looking to access the credit that is often so essential to meaningful opportunity—to get an education, start a business, or buy a house. Further, some of the most economically vulnerable consumers are more likely to be credit invisible.”

Source: Consumer Financial Protection Bureau

Tightening of Credit “Shuts Many Home Buyers Out”

The majority of renters — 73 percent — who live in single-family homes say that the challenges of getting a home mortgage is one of the main culprits keeping them from home ownership. About 33 percent point to their credit history as posing the biggest challenge in qualifying for a mortgage, while others are concerned about the tightening of credit that make it too difficult to qualify in general, according to the latest Fannie Mae National Housing Survey. 

Concerns about obtaining financing and growing concerns over the economy continue to plague the housing market, the survey finds.

“Consumers are more cautious due to concerns over employment and household finances,” says Doug Duncan, chief economist of Fannie Mae. “As a result, consumer spending, which accounts for about 70 percent of the economy, ground to a halt in the second quarter. Consumers are more hesitant to take on additional financial commitments, and a setback to confidence means a setback to the recovery of the housing market.”

Renters, however, seem to be getting the message that home ownership still makes more financial sense. Only 23 percent of renters living in single family homes said that renting makes more sense than buying a home.

But besides the tightening of credit, concerns over employment is also keeping many out of the market. “Dissatisfaction about the direction of the economy and related employment fears are damping demand to buy homes and slowing the recovery,” Duncan says. “People who believe owning is a better deal than renting are nonetheless planning to rent, at least until things improve.”

More information at source: “Credit Concerns Keep Renters From Buying,” RISMedia 8/16/11

Other articles relating to the Sacramento and Placerville, California regions at: www.sierraproperties.com

“Foreclosures” Costing Some Borrowers Their Jobs

Foreclosure can mean more than just a blemish to borrowers’ credit record–it can jeopardize their job too. Federal contractors and employees are finding a foreclosure can cost them their federal security clearance and ultimately their job. It can take years to restore a security clearance so they can work again too.

Many employees who have security clearances are required to report mortgage defaults and other financial issues to their company’s or agency’s security officer.

About 70 security clearance appeals involving foreclosures and other distress sales were reported from January 2006 through January 2010 by the U.S. Defense Department’s Office of Hearings and Appeals. Of those 70 cases, 62 clearances were revoked or denied, according to reports.

“Losing your security clearance is like losing your most marketable aspect for employment,” Travis John, a real estate broker, told the Orlando Sentinel.

David P. Price, a lawyer who specializes in security clearance cases, says he’s seen financial related security clearance problems double in recent years.

For borrowers at risk of foreclosure, they usually have more success at keeping their security clearance if they can prove that their mortgage was a sensible loan that did not overextend them at the time and also show they’ve tried to find a work-out solution, such as a short sale. However, Price says that even a short sale doesn’t put borrowers in the clear since it can take a long time to complete such transactions and increase the chance of a foreclosure.

Source: “Foreclosures Put Workers’ Security Clearances at Risk,” Orlando Sentinel (June 7, 2011)

Other articles relating to the Sacramento and Placerville, California regions at: www.sierraproperties.com

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Landlords Say They’ll Rent to the Foreclosed!

Eighty-two percent of independent landlords say they would rent to someone who had lost a home in foreclosure, if the applicant had otherwise good credit, according to a new survey by The National Association of Independent Landlords.

“Landlords typically won’t rent to applicants with poor credit–and a foreclosure will absolutely slam someone’s scores,” says Tracey Benson, president of The National Association of Independent Landlords. “The exception is when they see people who have paid their bills their whole life, but lost their job, can’t meet their mortgage and must hand their keys back to the bank.”

Benson says that applicants with a foreclosure aren’t necessarily bad credit risks. “Often, they lost their jobs and homes through no fault of their own,” she says.

As such, “because of this abundance of defaults, there is a greater need for rental property, so landlords should carefully vet applicants,” Benson says, adding that landlords should do a thorough background check to determine whether defaulting applicants were a victim to financial woes or following a lifelong trend of not paying bills.

Source: “Most Landlords Say They Would Rent to People Who Lost Homes to Foreclosure, The National Association of Independent Landlords Finds,” PRNewswire (April 20, 2011) 

Other articles relating to the Sacramento and Placerville, California regions at: www.sierraproperties.com

 

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