CREDIT SCORES....TAKE NO PRISONERS.......EAT THE WOUNDED..... WHY?

By
Real Estate Broker/Owner with People first then business! Ran Right Realty Riverside, Ca BRE LIC #636943

As we TRUDGE through this economy accepting the failure of Real Estate, the dispossessing of tens of millions of people from their homes, from historic job losses, failed stock market ventures, record bankruptcies, and Acts of God such as earthquakes, oil spills and hurricanes, IF THAT IS NOT ENOUGH.......Our systems have finally and I believe fatally been turned on US......or our fellow man...his family, wife & children.

We have successfully blemished and black-marked everyone who has defaulted on their line of credit. Oh, not just a slap on the wrist mind you, but when we punish, we do it right....all the way...

For about tens of millions of Americans....their MISTAKE or MISSTEP whatever you want to call it... will haunt them for the next 7-10 years hurting their ability to get competitive financing or any financing at all....

More than 40 million consumers have credit scores of 599 or lower which will effectively keep them not only out of the Real Estate market, but out of the Retail, car and luxury purchasing market for some time to come....

Millions have joined this latest statistic in just the last 2-3 years and there is plenty more expected.......

While it is true that FHA will forgive in 3-4 years so that you may re-purchase a home, between now and then remains a problem. Keep in mind that the ranks of people falling into this will keep FHA forgiving for many years to come. What do we do between now and then to help these people?

The walking credit wounded, the unemployed....where do they go and what do they do....? I am aware that unemployment will be harsh in my neck of the woods for 2-3 years. That means unstable Real Estate values, low or no growth and small businesses put at risk..

I am thinking that if we shorten the FICO scoring and record keeping periods to say.....4 years, then a man and his family who fell into today's recession can then effectively plan to come back within a reachable, hopeful time period. This can and should line up with the FHA policies as well.

I believe that 7-10 years is TOO MUCH to put on anyone. To have explain and be reminded of this for this length of time is counter-productive, time consuming, and doesn't encouraging or support solutions.

I believe that this is a supportive step to help correct and jump start not only the economy, but the Psyche of the buying public by tracking someones economic FALL for no longer than 4 years. That is sufficient time to tell the story of someone who failed at credit.

So, here is how it would work....during the 4 years, it is understood that no credit or expensive credit may or may not be available.  If you are in let's say your 3rd year, lenders and retailers would encourage you to keep clean for the next year and then apply to them for tiered financing or privileges. Getting started offers like competitive rates  (not punitive rates) and for those that maintain good habits....eventually can graduate to premium rates.

If you have ever made a mistake (whether public or private) where you wished for a second chance, this suggestion is based on those feelings. People with families and children desperately need another chance to make good. America should be that place and should encourage that thinking even more......

The results from this are very predictable....people will work hard to get back into the game. They will have goals to purchase homes, cars, and luxury items as well as plan educational and recreational futures. Heck, this could even discourage people from a life of crime giving them hope and to do the right thing and prosper.

I submit it for your consideration..............

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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Tish Lloyd 07/28/2010 06:51 PM
Topic:
ActiveRain Community
Location:
California
Tags:
fico scores
fha
credit reports
unemployment
foreclosure solutions
second chance
economy
consumers

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Rainer
147,103
Deborah "Dee Dee" Garvin
W. J. Bradley Mortgage Corp. - Carlsbad, CA
WJ Bradley Mortgage Corp.

Richie,  Great rant...LOL!  I might be PollyAnna, but I am willing to wager that I can get most people qualified for a new purchase in three to four years....with employment, income and re-established credit.  However, if someone just walks away....in a word, "screwed".  The lending criteria will mitigate, I predict...it always has.  Faith, my brother, faith!

Jul 28, 2010 06:28 PM #1
Rainer
370,054
Tish Lloyd
BlueCoast Realty Corporation - Wilmington, NC
Broker - Wilmington NC and Surrounding Beaches

Richie:  I couldn't agree with you more, and you have put into words what many of us believe. If the automobile and banking industries can be afforded a bailout, what about the Citizens of this great Nation!

I've suggested you post and will re-blog because I feel it has great merit and speaks to the common man; thanks!

Jul 28, 2010 06:50 PM #2
Rainmaker
1,249,580
Richie Alan Naggar Author PEARLS SERIES of books
People first then business! Ran Right Realty Riverside, Ca - Riverside, CA
on LIFE and LOVE plus Real Estate too!

Ahhh Deborah...my day is complete......and you have spoken well on the subject.....thank you

Tish...is a sweet dish and on behalf of all those that will be helped and touched....I thank you kindly.

Jul 28, 2010 06:55 PM #3
Ambassador
1,472,734
Liz and Bill Spear
RE/MAX Elite 513.265.3004 www.LizTour.com - Mason, OH
RE/MAX Elite Warren County OH (Cincinnati/Dayton)

Richie,

The punitive nature of the rules may go back well past our founding fathers to our original settlers.  Factor in the Puritanical beliefs that there would be punishment for sin, and failure to honor your financial obligations was a MAJOR sin... so no one gets off lightly, even today,  UNLESS you're a HUGE bank, auto industry or such other business with enormous political clout.  On one hand I do feel sympathy for those that had no hand in what happened to them, but the folks that just walked away for convenience sake?  Not sure there should be much mercy for them.  Their selfishness ultimately comes back to the rule abiding consumers to pick up their slack via either increased fees for loans or our taxes.

Jul 28, 2010 08:53 PM #4
Rainmaker
1,249,580
Richie Alan Naggar Author PEARLS SERIES of books
People first then business! Ran Right Realty Riverside, Ca - Riverside, CA
on LIFE and LOVE plus Real Estate too!

Liz and Bill....you made some good points and stirred my memory banks....the Jewish laws had a custom of forgiving debt every 7 years or people would be in bondage for the rest of their lives. Moneylenders were notorius for charging excessive fees causing many to enter into ruin for non-payment of interest due. I have no sympathy for the rich and well off as they do not need my help. I interact with the average guy in the street or the one trying to climb the ladder. Maybe even the guy who worked hard, saved his money and took the plunge only to choose the wrong time to do so...but his thinking was sound and the economy was not. I have done loan mods and short sales that pull on your insides. I do not like to see humans suffering in any which way....exception....when Justice is carried out.....and when necessary. I am reminded of the local food banks who give away generous, quality amounts of food and without fail, every time, there are people in that line who do not need the food as much as others do....they stand out and they even drive away in new cars not to mention their clothes and jewelry. Even our justice system is predicated upon letting a guilty person off instead of convicting an innocent person by mistake. Thus it takes 13 years to execute someone on death row (in California). There are no easy answers, but let us err on the side of the needy and know that people are receiving much needed help. I want to thank you for your most worthy contribution and thoughts to this post.......

Best

Jul 28, 2010 09:07 PM #5
Rainmaker
341,459
Elizabeth Bolton
RE/MAX Destiny Real Estate Cambridge, MA - Cambridge, MA
Cambridge MA Realtor

Hi Richie ~ I've been ranting about the credit reporting agencies for years.  There is little sense to it and the industry has been given far too much power.  All of this is greatly exacerbated by the invention of credit scores.

One of my big beefs with it for years has been the inordinate weight placed on a late payment or two and relative little penalty for those who actually don't repay their creditors. A person who has always repaid his obligations willl be raked over the coals for a late payment or two while the person who has walked away from his debt[s] is allowed to borrow after a fairly short wait. It is a game with large, illogical consequences.

Liz

Jul 28, 2010 09:11 PM #6
Anonymous
Anonymous
Anonymous

People should pay their bills.  People who generally do not, tend to fall behind again later in life again.  Credit scoring is very logical, in my opinion.

Jul 28, 2010 09:27 PM #7
Rainmaker
1,249,580
Richie Alan Naggar Author PEARLS SERIES of books
People first then business! Ran Right Realty Riverside, Ca - Riverside, CA
on LIFE and LOVE plus Real Estate too!

Liz...is.....wow...you brought a very interesting point....the system is flawed and not keyed for fairness or justice.....but to support the financial system......which we all knew going in. It is just so harsh when you get your reality lesson......it is a bitter pill. Thank you for some other things to ponder and wonder.....

Michael...is so right.....all debts to society should be paid, but not documented like a criminal rap sheet......it is too punitive. Michael, something I learned later in life that has allowed me to journey well.......and it is this....ALWAYS give people a way back......do not force them into corners or lead them into temptations....leave the door open...... for you may be on the other side of that door one day......life is that way my dear boy.......thanks for stopping in..

Jul 28, 2010 09:51 PM #8
Rainmaker
955,848
Kathy Clulow
RE/MAX All-Stars Realty Inc. Brokerage - Uxbridge, ON
CNE - ASP - SRES .... Uxbridge Ontario Real Estate

Richie - there is not enough hand ups for the little guy and too many hand outs for the big guy.

Jul 29, 2010 12:33 AM #9
Rainmaker
1,249,580
Richie Alan Naggar Author PEARLS SERIES of books
People first then business! Ran Right Realty Riverside, Ca - Riverside, CA
on LIFE and LOVE plus Real Estate too!

Kathy......thats pretty good.....I am going to use that one.......

Jul 29, 2010 12:46 AM #10
Rainmaker
379,456
Eric Kodner
Madeline Island Realty - La Pointe, WI
CRS, Madeline Island Realty, LaPointe, WI 54850 -

Liz is right..the credit scoring system needs a complete overhaul.  I have clients with zero net worth and no hope of buying who point to their "perfect" credit scores that are meaningless.  I see people with damaged scores who have been occasionally late but always paid, while others who completely default and boast about it suffer relatively little in comparison.

Jul 29, 2010 05:56 AM #11
Rainmaker
1,249,580
Richie Alan Naggar Author PEARLS SERIES of books
People first then business! Ran Right Realty Riverside, Ca - Riverside, CA
on LIFE and LOVE plus Real Estate too!

Eric....I agree with you both...it appears that the system was designed in favor of the lenders and does not cater to the individual or even care.....It is a brutal reminder of how the worlds business is conducted and you can either play or stay where you are.....You will not find the love of Jesus at work here..........

Jul 29, 2010 09:22 AM #12
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Rainmaker
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Richie Alan Naggar Author PEARLS SERIES of books

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