Bad Credit

Dear Liz: My wife and I sold our house and have to be out by the end of the month, but we can't find a place to live because of our bad credit. If we don't move out, we will lose the sale and still have to pay the real estate agent his commission. We've applied with about 65 landlords and each one checked our credit, which has caused our scores to fall further. We live on Social Security checks of $1,367 a month. We're in our 70s and not in good health and we don't need this stress.

Dear Liz: I just turned 70. Must I draw now from my IRA? I still work full time. I heard from one investment company representative that since I work, there is an exemption that I may not have to start withdrawals. Is this true? Answer: You can postpone withdrawals from your company's 401(k) plan past the typical required minimum distribution age if you're still working, but not from traditional IRAs. "An IRA owner must commence distributions from an IRA by April 1 of the calendar year following the year in which the IRA owner turns 701/2," said Mark Luscombe, principal analyst for tax research firm CCH Tax & Accounting North America, "regardless of whether they are still working or not. " With 401(k)

Your article, "Is There Life After Credit?" (by Jeannine Stein, Oct. 12), was only a partial and insufficient treatise on the subject. The article dealt chiefly with the irresponsible or abusive credit user. If not self-controlled, credit use can become a real problem. However, the established framework of the credit system is also abusive, and quite dishonest. The present credit system is a tyranny that would be illegal, if only people could realize that it actually supplants the legal system.

With home prices rising, interest rates falling and builders building, some prominent housing advocates are calling for a new kind of loan for buyers with lower incomes or bad credit. They'd like to call it the Dignity Mortgage, but it has another name -- one that's become more of an epithet since the housing crash: subprime. Applicants might include people caught in the early stages of the mortgage meltdown who have since rebuilt their finances, said Faith Bautista, who heads the National Asian American Coalition.

American International Group Inc., the largest U.S. insurer, lost more than $5 billion in the fourth quarter as bad credit ate into its investments, the company said Thursday. AIG has been thrust to the forefront of the credit crisis that is gripping financial markets because of contracts known as credit default swaps. These swaps pledge to cover missed payments on $579 billion in debt. AIG's swap portfolio lost $11.

State and U.S. authorities said Tuesday that they have moved to shut down a network of alleged con artists who tricked consumers into buying illicit remedies for bad credit. As part of the scam, con artists would solicit consumers with poor credit histories to buy instructions on how to establish new credit records, authorities said. The instructions sold for up to $399 on the promise that they contained legal secrets for clearing up blemished credit records.

Bankruptcies, foreclosures, short sales. Traditionally, would-be home buyers with one of these pockmarks on their credit wouldn't even think about applying for a new home loan until at least several years had passed since their financial misfortune. These financial setbacks remain on credit reports for seven years and can do a lot of harm.

Recently married, Erica Deutsch and her husband, residents of Silver Lake, have been planning to buy a house. But first, they had to try to expunge a 1996 bad credit report in Deutsch's name, which she discovered only in 1999. This story illustrates how, well before you plan to borrow money, it is wise to obtain your credit report. What you discover may, as it did in Deutsch's case, come as a shock.

Question: A longtime friend of mine recently moved to L.A. from New York. His credit score is miserable, so he's having a hard time finding an apartment. Would it be legal for me to rent an apartment in my name, sign the lease and let him live there? I understand I would be liable for damage or unpaid rent if he should decide to skip town. Answer: Honesty is always the best policy. It would not be legal or ethical to do what you ask. However, there is a simple solution to the problem.

Q: I recently looked at a Web site that claims to be able to erase bad credit, FBI records and driving records. Do you have any suggestions on researching the company to find out whether it is reputable? A: Perhaps you could try calling one of those psychic hotlines. Honestly, if you can't tell this is a fraud, then go ahead and hand over your money. You're going to lose it to some scam artist sooner or later, so you might as well get it over with.

Do you know the difference between credit rescoring and credit repair? Apparently, some lenders don't. As a result, they are refusing to fund mortgages that they otherwise would approve. At the same time, some title companies are starting to play hardball with borrowers who have recently undertaken home improvement projects. Even if the work is relatively minor, and even if it has been completed, the companies are refusing to issue title insurance policies, effectively stopping refinancings in their tracks.

Legislation aimed at regulating controversial Buy Here Pay Here used-car dealers, which charge steep interest rates and are quick to repossess vehicles, was approved by the state Senate Banking and Financial Institutions Committee. The bill, by Sen. Ted Lieu (D-Torrance), classifies the dealerships, which finance most of their own sales, as state-regulated lenders. "This bill regulates an unregulated industry," Lieu said. The bill cleared the committee on a party-line vote Wednesday, with five Democrats voting aye and two Republicans nay. The proposal now heads to the Senate Appropriations Committee and then to the Senate floor.

Saying California's working families are being exploited, state lawmakers are moving to impose tough new rules on a little-known segment of the used-car business that sells high-mileage cars to people with bad credit. The dealerships, known as Buy Here Pay Here lots, often sell their cars for far more than market value, impose interest rates as high as 30% on their loans and are known to aggressively repossess cars to boost profits by reselling them over and over. Their customers are typically people in low-paying jobs who need a car to get to work but can't qualify for conventional auto financing.

Dear Liz: My retired parents are in a financial crisis. They got behind on their credit cards while they were trying to pay the mortgage on their home of 41 years. That home is now in a short sale. An attorney has advised them to file for bankruptcy to discharge the credit card debt and any debt that might remain after the short sale. After the sale of the home, I need to relocate them to my state so that I can further assist them, but I'm not sure if any landlord will rent to them given their terrible credit history, which will look even worse after the bankruptcy.

Dear Liz: My wife and I sold our house and have to be out by the end of the month, but we can't find a place to live because of our bad credit. If we don't move out, we will lose the sale and still have to pay the real estate agent his commission. We've applied with about 65 landlords and each one checked our credit, which has caused our scores to fall further. We live on Social Security checks of $1,367 a month. We're in our 70s and not in good health and we don't need this stress.

Battered by unemployment and tighter lending standards, the credit scores of millions of Americans are sinking to new lows. About 25.5% of consumers — or 43.4 million people — had credit scores below 600 in April, according to FICO Inc. Historically, only about 15% of consumers — or 25.5 million — have had scores below that level, FICO said. Consumers with low credit scores will have increased difficulty obtaining credit cards and other loans, said Christian deRitis, director of credit analytics at Moody's Analytics.

Ameriquest Capital Corp. has spent hundreds of millions to build name recognition for its mortgage companies over the last two years -- inking high-profile deals with pro baseball, football and auto racing, and sponsoring the Rolling Stones on their current U.S. tour. The slogan for its Ameriquest Mortgage unit -- "Proud Sponsor of the American Dream" -- pays homage to its business of making home loans.

Here is how Quantum Fund, N.V., the legendary international investment fund run by renowned money-manager George Soros, made some of its money this year. It reportedly laid down about $900 million on the risky bet that Japanese stocks would take a dive, and staked about $2 billion on the gamble that the fall of the Berlin Wall would cause the German mark to soar. Both bets paid off. Then Quantum took some of its smart money to Burbank.

In the name of avoiding another catastrophic financial crisis, Congress and the Obama administration have crafted a new law thousands of pages in length and dealing with every nook and cranny of the banking business. But the financial-system meltdown had one root cause, and by now we all know what it was: Too many people, businesses and governments took on too much debt over nearly 30 years. Resolution of that debt remains the slow-motion crisis that threatens the health of the financial system and the economy.