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  Housing Problem Solvers Company


1201 West Peachtree Street, Ste. 2300,

 Atlanta, GA,30309

Housing Problem Solvers


Low-income Renters Struggle to Find Affordable Housing

Posted on October 3, 2013 at 11:45 PM Comments comments (78)
The foreclosure crisis has been a four-year nightmare for many homeowners, more than 3 million of whom have lost their homes. Many of these ex-homeowners are middle class people with jobs and safety nets, and have become renters or traded down for more inexpensive homes after losing their primary residences.But for the very poor, options are limited, and the situation is dire, according to a report out Wednesday from the National Low Income Housing Coalition.Using data from the Commerce Department’s American Community Survey, the advocacy group found that for every 100 extremely low income families, there are only 30 affordable units available for rent nationwide. The number of these ELI renters grew by 200,000 between 2009 and 2010, to 9.8 million, or nearly a quarter of all the renters in the U.S. Extremely low income renters are defined as families that earn less than 30% of the median income in their metropolitan area. These people typically depend on government assistance to buy food and health care as well. But the danger with these types of renters is that after paying their rent, these households will have less than 50% of their income remaining to spend on food, medicine, transportation and childcare.“What we’ve seen is a decline in the homeownership rate since 2008, and we’ve seen rent being pushed up,” pushing market-rate housing out of reach for an increasing number of people, said NLIHC chief executive Sheila Crowley in an interview. The gap between supply of affordable rental housing and demand from extremely-low income borrowers exists in all 50 states, but the problem is worst in Arizona, California, Florida, Nevada, Oregon, Texas, Utah and Michigan. “Where you have the biggest problems is where you have the biggest difference between rich and poor,” Ms. Crowley said.The imbalance comes at a time when the federal government, hobbled by budget deficits and deadlocks in Congress, is unlikely to increase its support for poor renters. In its projected 2013 budget, the U.S. Department of Housing and Urban Development showed that it was requesting just $2 billion for the production of affordable housing for low- to extremely low-income families and disabled people, and reported that there is a $26 billion shortfall in the agency’s capital needs.“There’s no doubt that there’s a gap, and it’s significant, and it’s getting worse,” said Becky Koepnick, an advisor to HUD Secretary Shaun Donovan. About 2 million low-income renters have gotten housing through the Low Income Housing Tax Credit, a Treasury and IRS program launched in the mid-1980s, Ms. Koepnick noted, but that program is not targeted at the lowest-income renters that the NLIHC is focusing on.The bottom line is, as more and more low-income people demand inexpensive rental housing, the market and the government are increasingly unable to meet their needs, the NLIHC says.Of course, many low-income people turn to government programs other than publicly-built housing, such as rental assistance and housing voucher programs. But the other big fear is that more people will fall into homelessness or be forced to double up with family members or live in substandard conditions.The NLIHC also called for funding to be given to the National Housing Trust Fund, a HUD program established in 2008 to produce more low-income housing that has yet to be funded.

Housing Recovery Seems Still on Track

Posted on September 25, 2013 at 4:25 PM Comments comments (110)
MultimediaGraphicHousing’s Rise and Fall in 20 CitiesEnlarge This ImageSteven Senne/Associated PressA house in Walpole, Mass. Home values rose 12.4 percent in July.Enlarge This ImageJustin Sullivan/Getty ImagesAn open house at a home for sale in San Francisco. Home prices soared 24.8 percent in San Francisco from July 2012 to this July.For now, though, builders are building, sellers are selling and mortgage lenders are less nervous about extending credit to buyers.The heady price increases in the first half of the year slowed a bit in July, according to data released on Tuesday.But in the face of pent-up demand and emboldened consumers, home values were still heading upward at a healthy pace, rising 12.4 percent from July 2012 to July 2013, according to the Standard & Poor’s Case/Shiller home price index, which tracks sales in 20 cities.A separate index of mortgages backed by Fannie Mae and Freddie Mac showed an 8.8 percent gain in prices over the same time period.Two national homebuilders, Lennar and KB Home, reported significant revenue growth and profits in the third quarter. Lennar said its third-quarter earnings rose 39 percent over the third quarter of last year, and KB said its profit had increased sevenfold.“We still have a lot of young people that are going to start moving out and forming households and we’re going to have to find housing for them,” said Patrick Newport, the chief United States economist for IHS Global Insight. “There are shortages of homes just about everywhere.”Higher home prices help the economy not just by strengthening the construction and real estate industries, but by making homeowners feel wealthier and more likely to spend.While the number of Americans who lost the equity in their homes in the housing crash set records, rebounding prices have helped nudge more and more households back above water. According to CoreLogic, 2.5 million households regained equity in their homes in the second quarter.Mr. Newport said the full effects of higher mortgage rates had probably not shown up in the numbers yet.Rates increased from about 3.4 percent on 30-year fixed-rate loans in January to about 4.4 percent in July, according to a survey by Freddie Mac, and many loans were written at even higher rates this summer. But they remain well below typical rates in recent decades, and mortgage borrowing costs have already eased a bit from their recent peak now that the Federal Reserve opted last week not to begin a wind-down of stimulus measures.Rising rates may not torpedo the housing market recovery, but they have made refinancing much less appealing.The number of mortgage applications for purchases has climbed by 7 percent over the last year, according to the Mortgage Bankers Association, but refinance requests have fallen by 70 percent since early May.As a result, banks have laid off thousands of workers in their mortgage units. Citigroup laid off 1,000 workers from its mortgage business, it said on Monday, following Wells Fargo and Bank of America, which have both done layoffs in recent months.Refinancing also gave households more spending power as it lowered monthly payments.Analysts offered a cornucopia of reasons for the continuing strength of the housing market: people rushing to buy before prices and interest rates increased further, a gradual relaxation of lending standards, an uptick in inventory, a smaller share of foreclosures in the sales stream and large-scale buying by investors looking to put houses on the rental market.Still, some analysts questioned whether fundamental factors like job and wage growth would sustain the market and restore first-time buyers to the market. Others warned of a lurking shadow inventory.“While recent results have been considerably better than those seen earlier in the cycle, and also better than we had anticipated, we have not given up on the argument that a large supply overhang of existing homes (factoring in all those in foreclosure or soon to be) promises to keep pressure on prices for some time,” Joshua Shapiro, the chief United States economist for MFR, wrote in a note to investors.Once the backlog of demand is absorbed, continued strength will depend heavily on consumer confidence. That’s where politics, including a looming battle over federal spending and the debt ceiling, could stall improvement.“The real test will come over the next few months, given the sharp drop in mortgage demand and the potential for a rollover in consumers’ confidence as Congress does its worst,” wrote Ian Shepherdson, an economist with Pantheon Macroeconomics.On Tuesday, the Conference Board, a New York-based private research group, reported that Americans’ confidence in the economy fell slightly in September from August, as many became less optimistic about hiring and pay increases over the next six months. The September reading dropped to 79.7, down from 81.8 the previous month, but remained only slightly below June’s reading of 82.1, the highest in five and a half years.Year-over-year prices were up in all 20 cities tracked by Case/Shiller, but the gains varied widely, from 3.5 percent in New York and 3.9 percent in Cleveland on the low end to a frothy 24.8 percent in San Francisco and 27.5 percent in Las Vegas.The month-to-month increase in the Case/Shiller index slowed to 0.6 percent, after gains of 1.7 percent in April, 0.9 percent in May and 0.9 percent in June.Asked if the slowdown in growth was alarming, Robert Shiller, the Yale economist who helped develop the home price index, said no. “I’m not worried,” he said in an interview with CNBC. “I think that would be a good thing.”His greater worry, he said, was “more about a bubble — in some cities, it’s looking bubbly now.”Still, Mr. Shiller said, even the bubbliest markets were still well below their peak.Other analysts raised the same point. Prices in San Francisco are still only at 2004 levels, cautioned Steve Blitz, chief economist for ITG Investment Research. “For those who bought and still hold homes in 2005, ’06 and ’07, they may still be in a negative equity position, depending on the terms of their mortgage,” Mr. Blitz wrote. “Don’t let those double-digit year-over-year percentage gains bias opinion to believe all is all right.”A

Buyers to Pay a Premium for New Homes?

Posted on September 25, 2013 at 4:18 PM Comments comments (315)

Many of the nation’s largest builders are raising their prices, even as existing-home prices are beginning to moderate. For example, homebuilder KB Home has had average prices for its new homes soar 23 percent annually. Lennar has raised the average price on its new homes by 16 percent annually in the third quarter, now averaging $291,000. The average price of all existing homes was $258,000, according to the National Association of REALTORS®. "The big picture is that new-build house prices fell less than existing house prices during the crash and have risen more during the recovery," says Paul Diggle at Capital Economics. While prices are up for new homes, both Lennar and KB Home announced this week a weaker pace for new orders. Lennar officials blamed the slowdown on rising mortgage rates and the double-digit percentage increases in home prices this year. “We see strong, viable, fundamental demand out there, but it has cooled a little bit,” Rick Beckwitt, Lennar’s president, said during a recent earnings call. “As a result, from a pricing standpoint, we have selected some of our inventory and increased incentives associated with that inventory.”Analyst Ivy Zelman doesn’t believe new home prices are inflated or priced at an abnormal premium over existing homes. "In Arizona, California, Florida, and Nevada, we conclude that prices are still 15 percent lower than the 2006 peak, which excludes an adjustment for an increasing size of new homes and would be further compounded by seven years of inflation,” Zelman says. 

List of Improving Housing Markets Hits Record High

Posted on September 10, 2013 at 9:54 PM Comments comments (115)
List of Improving Housing Markets Hits Record HighDAILY REAL ESTATE NEWS | TUESDAY, SEPTEMBER 10, 2013The number of housing markets listed as "improving" on the National Association of Home Builders/First American Improving Markets Index reached a record high this month of 291. The index, which started two years ago, gained 44 markets from August to September. The measure of improving housing markets had been declining for several months, but a change in the method to compile the index's data may partially explain this month's rise.  "The dramatic increase in markets qualifying for the [improving market index] in September was partly due to a recent improvement in the way that Freddie Mac measures home prices, which resulted in stronger gains than previously reported," says NAHB chief economist David Crowe. "Even so, the broadened list of metros on the [index] continues to demonstrate the slow but steady gains that individual housing markets are making to bolster the national outlook."NAHB Chairman Rick Judson says slightly more than 80 percent of the 361 metros tracked by the index have shown consistent growth in three key measures for at least six consecutive months: housing permits, employment, and home prices."While there is still plenty of room for growth, this is an excellent indication of how the housing recovery has begun to take hold across more geographic areas,” Judson says.Among some of the metros added to the list in September were Macon, Ga.; St. Cloud, Minn.; Brownsville, Texas; Spokane, Wash.; and Milwaukee. All 50 states have at least one metro on the list.

Treasury Department Allow States To Divert Foreclosure Fraud Fund to Demolition

Posted on September 6, 2013 at 8:38 PM Comments comments (130)
In the wake of last year’s multiple foreclosure fraud and abuse settlements and ongoing dispersion of housing assistance funds from the Troubled Asset Relief Program (TARP), many former homeowners thought that they would be receiving some form of compensation for wrongful foreclosures and poorly-conducted foreclosures, loan modification attempts, and short sales. Many others hoped that the money would be used, as directed by the settlements and TARP itself, to help them work out a way to keep their homes. Few have received such compensation or assistance, however, and even fewer should continue to look for it thanks to a recent decision from the U.S. Treasury Department that will allow states to use monies from these massive settlements and programs to demolish homes instead of helping people stay in their distressed homes[1].Michigan and Ohio have already altered their contracts with the Treasury so that they can use foreclosure prevention funds for demolition. Mary Townley, director of homeownership at the Michigan State Housing Development Authority, said that the diversion of funds will actually help more homeowners remain in their homes since “many of these communities had so many blighted properties that homeowners would throw their arms up and say… ‘Why am I doing this?’” Michigan has diverted $100 million (20 percent of its Hardest Hit Fund money) to demolishing 7,000 houses.Over protests from housing advocates who insist the money should have gone to help homeowners who did care about staying in their homes, the demolition process has already begun in Detroit, Michigan, where areas that still have potential for growth are being targeted for demolition funds. “You’ve got to remove blight in order to bring in new growth,” said state senator Carl Levin, adding that in his view, “supporting homeowners means you’ve got to remove the blight in their neighborhood.” Levin admitted that demolition is a “creative use” of the Hardest Hit funds, but said that in his mind, it is a necessary and “very positive use”[2]. Homeowners living in the areas targeted for demolition hope that removing blighted homes will encourage builders to erect new structures in the area and new homeowners to buy.

HUD Charges FiFth Third Bank & Mortgage Companies with Disability Discrimmination

Posted on August 27, 2013 at 11:44 AM Comments comments (357)
When Fifth Third Bank, Fifth Third Mortgage Company, and Cranbrook Mortgage Corporation required a couple on disability to prove, via physician’s letter, that they could be expected to continue to receive the disability payments that enabled them to pay their mortgage, the lenders say they were simply doing due diligence on a refinancing application. The U.S. Department of Housing and Urban Development (HUD) says that they may actually have been engaged in discrimination against persons with disabilities and in violation of the Fair Housing Act, however, because they required the couple to provide more and different evidence of their ability to pay than they would have had to had they not been disabled. The couple ultimately did not provide a physician’s letter and were denied the refi[1]. HUD believes that the lenders were unjustified in denying the refinancing application because at the time of the couple’s loan application Fifth Third’s underwriting policy “explicitly specified a physician’s statement as appropriate evidence for establishing continuance of disability income.” This, HUD argues, goes beyond the requirements placed on other applicants for verifying an applicant’s income amount and source.Fifth Third declined to comment on the charges. HUD’s acting assistant secretary for fair housing and equal opportunity, Bryan Greene, said regarding the lawsuit that “persons with disabilities should not have to meet higher mortgage qualification standards because they rely on disability insurance payments as a source of income”[2]. Do you think Fifth Third should be facing a lawsuit? How should disability income be verified fairly?

Fannie Mae Short Sales Reported as Foreclosures

Posted on August 27, 2013 at 11:34 AM Comments comments (40)
If you went through a short sale on your Fannie-Mae-insured loan only to find that your credit report showed a foreclosure in your recent history, the GSE says that now the issue should be resolved. According to a report from the government-controlled Fannie, “the standardized computer software the credit industry was relying on lacked a specific code for short sales.” As a result, when Fannie Mae reported short sales to credit firms, those short sales were recorded as foreclosures. The GSE requires a seven-year waiting period before borrowing again in the wake of a foreclosure and only a two-year waiting period on a short sale, so many homeowners who opted for short sales have been surprised when their loan applications on new home purchases were denied based on past foreclosures[1].According to the GSE, a new policy for lending will allow lenders to “disregard the erroneous [foreclosure] codes when processing new mortgages.” This, the GSE believes, will enable buyers with past short sales to circumvent the computer glitch and proceed with their new loan origination[2]. Of course, complains short sale advocate Pam Marron, the change will not necessarily resolve lenders’ bias against short sellers, since, Marron says, often banks assume that homeowners conduct a short sale just to get out of paying their mortgages. She adds that this bias is unfair and inaccurate, saying, “there was all this press about strategic defaulters, and I could not find any strategic defaulters.”

Fannie Could Curb Low-Down Payment Loan Purchase

Posted on August 19, 2013 at 6:19 PM Comments comments (92)
Fannie Mae is in discussions to curb its purchases of mortgages that require a minimum down-payment of 3%, according to people familiar with the discussions.Fannie never stopped accepting purchases of loans with 3% down payments, even after lending standards were ratcheted up following the housing bust. But many lenders stopped offering them, in part because they weren’t able to obtain mortgage insurance for those loans, which Fannie requires.In recent months, however, a series of changes in the mortgage market have led to an uptick in low-down-payment loans available for sale to Fannie. That prompted a review of the company’s lending policies, and officials are said to be working on a plan to limit the company’s purchases of these loans. The changes aren’t being made because of immediate problems with loan performance, according to people familiar with the discussions.Freddie MacFMCC -3.94% stopped backing such mortgages several years ago and requires a minimum 5% down payment. Any loans without a 20% down payment at both companies must have mortgage insurance or some other type of so-called “credit enhancement.”One proposal would be to continue purchasing only those sold by housing-finance agencies, which typically require home buyers to complete financial counseling. “We regularly review our standards and guidelines,” said Andrew Wilson, a Fannie Mae spokesman. “Any changes to our guidelines will be communicated to the market at the appropriate time.”Even though Fannie hasn’t bought many of these loans, low down-payment loans have remained widely available throughout the housing downturn largely due to federal agencies, including the Federal Housing Administration, which insures mortgages with down payments of 3.5%. Veterans and rural homeowners can still obtain loans without any down payment through separate federal agencies, though they face some restrictions.But Fannie is seeing more low-down-lending headed its way in part because the FHA has recently increased rather sharply the insurance premiums charged to borrowers. Private mortgage insurance companies, meanwhile, have begun to remove certain restrictions, or so-called “overlays,” that had limited the loans to a smaller group of borrowers. Better terms and growing availability of private mortgage insurance has made it possible for more lenders to offer low-down-payment mortgages that can be sold to Fannie.Fannie doesn’t disclose how many home-purchase loans it purchases or guarantees with 3% down payments, but private mortgage insurers have reported an uptick in their insurance volumes of those loans. MGIC Investment Corp. said its 3%-down loans accounted for around 5% of its business during the second quarter, or around $480 million. That was up from 2.8% in the year-ago period, or around $165 million.Some mortgage bankers say the change being considered by Fannie wouldn’t be that disruptive to the market because the FHA will continue to accept loans with 3.5% down payments, even though those loans are more expensive. “An awful lot of people who have only got 3% down would be advised to save another 2%. That’s an old hard-headed answer, but it’s true,” said Lou Barnes, a mortgage banker in Boulder, Colo.The higher insurance premiums that borrowers have to pay on a mortgage with a 3% down payment, versus one with a 5% down payment, is often enough to warrant “waiting six months or a year to save up the extra down payment,” he says.Loans with little or no down payment helped fuel the housing bubble, though many of those loans failed because of other features, such as resetting interest rates that sent payments higher or because borrowers weren’t required to document their incomes. Today, low-down-payment loans remain limited to a handful of products, such as 30-year, fixed-rate mortgages, and they require careful underwriting of a borrower’s income and assets.

Second Chance for Foreclosed Homeowners

Posted on August 19, 2013 at 6:05 PM Comments comments (116)
Potential homeowners who fell on hard times during the recession are being offered a lifeline back into the housing market, via the Federal Housing Administration.According to a letter sent to mortgage lenders, the FHA said it would offer mortgage insurance to borrowers who, during the recession, filed for bankruptcy or lost their homes through a foreclosure or short-sale proceeding.The insurance is now available to those who can prove they are no longer financially compromised — and met all other FHA requirements."FHA recognizes the hardships faced by these borrowers, and realizes that their credit histories may not fully reflect their true ability or propensity to repay a mortgage," the letter says.Besides the burden of proof on the borrower to demonstrate a recovery from the "economic event," the potential homeowner must also complete housing counseling. This event would need to result in a minimum loss of 20% of the household income.The FHA is requiring lenders to verify at least a year has passed since the foreclosure and the economic event is responsible for the loss of the home or bankruptcy.

Don't Fall for These 7 Credit Repair Myths

Posted on August 16, 2013 at 3:40 PM Comments comments (146)
Thanks to the recession and its aftermath, millions of people suffered foreclosures, bankruptcies and job losses that tanked their credit. Given how much bad credit can cost -- in higher interest rates, more expensive insurance premiums and bigger deposits for utilities -- many want to rehabilitate their credit as quickly as possible.But real credit repair doesn't happen overnight, and it can take even longer if you fall for any of these myths:

No. 1: Credit bureaus have to investigate disputes within 30 days.Federal law typically requires credit bureaus to investigate consumer complaints of errors on their credit reports and report the results of that investigation to the consumer within 30 days.
Check your credit report
But there's a pretty big exception. Under the Fair Credit Reporting Act, bureaus don't have to investigate disputes they consider "frivolous or irrelevant.""The bureaus can look at it (the dispute) and refuse to investigate. They can even do it based on the format of the dispute letter," said Barry Paperno, community director at and a former operations manager at Experian, one of the three major credit bureaus.Credit firms often reject the techniques used by many credit repair firms, such as using cookie-cutter forms, disputing the same information over and over again or disputing a bunch of items. You can reduce the chances of your dispute being discarded out of hand, Paperno said, by using your own words when writing disputes and including copies of relevant documents that support your position.Liz Weston

No. 2: Disputing information will remove it from my credit reports.If the credit bureaus do investigate your disputes, they won't remove the negative information in question while they do so. The bureaus wait to hear back from the company that supplied the information about whether it's accurate.Sometimes these companies don't respond to disputes in time. In that case, the credit bureau may delete the disputed information.Credit repair firms often claim victory when these deletions happen, but if the creditor doesn't remove this data from its own records, it could pop back up on your reports, said Gerri Detweiler, another blogger and author of "Reduce Debt, Reduce Stress: Real Life Solutions for Solving Your Credit Crisis."Understand your credit scoresFEATUREDTOP PICKS
  1 of 3  "They last long enough for (the credit repair firm) to cash your check," she said.Temporary deletions are a problem even when you get a legitimate error removed, Paperno said. That's why it's important to check your credit reports frequently and keep paperwork that proves you're in the right.

No. 3: Credit repair firms know secret ways to fix things.FTC's page on credit

The reality is that people can and do get errors removed. A recent FTC study found that four out of five consumers who filed disputes "experienced some modification to their credit report."
Even if you don't get caught, you often wind up with a completely blank credit history. Depending on the state of your current credit, you may find it harder to get credit with no credit history than with a troubled one.

No. 4: Paying off an old debt will help my credit scores.Some people think that paying off a debt somehow removes it from their credit reports. That's not true. But even people who understand that may assume that reducing the balance of a past-due debt to zero will help their credit scores.That's often not the case, said Paperno, who also worked for FICO, the leading credit score creator, for 12 years. If the debt shows up as a collection account, the balance owed is usually irrelevant for FICO credit scoring purposes, so paying it off won't help unless you convince the collection agency to stop reporting the debt -- something that's typically hard to do, Detweiler said.Balances matter more when the debt is still held by the original creditor. Even then, though, the credit scoring formula starts to ignore the balance information after a certain length of time. FICO doesn't disclose how long that time might be."Paying off an old charge-off isn't going to help you like (paying off) a new one," Paperno said.If you're trying to improve your credit scores, consider paying off your most recent defaults first and see how much that moves your numbers. (If your accounts are all current, pay down your credit card debts to improve your scores.)

No. 5: It's impossible to get errors removed from my credit reports.
As I have reported, the credit reporting system is highly automated and favors the "data furnishers" the creditors and other companies reporting information about you. Some people with legitimate beefs get ignored or trapped in a seemingly endless loop of information being deleted and then reappearing.

It's no wonder so many people are discouraged about the possibilities of fixing problems in their credit reports.
The reality is that people can and do get errors removed. A recent FTC study found that four out of five consumers who filed disputes "experienced some modification to their credit report."
"The dispute process is not fun," Paperno said, "But you can get erroneous information removed."
Understand your credit scores
  1 of 3  
If the error recurs, you can take the dispute directly to the creditor. If that doesn't work, you can sue the credit bureau in small claims court or take your case to a higher court, perhaps with the help of a credit-savvy attorney (you can get referrals from the National Association of Consumer Advocates).

No. 6: A new credit identity will help me get approved.
If a credit repair firm is offering you a fresh start via a new credit identity, you know for sure you're dealing with scam artists.
Sometimes these outfits are selling stolen Social Security numbers, often swiped from children who haven't started using credit yet. Other times they encourage you to apply for a federal employer identification number or EIN and use it in place of your Social Security number in credit applications. Either way, you're committing fraud, according to the FTC. When you use someone else's Social Security number, you're committing identity theft as well.
Even if you don't get caught, you often wind up with a completely blank credit history. Depending on the state of your current credit, you may find it harder to get credit with no credit history than with a troubled one.
No. 7: Credit repair is always a scam.
Given all the nasty things you've just read about credit repair outfits, you might conclude all of them are rip-off artists. But that's not actually true.
"They're not all bad 100% of the time," is how Paperno put it in a less-than-ringing endorsement.
Detweiler typically doesn't recommend hiring someone, but understands why people do.
"Reading a credit report can feel like reading something in a foreign language you're not fluent in," she said. "You get the gist of what they are saying, but you feel like you're not quite sure you understand it completely, and you may be missing out on important subtleties."
You may be able to educate yourself using the following resources:
  • For $30, Experian Credit Educator offers a 20 minute, one-on-one phone call with an agent who offers "a detailed walk through your credit repair components" and "insight for future decisions in credit management."
  • Credit counseling agencies sometimes offer credit report reviews. You can find an agency near you via theNational Foundation for Credit Counseling.
  • Buy your FICO score at for $20 and you'll get a report explaining the reasons behind the number as well as suggestions for improvement.
If you still want to hire a credit repair company, get referrals from mortgage professionals or real estate agents and check the companies out with your local Better Business Bureau. Don't sign up with any company that wants to charge you in advance or fails to provide you with a written contract.
The federal Credit Repair Organization Act makes it illegal for credit repair companies to lie about what they can do for you or to charge you before they've performed their services. They must detail in writing what they plan to do and explain your legal rights, offer you three days to cancel without charge, tell you how long it will take to get results and detail the total cost you'll pay.
There's clearly a lot of fraud in the credit repair field. There are plenty of companies that will charge you a lot to do very little, or nothing at all. But some can provide a legitimate service, Paperno said, by helping people through a process that they could do themselves, but may not want to.
"I can change my oil," Paperno said. "That doesn't mean I wouldn't want to hire someone to do it for me."

Liz Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "The 10 Commandments of Money: Survive and Thrive in the New Economy" (find it on Bing). Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. Join the conversation and send in your financial questions on Liz Weston's Facebook fan page.