Thank Goodness He Didn't Try To Finance A Car!

Michael Jackson’s credit score: 564

by Karen Datko

TMZ, the news source for all things Michael Jackson, expressed amazement that MJ had terrible FICO scores.

"Here's a shocker -- Michael Jackson had an abysmally low credit score," said a story at the Web site. In 2007, TMZ says it has learned, Jackson's scores from the three major credit bureaus were 592, 524 and 575, averaging out to just under 564.

It's really no surprise, considering his well-documented ultra-extravagant spending and financial woes, including the fact that Neverland Ranch nearly slid into foreclosure. But there's a lesson for everyday people in the specifics that caused the King of Pop to have poor scores.

Here are the reasons given in the TMZ report:
- A derogatory public record or collection filed.
- The amount owed on delinquent accounts.
- Number of accounts with delinquency.
- Too many inquiries in the last 12 months.

To put this in perspective, FICO scores have a range of 300 to 850. A score under 620 puts you in the subprime market. (Experian offers a state-by-state look at average scores and debt.)

Michael Jackson may have made a mess of his finances, but he did prepare a solid estate plan, including a will, a living trust, and trustees and executors who are experienced and knowledgeable.
All told, Jackson's estate is worth hundreds of millions -- a number that's still being figured out. The total is expected to be considerably larger than his estimated $435 million of debt. Plus, the size of the estate has grown by $100 million since he died on June 25, and is expected to make $50 million to $100 million a year, The New York Times says. Compare that with the $55 million Elvis Presley's estate earned last year. The NYT also said:

In life, Mr. Jackson faced a precarious financial future, as he piled on debts to finance his tastes in art, to travel on private jets and to keep up Neverland. In death, his estate may enjoy the financial security he never had.

Jackson will be buried on Sept. 3, according to the Glendale News Press

Will the real FICO score please stand up?

by Karen Datko

This post comes from partner blog The Dough Roller.

Earlier this week we took a look at how to get your free FICO credit score from myFICO.com. Operated by the Fair Isaac Corp., creator of the FICO credit score, it offers consumers a free credit report and FICO credit score when they sign up for a 30-day trial of Score Watch. The FICO credit score myFICO.com provides is from Equifax, one of the three major credit bureaus.
And that's where some confusion can creep in.

There are three major credit bureaus: Equifax, TransUnion, and Experian. And each of these credit bureaus calculates a consumer's FICO credit score, which can be and usually is different for each credit bureau. In other words, you likely have a different FICO credit score from each of the three major credit bureaus. And to add to the confusion, each of the credit bureaus calls its version of the FICO credit score by a different name.

So let's quickly sort all this out:

FICO credit score. FICO stands for the Fair Isaac Corp., the company that created the formula for the FICO credit score. Fair Isaac was founded in 1956 by engineer Bill Fair and mathematician Earl Isaac.

Fair Isaac does not calculate credit scores. While Fair Isaac created the FICO formula, it does not actually use it to calculate a consumer's FICO credit score. To use the formula, one needs credit information about the consumer, and that's where the credit bureaus come in.

Three credit bureaus. The three major credit bureaus in the United States use the FICO credit score formula to calculate a consumer's FICO credit score.

Three different scores. Because each of the three major credit bureaus has slightly different information on each consumer, the FICO credit score it calculates is usually different from the others. As a result, most consumers have three different FICO credit scores.

Three scores and three names. Each of the three credit bureaus has branded its FICO credit score with a different name. Equifax calls its score the Beacon score; Experian calls its score the Experian/Fair Isaac Risk Model or Score Power; and TransUnion calls its version of the FICO credit score Empirica.

VantageScore: You may have heard of VantageScore, which is a credit score formulation created in 2006 by the three credit bureaus in an effort to compete with the official FICO credit score. VantageScore has not been widely adopted by lenders and creditors.

Clear as mud, right? Now, how do you get your credit scores? As you may know, consumers can get a free copy of their credit reports from AnnualCreditReport.com. But if you want your FICO credit score, myFICO.com is the place to go, while FreeCreditReport.com offers its own version of a credit score. Here are the details:

MyFICO.com. MyFICO.com is run by Fair Isaac and offers consumers a credit-monitoring service called Score Watch. When you sign up for a free 30-day trial of Score Watch, myFICO.com gives you a free copy of your credit report and FICO credit score as reported by Equifax. You can also purchase from myFICO.com your credit report and FICO credit score as reported by TransUnion for $15.95.

FreeCreditReport.com: Known for its snappy commercials, FreeCreditReport.com is run by Experian. It offers a credit-monitoring service called Triple Advantage Credit Monitoring. In exchange for signing up for a seven-day free trial, you'll receive a copy of your Experian credit report and a credit score from Experian that is not a FICO score.

Stop The Madness!

Insanity reigns these days, or so it seems. Customers continue to make ridiculous offers or expect miraculous finance options, regardless of circumstances.

I am bombarded daily by customers who view our inventory on our website, and offer to purchase a vehicle for thousands less than we have it listed at, with the caveat that “I’m paying cash!” It seems that many consumers believe that we are so cash strapped that we will take any offer, so long as it’s in “dead presidents”. They are amazed when I graciously decline their offer, explaining that when we advertise a vehicle on our website, we list it at the lowest price we can sell it for. After all, why spend money to advertise something if you can sell it cheaper than you advertise it for?

It makes sense to me to advertise on the Internet the lowest sale price for a vehicle. The Internet allows us to reach well beyond our local marketing area, and although many of our local customers find us through our website, we sell to customers all over the US as well as the world. In the last thirty days, we sent vehicles to Tennessee, Mississippi, Maryland, and South Carolina, as well as Nigeria and the Caribbean. Our advertised prices are typically among the lowest on the web, and our out of town clients appreciate the fact that we sell vehicles at reasonable prices.

Our local clientele are the ones who tend to make ridiculous offers. I’ve had customers offer cash deals, but then not have the cash. Finance customers who can’t, or better yet, won’t prove their income. And out of state or even out of the country customers who want BHPH on a $23000 vehicle with $1000 down!

The biggest obstacle these days seems to be first time buyers with overzealous expectations. Trying to convince these customers to consider a more reasonable vehicle than a $17000 or $18000 vehicle is an obstacle we consistently have to overcome, albeit with less success than we would like to be enjoying. The “you’ll do anything to make a deal” mentality still permeates our marketplace, especially since we are the foreclosure capital of the nation! Many of our customers are past due on their mortgage, or in foreclosure, and think that lenders should overlook this fact. After all, isn't everybody in the same boat?

Once upon a time, people with bad credit felt some remorse over their situation. “Bad things happen to good people” we used to say, and customers with credit issues understood their options were limited. Many realized that there were dealerships out there that were willing and able to help them get a car, although some used tactics and techniques that were less than honorable.

Ultimately, many of the unscrupulous dealerships and there people were caught and punished, and in many instances, those folks responsible for abuses and fraud ended up in jail. Of course, the local news shows love nothing more than a car dealer or his employees getting taken away in handcuffs in front of the camera!

I wish the media would stop telling people that we dealerships are in dire straights, that we are all facing bankruptcy or about to go out of business. While some independents down here in south Florida have closed their doors, most of us are still in business and doing pretty good, if not flourishing. Is traffic down? Yes! Is it harder to get inventory? Absolutely! Are lenders tightening their standards? Without a doubt! But regardless of all these issues, we’re still selling cars and making money. And isn’t that what it’s all about?

Coming: A 3rd Wave of Foreclosures

The next group of Americans to lose their homes seemed to have good credit and affordable loans. But those families have been walloped by the recession.

By Michael Brush -MSN Money

There's a simple reason you shouldn't get too excited about the "green shoots" of an economic turnaround.

In the housing market, a lot of prime mortgages are becoming subprime as a new wave of foreclosures begins to hit. Mainstream homeowners -- those previously "safe" borrowers with sound credit who have conservative, fixed-rate mortgages -- are getting into trouble at an alarming rate.

In the first quarter, the percentage of these borrowers who were behind on their mortgages or in foreclosure had doubled from a year earlier, to nearly 6%. For the first time in the housing crisis, these homeowners accounted for the largest share of new foreclosures.

Job losses are a major reason once-safe borrowers are falling into trouble. With unemployment likely to rise, the problem will only get worse. So the core challenge at the heart of our economic crunch -- a poor housing market that infects banks and the whole credit system -- is not going away soon. That's bad news for the stock market and the economy in general.

"A couple of months ago, a lot of people had hoped that the housing collapse was about over," says money manager and forecaster Gary Shilling, a well-known bear who called the housing problems early in the cycle. "But it was more hope than reality."

The 3rd wave of woe

Economists call rising delinquencies and foreclosures among prime borrowers the third wave of trouble. The first two waves were housing speculators going bust and subprime borrowers -- those with poor credit histories and some version of no-down or low-down adjustable-rate mortgages -- getting into trouble.

Mark Zandi, the chief economist for Moody's Economy.com, calls the third wave a "significant threat" to the economy. "It is gathering momentum," he says. "The problem is now well beyond subprime and deep into prime."

It will cause at least three problems that could shrivel the "green shoots":
-Mounting foreclosures among prime borrowers will destroy their credit ratings, making it tough for them to contribute to growth by spending on credit.
-Rising foreclosures will add to an already high level of housing inventory on the market, pushing down home prices even more. That will make people feel poorer, so they'll spend less. It also will tempt more people to walk away from mortgages, adding to the problem.
-Foreclosures will mean more loan losses at banks, deepening the problems in the financial system.

Investment opportunities?
How do you play this as an investor? Well, if you missed the 30%-plus move off the bottom since early March but you're still confident enough to tiptoe back in, don't do anything more than that. Average in on down days.

Better yet, wait for the market pullback that this third wave makes more likely. Shilling has a bearish forecast of a trip down to 600 for the S&P 500 Index, more than a 30% decline from recent levels of 940.
Investors confident and daring enough to short stocks -- selling borrowed stock with the hope of buying it back later at a lower price -- may find profitable targets in the housing sector and among the regional banks. Homebuilder stocks look particularly tempting; they have risen more than 50% off their March lows on hopes for a quick recovery.

Whitney Tilson, a co-portfolio manager of the Tilson Focus Fund who also spotted the housing crisis early on, was recently short KB Home, Lennar and Toll Bros. in housing. He also has bearish bets against regional banks Regions Financial, First Horizon National, Zions Bancorp and New York Community Bancorp.

The 'subprime society'
Shilling suspects many so-called prime borrowers are now going bust because, well, they really weren't so prime to begin with. The same lax standards that created a zoolike atmosphere in subprime lending infected prime mortgage lending to some degree. Many prime borrowers still stretched to qualify, and they lack the financial reserves to sustain any personal setbacks, Shilling says.

A few months of unemployment will throw them into default. The official unemployment rate stood at 8.6% in April, and many economists believe it will top 10% as the recession drags on.

How much worse will the foreclosure crunch get? Credit Suisse analyst Rod Dubitsky predicted last week that 8.1 million mortgages, or 16% of all mortgages, will go into foreclosure over the next four years. A weak economy, continued declines in home prices and rising delinquencies among prime borrowers all but ensure that foreclosures "will march steadily higher," he says.

Dubitsky thinks such a high level of foreclosures could transform the U.S. into a "subprime society." The large number of people unable to borrow because of impaired credit will keep the consumer-spending engine on low idle.

Zandi predicts that a rising number of troubled prime borrowers will keep the number of distressed mortgages aloft for at least 18 more months. He thinks the number of mortgages in default or behind by more than 30 days (the definition of distressed) will rise to 9.2% in the current quarter from 9.1% in the first quarter, then stay above 7% through most of next year.

To put that into context, from 2000 through the end of 2006, 2.7% of mortgages were distressed, on average, at any one time.

Inventory overhang
A big problem stemming from all those foreclosures will be that huge excess inventories of homes for sale will continue to push down prices, Shilling says. "As long as you have those excess inventories, you have downward pressure on prices. It is no more complicated than that," he says.

The combined inventory of new and older homes on the market remained relatively constant at about 2.5 million for many years. Now, it's officially around 4 million, but Shilling thinks it could be higher because of miscounting.

In his bearish scenario, the inventory overhang will push down home prices so much that up to 25 million homeowners will be "underwater," meaning they will owe more than their homes are worth. That would be a huge increase over recent levels of 13.5 million homeowners and bad news for the economy.

Homeowners who are underwater can't borrow against their homes to fuel a rebound. They're reluctant to spend. And they are more tempted to simply walk away from what looks like a losing prospect.

2 more waves
Bad enough? Well, this third wave of prime borrowers going bust will be followed by two more waves of credit-related problems, Tilson says:
In a fourth wave, more homeowners with "jumbo prime" loans will go into default. These are loans to buy high-end homes that once boasted price tags upward of $1 million. "All over the country, the high end is starting to tip over," says Tilson. This wave will also bring more problems with home equity loans and second mortgages on homes.
A fifth wave will carry rising defaults on commercial-real-estate and business loans.

Like Shilling, Tilson believes all of these waves of credit-related problems spell the most trouble for homebuilders and regional banks. "Homebuilders are going to face severe headwinds trying to sell homes at least for a couple of years," he says.

Regional banks will have problems because they got heavily involved in commercial-real-estate loans when they lost so much of their home-mortgage business to upstarts vying for a piece of the subprime action during the boom. Regional banks also lack the income from wealth management and trading that's helping big banks such as JPMorgan Chase earn their way out of trouble.

There are 'green shoots'
There are some glimmers of hope in all this. For one thing, homes are more affordable than ever. Mortgage rates are still extremely low by historical standards despite a recent increase. So the cost of buying a home compared with average income levels is as low as it has been in nearly three decades.

And intriguingly, a housing sector analyst who first started warning of trouble back in 2003, way ahead of most people, now predicts a reversal is at hand. Stuart Feldstein, the president of SMR Research in Hackettstown, N.J., thinks home sales and prices are turning and will be in an uptrend soon.

One problem here is that Feldstein was early -- even if impressively prescient -- the last time around.

And of course, housing affordability doesn't mean much if so many people continue to lose their jobs. Goldman Sachs Group economist Ed McKelvey doesn't expect the jobless rate to peak until after 2010 -- in a sluggish economy that he expects will grow at a paltry 2% in the second half of next year.

With economic conditions like that, no matter how cheap houses get, it'll be tough for anyone to buy them.

At the time of publication, Michael Brush did not own or control shares of any company mentioned in this column.

Dear Mr. President

Below is a letter that was sent to President Obama from Larry Greeen, who is about to lose his franchise. You can send your own message to http://www.whitehouse.gov/contact/ or president@whitehouse.gov.


To: The President of the United States of America
May 16th, 2009
From: Larry Green (Concerned Citizen)

Mr. President,

I am writing you today as it is my right to share my opinion and thoughts with you, the leader of our country. The developments in the past weeks have been quite puzzling to me. Seeing you announce on public television that Chrysler LLC would file for bankruptcy is something In ever thought I would ever see our president do. To further complicate all that has been happening with the automotive industry I was in total shock to see who you had appointed to oversee the restructuring process and the lack of experience they have with automotive retail sales and
manufacturing.

If you want to learn how to raise livestock then the obvious place to start is seeking knowledge from a farmer. So why is there such a lack of experience in your appointee’s when it comes to automotive manufacturing and sales. I believe that when decisions of this magnitude are made that will have such an impact on the everyday American, we need people with proven track records advising you. Some places to find these successful people might be, The National Automobile Dealers Association,National Dealer Councils, previous CEO’s in the automotive industry, and the list goes on and on.

Now, Mr. President, I know you will probably never see this letter as your staff will intervene. But I am taking you for your word during your campaign, where you said on several occasions that you will represent we, the people! But I feel I need to send this to you with the little hope that you may indeed receive my letter.

I live in a small rural community in Brandenburg Kentucky. We received a notice letter from Chrysler yesterday stating that we are not part of their future plans. My concern is not about me, but rather the impact that the local community as well as hundreds of others across the country will feel from this outrageous, government sanctioned, protection of large corporations and unions at the expense of everyday people who elect government leaders. These leaders are elected because of their platform, ideals, abilities and concern for the American people in general. In the case of the automobile restructuring the average American has definitely taken a back seat.

What I want you to know Mr. President, is that in most cases the local automobile dealers are the community backbone in rural areas. I will share with you just a few things that we do here in Brandenburg; We provide numerous scholarships to graduating seniors every year. We are one of the largest employers in the community. We support numerous sport’s activities from little league all the way through high school.We are the number one contributor to the local Future Farmers of America.We have sent over 2000 large packages to our deployed soldiers in war zones. We assist the local Army Recruiting Command with a tutoring program that has enabled several young men and woman to enter into the military. We donate to the senior citizens in the community to give them a better quality of life. We provide assistance to local law enforcement and emergency service providers on a regular basis. We donate time,resources and money to numerous non profit organizations such as,American Red Cross, Relay for Life, American Cancer Society, Veterans Organizations, USA Cares, Association of the United States Army, Breast Cancer Awareness, Boy Scouts of America, Food Closets, Shelters, Park sand Recreation, Angle Tree, food and shelter for less fortunate people,and this list goes on and on, Mr. President.

We are also a major contributor in political contributions and are involved heavily with the democratic party. We are not unlike the typical rural dealer as I am sure you have not been briefed on what atypical dealer adds to a typical community. Mr. President, please do not allow these drastic cuts to occur until you know how they will impact on local communities.

In our dealership we have been profitable and have never, ever been a liability to Chrysler LLC. The areas they said they were going to measure, we exceeded in every category. So the question remains, why?We feel that all they did was cut numbers as they were told to do by your people. They quite simply looked at a map and tried to space their dealers 50 miles apart. The funny thing is Chrysler/Fiat thinks customers will drive the additional distance to buy their products. I hate to tell you that this is not factual at all. Most rural dealer shave loyal customers to their dealership and not the brand. In fact, we have been covered up by phone calls each and every minute since the news was published because our customers want to trade in their Chrysler products and buy Ford or Mercury. Why, because we are also a Ford-Mercury dealer and our customer base is loyal to us not the brand.That is why you need to have representation of dealers also involved in this restructuring process.

Your appointee’s are under the impression that rural dealers are a liability to Chrysler LLC. This is totally false, Mr. President and we are an example of that. We have always paid for everything that is sent to us, tools, brochures, supplies, training etc. We own our facility, we pay our employee’s, own our computer equipment and all other materials.In fact if you want the truth, we are an asset to Chrysler LLC and have made them millions of dollars in the 26 years we have been a Chrysler Dealer. I feel that our constitutional rights have been violated. Under section 8 (Powers of Congress) paragraph 4, states “to establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States”. Mr. President, there is nothing uniform in how these proceedings are being carried out.

Under Amendment 5 (Trial and Punishment, Compensation for Takings.Ratified 12/15/1791.) last paragraph, “nor be deprived of life, liberty,or property, without due process of law; nor shall private property betaken for public use, without compensation.” Cleaning out a dealerships CMA account of money that the dealer put in there (not Chrysler), is noway close to being anything short of a felony offense by Chrysler LLC,who did this just hours prior to filing for Bankruptcy. To this day we have received no compensation whatsoever. Mr. President, this is the company that our tax payers money bailed out for a short period of time.Wow what a payback.

Amendment 7 (Trial by Jury in Civil Cases Ratified 12/15/1791.) “In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and in no fact tried by a jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of common law.” It’s obvious that common law is in no way part of the present conduct of our legal process with this case.

Amendment 8 (Cruel and Unusual Punishment. Ratified 12/15/1791.) “Excessive bail shall not be required, nor excessive fines be imposed, nor cruel or unusual punishments inflicted”. How much crueler can the system be than they have been to average American people who happen to own profitable dealerships?

Amendment 11 (Judicial Limits. Ratified 2/7/1795) “The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by citizens of another State, or by Citizens or Subjects of any Foreign State.” Mr. President, we are well aware of who is calling the shots in how this process is unfolding and that is by Fiat, a Foreign company. It seems that our countries laws and processes are being interpreted to take care of non US Citizens rather than very productive members of our society who are US Citizens, the car dealers.

I will close this letter by asking you, respectfully, to consider those little league kids who might not be able to play ball next year.The senior citizens around our country who may not have electric or hot meals next winter. Those children in low income households who may not have Christmas next year. The Boy Scout who might miss out on going to summer camp. The lives that may have been saved through the Red Cross,Cancer Society and Breast Awareness. The Veterans programs that might be affected. And so much more! I don’t know about you, but this really bothers me. I urge you, Mr. President to please do the right thing and take care of our own!

Sincerely,

Larry D. Green
(270) 422-4901

The Nation’s Biggest Car Scam

May 4: In what police say is the biggest auto scam going on right now, crooks are taking advantage of people who are buying used cars. NBC’s Jeff Rossen reports.

http://today.msnbc.msn.com/id/26184891/vp/30557788#30557788

And Then There Were ....

Just posted on AppOne's credit portal:

"Due to current market conditions, AmeriCredit will no longer be accepting credit applications after April 30th. Any AmeriCredit approvals issued through April 30th will be funded as usual."

One by one, sub prime lenders are falling by the wayside. It's like a sub prime pandemic; the only question left to ask is "Who's next?".

This morning I was talking to my sales force and asked them if anyone was afraid of catching swine flu. They all agreed that the risk here in south Florida was minimal, at worst, and none of them was concerned about getting sick. But if you watched the news this morning, we're all doomed! Vice President Biden said he would NOT travel by plane or subway, and recommended staying away from crowded places! CDC official tell us not to travel to Mexico, and countries and states, cities and counties are shutting down public places to avoid a swine flu pandemic.

Let's all duct tape our doors and windows and not venture outside until we get the all clear!

No, don't get me wrong. There is always a concern for health and well being. We should all take precautions against getting ill, as well as spreading anything around. But perception is the reality in our society, and if the news tells us it's a pandemic, we believe it with the utmost enthusiasm. The news tells American consumers that the auto industry is going bankkrupt, and they stop buying cars. They tell us that there's not money to lend, so banks stop lending. The tell us that things are bad, and they just get worse. Maybe it's time to find some good news to report?

I'm sure this is an oversimplification of things, but then again, it's just my opinion.