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Fitch Rates Dryden 37 Senior Loan Fund/LLC

CHICAGO–(BUSINESS WIRE)–

Fitch Ratings assigns the following rating and Rating Outlook to Dryden 37 Senior Loan Fund/LLC:

–$320,000,000 class A notes ‘AAAsf’; Outlook Stable.

Fitch does not rate the class B, C, D, E, F or subordinated notes.

TRANSACTION SUMMARY

Dryden 37 Senior Loan Fund (the issuer) and Dryden 37 Senior Loan Fund LLC (the co-issuer) represent an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by Prudential Investment Management, Inc. (Prudential). Net proceeds from the issuance of notes will be used to purchase a portfolio of approximately $500 million of leveraged loans. The CLO will have a four-year reinvestment period.

KEY RATING DRIVERS

Sufficient Credit Enhancement: Credit enhancement (CE) of 36% for class A, in addition to excess spread, is sufficient to protect against portfolio default and recovery rate projections in the ‘AAAsf’ stress scenario. The level of CE for the class A notes is below the average for recent CLO issuances; however, cash flow modeling indicates performance in line with other ‘AAAsf’ rated CLO notes.

‘B+/B’ Asset Quality: The average credit quality of the indicative portfolio is ‘B+/B’, which is slightly better than that of recent CLOs. Issuers rated in the ‘B’ rating category denote relatively weak credit quality; however, in Fitch’s opinion, the class A notes are unlikely to be affected by the foreseeable level of defaults. The class A notes are robust against default rates of up to 57.4%.

Strong Recovery Expectations: The indicative portfolio consists of 96.4% first-lien senior-secured loans. Approximately 89.5% of the indicative portfolio has either strong recovery prospects or a Fitch-assigned Recovery Rating of ‘RR2’ or higher, resulting in a base case recovery assumption of 76.1%. In determination of the class A note rating, Fitch stressed the indicative portfolio by assuming a higher portfolio concentration of assets with lower recovery prospects and further reduced recovery assumptions for higher rating stress assumptions. The analysis of Dryden 37 class A notes assumed a 34.7% recovery rate in Fitch’s ‘AAAsf’ scenario.

RATING SENSITIVITIES

Fitch evaluated the structure’s sensitivity to the potential variability of key model assumptions including decreases in weighted average spread or recovery rates and increases in default rates or correlation. Fitch expects the class A notes to remain investment grade even under the most extreme sensitivity scenarios. Results under these sensitivity scenarios ranged between ‘A-sf’ and ‘AAAsf’ for the class A notes.

Sources of information used to assess these ratings were provided by the arranger, J.P. Morgan Securities LLC, and the public domain.

Key Rating Drivers and Rating Sensitivities are further described in the accompanying new issue report, which will be available shortly to investors on Fitch’s website at ‘www.fitchratings.com‘.

For more information about Fitch’s comprehensive subscription service FitchResearch, which includes all presale reports, surveillance and credit reports on more than 20 asset classes, contact product sales at +1-212-908-0800 or at ‘webmaster@fitchratings.com‘.

Additional information is available at ‘www.fitchratings.com‘.

Applicable Criteria & Related Research:

–‘Global Structured Finance Rating Criteria’ (Aug. 4, 2014);

–‘Global Rating Criteria for Corporate CDOs’ (July 25, 2014);

–‘Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds’ (Dec. 19, 2014);

–‘Counterparty Criteria for Structured Finance and Covered Bonds’ (May 14, 2014).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389

Global Rating Criteria for Corporate CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=753057

Criteria for Interest Rate Stresses in Structured Finance Transactions and Covered Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=838868

Counterparty Criteria for Structured Finance and Covered Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=981238

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY’S PUBLIC WEBSITE ‘WWW.FITCHRATINGS.COM‘. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE ‘CODE OF CONDUCT’ SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Investment & Company InformationFinanceFitch Ratings Contact:

Fitch Ratings

Primary Analyst

Aaron Hughes

Director

+1-312-368-2074

Fitch Ratings, Inc.

70 West Madison Street

Chicago, IL 60602

or

Secondary Analyst

Cristina Feracota

Associate Director

+1-312-606-2300

or

Committee Chairperson

Derek Miller

Senior Director

+1-312-368-2076

or

Media Relations:

Sandro Scenga, +1-212-908-0278

sandro.scenga@fitchratings.com […]

Fitch Upgrades 7 Classes of Wachovia CRE CDO 2006-1

NEW YORK–(BUSINESS WIRE)–

Fitch Ratings has upgraded seven classes of Wachovia CRE CDO 2006-1, Ltd. (Wachovia CRE CDO 2006-1). Fitch’s performance expectation incorporates prospective views regarding commercial real estate market value and cash flow declines. A detailed list of rating actions follows at the end of this release.

KEY RATING DRIVERS

The upgrades reflect the significant delevering of the capital structure and Fitch’s better than average base case expected loss of 6.2% for the CDO. Since the last rating action, classes A though G have paid in full from the disposal of 19 loan or CMBS interests as well as asset amortization. There were no realized losses over the same period as all assets were removed or paid off at or above par. Further, in August 2014, the asset manager surrendered portions of classes B through N for cancellation. Between built par and the surrendered notes, the CDO is significantly over collateralized by $166 million, as of the Feb 2015 trustee report.

As of February 2015, CDO collateral consisted of the following: whole loans/A-notes (82%), CMBS (3.6%), and cash (14.4%). The approximately $40 million in principal proceeds are expected to be used to further pay down classes H through K.

The CDO collateral continues to become more concentrated. There are interests in approximately 14 different assets contributed to the CDO. The current combined percentage of defaulted assets and Loans of Concern is 38%.

Under Fitch’s methodology, approximately 68.1% of the portfolio is modeled to default in the base case stress scenario, defined as the ‘B’ stress. Modeled recoveries are well above average due to the, generally, stabilized nature of the collateral and the senior position of the majority of the debt.

The largest contributor to base case loss is a whole loan (20.6% of the pool) secured by a 402,000 sf retail center located in Glen Mills, PA. As of 9/30/14, occupancy was 96.7%. The largest tenants are Home Depot through 2033 and Marshalls through 2018. The loan, which matures on March 31, 2015, is over leveraged and Fitch modeled a loss in its base case scenario.

This transaction was analyzed according to the ‘Surveillance Criteria for U.S. CREL CDOs’, which applies stresses to property cash flows and debt service coverage ratio tests to project future default levels for the underlying portfolio. Recoveries are based on stressed cash flows and Fitch’s long-term capitalization rates. The default levels were then compared to the breakeven levels generated by Fitch’s cash flow model of the CDO under the various defaults timing and interest rate stress scenarios as described in the report ‘Global Rating Criteria for Structured Finance CDOs’. The breakeven rates for classes H through O pass the cash flow model at or above the ratings listed below. Upgrades to classes M though O were limited due to the increasing concentration of the portfolio.

The Stable Outlooks generally the significant credit enhancement to the classes and positive cushion in the modeling.

RATING SENSITIVITIES

If the collateral continues to repay at or near par, classes may be upgraded further.

Wachovia CRE CDO 2006-1 is a CRE CDO managed by Structured Asset Investors, LLC with Wells Fargo Bank, N.A., successor-by-merger to Wachovia Bank, N.A., as sub-advisor. The CDO exited its reinvestment period in September 2011.

Fitch upgrades the following classes as indicated:

–$15 million class H notes to ‘AAAsf’ from ‘Asf’; Outlook Stable;

–$13 million class J notes to ‘AAAsf’ from ‘BBBsf’; Outlook Stable;

–$10.95 million class K notes to ‘AAAsf’ from ‘BBBsf’; Outlook Stable;

–$5 million class L notes to ‘AAAsf’ from ‘BBBsf’; Outlook Stable;

–$21.75 million class M notes to ‘Asf’ from ‘BBsf’; Outlook Stable;

–$6.9 million class N notes to ‘Asf’ from ‘Bsf’; Outlook Stable;

–$6.5 million class O notes to ‘Asf’ from ‘Bsf’; Outlook Stable.

Classes A through G have paid in full. The preferred shares are not rated.

Additional information is available at ‘www.fitchratings.com‘.

Applicable Criteria and Related Research:

–‘Surveillance Criteria for U.S. CREL CDOs’ (November 2014);

–‘Global Rating Criteria for Structured Finance CDOs’ (July 2014);

–‘Global Structured Finance Rating Criteria’ (August 2014).

Applicable Criteria and Related Research:

Surveillance Criteria for U.S. CREL CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=811268

Global Rating Criteria for Structured Finance CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=751136

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=981153

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY’S PUBLIC WEBSITE ‘WWW.FITCHRATINGS.COM‘. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE ‘CODE OF CONDUCT’ SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Investment & Company InformationFinanceFitch RatingsCDO Contact:

Fitch Ratings

Primary Surveillance Analyst

Stacey McGovern

Director

+1-212-908-0722

Fitch Ratings, Inc.

33 Whitehall Street

New York, NY 10004

or

Committee Chairperson

Mary MacNeill

Managing Director

+1-212-908-0785

or

Media Relations

Sandro Scenga, +1 212-908-0278

sandro.scenga@fitchratings.com […]

Sitrade Italia-Spa Recognized as Fastest Growing Cash Handling Equipment Manufacturer

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ResearchMOZ

In the fourth segment, the market size data of the 80 largest manufacturers of cash handling equipments in the world are compared.

Albany, NewYork (PRWEB) February 11, 2015

ResearchMoz has announced the addition of a new market study that offers an analysis of the cash handling equipment manufacturers worldwide. The research report, titled “Cash Handling Equipment Manufacturers (Global) – Industry Report”, offers an analytical report with a detailed study of 140 major manufacturers of cash handling equipment across the global cash handling equipment market, including their market strategies and their penetration level in the global cash handling equipment market.

Read The Full Report With TOC @ http://www.researchmoz.us/cash-handling-equipment-manufacturers-global-industry-report-report.html

Cash handling is the procedure of dispensing, tracking, and counting cash in a bank, cheque en-cashing, payday loan/advance, retail, casinos, and other business environments through specially designed software and hardware to prevent losses, theft, and to reduce management time for errors in cash drawer operations. Cash handling equipment include automatic teller machine (ATM), cash dispenser, cash validator, cash recycler, loose coin validator, rolled coin dispenser, and intelligent banknote neutralization system.

This research report on cash handling equipment manufacturers across the world is categorized into various sections and contains both written and graphical information of the global cash handling equipment manufacturers, all of it updated exhaustively.

The first section presents a thorough study on the global cash handling equipment market. This segment consists of manufacturers that are the leaders in the market in both sales as well as financial might. Ingenico GmbH has been ranked as the best trading partner in the global cash handling equipment industry.

The second section analyzes the sales growth and reviews the fastest developing and fastest shrinking manufacturers among the 140 key cash handling equipment manufacturers across the globe. Sitrade Italia-Spa is one of the fastest developing cash handling equipment manufacturers in the world.

The third section evaluates the gross and pre-tax profit statistics over the past ten years. In this section, a profitability synopsis is presented by comparing profits in the global cash handling equipment industry against small, medium, and large cash handling equipment manufacturers over the world.

Request A Sample The Report @ http://www.researchmoz.com/enquiry.php?type=sample&repid=240213

In the fourth segment, the market size data of the 80 largest manufacturers of cash handling equipments in the world are compared. This comparison is carried on the basis of the previous year’s market size and the most recent figure.

Among the next two segments, the first one ranks the top 50 cash handling equipment manufacturers on the basis of their market share, growth rate in sales, and gross and pre-tax profit. The other one determines the best performing cash handling equipment manufacturers according to their strong financial conditions and outstanding sales growth rates during 2014.

The last segment focuses on profile analysis of companies and provides a comprehensive study of the largest global cash handling equipment manufacturers within the industry.

About Us

ResearchMoz is the one stop online destination to find and buy market research reports & Industry Analysis.We fulfill all your research needs spanning across industry verticals with our huge collection of market research reports.We provide our services to all sizes of organizations and across all industry verticals and markets.Our Research Coordinators have in-depth knowledge of reports as well as publishers and will assist you in making an informed decision by giving you unbiased and deep insights on which reports will satisfy your needs at the best price.

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Email: sales(at)researchmoz(dot)us
http://www.researchmoz.us/


[…]

Singletary: What you should know before you take out a reverse mortgage

When you have most of your wealth tied up in your home, it’s referred to as being “house rich, cash poor.”

Many seniors who find themselves in this position may be enticed by the commercials offering salvation. They are wooed by a chance to tap into their home’s equity with a reverse mortgage. Smooth television ads make it appear to be a no-brainer. It’s actually much more complicated.

Michelle Singletary writes the nationally syndicated personal finance column, “The Color of Money.”

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The most appealing quality of this type of loan is that, unlike a traditional mortgage, you don’t have to make monthly payments. The lender doesn’t collect until the homeowner moves, sells or dies. Once the home is sold, any equity that remains after the loan is repaid is distributed to the person’s estate.

To qualify, you have to be 62 or older. The reverse-mortgage market isn’t huge — about 1 percent of all mortgages — but reverse-mortgage lenders are likely to pump up the volume in coming years as more seniors retire. For a lot of people, the only source of big money for them is the equity in their homes, the Consumer Financial Protection Bureau says.

In 2013, a typical household had only $111,000 in 401(k) or IRA savings, according to the Center for Retirement Research at Boston College. The center found that too many people are dipping into their retirement accounts during their working years, causing what is called a “leakage.”

But a lot of seniors have equity in their homes — about $3.84 trillion, according to one mortgage-industry survey. They can tap into that equity by selling or taking out a home equity loan or line of credit. But selling isn’t an option if they want to stay put, and they would have to make payments on the line of credit or loan. Given those options, it’s no wonder a reverse mortgage can be appealing.

The CFPB, in a report analyzing 1,200 reverse-mortgage complaints received from 2011 to the end of last year, found that many people are confused about this type of loan.

The fact that counseling is required from a government-approved agency for loans made through the Federal Housing Administration’s Home Equity Conversion Mortgage (HECM) program is an indication of the complexity of this financial product. Still, many seniors don’t understand what they are getting into.

People complained to the CFPB about their loan terms, the loan servicing companies and not being able to add a borrower. Adult children complained that lenders refused to add them as an additional borrower or allow them to “assume” the loan for an aging or deceased parent, the report said.

To help, the CFPB has issued some tips about reverse mortgages. Here are the three important things the agency says you or your relatives should know:

?Double check that your loan records accurately reflect who is on the mortgage.

?Be sure to understand the risks of not including a spouse on the loan. Often an older spouse will take out a reverse mortgage in his or her name only, because older homeowners are able to borrow against a greater percentage of the home’s equity.

“Non-borrowing spouses submit complaints distraught that they are facing foreclosure and about to lose their home after their husband or wife dies,” the report said. “Other non-borrowing spouses submit complaints worried about their ability to remain in their home should the older spouse die first.”

If you decide it’s financially better for just one spouse to take out a reverse mortgage, be sure to have a plan for the non-borrowing spouse. Can a surviving spouse stay in the home? The Department of Housing and Urban Development has attempted to address the issue of non-borrowing spouses. Under certain conditions, some spouses may be able to stay, but others may not get that protection.

The CFPB recommends that if only one spouse is on the mortgage, you should find out whether the loan servicer will permit the non-borrowing spouse to qualify for a repayment deferral allowing him or her to remain in the home.

?Talk to your heirs. If you have adult children or other relatives living in the house, be sure they understand what could happen if the reverse mortgage becomes due.

Go to the CFPB Web site at www.consumerfinance.gov and click the link for the agency’s consumer advisory on reverse mortgages.

There are some pros to a reverse mortgage. But the complexity of the product means you better be just as aware of the cons.

Readers may write to Michelle Singletary at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071 or michelle.singletary@washpost.com. To read previous Color of Money columns, go to http://wapo.st/michelle-singletary.

[…]

Fitch Affirms Wisconsin's $764MM Clean Water Rev Bonds at 'AA+'; Outlook Stable

CHICAGO–(BUSINESS WIRE)–

Fitch Ratings affirms its ‘AA+’ rating on the following outstanding bonds issued by the state of Wisconsin (the state):

–$764 million clean water revenue bonds.

The Rating Outlook is Stable.

SECURITY

The bonds are secured by pledged loan repayments, amounts in the reserve and subsidy funds, and other pledged amounts.

KEY RATING DRIVERS

SOLID FINANCIAL STRUCTURE: Fitch’s cash flow modeling demonstrates that the state’s Clean Water Fund Program (CWFP) can continue to pay bond debt service even if there were loan defaults in excess of Fitch’s stress test without causing bond payment interruptions.

STATE OF WISCONSIN EXPOSURE: Significant portions of CWFP’s bond debt service are subsidized by general obligation (GO) bond repayments issued by the state of Wisconsin (GOs rated ‘AA’ with a Stable Outlook by Fitch) and are required to provide 1.0x coverage. This structural reliance on the state to provide subsidies limits the program’s rating to ‘AA+’.

STRONG PORTFOLIO QUALITY WITH INTERCEPT: Borrower loan provisions are strong, with most of loan principal secured by general obligation or water/sewer system revenue pledges. Approximately 67% of the CWFP’s loan portfolio is estimated to be investment grade by Fitch. This is due in part to the program’s ability to intercept state aid payments otherwise due to delinquent borrowers. The state aid intercept reduces the risk of program debt service shortfalls.

HIGH SINGLE-BORROWER CONCENTRATION REMAINS: The pledged pool consists of 187 borrowers, with the top 10 participants representing approximately 73% of the total portfolio. The largest participant, Milwaukee Metropolitan Sewer District (MMSD), represents a significant 31% of the total portfolio. MMSD’s high credit rating (GO debt rated ‘AAA’ with a Stable Outlook) mitigates this concentration risk.

RATING SENSITIVITIES

SIGNIFICANT REDUCTION IN PROGRAM ENHANCEMENT: A measurable decline in pledged resources including quality of invested reserves and loan subsidy from the state could pressure the rating. The Stable Outlook reflects Fitch’s view that these events are not likely to occur.

CREDIT PROFILE

The state issues revolving fund revenue bonds under its leveraged portfolio to fund clean water loans for various governmental entities throughout the state. In addition, the state, through the Department of Administration (DOA), operates separate direct and proprietary loan portfolios for loans also made to governmental entities for clean water projects. The direct loan portfolio is funded from federal capitalization grants, required state match amounts, and recycled loan repayments while the proprietary portfolio is funded from state GO bond proceeds as well as recycled payments. Only loan repayments from the leveraged portfolio are pledged to CWF bondholders. Fitch considers a credit strength the DOA’s ability to sell or exchange loans between portfolios to avoid delinquencies in the leveraged portfolio.

FINANCIAL STRUCTURE EXHIBITS STRONG DEFAULT TOLERANCE

The CWFP’s scheduled loan repayments are projected to provide minimum debt service coverage of 1.0x, which does not include approximately $105 million in pledged reserves. Overall, Fitch calculates the program’s asset strength ratio (PASR) to be 1.2x, which is slightly weaker than Fitch’s median for the state revolving fund (SRF) sector of 1.8x. The PASR includes total scheduled loan repayments and all other pledged resources divided by total scheduled bond debt service.

Fitch’s cash flow modeling demonstrates that the SRF program can continue to pay bond debt service even with hypothetical loan defaults of 100% over the first, middle and last four-year period of the bonds’ life. This is in excess of Fitch’s ‘AAA’ liability stress hurdle of 30% produced by the portfolio stress calculator. The liability stress hurdle is calculated based on overall pool credit quality as measured by the rating of underlying borrowers, size, and loan term. Despite the ability of the program to meet Fitch’s ‘AAA’ liability default hurdle, structural reliance on state subsidies currently limits the program rating to an ‘AA+’.

The state subsidizes approximately 22% of the CWFP’s debt service costs in the form of state GO debt service payments of outstanding bonds purchased for the program. The purchased bonds (and repayments) are held in the subsidy fund by the trustee. This contribution reduces local borrowing costs by allowing a lower yield on the underlying loans than the yield on the bonds. The corpus of the subsidy fund GOs currently totals approximately about $161 million, or about 21% of outstanding bonds, and is available to cure debt service deficiencies if reserve funds are insufficient.

The program’s loan credit reserve fund is sized based on the estimated credit quality of the loan portfolio and is available to cure debt service deficiencies. The state must cure reserve fund shortfalls before additional loan disbursements or bond issuances. In addition, defaulting borrowers must replenish any reserve draws. As of Jan. 28, 2015, the loan credit reserve fund totaled approximately $105.6 million (14% of outstanding bonds), which is slightly greater than the current minimum requirement of $102.3 million.

The reserves are invested in the state’s investment pool, forward-delivery agreements providing for the delivery of U.S. treasury securities, a collateralized repurchase agreement and Wisconsin GO bonds. Pursuant to the CWFP documents, the reserves must be invested with institutions or instruments that are rated at least as high as the rating category on the clean water revenue bonds at the time the funds were initially invested.

STATE AID INTERCEPT PROVISION CONTRIBUTES TO STRONG POOL QUALITY

Fitch estimates that at least 67% of the pool’s loans are to investment-grade borrowers, including borrowers rated off the state’s GO rating by virtue of state aid credit enhancement. In the event a borrower becomes delinquent, the DOA must intercept that entity’s state aid payments – including state-shared revenues paid to cities, villages, and towns – and transportation aid, where available. The CWFP currently asserts priority over other agencies for intercepted funds, which is viewed by Fitch as a structural positive for bondholders. Fitch uses an assumed ‘AA-‘ rating for borrowers meeting Fitch’s state aid intercept criteria in determining the composite portfolio stress hurdle.

The program’s loan security is solid with approximately 64% of loan principal backed by GO pledges and remaining loans backed by water/sewer system revenue pledges. A minimum coverage ratio of 1.1x is required for new revenue-backed loans. Final loan maturity generally does not exceed 20 years, and level debt service schedules are typical, with principal amortization beginning one year after project completion.

Unpaid system fees must be added by municipalities as a special charge to the property tax bill of the delinquent user. Under the individual loan agreements, the DOA may appoint receivers to take over troubled projects. An internal database is used to track compliance. Additionally, each borrower’s audited financials are monitored on an annual basis. To date, there has not been a permanent loan default.

LOAN POOL EXHIBITS MODERATE-TO-HIGH CONCENTRATION

The combined pledged loan pool is composed of approximately 187 loans, with the top 10 obligors representing approximately 73% of the aggregate loan pool. MMSD, the largest borrower, represents about 31% of the total pledged portfolio. Fitch views overall pool concentration as moderate to high. Each of the remaining pool participants represents no more than approximately 4% of the total pool.

The state also presents a degree of concentration risk to the program structure because of its reliance on state subsidies to cover debt service in the form of state GO bond repayments. As of Jan. 28, 2015, expected state subsidy amounts totaled approximately 22% of total debt.

Additional information is available at ‘www.fitchratings.com‘.

Applicable Criteria and Related Research:

–‘Revenue-Supported Rating Criteria’ (June 16, 2014);

–‘State Revolving Fund and Leveraged Municipal Loan Pool Criteria’ (Oct. 22, 2014) .

Applicable Criteria and Related Research:

Revenue-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750012

State Revolving Fund and Leveraged Municipal Loan Pool Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=792908

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=979478

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY’S PUBLIC WEBSITE ‘WWW.FITCHRATINGS.COM‘. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE ‘CODE OF CONDUCT’ SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

BondsSecurity Upgrades & DowngradesFitch Ratings Contact:

Fitch Ratings

Primary Analyst

Adrienne M. Booker

Senior Director

+1-312-368-5471

Fitch Ratings, Inc.

70 West Madison Street

Chicago, IL 60602

or

Secondary Analyst

Major Parkhurst

Director

+1-512-215-3724

or

Committee Chairperson

Jessalynn Moro

Managing Director

+1-212-908-0608

or

Media Relations:

Elizabeth Fogerty, New York, +1 212-908-0526

Email:

elizabeth.fogerty@fitchratings.com […]

Fitch Rates Indiana Finance Authority's 2015B SRF Bonds 'AAA'; Outlook Stable

AUSTIN, Texas–(BUSINESS WIRE)–

Fitch Ratings has assigned an ‘AAA’ rating to the following bonds issued by the Indiana Finance Authority (IFA):

–Approximately $137 million state revolving fund (SRF) program refunding bonds, series 2015B (Green Bonds).

Series 2015B bond proceeds will be used to refund certain outstanding series of bonds and to pay costs of issuance. The 2015B bonds are expected to price via negotiated sale the week of Feb. 9.

In addition, Fitch has affirmed the following rating:

–$1.5 billion outstanding parity bonds at ‘AAA’.

The Rating Outlook is Stable.

SECURITY

The bonds are secured by loan repayments, debt service reserve funds and/or releases from such funds, and other accounts pledged under the series and master trust indentures.

KEY RATING DRIVERS

SOUND FINANCIAL STRUCTURE: Fitch’s cash flow modeling demonstrates that IFA’s SRF program can continue to pay bond debt service even with loan defaults in excess of Fitch’s ‘AAA’ liability rating stress hurdle, as produced using Fitch’s Portfolio Stress Calculator (PSC).

MODERATE POOL DIVERSITY: IFA’s combined loan pool is large and moderately diverse. The largest borrower, the city of Fort Wayne, represents a manageable 9.3% of the combined pool. The largest 10 borrowers represent approximately 41% of the total pool.

BELOW-AVERAGE POOL QUALITY: Approximately 60% of IFA’s loan portfolio consists of unrated entities, which Fitch conservatively assumes to be of speculative-grade credit quality in its analysis. Overall, pool credit quality is slightly below average in comparison to other SRFs rated by Fitch.

STRONG PROGRAM MANAGEMENT: The IFA adheres to consistent, conservative underwriting policies. Management and underwriting strength is exhibited by the fact that the program has never experienced a default.

RATING SENSITIVITIES

REDUCTION IN MODELED STRESS CUSHION: Significant deterioration in aggregate borrower credit quality, increased pool concentration, or increased leveraging resulting in the SRF program’s inability to pass Fitch’s ‘AAA’ liability rating stress hurdle would put downward pressure on the rating. The Stable Outlook reflects Fitch’s view that these events are unlikely to occur.

CREDIT PROFILE

IFA’s clean water SRF (CWSRF) and drinking water SRF (DWSRF) were created to provide loans to local entities for wastewater and drinking system improvements. The IFA is responsible for administration and management of the SRFs. Like many SRF programs, the IFA is in the process of transitioning the program from primarily a reserve fund structure, wherein loss protection is provided by reserves, to a cash flow structure, or one in which loss protection is provided by available surplus cash flows.

FINANCIAL STRUCTURE EXHIBITS ADEQUATE DEFAULT TOLERANCE

Fitch considers the program’s asset strength ratio (PASR) to be below average but adequate at approximately 1.4x versus Fitch’s 2014 ‘AAA’ median of 1.8x. The PASR is calculated by dividing total scheduled loan repayments plus all reserve balances and account earnings by total scheduled bond debt service. Minimum annual debt service coverage is also calculated to be about 1.1x, which is typical for SRF structures enhanced by reserve funds.

Because of this available enhancement, cash flow modeling demonstrates that the program can continue to pay bond debt service even with hypothetical loan defaults of 96% in the first four years and 100% in the middle and last four years of the outstanding bonds’ expected life (per Fitch criteria, a 90% recovery is also applied in its cash flow model when determining default tolerance). This result is in excess of Fitch’s ‘AAA’ liability rating stress hurdle of 42%, as produced by the PSC. The liability stress hurdle is calculated based on overall pool credit quality as measured by the rating of underlying borrowers, loan size and term, and concentration.

LOAN POOL MODERATELY DIVERSIFIED

The combined loan pool is composed of about 350 borrowers. Excluding the Indianapolis Local Public Improvement Bond Bank, whose loans were defeased via an escrow agreement in 2011, the city of Fort Wayne is the largest participant, representing about 9.3% of the pool. At 7.8%, the second largest borrower is the Terre Haute Sanitation District. Although the specific loan securities pledged by these borrowers are not rated by Fitch, both are assessed to be of high credit quality. Each remaining program participant accounts for 4% or less of the total pool. Overall, Fitch views the loan pool as having above-average diversity in comparison to other similar ‘AAA’ programs. In aggregate, the top 10 borrowers represent approximately 41% of the loan pool versus Fitch’s ‘AAA’ median level of 53%.

While approximately 40% of the pool is rated ‘A-‘ or better, the remaining 60% does not have a public rating. Therefore, in accordance with its criteria, the unrated portion of the pool was conservatively estimated to be of speculative grade credit quality (‘BB’) in Fitch’s analysis.

Due largely to the number of unrated entities, credit quality is somewhat weaker than that of similar municipal pools rated by Fitch, as reflected by an ‘AAA’ PSC liability stress hurdle of 42% versus Fitch’s ‘AAA’ median level of 30% (lower liability stresses correlate to stronger credit quality). However, the strong loan security pledges, which consist primarily of water/wastewater net system revenues, and above-average pool diversity somewhat mitigate the pool credit risk.

LOSS PROTECTION PROVIDED BY RESERVES AND OVERCOLLATERALIZATION

Under the SRF program’s structure, each bond series is protected from losses by borrower loans made in excess of bond debt service (overcollateralization) and, in certain prior series, separately secured debt service reserves. As series bonds amortize, released reserves, excess loan repayments and interest earnings are deposited into a deficiency fund, which is available to make debt service payments on any bonds issued under the master trust indenture. The method by which excess amounts are deposited into the deficiency fund allows for cross-collateralization between the CWSRF and DWSRF, increasing pool diversity and potentially lowering total loss amounts. Due to the cross-collateralization feature, Fitch combines the programs in its cash flow modeling.

No dedicated reserve fund is expected to be funded with the series 2015B bonds. However, the bonds benefit from excess reserve deallocations released from previous series’ reserves, as described in the preceding paragraph. At the direction of the IFA, funding of dedicated reserves for the series bonds may be initiated by delivering written notice to the trustee. Combined reserve balances from previous bond issues are approximately $245 million, or roughly 16% of total outstanding bonds.

STRONG PROGRAM MANAGEMENT AND UNDERWRITING

IFA manages both the CWSRF and DWSRF programs using strong underwriting practices. Among other factors, IFA takes into consideration in its borrower assessment the creditworthiness of the borrower and environmental goals of the SRF program. Loans secured by system revenue pledges (the primary source of loan security) must demonstrate minimum coverage of 1.25x annual debt service coverage and are also required to create a local debt service reserve fund equal to 1.0x maximum annual debt service.

Loans are typically limited to 20 years and are structured with level annual payments. Annual loan monitoring is conducted on outstanding borrowers and includes verification of local reserves and a review of financial statements. No loan defaults have been reported within the IFA SRFs to date.

Additional information is available at ‘www.fitchratings.com‘.

Applicable Criteria and Related Research:

–‘State Revolving Fund and Leveraged Municipal Loan Pool Criteria’ (Oct. 22, 2014);

–‘State Revolving Fund and Leveraged Municipal Loan Pool 2014 Peer Review’ (Nov. 10, 2014);

–‘Revenue-Supported Rating Criteria’ (June 16, 2014).

Applicable Criteria and Related Research:

Revenue-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750012

State Revolving Fund and Leveraged Municipal Loan Pool Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=792908

State Revolving Fund and Leveraged Municipal Loan Pool (2014 Peer Review)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=806628

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=979402

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY’S PUBLIC WEBSITE ‘WWW.FITCHRATINGS.COM‘. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE ‘CODE OF CONDUCT’ SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

BondsSecurity Upgrades & DowngradesFitch Ratings Contact:

Fitch Ratings

Primary Analyst

Major Parkhurst

Director

+1 512-215-3724

Fitch Ratings, Inc.

111 Congress Avenue

Austin, TX 78701

or

Secondary Analyst

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Senior Director

+1 312-368-5471

or

Committee Chairperson

Steve Murray

Senior Director

+1 512-215-3729

or

Media Relations, New York

Elizabeth Fogerty

+1 212-908-0526

elizabeth.fogerty@fitchratings.com […]

Will Fannie Mae and Freddie Mac’s Low Down Payment Loans Cause Another Housing Collapse?

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Fannie Mae and Freddie Mac both recently introduced programs to clearly define their lending standards and give homebuyers loans with as little as 3% down. This has prompted criticism from many people as to the safety and responsibility of this type of loan. After all, didn’t the abundant availability of low down payment loans contribute to the housing collapse?

While that’s definitely been true in the past, things are a little different this time around. There is a right way and a wrong way to let people become homeowners without a lot of cash up front, and it looks like Fannie and Freddie are getting it right this time.

The new loan programs
Fannie Mae’s 3% down loan program is available right now, and is limited to first-time homebuyers, which are defined as anyone who has not owned a home in the past three years. And even if a borrower does not meet the “first-time” standard, a conventional mortgage can be obtained with as little as 5% down.

Freddie Mac’s 3% down program is called Home Possible Advantage, and will be available for settlement dates on or after March 23. Unlike Fannie Mae’s program, the Home Possible Advantage loan program is not limited to first-time buyers.

Both programs limit the low down payment options to single-unit primary homes. So, investment properties, second homes, and properties such as duplexes are disqualified.

What’s different this time around?
Low down payments all by themselves aren’t necessarily a bad thing, if used correctly. And Fannie and Freddie are taking steps to make sure things are different this time around.

One big difference is that the low down payment loans are limited to standard (up to 30-year) fixed-rate mortgages. The “exotic” loan options that used to be widely available with little or no money down, such as interest-only and negative amortization loans, are a thing of the past. And adjustable-rate loans are not eligible for this option, to prevent cash-strapped borrowers from finding themselves in over their heads when the interest rate jumps.

The level of documentation required is another big difference from the housing collapse. Prospective homebuyers are now expected to be able to document every detail of their financial situation. In fact, it’s not uncommon for a mortgage application packet to consist of more than 100 pages of various income, employment, and financial documentation.

And finally, credit standards have relaxed in recent years but are still much higher than they ever were in the years leading up to the collapse. This is especially true for low down payment loans. According to Fannie Mae’s loan-eligibility matrix , a borrower needs a minimum credit score of 680 in order to qualify for a down payment of less than 25%, which is significantly higher than the 620 required for loans with higher down payments.

In a nutshell, the difference is that even though you can once again buy a home with a low down payment, borrowers are being held to a higher standard in order to do so.

If you want to become a homeowner
If you’re a renter and have been thinking of taking the plunge into homeownership, this could be the opportunity you were waiting for. In order to make the process go smoothly, there are a few things that you should do before applying for a loan.

For starters, you need to know where you stand credit-wise since the new loan programs require reasonably good credit. And, if your score is a little bit low, here are some suggestions on how to improve it . And, you should know exactly what to expect throughout the mortgage process and what lenders are looking for. You’ll not only need credit, but enough income to justify the loan, a solid employment history, and the ability to document your savings and other financial assets.

It could be a good catalyst for housing in 2015
Along with the already popular FHA loan options, there are now plenty of ways for people to become homeowners without large amounts of money down. And the new programs prompted the FHA to significantly lower its mortgage insurance premiums in order to remain a competitive loan option.

These loans seem to me to be less likely to contribute to another housing collapse, and could actually do a lot of good for the housing market. First-time homebuyers currently make up a much lower share of the market than they have historically, and if these new programs are successful, an influx of first-time buyers could go a long way toward a healthy U.S. housing market.

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The article Will Fannie Mae and Freddie Mac’s Low Down Payment Loans Cause Another Housing Collapse? originally appeared on Fool.com.

Matthew Frankel has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

[…]

Tighter payday loan rules intended to shield debtors | TribLIVE

WASHINGTON — Troubled by consumer complaints and loopholes in state laws, federal regulators are putting together the first rules on payday loans aimed at helping cash-strapped borrowers avoid falling into a cycle of high-rate debt.

The Consumer Financial Protection Bureau said state laws governing the $46 billion payday lending industry often fall short and that fuller disclosures of the interest and fees — often an annual percentage rate of 300 percent or more — may be needed.

Details of the proposed rules, expected early this year, would mark the first time the agency has used the authority it was given under the 2010 Dodd-Frank law to regulate payday loans. In recent months, it has tried to step up enforcement, including a $10 million settlement with ACE Cash Express, accusing the payday lender of harassing borrowers to collect debts and take out multiple loans.

A payday loan, or a cash advance, is generally $500 or less. Borrowers provide a personal check dated on their next payday for the full balance or give the lender permission to debit their bank accounts. The total includes charges often ranging from $15 to $30 per $100 borrowed. Interest-only payments, sometimes referred to as “rollovers,” are common.

Legislators in Ohio, Louisiana and South Dakota unsuccessfully tried to broadly restrict the high-cost loans in recent months. According to the Consumer Federation of America, 32 states now permit payday loans at triple-digit interest rates, or with no rate cap.

“Our research has found that what is supposed to be a short-term emergency loan can turn into a long-term and expensive debt trap,” said David Silberman, the bureau’s associate director for research, markets and regulation.

The agency is considering options that include establishing tighter rules to ensure a consumer has the ability to repay. That could mean requiring credit checks, placing caps on the number of times a borrower can draw credit or finding ways to encourage states or lenders to lower rates.

Payday lenders say they fill a vital need for people who hit a rough financial patch. They want a more equal playing field of rules for both nonbanks and banks, including the way the annual percentage rate is figured.

“We offer a service that, if managed correctly, can be very helpful to a diminished middle class,” said Dennis Shaul, chief executive of the Community Financial Services Association of America, which represents payday lenders.

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[…]

RadioShack May Plan Bankruptcy Filing; Difficult Times Ahead – Analyst Blog

As reported by The Wall Street Journal, beleaguered electronic and mobile products retailer, RadioShack Corp. (RSH), may possibly file for bankruptcy protection in early February. The company has been struggling to raise enough cash and credit to stay afloat, despite desperate attempts to turn around business over the last 18 months. ;

Apparently, the company is considering selling its assets on bankruptcy grounds and is in talks with a private-equity firm that could buy the same. However, there are chances that the talks might not materialize, in the event of which the company may consider alternatives like near-term recapitalization or debt restructuring.

According to a reliable source, RadioShack has also reached out to potential lenders that can help with a loan to fund the company’s operations during the bankruptcy case. Earlier, The Wall Street Journal had reported that Salus Capital Partners has agreed to offer $500 million to RadioShack for the same.

RadioShack’s core consumer electronics (including digital TVs, digital music players, and digital cameras) retail business is on a secular downtrend and is unlikely to recover in the near future. Loss of foot traffic is also taking a toll on RadioShack’s mobility business – a platform on which the company had been banking for future growth.

In Sep 2014, the company announced that it is running out of cash and may file for Chapter 11 bankruptcy if it fails to improve its cash position.

In the recent past, RadioShack had undertaken several strategic moves to turnaround its business. The company had redesigned its retail website with new deals in the offering. Also, management had been focusing on reducing costs, which includes closing up to 200 stores every year over the next three years; lowering rent expense through negotiations with landlords; reducing compensation expense by optimizing labor hours and store operating hours; and reviewing other expenses to identify cost-reduction opportunities. Unfortunately, none of these methods has led RadioShack out of the dark.

Dismal Quarterly Numbers

Investors’ apprehension about RadioShack’s future increased further following dismal financial numbers in the third quarter of fiscal 2015, reported on Dec 11, 2014. The company’s adjusted loss per share of $1.23 was much wider than the Zacks Consensus Estimate of a loss of $1.07 per share. Meanwhile, total revenue came in at $650.2 million, down 16.1% year over year and considerably below the Zacks Consensus Estimate of $724 million.

At the end of the reported quarter, RadioShack had only $43.3 million in cash & cash equivalent compared with $296.6 million at the end of Oct 31, 2013. This hints at the possibility that the company is fast losing cash and may not be in a position to fund its operations beyond the ‘very near term’, unless it formulates a concrete plan to increase its cash. Moreover, total debt at the end of the quarter was much higher at $841.4 million versus $613 million at the end of Feb 1, 2014. Click here for the complete fiscal third-quarter earnings report >>

The Bottom Line

Unfortunately, all efforts of this Zacks Rank #3 (Hold) stock to ramp up sales have fallen flat due to rapid changes in consumer buying trends. Buyers nowadays prefer purchasing online to visiting retail stores. Moreover, most consumers prefer tablets and smartphones today, which are less profitable for the retail industry.

We believe, under such circumstances, it might be difficult for RadioShack to make a substantial turnaround in its business in the face of stiff competition from retail giants like Amazon.com Inc. (AMZN), Best Buy Co., Inc. (BBY) and Wal-Mart Stores Inc. (WMT).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
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WAL-MART STORES (WMT): Free Stock Analysis Report
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AMAZON.COM INC (AMZN): Free Stock Analysis Report
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BEST BUY (BBY): Free Stock Analysis Report
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RADIOSHACK CORP (RSH): Free Stock Analysis Report
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Paying by cash won't build credit score

Dear Speaking of Credit,
Hello. I just tried to pull my credit report through Credit Karma and it wouldn’t give me a score. It says “thin file.” I always pay for everything outright and do not want to have credit cards. — Monika

Hello Monika,
Despite having made somewhat of a career out of advising people about credit, I have to say I really admire people who are able to pay cash for what they need and successfully avoid the often complicated and tedious world of credit management. There is certainly a lot to be said for simplicity and a whole lot to be said for being debt-free.

Yet in discussions weighing the pros and cons of credit versus cash, I find that many of the staunch credit critics advocating the cash-only lifestyle tend to equate credit use with taking on mountains of debt and paying exorbitant interest. While this happens and credit is not for everybody, the efficient use of credit cards and loans can provide the convenience, safety and money savings that checking accounts, prepaid cards and debit cards can’t — and without incurring any debt, interest or fees.

Here are just a few reasons why you may want to consider adding at least a minimal amount of credit activity — minus the debt — to your financial picture:

Credit cards paid in full each month can earn rewards and cash back on purchases you’re making already, such as groceries, gas and travel. Having a credit card on hand can make an already unpleasant medical emergency, auto or home repair situation much less stressful. Traveling with a credit card allows you to carry less cash and if stolen, provides protections against financial liability that debit and prepaid cards may not. If you plan to finance a home or car, you’ll need a good credit score based on credit experience to qualify for affordable rates. Compared with other payment methods, credit cards offer better recourse against faulty products or services.

In your email, I couldn’t help but detect some exasperation over having no credit score despite being debt-free, which, common sense might imply, should put you in a very low-risk category, with a good credit score to match. It might also feel like you’re being penalized by the credit scoring system for not going into debt and playing the credit card game.

While equating low risk with paying outright may seem like just plain common sense, the numbers disagree. Research into how millions of consumers have managed their credit over many years has shown that while it’s true that deeply-in-debt consumers are more likely to be headed for bigger financial trouble than those with zero debt, consumers with low debt and a proven credit track record tend to be better risks than those with low or no debt due to a lack of recent credit experience. In other words, there is no way to know how well a consumer who hasn’t used credit in the past, or recently, will handle credit in the future.

What exactly constitutes a credit track record? Actually, you might be surprised at how little experience is required for a credit score. All it takes is single card or loan opened at least six months ago and reported to the credit bureau within the past six months to meet the minimum FICO credit scoring criteria.

For those not new to credit, but who have used credit in the distant past, just not recently, it’s also helpful to know that these two minimum scoring criteria — an account that has been 1) opened at least six months ago, and 2) reported within the past six months — can be satisfied by a single account or by multiple accounts. For example, let’s say that instead of having your very first account opened six months ago, your credit report shows one old paid-off loan or closed credit card and a new card you just opened. This minimal amount of credit experience is all it takes for a FICO score to be calculated immediately.

But if your thin file means you don’t have a credit score, how do you get approved for credit when doing so requires a score? Actually, it’s pretty easy. What follows are a couple of the most commonly used ways to build and rebuild a credit history:

A secured credit card issued by a bank or credit union. All you need is some cash to put down as a deposit and pay a nominal annual fee. Secured cards that you can pay in full each month without interest appear on your credit report and contribute to a credit score just like unsecured cards. What makes them ideal for this purpose is that most do not to require any — or good — prior credit history. Authorized user credit card. Whether you actually use this card or not — it’s up to you — by having a spouse or partner add you as an authorized user to a credit card in good standing, the entire history of the account will instantly become part of your credit file, while you bear no responsibility for the balance. As with most secured cards, no prior credit experience is required of an authorized user. If you still don’t want to have credit cards, but wouldn’t mind having a credit score to help you qualify for car or home financing in the future? Many credit unions offer “credit building” personal loans, in which you take out a small loan secured by a cash deposit and make monthly payments over time — though, expect to pay interest and an origination fee. As with a credit card, this loan will appear on your credit report and could, by itself, deliver a score after six months.

Still, in the end, whether you continue to pay as you go and avoid credit cards entirely, or begin to incorporate some credit usage into your financial picture, the name of the game is steering clear of debt. Good luck, Monika!

See related: 4 ways to build credit without a credit card

Paying by cash won’t build credit scoreClosed accounts affect your credit score, but maybe not how you thinkHow many cards is too many?CreditFinancecredit cardscredit scorecredit report […]