Global funds make a beeline for Indian banks, finance firms; $1.46 billion …

Investors looking for growth and returns in a sluggish economy are pouring money into small- and mediumsized finance firms whose nimble models are delivering financial inclusion and growth faster than that of the stateowned banks.

In the first six months of 2015, private equity funds invested $1.46 billion in finance firms, compared with $1.29 billion in the same period of 2014 and $0.9 billion in Jan-June 2013, a Bain Consulting study showed.

Financial services sector has been very warm over the last two years as it happens to be one sector where most of the large private equity funds have been very focused. While in banks shareholding of more than 5% is not allowed, so the focus has been on NBFCs in areas like vehicle finance, home finance and even microfinance, said Sanjeev Krishan, leader (private equity and transaction services), PricewaterhouseCoopers India.

A McKinsey study released earlier this year showed that returns on invested capital for private equity investments in financial services were 14%, second only to information technologys 39% in 2009-13.

Some promoters who partnered PE funds say that this is a long-term play. When PE firms invested in our company we told them that growth will not come in a few months as we do not expect macro to change anytime soon, said Sanjay Chamria vice chairman Magma Fincorp, which raised Rs 500 crore in March 2015 from investors such as India Value Fund, Leapfrog and KKR. There is growing interest for new-age financial services companies. Recently, Apax Partners invested Rs 500 crore in the Murugappa Group-owned non-banking finance company Cholamandalam, following it up with a Rs 2,300-crore stake buy in Shriram City Union Finance (SCUF) — the retail lending arm of Shriram Group.

The returns have also been lucrative and sometimes even quick. Wolfensohn Capital Partners, founded by former World Bank president, sold shares in housing finance firm Repco Home Finance making two times returns in less than a year when it exited Repco in April 2014. TPG Capital, which sold the 20% to Apax in Shriram City, made 4.5 times returns. With the gradual opening up of various parts of the financial services market and the introduction of new disruptive technologies, we are seeing greater interest in investing in this sector, Sri Rajan, Bain India MD and senior leader of Bain Companys private equity consulting practice. Private equity investors pumped in a total of $9.5 billion in Indian companies in the first six months ending June this year. This is a turnaround from what was seen in the preceding years when global investors were recaliberating their India approach. Since last year, PE investors have stepped up their India investments after a seemingly pro-business government came to power at the centre.

Pulaski Financial Reports 44% Increase in Third Fiscal Quarter EPS

ST. LOUIS–(BUSINESS WIRE)–Pulaski Financial Corp. (Nasdaq Global Select: PULB, the “Company”)
reported net income available to common shareholders for the quarter
ended June 30, 2015 of $4.4 million, or $0.36 per diluted common share,
compared with $2.8 million, or $0.25 per diluted common share, for the
same quarter last year. For the nine months ended June 30, 2015, net
income available to common shareholders was $10.6 million, or $0.88 per
diluted common share, compared with $6.9 million, or $0.61 per diluted
common share, for the same period last year.

The Company reported another quarter of significantly higher returns
compared with the same prior-year quarter. The annualized return on
average assets increased to 1.22%, up 27 basis points from 0.95%
reported in last year’s quarter. The annualized average return on common
equity increased to 14.46%, up 357 basis points from 10.89% reported for
the quarter ended June 30, 2014.

Earnings for the quarter were marked by a 150% increase in mortgage
revenues over the same quarter last year, as the demand for loans to
finance home purchases remained strong. The Company saw a 49% increase
in loans to finance home purchases compared with last year’s quarter,
representing the highest purchase money mortgage volume in over five
years. In addition, low market interest rates continued to fuel strong
customer demand for loans to refinance existing mortgages.

Also increasing non-interest income during the June 2015 quarter was a
$1.3 million payment received by the Company under its fidelity bond,
which was related to an elaborate fraud perpetrated against the Company
by one of its commercial loan customers in a prior year. This was
equivalent to $0.07 per average diluted share after tax and represented
the Company’s final settlement with its insurance carrier. The Company
previously recorded a $688,000 insurance recovery in the quarter ending
December 31, 2014 bringing the total amount of insurance settlement for
this matter to $2.0 million, or $0.11 per average diluted share.

Net interest income for the quarter was up 5% from the June 2014 quarter
as the Company benefited from substantial growth in portfolio loans and
residential mortgage loans held for sale. This growth more than offset a
decline in the net interest margin that resulted primarily from market
driven declines in loan rates. The total balance of portfolio loans
increased 6% from March 31, 2015 as the result of an increase in
commercial loans and residential real estate loans.

The Company continued to be successful in raising deposits while
carefully managing the total cost of deposits. Total deposits increased
3% during the quarter, while the weighted average period-end cost of
total deposits increased to 0.36% at June 30, 2015 from 0.34% at March
31, 2015.

Gary Douglass, President and Chief Executive Officer, commented, “We are
very pleased with our quarterly results driven by strong loan portfolio
growth, significant growth in mortgage-related revenues and a
continuation of low net credit costs.”

Douglass concluded, “We expect to end our fiscal year with another
strong earnings performance which should approximate the earnings
reported in the current quarter, exclusive of the insurance recovery.”

Conference Call Tomorrow

Pulaski Financial’s management will discuss third quarter results and
other developments tomorrow, July 29, 2015, during a conference call
beginning at 11 am EDT (10 am CDT). The call will also be
simultaneously webcast and archived for three months at: http://www.pulaskibank.com/our-story/shareholder-relations/.
Participants in the conference call may dial 877-473-3757, conference ID
67756699, a few minutes before the start time. The call will also be
available for replay through August 29, 2015 at 855-859-2056 or
404-537-3406, conference ID 67756699.

About Pulaski Financial

Pulaski Financial Corp., operating in its 93rd year through its
subsidiary, Pulaski Bank, NA, offers a full line of quality retail and
commercial banking products through 13 full-service branch offices in
the St. Louis metropolitan area. The Bank also offers mortgage loan
products through loan production offices in the St. Louis, Kansas City,
and Chicago metropolitan areas, mid-Missouri, southwestern Missouri,
eastern Kansas, Omaha, Nebraska and Council Bluffs, Iowa. The Company’s
website can be accessed at www.pulaskibank.com.

This news release may contain forward-looking statements about
Pulaski Financial Corp., which the Company intends to be covered under
the safe harbor provisions contained in the Private Securities
Litigation Reform Act of 1995. Statements that are not historical
or current facts, including statements about beliefs and expectations,
are forward-looking statements. These forward-looking statements cover,
among other things, anticipated future revenue and expenses and the
future plans and prospects of the Company. These statements often
include the words may, could, would, should, believes,
expects, anticipates, estimates, intends, plans, targets,
potentially, probably, projects, outlook or similar expressions.
You are cautioned that forward-looking statements involve uncertainties,
and important factors could cause actual results to differ materially
from those anticipated, including changes in general business and
economic conditions, changes in interest rates, legal and regulatory
developments, increased competition from both banks and non-banks,
changes in customer behavior and preferences, and effects of
critical accounting policies and judgments. For discussion of these and
other risks that may cause actual results to differ from expectations,
refer to our Annual Report on Form 10-K for the year ended September 30,
2014 on file with the SEC, including the sections entitled Risk
Factors. These risks and uncertainties should be considered
in evaluating forward-looking statements and undue reliance should not
be placed on such statements. Forward-looking statements speak
only as of the date they are made, and the Company undertakes no
obligation to update them in light of new information or future events.

Fort Washington business owners sought for alleged ID theft turn themselves in …

UPPER DUBLIN gt;gt; The co-owners of a Fort Washington business who were being sought on ID theft and related charges turned themselves in Tuesday at the Upper Dublin police station. The two are accused of stealing $124,981 by using stolen identities of area residents to open fraudulent credit accounts.

Eric Lamont Martin, 33, and his wife, Portia D. Martin, 29, owners of Centra-Spike, a heating, ventilation and air conditioning company at 426 Pennsylvania Ave., allegedly obtained the personal information of at least eight people and applied for fraudulent loans in their names through Synchrony Financial, a company that provides loans to individuals to finance home improvement projects, according to a release from the Montgomery County District Attorneys Office.

None of the victims, mostly senior citizens, had any business with Centra-Spike or applied for credit through Synchrony Financial, which paid the loans into Centra-Spikes business account. The funds were then diverted from the business account into Eric and Portia Martins individual savings and checking accounts, according to the criminal complaints.

Both have been charged with eight felony counts each of ID theft, theft by deception, theft by unlawful taking, receiving stolen property, deceptive or fraudulent business practices, unlawful use of a computer, criminal use of a computer and conspiracy, according to the complaints.

The theft came to light in March when a Maple Glen resident reported to Upper Dublin police that he had received notice from Synchrony Bank regarding a credit account opened using his name and personal information, according to the affidavit of probable cause. The account was opened Feb. 11 and was charged twice by Centra-Spike for a total of $23,931, the complaint says.

The victim reported he had never opened a credit account with Synchrony Financial and had no business dealings with Centra-Spike.

An investigation determined the credit application for the Maple Glen man had been electronically generated at Centra-Spikes business from the companys credit card terminal, the complaint says.

After detecting an increase in credit accounts for Centra-Spike, Synchrony conducted an internal investigation and determined that eight credit accounts had been fraudulently opened, according to the complaint. In addition to the Maple Glen victim, the complaint lists the other victims as: a Wyncote woman, Elkins Park woman, Warminster woman, Warminster man, Hatboro woman, Norristown woman and Chester Springs resident.

All of the accounts had been opened between Feb. 11 and 22 of this year, with deposits of varying amounts made to Centra-Spikes business account. The same day the deposits were transferred in pairs into personal accounts listing various addresses of Eric Martin and Portia Martin, the complaint says.

My understanding is the financial institution is out the money, Montgomery County District Attorney Risa Vetri Ferman said Tuesday, but many times a byproduct of such fraud is that the credit reports of the innocent victims could be compromised as a result. We dont know if that has happened, but we want to take action to avoid any negative consequences, she said. Continued…

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Huntington earnings boosted by home lending, finance unit purchase

Strong home lending and the acquisition of an equipment-finance company helped power Huntington
Bancshares Inc. to a record second quarter.

The bank on Thursday said profit for the three months that ended June 30 rose 19 percent to
$196.2 million, or 23 cents per share, from the second quarter in 2014. Revenue increased 9 percent
to $780.4 million.

The results beat analyst estimates by 2 cents per share and drove Huntington shares to a
post-recession high of $11.90 on Thursday, a gain of 2 percent. The shares closed at $11.73, a gain
of 13 cents, up 1.1 percent.

“We’re pleased with what was a record-breaking second quarter. The results are showing our
investments are paying off,” said Steve Steinour, the bank’s chairman, president and CEO.

The bank reported a 70 percent increase in mortgage-banking income for the quarter compared with
a year ago on a booming housing market.

Nationally, sales in June rose to their highest pace in more than eight years, and the median
sales price of $236,400 surpassed the previous high set in July 2006, shortly before the housing
market started crumbling.

The recovery of housing prices also is starting to drive an increase in home-equity loans for
families looking for ways to finance home improvements, pay for college and address other expenses,
Steinour said.

“The basic business model is meeting consumer needs, including home mortgages,” he said. “That’s
been very strong for us.”

The bank said its
purchase of Macquarie’s equipment-finance unit, which has since been rebranded
Huntington Technology Finance, that was finalized in March added about a penny per share to its
second-quarter profit.

“It’s proven to be a very robust business as companies expand,” Steinour said.

The bank also benefited financially from continued growth of customers, attracted to the bank by
policies including its 24-hour grace period before charging overdraft fees. Customers also are
adding more accounts with the bank.

Lending for commercial and industrial customers and auto lending continue to do well, according
to the bank’s report.

Huntington’s results, especially its higher revenue, come at a time when many companies have
struggled to increase revenue. Many companies have been increasing profit by cutting costs.

The results for Huntington were “pretty solid,” said Nick Raich, CEO of the Earnings Scout in
Cleveland. “The financial sector has had, in general, better top-line beats than the overall
market, and Huntington was right in line with that. Revenue growth is hard to come by
everywhere.

Raich said Huntington has benefited from an improving housing market, but there have been
worries about the exposure of regional banks to the energy sector, which has been dragged down by
low prices.

Despite the success of the quarter, Steinour said, the bank can do better.

“We’ve made investments,” he said. “None of our investments are mature. We continue to challenge
ourselves. This was a nice quarter, but we can do better and we expect to do better.”

mawilliams@dispatch.com

@BizMarkWilliams

Is forcing banks to lend to SMEs a good idea?

Under the new rules, announced in April, banks must by March next year ensure that they lend a minimum of seven percent of their net credit to small businesses and a minimum of 7.5% by March 2017.

For banks it means more work. They will have to continue to ensure that a total of 40% of their net credit goes to priority sectors (sectors like small farmers, export, renewable energy and small loans for education and housing), while also meeting the new sub-targets for small businesses and other sectors.

For foreign banks the sub-targets for small and marginal farmers and micro enterprises would apply from 2018 following a review in 2017, the reserve bank said. Previously foreign banks werent required to meet a specific target to lend to small businesses, just the overall one to lend 32% of credit to priority sectors.

Lending certificates

But while the screws are tightening for banks, they have been offered a new solution which could help them to meet targets. This, as for the first time banks be able to meet their targets by buying debt linked to priority lending (using a certificate) from those fellow banks which have already surpassed their targets.

Micro lending institutions which are closer to the target market will not be able to sell certificates to banks. But they will benefit indirectly with the launch of the Micro Units Development Refinance Agency (Mudra) Bank, also in April.

Read more: India is home to 3rd-biggest startup ecosystem in the world, says report

This is because Mudras lending capital is being sourced from the shortfall owed by banks in priority sector lending (usually banks that fail to meet the target are mandated to place the shortfall in lending in the Rural Infrastructure Development Fund). When it operational it will lend directly to micro enterprises and to micro-financiers who would then onlend to micro enterprises.

MV Nair, the head of a committee on priority sector lending said in April that the certificates will allow banks to more easily meet the targets as those banks that have the infrastructure to lend to priority sectors can then surpass targets, and pass their liabilities on by selling these certificates.

Bank credit to MSMEs

While total bank credit to the small business sector stood at 7.9 trillion rupees in 2014, the new changes are aiming at addressing the supposed shortfall in finance to small businesses, which is estimated to be 32.5 trillion rupees, according to the International Finance Corporation (IFC). In addition Nairs committee estimates that only five percent of small businesses have access to finance.

Like this the state argues that it must continue to intervene and force banks to lend to small businesses. With the stricter measures in April the reserve bank hopes to ensure that this gap is closed.

Impact so far

So how has the policy fared so far?

India introduced its priority lending policy in 1969 following its nationalisation of banks. However lending targets only came into existence in 1974. The target for public banks has remained 40% since 1979, while foreign banks have had to meet the 32% target since 1993.

A study released in January by Shilpa Rani and Diksha Garg of Kurukshetra University, concluded that both public sector and private sector banks have struggled to meet their respective targets over the years.

Another, a 2013 study by Najmi Shabbir, revealed that in 1969 the share of small-scale industries lending in net bank credit by private banks came to 10%, peaking in 1989 at 20%, before almost consistently sliding – to six percent in 2011. Public sector banks fared little better beginning at 8.3% in 1969 and peaking at 17% in 1989, before consistently sliding to 11% in 2008.

Since the category of MSME was created under the MSME Act in 2006, the percentage of credit to the sector by public-sector banks has climbed from 11% in 2008 to 15% in 2011, while for commercial banks it moved from almost 12% to 10% over the same period.

Risks

While some like Manavjeet Singh, the managing director of Bestdealfinance.com say banks must understand the small business sector better and design relevant products to meet lending target, others point out that the rule stack more demands on Indian banks that are already accumulating more bad debt.

Read more: Ventureburn survey sheds light on SA’s tough, but pioneering startup industry

Between 2001 to 2013 loans to small businesses made up just 8.9% of total bank credit, but represented 15.1% of non-performing loans, according to figures by CARE ratings. Last year the gap closed a little for public banks these were 5.2% as against 4.5% for non-priority sector loans in 2014.

This may not be surprising a 2008 World Bank study indicated that the average non-performing loan ratio in developing countries for SMEs is 6.5%, compared to 4.1% for large firm loans

But there are other concerns. Priority sector lending requirements may also discourage foreign banks from entering a market to the extent they must follow the same mandate. This locks out competition.

Costly

Its also costly. A 2013 study by consultants Nathan India found that the difference between the returns and costs on small loan sizes (10 000 rupees) for public sector banks is (-) 27.6%, for private sector banks it is (-) 12.7%, and (-) 11.7% for foreign banks.

The consultants found that countries (Japan, Korea, China, Brazil, and Thailand) that have used directed credit programmes shows that the overall costs of implementing such programmes are enormous relative to the benefits that they generate, thus reducing the net benefits to the economy.

Consequently the consultancy notes that several countries have phased out their such preferential or priority lending policies, or are in the process of downsizing them despite the fact that these programmes are extremely difficult to discontinue once introduced.
Picture
In the end lending to small businesses in India by banks is being heavily subsidised by the state, which still owns the majority of the countrys banks.

Indias 26 public banks accounted for 84% of branches and 76% of advances in 2012. India also has 20 private sector and 40 foreign banks.

Had it not been for the heavy state involvement such a policy would have been near impossible.

But more than the risk of growing debts which could place the banking system at risk, the policy could drive banks to lend badly to businesses that dont deserve to be funded, creating a lot of inefficiencies all propped up by cheap credit.

Another way?

South Africa has its own kind of priority lending initiative the Financial Sector Code, which is in line with its Black Economic Empowerment rules which aim to racially transform the economy.

Under the code, which runs from 2012 to 2017, banks must lend out R48-billion (US$4-billion) in targeted investments, which not only includes financing black-owned SMEs, but also financing black farmers, affordable housing and transformational infrastructure.

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The first Financial Sector Charter which ran from 2004 to 2008 specified a target of R5 billion that banks were expected to advance to black SMEs during that period. During that time banks surpassed the target by lending out R11.4-billion.

Unlike in India there are no direct penalties for banks that miss these targets (except that banks with a better score are more easily able to punt for work with the government).

In addition the targets run over a five-year period, which gives banks some time. They also dont specify directly on the amount that must be lent to black-owned SMEs allowing banks that are stronger in some of the other areas to still meet the target.

But like this banks could also underplay lending to black-owned SMEs, opting instead to focus on the other sectors which make up the target.

Yet by all accounts banks are getting stuck in. Nedbank’s 2014 Transformation Report reveals that the banks new loans and disbursements to black-owned small businesses totalled R1.7-billion, up from the R1.1-billion it lent to 2,989 black-owned small firms in 2012. Lending by Standard Bank to black SMEs has more than doubled from R1.8-billion in 2012, to R3.7-billion last year.

Still a drop in ocean

Yet this these figures show that lending to black-owned SMEs still makes up just a minute proportion of banks lending to small businesses which as of September 2013 stood at R179.5-billion for SME retail lending (retail loans of less than R7.5 million lent to small firms), according to reserve bank data.

While the South African example perhaps shows how far things still need to go and black entrepreneurs must also be helped to develop more bankable ideas it also offers another way in which the state can slowly begin go tighten the screws on what one institution often loathed by small business banks.

Rahul Gandhi promises a liquor policy that suits Tamil Nadu

Hitting out at the state government for destroying the family and community through liquor sales, the scion of the Gandhi family said the Congress would enact a new liquor policy in the state if it is elected to power. We will listen to the voice of the family torn apart by the liquor and will come up with a new liquor policy after listening to what you have to say. The liquor policy that will work in your interest.

Rahul said, Kamaraj-ji used to build family and community, but the current leaders are destroying families and community. Last year, liquor sales contributed Rs 30,000 crore to the states revenue. It means every year almost Rs 10,000 is going from the pocket of every person in Tamil Nadu straight into the benami firms of leaders of regional parties.

Rahul also criticized the state government for not ensuring safe zone to the dalits in Tamil Nadu. He promised to set up more fast-track courts to give justice in the cases of atrocities to the dalits.

It has been almost 70 years since India got independence, but the dalits in the state are denied justice. Almost 70% of atrocities against dalits go without any action. This is the sad reality in Tamil Nadu. When Kamaraj-ji was chief minister, the dalits were safe and he made a dalit the home minister, he said.

On unemployment in the state, he said, The students know that education is the passport for future. They work for their education. They take loans for education. They believe that if they get an education, they will get a job. Once they are educated, they dont get a job in Tamil Nadu. One out of three youngsters in Tamil Nadu does not have a job. Please listen to their voice. The government is not listening to the youth of Tamil Nadu, he said.

READ ALSO: Who spoiled two generations of people by lifting prohibition in TN, Anbumani asks Stalin

Smart, fun ways to spend your tax refund

Don’t know what to do with your tax return windfall? We share a few sensible and fun ways to spend the extra cash

It’s tax season again, which means many of you will receive a little extra money to play around with.

While it might be tempting to use the extra cash to splurge on that expensive pair of heels you’ve been eyeing, or that latest ‘must-have’ tech gadget, it’s important to start off with the seemingly less sexy option of settling outstanding debt.

Pay off your debt

This is arguably the most sensible way to spend your money. You should focus on settling debt that bears the highest interest rate, which is usually your credit card and personal loans. Making an extra payment towards your bond, regardless of the amount, will help reduce your repayment time-frame in the long run.

Boost your retirement and emergency savings funds

If you’re in the enviable position of being debt-free, consider putting a portion of your windfall towards buffering your rainy day fund as well as your retirement savings.

According to universal standards, having a savings account that contains approximately six-months worth of living expenses is considered a healthy rainy day fund.

Pay premiums or monthly subscription fees once-off

Opting for a once-off annual payment option on life or car insurance premiums, monthly subscription fees like DStv, or something sensible such as school fees could actually save you a bit of money. Most insurance companies charge a monthly transaction fee, which you can avoid if you pay a lump sum.

Similarly, schools generally offer discounted tuition fees to parents who make a single payment at the beginning of the year, and the same goes for a DStv subscription.

Invest in your career

Personal development is an area many professionals neglect to their detriment. Remember to set money aside to pursue training courses that will develop your skills set and ultimately set you up for a promotion, or even prompt you to change careers and improve your earning potential.

But let’s face it, you work hard for your money after all and deserve to spoil yourself a little.

As the saying goes, all work and no play makes Jack (or Jill) a dull boy (or girl). It’s important to maintain balance in your life, so take the opportunity that a tax refund offers to do something you might not ordinarily consider.

Treat yourself to a holiday

While the Bahamas or Caribbean might be a stretch, make sure you book that holiday away – even if it’s locally.

Do your research and shop around for the best season and travel dates that will allow you to get the best trip for your money.

Do those home renovations you’ve been dreaming about

With bigger daily concerns to consider, home maintenance issues are often relegated to a ‘when it’s absolutely essential’ status.

Why not give your house a new coat of paint, fix your roof or splurge on those electronic appliances that will spruce up your kitchen.

Pamper yourself

We all have varying ideas about what pampering entails; the important thing is to do whatever makes you happy.

Whether it’s a day at the spa or buying a cost-saving gadget, (you can argue that digital subscriptions and online shopping is cheaper), celebrate your hard work in style.

Source: Stockspot, Direct General

    3 Ways Roommates Can Wreck Your Credit

    Rah commented that he and his roommate shared a lease. When they ended up owing “$600 in damage,” the burden fell to him. “I can not get in contact with my old roommate, shes in hiding probably. Anyways this is leaving me the debt. How do I hold her accountable as much as I am being held accountable?” he asked.

    Sharing a home or apartment with one or more roommates can be a great way to split expenses. But it is not without hazards. In fact, there are three ways a roommate can ruin your credit.

    1. Our Lease Becomes Your Lease

    Signing a lease with someone else is just like co-signing a loan: you are ultimately on the hook for the entire amount if the other person doesn’t pay. “If you sign a contract, even if someone signs it with you, you are responsible for performance under the contract,” says Ohio consumer protection attorney Barbara Quinn-Smith. “If you have signed a lease you are fully responsible for the rent and the landlord can go after both of you.”

    This is perhaps the most crucial thing to understand going into a lease: You could wind up paying the entire rent, plus more, if there are damages to the property. Can you afford that? If not, you can face eviction and/or collection accounts for balances owed, both of which can severely hurt your credit. (You can read more on how eviction impacts your credit scores here.)

    2. Utility Bill Woes

    Sharon said that when she decided to move out of the apartment she was sharing with a roommate, the power company refused to disconnect her service in order to take her name off the account. “They tell me it is illegal for them to do so. I cant think that just because I once lived here and am going elsewhere that I can be forced to leave this service in my name forever . Help.”

    And Sarah found a past due account from a cable/TV/Internet provider on her credit report. “I had transferred the account to my roommate when I moved out of the apartment. Apparently service was terminated in late 2012 and the last tenant failed to pay the last bill,” she wrote.

    One of the crucial things you’ll have to decide is whose name the utilities should be in. If they will be in your name, what happens if you leave sooner than your roommate? If they are not in your name, what happens if they leave early, or if they don’t pay?

    And what if there is an unexpectedly large bill? Would you and/or your roommate be able to pay it? If not, who could be stuck with it?

    Utility providers dont typically report payments to the credit reporting agencies. But if bills remain unpaid they will be sent to collections, and those accounts do hurt credit scores.

    See Where You StandSign up at Credit.com and get your FREE credit score report card. Plus see how you compare to others. FREE updated every 30 days.
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    3. They Steal Your Identity

    Most cases of identity theft involving roommates don’t turn out to be as sensational as Brittany Ossenfort’s, whose roommate allegedly stole her identity, mimicked her appearance and used her name when arrested for prostitution. But ID theft situations don’t have to be dramatic to be traumatic.

    “We hear, on a regular basis, that victims know their identity thieves,” says Eva Velasquez, president/CEO of Identity Theft Resource Center.  While she isn’t aware of how often the perpetrator is a roommate, “identity theft is often a crime of opportunity, and people that have ready access to your information have plenty of opportunity,” she wrote in an email. “Especially when they have access for long periods of unattended time, like a roommate would.”

    Identity theft can wreak havoc on your credit reports and scores, and sometimes takes months — or years — to resolve. In the meantime, it may be difficult to get credit.

    How to Protect Yourself

    If you decide the benefits of a roommate outweigh the risks, here are some ways to protect yourself.

    1. Screen your roommate as a landlord would. While exchanging credit reports is probably too much information (and could make it easier for the recipient to commit fraud), you could both get your credit scores and share those results with each other. You can each get a free credit score and analysis of your credit at Credit.com.
    2. Treat personally identifying information just as you would any other valuable, suggests Velasquez.  “Guard it, allow only limited access to it, and keep track of it,” she recommends. “Would you leave a $100 bill sitting out on the table?  Apply this same principle to your financial statements, tax returns and information, medical info, and any other documents that have your information, particularly your Social Security number on them.”
    3. Monitor rent and utility bills — and your credit. If you and your roommate write separate checks for your shares of the rent, make sure their payment actually gets paid. When you move out, get a statement from the landlord indicating that the balance you owe is zero. If you are giving your roommate money for your share of the utilities, make sure those bills are getting paid. And monitor your credit. Get your free annual credit reports and review your free credit scores on a regular basis to help you spot problems.

    More Money-Saving Reads:

    • What’s a Good Credit Score?
    • What’s a Bad Credit Score?
    • How Credit Impacts Your Day-to-Day Life

    Image: iStock

    How to Build Credit Fast

    Contrary to popular belief, it doesnt take years to build credit. If you know how credit scores work, you can achieve a good credit score in less time than you may think. With that in mind, heres what you need to know in order to build your credit as quickly as possible.

    How credit scores work
    Before you can learn how to build credit fast, you need to understand where your score comes from. There are several different credit scoring models, but the most popular is the FICO score, used by more than 90% of lenders.

    Your FICO score is made up of five categories of information, with a weight assigned to each:

    • Payment history (35% of FICO score) — The single most important factor in your credit score is whether you pay your bills on time. Late payments, delinquent accounts, collections, and judgments can drag down this part of your score, and the longer you go without any of this derogatory information, the more of a positive impact this category will have.
    • Amounts owed (30%) — This doesnt refer to the actual dollar amounts you owe, as much as it refers to how much you owe relative to your credit limits and original loan balances. Keeping your credit card usage low and paying down loan accounts will boost this part of your score.
    • Length of credit history (15%) — This category uses certain information that tells creditors how long youve established credit. It takes into account when you opened your first account (even if its been closed), the average age of all accounts, and the age of your individual accounts, among other time-related information.
    • Types of credit in use (10%) — This looks at whether you have a healthy mix of credit accounts, such as credit cards, store accounts, mortgages, student loans, auto loans, etc. The theory behind this is that it shows how responsible you can be with any type of credit.
    • New credit (10%) — As the name implies, this factors in how many of your accounts were recently opened. If you open several new accounts in a short time period, it could hurt your score. Also included in this category are your recent credit inquiries — the number of times youve applied for credit. Only inquiries from the past year count, so it doesnt take long for this category to become all clear.

    Good credit doesnt have to take long
    As you can see, most of these categories can be positively influenced in a short period of time. Obviously, the length of credit history category takes years to capitalize on, and by definition the new credit category wont be stellar when youre just getting started. However, these categories represent just one-fourth of the total.

    To establish an excellent payment history takes years, but you can create a good history fairly quickly. The actual FICO formula is a well-guarded secret, but you might be surprised how much of an impact a few months of on-time payments and no adverse information can have.

    The Amounts owed category is perhaps the easiest way to have a quick impact on your credit score. Once you open a credit account, simply keeping your balance low as a percentage of your available credit is all you need to do. Experts generally say that usage of 30% or less is good, and lower is even better. People with the highest credit scores tend to use a single-digit percentage of their credit limits, so if you get a credit card with a $1,000 limit, carrying a balance of less than $100 could be a highly effective way to boost your credit.

    Types of credit in use is a tough category to crack when youre just starting out. After all, you probably wont have a mortgage, auto loan, and several credit cards at first. Still, something is better than nothing, and if you can establish just a couple of account types (say, a credit card and department store account), you could see your score rise rather quickly.

    So, while an excellent credit score takes years of responsible habits, it is possible to build a good credit score in a short period of time.

    The best plan of attack
    The best way to build (or rebuild) credit is to establish an account and use it responsibly. For those just establishing credit, this usually means getting a credit card, and there are several cards out there designed specifically for first-timers.

    A secured credit card can also be an excellent way to get started. In fact, this is how I established my own credit years ago. Since youre required to put down a security deposit equal to your credit limit, its not difficult to get approved for these, even with a lack of credit history. They report to the credit bureaus just like a standard credit card, and tend to have more favorable terms than other starter credit cards.

    Once you open an account, and use it with the credit scoring formula in mind, you might be surprised how much credit you could build in a short amount of time, which can make your large financial purchases like a house and car both easier and cheaper.

    7 Dangerous Credit Card Mistakes You’re Making

    After payment history, FICO looks at amount owed, which makes up 30 percent of a credit score. The key calculation here is the borrowers credit utilization ratio, which is how much available credit you use. For example, if you have a card with a $5,000 credit limit and a $2,500 balance, your utilization ratio is 50 percent. In generating the score, FICO analyzes each account and the total of all your accounts.