MYCREDITREPORTHELPER

Your Credit History is More Revealing Than You Think

2011-11-04T05:40:00.000-07:00

The information in your credit report has long been used to predict how likely you are to pay credit card bills on time or remain current on your mortgage. But now credit information companies say they can figure out everything from how much discretionary income you have to how likely you’ll be to take medication as prescribed. It’s the next logical step for companies intent on finding new and lucrative ways to sell your personal data to marketers — but it’s also kind of creepy.

“Any time companies collect information and put it in databases to make decisions about consumers, there is a privacy question,” Ed Mierzwinski, consumer advocate at US-PIRG, says via email. He urges financial regulators to take a harder look at some of these strange new scores.

Credit bureau Equifax offers a product called a “discretionary spending index” that’s designed to help marketers ferret out consumers who have some extra money with which they could be persuaded to part. The 1,000-point scale “enables marketers to rank customers and prospects by spending power,” the company’s website says.

With this information, companies know which customers are the best candidates to target for marketing opportunities.

The webpage for the index also says it can tease out how much money low- and middle-income households have to spare. This could be a boon to bill collectors, since they would know which customers legitimately don’t have enough money to pay their debts versus those who just say they can’t pay up. A related product, the “ability to pay index,” makes similar claims. “[A] leading collections firm was able to identify over $14 million in collections, representing close to 40% of all outstanding balances from just 21% of delinquent accounts,” a testimonial on the site says.

Equifax and rival credit bureau Experian both offer products that claim to offer detailed information about a person’s income, including wages along with other income streams like investments. As with the discretionary spending index, this would give marketers a lot more insight into which consumers are worth the resources to pursue, and which ones aren’t as valuable.
The Wall Street Journal describes how Fair Isaac Co. — the company behind the ubiquitous FICO score — has developed what it calls a “medication adherence score” designed to tell doctors which patients are most and least likely to follow the directions on their prescriptions. The marketing materials on FICO’s website promise that with only a name and address, and either a healthcare company’s own records or “publicly available third-party data,” the company can predict whether or not a patient will take medication as directed.

“FICO has unlocked the predictive power of other data sources, such as retail purchase behavior, geo-credit profiles and income/wealth indicators,” the site says. Your shopping habits might seem like a strange thing to evaluate in connection with your health, but the Journal says seemingly unrelated factors like whether or not the person has a car or a spouse are factored into the analysis.

In the Journal, creators of these developments defend them. “[T]hey say credit-based scores increase economic efficiency, improving people’s access to loans and cheaper insurance,” the article says. But they also claim that these alternative yardsticks for measuring everything from how much extra cash people have at the end of the month to how much they earn in investment income don’t fall under all of the regulations that pertain to regular credit scores.

But PIRG’s Mierzwinski disagrees. “We … expect both the FTC and the CFPB to take a hard look at these new databases to determine whether consumers have full Fair Credit Reporting Act rights when this information is collected or sold,” he says. “We think they do.”

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4 Quick And Surefire Ways To Raise Your Credit Score

2011-08-16T05:56:00.000-07:00

Written on August 15, 2011 by Guest in Debt .For the most part, having a good credit score requires that you follow solid financial habits and use credit responsibly over time. However, if you aren’t happy with your credit score, there are some things you can do to improve matters relatively quickly.

As you put your plan into action, though, you should remember that “quick” in the world of credit scoring usually means 30 to 60 days, or longer. Don’t expect that your credit score will improve overnight, but you can get a jump start with these 4 ways to raise your credit score.

Note: If you don’t know where you stand today, here are a few ways to check your credit score for free.

1. Fix Errors on Your Credit Report

Since your credit score is based on information in your credit report, an accurate file is important. You can get one free copy of your credit report every year with the help of annualcreditreport.com. You can also purchase copies of your credit report. If you have been turned down for credit, you are entitled to a free copy of your report — and the score that was used to decline your application.

Armed with your credit report, you can then find out what information could be dragging down your score. If there are inaccuracies, get them fixed. I once had a credit card balance and a student loan listed twice — making it look like I owed more than I did. Fixing these two mistakes gave my credit score a little bump.

2. Pay Down Debt

One of the items that heavily impacts your score is your debt utilization. If you are maxing out your credit cards, your debt utilization is high. Instead, you should aim to be using no more than 30% of your available credit. If you have high debt, do your best to make drastic inroads into your debt so that you aren’t so close to your limits — here are some tips to get out of debt if you need a little inspiration. You’ll see an improvement in your credit score as your debt load decreases.

3. Avoid Late Payments

If you want to raise your credit score, you need to make sure you are focusing on your payment history. This is the #1 factor considered in the FICO score algorithm. You need to make sure that you are paying on time. The longer your history of on-time payments, the better your credit score. Do what you can to pay on time, and your credit score will benefit. One missed payment can ding your score if you aren’t careful; make sure that you get your payments on time.

4. Get Another Type of Loan

If all you have is one type of loan, you can improve your credit score by mixing it up a little bit. Loans are broadly divided into two types: revolving and installment. A revolving loan is something like a credit card; you have a limit, and you can keep borrowing as long as you make payments to stay below the limit.

An installment loan, though, is one with a payoff schedule. You make regular payments until the loan is gone. If you only have installment loans, you might try adding a credit card to the mix. If you only have revolving credit, consider getting a small personal loan to pay off over time. A little loan diversity can give your score a little nudge higher.

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How your FICO credit score is calculated: Payment history

2011-06-24T09:27:00.000-07:00

Your history is complex and changing, but it's all about paying bills on time

By Jeremy M. Simon

This is the first of a five-part series examining what goes in to creating your FICO credit score -- the three-digit number that helps determine how much you can borrow and on what terms. Each part of the series will take an in-depth look at one of the five basic components of the credit scoring model. Today: payment history.

In the calculation of your FICO credit score, no factor is more important than your payment history.

That history's comprised of many complex components, which can confuse consumers. But experts say that ultimately, there's one main thing consumers need to know: Always make your payments on time and your FICO score will improve.

The primary objective of a credit score is to illustrate to lenders just how likely you are to repay your debts, and while many other types of credit scores are out there, FICO's is, by far, the one lenders use most to make lending decisions. The higher your score, the more likely you are to get a low interest rate and a high credit limit.

To calculate that score, FICO considers five different factors:

1. How much new credit you have.

2. What types of credit you have.

3. How much total debt you have.

4. How long you've had credit.

5. How you've handled that credit (otherwise known as your payment history).

They're all weighted differently in the calculation, with payment history carrying the most heft.

Although FICO is secretive about many of the inner workings of its scoring model, the company's website openly lays out the numerous components that make up a borrower's payment history. Those components include everything from information on loan accounts that are being paid on time to accounts that have gone delinquent to any public records, such as bankruptcies and judgments.

While that may sound like a lot to understand, it's not, experts say.

"It's very simple," says Howard Dvorkin, founder of Consolidated Credit Counseling Services. "Pay your bills on time!"

A weighty factor

FICO's scoring system grades borrowers along a range from 300 to 850. If you're looking to improve your score, focusing on payment history is a smart place to start.

Within the standard FICO scoring formula, payment history accounts for 35 percent of a borrower's FICO score. (The second-most heavily weighted factor -- amounts owed -- accounts for 30 percent of a FICO score.) Although FICO has a slightly different scoring model for Equifax, Experian and TransUnion -- the three major U.S. credit bureaus which maintain consumers' credit reports -- that payment history percentage is the same for each bureau's FICO scoring model.

The scoring model's creator says there's a good reason for that. "FICO's research has shown that a person's payment track record tends to be the strongest predictor of the likelihood that the individual will pay all debts as agreed in the future," says Barry Paperno, consumer operations manager for the company's myFICO.com website. In other words, FICO has found that if you've handled credit well in the past, you're more likely to do it in the future, too.

Payment history components

So what goes into your payment history? The data can be broken down into seven components:

Payment information on various types of accounts, including credit cards, retail accounts, installment loans and mortgages.

The appearance of any adverse public records, such as bankruptcies, judgments, suits and liens, as well as collection items and delinquencies.

How long overdue any delinquent payments have become.

The amount of money still owed on delinquent accounts or collection items.

How much time has passed since any delinquencies, adverse public records or collection items.

The number of past due items listed on a credit report.

How many accounts are being paid as agreed.

Simple, right? Not so much. The FICO score depends on the information in borrowers' credit reports, which is provided by creditors. And not all creditors behave the same. For example, many creditors don't report missed payments until they become at least 30 days late. Others may wait even longer, if they even report at all.

How long those blemishes remain on your credit report can also vary: Negative items generally stay on a credit report for seven years, but can remain for up to 10 years in the case of bankruptcies. Meanwhile, you can expect on-time credit card payments to appear, but payment information from other businesses, such as utility companies, isn't necessarily listed on credit reports or included in your FICO score.

If you're an authorized user on someone's credit card, things can get tricky, too. While the payment history for a shared account can impact an authorized user's FICO score, one of the bureaus (Experian) only includes positive information on the authorized user's credit report, while the other two bureaus include both positive and negative data. And authorized users can even remove part of their histories if things go wrong with the authorized account -- all they have to do is ask to removed from the card account, and over time, that card's history will vanish from their payment history. Account holders, and even co-signers, don't have that luxury.

Tips for a good credit history

Building a strong payment history is not only about what you do right, but also about what you do wrong. To get a great score, you'll need to make consistent, on-time payments while simultaneously avoiding mistakes that cost you FICO points. What happens if you mess up your credit? Expect a 30-day late mortgage payment, for example, to drop your FICO score by as much as 110 points. After a mortgage delinquency occurs, expect to wait three years before your credit score fully recovers.

If you have a few accounts that are delinquent, "it's going to hurt you a little," Dvorkin says. "If you've got a lot of delinquents, it's going to hurt you a lot."

Mistakes can take years before they disappear entirely. Typically, negative items, such as missed payments, will remain on your credit reports for up to seven years.

That's why it's very important to be cautious about your payment history.

"Relative to all other types of credit report information being evaluated by the FICO scoring formula, payment history can always be expected to have the most impact, both positively and negatively, on a person's FICO score," Paperno says.

Read more: http://www.creditcards.com/credit-card-news/fico-credit-score-payment-history-1270.php#ixzz1QD9IXpl3

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5 Frugal Ways to Spend Vantine's Day

2011-02-09T12:42:00.000-08:00

Valentine’s Day leaves a lot to the imagination. In fact, frugal guys and gals find all sorts of ways to celebrate February 14th. You don’t have to rely on overpriced chocolates and flower arrangements to make your sweetheart happy. With a little imagination and even less money, you can make it a day to remember without all the clichés. Here’s how you can make the most out of the upcoming holiday:

1) Plan a scavenger hunt around town. Leave clues sealed in envelopes at different romantic locations. Make the final destination somewhere the two of you really wanted to go to. This can be an art gallery, a museum, a concert, play or movie. Daily deal sites and group coupon sites are great for this purpose. Visit Groupon or Living Social periodically to see what they offer. Heck, just today before I posted this my daily local groupon was for 50% off flowers. Can’t beat that.

2) Create a bunch of love notes and place them into helium filled balloons. Help your partner pop the balloons so they can read the messages that are enclosed inside. If time permits, fill an entire room full of these. Make it hard for your man or woman to get through the door.

3) Spread out a picnic blanket and have lunch in your living room. Prepare and eat some of your favorite foods. Take off your shoes and relax for a while. Listen to some great music. Read a book or play a board game.

4) Recreate your first date together. Go to the same location. Order the same items from the menu. Get your picture taken in a photo booth. Take a walk on the beach. Reminisce on the past and look forward to the future together as a couple.

5) Rent a movie from Redbox and call it a night. Pick up a new release from Redbox and stay in for the evening. (There is a large selection of titles to choose from and you can even reserve one online and pick it up later. Serve movie theater style concessions and curl up together on the couch.) A good romantic comedy is the perfect end to another great Valentine’s Day. Even if you don’t have a Redbox near you or if you don’t want to leave the house at all just pull up your cable or satellite on demand listings. A movie might cost a few dollars more, but it will still be cheaper than even a single ticket at the theater.

You don’t have to jump on a jet and fly to Paris to enjoy a romantic evening with your loved one. With a little bit of determination, you can avoid the high costs associated with Valentine’s Day and make it as memorable as ever.

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Debt-free holidays: Six easy ways to save on food costs

2010-11-19T05:53:00.000-08:00

The holiday season can be a wonderful time of year. It can also be a stressful time of year for those of us trying to keep our spending under control. According to the National Retail Federation, Americans are going to spend more this year than we did last year on our holiday expenditures -- almost $689 per person, a bit more than last year's $681.83.

To help you navigate through the season with your wallet and your sanity intact, WalletPop has consulted with our own expert team as well as experts in all things holiday. From food to entertaining to travel and more, we've got a bevy of tips and advice for keeping costs under control. Let's get started with one of our biggest budget busters: food.

Holidays can call for some pretty pricey fare, but our experts have some tips, tidbits and recipes to keep your food budget from disappearing faster than Frosty the Snowman on a sunny day.

Convenience foods can be expensive, says WalletPop's Christina M. Fierro. "Don't buy anything pre-cut -- vegetable trays and pre-made platters are very overpriced," she advises. You can cut veggies, cheese and the like up yourself if you have time, or you can kill two birds with one stone if you have one guest who always tends to arrive early and asks, "How can I help?" Even poor cooks can't mangle this task, and it keeps them out from underfoot while you're rushing around in the kitchen. Clear a space for them with a cutting board and a good sharp knife, and you're set.

When it comes to most meals, the most expensive part is the protein. Get around that by offering a frittata or a quiche for the main course; it will be just as filling and festive at a fraction of the price. You can either leave it meatless or add a bit of bacon, ham, prosciutto or sausage. Invite legumes to your holiday meals to stretch them and add some healthy nutrients at the same time. Puree chickpeas with garlic, olive oil and sesame paste to make homemade hummus (perfect as a dip for crackers or crusty bread), serve a hearty minestrone soup with kidney beans as a first course, or serve the meat over slowly simmered lentils or white beans.

Comfort food is inexpensive yet appealing around the holidays, says event professional Jaclyn Bernstein. As president and partner of Empire Force Events, Bernstein regularly coordinates receptions, dinners and other gathering for Fortune 100 CEOs.

"Many times for the holidays a lot of our clients are trying to go above and beyond what they think people want to eat and drink, but doing a twist on comfort food can be much more interesting and appetizing than trying to do the fancy food and cocktails," she advises. Bernstein says a couple of cheap dishes that get gobbled up even by the limousine set are pigs in a blanket and macaroni and cheese. Or add some ethnic flair: A big pot of chili or a pan of baked ziti will warm and fill your guests just as well as a more expensive option like a roast.

Howard Givner, executive director of the Event Leadership Institute and a professional event planner with 23 years of experience, has coordinated bashes like Mariah Carey's fragrance launch. Presentation is key, he tells WalletPop. "You can get food pretty cheaply, and if it's displayed decently, it's not necessarily going to detract from the experience," he says. "For example, Costco has these outrageous chocolate chip cookies. Take them out of the Costco plastic bin, and display them on a nice plate and boom!"

Another way to dress up inexpensive items is to make them part of an interactive experience, says Bernstein. For instance, instead of just spooning mashed potatoes onto plates, let guests get in on the action with a mashed-potato bar. Dish out the spuds into martini glasses, and let guests add toppings like sour cream, bacon, cheese, chives and so on for a snazzy spin on an old staple.

Don't forget to put your leftovers to work by typing "leftover turkey" or "leftover ham" into the search box of epicurious.com, kitchendaily.com or our own sister site slashfood.com for a bevy of ideas on how to use up your leftovers. Some of them are so good, you could invite your guests back and they'd never know you were serving leftovers.

WalletPopper Tom Barlow offers this inventive party dish for a hungry pre-dinner crowd. "My favorite party appetizer is Pate Chateau Blanc." Wondering what that is? "Take a bag of White Castles (yes, buns and all), puree them, form them into a log, and cover with cream cheese. Cheap, and people will eat it up unless you tell them what's in it," Barlow promises. If you try it, be sure to let us know how it went!

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Great credit may not get you a great mortgage

2010-09-28T05:58:00.000-07:00

Have you been working to boost your credit score before trying to get a mortgage? It may not yield the payback you expect.

The mortgage loan interest rates offered to borrowers with stellar FICO scores aren't much lower than the rates offered to those with a middle-of-the-road 720 score these days.

That means that efforts to drive up a credit score to lofty heights aren't likely to produce substantial savings over the life of the loan.

The real savings comes from getting your score to that magic line of 720.

An analysis of interest rate quotes made through real estate website Zillow.com during the first half of September found that prospective borrowers with FICO scores of 620 or below aren't likely to get any mortgage offers. "These lenders are really not looking at people under 620 at all," said Stan Humphries, chief economist for Zillow.

That means well over a quarter of U.S. adults have little or no access to mortgage loans right now, based on the most recent distribution of scores provided by FICO. That's because credit remains tight and banks, which have written off billions in bad loans in the past three years, are trying to keep their risks low, so they're bypassing the diciest borrowers. "As the housing market continues to improve over the next five years, then this situation will also change," Humphries predicted.

For potential borrowers with scores between 620 and 720 — roughly another quarter of U.S. adults — the lowest annual interest rate offered by lenders through Zillow.com shows the impact a few credit score points can have.

•For scores between 620 and 639 the best average annual percentage rate offered was 4.9 percent.

•For scores between 640 and 659, the rate was 4.73 percent.

•For scores between 660 and 679, the rate was 4.6 percent.

•For scores between 680 and 699, the rate was 4.56 percent.

•For scores between 700 and 719, the rate was 4.44 percent.

•For scores of 720 and above, the rate was 4.3 percent.

That means that for each 20-point score increase, the average rate dropped 0.12 percent. On a $300,000 home with a 20-percent down payment, a 0.12 percent decline equals about $6,400 saved over the course of a 30-year mortgage, according to Zillow. The company looked at 25,000 loan requests and the quotes they garnered from its pool of 1,000 lenders to come up with its data.

"If you're between 620 and 720, you should be killing yourself to get every point you can," Humphries said.

But if you're already at 720, the benefits start to dwindle as you improve your score further. There are still incremental rate reductions for borrowers in the higher range, but they won't see the same level of drop-off that improvements lower on the scale can produce.

Part of the reason for so little change for the top borrowers is that interest rates are so low overall. "There's not that much room right now between the rates," noted Diane Winland, a financial planner with Financial Finesse, based in Manhattan Beach, Calif.

Another potential factor is that consumers with "perfect" credit scores tend to be less profitable for banks than consumers with a few dings on their histories, who pay higher rates and often penalties like late fees.

Consumers with great scores by and large avoid credit, explained John Ulzheimer, president of consumer education for the website Credit.com. "They have credit, they have had credit for a very long time, but they're definitely a small-time user of credit. Which means that they're not very profitable."

The current situation means that potential mortgage applicants need to carefully evaluate their current standing and their goals before taking any steps.

Someone with a low credit score should work to improve their credit report before applying. "There's lots of things people can do in a short period of time to go up 10 points," said Todd Marks, vice president of education at the Consumer Credit Counseling Service of Greater Dallas.

But someone who already has a relatively high score may not benefit enough from an improved score to make delaying a home purchase worthwhile. "I always tell people, don't get greedy," Ulzheimer said. A rate in the low 4-percent range is still very good by historic standards, he noted. "In the grand scheme of things, it does not pay to wait."

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Improve your score

If you're planning to apply for a mortgage or other consumer loan in coming months, you'll get more offers and lower interest rates with a solid credit score. Here are some tips for improving your score before you apply:

Carefully read your credit reports from all three credit reporting agencies: Equifax and Experian and TransUnion.

Each is legally required to provide one free report per year. You can get yours through www.annualcreditreport.com.

Check all three reports to make sure personal information such as your Social Security number is correct; every line of credit is actually yours; and payment data is accurate. If you find anything that's incorrect, contact the agency to have it removed. Correcting a mistake that's dragging your score down can make a significant difference.

Make sure all of your loan, credit card and other bill payments are on time. Setting up automatic payments for at least the minimum will ensure that you don't miss future payments.

Pay down your balances. One factor in your score is your utilization ratio, or the amount of available credit you're using. Paying off a substantial portion of your credit card debt may reduce your ratio enough to raise your score and allow you to qualify for a better mortgage rate — enabling you to possibly save much more than your original debt over the course of your mortgage.

Don't apply for additional credit. Adding a new car loan to your report can temporarily cut 20 points from your score, for instance, so if you're planning on buying a house in the next few months, hold off on seeking any more credit.

Don't close old accounts. Even if you haven't used a credit card in some time, shutting down the account can hurt your score. The length of your credit history factors into in a score, and reducing your available credit will increase your utilization ratio

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Bank Losses Lead to Drop in Credit Card Debt

2010-09-27T09:59:00.000-07:00

By CHRISTINE HAUSER

The substantial drop in credit card debt in the United States since early 2009 has been widely attributed to newly frugal consumers. But analysts say that a significant portion of the decline is actually the result of financial institutions writing off billions of dollars in credit card debt as losses.

While consumers have done their part by shying away from exceeding new credit limits and turning increasingly to debit cards, the question is to what extent are consumers voluntarily reducing their balances, and to what extent are banks making the decision for them.

The answer has wide implications for the broader economy as banks try to determine whom to extend credit to — and how much — and as businesses try to adapt to the changes in consumers’ spending patterns.

“There is a lot of debate going on right now among economists,” said Cristian deRitis, the director of credit analytics with Moody’s Analytics, which is studying the issue. “Is there truly deleveraging or are charge-offs removing a lot of balances?”

Kenneth J. Clayton, senior vice president for the American Bankers Association for card policy, said the impact of tighter credit was working its way through an economy in which consumers continue to feel the effects of joblessness, lower incomes and declining housing values. “It has a braking effect on the economy, and the key thing is to get to the right balance,” he said. “We are in a process right now of finding that balance.”

Consumer debt has been steadily falling over the last couple of years. The Federal Reserve said last week that household liabilities — including mortgages, credit card accounts and nonrevolving accounts like auto loans — totaled $13.9 trillion in the second quarter of 2010, down $200 billion from the same quarter a year earlier.

Outstanding revolving accounts, mostly credit cards, declined to $832.2 billion from $915 billion in that same period, the Fed said in a separate report earlier in the month.

But economists said they were trying to calculate how much of the drop in credit card debt was the result of banks writing it off — charging off, in bank parlance.

Mr. deRitis, of Moody’s, said he was examining the credit card accounts of individual borrowers. He said he expected to learn which borrowers were voluntarily paying down their debt, which were taking on new debt, and to what extent existing borrowers were curtailing balances by paying more than the minimum.

While the study is not yet complete, Mr. deRitis said it appeared so far that most of the overall decline is in the form of charge-offs.

“There clearly is a differential impact with defaulting borrowers having greater difficulty finding credit in the future,” he said. “Nondefaulting borrowers are reducing their overall credit exposures but not at an especially rapid pace, given stagnant incomes and wealth.”

“Bottom line — we are becoming more of a polarized set of consumers,” Mr. deRitis added.

A study released last week by Evolution Finance’s CardHub.com, calculated that financial institutions charged off about $20 billion each quarter from early 2009 through early 2010, about equal to the amount of the decline in outstanding credit card debt.

“This study’s findings give real insight into how seriously the recession crippled consumers with credit card balances,” said Odysseas Papadimitriou, the company’s chief executive. “These write-offs also indicate that many banks are still experiencing deep losses and are still in serious trouble.”

But Gregory Daco, a senior economist with IHS Global Insight, said that the revolving debt figures alone did not explain consumer behavior. He said the Fed figures showed that consumers were clearing their balance sheets of various kinds of debt — mortgages, revolving debt for credit cards and nonrevolving debt like car loans.

Still, Mr. Daco said, the numbers only “give you an overview of the consumer credit picture.”

“You don’t know,” he said, “the exact proportion of how much people are actually paying off. It is a fact that part of the downward trend in consumer credit is due to charge-offs, but it doesn’t give you a clear answer as to what are the main underlying causes of that. And the best way is to refer to anecdotal evidence.”

Analysts said they had found that consumers who once relied on home equity are shuffling their finances, with some not paying their mortgage and using the temporary increase in liquidity to pay off credit cards, which they can then use again and again for daily necessities.

The consequences of that behavior play out in offices like that of Urmi Mukherjee, a financial counselor in Kansas. She had a client who “had to make a decision between paying the mortgage and paying credit card debt,” she said. “We see it very often.”

Ezra Becker, a director in the financial services business unit of TransUnion, a credit information company, said any bank that ignored shifts in consumer behavior did so at its peril. That behavior, he said, “needs to inform lender policy or lender strategy in how they approach their customers both today and going forward.”

In interviews, officials at several of the top American banks that issue credit cards said they believed the worst of the troubled balances have worked their way through the system. Some said in filings this month that their delinquency rates for August were at their lowest levels this year and that they expected write-offs to decline, too.

“We see deleveraging of the consumer,” said Jerry Dubrowski, a spokesman for Bank of America, adding that a frugal consumer, decreasing demand for credit and declining balances were also factors. “As they work the balances down, they are not replenishing that with new debt,” he added.

Bank of America’s chief executive officer, Brian T. Moynihan, said in April that consumer loan balances were down $37 billion from a year earlier, with $34 billion of that reduction the result of charge-offs. But Mr. Moynihan said he expected future credit card losses to be lower.

Even private label cards, or those that can be used only at a single retailer, report an improvement. The largest issuer of such cards, General Electric, said delinquencies and charge-offs were lower in the second quarter of 2010 than in the previous quarter and year. “U.S. consumers are by and large deleveraging,” said Stephen White, a spokesman. “They are buying less and electing to make purchases more often with debit cards.”

Economists agree that one of the consequences of deleveraging has been the shift to debit cards from credit cards, a migration that started before the recession but accelerated during it, said James Van Dyke, president of Javelin Strategy & Research.

David Robertson, the publisher of The Nilson Report, an industry newsletter, said the dollar amount of purchases put on debit cards is set to exceed those on credit cards sometime in 2014. That is partly because more cardholders will fall by the wayside as issuers raise prices for outstanding balances in response to the Card Act, he said.

“Between the recession-related psychology of not wanting to spend, out of fear of what the future might bring, you have the reality of people who simply don’t have a credit card anymore.”

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9 credit score myths do more harm than good

2010-09-15T07:26:00.000-07:00

Dispute everything on your report? Freeze your cards in ice? Hmmm ...

By Teresa Bitler

In today's economy, a good credit score is more valuable than ever, and for many, improving your score has become a financial priority. Turn on the radio, flip on the TV or head to the company water cooler and you'll likely be bombarded with various credit-improving strategies. But not all advice is good advice. Here are nine credit score myths that could actually do more harm than good:

1. Closing out old, inactive accounts will help your score.

Your credit score is based, in part (15 percent), on the length of your credit history; and in part (30 percent) on your utilization rate -- your total balances versus the total amount of credit available to you. Canceling old accounts can make your credit history appear shorter and, as a result, actually lower your score, according to Heather Battison, consumer education director for TransUnion. It also reduces the total amount of your available credit, so you'll be utilizing a higher percentage of your credit, which can also affect your score.

2. Opening (but not using) accounts will help your score.

To improve their utilization rate and, theoretically, their credit scores, some people open as many accounts as they can. Rod Griffin, director of public education for the credit bureau Experian, says this strategy is more likely to raise eyebrows than your credit score. "Your score is affected by how well you manage the credit you do have over a period of time, not by how many credit cards you have or the available balances."

3. You should avoid using your credit cards at all.

Remember the advice that you should stick your credit cards in a bowl of water and freeze them, ausing them only for emergencies? If you're a financially responsible consumer, that approach could negatively impact your credit score. Bruce W. McClary with ClearPoint Credit Counseling Solutions explains that your score reflects the responsible use of credit. If you're not using your credit, you're not building credit history. He advises using your credit from time to time and then promptly paying off the balance.

4. Dispute letters can clean up your bad credit.

Errors on your credit report can and should be disputed, but don't expect to magically erase accurate but negative credit history. Disreputable credit repair firms will advise that if you send enough letters disputing legitimate but negative records on your credit report, eventually the lender will not be able to respond quickly enough and the credit bureau will have to remove the item permanently from your credit report. Griffin says that's not the case. Dispute letters may force the removal of negative items temporarily, but once the lender can prove the record's accuracy, it will reappear on your credit report.

5. Paying off old debts and judgments will help your score.

Have a judgment or an account that went to collections? Don't expect to make that negative "disappear" by paying it off. Negative records -- judgments, collections accounts, bankruptcies or late payments -- remain on your credit report for seven to 10 years, regardless of any remedies you've made.

6. Credit inquiries hurt your score.

Inquiries alone have little impact on your score. Coupled with a history of bad credit, a hard inquiry, such as an inquiry for credit, could factor negatively into your score, but again, the effect would be minimal. Another myth? Pulling your own credit report, a soft inquiry, lowers your score. In fact, checking your credit report on a regular basis allows you to catch errors that could affect your score and identify those areas that need improvement.

7. Using a credit counseling service lowers your score.

Credit counseling services no longer figure into the FICO scoring system, so although your report might indicate you are receiving credit counseling, using those services won't lower your score. It could actually help your score, according to Todd Christensen, director of education at Debt Reduction Services Inc. "You're making your payments on time and paying down your debt, the top two factors in credit scoring," he says.

8. There's a set formula for obtaining good credit.

Be suspicious of any blanket statement about what people should or shouldn't be doing to improve their credit scores. "Credit is a very individual thing," says Griffin. "Credit scoring looks at everything and takes it all into account. If you are keeping your balances low and paying your bills on time, you'll have good credit and a good credit score."

9. You can get a perfect score.

Don't go to Herculean efforts trying to obtain that elusive 850 -- getting a perfect credit score is nearly impossible. Your credit score is a reflection of your credit risk, and regardless of your credit history, there's always a risk. Doug Minor, author of "Anatomy of Credit Scores," recommends working toward a score of at least 740. "It's more realistic and attainable than 850," he says.

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How to Get Your Credit Card Company to Lower Your Interest Rate

2010-09-09T06:04:00.000-07:00

In the modern world, economic and financial challenges are a worry for all of us. Of these concerns, the most common one is mounting debt and the biggest form of debt tends to be credit cards.

To understand credit cards, it’s important to know what “Annual Percentage Rate,” or APR, is. Take a moment to look at your credit card bill, where this should be listed. It’s a contributor in the minimum amount you must pay each month, and if you want your debt to go down, you will need to request a decrease in this rate.

Since credit cards are commonly confusing items, here are a few key items to understand:

APR Explained
You use credit cards to purchase things, and sometimes as a payment method when you don’t have the funds to pay right away. When you slide that card, you’re then responsible for paying back the money you owe. On top of this debt, there’s interest attached to it. This is the money that the credit card company charges for allowing you to use their money.

Usually, a credit card company will charge you interest on any balance that you haven’t paid by the end of the month. Those who have good or excellent credit get a low introductory annual percentage rate compared to those with fair or poor credit. This isn’t always the case though. The average APR is between 3 percent and 30 percent. The better your credit is, the lower your interest rate should be, in theory.

Beware of “Hidden” APR Rates
If you have a credit card, it’s important to note that there are sometimes hidden APRs mixed in with the ones you can clearly see. These are considered to be predatory hidden rates because they’re normally heavy fees and can result in an incredible amount of debt.

Sometimes, a credit card company will lure a person in with a low introductory rate. With this, you get to use your credit card without accruing interest, or in some cases, accruing only a small amount of interest. Make sure you know how long this intro rate lasts and what the APR will jump to afterward.

It’s also important to note that as of August, 2010, introductory rates may be higher since issuing banks can no longer increase a new customer’s interest rate during the first year.

Another APR to be aware of is the high interest rates that convenience checks typically carry. These checks allow you to access cash and in turn, the issuing bank charges you heavily for the convenience.

Understanding the Problem
While you may have a high APR, you aren’t the only one. Credit card companies are for-profit businesses and part of the way they make their money is by assigning a higher APR for those they determine are a higher risk.

Maybe your hours at work are being cut back. You might experience a personal loss. There are a number of situations where you just can’t pay the full amount due each month. If you are having any of these problems in your life, there is something you can do:

How to Lower Your Credit Card Interest Rate
As you follow these steps, make sure you have the information you need to discuss your account. It’s important that you only provide factual information. Trying to pull one over on the bank can have negative results.

1. Have your account information ready.

2. Know your payment history. If you’re asking for a benefit from your credit card company, then it’s helpful to have a solid and consistent payment history. You may want to consider mentioning the payment history on all your accounts to prove you are paying all your debts as directed.

3. Pull your credit report, and know your credit score before you even begin. When you know what you are working with, you have the upper hand. Not all banks will offer this information to you.

4. Compare your current APR with similar cards so you know where you stand. In cases where you have a similar credit card to use as a comparison, provide this information to the bank as well. This may sway their decision.

5. Be cool, calm and professional. Getting upset with the person you’re asking a favor from won’t help your cause. Stay cool, use facts to make your case and treat the person on the other end of the phone as you would like to be treated.

Take the time to follow each of these steps and you’ll see how easy it can be to get your credit card company to lower the annual percentage rate you pay. In some cases, you may need to submit additional information – so be prepared.

If you’re successful, you’ll find that you have more money in your pocket, which you can use for more important bills in your life. It will also help you avoid negative marks on your credit report for missed and late payments.

Even as your APR is lowered, continue to pay more than the minimum payment due each month. This helps to reduce the amount of interest you accrue, by reducing the principal you owe.

Source

Different websites provide very different credit scores

2010-08-17T10:53:00.000-07:00

Dear Credit Score Report,

Why do I get extremely different scores on the same day, with the same reporting agency (Experian), but different websites? On July 22, 2010, I checked my credit score on two websites. FreeCreditReport.com shows me that my credit score per Experian is 738, while Bank of America Privacy Assist shows me that my score is 671 (again, per Experian). I went through both reports and the information regarding limits, outstanding balances and all other data is exactly the same. Why am I getting such opposite credit scores? Which one is trustworthy? Does this credit scoring mechanism really work? I am highly in doubt if the whole FICO system works well. I am sure another website would also give me a totally different score. I just don't understand how in the world this is happening. Thanks in advance for your answer. - Enyew

Hey Enyew,

There's a good reason why you're getting such different credit scores, despite checking them on the same day: Those two numbers were generated using different credit scoring models.

Although the FICO credit score is most commonly used in lending decisions -- and the term FICO score and credit score are often used interchangeably -- there are plenty of scoring models out there. This can make things confusing for consumers. "Many consumers, if not most, are misinformed that there is only one credit score, when in fact, there are many," says Rod Griffin, director of public education for credit bureau Experian. Those include scores provided by the major credit bureaus (Equifax, Experian and TransUnion), proprietary models created by lenders but not shared publicly as well as scores offered to consumers by various other companies and websites. In your case, those two different scores are based on information from two different credit reports -- but neither score is used in lending decisions.

Those sources provided you with so-called "educational" credit scores, which give you an idea of how lenders view you, but aren't actually used by banks. FreeCreditReport.com offers the Experian PLUS Score, which "like all scores provided to consumers online is an educational score," says Griffin. Bank of America's Privacy Assist identity protection service, meanwhile, provides the CreditXpert credit score, which is generated from information in Equifax credit reports. "As a purely educational score, the CreditXpert Score is not used for lending decisions," says David Chung, managing director of CreditXpert, in an e-mail.

The FICO score, however, is used by many lenders in their decisions about whether to loan you money and at what interest rate. To get a copy of that score, you can purchase your FICO score from myFICO.com for $15.95 or see if your bank or credit union will provide you with a free FICO score.

As for the scores you received, timing could also be an issue, since they may be calculated at different times even if you see them on the same day. Bank of America says the CreditXpert score is updated every 90 days, while Experian says the PLUS score is updated each time the consumer requests a new credit report. Think back over the past few months: Have you opened any new accounts or taken on more debt, for example, during that period? Depending on when in the CreditXpert update cycle you requested that score from BofA, it could be weighing different information than your PLUS Score.

Meanwhile, these scores also have different numerical ranges: The Plus score ranges from 330 to 830, while the CreditXpert score ranges from 350 to 850. The FICO score, meanwhile, ranges from 300 to 850. In all three cases, the higher the credit score, the lower the risk that borrower will fail to repay a loan. So you can get a different score result -- but still have "good" credit -- under each model.

With all the variation in credit scores, it was smart to compare your underlying credit reports. You already looked over your Experian report, but make sure to also check your Equifax and TransUnion reports, too. Those reports should include very similar information, since major lenders typically report account data to all three bureaus. But mistakes do happen and could potentially account for differences in your scores. If you find any damaging errors on your reports, take steps to correct those negative items. Otherwise, they can drag down one -- or more -- of your credit scores.

Beyond just finding errors, examining those credit reports can guide you to improved borrowing behavior. "More important than the numbers are the risk factors he received in the report provided with the scores," says Experian's Griffin. "The risk factors explain what from his credit report most affected the scores. They are usually very consistent from one score to another, even when the numbers are quite different," he says. "By using those risk factors to identify what he needs to address in his credit history, he will improve all of the credit scores calculated using his credit report."

Good luck!

-- Jeremy

Source

Watch Out for Credit Card Skimmers!

2010-08-11T08:05:00.000-07:00

If you have ever had your credit or debit card information stolen, you know that it can be a huge hassle.

Today’s thieves are using more creativity when skimming or stealing your credit or debt card information.
Prior to new technology, skimming was most often a practice limited to dishonest employees who would photo copy or copy receipts that included your full account number and security code on your card.

Although this method is still a threat, many thieves have moved onto stealing your information using a small electronic device that stores all of your information as you enter it at gas pumps, ATMs, and other places you may have used your card. What areas could possibly have skimmer devices installed on them? Any place you swipe your credit or debit card is going to be a risk. Recently, my parent’s debit card information was stolen by a skimming device on a gas pump. Sometimes it can be very difficult to spot these devices. The most commonly found areas are on credit card and ATM machines in remote locations where the machine is not under constant supervision. The thief installs the device while no one is watching. This could include gas pumps, ATMs, and self-checkout cash registers at stores. What do they look like? Typically, on ATM machines, the thief will install a pinhole camera and skimming device to read the information on your card.

These are very difficult to spot, but there is a great picture of the device and how it is set up on an ATM at The Consumerist web site.

How can I avoid credit card skimmers?
As you can see from the pictures, this device is very difficult to spot. So, how can you protect yourself? Your first line of defense is to stop using your debit and credit card at retailers, gas pumps, and ATMs. I know this sounds a bit unrealistic. However, this is a just another reason why cash is king. Using cash eliminates a lot of probability that your identity will be stolen. If you must use a credit or debit card at retailers and ATMs, then try to review the card slot before inserting your card. Avoid places where anything looks slightly suspicious. In addition, try to monitor your bank accounts and statements weekly if possible. Many times skimmers will steal the information and hold onto to it for months. Therefore, they can strike your bank account at any time. This makes it difficult for the bank to identify the source of the fraudulent activity. Finally, when getting money out of an ATM, be sure to cover your hand as you enter your pin number. You will block a thief from gaining instant access to your cash via ATM, but preventing a pinhole camera from recording you entering your pin number.

Source

Credit Score Reality Check: Is 760 the New 680?

2010-07-28T10:25:00.000-07:00

The bar has been raised with respect to the three-digit number lenders use to determine your worthiness to borrow money.

“Three years ago, a creditworthy borrower was someone with a 680 to 700 score. Now, to get the best rates, that score needs to be 760 and up,” says Greg McBride, senior financial analyst at Bankrate.com. Your three-digit credit score generally ranges from 300 to 850. The higher your score, the better credit risk lenders deduce you are.

The sobering news is that 60 percent of all Americans have a score below 750, according to data compiled by Minneapolis-based Fair Isaac Corp., which runs the FICO scoring system most lenders rely on.

Why should you care about your credit score? Lenders use it to determine your interest rate and whether they should lend you money. Many insurers use it to set the size of premium you pay on auto and home insurance. Landlords may use it when deciding whether or not to rent to you, and some employers review it when deciding to hire you.

Fortunately, you can improve your score and have an easier time getting credit by following these six strategies.

1. Review your credit report. One of the biggest factors lowering your score could be a mistake on your credit report, including outdated data, paid-off loans listed as due, and money owed by relatives or strangers with names similar to yours.

You can stay on top of your information by going to AnnualCreditReport.com every twelve months to request a free credit report from each of the major three reporting agencies: Experian, Equifax and TransUnion. Your credit score isn’t included in the report. You’ll have to pay the agencies around $15 for it.

For unlimited access to both your credit report and score throughout the year, consider signing up for CreditCheck® Monitoring offered through USAA.

If you have disputes about your report, you’ll need to work with the individual credit agencies. Be prepared: Errors could take up to six months to get fixed.

2. Stabilize your credit. “If you know you’re going to buy a new car or be in the market for a home in three to six months, don’t open new accounts, close accounts, or transfer balances,” advises Maxine Sweet, vice president of public education for Experian.

Also, stop applying for credit cards you don’t really need. For example, say no when a department store offers you 10 percent off the purchase if you open a new credit card account. You can be docked ten points just for applying for a store credit card.

3. Use the credit you have. “Your credit history is your credit reference when you go for a loan. You need to show that you know how to manage credit by paying balances and making payments on time,” advises Sweet.

4. Get a handle on your bills.

Never miss a payment or due date. “That’s the ultimate rule,” says Sweet. All it takes is one late payment to crush your score and make lenders wary. If you’re thirty days late with a payment and your creditor reports that delinquency to one of the big three credit bureaus, your score can dive about 100 points.
Trim your credit card debt to below 30 percent of the available credit limit from your lender. If possible, eliminate credit card debt entirely.

Always pay at least the minimum amount due, preferably more.

5. Don’t cosign for a credit card or other consumer loan. When you cosign, that debt is also considered your debt. If the borrower misses payments, it will be reflected in your score.

6. Save. To get the best loan for a house or car, you’ll probably need a sizable savings for a down payment, which can be as much as 20 percent in some cases. For most home loans, lenders are eyeing an overall debt (including total mortgage and housing costs, recurring monthly car and college loans) to gross income ratio that falls at or below 36 percent.

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How the Law Helps You. Reflections on Five Years of the Uniform Debt-Management Services Act

2010-07-16T10:11:00.000-07:00

July 2010
Reflections on Five Years of the Uniform Debt-Management Services Act

Congress is poised to enact financial regulatory reform that will more than likely result in a new regulator of consumer financial products and services, including credit counseling. While it will be months, if not years, from the date of creation of the new agency to the actual issuance of regulations by the agency, there are a number of legal issues looming over the industry, most notably those surrounding the potential scope, breadth and depth of new regulations that such a federal regulator may propose.

Of critical importance is how this new federal agency may seek to regulate the credit counseling industry.

At the same time, Congress, the Obama Administration, the Federal Trade Commission (“FTC”), state Attorneys General, and others are taking an active interest in the workings of the industry and in protecting consumers from false and misleading advertising related to debt relief services – including credit counseling.

July 21, 2010 marks the fifth anniversary of the approval of the Uniform Debt-Management Services Act1 (“UDMSA”), which offered credit counseling agencies the promise of consistent state regulation of debt management plans.

After years of work, the UDMSA was approved by the National Conference of Commissioners on Uniform State Laws in 2005, and Utah2 became the first state to adopt the Act in 2006. Since then, the UDMSA has been adopted in six additional jurisdictions, Colorado3, Delaware4, Nevada5, Rhode Island6, Tennessee7, and the U.S. Virgin Islands.8

The UDMSA requires registration, provides specified disclosures in agreements, and authorizes enforcement authority. In each of the jurisdictions that have enacted the UDMSA, the requirements have generally been stiffer than the prior requirements for credit counseling agencies.

All but Colorado and the Virgin Islands had existing regulatory requirements, although some exempted tax-exempt nonprofit credit counseling agencies from these requirements (e.g., Nevada).

The UDMSA was originally drafted to address consumer protection issues that arose in the ten-year period prior to the drafting sessions and to enable the states to take a uniform approach to the regulation of the credit counseling and debt settlement industries.

Consumer groups and many in the nonprofit credit counseling industry agreed with the sprit of the requirements based on these promises and the belief that the UDMSA would remove unnecessary regulatory burdens and establish a baseline for consumer protection.

Five years later, credit counseling agencies are left wondering, “What happened to the promise of uniformity?” Debt management plan services are now regulated in virtually every state by one or more state-specific statutes.

Looking back on what we know now, it may be that the UDMSA was based on a laudable premise, but attempted to do too much without considering the practical impact on those already in compliance with the law.

Moreover, since its availability for consideration by the states, adoption of the law has been spotty despite an increase in the scope and breadth of statutes that regulate the industry. .Overall, today 49 states have what we consider to be a debt adjusting statute, which are the primary state laws that regulate the industry.

In 2005, out of the states that had debt adjusting statutes, about 25 required licensing. That number has since risen to about 37. Moreover, the number and diversity of proposals for additional reforms currently being considered in state legislatures are too numerous to detail here, but over the last five years easily number in the hundreds.

In 2010 alone, for example, various versions of the UDMSA have been introduced in at least half-dozen states, and there are additional proposals that take other approaches to regulating the industry.

While the existing state laws are far from uniform, these laws include provisions that cover such areas as licensing/registration, fee restrictions, written agreement requirements, certification requirements, consumer education requirements, prohibitions on various activities including offering “other services” and most compensated referrals.

These laws also frequently include enforcement provisions that provide for a private right of action – something that is extremely significant and should not be understated.

Unlike the harm that the UDMSA sought to prevent, it is much harder to quantify the impact of the UDMSA and whether its goals have been realized. One justification for regulation is often that instituting a more complex regulatory framework can weed out bad actors.

Indeed, a number of companies – both credit counseling and debt settlement entities – have likely been forced to cut back on the number of states in which they work as a result of the institution of the UDMSA.

Those that have decided to operate in UDMSA states must adhere to the requirements of the statute or otherwise risk enforcement actions and/or private (including class action) lawsuits.

While we are aware of a number of enforcement actions and non-public investigations that have resulted in settlements (e.g., Colorado), we are not aware of any private lawsuits yet under the UDMSA in states in which it is effective.

We also are not aware of any reported court decisions yet involving the statute. There almost certainly will be, in time, of course. That is not to say, however, that there have not been any unintended consequences for credit counseling agencies.

As a result of the rush by the states to regulate debt management services of all types in the face of the economic downturn, the increase in state debt adjusting law requirements has resulted in increased costs of doing business for many credit counseling agencies.

Five or ten years ago, credit counseling agencies did not require much in the way of dedicated in-house compliance staff. The adoption of the UDMSA and registration requirements, along with other state debt adjusting laws, however, created more of a need for dedicated compliance staff to ensure that the various state requirements are satisfied and to stay abreast of industry developments.

When you take into account the legal and reputational risk of non-compliance with the UDMSA requirements, most would argue that such costs become money well spent. So where are we? Today, the UDMSA provides legislatures and policymakers with a model approach to regulating debt-management services.

Other states, state Attorneys General, and other state regulators looking for “best practices” in regulating debt management have, directly or indirectly, used the model law as a reference. In contrast, before 2005, enforcing credit counseling regulations was not as high a priority with some state regulators and state Attorneys General.

In states with the UDMSA, the profile of debt management regulation has been raised to a new level. Moreover, the consumer protection issues widely written about in the years leading up to the UDMSA no longer permeate the credit counseling industry.

Instead, it seems as if the debt settlement industry is now the leader when it comes to reports of consumer protection issues, while the credit counseling industry is considered a “white knight” to a number of those companies’ former customers.

Where the UDMSA perhaps succeeds most is as a benchmark for what potential federal regulation could look like under a new regulator for financial products and services. Alternative approaches also are available, and some may argue that the full UDMSA at the federal level may not be needed if state legislatures continue to advance reforms targeted at debt settlement and for-profit providers.

The results of the FTC’s pending rulemaking covering for-profit providers of debt relief services9 and whether the debt settlement industry overhauls its practices to comply with what will almost certainly be stricter requirements also will weigh into the analysis.

Nevertheless, if the promise of the UDMSA is to be realized, the industry will need to focus on several key areas going forward:

Examine the Scope and Restrictions. The “off-the-shelf” version of the UDMSA would allow for-profit and nonprofit corporations to provide debt management plans and debt settlement services. How will that change in the coming years?

Are you able to provide the types of services that consumers in financial distress need? For example, the UDMSA prohibits the sale of a number of products and services, but some of these products and services may be needed by consumers.

Should states that consider the UDMSA allow for-profit companies to provide debt management services? Should state regulation address “counseling-only” or housing counseling services10?

Watch Out for Lawsuits and Consider the Costs. While we are not aware of any reported cases brought by private plaintiffs under the UDMSA yet, a private right of action is permitted under the UDMSA.

The cost of defending private (particularly class action) lawsuits by clients en masse could literally cripple credit counseling agencies that already are operating on slim budgets.

Which raises the question, considering the costs to comply with the UDMSA, should states consider alternatives to the enforcement mechanisms provided in the UDMSA? Should the private right of action be removed?

Impossible Compliance Requirements. Certain aspects of the UDMSA are considered by some to be virtually impossible to comply with or outright overkill. States reviewing the UDMSA should consider the UDMSA from the standpoint of the risks it seeks to control and not imagined concerns that could, but have never, occurred in the industry.

For example, do only providers that obtain compensation from creditors truly need to be covered by the statute, which is its current scope? What about zero-deductible insurance policies? Is the UDMSA superior to the existing state regulatory scheme?

Uniform Administration and Interpretation. With seven jurisdictions enforcing the UDMSA, there is no good reason why there are seven different registration applications and interpretations, rather than a uniform registration process and uniform interpretations. (Years ago, state Attorneys General created a uniform registration form for the state charitable solicitation registration process; that would be an excellent model to follow here.)

Further, the legislative comments to the UDMSA – which the drafters of the UDMSA put enormous time and thought into – are rarely followed or even acknowledged by state regulators.

Policymakers and regulators should communicate with each other and with the industry on these issues, and vice versa. As we mark this fifth anniversary and reflect on the intent initially raised by the UDMSA, it is time that credit counseling agencies renew their efforts to ensure that state debt adjusting laws are reasonable and focused on consumer protection.

Despite the lack of widespread adoption, the impact of the UDMSA has been significant. If the collective efforts of consumer advocates and other supporters (including some credit counseling agencies) are successful, the UDMSA may very well become the law in other states.

Policymakers should be mindful though of making it overly difficult for credit counseling agencies to serve consumers. Credit counseling agencies, for their part, must be mindful that there are both enforcement and litigation risks, as well as complex compliance requirements, and should continue to dedicate staff to compliance efforts and dedicate resources for legal review.

Finally, it is safe to predict that as the credit counseling industry continues to evolve, the legal and regulatory landscape also will continue to evolve. Accordingly, credit counseling agencies should continue to actively participate in the legislative and regulatory process at both the state and federal levels.

As Congress, possible future federal regulators, and additional states consider how to police the industry, they might just be looking at the UDMSA.

* * * * * *
Jonathan Pompan, an attorney in the Washington, DC office of Venable LLP, represents nonprofit credit counseling agencies and others in a wide variety of areas including regulatory compliance, as well as in connection with federal and state investigations and law enforcement actions.

Jeffrey Tenenbaum chairs Venable’s Credit Counseling and Debt Services practice, as well as its Nonprofit Organizations practice. For more information, please contact Mr. Pompan at 202.344.4383 or jlpompan@venable.com, or Mr. Tenenbaum at 202.344.8138 or jstenenbaum@venable.com.

For more information about this and related industry topics, see www.venable.com/ccds/publications.
This article is not intended to provide legal advice or opinion and should not be relied on as such. Legal advice can only be provided in response to a specific fact situation.

1 The UDMSA is available at: http://www.nccusl.org/. For additional information, see “Summary of Provisions in the Uniform Debt-Management Services Act” available at: http://www.venable.com/summary-of-provisions-in-the-uniform-debt-management-services-act-03-24-2006/#_ftn1.

2 Utah Code § 13-42-101 et seq. (effective January 1, 2007).3 Colo. Rev. Stat. § 12-14.5-201 et seq. (effective January 1, 2008).4 Del Code tit. 6 § 2401A et seq. (effective January 17, 2007).5 Nev. Rev. Stat. § 676A (effective July 1, 2010).6 R.I. Gen. Laws § 19-14.8 (effective July 1, 2007).7 Tenn. Code Ann § 47-18-5401 et seq. (effective July 1, 2010).8 V.I. Code Ann tit. 12A (effective June 27, 2010).9

http://www.ftc.gov/os/2009/07/R411001tsrnprm.pdf. 10 In the last several years, a new breed of state regulation has been adopted in about half of the states to address mortgage foreclosure consultants. Many of these statutes reference and exempt licensed “debt adjusters”, but these statutes are not all uniform and do not always easy to reconcile with other statutes within the same state.

This article appeared in the June 2010 issue of The Independent Counselor, published by The Association of Independent Consumer Credit Counseling Agencies.

Credit scores hit alarming lows

2010-07-13T05:07:00.000-07:00

The credit scores of millions more Americans are sinking to new lows.

Figures provided by FICO Inc. show that 25.5 percent of consumers - nearly 43.4 million people - have a credit score of 599 or less, marking them as poor risks for lenders. It's unlikely they will be able to get credit cards, auto loans or mortgages under the tighter lending standards that banks now use.

Because consumers relied so heavily on debt to fuel their spending in recent years, their restricted access to credit is one reason for the slow economic recovery.

"One in four consumers have a FICO score that is basically subprime," said Louis Spagnuolo, a mortgage broker at WCS Lending in Boca Raton. "When you combine that with lenders raising the minimum scores to qualify for loans, it's a double whammy."

The FICO fallout is probably more severe in Florida, which has suffered a flood of foreclosures since the housing bubble burst. Spagnuolo guessed that 40 percent of Floridians have credit scores below 600.

FICO's latest analysis is based on consumer credit reports as of April. Its findings represent an increase of about 2.4 million people in the lowest credit score categories in the past two years. Before the Great Recession, scores on FICO's 300-to-850 scale weren't as volatile, said Andrew Jennings, chief research officer for FICO. Historically, 15 percent of the 170 million consumers with active credit accounts, or 25.5 million people, fell below 599, according to data posted on Myfico.com.

More are likely to join their ranks. It can take months before payment missteps lower a credit score. The Labor Department says about 26 million people are out of work or underemployed, and millions more face foreclosure, which alone can chop 150 points off an individual's score. Once the damage is done, it could take years to restore scores.

The news isn't all dreary. The percentage of consumers who have a score of 800 or higher remains above historical norms. At least in part, this reflects that more individuals have cut spending and paid down debt in response to the recession. Their ranks now stand at 17.9 percent, which is above the historical average of 13 percent, though down from 18.7 percent in April 2008.

There's also been a notable shift in the important range of people with moderate credit, those with scores between 650 and 699. The new data show that this group comprises 11.9 percent of scores. This is down only marginally from 12 percent in 2008, but reflects a drop of roughly 5.3 million people from its historical average of 15 percent.

This group is significant because it may feel the effects of lenders' tighter credit standards the most, FICO's Jennings said. Consumers on the lowest end of the scale are less likely to try to borrow. However, people with midrange scores who were eligible for credit before the meltdown are looking to buy homes or cars but finding it hard to qualify for affordable loans.

A low credit score can be costly. Consider the example of a would-be home buyer in Melbourne whose score of 679 meant he couldn't get the best interest rate on a $100,000 mortgage. Had his score been 680, the rate he was offered would have been half a percentage point lower. The difference was only about $31 per month, but over a 30-year mortgage would have added up to more than $11,000.

Credit scores also are used by a wide variety of companies and can affect your ability to land a job, rent an apartment or secure insurance.

"Everything is so credit-driven now," Spagnuolo said. "It's going to be tough to get a cellphone with a 580 credit score."

On a broader scale, some of the spike in foreclosures came about because homeowners were financially irresponsible, while others lost their jobs and could no longer pay their mortgages. Yet both reasons for foreclosures have the same effect on a borrower's FICO score.

A number of websites will disclose your credit score for a fee. They include Experian's VantageScore.com ($7.95), FICO's Myfico.com ($15.95) and freecreditscore.com ($14.95 a month).

Source

5 Steps Toward Financial Independence

2010-07-01T06:08:00.000-07:00

Whether you’re a brand new grad or regrouping after a layoff or other financial difficulties, you may find that it’s more difficult than you’d imagined to wean yourself from any monetary help you’ve been getting. Though most of the process is straightforward, it’s always good to remember what it takes to achieve financial independence.
1. Get a Job

While finding a job in your niche or industry is great, any job is better than none at all. With job markets still sluggish, getting your foot in the door anywhere will help you towards your financial goals. Once you’re in, it doesn’t mean you have to stay. Getting a job that will hold you over, though, may mean the difference between making it on your own and moving back in with the folds.

2. Know Your Expenses

It’s easy to get overwhelmed with the different types of expenses you have, particularly if you aren’t used to paying them yourself. While writing a check here and there will get the bills paid, you’re more likely to achieve financial independence if you’re intimately familiar with your expenses.

Knowing approximately how much you pay each month in certain categories will also help you find any problems. If your electric bill suddenly skyrockets, you’ll know you need to investigate to find the source of the extra charges.

3. Commit to Saving

Being financially independent doesn’t only mean paying your own way now, but making preparations to do so in the future. Plan ahead as soon as you have some extra money, and it will go far towards ensuring your financial independence even if something bad happens, like you lose your job or face a large, unexpected bill.

Put your savings away after your regular expenses are paid and before you buy anything else. This will help your savings grow and make sure that you stay committed to it in the long term.

4. Prioritize Essentials

Make sure you know how much money you’ll need each month, and categorize your expenses. Determine which ones are necessary, which are high priority, and which ones you can eliminate if you need to. This will help you know what to pay first, as well as how much money you need to make to achieve your goals.

Prioritizing your expenses also gives you a good idea of how much you need to make each month. If your expenses are high, consider lowering them by finding roommates or changing your lifestyle for a few months, until you can get more income.

5. Give Yourself a Deadline

Decide when it’s realistic for you to achieve your financial goals and make that your deadline. Once you have that in mind, you’ll know how long you have to find a job, find a place to live, and figure out your personal budget.

Deadlines provide fantastic motivation. With one in place, you’ll be more likely to follow through on your intentions and to do so in good time. Of course, your deadline isn’t absolute. If something falls through or your situation changes, you can always move it back. But don’t move it unnecessarily, because then it isn’t a deadline at all.

Source

Preventing Identity Theft of a Loved One Who Has Passed

2010-06-08T10:47:00.000-07:00

Here are five steps to take after a loved-one has passed away to make sure that their identity rests in peace:

Short Obituaries. Make sure that you don’t include too much identifying information when you write the obituary. Identity thieves use this information (mother’s maiden name, address, ancestry, occupation, birth date, death date) to set up new accounts, licenses, etc. in the deceased person’s name. It is important to honor the person, just don’t give away all of their personal information.

Protect Death Certificates. Guard the death certificate like you would a birth certificate or other piece of identity. You will need to fax this document to certain organizations in order to prove that your family member is deceased, but only send it to trusted institutions who absolutely won’t take the name off of the account without it. When you are done with the death certificate, store the original and all copies in your safe where you keep other identity documents. Be forewarned that for securities sake, many organizations are requiring an original copy of the death certificate as proof, so ask for ten to twelve originals copies when you request the death certificate.

Notify Credit Bureaus. Immediately notify the three credit reporting bureaus that your family member has passed away. Request that the credit report is flagged with the note: Deceased, Do Not Issue Credit. Request a copy of the decedent’s credit report so that you will have a list of all of the accounts you need to modify/close (see Step 4). The procedure varies by credit burea, so the numbers to contact them are as follows: Experian: 888-397-3742 and 888-397-3742; Equifax: 888-766-0008 and 888-766-0008; TransUnion: 800-680-7289 and 800-680-7289. Don’t wait for the Social Security Administration to notify the credit bureaus—it takes them too long! And make sure to log all correspondence and conversations and send documents via certified mail so that you have proof of delivery, should you ever need to dispute a claim of non-receipt.

Notify Financial Institutions. Notify all banks, insurance companies, credit card companies, stock brokers, mortgage companies, loan/lien holders, etc. about the death of your family member (if it was a joint account OR an account under their name). The executor or surviving spouse will need to resolve all outstanding debts and how they will be dealt with before the account can be closed or the deceased person’s name is removed from the account. Also notify the Social Security Administration, Veteran’s Administration, Department of Motor Vehicles, professional license associations (Bar Association), membership programs (Costco, Sam’s, Blockbuster, etc.) and any creditors or collection agencies with which the deceased had an account or membership. This is a difficult time to put in all of the work to protect an identity that should be left alone; but the current reality is that the identities of deceased individuals are easier to steal and abuse than those of the living.

Share Wisely with Family Members. Unfortunately, many cases of deceased identity theft are committed by a member of the deceased’s family. It might be a relative who is in financial trouble, a friend who has a costly addiction or a child that they were wronged in the will or estate planning. For that reason, the identifying information of a deceased family member should be kept to as small a circle as possible. It seems to work best when one family member is the point-person for collection of documents, closing of accounts, checking of credit, etc. Generally, this is someone other than the person who organizes all of the other events that surround the death of a loved one.

Source

Instead of Reshuffling Debt, Eliminate its Source

2010-06-01T07:02:00.000-07:00

Dear Liz: I am trying to improve my credit score quickly. I have been offered a $5,000 loan from my bank. I would like to use $3,000 to pay off 70 percent of my credit card debt so that my remaining balances are at or below 30 percent of the card's credit limits. Then I would like to use the remaining $2,000 to pay back 40 percent of the $5,000 loan. It seems like this would help my score, as all of my credit card balances are brought down and the personal loan is at only 60 percent. Will this actually help my credit or make it worse?

Answer: Lowering your balance-to-limit ratios should help your credit scores (and hopefully your wallet, if the interest rate on the loan is lower than what you pay on your cards). The credit scoring formula isn't as sensitive to amounts owed on installment loans, however, so there's no real need to borrow more money simply to pay it back and lower your balance owed.

What you really need to do is discover why you maxed out your cards in the first place. If you haven't solved the overspending problem that led to this debt, just shifting balances around will be a short-term solution. You'll quickly run up more debt and be right back where you started, except deeper in the hole.

Palm Beach Post

Questions for Liz Pulliam Weston may be sent to 3940 Laurel Canyon Blvd., No. 238, Studio City, CA 91604 or through www.asklizweston.com.

Unused credit cards can hurt you

2010-05-17T07:06:00.000-07:00

In recent months, lenders have become eager to close accounts in an effort to protect their profits. Alternately, the card issuer could begin demanding that the consumer charge X amount to keep it open says Gail Cunningham, the vice president of public relations for the National Foundation for Credit Counseling.
Regardless of who closes an account, your credit scores may fall due to a change in a key credit scoring ratio.
The FICO score assesses all the information on your credit report. So the score impact from any one action, such as closing an account, will depend on what other information is present on the credit report.
You could charge a recurring subscription fee, such as Netflix, or a monthly cost, such as your cell phone bill, to your emergency card. By putting such regular charges on your plastic, you won't be actually taking on additional debt but should keep the card alive.
Just be sure you always pay your bills on time and in full, since those two steps are necessary for building good credit. Keeping the account open, using it to make small purchases and paying the balance in full each month is a good way to maintain your credit scores and might help improve them, especially if you've had recent credit problems.
If you've been a responsible borrower, it's unlikely that an account closure would have much impact. Because the most important steps for good credit involve making payments on time, not carrying excessive debt and applying for new loans only when necessary, closing one card is much less likely to affect your FICO score.
Source

Credit Report

2010-05-14T07:50:00.000-07:00

Correct your credit record
An erroneous entry, such as a debt in collection, could cause your score to drop by 100 points.
Ingredients:
• Internet access.
• Your credit reports within 30 days of getting them.
Instructions:
Read through each report, noting any negative items. If you've just gotten a report, you'll see a link to start a dispute of any errors. Otherwise, each credit bureau's website (TransUnion, Experian and Equifax) provides a link.
If the error started with the company reporting it, go to the source of the problem.
Total time: 15 minutes to initiate a complaint; resolution will take longer.

Copy everything in your wallet, except the cash of course
If your wallet is lost or stolen, suspending accounts and getting replacement cards will be far easier.
Ingredients:
• Your wallet or purse.
• Copier or scanner.
• File folder.
• Secure household location big enough to hold your file.
Instructions:
• Pluck out the items from your billfold or purse that you need -- credit cards, insurance cards, IDs, frequent-traveler cards, whatever.
• Copy or scan both sides of each item. Note that the customer-service number you need to call to report a compromised card is often on the back.
Total time: three minutes.

These few steps can save you a lot of work later. It is never fun to have your personal belongings stolen, this includes identity theft. If you identity is stolen you will have to cancel all of your credit cards and accounts and this step will assist you in doing that.
Source

Do you take thee, with good credit score or bad?

2010-05-10T12:51:00.000-07:00

The wedding season is upon us, and everyone knows that emotional compatibility is important.

But what many couples fail to consider is financial capability, and that's just as crucial. Conflicts over money are a major cause of divorce.

Marriage is as much a financial partnership as it is an emotional one, and you need to go into it with your eyes wide open.

"Before you get serious with someone – certainly before you step to the altar – you want to know how your financial lives are going to commingle," said Craig Watts, spokesman for FICO, the company that developed the widely used credit score.

Decide who will handle the bill-paying responsibilities and how the bills will be divvied up.

One reader told me that he and his fiancee exchanged their credit reports and scores before they married. That's not a bad idea if you're both comfortable with that.

"Your FICO scores offer a neat snapshot of how you've each handled your money – student loans, car payments, credit cards," said Deborah Owens, author of A Purse of Your Own, an investments and financial book for women. "FICO scores will reveal who has more financial acumen and if there are areas that the two of you need to address.

"You fell in love with the man and not his money," she adds, "but how he handles his finances can tell you a lot about his values, character and future money behavior."

At some point during your marriage, you will undoubtedly think about purchasing a home or car, so you'll want to know your future spouse's potential for qualifying for new credit.

"You're not just mingling your personal life with this person," Watts said. "You're also mingling your aspirations and your ability to achieve those goals. Not having your eyes open on any liabilities when it comes to the financial side means you really are walking blind into your future."

There's one misconception I want to clear up. Some people think married couples have one credit score and one credit report. Not true.

"Some people think that once you get married, then your credit histories must get mingled at the credit bureau so now you have a joint credit score," Watts said. "You always have an individual credit score based on your personal history."

However, if you get a joint credit card account or co-sign for a loan with your spouse, "now your credit reports start looking more similar," he said.

And if your spouse forgets to make the loan payment on that joint account or co-signed loan, your credit will be hurt along with your partner's.

If both of you need a loan and you're the one with good credit, you should apply for credit based on your credit history.

So be honest and discuss finances with your partner because his or her financial burdens will affect your credit.

"You're talking about a lifetime commitment here, and you want to make sure that you understand the risks that you're taking by mingling your future with your partner," Watts said.

Source

Complaints to BBB Against Debt Settlement Companies On the Rise

2010-04-29T12:47:00.000-07:00

Debthelper.com is NOT a debt settlement company. We are a non-profit debt consolidation company.
Call our counselors today and get on the road to financial recovery
1-800-920-2262 or email us at clientservice@debthelper.com

Arlington, VA – April 29, 2010 – Better Business Bureau is warning financially troubled families to beware of misleading debt settlement companies that claim they can easily reduce or eliminate credit card debt. Since the start of the recession, BBB has received more than 3,500 complaints from individuals, including many who paid hundreds of dollars in upfront fees to debt settlement companies but only fell deeper into debt.

“The debt settlement industry is flourishing and many families are being lured into believing that debt settlement is an easy fix and that their credit card debt will just disappear,” said Stephen A. Cox, President and CEO of the Council of Better Business Bureaus. “The truth is that the process doesn’t work for many consumers, it has potentially serious negative consequences, and should primarily be used as a last ditch effort to stave off bankruptcy.”

Consumers from all 50 states have filed complaints with BBB about debt settlement companies since the recession began in late 2007. In addition to BBB, angry customers are also taking their complaints to their state Attorney General. Attorneys General from Florida, Maine, Texas, Idaho, Missouri, New York, Illinois, West Virginia, Vermont and Minnesota have taken action against companies such as Dallas-based Debt Settlement America, Debt Rx USA, Financial Freedom of America and Credit Solutions—which has received more than 1,600 complaints alone in the last 36 months—and Austin-based Clear Your Debt and Swift Rock Financial Solutions.

Some practices by debt settlement companies are also coming under fire on Capitol Hill. On Wednesday, Senator Charles Schumer (D-NY) introduced the The Debt Settlement Consumer Protection Act which seeks to “protect consumers from deceptive, abusive and financially injurious practices rampant in the debt settlement industry.”

Typically with debt settlement (also referred to as debt negotiation), the consumer pays an upfront fee to the debt settlement firm with the understanding that the company will try to negotiate a settlement with creditors for less than what is owed. The debt settlement business works with the consumer to establish a plan for the consumer to put money into an account administered by the debt settlement company or a third party, and that money is used to pay any negotiated settlements. It will usually take at least six months to a year before there is enough money to start settling accounts, and during that time the consumer will typically not be making payments to creditors. Not only does this put the consumer at risk of having creditors file garnishments or other legal actions, his or her credit rating will likely suffer as a result of not making required monthly payments.

Complainants to BBB allege that instead of having their debt settled as promised, they were driven deeper into debt and sometimes sued by their creditors—which led to mounting legal fees—and had their wages garnished. Some complainants decided after making several months worth of payments that they did not want to proceed with the debt settlement process, but the debt settlement company did not give them their money back which they had set aside—in one case as much as $15,000.

BBB warns families that are drowning in debt to look for the following red flags when considering getting help from a debt settlement or negotiation firm:

•High upfront fees – Beware of companies that require large upfront fees before any debts are settled. Often, these upfront fees may be better used to reduce a consumer’s overall debt.

•Promises that are too good to be true– Some companies might promise that they can reduce debt by more than half even before looking into the customer’s financial situation.

•Claims that it’s a fast, easy and painless process. - Reducing debt through debt settlement takes time—often years—and can have a significant negative impact on the customer’s credit score. It can also expose consumers to lawsuits and garnishments.

Before enlisting the help of a debt settlement company, BBB recommends that struggling consumers:

•Contact their lender first. – Try to work out an agreement directly with your lenders before enlisting outside help.

•Seek help from a non-profit credit counseling center – Credit counseling centers can provide guidance for little or even no cost. You can find a credit counseling center near you at the National Foundation for Credit Counseling, www.nfcc.org.

•Consider debt settlement only as a last resort before filing for bankruptcy. The debt settlement process can take years and have a severely negative impact on your credit rating and can limit your access to future credit. In the meantime, your credit card company or other creditors can decide to take you to court and garnish your wages. It is best to avoid these potential consequences if you have other workable alternatives to dealing with your debt.

•Research the debt settlement firm with BBB first. Find out how many complaints it has received, how the firm responded to complaints and whether or not there are any recent government actions or lawsuits against the company.

Source

5 Tips for Cleaning Up Your Credit to Buy a Home

2010-04-21T07:54:00.000-07:00

Credit problems are often an obstacle to buying a first home. You can take steps to improve your credit score and increase your chances of getting approved for a mortgage on better terms. As a starting point it's critical to look at your credit report well in advance and take steps to fix any problems. Here are five tips:

1. Obtain a free credit report

If you don't qualify for a loan, it's likely because your credit score is too low. Your credit score is calculated by credit reporting agencies -- Equifax, Experian and TransUnion. You are entitled to look at these reports once a year for free. You can request a free report by visiting www.annualcreditreport.com.

Check the reports for accuracy. If you need to correct anything, guidelines are offered by the Federal Trade Commission at: http://tinyurl.com/39yv9l.

2. Know your credit score and what it means
Once you obtain your credit report, you'll be asked if you want to buy your credit score. The charge is $7.95 for the FICO score provided by Equifax and Experian. TransUnion offers a different score, called the VantageScore, for $9.95 along with your free annual report.
Your score determines whether you'll qualify for a loan and at what interest rate.

Your credit score is based on several factors, including whether you've made payments on time; the amounts you owe; the length of your credit history; the number of new accounts and credit inquiries; and the types of credit you use.

A FICO score above 700 generally will get you a lower interest rate. A score below 600 could mean you'll pay 2 or 3 percent more, which could cost you thousands of dollars a year more. See the differences in house payments correlated to credit scores here: http://www.myfico.com/HelpCenter/FICOScores.

3. Take steps to fix your credit

If you're behind on paying some bills, get caught up. If you have credit card balances near the maximum credit limit, pay them down. For example, having one credit card over the limit could cost you as much as 100 points in your credit score. The number of credit lines you have matters, too, so if you have plenty of credit available, don't apply for new credit in the months leading up to buying a home.

4. Find a trusted banker or mortgage broker

Develop a relationship with a trusted banker or mortgage broker. The best way to find one is through referrals from friends, co-workers or family. You'll want someone willing to assess your credit and, if necessary, work with you to fix problems that may prevent you from qualifying for a loan.

5. Seek pre-qualification for a mortgage

Once you find a broker or banker, go through the pre-qualification process to see how your credit stacks up.

Your banker, after gathering basic financial information, can give you an idea if you'll qualify for a loan. If you do, a loan pre-qualification letter provides an amount you can likely borrow to buy a home.

Source

Why you need multiple credit cards

2010-04-06T07:13:00.001-07:00

How many credit cards should you have?

Many people are afraid to have multiple cards. Some worry they would lose track of the different bills each month and fall behind on their payments. Others fear that the temptation of high credit limits would entice them to overspend.
And some people fear that creditors, upon seeing multiple open credit lines, would be less likely to lend them money because the creditors would suspect they'd be more likely to fall into debt.
Financial safety
A simple reason to keep multiple credit cards is safety. If a person has only one credit card, there are a number of problems that can arise.
Several credit experts interviewed say you should keep one credit card with a zero balance in a safe-deposit box or other safe place outside the home. This way, if your wallet or purse is stolen or your house burns down, you'll have a credit card to use while you wait to have the damaged or stolen cards replaced.
A second safety reason would be for use exclusively for online purchases. Though online shopping is convenient, one of its primary pitfalls is the possibility of identity theft. A separate card for such purchases makes it easier to spot fraudulent activity and could help limit the damage if you ever are a victim of online identity theft.
An aid to credit scores
Many people are reluctant to have multiple credit cards because they're afraid potential lenders will be scared off by a person with multiple credit lines and a high credit ceiling, figuring that lenders will assume such a person is more prone to debt.
Source

Understand how your credit score is determined

2010-04-05T13:12:00.000-07:00

Your credit score is usually based on the answers to these questions:

Do you pay your bills on time?
The answer to this question is very important. If you have paid bills late, have had an account referred to a collection agency, or have ever declared bankruptcy, this history will show up in your credit report.

What is your outstanding debt?
Many scoring models compare the amount of debt you have and your credit limits. If the amount you owe is close to your credit limit, it is likely to have a negative effect on your score.

How long is your credit history?
A short credit history may have a negative effect on your score, but a short history can be offset by other factors, such as timely payments and low balances.

Have you applied for new credit recently?
If you have applied for too many new accounts recently, that may negatively affect your score. However, if you request a copy of your own credit report, or if creditors are monitoring your account or looking at credit reports to make prescreened credit offers, these inquiries about your credit history are not counted as applications for credit.

How many and what types of credit accounts do you have?
Many credit-scoring models consider the number and type of credit accounts you have. A mix of installment loans and credit cards may improve your score. However, too many finance company accounts or credit cards might hurt your score.
Source

FREE CREDIT REPORTS

2010-04-02T07:11:00.000-07:00

As of April 1, it's illegal for companies to advertise 'free credit reports' that really are free trials for credit-monitoring services that cost money.
The Federal Trade Commission has announced new rules to help consumers avoid being misled by companies that shout "Free credit report!" but whisper "Actually, this could cost you."
The FTC's new guidelines require the companies' Web sites, telemarketing calls, and print and television ads to disclose more prominently that the services they are pitching differ from the government-approved AnnualCreditReport.com, which offers free credit reports with no strings attached.
The commission was required to adopt the new rules as part of the Credit CARD Act of 2009, the bulk of which went into effect Feb. 22. The move is the latest step in the government's increased control over the advertising practices of companies that offer credit reports. The changes could further encourage consumers to examine the accuracy of their credit reports, which are used by credit card issuers, mortgage lenders, employers and others to make decisions.
Consumer groups applauded the FTC's move. In a statement March 30, Experian said it was reviewing the rules "to determine the appropriate actions to support our business." It added, "We remain committed to clearly and conspicuously disclosing to consumers that the free report we offer is not the free annual credit file disclosure provided by federal law." FreeCreditReport.com is now charging $1 for credit reports.
Changes in effect now
As of April 1, the FTC's new rules require such sites to give disclaimers much more prominent play: They must be at the top of the page, in big fonts and distinct colors, with a working Internet hyperlink to AnnualCreditReport.com, which must be referred to as "the ONLY authorized source under federal law."
Source

Facts For Consumers

2010-03-22T08:03:00.000-07:00

Your credit report contains information about where you live, how you pay your bills, and whether you’ve been sued or arrested, or have filed for bankruptcy. Consumer reporting companies sell the information in your report to creditors, insurers, employers, and other businesses that use it to evaluate your applications for credit, insurance, employment, or renting a home. The federal Fair Credit Reporting Act (FCRA) promotes the accuracy and privacy of information in the files of the nation’s consumer reporting companies. Some financial advisors and consumer advocates suggest that you review your credit report periodically. Why?
• Because the information it contains affects whether you can get a loan — and how much you will have to pay to borrow money.
• To make sure the information is accurate, complete, and up-to-date before you apply for a loan for a major purchase like a house or car, buy insurance, or apply for a job.
• To help guard against identity theft. That’s when someone uses your personal information — like your name, your Social Security number, or your credit card number — to commit fraud. Identity thieves may use your information to open a new credit card account in your name. Then, when they don’t pay the bills, the delinquent account is reported on your credit report. Inaccurate information like that could affect your ability to get credit, insurance, or even a job.
Getting Your Credit Report
• An amendment to the FCRA requires each of the nationwide consumer reporting companies — Equifax, Experian, and TransUnion — to provide you with a free copy of your credit report, at your request, once every 12 months.
• Other situations where you might be eligible for a free report
• Under federal law, you’re also entitled to a free report if a company takes adverse action against you, such as denying your application for credit, insurance, or employment, based on information in your report. You must ask for your report within 60 days of receiving notice of the action. The notice will give you the name, address, and phone number of the consumer reporting company.
• You’re also entitled to one free report a year if you’re unemployed and plan to look for a job within 60 days; if you’re on welfare; or if your report is inaccurate because of fraud, including identity theft.
• Otherwise, a consumer reporting company may charge you up to $10.50 for another copy of your report within a 12-month period. To buy a copy of your report, contact:

Experian-1-888-397-3742
http://www.experian.com/

TransUnion-1-800-916-8800
http://www.transunion.com/

Equifax-1-800-685-1111
http://www.equifax.com/

• Under state law, consumers in Colorado, Georgia, Maine, Maryland, Massachusetts, New Jersey, and Vermont already have free access to their credit reports.
Source

Credit Score

2010-03-09T06:53:00.001-08:00

Your credit score is likely the most important three-digit number in your life.
Your score affects how much you pay for credit, and it can affect other bills you pay, where you live and where you work.
• Banks and credit card companies review your score when deciding whether to extend you credit and how much interest to charge.
• A high score can lead to lower car- and home-insurance premiums, a deposit waiver from utility companies and a better service package from the cell-phone company.
• Many landlords check credit scores before allowing you to sign a lease.
• Many employers -- 35% in 2003 -- are doing credit checks on prospective employees, particularly those who would deal with money. Employers need your written permission to make the check and must give you a chance to respond.
With so much at stake, it's wise to find out where you stand and take steps to raise your score if it's below 700, particularly before you apply for a mortgage or other loan. Above 760 and you're in the upper echelon. A score below 620 tells people you're not a good risk and destines you for credit denial or subprime interest rates.
Source

You Owe It to Yourself to be Creditworthy Again

2010-03-03T05:59:00.000-08:00

There are so many consumers who have fallen behind on credit card payments and other financial obligations it seems no longer taboo to admit you have had some financial setbacks. In fact, getting help to control your debt is a popular topic these days as many consumers realize the seriousness of debt.

Every individual can be credit worthy again, not matter what happened in the past. Being credit worthy allows you the option to select from the best rates and terms for credit cards, loans, mortgages, and the like. Getting a boost to your credit score is even more important now than ever before because it takes a higher credit score, 730 +, to be deemed as having excellent credit. Rebuilding your credit on your own is not impossible if you follow some of these tips:

Pay Off Debt First

While it may seem enough to just pay down your balances, it is much better than you focus on paying off your balances. You can boost your credit score by having less debt and you will also be able to save more cash for your retirement and investing purposes. Focus on making more than the minimum payment on your balances and stick to your budget to prevent overspending which you work to pay off all that you owe.

Don’t Apply for New Credit

As you work to pay down your debt, do not seek any financing or additional credit cards. Having too much credit will be a sure-fire way to bring down your credit score instead of raising it up. Do not send out any applications for new credit cards until you are able to get the best deals and rates.

Check Your Credit History

When you are working to improve your credit score, it will certainly help to know what you are improving. Order a copy of your FICO score as well as your credit report from both of the credit reporting agencies, TransUnion and Equifax. Then take the time to go over each individual item and make sure it is accurate. If it is not, file a report immediately. The credit agencies will have to open an investigation and any thing they can not resolve, it will be removed from your credit report, thereby boosting your score. After 6 months paying off your debts and paying your bills on time, you should reorder the same reports and score and see how you have improved your credit worthiness.

If you want a financially secure future free of debt, you have to act now to get a head start on better money management and debt-free living. Your credit score will make a big difference in the amount you pay in interest for credit cards, mortgages, and any personal loans or financing.

Source

FHA requirements / Mortgage rates

2010-02-22T08:45:00.000-08:00

With so many borrowers unable to meet today's stricter lending requirements, FHA-backed loans have become increasingly popular. Today, the FHA guarantees nearly 30% of new home mortgages. That's a stunning increase from 2006, when the agency backed roughly 3% of new home loans.
Meanwhile, the agency's finances have deteriorated considerably. The seasonally adjusted delinquency rate for FHA loans increased from about 13% in the third quarter of last year to 14.36% in this year's third quarter. At the same time, the agency's capital reserve ratio dipped below the level that Congress mandates.
In the face of mounting political pressure, the Obama administration has announced steps that may make it more difficult for some borrowers to obtain mortgages backed by the FHA agency. These include raising the minimum FICO score, increasing upfront cash requirements and possibly charging higher insurance premiums. "We want to ensure that we are able to continue to support the housing market in the short term and provide access to homeownership over the long-term, while minimizing the risk to the American taxpayer," Housing and Urban Development Secretary Shaun Donovan said in written testimony to a congressional committee.

Mortgage rates

Mortgage rates in 2010 are expected to climb from 2009's extremely low levels. After the Federal Reserve announced plans to purchase debt and mortgage-backed securities from Fannie Mae and Freddie Mac last year, rates on 30-year fixed conforming mortgages fell to historic lows, plunging to 4.97% in late November from 6.19% a year earlier. But the Fed's asset purchase program is scheduled to expire at the end of the first quarter of 2010, and a lack of private demand for mortgage-backed securities could lead to higher rates.
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Down Payments

2010-02-22T08:35:00.000-08:00

Remember a few years ago when you could put down $500.00 to $1,000.00 and purchase a home? Well, those days are gone. Say Good Bye! This tight credit environment is affecting consumers in several ways. Down payment requirements will be higher than they were just a few years ago. Loans backed by the Federal Housing Administration are at the low end of the spectrum and come with minimum down payments of 3.5%, this is the FHA Loan. If you purchase a $200,000 home you need at least $7,000 for an FHA loan. That’s much better than the 20% for a regular loan, if you can qualify. Down payments on loans outside the FHA will vary depending on the market, the borrower and the property type. Generally, to get the best rate around, you need at least 20% for a down payment. That doesn't mean you can't get a mortgage if you have less of a down payment, It just means that you are not going to get the best interest rates and that could start a whole new set of obstacles to purchasing. 20% of 200,000 would be $40,000. Who has that kind of cash lying around? Could lenders ease up on down payment requirements in 2010? Possibly, if lenders become convinced that home prices are improving, they may allow borrowers to put slightly less down. But don't expect that to occur until the end of the year, if at all. Check out this mortgage calculator at http://www.yourmortgagecalculator.com/. You can also learn more about FHA Loans at www.hud.gov/buying/loans.cfm.
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Disputing Credit Report Issues

2010-02-09T08:11:00.000-08:00

Potential lenders, insurers and employers often review your credit report to help them make decisions about your credit worthiness, insurability or employability. It's important for you to ensure that your credit files are accurate and up-to-date to obtain the credit, insurance or employment you deserve.

Helpful Hints

• According to the Federal Trade Commission, filing by mail may be the best way to dispute items in your credit files. When filing a dispute, include supporting documents such as copies of monthly statements.
• Never send originals. Keep copies of all correspondence for yourself, as well as detailed notes about any telephone conversations regarding your case, including the date of your call and the name of the person with whom you spoke.
• Of the three national credit reporting agencies, only Equifax and TransUnion accept disputes by mail. Experian does not accept disputes by mail and telephone, but you may file a dispute online.
• Avoid applying for new credit until your dispute is resolved. The outcome of the investigation may affect the creditor's decision. If you have a pending credit application at the time the dispute process is initiated, inform the creditor and ask the creditor to order an updated copy of your credit report once the investigation is completed.
• Avoid frivolous disputes, as they may hurt your credit rating.

What Kind of Information Can I Dispute?

You can dispute any information that you believe appears incorrectly on your credit report. For a detailed listing of what to look for, see Reviewing Your Credit Report.

Source

Identity Theft :(

2010-02-05T13:17:00.000-08:00

We have scoured the latest news and research and summarized the most important findings, giving you access to the most important developments in identity theft and consumer credit at your fingertips. Stats & Facts — Identity Theft

PREVALENCE:

• Identity theft struck 27.3 million Americans in the last five years and nearly 10 million in the last year alone.
• Identity theft struck 1 in 8 Americans in the last five years (12.7%).
Source: Federal Trade Commission Identity Theft Survey Report, September 2003
• "Given the percentage of growth, the reality is that most of us will become a victim of identity theft sometime in our lives, if not multiple times."
Source: Linda Goldman-Foley, executive director of the Identity Theft Resource Center, Parade Magazine, July 6, 2003
• Identity theft is the fastest growing crime in the United States.
Source: General Accounting Office, March 2003

COSTS TO CONSUMERS:

• Identity theft cost consumers $5 billion in direct out-of-pocket losses last year alone.
• The costs to the victim of identity theft — both in terms of out-of-pocket expense and in time resolving problems — are substantially smaller if the misuse is discovered quickly.
• Americans spent almost 300 million hours resolving problems related to identity theft in the past year.
• Thirty-six percent of all identity theft victims, and 64 percent of the most serious cases, reported ongoing problems other than direct financial loss, including loan or insurance rejection, criminal investigation or harassment by creditors, as a result of the fraud.
Source: Federal Trade Commission Identity Theft Survey Report, September 2003
• Out-of-pocket costs to remedy ID theft rose to $1,500 on average from $800 in 2000, according to the Identity Theft Clearinghouse. The average total fraudulent dollars charged soared to more than $39,000 per victim from $18,000 in 2000.
Source: CBS MarketWatch, "The cost, inconvenience of ID theft," Sept. 23, 2003
• Victims now spend an average of 600 hours recovering from identity theft, often over a period of years. This equals nearly $16,000 in lost income potential per victim.
Source: Identity Theft Resource Center, "Identity Theft: The Aftermath — 2003"
• The emotional impact of identity theft has been found to parallel that of victims of violent crime.
Source: Identity Theft Resource Center, "Identity Theft: The Aftermath — 2003"
Source

New Credit Card Rules Protect, But Don't Fall Through Loopholes

2010-02-05T05:50:00.000-08:00

If you use a credit card, new rules protect you, whether you pay off the balance when the bill comes (54% of you, according to a Consumer Reports survey) or make the minimum payment. Portions of the Credit Card Accountability, Responsibility and Disclosure Act of 2009 -- often called the Credit CARD Act -- are effective February 22, 2010. Other provisions will become effective in August.

Here's what to look for:

•Before you open an account, the terms must be clearly disclosed

•A promotional rate must stay in effect for at least six months

•Rates can't be raised on new accounts in the first year, unless you are 60 days late with your payment

•After 12 months, if your rate is increased, it will apply only to new charges, not an existing balance

•Rates can't be increased on existing balances unless you're at least 60 days late

•No over-the-limit fees, except if you agree to them ahead of time

•Co-signers are needed for credit card applicants younger than 21, unless they can show they have sufficient income to repay the debt

Because the CARD Act halts a number of practices that were highly profitable for credit card issuers, be aware that some may try to make up for lost revenue in other ways. For example, the New York Times reports that an issuer of private label credit cards for specialty stores plans a $1 monthly surcharge to customers who elect to get account statements by mail. Watch out for other fees that may pop up that may violate the spirit of the law, if not the letter.

In response to the new rules, many credit card issuers ramped up their rates and increased late fees last summer. If your rate has ballooned -- many major credit cards now carry an annual percentage rate of 29.99% -- take action:

•Check with your credit union about a balance transfer or a consolidation loan. But don't automatically close your old account, as credit cards you have held the longest contribute the most to your credit score. If you choose to close the old account, ask that the notation "closed at consumer's request" be added to your credit report.

•Call the credit card company and negotiate a lower rate or ask that part of the debt be written off. If some of your debt is forgiven, however, note that this will negatively affect your credit score and that you must pay taxes on the amount that is forgiven.

Source

What is a Credit Report and Why is it Important?

2010-01-20T06:17:00.000-08:00

Your credit report is a compilation of information about the way you handle debt. It includes information about how much debt you've accumulated, how you pay your bills, where you live, where you work, whether you've filed bankruptcy, and whether you've had a home foreclosed or vehicle repossessed. If it sounds like your credit report contains a lot of information, that's because it does.

How Does Information Get On Your Credit Report?

Credit reports are maintained by businesses known as credit bureaus or credit reporting agencies. Companies that you do business with have agreed to send your debt information to credit bureaus who then update that information in your credit report. Most of your credit card and loan accounts are updated on your credit report monthly.

Some businesses don't update your credit report until you've been seriously delinquent on your payments. For example, your cable bill isn't automatically included in your credit report, but if you fall more than six months behind on your payments, the bill might be listed on your credit report as a debt collection.

What Type of Information is Included In Credit Reports?

Credit reports include basic identifying information like your name, address, and place of employment.

Your credit report contains detailed information about your credit cards and loans. For credit cards, your balance, credit limit, account type, account status, and payment history are all included on your credit report. Loan balances, original loan amount, and payment history appear on your credit report.

Public records like bankruptcy, foreclosure, repossessions, and tax liens are listed on your credit report.

Credit reports include a list of businesses that have recently checked your credit history either as a result of an application you made or a promotional screening.

You Can (and Should) Check Your Credit Report

You should order your credit report at least once a year to make sure the information listed on it is correct. If you suspect you've been a victim of identity theft, you should monitor your credit reprot more frequently. You can order your credit report in a few ways: for free through a website the government set up for that purpose, for free via a promotional offer, or by purchasing from one of the three credit bureaus.

A variety of businesses check your credit report to make decisions about you. Banks check your credit report before approving you for credit cards and loans, including a mortgage or auto loan. Landlords review your credit report to decide whether to rent to you. Some employers check credit reports as part of the application process. Your credit report affects many parts of your life, so it's important that the information included is accurate and positive.

Source

Earthquake Relief in Haiti

2010-01-14T07:03:00.001-08:00

In an effort to help those who have been affected by the earthquake in Haiti, and their continuing tragedies, Credit Card Management Services, Inc. d.b.a Debthelper.com is now a collection center to help those in need.
Your gift will help distribute relief supplies to children and families impacted by the earthquake and aftershocks in Haiti.

Anything you are willing to provide will be greatly appreciated and invaluable to the families you will be helping. The immediate need is dry foods such as rice, beans; can foods, tents and army type cots, blankets and medical supplies.

Where: 4611 Okeechobee Blvd. Suite 114 WPB, FL 33417

Time: Mon – Fri: 9:00am – 8pm; Sat: 12:00pm – 5:00pm

Information: (561) 472-8000

Debthelper.com

How Your Credit Score Is Calculated

2010-01-05T08:41:00.000-08:00

In a recent article, New York Times writer Jennifer Barret discussed how credit scores are created and used. For anyone who has ever wondered how to improve their credit score, knowing how the score gets calculated will give you the information that you need to determine what methods would be best for you. And if you are interested in keeping a good credit score, the information provided below will let you know what you need to keep an eye on.

A link to the specific article will be provided at the bottom of this blog post, but I will post the specifics of how your credit score is calculated down below.

Calculation:

The following percentages make up your credit score as calculated by the Fair Isaac Corporation. The Fair Isaac Corporation's report (or FICO score) is the number and formula trusted by most lenders and credit unions; in addition, it is also used by the three largest credit reporting agencies: Equifax, Experian, and TransUnion.

Paraphrased Section:

"35 percent is determined by your payment history.

30 percent is based on the amounts you owe each of your creditors, and how that compares with the total credit available to you or the total loan amount you took out.

15 percent is based on the length of your credit history, both how long you’ve had each account and how long it’s been since you had any activity on those accounts.

10 percent is based on how many accounts you’ve recently opened compared with the total number of your accounts, as well as the number of recent inquiries on your report made by lenders to whom you’ve applied for credit.

The final 10 percent is determined by the types of credit used."

And remember! Use the information given above to your benefit. Whether you are in debt or not, knowing how your credit score is calculated is invaluable. Figure out what you need to prioritize and what you need to keep an eye on. And then go for it.

Related Link:
NY Times Article

How To Hide Naughty Credit Card Purchases.

2009-12-22T13:19:00.000-08:00

A friend asked me this week with a reasonable concern regarding the use of his credit card for a purchase that may affect his credit:

"Hey, dude. I want to buy my girlfriend some “nice” lingerie from an online merchant that may be considered somewhat “spicy” to banks. I heard that people who have memberships to adult websites usually have lower credit scores. Should I charge it on my credit card?"

It is already known that credit card companies do analyze the types of transactions that are made with credit cards. The activity on a credit can be used to create an overall profile of a consumer. Therefore, there are certain purchases you should not put on your credit cards.

Things not to put on your credit card include:

Traffic tickets

Retreading tires

Bargain binges

Adult playthings

Marriage counseling and therapy

Lottery tickets

Cash advances

Personal pampering

Income taxes

Booze

.Effects on Credit

Luckily, should a consumer choose to make naughty purchases such as gambling, adult entertainment, and alcohol – there would be no direct effects on your credit history or credit report. Rest assured that the credit bureaus do not care what types of credit card purchases you make.

The credit card companies on the other hand… do care.

People are judging people all the time and banks are judgmental too. After approving your credit card application, credit card companies will truly learn what your financial habits are. Even though they may not cancel your card, they can limit the privileges of your account.

Naughty purchases are considered risky behavior in the eyes of credit card companies. If you called to ask for a lower interest rate or to have a fee removed, good luck – because a flagged card would certainly decrease your chances of getting it.

Use Your Credit Card, But Safely

While refusing to use your card is the 100% safe way to go when making naughty purchases, it may be impossible to buy anything online without one. Two ways you can avoid having your credit card company find out about these purchases are through gift cards and electronic payment services.

Gift Cards

These are not store gift cards what one would normally purchase. The gift cards that you should get are those from Visa, which can usually be purchased online or at a major bank branch. The gift cards can be paid for with your credit card and they work the same as a prepaid credit or debit card. Since your name is not connected with the card, you can now use it to pay for your “dirty little secrets”.

E-commerce Payment Services

The first option that comes into mind is Paypal. Online payment services may or may not be a viable method of paying for naughty stuff because it depends on how the company describes your purchase or whether or not they provide money payments and transfers to these risky businesses.

There are probably several other ways to hide your naughty credit card purchases but I do believe that gift cards is the best alternative other than strict cash. Cash is not dead is still a powerful financial tool.

Source

MyFICO Promotional Code Offers Chance to Check Credit Report

2009-12-14T07:41:00.000-08:00

Over the weekend I completed one of my year-end financial checkup tasks. I visited MyFICO.com and pulled a current copy of my credit report. This exercise was even easier this year considering the MyFICO promotional code that gives 26% off of their standard score report between now and the end of the year (just provide the promotion code “26UNTIL2010“ when ordering your FICO score report.

I was pleasantly surprised at the bump in my credit score since the last time I checked it. Since paying off all our credit cards, our FICO score has increased about 40 points. It wasn’t bad to start with, but was in the “average” range, and has now moved to “very good.”

Getting our updated credit score was nice, but the real reason I request a credit report at the end of the year (and again in the summer) is to check for any suspicious account activity – new accounts that I didn’t open, balances or personal information that I don’t recognize, etc.

If it has been a while since you last pulled you credit bureau report, I suggest taking advantage of this opportunity offered by MyFICO.com.

How to Save 26% On Your FICO Standard Score Report

1. Visit MyFICO.com

2. Choose “FICO® Standard” in the right sidebar

3. Click the “Buy Now” button

4. Select the credit bureau(s) you’d like to receive a report from

5. Log in or create an account

6. On the “Customer Agreement” page, enter the promotional code “26UNTIL2010″

7. Verify your discounted order and finalize the purchase.

Source

Celebrity credit card lessons: The famous who became not so rich

2009-12-09T06:40:00.000-08:00

If fame and fortune were all we needed to be happy and secure, then there wouldn't be so many celebrities fighting off creditors.

Many of us think that if we had the kind of money that celebrities have, we'd do a better job of managing our credit card debt. But if you have a credit limit of, say, a million dollars, you might have trouble reining in your spending, too.

Here's a look at how celebrities Tori Spelling, Ed McMahon, Kim Kardashian and Courtney love joined the ranks of those with those who got into credit card debt. And there are some lessons here, too, for us regular folks.

Tori Spelling: The daughter of late billionaire, Aaron Spelling, and author of "sTori Telling," revealed in a "20/20" interview that she had hundreds of thousands of dollars in credit card debt when her TV show, "Beverly Hills 90210," went off the air. She blamed the debt on her "bad shopping habits." Spelling says she got used to having a hit TV show and spending a lot of money. To her credit (no pun intended), she went back to work and got out of debt on her own.

Lessons for the rest of us: When things are going well, don't rack up debt just because you can. You may have a high-paying job today, but resist the urge to whip out your card and live the high life. There's no guarantee that you'll have the same job when the bill comes due.

But there's a reason why it's easy to get caught up in "bad shopping habits." Spending money on something you want activates the pleasure center in the brain," says Dr. David Krueger, author of "The Secret Language of Money." "Spending creates pleasure, but using a credit card also creates a separation between the spending part and the payment part," says Krueger. So it's easy to get into a cycle of spending because you're not thinking about the other end of the sale -- the part where you get your statement and owe the money.

To end the spending cycle, it's important to take responsibility for your debt. Otherwise, change is difficult. "Spelling was able to get out of debt because she decided not to be in debt any longer," says Justin Krane, a financial planner in Los Angeles.

Ed McMahon: Before McMahon died in June 2009, he was deeply in debt. He faced foreclosure on his home -- he was $622,000 in arrears and defaulted on $4.8 million in mortgage loans -- and reports also showed that McMahon and his wife had a huge amount of credit card debt. (Reports ranged from $180,000 to $750,000.) In an interview with Larry King, McMahon said it happened because he spent more than he made.

Lessons for the rest of us: Most of us would have to do plenty of shopping to rack up that much credit card debt. But when you have a huge limit and your spouse is also spending, things can get out of hand in a hurry.

When couples approach finances, there's a power aspect involved. "Whether you make $20,000 or $200,000, decide that each partner gets to be autonomous over a specific amount, say $20 per week. Then sit down and communicate about where the family needs to go from a financial standpoint," says financial planner Ken Clark, author of "The Complete Idiot's Guide to Getting Out of Debt." When you each have a small amount of "mad money," these talks are easier to swallow. And be sure that you agree on what card you'll use for these "mad money" purchases.

Kim Kardashian: Kardashian was hired as a "stylist" for R&B singer Brandy Norwood. Norwood's mother allegedly gave Kardashian her American Express card and permission to make one purchase. According to news reports, Kardashian made a purchase, but then shared the card with her sisters, ringing up more than $120,000 in credit card debt. Kardashian claims she had permission to use the card for more than one purchase.

Lessons for the rest of us: The Kardashian and Norwood case has since been dismissed by the courts, but the basic credit card lessons of being responsible with plastic -- especially other people's plastic -- is at the heart of the matter. "This is an example of why it's important to teach your kids about credit cards and the value of money," says Krane. "Kids who understand that are better equipped as adults to manage their money responsibly."

And what about handing your card over to someone else? This is never a good idea. And not just because you can't control their spending. "You shouldn't trust others with your card. When it comes to identity theft, it's often someone you know," says Clark.

Courtney Love: American Express was suing Love for failure to pay off her $350,000 bill on her gold card earlier this year. Love said she wouldn't pay because the charges were fraudulent. According to her attorney, Love believed her Social Security number was stolen, and she hired a private investigator to track down the perpetrators.

Lessons for the rest of us: Love's situation shows how important it is to remember the basics when it comes to protecting yourself from fraud. It's important to look at your credit card statements every month and take immediate action if you see charges for things you didn't purchase.

"Celebrities and their high-powered attorneys need to understand that when it comes to responsibly using credit, the same rules apply to them as to the rest of us. They need to promptly open their credit card statements each month and check to make sure that all the transactions were authorized. If not, they should immediately report any inaccuracy to the issuer, and if identity theft is suspected, consider putting a freeze on their credit report. Delaying a dispute only complicates things, something I'm sure Courtney Love would attest to," said Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling.

Source

Life After Debt: Is It Easier On The Other Side?

2009-12-01T07:17:00.000-08:00

In a recent post I reported that the Frugal family was nearly debt free. Well, we’ve crossed that pinnacle point, and are now enjoying life after debt. A comment from that post, and my initial experiences, have me wondering if life really is any easier after crossing over from being in debt to enjoying a life without it.

The first thing we did after reaching debt freedom was realign our financial goals. The first, of course, was to secure a fully-funded emergency fund, one that represented about six months of expenses. Admittedly, it was tough to keep up the same intensity towards saving money as we had for paying off debt. That brings me back to the thought-provoking comment left by Rob from PassionSaving.com. Here’s a portion of that comment that struck me:

If your experience is like mine, it won’t be all smooth sailing from this point forward. I say this not to be discouraging, but to point out what might be a basic reality of human life — it is a journey of ups and downs no matter how skilled one becomes at handling one’s money issues.

What I believe today is that accomplishing a big money goal like paying off one’s debt does not so much solve all your problems as open you up to a higher class of problems. The old problems truly are solved. But solving them provokes you into taking on new adventures, which lead to new problems. You will continue to find yourself frustrated and stuck and in pain and in fear in days to come.

My initial reaction? Yeah right! What could possibly be any more painful, financially, than going through the motions of paying off debt? What money struggles could we face that are even close to the struggles faced in the past? I suspect most people still deep in debt probably had that same reaction. But as I thought more about Rob’s comment, and began to experience life after debt, I understand his point.

Yes, we no longer have to contend with debt, but that doesn’t mean more daunting financial challenges aren’t ahead. My oldest child will soon be ten years old, which apart from terrifying me as a father, also serves as a wake-up call to get her college savings in order. Because we spent so many years toiling with debt and trying to get on solid footing, her college savings have suffered. The good news? Without debt we can afford larger contributions to her 529 plan, which should help us make up ground.

It’s a similar story for our own retirement plan. I diverted money we could have, and probably should have, used for retirement savings to pay down debt. Unfortunately, this means we missed a great opportunity to invest in our 20’s and let that money compound for a few decades. Are you reading 20-somethings? Make long-term savings a priority now!

In the final analysis, I would have to admit that yes, life is easier after debt. Paydays are now an exciting event because it means making more contributions to savings, rather than distributing most of your income to credit card and auto finance companies. But life after debt is not without challenges. And those challenges can conjure up the familiar fears and anxiety felt when looking at a pile of debt.

How will I even save enough to retire? How much will my kids need for college? Will I ever be able to save in taxable investments to chart a course to early retirement? I’ll approach these new challenges the same way I approached, and overcame, the ones related to debt. We’ll tackle them head on, and remain disciplined through the same frugal approach we take towards nearly all of life’s ups and downs.

Source: Frugal Dad

15 Must-Know Credit Card Terms

2009-11-25T08:21:00.000-08:00

Source: Debthelper.com 800-920-2262

If you don't understand the language, credit card offers and statements could lead you to deep debt -- or at least furious frustration. For the big scoop on the fine print, here's what these frequently used credit card terms mean.

Average daily balance -- This is the method by which most credit cards calculate your payment due. An average daily balance is determined by adding each day's balance and then dividing that total by the number of days in a billing cycle. The average daily balance is then multiplied by a card's monthly periodic rate, which is calculated by dividing the annual percentage rate by 12. A card with an annual rate of 18 percent would have a monthly periodic rate of 1.5 percent. If that card had a $500 average daily balance it would yield a monthly finance charge of $7.50.

Annual percentage rate (APR) -- A yearly rate of interest that includes fees and costs paid to acquire the loan. Lenders are required by law to disclose the APR. The rate is calculated in a standard way, taking the average compound interest rate over the term of the loan, so borrowers can compare loans.

Balance transfer -- The process of moving an unpaid credit card debt from one issuer to another. Card issuers sometimes offer teaser rates to encourage balance transfers coming in and balance-transfer fees to discourage them from going out.

Cash-advance fee -- A charge by the bank for using credit cards to obtain cash. This fee can be stated in terms of a flat per-transaction fee or a percentage of the amount of the cash advance. For example, the fee may be expressed as follows: "2%/$10". This means that the cash advance fee will be the greater of 2 percent of the cash advance amount or $10.

The banks may limit the amount that can be charged to a specific dollar amount. Depending on the bank issuing the card, the cash advance fee may be deducted directly from the cash advance at the time the money is received or it may be posted to your bill as of the day you received the advance. The cost of a cash advance is also higher because there generally is no grace period. Interest accrues from the moment the money is withdrawn.

Cardholder agreement -- The written statement that gives the terms and conditions of a credit card account. The cardholder agreement is required by Federal Reserve regulations. It must include the Annual Percentage Rate, the monthly minimum payment formula, annual fee if applicable, and the cardholder's rights in billing disputes. Changes in the cardholder agreement may be made, with written advance notice, at any time by the issuer. Rules for imposing changes vary from state to state, but the rules that apply are those of the home state of the issuing bank, not the home state of the cardholder.

Finance charge -- The charge for using a credit card, comprised of interest costs and other fees.
Floor -- The minimum rate possible on a variable-rate loan or line of credit, after any initial introductory rate period. For example, on a credit card with the Prime rate as its index, no matter how low the Prime rate drops, the rate on the line may never decrease below the stated rate floor.

Grace period -- If the credit card user does not carry a balance, the grace period is the interest-free time a lender allows between the transaction date and the billing date. The standard grace period is usually between 20 and 30 days. If there is no grace period, finance charges will accrue the moment a purchase is made with the credit card. People who carry a balance on their credit cards have no grace period.

Minimum payment -- The minimum amount a cardholder can pay to keep the account from going into default. Some card issuers will set a high minimum if they are uncertain of the cardholder's ability to pay. Most card issuers require a minimum payment of two percent of the outstanding balance.

Over-the-limit fee -- A fee charged for exceeding the credit limit on the card.

Periodic rate -- The interest rate described in relation to a specific amount of time. The monthly periodic rate, for example, is the cost of credit per month; the daily periodic rate is the cost of credit per day.

Pre-approved -- A credit card offer with "pre-approved" only means that a potential customer has passed a preliminary credit-information screening. A credit card company can spurn the customers it invited with "pre-approved" junk mail if it doesn't like the applicant's credit rating.

Secured card -- A credit card that a cardholder secures with a savings deposit to ensure payment of the outstanding balance if the cardholder defaults on payments. It is used by people new to credit, or people trying to rebuild their poor credit ratings.

Teaser rate -- Often called the introductory rate, it is the below-market interest rate offered to entice customers to switch credit cards or lenders.

Variable interest rate -- Percentage that a borrower pays for the use of money, and which moves up or down periodically based on changes in other interest rates.

Four Loopholes in the New Credit Card Laws

2009-11-24T07:22:00.000-08:00

On August 20, 2009, the rules of the credit card game changed when the first phase of the new Credit CARD Act of 2009 became effective.
Under the first phase, you, as a credit card account holder:

Get a fair warning. You must receive least 45 days advance warning of changes to your credit card terms, rather than only 15 days notice. The notice must explain the steps that you, the cardholder, can take to exercise your rights to cancel if you don't like the changes, including a toll-free number to call and the deadline for opting out.

Can opt out. You have the right to pay off your balances under the old, lower interest rate if you opt out and cancel the account.

Get time to pay. You must be allowed at least 21 days to pay your monthly credit card statements without threat of late fees and penalties.

Are you impressed? You might want to reserve judgment until you learn about the exceptions to these phase one provisions:

Loophole #1: You cannot opt out of minimum payment increases or credit limit decreases.

Loophole #2: If you are 60 or more days late making payments, you lose your right to opt out of interest-rate increases.

Loophole #3: If yours is a variable rate credit card account, your interest rate is tied to an index, which is almost always the "prime rate." Those interest rate increases can be passed on to you with no opt out option required. In recent months, card issuers have rebelled against this law by switching consumers from fixed rate to variable rate cards.

Loophole #4: Finally, there is a significant loophole that is best explained this way: Assume that you have a credit card account at 6.99 fixed APR. You get a notice that your rate will increase to 18.99 APR, and that you have 45 days to either accept the change or decline and close your account. You decide that you will opt out before the 45 days are up. However, you decide to spend all you can under the older, lower rate before the new APR kicks in.

That move could come back to bite you because of this loophole buried in the new Credit CARD Act of 2009:

The law says the new, higher APR will apply to any purchases made 14 days after the notice is mailed. If you receive a 45-day notice, you cannot run out and start charging things in days 15 to 45, hoping to add those transactions to the lower protected balance. Under the law, banks are not required to disclose this 14-day loophole.

Another problem with the terms of this new law is the effect opting out will have on the cardholder's credit score because of the negative effect of a "closed account" on a credit report.

The only thing that is clear about the new law is that it is very confusing.

Source: crosswalk.com

7 Expenses that Are Keeping You in Debt

2009-11-20T08:06:00.000-08:00

In the United States, 43% of families are spending more than they earn each year, according to MSNMoney. At the end of 2008, the average American household that had a credit card was holding nearly $11,000 worth of credit card debt. With numbers like these, living with debt seems unavoidable and paying it off seems like an uphill battle you are destined to lose. However, if you are interested in living debt-free, here are seven expenses to watch for that may be holding you back from being in the black.

1.Not Knowing Your Limits

The Financial Times recently reported that U.S. banks are set to earn $38.5 billion this year from overdraft fees alone, more than double the number from 1994. If you don't know how much is in your bank account, you could easily withdraw or spend beyond your limit or have a check clear that takes your balance below zero. When that happens, banks charge anywhere from $5-$10 in overdraft fees. And that's not all. If you fail to pay back the amount you've overdrawn, you could be hit with even more fees after a set number of days in the form of a large sum (as high as $35) or a daily tariff (often between $5-$10). According to the National Consumer Law Center, the average overdraft fee is $34.65, and considering a purchase as small as your morning latte could put your account in the red, that's a hefty price tag.

Credit cards fare no better, with late payment fees increasing as well as charges for going over your limit. According to a survey done by the Pew Safe Credit Cards Project in March 2009, 92% of credit cards had a fee for exceeding the credit limit, including 100% of student cards. The over-the-limit fee and the late payment fee were both $39 for most accounts. Also, these infringements can result in your interest rate skyrocketing up to 30% or higher. In fact, that same survey found that 93% of cards allow the issuer to raise any interest rate at any time. And once that rate goes up, it is unlikely to come down. (Find out more in Expert Tips For Cutting Credit Card Debt.)

2.Fees, Fees, Fees

Banking and fees go hand in hand. But there are ways to reduce the charges you pay on a regular basis. First, make sure all of the accounts you have open are absolutely necessary. Consolidating multiple checking or savings account could add up to monthly savings of $20 or more.
Also, make sure you understand what and how you are being charged. Some accounts advertise as being free, but in order to have the monthly charges waived, you may need to fulfill some conditions including but not limited to a minimum balance, not exceeding a set number of transactions per month and/or having a set number of direct deposits or automated bills associated with that account.

Transaction fees can also add up quickly. Remember, if you withdraw money from an ATM instead of your bank, the average $1.50 fee is charged both by the cash machine AND by your bank. Likewise, most banks include a surcharge on email money transfers. Keep an eye on your account and make sure you know how much these conveniences are costing you. (Learn more about lowering your costs in Cut Your Bank Fees.)

3.Paying The Minimum

Approximately one in six families with credit cards pays only the minimum due each month, according to an Experian national score index study. You've probably read everywhere that this is financial suicide, but let's take a look at what the actual damage would be.

The average interest rate on a credit card in the U.S. is 11.2% according to bankrate.com. However, with this kind of payment history, and one-third of credit card holders paying between 20-41%, let's guess conservatively that this family's interest is around 20%. The minimum payment is usually around 2% of the total balance, so in this case that would be about $220 per month. If only that minimum is paid, the debt would be paid off in nearly 77 years, with a total of more than $52,000 paid in interest. Push that interest rate up to 30% and the minimum payment is insufficient to ever pay down the debt.

4.Credit Card Cash Advances

You know that getting a cash advance from your credit card is a bad idea, but we'll all been in an unforeseen situation where you need cash fast. So what does this convenience end up costing you? According to CardWeb.com, the fees ten years ago were on average 2% of the amount advanced with a $2 minimum and a $10 maximum fee. Unfortunately, today that number has gone up to 3% with a minimum ranging from $5-$15 with no maximum fees. Add these fees to the transactions fees you might be paying and you'll be shocked to see the total amount that disappears from your wallet each month on convenience fees alone. (Read more in 6 Major Credit Card Mistakes.)

5.Payday Loans

This expense may be the most dangerous of the all for your pocket book. These highly unregulated lenders do provide a valuable service – if you need cash now, you can get it for a fee and a promise to repay the amount once payday comes around. However, the industry standard in annualized interest is between 200 and 500%.

These lenders are able to avoid usury laws by calling their interest charges “service fees” which are not regulated the same way in many places. In fact, payday services have been outlawed or severely restricted in 13 states according to bankrate.com. (Hold too tightly to this rescue line and you'll soon be drowning in debt. Check out Payday Loans Don't Pay.)

6.Not Negotiating

This step can be tricky, but it could also save you enormous amounts of money interest. If you are having trouble paying down your debt, call your creditor and ask to have your interest rate reduced. These companies want your business, so often you will be able to negotiate a repayment schedule that can help you pay down your debt faster. Make sure you ask for the lowest fixed rate – an introductory rate that will shoot right back up in a few months will have you back at square one.

Don't be afraid to bring up competitors' rates; your credit card company may be more willing to offer a comparable rate if you can get it somewhere else .If the company will only offer you a lowered rate for a set amount of time (usually six months to a year), that is better than nothing. The best part about this step is that there is no harm in asking, only the potential for big savings. (Reducing the rate charged on your credit card balance is the first step to getting out of debt. Check out Cut Credit Card Bills By Negotiating A Lower APR.)

7.Ignorance is NOT Bliss

The worst culprit for keeping you in debt is not knowing where your money is going. Make it a priority to keep records of where and how you spend your hard-earned cash. Make a repayment plan and have set goal-dates for paying off debts. Without these tools, it's far too easy to stay in debt. You can purchase accounting software, make a simple (and free) spreadsheet on your computer or even work it out with a pen and paper; just make sure you make a long-term plan for regaining control of your finances.

Debt may seem like a life sentence, but it doesn't have to be. The number one tip for maintaining financial health is awareness. Be aware of your money and where it goes each month, and be aware of the options available to you. There are easy ways to help alleviate the stress on your finances and move from red to black, and the rewards are more than just monetary. (Want to stay in the black permanently? Read Can You Live A Debt-Free Life?)

Source: Investopedia

Overdraft Overhaul

2009-11-17T08:28:00.000-08:00

Last Thursday the Federal Reserve announced that, starting in the middle of next year, U.S. banks cannot allow customers to overdraw their accounts and then charge them hefty fees for doing so. That is, unless customers say they want to sign up, a hurdle that will likely kill this big bank cash cow.

The new rule goes into effect next July and requires customers to "opt in" to overdraft protection--a service that most banks offered as some sort of courtesy but that can actually generate huge fees for dubious reasons. Most overdraft protection programs work with either a linked savings account or a linked credit card. If you spend over your limit the bank charges the savings account or credit card to make up the difference so that your purchase is still completed. Sounds nifty, but the banks also charge a fee for this. Odd that the same bank that likely offers free money transfers between accounts or that doesn't charge customers extra for using a credit card would attach a price to this. If it really costs the bank more than $20 every time you use your credit card, there'd be far fewer credit cards available today.

While certain customers like not having to worry about overdrawing their account, Congress calls the practice "abusive" and is considering even more restrictions.

Bank of America took in $692 million in such penalties in just three months this year, charging customers $35 for each instance. Nearly one in five bank customers pays at least one overdraft fee a year, says the bank industry's lobbying group, but a few poor souls rack up tons of them: Just under 4% of all bank customers are hit with five or more a year.

That means big bucks to a fiercely competitive industry that's come to depend on fees to supplement lending income. It also means that those same banks will seek to make up that lost profit by charging the rest of us higher rates, figures banking analyst Jason Goldberg at Barclays.

The regulation prohibits banks from charging different rates to customers who choose overdraft protection and those that don't. Bank could stop offering free checking accounts, a trend that may have already begun, says Goldberg. Higher borrowing rates could also be in store.

Expect a handful of banks to see their revenue take a significant hit. At the top of the list is TCF Financial, which owns banks across the Midwest and derives two-thirds of its fee income and more than a quarter of its overall sales from overdraft charges.

Trailing far behind, but still on the hook, are Regions Financial and Bank of America. Regions has struggled through the financial crisis and still gets a third of its fees and 14% of sales from overdraft. BofA, with its huge balance sheet, can better withstand the hit to its top line. Other institutions that stand to lose a significant portion of their revenue are SunTrust Banks, PNC Financial Services, M&T Bank and Fifth Third Bank.

Source: Forbes

Minors seeking a credit card will need a helping hand from parents

2009-11-12T07:32:00.000-08:00

Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families."

Dear Opening Credits,

I'm 16 and want a credit card. How can I get one? How else could I build my credit at my age? -- Kristina

Dear Kristina,

Sigh. You're a girl after my own heart, Kristina. Though I didn't really become fascinated by personal finance until my college years -- living on pennies inspires imaginative budgeting -- I think it's fantastic that you're thinking about these issues at such an early age.

Be aware that there are two basic reasons to get a credit card. The first is to have a safe, convenient way to purchase the items you want and need to buy. The second is what you mentioned -- to create a credit history. A long, positive record of using credit paves the way for all sorts of fabulous things, from obtaining inexpensive loans for cars and homes to being appealing to landlords and employers to gaining access to premium plastic equipped with very cool perks.

I'm sorry to say that getting a credit card on your own may not be so easy. In general, minors cannot enter into legally binding contracts -- which is what credit accounts are -- so an individually held card is probably not an option for you right now.

There may be another way, though, to build a credit history before you turn 18. It's by "piggybacking" on someone else's credit card account as an authorized user. This means you'd have a credit card with your name on it and enjoy charging privileges, but because the account wasn't granted to you based on your financial information and credit history, the ultimate payment responsibility would fall on the actual account holder's shoulders.

Now, I only recommend these types of joint accounts with extreme caution as they carry considerable risk to all concerned. The payment activity and account balance history appears on each cardholder's credit report, so if any of you mess up (pay late, charge over the credit limit, etc.), everybody's reputation suffers. However, as long as all parties use the account responsibly, it can work.

Your parents are the obvious choice to approach about being added as an authorized user. However, before you do, become perfectly clear about how to use a credit card well. The directions are actually quite easy -- a lot of adults just overcomplicate it. All you need to do is charge the amount you will (not can, will) repay when you get the bill. If, for some reason, you would be handling the account management side, pay on time and read every statement for account changes, errors and identity theft issues. If you spot or anticipate problems, address them with your credit issuer immediately.

Believe you can handle that? Then have a formal talk with your parents and explain what you want and why you want it. Let them know that you recognize how to use credit correctly, and ask that they add you to one of their accounts. The discussion should include:

•What you'd like to use the card for.

•Whether you need permission before charging certain or all items.

•What the consequences for misuse are.

If each of you agrees to the terms, follow it up with a written and signed contract. Then your parents would need to contact their credit card company and request you be added as an authorized user. A card sporting your name will soon be mailed to them.

In the event that your parents do not consent to the deal, I wouldn't blame them and neither should you. Credit is serious business, and it's sensible for them to be highly protective of their finances and credit report.

So what can you do? Well, thank them for their time, say you understand why they denied your request, and tell them that you'd like to review the deal again a year from now. During that time, take initiative and prove your trustworthiness: get a part-time job, save your earnings, borrow a little from them here and there and pay them back on time -- or even better, early. While these actions won't do a thing for your consumer credit file, your rating as a dependable and money-smart daughter will surely rise.

Source: CreditCards.com

Hardly a ‘free’ credit report

2009-11-09T06:13:00.000-08:00

FTC takes aim at Web site that charges customers for what should be free

In a series of entertaining television ads, freecreditreport.com features a band singing humorous songs about its terrible state of life, which is blamed on bad credit. The catchy jingles imply that if the band members had only known about what was on their credit reports, they could have done something to get out of their current situations.

The Federal Trade Commission, however, doesn’t see much to laugh about in those ads. The FTC says Experian (one of the three major credit reporting agencies and the ad’s sponsor) is tricking people into buying credit information with the promise of something free.

By law, consumers are allowed one free credit report from each of the agencies each year. People who go to Experian’s freecreditreport.com will find out that they need to give the company a valid credit card to get their reports. What they’re really signing up for is a free trial of the company’s credit monitoring service, which gives updates at least monthly on users’ credit scores. If they don’t cancel the trial within seven days, they are charged $14.95 a month.

Consumer advocates say the average person doesn’t need such a service — checking the monthly bills and getting a credit report up to a few times a year is more than sufficient, they say. Edgar Dworsky, founder of ConsumerWorld.org, recently told The New York Times that the drive is fostered by “paranoia.”

It is no wonder why there is paranoia, considering how the ads play on the current economic doldrums.

The FTC has battled with Experian for several years and the commission has fined the company $1.25 million over the past five years, saying Experian duped people into going to its site instead of a site called annualcreditreport.com, which offers truly free credit reports from all three reporting agencies. The FTC tried to get the company to give up the name of its Web site, but so far the company has refused.

Given people’s concern over their credit scores, the FTC is right to press Experian on its tactics, which only lead to more bills — and potentially more credit debt.

Source: Las Vegas Sun

Deter. Detect. Defend. Avoid ID Theft

2009-11-03T06:57:00.000-08:00

This website is a one-stop national resource to learn about the crime of identity theft. It provides detailed information to help you deter, detect, and defend against identity theft.

On this site, consumers can learn how to avoid identity theft – and learn what to do if their identity is stolen. Businesses can learn how to help their customers deal with identity theft, as well as how to prevent problems in the first place. Law enforcement can get resources and learn how to help victims of identity theft.

Read on (http://www.ftc.gov/bcp/edu/microsites/idtheft/) to find out more about identity theft and what you can do about it.

Build Up Your Holiday Gift Budget in Just Two Short Months

2009-10-28T07:54:00.000-07:00

Can you believe that Black Friday is just a month away? It’s the biggest shopping day of the year and there will be countless deals to take advantage of to ramp up for the holiday season. After that, you have just under a month until Christmas. How does your holiday budget look this year? Have you been saving money for the holidays throughout the year or are you just now starting to seriously think about it?

Either way, the last thing you want to do this year is rack up another credit card bill just to buy gifts and maybe pay for some travel. If you do, you’ll be like millions of other Americans who find themselves with a bad financial hangover come January. So, with just two short months until Christmas how can anyone save up enough money to pay for the holidays?

Save $50 a Week Starting Right Now

Starting today, put $50 in a savings account meant for holiday spending. Do it right now! If you already have a savings account you can just use that, but it’s even better if you create and designate a new account strictly for this purpose so that the money doesn’t mysteriously disappear as it gets spent on other things. A good way to start is to open up an online savings account.

What will $50 a week add up to by Christmas? About $400. How many presents does $400 buy? It depends on who you’re buying for, but that’s a good chunk of change that can put a dent in your holiday budget. If you have to travel to visit family that could even cover your airline ticket. Either way, by tucking away just $50 a week from now until Christmas you can have a nice cushion set aside to use as you begin buying gifts.

Want to do one better? If your spouse or partner also works have them save $50 each week. Now you’ve just created an automatic savings plan that will put $800 in your account by Christmas. That isn’t chump change and it can really make a difference this holiday season.

Yes, You Can Afford $50 a Week

I know what you’re saying. We’re in a recession, money is tight, and there’s just no way to squeeze $50 out of my budget each week. Unless you’re already the most frugal person in the world and there is literally not a single penny left to be saved, there are plenty of ways here and there you can come up with a few dollars a week over the next two months.

1. Ditch or reduce your TV services for two months.

Sure, you’ve heard this a million times. Cutting back on your TV costs can mean big savings. Well, the reason you keep hearing it is because it’s true. But let’s look at the next few months specifically. Usually November and December are very busy months for most people. With all of the holiday travel, entertaining, shopping, and things that go along with the holidays that means you’re spending less time at home to actually watch TV. So, if you won’t have much time to enjoy your premium cable or satellite TV services you might want to downgrade for just a few months. If you reduce your package by $25 a month or cut out a premium channel or two until January that might save another $15-$30 a month. Total savings for just two months of fewer TV options could amount to $10-$15/week.

2. Eliminate just one meal out each week.

Ok, if you already make every single meal at home and never eat out this might not apply to you, but for most of us we grab a meal out at least a few times a week even if it’s just a quick lunch. But this is one of the easiest ways to save some money. Even if you only spend $5 or $6 a few times a week for lunch if you were to cut just one of those out and bring leftovers or a snack from home you instantly save that money.

Even better, if you regularly go out for dinner a few nights a week you can realize even bigger savings. Even a $15 meal at a casual dining resturant can add up to over $20 after a tip and a drink other than water. By just staying home one night a week and fixing a meal yourself you can probably do it for a fraction of the cost yielding a total savings of $10-$15 each week. If you’re married, remember, your spouse has to eat too and if you’re going out you’re spending twice as much while cooking at home usually doesn’t mean double the price so it’s an even greater savings.

3. Entertain at home instead of going out.

Who doesn’t like to have a good time with friends and family? Well, who says entertainment has to mean going out to eat, catching a movie at the theater, or some other costly night on the town? For the next month or two try ditching the entertainment nights out and do some entertaining of your own. Like to catch a movie every once and a while? Invite some friends over, pop some popcorn and have guests bring snacks and you can have a group of people watch a movie for nearly the cost of a DVD rental.

If playing games is more your thing you can organize a game night. Maybe it’s cards, poker, or just board games, but it’s a lot of fun to get people over and have a good time playing games that don’t even cost anything. And if you tell everyone to bring a dish to pass you’ve just killed two birds with one stone! No money spent on cooking dinner or going out to eat and no money spent on entertainment. The savings from just having one entertainment night at home could easily be $50 or more. Do this a few times before Christmas and you’ll probably save $100.

4. Only buy things that are on sale.

When you go grocery shopping, try to buy only things that are on sale. If you’re stocking up on some meat for the week and you see that pork chops are on sale but chicken breasts are not, don’t buy the chicken anyway just because you felt like chicken. Stick to the pork and substitute it for chicken in a dish or simply make a dish that works with pork instead. Same thing goes for produce. If a certain type of apple is on sale versus another type you normally buy, give the one on sale a try. Or if Yukon gold potatoes are on sale instead of Russets you should opt for the Yukon. The savings realized on produce and meat products can easily amount to a few dollars per item when bought on sale. Not only that, but it’s a great way to try new foods and introduce you to different items if you stray from your standard fare and opt for whatever is on sale. The total savings from buying only sale items at the grocery store can easily amount to $10-$20 each week.

5. Saving on holiday items themselves.

While I’ve highlighted a few ideas to save money each week on regular expenses, let’s not ignore the money spent on the holiday items themselves. First, start shopping early. If you have a gift in mind already it might not make much sense to wait until Christmas gets closer. Keep your eye out for sales right now. If you can save 10% on something now and not have to hassle with fighting the crowds as the holidays draw closer it could be the best 10% you ever saved. Also, shop online. It’s a lot easier to shop from the comfort of your home on your own time rather than hitting the stores and searching for items. So, go online and start pricing out the gifts you’re looking to buy and find the best deals. You can then use this information to comparison shop if you do want to check out some of the regular stores.

Finally, don’t go overboard with wrapping the gifts. Guys, raise your hand if you’re lazy and pay for a gift box or wrapping service. I’ve been guilty of this in the past, but that’s what I get for waiting until the last minute to do my shopping. Instead of paying to have your items wrapped you can buy a roll of wrapping paper for a couple bucks and do it yourself. It might not look as nice, but come on, the paper is just going to get ripped off and thrown away anyway. This goes for buying all the fancy bows and ribbons and stuff as well. Some people can spend $50 or more just on gift wrapping supplies! You’ve spent money on the gift already, so don’t spend even more just to cover it up with some paper.

If you really want to get a head start on next Christmas be sure to hit the stores in the few days after and stock up on your wrapping paper and decorations. As soon as the holiday is over you’ll see stuff marked down 50% or more. Buy your wrapping paper, bows, tags, or other decorations you know you’ll need after Christmas and throw them in your attic or storage until next year to realize big savings.

Don’t Let the Savings Stop There

As you can see, it’s pretty easy to come up with an extra $50 each week by making a few small changes to your lifestyle. While this might work for a few months to help you build up that holiday spending money, don’t let it stop there. You’ll probably find that after making a few of these changes that it really isn’t much sacrifice. So, instead of reverting back to your old ways in January you should strive to keep these habits. Think about it this way — if you save $50 a week for the entire year you’ve set aside $2,600 just by making a few minor lifestyle changes. If your spouse does the same thing you’ve just saved over $5,000. That can go a long way in helping you build an emergency fund, invest in an IRA, or apply towards your child’s college fund.

These are just a few ideas and not everyone will be able to utilize them all. But what are some of your money saving tips that can add up without making a huge sacrifice on your lifestyle?

Source: Gen-X Finance

More tips for a better credit score

2009-10-26T06:41:00.000-07:00

Improving your credit score will pay off in lower interest rates, lower insurance rates, and better terms. Three major bureaus, Transunion, Equifax and Experian keep track of your credit history and scores. If your score isn’t what it should be here are a few more tips.

Collection Agencies

If the lender is positive you won’t pay the account in full, and it’s been 6 months since you’ve made any payment at all, they may sell the account to a collection agency for pennies on the dollar. Literally a $5,000 debt may be sold for $100. The agency knows it won’t collect on every debt and it knows the odds are it won’t collect the full amount. But it will go after you in the most aggressive way that’s legal. A debt turned over to an agency is an indication you’re on a downward slide financially. Even if you pay off the debt to the agency that black mark stays on your record.

Credit card companies or lenders aren’t the only ones to report to the credit agencies.

If you owe money, the person or company that you owe it to, has the right to report it to the credit bureaus. Libraries, doctors, small businesses, even clubs you’ve joined that have a contract can and do report nonpayment. Don’t let these little bills ruin your credit. Pay them and have the notices removed from your report.

Negotiation is a no no

You can negotiate interest rates, application fees, and late fees. But don’t negotiate the amount you owe. It’s a short term victory. If the creditor agrees to settle for less than you owe, the amount you didn’t pay will be reported to the credit bureaus and will stay on your record for seven years.

Time is on your side

However negative your credit report is now you can clear it up in time. Make payments on time from now on and you’ll start to see that score go up. Creditors look at the total score but they also look at the most recent payments. If your score is climbing upwards because you’ve been responsible with your credit and payments that’s a better sign than if your recent history shows missed and late payments.

Work on improving your credit score and you’ll start to see results.

Source: Fav Stocks

Why Should You Have to Pay for Your Credit Score?

2009-10-19T07:03:00.000-07:00

Seriously. Why should you buy your credit score? After all, the score is based on your information. Shouldn’t it belong to you? Yet federal law requires you to pay $15 to get it. The fee is a gift to credit scoring companies like Fair Isaac, Choicepoint, TransUnion and Vantage. They don’t need the dough; they already collect zillions of dollars from banks, car dealerships and other lenders who buy your score to make sure they’re charging you enough to offset their risk.

True, some websites offer you the score for free, but only if you give them your credit card number and sign up for a monthly credit monitoring service, an item you don’t need unless you are planning to buy a house and a car every other day. Some of them, like freescore.com, peddled by celebrity economist Ben Stein (whom I wrote about a while ago), charge as much as $29.95 a month, an outrageous amount to learn, for example, that Greedibank made an inquiry to see if you are worthy enough to receive an offer for its Visa Extortion card.

Sometimes I think (actually I think it pretty much all the time) that the hullabaloo about the importance of knowing your credit score — and knowing it every moment of the day — is nothing more than propaganda pumped out by the scoring companies to scare you. Oooh, you’d better get your score or something terrible will happen! Ooh, your score will follow you wherever you go! Doesn’t this remind you of the Permanent Record that teachers warned you about in high school? When you finally got to college, you realized that nobody cared that you got a D in French.

I developed my own guerrilla method of getting my score without paying. I download a credit report from the official government website annualcreditreport.com (which allows you to get three free reports a year, one from each of the three major credit bureaus — Equifax, Experian and TransUnion). Then I fed the data into the FICO Estimator at the webiste of Fair Isaac, the company that invented the credit score. The number should be close to the actual score.

A couple of new enterprises have caught my why-pay-for-it fever. Credit Karma buys your score from TransUnion and lets you have it for free, along with tips on raising it (if it’s low). The drawback: You have to opt in to receive email from the company. (Of course, if you’re really a free-loader, you could direct the stuff to your spam folder.) Credit.com, a financial services website, offers a similar service. It downloads your report from TransUnion and shows you how you rank on credit scoring systems used by Fair Isaac, Vantage and TransUnion. It doesn’t give you a score, only a grade on the five ingredients of your score, but that should be enough to tell you whether you have a problem.

These are all good workarounds. But now that Congress is considering a batch of financial reforms, here’s one that would be easy to enact: Repeal the stupid $15 charge and give consumers access to their own financial information.

Source: Money Watch

Does It Really Matter Where You Bank?

2009-10-14T07:12:00.000-07:00

Do you need a traditional retail bank?

Until recently this might have been an odd question. Bank failures, government bailouts and increased fees are causing many people to stop and think about their choice of bank. In this day of direct deposit, ubiquitous ATM’s and increased competition some people are realizing that all of their banking needs can be met in other ways – often with better rates and lower fees!

Retail banks offer a variety of financial services, but the majority of people use them for checking and savings accounts. The #1 criteria for choosing a local bank is often convenience. People tend to give their business to the bank that is closest to where they live or work even though a better deal can be found elsewhere.

Where can a better deal be found? Two sound alternatives to retail banks are credit unions and online banks.

Credit Unions
Credit unions are similar to banks with one key difference: they are nonprofit, member-owned cooperatives. Credit unions return any profit to members, generally resulting in higher checking and savings account interest rates and lower fees than retail banks. Deposits are federally insured.

Credit unions may offer a more limited range of services than a retail bank. They may also provide restricted access to ATM’s and have branches that are less convenient to visit.

For more information about credit unions visit the Credit Union National Association.

Online Banks
Online banks are retail banks without branch locations. Eliminating the cost of operating local branches results in a savings to the bank that is usually passed along to customers in the form of lower fees and better interest rates. Paying bills or transferring funds is incredibly easy and efficient. Online banks are open 24/7 for your convenience. Deposits are federally insured.

Obtaining money from on online bank isn’t as easy as a retail bank. ATM cards are provided so you can withdraw cash, but ATM access may be restricted.

Two popular online banks are ING Direct and HSBC Direct. Other options can be found at The Best Bank for Your Money.

Source: My Dollar Plan

10 myths about credit reports

2009-10-13T07:11:00.000-07:00

Can the previous tenants of your house 'ruin' your credit rating? Will just one missed payment harm your chances of getting credit? Moneywise looks at the 10 most common credit report myths.
Since the onset of the credit crunch, we are more aware than ever before of the importance of ensuring our credit record is not only accurate but also as ‘good’ as possible.

When you apply to take out a financial product (such as a credit card, loan, mortgage or even a current account), your credit history will be checked by the provider to confirm the information you have told it and to give you a credit score. If you don’t match its criteria, it will reject your application. At the very least, it may use your score to decide how much interest to charge you.

Lenders aren’t the type of company that may search your credit record – when you sign up to a contract, for a mobile phone or gym membership for example, you may be subject to a credit search. In addition, landlords will often check the records of prospective tenants to make sure they are responsible and will pay the rent. Just remember, though, that firms must get your permission before they run a credit search on you.

Your credit report contains information about you from the electoral role, any financial links you might have (a joint mortgage, for example) and whether you have any County Court judgments, bankruptcy orders or individual voluntary arrangements.

Most importantly, your record includes all your credit agreements from the past six years – including how you have managed your repayments and the amount of credit you have available to you.

It’s good practice for people to check their credit records on a regular basis to make sure all the information is correct and to ensure they haven’t fallen victim to identity theft.

However, many people are deterred from requesting to see this information because they think this will leave a ‘footprint’ on their report and will have a detrimental affect on their ability to get credit in the future.

This is just one of many ‘myths’ surrounding credit reports:

1. Checking my credit report will be expensive

A quick internet search will reveal dozens of companies that offer people their credit report, but the three most popular credit agencies are Experian, Equifax and CallCredit. By law all credit agencies are required to provide you with a one-off copy of your credit report for £2. However, you can also purchase additional products that allow you unlimited viewings of your rating online.

2. Checking my report will damage my chances of being approved for credit

Checking your credit report will not leave a footprint or reduce you chances of being approved for credit down the line. You can check your record as often as you like and even request your report from more than one agency.

3. Other people who live or used to live at my address have damaged my credit rating

Your credit report only contains information about you. While your address (and your previous addresses from the previous six years) will be included in the public information about you, the credit history of previous or other current residents won’t impact your score.

However, if you share a financial product with another person then their score could impact your rating.

4. I’m on a credit blacklist

There is no such thing as a credit blacklist of certain postcodes. Lenders will look at you and your own history when deciding to lend to you. They will not consider factors such as your race, religion, political persuasion or gender.

A quick tip to improve your score, however, is to make sure you are on the electoral register at your current address. If you are not, then lenders are likely to be reluctant to lend to you.

5. Only financial products are included on my record

Most people assume that only credit cards, loans and mortgages are included on their credit rating. In fact, if you miss a mobile phone payment or forget to pay a utility bill, this will also be noted on your record and could impact your ability to borrow in the future.

6. Being turned down for credit will show up on my record

When a firm searches your credit record, it leaves a ‘hard footprint’ that can be seen by other lenders. However, if you are rejected for a loan, for example, this won’t be recorded on your file.

On the other hand, making numerous applications for credit within a short space of time can adversely affect your credit rating.

7. A missed credit card payment from a few years ago has damaged my rating

Your credit report contains all your credit agreements from the past six years, and includes how you have managed your repayments. For example, a 0 indicates that your payments are up to date while a 4 shows payments are four months late. The letter D indicates the account is not being used while a U is displayed when a credit agreement is new and the information is not yet available.

If an account has been settled and you made all the repayments on time, then this will be recorded. But if an account was in default because a payment was late then the date this happened and the amount outstanding will be included.

While missing a payment will be recorded on your file and could affect your overall credit score, it’s worth remembering that lenders will put more prominence on more recent activity. If you have been completely up to date with all your credit agreements, but once missed a payment, this will not necessarily ruin your chances of getting credit in the future.

You can also include a statement on your report where you can explain why you missed a payment. Although lenders don't have to take this into account, it at least gives you the chance to tell your side of the story.

8. I’ve never borrowed so my credit record is squeaky clean

You might think that if you have never had a credit card, or any other type of loan, then your credit record will be squeaky clean – making you the perfect candidate for lenders.

However, a quirk of lenders is that they are more confident in lending to people who have a history of borrowing and repaying debt on time.

If you have never had a credit agreement then taking one out and repaying it in full and on time will improve your rating. Most store card providers don’t carry out credit checks, so this is an ideal place to start. Just make sure you pay off the balance in full and on time.

9. I’ve paid off all my debt so having credit cards won’t impact my rating

When lenders consider you for a loan, they will pay particular attention to the amount of credit you have at your disposal – even if you aren’t currently using this.

Having several dormant credit cards might cause concern, as it suggests the potential for you to run up great piles of debt. It’s therefore worth cancelling some or all of your credit card agreements once you no longer need these cards.

10. It’s impossible to improve my rating

Many people assume that once they have missed a payment, or taken on too much debt, then their credit record is damaged and there is nothing they can do about it. But in fact, there are steps you can take to improve your record and overall credit score.

As well as making sure you make all your payments, you should focus on trying to pay off some of your debt. For example, rather than just making the minimum repayment on your credit card each month, try to clear as much as you can afford – or, even better, pay off the entire balance.

Not only will this save you money as you won’t face interest payments, but you will also reduce your overall amount of indebtedness. As per point nine, however, you should also consider cancelling unneeded credit card agreements.

You should also check your credit report for mistakes or suspicious footprints or credit agreements you weren’t aware you had. If you spot a mistake or suspicious activity then contact the agency that sold it to you. It will be able to investigate the matter and find out whether you have been the victim of ID theft or a bank’s mistake.

If you have been turned down for a loan or other credit agreement then you have the right to know why. Ask the lender for details of your application as this may highlight any mistakes or issues with your report.

Source: Moneywise

2009-10-12T06:51:00.000-07:00

By STEPHEN KREIDER YODER, ISAAC S. YODER and LEVI YODER

ISAAC: One day last week, I went to the college mailroom, opened my mailbox and pulled out a small envelope with a shiny little piece of plastic inside -- my first credit card.

I was thrilled. But wary. This seemed a little too easy. It struck me as strange that I, a college student with an unproven record, could garner the bank's trust so quickly.

It was only a couple of weeks earlier that I had decided that my ATM card was inadequate, and that I was finally ready for a credit card.

I was tired of asking my parents anytime I wanted to order something online, tired of using my dad's iTunes account (iTunes accounts generally require a credit card) and tired of waiting in the checkout line of a corner store only to find out that their register didn't take my ATM card.

That was OK in high school. Not now. Plus, it seemed like a good idea to start my credit history early, so if I need a loan after college I'll have a better chance.

I went to my bank's Web site to apply for a card and was met by a flurry of different options. I had no idea how to sort out what seemed subtle differences. Finally, I somewhat arbitrarily decided on a card that offered "thank you points" for good GPAs and for purchasing things like textbooks.

Half a week later came the email: accepted.

I understand that credit cards can be dangerous -- I've heard all the horror stories of credit-card debt consuming college kids. And many of my college classmates have decided to avoid getting one for that reason.

But I think I can successfully stay out of the debt trap. Here's how:

I'll try to not use the real "plastic" any differently than my old ATM card -- paying mainly with cash, and remembering that I'm using real money when I make transactions with my card.

I set up automatic payment online, to pay off the full balance every month, so I avoid paying interest.

I plan to strictly adhere to my $800 credit limit.

I'll only use my card to buy things online if I would have bought those things in a store with cash, given the option.

As soon as the new card arrived, I quickly called the phone number on the credit card to activate it. Though I couldn't understand a word the man (who spoke with a foreign accent) on the phone was saying, I agreed to all the contractual agreements.

But wait a minute: Right before I hung up, the guy told me that something was free for 30 days. That didn't sound right. I thought the card was free.

I sent a text to my dad, who suggested that I might have inadvertently signed up for extra services that charge a fee each month. Sure enough, as I logged into the bank's Web site, I found out that I was enrolled for some identity monitoring and credit-protection service. Oops. I canceled that.

STEVE: I'm of two minds about putting a credit card in a teenager's hands, and I know our readers are, too.

In our New Year's resolution column, I vowed to help Isaac get a card and to teach him safe credit habits before he left for college. Then I dallied. I have a deep-seated ambivalence toward consumer credit, and my procrastinating let me avoid facing my gnawing doubts.

Some readers emailed, encouraging me to get on with the deed. They had gotten credit cards for their teens, usually with strict credit limits and balances that the parents could monitor daily. It was a rich teaching opportunity, several readers reported, that led to good kitchen-table discussions about the perils of credit.

Other readers were aghast. "Shame on you," wrote one, who said my resolution to put plastic in Isaac's hands was like providing him with addictive starter drugs. Have Isaac stick to cash, she admonished.

I wanted to agree with her. I grew up believing consumer debt was a bad thing -- a lesson from Depression-era parents who paid only in cash they already had earned. Avoiding debt was an almost religious tenet for me. I paid off my college loans early, feeling like that debt was somehow a disgrace, and I was aghast at classmates who took out loans to buy cars. I avoided credit cards in college and throughout my 20s.

Then I caved. Karen and I got our first major credit cards at age 32 when, just back to the U.S. from living in cash-friendly Japan, we found we couldn't rent a car or reserve a hotel room without one. Karen and I vowed always to use our credit cards as if they were ATM cards, setting them up for automatic payment of the full monthly balance.

I'm sure Isaac could have avoided getting a credit card. He could have gotten a Paypal account linked to his checking account, for example, that would let him make many Web purchases.

But credit cards are all but unavoidable today to have a normal financial life. So Isaac may as well get one now and learn to use it right. If he really sticks to his own rules, he'll be ahead of the pack. (If he doesn't, we'll make sure readers know about it.)

And it sounds like Isaac got a taste of what will be a lifelong battle against banks' efforts to up-sell him. "This is a good lesson," I emailed him. "Whenever you sign up for anything at a bank, they always try to sell you some other garbage, especially if it's a subscription where they get you to pay automatically month after month."

Steve Yoder is chief of The Wall Street Journal's San Francisco bureau. His son Isaac is 18 years old and a freshman in college. His son Levi is 14 years old and a freshman in high school. Email: yoder&son@wsj.com

Source: WSJ

Answer Me, It's Your Credit Card Calling

2009-10-07T06:59:00.000-07:00

A new poll by a New York fraud prevention company reminded me of a cell phone call I got from my credit card company once. No. It wasn't a debt collection call. An automated voice said they were calling to alert me to some unusual activity on my Visa card.

As it turns out the "unusual activity" was actually me, traveling on a road trip and buying gas in multiple states with my Visa card. I was still at the gas station when the call came through -- perhaps a minute after the gas station attendant told me the transaction was denied. It seems buying gas is a common tactic used by fraudsters who have stolen credit cards.

Call me!
The poll of 200 consumers (I know, a small sampling) asked how credit cardholders would prefer to be notified of potential fraud on their accounts. A majority (54 percent) preferred cell phone calls from the credit card issuer. Another 20 percent said they prefer calls to landline phones, 20 percent said they wanted e-mail alerts and six percent preferred SMS/text messages on their cell phones.

A cell phone call would be my first choice as well. It's the fastest way to reach me -- although a text would be fine as well.

The poll's authors note that credit card fraud as a percentage of overall identity theft has decreased for six years in a row, largely because credit card companies are reacting in real-time to prevent losses from fraudulent activity.

Keeping tabs on account activity
I'm especially sensitive to fraud because I was a victim of ID theft several years ago. So, another aspect of the poll -- how often people, especially those who have been victims of fraud already, check their account status online -- caught my eye. I would be among the 11 percent of the poll respondents who check their accounts daily.

Yes, daily. Online banking makes this very easy and quick. I know what purchases I've made and I check daily to see when they post to the account. I recently caught a suspicious charge from a hotel I had visited in August. They charged me an additional $12.88 AFTER I had checked out -- even though I hadn't charged anything to the room. I called and e-mailed the hotel's accounting manager to question the charge. He called it a hotel error and credited my Visa account.

The majority of the people in the poll (53 percent) said they check their accounts weekly and a third (33 percent) check them once a month. Three percent said they never check their statements. Yikes! This is troubling since a popular credit card scam involves making small $1 transactions on a card to see if the card is valid and to slide under the radar of fraud detection programs.

I welcomed that call from my credit card issuer at the gas station -- although it was an annoyance to have the transaction denied. What if it hadn't been me buying all that gas and it really was fraud? Shutting down the account so quickly was a positive thing to protect both me and the bank, but mostly the bank. Since many credit card companies now have zero customer liability for fraud, there is more incentive for the banks to quickly identify and stop fraud losses. I'm sure there are probably people who have horror stories about not getting prompt notification. For me, that cell phone call from the bank offers piece of mind.

Source: CreditCards.com