A credit report is a record of your credit activities. It lists any credit-card accounts or loans you may have, the balances, and how regularly you make your payments. It also shows if any action has been taken against you because of unpaid bills.
A company that gathers and sells credit information is called a consumer reporting agency (CRA). These types of companies collect information about your credit activities, store it in giant databases, and charge a fee for supplying the information. The most common type of CRA is the credit bureau.
There are three major credit bureaus that operate nationwide, plus many smaller companies serving local markets.
Your credit rating is drawn from your credit report, which outlines your borrowing, charging, and repayment activities. A good rating helps you reach financial goals; a poor rating limits your financial opportunities.
Since your credit report influences whether you are able to buy a home and even get a job in some cases, it is extremely important to protect your credit rating by making loan and bill payments on time and by not taking on more debt than you can handle.
Types of information:
Identifying Information:
Your full name, any known aliases, current and previous addresses, social security number, year of birth, current and past employers, and, if applicable, similar information about your spouse.
Credit Information:
The accounts you have with banks, retailers, credit-card issuers, utility companies, and other lenders (accounts are listed by type of loan, such as mortgage, student loan, revolving credit, or installment loan; the date you opened the account; your credit limit or the loan amount; any co-signers of the loan; and your payment pattern over the past two years).
Public Record Information:
State and county court records on bankruptcy, tax liens, or monetary judgments (some consumer reporting agencies list non-monetary judgments as well).
Recent Inquiries: The names of those who have obtained copies of your credit report within the past year (two years for employment purposes).
Credit bureaus collect information from parties that have previously extended credit to you, such as a department store that issued you a credit card or a bank that granted you a personal loan.
The lenders themselves make the decision about whether or not to grant you credit. The credit-reporting companies only supply the information about your credit history.
To avoid any unwelcome surprises, it's important to see a copy of your credit report before you apply for credit such as car loans, mortgages, or credit cards. Errors in credit reports are extremely common. Keep in mind, however, that they are not part of a conspiracy against you. They are simply the result of human error.
Think about how often your mail has a misspelling of your name or a mistake in your street address. Then, imagine the possibility for error in a report that contains much more information about you. Cases of mistaken identity, out-of-date information, and outright errors can easily occur.
Contact the consumer credit reporting agency immediately. The company is then responsible for researching and changing or removing incorrect data. This process may take as long as 45 days. At your request, a corrected report will be sent to those parties that you specify who have received your report within the past six months, or employers who have received it within the last two years.
You have the right to present your side of the story in a brief statement (100 words or less), which the credit bureau must attach to your credit file. Your statement should be used to clarify inaccuracies, not explain reasons for delinquency. Anyone requesting a copy of your credit report would also automatically receive your statement (or a summary of it), unless the credit bureau decides that it is irrelevant or frivolous.
Generally, all your credit history information, good or bad, remains on your report for seven years. If you file for personal bankruptcy, that fact remains on your credit report for 10 years.
Saturday
Friday
Time To Rebuild
Managing money smarter can put you on track to a rich life.
Here's how to reach your long-term financial goals.
Bring order to financial clutter
Time it takes: 35 days
Week 1: Get Psyched - When you organize your financial paperwork, you're less likely to miss a bill payment and more likely to know exactly where your money is going, which could help you save.
Week 2: Pay Attention - Jot down in a notebook what you spend for a month. As Bob Goldman, a financial planner in Sausalito, Calif., puts it, the idea is to cut through the "grand amnesia of what happens to your money" after your paycheck lands in your bank account. Can't bear to record every latte and magazine for four weeks? Do it for one week and multiply each category by four; add in your monthly bills. Then take stock to see where you can cut back.
Week 3: Shred - You don't need most of the financial paperwork that's cluttering your life. You can throw out utility bills and credit-card statements within a few months. Hold on to pay stubs only until your W-2 arrives, monthly financial statements until you have year-end ones.
Prevent new clutter from forming by opting for online statements from banks or brokerage firms.
Week 4: File - Create a tidy home for the stuff you need to keep: tax returns (and backup documents for at least six years), insurance policies, deeds, annual brokerage, 401(k) and fund statements and receipts for major purchases. Develop a filing system - a simple alphabetical one or groupings like auto and home.
Week 5: Automate - Move your bill paying online. Even better: Set up automatic payments for regular bills that are due every month or quarter, like your mortgage, cable and insurance.
Find a better job
Time it takes: 35 weeks
Revitalize your network - If you're smart, you've stayed in touch with folks who can help you now. Better yet if you've been helpful to them. When you get together, don't ask about jobs. "People feel used," says Pam Lassiter, author of The New Job Security. Instead, exchange ideas about the industry. Your goal is to get them thinking of you.
Get to know you again - You need an honest overview of your skills, values and what makes you happy. Well-meaning friends may not be objective sounding boards. For that, hire a career counselor. Expect to spend at least $150 for every hour-long session, with a minimum of six meetings.
Look for trends - To see what talents are in demand, scan the help-wanted ads on sites like ExecuNet.com (minimum cost: $39 for 30 days) or Monster.com (free). Package yourself accordingly. Work up different versions of your résumé to highlight certain skills.
Develop a pitch about yourself - At an interview you need to be able to say succinctly why a company should invest in you. "The closer you can come to putting a dollar amount on what you've done, the better," says Lassiter.
Clean up damaged credit
Time it takes: 35 months
Learn your reputation - Order a free credit report and buy your credit score to learn how bad the damage is. With your credit score you'll find out the key reasons your score is not higher. If you find errors, correct them immediately.
Be patient - You typically need two to three years to fully repair terrible credit, says John Ventura, author of "The Credit Repair Handbook". But take heart: Every act of good bill-paying and credit behavior on your report pushes your old rep further into the past and lifts your score.
Have a payoff plan - Track your spending for a month to see how much you can devote to retiring your credit card balances. Attack the highest-rate debt first. The typical household, with $7,300 in credit-card debt at an average rate of 13.9%, could be in the black after 35 monthly checks for $254.89. 4 Save too Build a cash cushion for emergencies so that you don't have to run up high credit-card balances again.
Rewrite history - You can add positive information to your credit report by paying bills on time and retiring your balances. Also, avoid applying for new credit that you don't need. Keep your oldest accounts open and active (use them at least every six months). Loyalty and unused borrowing capacity look good to a credit scoring computer.
Build lifetime wealth
Time it takes: 35 years
Own stocks - You can't beat the long term returns: The S&P 500 has gained 10.2% a year since 1925, a record that no other asset class can match. Stocks may be riskier than bonds and cash in the short run, but you've got 35 years. This is where most of your money should be.
Pay less - That 1.5% annual fee your mutual fund charges looks piddling, but it takes a year PLAN big bite over 35 years. The difference between investing $10,000 in that fund and the same amount in one that charges 0.2% is $50,700 after 3½ decades (if both earn 8% annualized returns).
Start young - Putting money aside early is a surer bet than counting on high returns.
Diversify - Owning a mix of stocks, bonds and other assets paves the way for smooth returns. As you get older, add more bonds to ensure that short term swings in stock prices don't jeopardize your retirement.
Buy a house - Mortgages are getting a bad name right now, so it's worth remembering their virtues: You can deduct the interest you pay; writing a check to a lender rather than a landlord is forced savings; and if you lock in a rate for the next 30 years, your payment will feel smaller and smaller as time marches on and inflation ramps up.
Get and stay married - Researchers at Ohio State University found that divorce reduces a person's wealth by more than half, proving that when it comes to money, you're better off staying on a team.
Here's how to reach your long-term financial goals.
Bring order to financial clutter
Time it takes: 35 days
Week 1: Get Psyched - When you organize your financial paperwork, you're less likely to miss a bill payment and more likely to know exactly where your money is going, which could help you save.
Week 2: Pay Attention - Jot down in a notebook what you spend for a month. As Bob Goldman, a financial planner in Sausalito, Calif., puts it, the idea is to cut through the "grand amnesia of what happens to your money" after your paycheck lands in your bank account. Can't bear to record every latte and magazine for four weeks? Do it for one week and multiply each category by four; add in your monthly bills. Then take stock to see where you can cut back.
Week 3: Shred - You don't need most of the financial paperwork that's cluttering your life. You can throw out utility bills and credit-card statements within a few months. Hold on to pay stubs only until your W-2 arrives, monthly financial statements until you have year-end ones.
Prevent new clutter from forming by opting for online statements from banks or brokerage firms.
Week 4: File - Create a tidy home for the stuff you need to keep: tax returns (and backup documents for at least six years), insurance policies, deeds, annual brokerage, 401(k) and fund statements and receipts for major purchases. Develop a filing system - a simple alphabetical one or groupings like auto and home.
Week 5: Automate - Move your bill paying online. Even better: Set up automatic payments for regular bills that are due every month or quarter, like your mortgage, cable and insurance.
Find a better job
Time it takes: 35 weeks
Revitalize your network - If you're smart, you've stayed in touch with folks who can help you now. Better yet if you've been helpful to them. When you get together, don't ask about jobs. "People feel used," says Pam Lassiter, author of The New Job Security. Instead, exchange ideas about the industry. Your goal is to get them thinking of you.
Get to know you again - You need an honest overview of your skills, values and what makes you happy. Well-meaning friends may not be objective sounding boards. For that, hire a career counselor. Expect to spend at least $150 for every hour-long session, with a minimum of six meetings.
Look for trends - To see what talents are in demand, scan the help-wanted ads on sites like ExecuNet.com (minimum cost: $39 for 30 days) or Monster.com (free). Package yourself accordingly. Work up different versions of your résumé to highlight certain skills.
Develop a pitch about yourself - At an interview you need to be able to say succinctly why a company should invest in you. "The closer you can come to putting a dollar amount on what you've done, the better," says Lassiter.
Clean up damaged credit
Time it takes: 35 months
Learn your reputation - Order a free credit report and buy your credit score to learn how bad the damage is. With your credit score you'll find out the key reasons your score is not higher. If you find errors, correct them immediately.
Be patient - You typically need two to three years to fully repair terrible credit, says John Ventura, author of "The Credit Repair Handbook". But take heart: Every act of good bill-paying and credit behavior on your report pushes your old rep further into the past and lifts your score.
Have a payoff plan - Track your spending for a month to see how much you can devote to retiring your credit card balances. Attack the highest-rate debt first. The typical household, with $7,300 in credit-card debt at an average rate of 13.9%, could be in the black after 35 monthly checks for $254.89. 4 Save too Build a cash cushion for emergencies so that you don't have to run up high credit-card balances again.
Rewrite history - You can add positive information to your credit report by paying bills on time and retiring your balances. Also, avoid applying for new credit that you don't need. Keep your oldest accounts open and active (use them at least every six months). Loyalty and unused borrowing capacity look good to a credit scoring computer.
Build lifetime wealth
Time it takes: 35 years
Own stocks - You can't beat the long term returns: The S&P 500 has gained 10.2% a year since 1925, a record that no other asset class can match. Stocks may be riskier than bonds and cash in the short run, but you've got 35 years. This is where most of your money should be.
Pay less - That 1.5% annual fee your mutual fund charges looks piddling, but it takes a year PLAN big bite over 35 years. The difference between investing $10,000 in that fund and the same amount in one that charges 0.2% is $50,700 after 3½ decades (if both earn 8% annualized returns).
Start young - Putting money aside early is a surer bet than counting on high returns.
Diversify - Owning a mix of stocks, bonds and other assets paves the way for smooth returns. As you get older, add more bonds to ensure that short term swings in stock prices don't jeopardize your retirement.
Buy a house - Mortgages are getting a bad name right now, so it's worth remembering their virtues: You can deduct the interest you pay; writing a check to a lender rather than a landlord is forced savings; and if you lock in a rate for the next 30 years, your payment will feel smaller and smaller as time marches on and inflation ramps up.
Get and stay married - Researchers at Ohio State University found that divorce reduces a person's wealth by more than half, proving that when it comes to money, you're better off staying on a team.
Wednesday
Your Credit Score
What is a credit score?
A credit score is a number that lenders use to estimate risk. Experience has shown them that borrowers with higher credit scores are less likely to default on a loan.
How are credit scores calculated?
Credit scores are generated by plugging the data from your credit report into software that analyzes it and cranks out a number. The three major credit reporting agencies don't necessarily use the same scoring software, so don't be surprised if you discover that the credit scores they generate for you are different.
Why are credit scores sometimes called FICO scores?
The software used to calculate a great number of credit scores was created by Fair Isaac Corporation--FICO.
Which parts of a credit history are most important?
The figures below show a breakdown of the approximate value that each aspect of your credit report adds to a credit score calculation.
Length of Credit History:
Types of Credit:
Your New Credit:
In general, checking to make sure you aren't attempting to open numerous new accounts
Credit scoring software only considers items on your credit report. Lenders typically look at other factors that aren't included in the report, such as income, employment history and the type of credit you are seeking.
What's a Good Credit Score?
Credit scores (usually) range from 340 to 850. The higher your score, the less risk a lender believes you will be. As your score climbs, the interest rate you are offered will probably decline.
Borrowers with a credit score over 700 are typically offered more financing options and better interest rates, but don't be discouraged if your scores are lower, because there's a mortgage product for nearly everyone.
A credit score is a number that lenders use to estimate risk. Experience has shown them that borrowers with higher credit scores are less likely to default on a loan.
How are credit scores calculated?
Credit scores are generated by plugging the data from your credit report into software that analyzes it and cranks out a number. The three major credit reporting agencies don't necessarily use the same scoring software, so don't be surprised if you discover that the credit scores they generate for you are different.
Why are credit scores sometimes called FICO scores?
The software used to calculate a great number of credit scores was created by Fair Isaac Corporation--FICO.
Which parts of a credit history are most important?
The figures below show a breakdown of the approximate value that each aspect of your credit report adds to a credit score calculation.
Use these percentages as a guide:
35% - Your Payment History- 30% - Amounts You Owe
- 15% - Length of Your Credit History
- 10% - Types of Credit Used
- 10% - New Credit
Number of accounts paid as agreed
Negative public records or collections
total number of past due items
how long you've been past due
how long it's been since you had a past due payment
What You Owe:
How much you owe on accounts and the types of accounts with balances
How much of your revolving credit lines you've used--looking for indications you are over-extended
Amounts you owe on installment loan accounts vs. their original balances--to make sure you are you paying them down consistently
Number of zero balance accounts
Length of Credit History:
Total length of time tracked by your credit report
Length of time since accounts were opened
Time that's passed since the last activity
The longer your (good) history, the better your scores
Types of Credit:
Total number of accounts and types of accounts (installment, revolving, mortgage, etc.)
A mixture of account types usually generates better scores than reports with only numerous revolving accounts (credit cards)
Your New Credit:
- Number of accounts you've recently opened and the proportion of new accounts to total accounts
- Number of recent credit inquiries
- The time that's passed since recent inquiries or newly-opened accounts
- If you've re-established a positive credit history after encountering payment problems
In general, checking to make sure you aren't attempting to open numerous new accounts
Credit scoring software only considers items on your credit report. Lenders typically look at other factors that aren't included in the report, such as income, employment history and the type of credit you are seeking.
What's a Good Credit Score?
Credit scores (usually) range from 340 to 850. The higher your score, the less risk a lender believes you will be. As your score climbs, the interest rate you are offered will probably decline.
Borrowers with a credit score over 700 are typically offered more financing options and better interest rates, but don't be discouraged if your scores are lower, because there's a mortgage product for nearly everyone.
Tuesday
Student Beware
It’s that time again when college campuses are abuzz with excitement. For many of these students, it can be the start of their life in the adult world. It does not always turn out to be a positive thing though because the college student is barraged with, among other things, credit card offers.
A recent study conducted by the Attorney General’s office suggests that credit card usage among students can cause graduates to carry the burden of credit card debt along with their student loan debt. The average college student graduates with $18,000 in credit card debt, some charges being for tuition and school related expenses, most being for party essentials.
This accounts for over $500 in monthly credit card debt, paying minimums for around 18 years. Not to mention repayment of student loans and living expenses such as housing, automobile and insurance. You could easily be looking at a $2,000 immediate monthly expense. If it becomes a problem, never fret, you can always get another credit card and put yourself deeper in financial slavery to the credit card companies.
Student credit cards can spell early financial disaster for some students succumbing to temptation and taking advantage of those readily available lines of credit conveniently offered from Visa and MasterCard. The amounts can accumulate quickly. Growing up comes with the added responsibility of paying interest, late fees and penalties.
If you need to carry a credit card, develop the discipline of paying off your card balance every month. It is swiftly becoming a major concern as more students are carrying and using charge cards while seeking higher education, yet a small percentage contemplate the power that these little plastic card hold.
Just a short time ago, the major debt that a student would anticipate was student loans. Now the average student will triple the amount of credit cards they carry from freshman to senior year and graduate with an average $8,000 additional credit card debt.
The credit card companies paint themselves a cheery picture, portraying themselves as responsible lenders, yet on the Visa website you can read:
“It's not uncommon for people to have difficulty handling credit, especially when they are just starting out... keep in mind that a bad credit rating can have serious negative consequences down the road."
Despite the fact that the credit card companies aggressive targeting of vulnerable by contracting slick marketing companies.
I realize that a credit card is necessary to help pay some expenses that the student will ultimately face but these should not include parties or spring break vacations. A debit card connected to a savings account may be a good alternative to help with expenses. The students parents could agree to help with this.
The emphasis is normally placed on schools to prepare students for life in the real world but I have yet to see schools offer any type of real education about credit, credit cards, debt and debt management. But they are not fully to blame. Some responsibility rest squarely on the shoulders of the parents. Finances should be stressed starting at an early age. Parents need to talk with their children about these important financial issues and maybe even learn together because they might not have received the necessary education either.
I believe that schools should have classes in finances starting in kindergarten, stressing the importance of savings and making financial education courses required classes prior to graduation.
If this was the case, do you think that unsecured consumer debt would be as rampant as it is today?
A recent study conducted by the Attorney General’s office suggests that credit card usage among students can cause graduates to carry the burden of credit card debt along with their student loan debt. The average college student graduates with $18,000 in credit card debt, some charges being for tuition and school related expenses, most being for party essentials.
This accounts for over $500 in monthly credit card debt, paying minimums for around 18 years. Not to mention repayment of student loans and living expenses such as housing, automobile and insurance. You could easily be looking at a $2,000 immediate monthly expense. If it becomes a problem, never fret, you can always get another credit card and put yourself deeper in financial slavery to the credit card companies.
Student credit cards can spell early financial disaster for some students succumbing to temptation and taking advantage of those readily available lines of credit conveniently offered from Visa and MasterCard. The amounts can accumulate quickly. Growing up comes with the added responsibility of paying interest, late fees and penalties.
If you need to carry a credit card, develop the discipline of paying off your card balance every month. It is swiftly becoming a major concern as more students are carrying and using charge cards while seeking higher education, yet a small percentage contemplate the power that these little plastic card hold.
Just a short time ago, the major debt that a student would anticipate was student loans. Now the average student will triple the amount of credit cards they carry from freshman to senior year and graduate with an average $8,000 additional credit card debt.
The credit card companies paint themselves a cheery picture, portraying themselves as responsible lenders, yet on the Visa website you can read:
“It's not uncommon for people to have difficulty handling credit, especially when they are just starting out... keep in mind that a bad credit rating can have serious negative consequences down the road."
Despite the fact that the credit card companies aggressive targeting of vulnerable by contracting slick marketing companies.
I realize that a credit card is necessary to help pay some expenses that the student will ultimately face but these should not include parties or spring break vacations. A debit card connected to a savings account may be a good alternative to help with expenses. The students parents could agree to help with this.
The emphasis is normally placed on schools to prepare students for life in the real world but I have yet to see schools offer any type of real education about credit, credit cards, debt and debt management. But they are not fully to blame. Some responsibility rest squarely on the shoulders of the parents. Finances should be stressed starting at an early age. Parents need to talk with their children about these important financial issues and maybe even learn together because they might not have received the necessary education either.
I believe that schools should have classes in finances starting in kindergarten, stressing the importance of savings and making financial education courses required classes prior to graduation.
If this was the case, do you think that unsecured consumer debt would be as rampant as it is today?
Friday
Credit Cards and Living Expenses
“Difficulty is the excuse history never accepts.”
- Edward R. Murrow
The use of credit cards has become a problem of epidemic proportions in the United States. With rising costs of living and flat incomes, families are using credit cards to help pay their living expenses. The average American is living beyond their means due to increased of their credit cards.
This is a sign that the American family is desperately struggling to stay afloat in an increasingly unstable economy. The average household has experienced slow growing incomes that do not keep pace with the rising cost of housing, health care and other basic expenses.
Since the early 1980’s there has been an explosive rise in consumer debt and according to the Center for Responsible Living, credit card debt has tripled since 1989, with Americans owing more than $800 billion in credit card debt alone. There has been over $350 billion in home equity loans to home owners between 2001 and 2003 and personal bankruptcies have gone from 616,000 in 1989 to over 2.5 million in 2005 before revisions to the bankruptcy laws made it almost impossible for a consumer to file chapter 7 bankruptcy.
A survey of low to middle income families reveals that families are going into credit card debt due to drops in income and unexpected expenses. Seven out of ten households reported that they have been using their credit cards to pay for car repairs, basic living expenses, medical expenses, house repairs and paying down other credit cards.
One out of three of the households surveyed indicate that they regularly use their credit cards to pay basic living expenses such as rent, mortgage payments, groceries, utilities and insurance because they did not have sufficient funds in their checking or savings account.
You can see how this is a dangerous practice and can result in what is equivalent to financial suicide. The reasons range from loss of job, prolonged unemployment and unexpected health care costs. It is a sad fact that the average American family is one or two paychecks away from the poor house. In one of the richest countries in the world, this is highly unacceptable.
Another dangerous practice that homeowners are using is taking the equity out of their homes to pay off their credit card debt. While there are tax advantages and the mortgage and banking industry promote consolidation loans, it is not wise to remove the security of your home to pay an unsecured debt like a credit card. You are jeopardizing the single most valuable asset that you possess.
While in theory, the use of home equity to pay off higher interest credit cards provides a short term solution but does not address the long term economic reality that families face. A non-secured debt burden does not warrant risking your home. There are more serious consequences in missing a mortgage payment than missing a credit card payment.
The harsh reality for a family is that wage increases have averaged only 5 percent while fixed costs like housing, child care, health insurance, groceries and taxes has climbed from 53 percent to 75 percent.
Over the course of the last thirty years, American’s savings rate has declined to the point of non-existance. Individuals have put themselves in the position that they must use their credit cards in situations where traditionally funds set aside for “rainy days” would have been used. Savings normally serve two important functions: they help with temporary income loss and unexpected expenses and it help families plan for the future.
With the current trend in family financial practices, what will America’s future hold?
- Edward R. Murrow
The use of credit cards has become a problem of epidemic proportions in the United States. With rising costs of living and flat incomes, families are using credit cards to help pay their living expenses. The average American is living beyond their means due to increased of their credit cards.
This is a sign that the American family is desperately struggling to stay afloat in an increasingly unstable economy. The average household has experienced slow growing incomes that do not keep pace with the rising cost of housing, health care and other basic expenses.
Since the early 1980’s there has been an explosive rise in consumer debt and according to the Center for Responsible Living, credit card debt has tripled since 1989, with Americans owing more than $800 billion in credit card debt alone. There has been over $350 billion in home equity loans to home owners between 2001 and 2003 and personal bankruptcies have gone from 616,000 in 1989 to over 2.5 million in 2005 before revisions to the bankruptcy laws made it almost impossible for a consumer to file chapter 7 bankruptcy.
A survey of low to middle income families reveals that families are going into credit card debt due to drops in income and unexpected expenses. Seven out of ten households reported that they have been using their credit cards to pay for car repairs, basic living expenses, medical expenses, house repairs and paying down other credit cards.
One out of three of the households surveyed indicate that they regularly use their credit cards to pay basic living expenses such as rent, mortgage payments, groceries, utilities and insurance because they did not have sufficient funds in their checking or savings account.
You can see how this is a dangerous practice and can result in what is equivalent to financial suicide. The reasons range from loss of job, prolonged unemployment and unexpected health care costs. It is a sad fact that the average American family is one or two paychecks away from the poor house. In one of the richest countries in the world, this is highly unacceptable.
Another dangerous practice that homeowners are using is taking the equity out of their homes to pay off their credit card debt. While there are tax advantages and the mortgage and banking industry promote consolidation loans, it is not wise to remove the security of your home to pay an unsecured debt like a credit card. You are jeopardizing the single most valuable asset that you possess.
While in theory, the use of home equity to pay off higher interest credit cards provides a short term solution but does not address the long term economic reality that families face. A non-secured debt burden does not warrant risking your home. There are more serious consequences in missing a mortgage payment than missing a credit card payment.
The harsh reality for a family is that wage increases have averaged only 5 percent while fixed costs like housing, child care, health insurance, groceries and taxes has climbed from 53 percent to 75 percent.
Over the course of the last thirty years, American’s savings rate has declined to the point of non-existance. Individuals have put themselves in the position that they must use their credit cards in situations where traditionally funds set aside for “rainy days” would have been used. Savings normally serve two important functions: they help with temporary income loss and unexpected expenses and it help families plan for the future.
With the current trend in family financial practices, what will America’s future hold?
Thursday
Rebuild Your Credit
When you first receive your Trans Union and Equifax credit reports, you will be totally lost.
The information is coded in a way that is not immediately readable by the average consumer.
Each credit report should arrive with a key that interprets the codes and indicators on the credit report. Sit down with the credit report and the key and study it until you understand what each number and code means.
Gather a yellow and orange highlighter pen. Whenever you identify a negative listing, mark the listing in yellow on your scratch copy of the credit report.
Very often, it is difficult to tell if an item on the credit report is negative or positive. The following table will help you identify every negative listing on your credit reports.
Negative Credit Indicators
If the listing contains one or more of these indicators, then the listing is negative. If the listing contains none of these indicators, then the listing is positive.
Experian Credit Report
Any item marked with an asterisk any inquiry
Trans Union Credit Report
Any item rated higher than I1, M1, or R1
.
Any item listed as repossession, foreclosure, profit and loss charge off, write off,
paid profit and loss write-off, paid charge off, settled, settled for less than full balance, or included in bankruptcy
Any collection amount, whether paid or not.
Any court account, including a lien, judgment, bankruptcy chapters 11, 7, or 13, divorce, satisfied lien, or satisfied judgment.
Any item showing one or more thirty, sixty, or ninety day late payments in the column to the far right.
Any inquiry.
Equifax Credit Report
Any item rated higher than I1, M1, or R1 (such as R2 or I9).
Any item proceeded by a ">>>>" icon.
Any item listed as repossession, foreclosure, profit and loss write-off charge-off, paid profit and loss write-off, paid charge off, settled, settled for less than full balance, or included in bankruptcy.
Any collection amount, whether paid or not.
Any court account, including a lien, judgment, bankruptcy chapters 11, 7, or 13, divorce, satisfied lien, or satisfied judgment.
Any item showing one or more thirty, sixty, or ninety day late payments in the column to the far right.
Any inquiry.
Those I2 and R9 codes - what do they mean?
R- Revolving (usually a credit card)I - installment (like home or auto loan)
R1 or I1 = pays as agreed never late R2 or I2 = 30 days late R3 or I3 = 60 days late R4 or I4 = 90 days late R5 or I5 = 120 days late R7 or I7 = making regular payments under wage earner plan R8 or I8 = repossession R9 or I9 = charge off
Correcting Errors Under the FCRA, both the consumer reporting company and the information provider (that is, the person, company, or organization that provides information about you to a consumer reporting company) are responsible for correcting inaccurate or incomplete information in your report. To take advantage of all your rights under this law, contact the consumer reporting company and the information provider.
Step OneTell the consumer reporting company, in writing, what information you think is inaccurate. Include copies (NOT originals) of documents that support your position. In addition to providing your complete name and address, your letter should clearly identify each item in your report you dispute, state the facts and explain why you dispute the information, and request that it be removed or corrected. You may want to enclose a copy of your report with the items in question circled. Send your letter by certified mail, “return receipt requested,” so you can document what the consumer reporting company received. Keep copies of your dispute letter and enclosures.
Consumer reporting companies must investigate the items in question—usually within 30 days—unless they consider your dispute frivolous. They also must forward all the relevant data you provide about the inaccuracy to the organization that provided the information. After the information provider receives notice of a dispute from the consumer reporting company, it must investigate, review the relevant information, and report the results back to the consumer reporting company. If the information provider finds the disputed information is inaccurate, it must notify all three nationwide consumer reporting companies so they can correct the information in your file.
When the investigation is complete, the consumer reporting company must give you the results in writing and a free copy of your report if the dispute results in a change. This free report does not count as your annual free report. If an item is changed or deleted, the consumer reporting company cannot put the disputed information back in your file unless the information provider verifies that it is accurate and complete. The consumer reporting company also must send you written notice that includes the name, address, and phone number of the information provider.
If you ask, the consumer reporting company must send notices of any corrections to anyone who received your report in the past six months. You can have a corrected copy of your report sent to anyone who received a copy during the past two years for employment purposes.
If an investigation doesn’t resolve your dispute with the consumer reporting company, you can ask that a statement of the dispute be included in your file and in future reports. You also can ask the consumer reporting company to provide your statement to anyone who received a copy of your report in the recent past. You can expect to pay a fee for this service.
Step TwoTell the creditor or other information provider, in writing, that you dispute an item. Be sure to include copies (NOT originals) of documents that support your position. Many providers specify an address for disputes. If the provider reports the item to a consumer reporting company, it must include a notice of your dispute. And if you are correct—that is, if the information is found to be inaccurate—the information provider may not report it again.
Adding Accounts to Your File Your credit file may not reflect all your credit accounts. Although most national department store and all-purpose bank credit card accounts will be included in your file, not all creditors supply information to consumer reporting companies: some travel, entertainment, gasoline card companies, local retailers, and credit unions are among the creditors that don’t.
If you’ve been told that you were denied credit because of an “insufficient credit file” or “no credit file” and you have accounts with creditors that don’t appear in your credit file, ask the consumer reporting companies to add this information to future reports. Although they are not required to do so, many consumer reporting companies will add verifiable accounts for a fee. However, understand that if these creditors do not report to the consumer reporting company on a regular basis, the added items will not be updated in your file.
When negative information in your report is accurate, only the passage of time can assure its removal. A consumer reporting company can report most accurate negative information for seven years and bankruptcy information for 10 years. Information about an unpaid judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer.
There is no time limit on reporting: information about criminal convictions; information reported in response to your application for a job that pays more than $75,000 a year; and information reported because you’ve applied for more than $150,000 worth of credit or life insurance. There is a standard method for calculating the seven-year reporting period. Generally, the period runs from the date that the event took place.
The information is coded in a way that is not immediately readable by the average consumer.
Each credit report should arrive with a key that interprets the codes and indicators on the credit report. Sit down with the credit report and the key and study it until you understand what each number and code means.
Gather a yellow and orange highlighter pen. Whenever you identify a negative listing, mark the listing in yellow on your scratch copy of the credit report.
Very often, it is difficult to tell if an item on the credit report is negative or positive. The following table will help you identify every negative listing on your credit reports.
Negative Credit Indicators
If the listing contains one or more of these indicators, then the listing is negative. If the listing contains none of these indicators, then the listing is positive.
Experian Credit Report
Any item marked with an asterisk any inquiry
Trans Union Credit Report
Any item rated higher than I1, M1, or R1
.
Any item listed as repossession, foreclosure, profit and loss charge off, write off,
paid profit and loss write-off, paid charge off, settled, settled for less than full balance, or included in bankruptcy
Any collection amount, whether paid or not.
Any court account, including a lien, judgment, bankruptcy chapters 11, 7, or 13, divorce, satisfied lien, or satisfied judgment.
Any item showing one or more thirty, sixty, or ninety day late payments in the column to the far right.
Any inquiry.
Equifax Credit Report
Any item rated higher than I1, M1, or R1 (such as R2 or I9).
Any item proceeded by a ">>>>" icon.
Any item listed as repossession, foreclosure, profit and loss write-off charge-off, paid profit and loss write-off, paid charge off, settled, settled for less than full balance, or included in bankruptcy.
Any collection amount, whether paid or not.
Any court account, including a lien, judgment, bankruptcy chapters 11, 7, or 13, divorce, satisfied lien, or satisfied judgment.
Any item showing one or more thirty, sixty, or ninety day late payments in the column to the far right.
Any inquiry.
Those I2 and R9 codes - what do they mean?
R- Revolving (usually a credit card)I - installment (like home or auto loan)
R1 or I1 = pays as agreed never late R2 or I2 = 30 days late R3 or I3 = 60 days late R4 or I4 = 90 days late R5 or I5 = 120 days late R7 or I7 = making regular payments under wage earner plan R8 or I8 = repossession R9 or I9 = charge off
Correcting Errors Under the FCRA, both the consumer reporting company and the information provider (that is, the person, company, or organization that provides information about you to a consumer reporting company) are responsible for correcting inaccurate or incomplete information in your report. To take advantage of all your rights under this law, contact the consumer reporting company and the information provider.
Step OneTell the consumer reporting company, in writing, what information you think is inaccurate. Include copies (NOT originals) of documents that support your position. In addition to providing your complete name and address, your letter should clearly identify each item in your report you dispute, state the facts and explain why you dispute the information, and request that it be removed or corrected. You may want to enclose a copy of your report with the items in question circled. Send your letter by certified mail, “return receipt requested,” so you can document what the consumer reporting company received. Keep copies of your dispute letter and enclosures.
Consumer reporting companies must investigate the items in question—usually within 30 days—unless they consider your dispute frivolous. They also must forward all the relevant data you provide about the inaccuracy to the organization that provided the information. After the information provider receives notice of a dispute from the consumer reporting company, it must investigate, review the relevant information, and report the results back to the consumer reporting company. If the information provider finds the disputed information is inaccurate, it must notify all three nationwide consumer reporting companies so they can correct the information in your file.
When the investigation is complete, the consumer reporting company must give you the results in writing and a free copy of your report if the dispute results in a change. This free report does not count as your annual free report. If an item is changed or deleted, the consumer reporting company cannot put the disputed information back in your file unless the information provider verifies that it is accurate and complete. The consumer reporting company also must send you written notice that includes the name, address, and phone number of the information provider.
If you ask, the consumer reporting company must send notices of any corrections to anyone who received your report in the past six months. You can have a corrected copy of your report sent to anyone who received a copy during the past two years for employment purposes.
If an investigation doesn’t resolve your dispute with the consumer reporting company, you can ask that a statement of the dispute be included in your file and in future reports. You also can ask the consumer reporting company to provide your statement to anyone who received a copy of your report in the recent past. You can expect to pay a fee for this service.
Step TwoTell the creditor or other information provider, in writing, that you dispute an item. Be sure to include copies (NOT originals) of documents that support your position. Many providers specify an address for disputes. If the provider reports the item to a consumer reporting company, it must include a notice of your dispute. And if you are correct—that is, if the information is found to be inaccurate—the information provider may not report it again.
Adding Accounts to Your File Your credit file may not reflect all your credit accounts. Although most national department store and all-purpose bank credit card accounts will be included in your file, not all creditors supply information to consumer reporting companies: some travel, entertainment, gasoline card companies, local retailers, and credit unions are among the creditors that don’t.
If you’ve been told that you were denied credit because of an “insufficient credit file” or “no credit file” and you have accounts with creditors that don’t appear in your credit file, ask the consumer reporting companies to add this information to future reports. Although they are not required to do so, many consumer reporting companies will add verifiable accounts for a fee. However, understand that if these creditors do not report to the consumer reporting company on a regular basis, the added items will not be updated in your file.
When negative information in your report is accurate, only the passage of time can assure its removal. A consumer reporting company can report most accurate negative information for seven years and bankruptcy information for 10 years. Information about an unpaid judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer.
There is no time limit on reporting: information about criminal convictions; information reported in response to your application for a job that pays more than $75,000 a year; and information reported because you’ve applied for more than $150,000 worth of credit or life insurance. There is a standard method for calculating the seven-year reporting period. Generally, the period runs from the date that the event took place.
Tuesday
Cardholder Beware
With this increased choice in credit cards comes increased consumer responsibility. In many cases, there's no law stopping an issuer from charging you a super-high interest rate or an interest rate higher than you deserve.
The only person who can insure that you get a good card rate is you. The best advice is to build a strong payment history and keep your credit as clean as possible.
"The main thing is to keep your nose extremely clean no matter what," says Linda Sherry, editorial director at Consumer Action, a consumer advocacy organization based in San Francisco, Calif. "Avoid late payments."
You can bet a credit card issuer will up your interest rate if they see something on your credit report they don't like. Don't give them a reason. Pay your credit and other bills on time, every month. Here are some tips on avoiding credit card late fees:
Follow payment guidelines as outlined by the issuer on the back of each credit card bill.
Use the preprinted envelope provided by the credit card company.
Include the billing coupon, and be sure to write the amount being paid in the box provided.
Make sure checks are legible and the payment amount is correct.
Sign the check. Write the credit card account number on the check.
Send payment with proper postage at least one week in advance of the due date to the payment address requested by the issuer.
Consider online bill paying. Issuers, including Discover, American Express and First USA, accept online payments.
If the due date is looming, consider sending the payment by express mail or wiring the payment with Western Union. These express services may prove cheaper than paying a late fee.
Let's say your credit record has improved since you applied for your card. There's a good chance you qualify for a lower rate. But no card issuer in the world is going to knock down your rate unless you ask. So call and ask. Have other lower rate credit card offers in hand when you call.
If your issuer won't lower your rate, transfer your balance to a lower rate card.
As an informed and intelligent consumer, you must read the terms and condition of the credit card offer and read the disclosure in its entirety. These are the rules set forth from the issuing bank that you will be playing by so you do need to know what your new credit card is all about. Beware of terms like “universal default” which will allow this credit card to increase their interest rate if you go past due on any other account that you hold. There are many traps that are within the realm of the disclosure that an unsuspecting consumer should be aware of. Read it word for word and do not agree to the terms unless you are one hundred percent sure that you know what the full deal really is.
There are literally thousands of credit card offers available to consumers with interest rates ranging from the 0% A.P.R. (annual percentage rate) which is normally an introductory rate, and as high as 18 to 23 percent for high risk consumers. It is up to the consumer to educate themselves as to how the card works and what fees are involved. Ignorance is not an excuse for not knowing about the terms.
It is all spelled out for you in the disclosure, which no one really reads, and that’s how people get into trouble with their credit cards.
The only person who can insure that you get a good card rate is you. The best advice is to build a strong payment history and keep your credit as clean as possible.
"The main thing is to keep your nose extremely clean no matter what," says Linda Sherry, editorial director at Consumer Action, a consumer advocacy organization based in San Francisco, Calif. "Avoid late payments."
You can bet a credit card issuer will up your interest rate if they see something on your credit report they don't like. Don't give them a reason. Pay your credit and other bills on time, every month. Here are some tips on avoiding credit card late fees:
Follow payment guidelines as outlined by the issuer on the back of each credit card bill.
Use the preprinted envelope provided by the credit card company.
Include the billing coupon, and be sure to write the amount being paid in the box provided.
Make sure checks are legible and the payment amount is correct.
Sign the check. Write the credit card account number on the check.
Send payment with proper postage at least one week in advance of the due date to the payment address requested by the issuer.
Consider online bill paying. Issuers, including Discover, American Express and First USA, accept online payments.
If the due date is looming, consider sending the payment by express mail or wiring the payment with Western Union. These express services may prove cheaper than paying a late fee.
Let's say your credit record has improved since you applied for your card. There's a good chance you qualify for a lower rate. But no card issuer in the world is going to knock down your rate unless you ask. So call and ask. Have other lower rate credit card offers in hand when you call.
If your issuer won't lower your rate, transfer your balance to a lower rate card.
As an informed and intelligent consumer, you must read the terms and condition of the credit card offer and read the disclosure in its entirety. These are the rules set forth from the issuing bank that you will be playing by so you do need to know what your new credit card is all about. Beware of terms like “universal default” which will allow this credit card to increase their interest rate if you go past due on any other account that you hold. There are many traps that are within the realm of the disclosure that an unsuspecting consumer should be aware of. Read it word for word and do not agree to the terms unless you are one hundred percent sure that you know what the full deal really is.
There are literally thousands of credit card offers available to consumers with interest rates ranging from the 0% A.P.R. (annual percentage rate) which is normally an introductory rate, and as high as 18 to 23 percent for high risk consumers. It is up to the consumer to educate themselves as to how the card works and what fees are involved. Ignorance is not an excuse for not knowing about the terms.
It is all spelled out for you in the disclosure, which no one really reads, and that’s how people get into trouble with their credit cards.
Monday
The New Identity Theft Market
“Take chances, make mistakes. That's how you grow. Pain nourishes your courage. You have to fail in order to practice being brave."
- Mary Tyler Moore
Oh great.
Another article about identity theft.
How original.
I know what you’re thinking. Those same old boring statistics and scare tactics to make you worry about someone ripping off your identity. We’ve heard that it’s the fastest growing crime in America claiming over 10 million victims each year in the United States alone. We heard it all, but what can done to actually prevent it from happening in the first place. The services that I’ve seen are more reactive than proactive meaning that they react to a problem after it occurs as opposed to preventing the problem to begin with.
That is until now.
Services are now offering security measures that prevent anyone from opening credit accounts without your personal verification and typically range between $100 - $150 per year for this credit monitoring service. A small price to pay compared to the cost to repair damage done by the identity thieves, which can literally cost a consumer thousands of dollars, not to mention time and the affect it has on your credit score.
And a new market is born. Your credit, what was once a closely guarded secret now has become something that can be quite easy to steal. You NEED protection. You are ‘at risk” of becoming a victim. We’ve heard all the marketing taglines and yes we agree that we need to do something. It has become a common occurrence to hear on the nightly news that our personal information is being compromised. Databases are being hacked into and computers are being stolen.
Also, identity thieves are coming up with new ways to get your personal information all the time.
Yet a credit report carries so much power with the information it holds, but 90 percent of all credit reports that I have examined for consumers all contain errors. What a consumer pays in interest charges and credit worthiness is determined by such information. It resembles the dreaded “permanent record” threat that parents give children in school. The problem is that this document that holds such vital information, holds this information in a less than secure manner. Consumers and creditors alike take the information for granted.
Your social security number, when it was first developed in 1936 was never meant to be a source of identification. It was only meant for tax purposes, but we are always being asked for it for various reasons. Now there is an entrepreneur whose company developed a great deal of publicity by his advertising the owners social security number and offering a one million dollar guarantee that no one will ever open credit accounts without your knowledge.
With subscription costs ranging from $4.95 to $19.95 per month, even the credit bureaus themselves have been marketing their own monitoring service, basically selling a service that protects you from themselves. Does this make sense? Shouldn’t an agency that holds information that is looked upon so vitally be held accountable for errors in their system without charging the consumer for it?
But we gladly pay for the protection and peace of mind that we will not get ripped off. But how are we to know if these companies themselves are not a scam? Have we become this jaded and mistrusting of our fellow man?
You betcha!
- Mary Tyler Moore
Oh great.
Another article about identity theft.
How original.
I know what you’re thinking. Those same old boring statistics and scare tactics to make you worry about someone ripping off your identity. We’ve heard that it’s the fastest growing crime in America claiming over 10 million victims each year in the United States alone. We heard it all, but what can done to actually prevent it from happening in the first place. The services that I’ve seen are more reactive than proactive meaning that they react to a problem after it occurs as opposed to preventing the problem to begin with.
That is until now.
Services are now offering security measures that prevent anyone from opening credit accounts without your personal verification and typically range between $100 - $150 per year for this credit monitoring service. A small price to pay compared to the cost to repair damage done by the identity thieves, which can literally cost a consumer thousands of dollars, not to mention time and the affect it has on your credit score.
And a new market is born. Your credit, what was once a closely guarded secret now has become something that can be quite easy to steal. You NEED protection. You are ‘at risk” of becoming a victim. We’ve heard all the marketing taglines and yes we agree that we need to do something. It has become a common occurrence to hear on the nightly news that our personal information is being compromised. Databases are being hacked into and computers are being stolen.
Also, identity thieves are coming up with new ways to get your personal information all the time.
Yet a credit report carries so much power with the information it holds, but 90 percent of all credit reports that I have examined for consumers all contain errors. What a consumer pays in interest charges and credit worthiness is determined by such information. It resembles the dreaded “permanent record” threat that parents give children in school. The problem is that this document that holds such vital information, holds this information in a less than secure manner. Consumers and creditors alike take the information for granted.
Your social security number, when it was first developed in 1936 was never meant to be a source of identification. It was only meant for tax purposes, but we are always being asked for it for various reasons. Now there is an entrepreneur whose company developed a great deal of publicity by his advertising the owners social security number and offering a one million dollar guarantee that no one will ever open credit accounts without your knowledge.
With subscription costs ranging from $4.95 to $19.95 per month, even the credit bureaus themselves have been marketing their own monitoring service, basically selling a service that protects you from themselves. Does this make sense? Shouldn’t an agency that holds information that is looked upon so vitally be held accountable for errors in their system without charging the consumer for it?
But we gladly pay for the protection and peace of mind that we will not get ripped off. But how are we to know if these companies themselves are not a scam? Have we become this jaded and mistrusting of our fellow man?
You betcha!
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