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Oct 26, 2008

Pre-approved Credit: How to Avoid Credit Profiling

Just about everyone has received the offers in the mail: “You’re Pre-approved for a New Platinum Card!” or “0% Financing – Pre-approved!” Often, these offers come just at a time when you are making improvements to your credit score – either through a credit repair service, or through careful management of your debts and payments. Other times, these types of offers come when you are already in financial trouble – just after a bankruptcy, or when you are having trouble making payments on other obligations. And nearly every time, these offers contain terms that are all too-tempting until you take a look at the fine print and realize that the great offer comes with some heavy fees attached. Typically, these types of pre-approved offers come with annual fees, account maintenance fees, high interest, and no grace period for purchases. But for a person who isn’t credit savvy, the numbers in large font and bold type can seem too good to pass up.

Receiving offers for credit that you did not initiate is nothing new for most consumers. However, some people may be surprised to realize that this type of marketing is not limited to credit cards. People with troubled credit history, people just out of bankruptcy, and people who are shopping for a mortgage or to refinance are just a few of the broad demographics that data mining companies keep track of, and within these demographics, smaller subsets are often taken. Your personal information (name, address, financial profile, etc.) is then sold to various companies who use that information to market credit card offers, lines of credit, or even mortgage loans directly to you. Information about your household size, your debt-to-income ratio, or even the types of magazines you subscribe to can be included in these types of data mining schemes.

When you have problem credit, these types of offers can seem like a life-line, or vindication (”My credit score must be improving; I’m receiving offers for new credit cards!”) but more often than not, these offers are just another trap to weigh you down with more debt and financial obligations that you may not be able to meet. These institutions will have information on your income, housing status, family size, and other data that can be gleaned by combing through public records and other areas that you may not suspect. And they tailor their offers to provide themselves with the greatest potential for profit, usually to your detriment.

So how do you stop these unsolicited offers and maintain your privacy? On most of the offers you’ll receive, there is a toll-free number that you can call to tell companies that you don’t want your information sold to third parties. If you opt-out of these types of pre-screened offers when it comes to your credit, it will eliminate much of the problem. Be skeptical of any offer for credit that you did not initiate, especially if you’re shopping for a mortgage. Credit bureaus may flag your account and offer other banks a chance to market their options to you as well – in general, if you’ve got a good deal, stick with what you know. If you don’t have a deal you’re happy with, do your own shopping around. In this way, you are more likely to be fully informed of the financial decision you are about to make.

Offers of pre-approved credit can make you feel like you’re back on the right track again when it comes to improving your credit score, but the real test may well be your ability to say no to these types of offers and continue the smart financial habits that improved your score in the first place. Don’t let clever marketing tactics get you into trouble financially – always initiate your own inquiries for new credit, and avoid the pre-approved pitfalls.

Posted in credit, credit card offers, credit repair service, credit scores, finance, opt-out, pre-approved | No Comments »



Oct 17, 2008

Freedom from Fees: Repairing Your Credit While Saving Money

One of the simplest steps in credit repair is simply making a habit of paying your bills before the due date. However, this seemingly good habit can be costing you money in the form of additional fees and charges tacked on by the various companies whose bills you are paying. For example, many credit cards offer a ‘pay-by-phone’ option that is available in addition to other methods. What some may not realize is that these types of options, while assuring prompt credit to your bill, also carry a fee for their use. While $3.00 – $5.00 may not seem like much, over time, with several creditors each charging their own fee, you spend a substantial amount of money.

And it isn’t just pay-by-phone options that can cost you. Some utility companies charge fees when you use credit cards to pay, and if you cannot pay off the credit card in full each month, you are effectively paying interest on fees charged to pay a bill, not even the bill itself, which is a definite waste of money that could otherwise be used to help balance your budget, increase your savings, or even add to an investment.

So how best to avoid these types of fees when you’re trying to repair your credit and pay bills on time? The easiest way is the old way – write a check, be sure that you mail it in time for it to arrive well before the due date of the bill. However, for many people who are living paycheck to paycheck, this may not be an option at first. Another method that can work just as well is to set up automatic bill pay through your bank. Because many banks offer bill pay for free when you have a checking account with direct deposit, it can be simple to ensure that your bills are paid on time without having to pay additional ‘convenience fees’.

Another way to avoid fees when paying your bills is to enroll in automatic payment. If you know you won’t have the money available before the due date in order to mail a check, but will have the money available on the due date itself, you can oftentimes set up an automatic bank draft or charge to your credit card that does not incur additional fees. However, you should be careful with these types of arrangements if you are still trying to manage your budget – over the limit fees on your credit card or overdraft fees on your bank account can wreck havoc on your careful spending plans.

Regardless of which method you choose, it pays to be informed of exactly how you are managing your bill payments – repairing your credit shouldn’t cost you more than it has to, and with proper planning, you will be well prepared to take care of your bills in a manner that is both convenient and free. Always ask if there will be an extra charge when you pay over the phone, and be prepared to explore alternate payment methods that will let you meet your financial obligations without charging you extra to do so.

Posted in convenience fees, credit, credit card fees, finance charges, interest fees, overdraft fees, paying bills, payment fees, payment methods | No Comments »



Oct 11, 2008

Reverse Mortgages: Risky Credit Choices and Their Consequences

Reverse mortgages – many people have not heard this term before but now with the apparent credit crisis in our country finance companies and banks are looking for other ways to tap into resources that would otherwise be inaccessible to them. For those older Americans feeling the squeeze in regards to their own credit availability and the need to pay down their debts, a reverse mortgage may seem like a pie in the sky solution. Unfortunately, a reverse mortgage is extremely risky and can have unforeseen consequences for the entire family who resides in the home in question.

Simply speaking, a reverse mortgage is a type of mortgage loan that is generally available to Americans who are over 62 years of age and who have equity in their home. The bank will lend you money based on the amount of equity you have in your home without you having to make payments so long as you reside in that home. This seems like a good deal right? There’s a catch — the loans accrue interest which is compounded and every time you take out more money in this manner your home loses equity and you lose more of your home ownership. With housing values steadily sinking across the nation, it’s very easy for the unwary to end up owing more due to a reverse mortgage than their home is actually worth.

This increased debt to income ratio can make it virtually impossible to get any other type of loan regardless of your payment history and other areas. Additionally, the interest continues to be compounded and as many individuals who take out reverse mortgages have limited or no income paying down these loans becomes impossible after only a short amount of time has passed.

The lack of required payments, rather than being a benefit turned out to be detrimental. The loan must be repaid, and in many cases ownership of the home will revert to the bank after the homeowner has died if these payments are not made in a timely fashion. This can mean that a surviving spouse or other dependents will be forced to make high mortgage payments or give the house up for foreclosure.

So when can a reverse mortgage actually be beneficial? It definitely depends on the circumstances. An older individual who has adequate income can use are averse to mortgage to improve his or her credit score if they are careful. Making timely payments and ensuring that the bank reports these payments can improve your credit history. These payments, although not required, will reflect a steadily decreasing balance on your debt which looks good to other potential creditors. Having a responsible repayment plan that you are able to stick to faithfully can help you to avoid the pitfalls of a reverse mortgage and take advantage of the flexible payment arrangements it affords. Otherwise, this type of mortgage may prove to be too risky to your overall credit health.

Posted in credit, debt to income ratio, foreclosure, home ownership, reverse mortgage | No Comments »



Oct 5, 2008

Identity Theft, the Elderly, and Credit Concerns

Older Americans are often the target of many identity theft and financial scams. Sadly, the consequences for this particularly vulnerable group of Americans is just as severe as those for younger generations, if not more so. However, there are actions that older Americans can take in order to prevent identity theft and minimize the dangers of financial abuse and scams designed to take advantage of a senior’s good credit. Keep these tips in mind and your credit score is less likely to be damaged due to scams or fraud.

Avoid Giving Out Personal Information over the Phone

It seems like a simple rule to follow, but in the reality is that many times it can be difficult to know whether or not a business is reputable or not. Con artists sound just as sincere as customer service representatives, and it can be impossible to ascertain a company’s legitimacy over the phone. For this reason, unless the call is initiated by the elderly individual, and he or she knows exactly who she is calling and why, no personal information should be given out over the phone. This includes phone calls from supposed charities, banks, churches, and other ‘good-will’ organizations. If you really want to do business with the company or charity involved, look up the phone number yourself and initiate the telephone call – the offer will still be available, and you won’t have to worry about giving information to an unscrupulous caller.

Do Not Trust Links in Email

For those senior citizens who are tech-savvy, the web brings a whole new host of potential problems. Banks, investment groups, online merchants and other businesses frequently send out emails to those who have an account with them. However, many scam artists take advantage of this fact and use ‘phishing’ techniques to mimic company emails in an attempt to trick users into entering account or credit card information. The best safeguard against such practices? Don’t trust the links in email. If you receive a notice from a company that needs you to verify a credit card number or account information, call the company to confirm – almost always, these types of emails are a scam. Never use the links in an email; always type the address into the browser rather than following the emailed link.

Pay Careful Attention to Financial Managers

Sadly, most cases of financial abuse and identity theft are often perpetrated by close friends or family members. So pay careful attention to any business investments, new accounts, or other activities that are initiated on your behalf. Keep a copy of all transactions and pay attention to your credit report – if you notice accounts opened in your name that you do not recognize, take steps to protect yourself immediately.

Credit Repair Services Can Help

Elderly individuals are often at a disadvantage when it comes to damage to their credit score. This is because seniors often do not have the luxury of waiting 7 to 10 years for negative items on their credit report to be removed. Also, because of the fact that many seniors live on a fixed income, the need to have access to affordable credit lines is an important one. Credit repair services can help to undo the damages caused by identity theft and fraud, while giving back control to the victim.

Credit repair programs are especially helpful in those situations where the elderly individual needs guidance and assistance in order to understand the credit repair process, or in those cases where the elderly individual cannot act on his or her own behalf. Finding a reputable company that cares for its clients can go a long way to undoing the damage caused by financial fraud. Fortunately, there are many such companies available – so the elderly do not have to suffer in silence due to the fraudulent actions of others.

Posted in credit, credit repair services, email scams, financial scams, identity theft, phishing | No Comments »