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 »



Sep 8, 2008

Credit Repair Scams: File Segregation and EIN

Repair Your CreditOne old credit repair scam that is making the rounds again is the concept of file segregation. Not only does this type of credit repair not work, it is actually illegal and you could face severe fines as well as jail time for attempted fraud. So how can you recognize a file segregation scam? Your first clue should be any credit repair service that promises to give you a “fresh start” or an entirely new credit history. Another clue is any credit repair service that asks you to apply for an Employer Identification Number, or EIN.

Having an EIN is not illegal in and of itself. However, when used in conjunction with unscrupulous credit repair tactics, establishing an EIN may be considered an attempt at fraud. This is because traditionally, an EIN is used to establish credit for a business entity. Misrepresenting yourself as a business, combined with any attempts to segregate your credit history such as using a different mailing address from the one on your personal credit history, can be considered fraud. Companies that claim you can get a clean credit history through file segregation are promoting practices that are known to be illegal. Above and beyond that, this type of strategy will have no effect on your actual credit rating and will not help your ability to obtain credit in the future.

Companies who promote file segregation and EIN are counting on your ignorance of how credit actually works. The EIN may not be linked to your poor personal credit history, however, a lack of negative credit history does not help your chances at obtaining credit when there is no credit history whatsoever. This “blank slate” will also have difficulty obtaining credit from most businesses and banks due to the fact that a new business with no credit history is not a good credit risk. Establishing credit for your new identity is fraught with unnecessary risks, and if you use the EIN legally, your old credit history will be tied to this new number as well. In short, file segregation and applying for an EIN only wastes time, and leaves you vulnerable to criminal fraud charges. Never deal with any company that offers this type of service — it is always a scam.

If you are looking for credit repair solution, steer clear of any file segregation and EIN “solutions” you may be offered. Instead, focus on repairing your personal credit history through proven methods that actually work. By disputing incorrect items on your own credit report as well as other legal methods, you can improve your credit without taking the risk of committing fraud through deception. If you’re unsure of how to repair your credit on your own, make certain that any credit or company you deal with is reputable and has proven results.

Posted in credit, credit repair scams, credit repair service | No Comments »



Jun 4, 2008

Legal Credit Repair vs. Illegal Credit Repair

When it comes to credit repair, the law is on your side. The laws created by the FTC on credit repair are to protect you from the credit reporting agencies, collection agencies and credit repair companies. Legal credit repair methods are not only smarter (because you won’t end up in jail), but they are also less expensive.

Most unlawful credit repair companies have been taken down by the FTC; however there are still some in operation. If you are would like to repair your credit, it’s important that you don’t get lured in by illegal tactics and fraudulent companies. If you follow illegal advice and commit fraud, you may be subject to prosecution. Below is a list of illegal credit repair techniques to look out for:

Illegal Credit Repair Tactics

  • Changing your social security number or starting a “new” credit file. Some companies will offer to teach you how to start a new credit file by applying for an Employer Identification Number to use instead of your Social Security number. Avoid and report such companies.

  • Companies that ask you to pay for credit repair services before they provide any services.

  • Companies that don’t tell you your legal rights and what you can do by yourself for free.

  • Remember, it is also illegal to try to obtain credit by lying or making false statements on an application.

Now that you know what to avoid, let’s look at some of the things you can do to repair your credit.

Legal Credit Repair Tactics

  • Dispute erroneous information on your credit report. Not only is it legal, it’s your federal right. The Fair Credit Reporting Act gives you the right to dispute items on your credit reports directly with the credit bureaus. The burden of proof is on the credit bureaus. If they can’t verify that information is correct, then it must be deleted.

  • Debt validation is a tactic that’s used when dealing with collection accounts. The FDCPA gives you the right to demand that collection agencies validate any debts that they are trying to collect on.

  • Negotiating directly with creditors is a tactic that is sometimes used to ask the creditors politely to remove the negative items from your credit report.

If you would like to have professionals repair your credit, check out the top legal credit repair services. If you prefer to do-it-yourself, the credit repair forums are a great place to start!

Posted in collection agencies, credit, credit repair forum, credit repair service, credit reporting agencies, debt validation, dispute bad credit, do it yourself credit repair | No Comments »



Mar 20, 2008

Is Credit Repair Affordable?

Let’s play a game. It’s called “Which is More Expensive?”

Here’s how it works: I give you 2 things and you tell me which one of the 2 is more expensive. Ready? Go!

1. Buying your favorite magazine every month at Barnes & Nobles.

2. Getting a 1 year subscription to that same magazine.

Did you answer #1? If you did, you’d be correct. #1 is obviously more expensive. Getting a subscription can save you lots of money.

One of my favorite magazines is Men’s Health. It’s $4.50 an issue at the newsstand. A 1 year subscription (10 issues) is $19.97.

Let’s do some real quick math:

10 x $4.50 = $45.00
$45.00 – $19.97 = $25.03

That means if I get the subscription I save $25.03 a year!

Ok, that was a no-brainer. Here’s another one:

1. Having a credit repair service fix your credit for about $500. Then, enjoying a low interest rate of 6% on a 30 year mortgage.

2. Save the $500 by not repairing your credit. Then, get a sub prime mortgage with an interest rate of 8%. (You may pay much higher, but let’s just use 8% as an example.)

#2 would be much more expensive. Hopefully you chose to hire a credit repair service. If you’re purchasing a $100,000 house and paying 6% interest; according to my mortgage calculator you’re monthly payment would be $599.55. If you purchase the same home at an 8% rate you’re monthly payment would be $733.76.

Let’s do some real quick math.

$733.76 – $599.55 = $134.21

You’d be paying $134.21 more every month. Multiply that times 12 and you’re paying $1610.52 more per year.

Multiply that again times 30 for the life of your mortgage and now you’re paying $48,315.60 more than your neighbor paid after 30 years for the EXACT SAME HOUSE.

So, which is smarter? All of the sudden paying $500 to get your credit repaired seems quite affordable, doesn’t it?

By playing my little game, hopefully you were able to see my point. By even paying .25% more in interest on such a major purchase, you’re really throwing a lot of money away. When you up that by 2-4 percentage points, it’s disastrous.

This is just one example of what bad credit will cost you. Don’t forget about cars, credit cards, cell phones, jobs, insurance rates and everything else.

I hear it everyday, “I can’t afford that kind of money to get my credit repaired!”

Here’s the truth: If you have bad credit or even mediocre credit, you can’t afford NOT to get your credit repaired.

STOP paying higher interest rates and start reaping the benefits of a good credit score. For a one time set up fee of $99 and as low as $39/month, Lexington Law Firm will work to increase your credit score by removing negative items from your credit history.

Posted in affordable credit repair, credit, credit repair service, credit report repair, personal finance | No Comments »



Dec 19, 2007

Choosing a Credit Repair Company

Finding the right credit repair company can be a big decision for anyone with bad credit. Choosing the right one could end up being one of the best things you can do for your financial future. Repairing your credit scores can help you qualify for lower interest rates and increase your financial options.

A typical credit repair service usually charges a few hundred dollars and takes about 6 months to repair your credit. It usually depends on how bad your credit is. Some clients can be finished within a month or two and will pay considerably less. Others can take over a year and cost more than a thousand dollars. Most credit repair companies have a one-time set up fee and then low monthly payments. It is in violation of the Credit Repair Organizations Act to charge the full amount before they provide any services.

Unfortunately, the credit repair industry has received a bad reputation because of the publicity given to credit repair scams. While fraudulent credit repair firms tend to be shut down quickly, it is still in your best interest to learn how to identify the differences between a legitimate credit repair service and a credit repair scam.

Some warning signs to look out for:

  • The company wants you to pay for credit repair services before they provide any services.
  • They don’t tell you your legal rights and what you can do for yourself for free.
  • They suggest that you try to invent a “new” credit identity and a new credit report by applying for an Employer Identification Number to use instead of your Social Security number. This is highly illegal. If you follow illegal advice and commit fraud, you may be subject to prosecution.

You should also research a credit repair company at the BBB (Better Business Bureau). The BBB keeps notes on complaints made against companies. If the BBB report for a credit repair company lists multiple unresolved complaints or an overall low rating, you should be wary of the company.

Check out the Top Credit Repair Companies online.

Posted in credit, credit repair company, credit repair firm, credit repair service, credit report repair | No Comments »