AAACreditGuide.com

Hidden Credit Builders: Adding Positive Information to Your Report

2009-07-31T03:11:00.001-04:00

Most people focus on removing negative items from their credit reports in order to improve credit scores. While this is an effective means of improving scores by clearing up items that cause credit scores to drop, it is also sometimes possible to improve your credit by adding to your credit report. Just as negative information can be inaccurately reported, positive information may also have been left off, or misreported on your credit report. In some instances, it may be possible to add this positive information and give your credit scores a natural boost.

Some common mistakes with regards to positive information on your credit report include the length of time the account has been open, the credit limit on the account, and any accounts where you may be a joint account holder but the account isn’t listed on your credit report. When it comes to these types of mistakes, adding the positive information to your credit report can usually be accomplished one of two ways:

Contact the creditor. If it’s a case of not having a joint account listed on your credit report, you’ll want to contact the creditor directly. In many instances, your creditor will be able to add the account to your report for you. This is especially true if the account is listed for the other joint account holder already.

Contact the credit bureaus. After you’ve contacted your creditor, you’ll want to confirm that the information has been changed within the credit bureaus. Wait a couple of weeks, and then check your report – if you still see errors, send a letter to the credit bureau asking them to correct the information, or use the online contact form.

For accounts that are in your own name, but that aren’t listed on your credit report, you should verify with your creditor that they report to the three national credit bureaus. Not every creditor chooses to report to the bureaus, and without their voluntary reporting, the credit bureau won’t be able to help you. If you do confirm that the creditor typically reports and just hasn’t reported your account, you can take the same steps above in order to have the situation resolved.

For creditors that do not choose to report your credit to the agencies, you can still help your chances of obtaining credit if you can get a certified copy of your payment history. If possible, request a copy of the payment history on company letterhead, and signed by a manager or someone else in charge. By having this documentation on hand to bolster your credit report, you may be able to convince some lenders.

Adding positive information can be a helpful step when it comes to repairing your own credit. Listing accurate, positive information can counteract some negative marks on your report. Additionally, by verifying these positive items, you will can be more vigilant to potential errors in the reporting process overall. Don’t just look at your negative items – always look at your credit report as a whole to attain the best results.

Credit Card Agreements – Understanding the Fine Print

2009-07-07T00:29:00.001-04:00

With the passage of the Credit Card Holders' Bill of Rights, credit card companies will be required to make some changes in their disclosure practices when it comes to credit card agreements. Until these changes go into effect, if you are shopping for a credit card, it’s important to understand the terms and conditions included in the fine print of your credit card. Otherwise, you could find yourself owing hundreds more in unexpected fees and interest, which in turn, may damage your credit scores. Below is a list sampling the most common terminology found in credit card agreements, and what these terms actually mean to you, as a consumer:

"Any disputes related to this credit card account are subject to binding arbitration..." Binding arbitration means you are not allowed to file suit in a court of law over any disagreement that you may have with the credit card company. It eliminates the possibility of class action law suits, and any number of legal rights. There is no way around this – if you use the card, you are agreeing to the binding arbitration clause. Be aware that your credit card company will most likely be the one who chooses the arbitrator as well, and your usual options for legal relief will be severely limited should you decide to pursue legal action.

One to watch out for if you are taking advantage of a balance transfer to a lower-interest card: "Balance transfer fees are added to the purchase balance and are subject to the APR for purchases…” This basically means that any fees associated to your balance transfer will be treated as if you made a purchase, and will be added to your credit card balance. In addition, you will pay interest on that balance transfer fee. Something to keep in mind if you are close to your limit with the balance that you are transferring – the balance transfer fee may push you over, and cause over limit fees, just as a purchase would.

Here's the phraseology that indicates your credit card is subject to universal default laws: "If the cardholder is reported as delinquent on an account with any other creditor, we may increase the APRs on your account up to the maximum default APR…" Universal default is one of the many terms that will be modified under the new Credit Card Holders’ Bill of Rights, but until that goes into effect, you may be charged a default rate on all credit cards which have this phraseology, even if you’ve only missed a payment with one of those creditors.

The terms and conditions that accompany any new credit card are often lengthy and complex – one of the reasons that many consumers don’t bother to read them. However, this strategy can cost you money and hurt your credit in the long run. Understanding the fine print will help you to make a more informed choice when it comes to your credit, and will help you choose the best credit cards for your overall financial health.

Recognizing Credit Repair Scams

2009-07-02T00:29:00.004-04:00

As the economic slump continues, more and more people are looking to credit repair in order to improve their credit scores. Creditors are requiring higher scores in order to qualify for loans that in the past could be obtained with mediocre or even marginal credit. Individuals who have lost their jobs and missed payments on credit accounts depend on credit repair in some cases to improve their scores to levels that will allow them to qualify for these increasingly strict credit requirements that lenders have imposed. Scam artists recognize the increased market, so any consumer looking for credit repair help should be prepared to go the extra mile before signing on with any credit repair company. In particular, be wary of any company that falls into one or more of the following categories – chances are good that you may be looking at a scam:

Guaranteed Score – any credit repair company that guarantees you a particular credit score is almost always a scam. There is no way to know for certain how high your credit score will be, even if the credit repair is successful. Creditors advertising a 700 or better in 30 days are just out to take advantage of desperate consumers.

Minimal Contact Information – be wary of a credit repair company that operates solely from a website. If there is no phone number, and no physical address, it is very difficult to be certain of a company’s legitimacy.

Just Opened – don’t trust your credit repair needs to a company that just opened. Scam artists often start fake companies only to fold months later, after taking hundreds of thousands of dollars from unwary consumers.

High Pressure Sales – reputable credit repair agencies don’t need to resort to high pressure sales tactics to convince you to hire them. If the company’s experience, history, and level of service aren’t enough to impress you with their ability to help, don’t let a flashy sales presentation convince you otherwise.

Credit repair companies provide a valuable service to consumers looking to get a fresh financial start, but it’s important to be certain you’re working with a professional. Check references, the Better Business Bureau, and even online complaint boards before you make a decision, and be prepared to shop around in order to avoid being taken in by scam artists. By doing the research before you commit, you’ll have a better chance of avoiding scam artists and actually getting the credit repair services you need.

Pay for Deletion – Can it Really Help?

2009-06-17T01:23:00.002-04:00

One of the many means that people often use to repair their credit is the pay for deletion agreement. With this agreement, your creditor (or a collection agency who currently holds the debt) agrees to have your derogatory collection account removed from your credit report, in exchange for payment on the account. In some cases, you may pay the full amount you owe – in others, you may only pay a percentage, anywhere from 40%-80%.

Pay for deletion is not the same as a settlement agreement. When you pay off a settlement account, the account itself remains on your credit report, and will be listed as either 'Paid in Full' or 'Settled' depending upon whether or not you paid the full amount to the creditor or a partial payment. Having these settled accounts on your credit report can actually hurt you in some instances, as potential creditors may consider you a risk when it comes to repaying your debts in full. With pay for deletion, the record is removed from your credit report entirely – a potential creditor will not see the account, and it will not be a factor in your credit score.

Pay for deletion is most helpful for charge-off accounts that have been purchased by collection agencies, and other very old debts that have not been paid. By removing these debts from your credit history, you may be able to raise your credit score by several points. If you are using a credit repair agency, and they recommend a pay for deletion strategy, be certain that you have the agreement in writing before you pay – without the written agreement, you may find that the derogatory account remains on your credit report, even after you've paid.

It's important to realize that pay for deletion is only a useful strategy when you have the money available to pay. Creditors will expect money in certified funds, such as a cashier's check or money order, so having the funds on hand will help to expedite the process, should your creditor agree to the pay for deletion arrangement. Some creditors do not enter into these types of agreements, so it's not a one-size fits all solution. However, even if the creditor does not agree, you or the credit repair agency may be able to negotiate other favorable terms in order to avoid having a 'settled' account on your credit report.

While pay for deletion is not always a viable option for everyone, it can help some individuals who have old debts that they can afford to pay off right away. Whether you are repairing your own credit, or relying on the services of a credit repair agency, get the pay for deletion agreement in writing, be ready to pay, and follow up to be sure that the account has been successfully deleted from your credit report after you've paid. As long as you pick accounts that are best suited to this type of agreement, you may be able to benefit from a tangible boost to your credit score.

Double Billing Cycles: Is Your Credit Card Company Charging You for Paid Balances?

2009-06-05T19:48:00.002-04:00

It's common knowledge that paying down your credit card balances is good for your credit, and can help you to improve your credit score. However, your credit card company's billing practices may make repayment more difficult over the long term. Some credit card companies even charge interest on the same balances twice – regardless of whether you’ve paid the balance or not. It's a practice that is typically referred to in the disclosure of credit card terms as "two-cycle average daily balance". What it amounts to, however, is double billing, plain and simple.

How Double Billing Cycles Work

When a credit card company uses the double billing cycle method to calculate your interest rates, it takes the average of your previous month's balance and your current month's balance. What this means is, if you have a balance of $1000 in January, and a balance of $200 in February, the credit card company will average these two balances together and charge interest on the amount of $600. That is $400 more than what you currently owe on the card, and is in effect, interest on a balance that has already been paid.

The double billing cycle creates additional interest charges that can make it very difficult for you to pay off your balance entirely, if you are in the habit of keeping a balance on your card. In particular, it punishes individuals who try to pay down their balances all at once, or who have balances that fluctuate regularly. On the example above, on a credit card with a 12% interest rate, you would pay $1.64 in interest charges for February's balance, based on the Average Daily Balance method. Under the Double Billing Cycle method, your charges would be $4.93 – three times as much.

What You Can Do About Double Billing Cycle Charges

If you have a card that uses the double billing cycle method, you may want to consider transferring your balance to a card that uses the average daily balance method instead. Otherwise, if you want to minimize the hit that double billing cycle charges can cause, you should gradually pay off the card, avoiding any steep pay-offs that will effectively bill you for money you’ve already given the credit card company.

When considering a balance transfer, make sure you do the math. Factor in any balance transfer fees that you may be charged, and compare those charges to what it will cost you to just pay off your card – you may come out better by just paying the card down, if there are excessive balance transfer fees. Other considerations you will want to keep in mind:

1. The credit limit on the new card – don’t transfer a high balance to a card if that will max out the credit limit. Anything that negatively impacts your available credit to debt ratio will have a negative impact on your credit score as well.

2. The introductory period for finance charges – if you transfer the balance, make certain that you can pay down the balance before your introductory period is up. And make certain that the interest rate applies to the balance transfers as well.

Keep in mind that some credit card companies have recently started closing accounts that do not have any balance or recent activity, so you may wish to keep a low balance on a credit card that uses the double billing cycle method if you’ve had the card for awhile and it has a good history of repayment. By staying informed about what your credit card company is really charging you, you can avoid excessive fees and keep your credit score healthy.

Should I Close My Credit Card Account?

2009-05-26T03:02:00.002-04:00

Five Considerations to Keep in Mind When Closing Accounts

With the interest rate hikes that have affected thousands of consumers across the United States, many consumers are considering closing credit card accounts as a means to avoid these higher fees, and to keep their credit under control. However, closing a credit card account should never be a rash decision – you need to take into account several factors when making the choice. In some cases, closing a credit card account may do your credit more harm than good. The following are five issues to think about when dealing with a credit card account and whether or not you should close it.

1. The Age of the Account – if the credit card is one of your oldest credit card accounts, closing it will erase much of your payment history. Creditors typically place a high value on the length of time that an account has been opened, so if you shorten your credit history, you may damage your credit score.

2. The Balance of the Account – if the account is currently carrying a balance, don’t close it. Pay off the account first, and then close it. When you close an account, the available balance is shown as $0, so if you close an account that has a balance remaining, it will appear that you have maxed out your credit card – a sure way to lower your credit score.

3. The Terms of the Account – compare the terms of the account you are thinking of closing to the terms on your other cards. If the account has better terms than some of your other cards, you may want to reconsider closing the account.

4. The Balance of Other Credit Card Accounts – if your other credit cards are carrying a high balance, closing your credit card account may damage your available credit ratios, which in turn will result in a lower credit score.

5. The Number of Other Credit Card Accounts – never close your only credit card account. Having a mix of different types of credit is an important part of your credit score. If you need a card with better terms, shop around until you find one that suits your needs better, and transfer your balances, rather than close out the account.

Once you’ve made the decision to close a credit card account, do so formally – write a letter to the company asking for the account to be closed. In addition, make certain to request a letter stating that the account is being closed in good standing. This can be important for your records in case you need to put a statement on your credit report explaining the account’s closure. Additionally, be certain to destroy the old cards, including cards that others may have had as authorized users of the account. This will minimize the chance of identity theft, and will avoid any inadvertent attempt to use the card in the future. Closing a credit card account can be a wise move, but only if you make certain that it won’t harm your ability to get new credit in the future.

Credit Card Holders’ Bill of Rights: Hype or Help?

2009-05-12T04:15:00.004-04:00

While it’s not official yet, the aptly named "Credit Card Holders' Bill of Rights" is one step closer to becoming law. The bill was recently passed by the House of Representatives, leaving the Senate to take up the issue next – if passed, the new laws would go into effect in July 2010. As consumers struggle in the current economic downturn, the recent interest rate hikes on credit cards across the board have been met with disapproval on many levels. However, credit card companies and their lobbyists continue to push against this new reform. So what will the Card Holders' Bill of Rights mean to you if it passes? Among the proposed changes that consumers can feel hopeful about are:

An end to Universal Default – credit card companies will no longer be able to charge you the default rate on your credit card just because you’ve missed a payment to another card issuer.

Prevention of double billing cycles – credit card companies will be prevented from using your past billing cycle to increase your interest charges.

No more retroactive rate increases – rate increases will no longer be applied to past balances, or past billing cycles.

Mandatory 45 days notice of rate increases – if your credit card company wants to raise rates, it will have to notify you 45 days in advance. This gives the average consumer more time to shop around for a better rate.

Limited Fees on Subprime Credit Cards – no longer will credit card issuers be able to charge fees upwards of 90% on subprime cards. The new legislation will put a cap on the fees at 50% of the card balance, with only half those fees allowed to be payable at the account opening.

Needless to say, credit card companies are lobbying hard to avoid these new regulations. They claim that credit will be more difficult to obtain for the average consumer if they are not allowed to continue their current billing practices. Whether or not the bill is ultimately approved, credit card rates are unlikely to lower any time in the near future, as the companies attempt to offset losses expected as credit card defaults continue to climb due to the rise in unemployment across the country. Regardless as to whether or not the bill passes, there are some steps that the average consumer can take to minimize the impact of the current credit crunch:

1. Keep your balances low – lower balances means lower payments in terms of interest.

2. Pay all credit card bills early – make certain that you get the payment in well in advance of the due date, as many credit card companies begin charging late fees if the payment is even one minute late.

3. Read the fine print – many credit card companies have started raising the interest rates on all customers, even those who pay on time regularly. Make sure that your current card agreement is one that you can live with.

If the Credit Card Holders' Bill of Rights does pass, it will be a huge step forward for individuals who want to build and maintain their good credit. The more transparent credit card companies have to be in their billing practices, the easier it is for consumers to make an informed choice about who to turn to for their credit card needs.

Paying the Debts of the Deceased – What You Don’t Know Could Cost You

2009-05-05T22:32:00.002-04:00

Some debt collection agencies are taking their collection practices to new extremes when it comes to making a profit – collecting from the relatives of the deceased. In most states, the estate of the deceased is responsible for payment of any debts that are presented during the probate period. However, these debt collectors circumvent this process by going directly to the surviving spouse, children, parents or siblings, in an attempt to directly collect. Oftentimes, these individuals are not legally responsible for these debts, and the debt collectors typically do not disclose this fact. By assuming the debt of a relative who has died, these individuals potentially place themselves in a position of unnecessary financial risk.

How can you protect yourself from these predatory practices? There are a few simple guidelines to follow when dealing with creditors who are attempting to collect a debt from a deceased individual. Use these tips to deal with creditors, and if necessary, get legal advice for your particular situation.

Don’t discuss the debts of the deceased. This is likely the simplest solution, overall. Inform creditors who call that the individual they are calling for is deceased. Do not offer additional information, and do not allow the creditor to pressure you into making a payment. If you were not a joint account holder or otherwise responsible for the debt, there is no reason to communicate with the debt collector in most instances.

Don’t provide your personal information. This tip is also important, because if you provide your personal information to the debt collector, they may try to get you to assume the debt, thereby placing it on your credit report. This can have a negative impact on your overall credit, and it also makes it more difficult for you if you later decide that you do not want to handle your loved one’s old debts.

Don’t give in to pressure. If you know that you aren’t responsible for the debt, don’t succumb to creditor pressure to assume the payments. Unless the debt involves secured property that is of value to you or your family, there is no reason to negotiate over payments on a debt that you do not owe.

Do handle any debts on which you are a co-signer or are otherwise responsible. Find out the laws about credit card liability in your state – in many instances, the spouse is not responsible for credit card debt that is not part of a joint credit account. However, if you are jointly responsible for the debts in question, making arrangements sooner, rather than later, can help preserve your good credit.

If creditors are persistent in contacting you, you may want to get legal advice from a local attorney about how best to proceed. In most instances, if creditors do not make their claim during the probate process, they are out of luck – trying to collect from relatives not associated with the original account is a shady practice at best. Losing a loved one is difficult. Don’t let opportunistic creditors make an already difficult time that much worse – know your rights, and don’t offer to pay for any debts to which you are not contractually obligated.

Credit Cards, Credit Crisis, and Your Credit Score

2009-04-14T03:10:00.001-04:00

Credit card companies are switching tactics due to the credit crunch, and consumers are taking the brunt of the change. Higher interest rates, larger late fees and penalties, along with abrupt, unexpected credit card cancellations for accounts deemed "inactive" are only a few of the ways these companies are seeking to minimize their risks. Unfortunately, even if you’ve been making regular payments, you could get caught up in this sweeping readjustment just the same. Higher fees, when coupled with smaller credit limits can turn even a respectable credit score into one that needs a lot of work.

Amongst the circumstances that could cause you to be flagged for a higher rate, high balances on other cards, along with having an adjustable rate mortgage are two of the most common. So what can you do to protect yourself from an unexpected increase? While there is no guaranteed prevention plan, there are some measures you can take that will help to minimize the chance that your credit card is subjected to these harsh new penalties.

Minimize your balances – if you carry a high balance on one card, that credit card company may consider you to be a risk of default and may lower your limit and increase your rates, even if you’ve been paying on time. This in turn can cause a spillover effect, wherein your other credit card companies follow suit, reducing the limit and upping the rates on cards you barely use. The solution? Carry a smaller balance across all of your cards, rather than a high balance on only one. In this way, you have an active account, but the balance is small, which can be seen as less of a risk.

Pay more than the minimum – if you consistently pay more than your minimum balance, there is a chance that your credit card company will see you as a better risk than those who are only making their minimum payments. If you can afford to pay more each month, do so – not only will it help to keep you out of the 'high-risk' category, it will also save you money on interest.

Read your credit card terms – many credit card companies have updated their terms of service to include language that allows them to raise your rates and lower your limits if you are late for even one payment. And late may be defined as 12:01 AM on the due date or the day after. Make certain you know what your terms are, and be prepared to negotiate if you feel you aren’t being treated fairly. If you’ve been a steady, good-paying customer for years, some credit card companies may be willing to negotiate better terms. If not, then you may have to adjust your spending accordingly.

Credit card companies have always been business first, and the consumer now, as always, must be prepared to take proactive steps to build and maintain positive credit, regardless of what the credit card companies decide to do.

No More MyFICO? Experian’s Decision to Eliminate Consumer Access to Its FICO Scores

2009-04-06T21:59:00.002-04:00

Consumers checking their credit scores no longer have access to Experian’s FICO score directly – the company did not renew its contract with MyFICO.com, and has no plans to offer consumers access to their FICO score directly in the future. Instead, Experian offers a different score model to consumers which is supposed to help simplify the scoring process for consumers. Unfortunately, the new scoring system does not use the same calculations or scale as the FICO score, which can lead to confusion among consumers who want to compare their FICO score amongst Experian, Equifax, and TransUnion. Considering the current credit market, and the fact that just a few points on your FICO score can make the difference between an affordable interest rate and payments that you just can’t make, this is a serious disadvantage – not only for people who are trying to improve their credit scores, but for those who may be shopping around for an auto loan or mortgage.

Unless Experian changes its mind in the future, the only way to get a glimpse of your current Experian scores now is if your lender makes those scores available to you during the lending process. Fortunately, you can still check your FICO scores for Equifax and TransUnion, which will give you a fair idea of the range you can expect when it comes to your Experian score as well. If you are concerned about not having access to your Experian credit score, there are a few steps you can take that will ensure that your score is the highest it can be, even if you don’t have access to your credit score directly.

Credit Report Cleanup

To start, you should get a copy of your credit report from all three bureaus and check for discrepancies – make sure that the information listed on each report is accurate, up-to-date and consistent from one report to the next. In this way, you can be certain that all three credit scores are drawing from the same information. Make certain that if you dispute an item on your credit report, either through a credit repair service or on your own, you dispute that same item at each credit reporting agency – erroneous information left on one credit report can drag down your score.

Third Party Reports

If you’re planning on making a major purchase and you are in the pre-approval process, you may be able to get some lenders to part with your credit scores, not only from TransUnion and Equifax, but from Experian as well. Because Experian is selling their proprietary scores directly to businesses, this may be the only way for you to get a clear snapshot of your score for your reference. Don’t apply for an auto loan, credit card or line of credit just to see your Experian scores, however – multiple inquiries on your credit report can sometimes lower your score, defeating the purpose of your hard work.

Overall, your best approach to maintaining a good credit score is the same that it’s always been. Timely payments to creditors over the long-term will improve your credit score, even if you don’t have direct access to it. Take the time to improve your credit naturally, use credit-repair services wisely, and regardless of your access to your Experian FICO score, you can still qualify for that loan you deserve.

Credit Repair During a Recession

2009-03-29T02:33:00.002-04:00

With the credit market dwindling, only the people with the very highest credit scores are likely to remain unaffected. For the vast majority of Americans, buying a car, getting a mortgage, or even qualifying for a credit card with a reasonable interest rate has become more and more difficult. Now, more than ever, it is important to realize that errors in your credit report can cause significant financial difficulty down the line. Should you be considering a credit repair service? If you fall into any of the following categories, credit repair may help you attain your financial goals:

You are Looking for a Job:

If you’re in the job market, having a clean credit record will put you a step ahead of other candidates with similar skills and experience. Employers now, more than in recent years, are scrutinizing potential hires more closely in an effort to make certain that any potential employee will be of the best benefit to the company. Leaving your credit report to chance could leave you out of the running for your next position. Having a good credit score will reflect well on how you will handle the responsibilities of a new job, and allows potential employers to feel confident that you can handle your position effectively if hired. Conversely, people who have problem credit may find it more difficult to get a job as employers look to hire only those who seem to be a 'safe' investment.

You Want to Buy a Home:

The market for subprime mortgages is virtually nonexistent now, but buying a home in the current conditions could be ideal if you have a strong credit score. Low interest rates, coupled with the current drop in housing prices could mean that the home you want is finally affordable. However, if your credit isn’t in the best condition, this favorable market could pass you by. Removing negative information that is too old, incorrect or incomplete could help you to qualify for the home of your dreams sooner than you realized.

You Need to Buy Insurance:

Believe it or not, insurers also look at your credit score, and a better credit history will net you lower premiums than someone who looks like a credit risk. The savings you receive as a result of a good credit score could allow you to afford more coverage at a higher tier. Having adequate insurance is essential in a troubled economy, whether that insurance is for you, your house, or your car. Keeping the premiums affordable is just another added benefit to a clean credit report.

These are just a few of the main reasons you might want to look at getting your credit repaired sooner, rather than later in the current economic climate. Now, more than ever, a good credit score can help you to reap the benefits that can be found while companies are tightening their lending policies. A good credit repair company can help you get rid of errors, or debts that should have been removed due to age. By taking advantage of a reputable credit repair service, you can open the doors to financial opportunity even in a troubled economy.

Paid to Cancel Your Card? Why Taking the Offer Can Hurt Your Credit

2009-03-16T02:18:00.001-04:00

American Express recently began offering $300 to certain cardholders if they pay off the balance owed on their cards and cancel the account. While this may seem like a great deal on the surface, this type of paid encouragement to close your account and pay down your debts can actually make your credit situation worse. While American Express seeks to entice some of its customers to say goodbye willingly, other credit card companies have begun closing accounts for lack of activity, certain types of buying patterns, or other activity that has been deemed 'high-risk'. While the credit card companies' terms of service often state that an account can be closed for many reasons, consumers often don’t pay attention to the fine print until it’s too late.

If you are one of the "lucky" ones who received the paid offer, you may be tempted to cancel your card and cash in while you can. However, if your credit score is already marginal, closing an established account could send your scores dropping even further. Even if you have good credit, canceling an established account will lower your score, possibly placing you in a different risk category, which could trigger further adjustments from other credit card companies. And if for some reason you don’t pay off your balance by the deadline, the $300 incentive is lost, leaving you with a damaged credit score and no reward for your efforts to pay down your debt. Of course, if you paid down your debts without taking the incentive to close your account, your savings in interest alone could top $300 depending upon your initial balance.

Because credit card companies often raise rates, fees, and other costs based upon activity on another account, closing your already established account may cause you to have higher interest rates on the cards you do decide to keep open. This can create a cascading-effect that lowers your overall available credit, which, in turn, can lower your scores even further if your debt-to-available-credit ratios fall below a certain margin. This can make it difficult for you to get a new credit card if you decide to open another account to replace the one that you’ve closed. Even if you don’t decide to open another account right away, the hit to your credit score can cause problems in other areas, such as insurance rates, interest rates on loans, and interest rates on any existing lines of credit.

Your best bet when it comes to keeping your credit score healthy is to pay off your credit cards, and leave the accounts open. Use the cards for incidental purchases, and pay them off again as quickly as possible. Keep your card active, and your balance low, and you may be able to avoid getting hit with a rate spike, or an unexpected cancellation. Getting free money may seem like a great incentive to cancel your card, but when compared to the potential downsides to your credit score, your best option may be to turn down free money in exchange for a little extra financial discipline.

Debt Relief Companies and Your Credit

2009-03-07T20:15:00.002-05:00

When bills start to pile up, some people look to debt relief companies in order to find a way out and improve their credit at the same time. Unfortunately, not all debt relief companies have the best interests of their customers at heart. Depending on the situation, the practices used by some debt relief companies can actually worsen your credit score, even if you are paying down debt. So how can you tell if a debt relief company is reputable, and if the strategies they offer will work for you? Here are some tips to ensure that you aren’t burned by deceptive debt relief practices:

1. Talk to your creditors! Some creditors report the use of a debt relief company in such a way that it negatively impacts your credit score. Some creditors won’t work with a debt relief company at all. If you are looking to settle debt for pennies on the dollar, be aware that even if your creditor does accept such a proposal, settling a debt for significantly less than the amount owed will be a serious blemish with regards to your credit score, and will stay on your credit report for up to seven years.

2. Shop around. There are literally thousands of debt relief companies, with more springing up as the current economic downturn worsens. Some of these companies are little more than scammers, looking to take your money and provide little or nothing in return. So, when you’re looking for a debt relief company, take the time to evaluate several – don’t just choose the first one that seems promising.

3. Nonprofit may not mean reputable. Nonprofit debt relief firms may seem to be a safer option, but beware – in some cases, these nonprofit debt relief organizations funnel money to a for-profit companies, while providing you with little or no real benefit. A true nonprofit credit-counseling organization will help you to get concessions from your creditors such as a lower interest rate or waived late fees, and will provide solid advice on how to improve your situation.

4. Ask questions. When you are deciding on which debt relief company to use, make sure to ask questions regarding how the service works. Be certain your credit counselor spends at least 20-30 minutes evaluating your particular situation, and offers advice based upon that evaluation, rather than canned responses. Be wary of any promises that seem to be too good to be true, or that don’t take into account the reality of your situation.

5. Get it in writing. Make certain that your agreement with the debt relief company says the same thing on paper as you discussed over the phone – ask for clarification of any points that you do not understand, and make certain they discuss the impact that their service could have on your credit score.

6. Be wary of upfront fees. Most reputable debt relief companies won’t charge a large start-up fee in order to enroll you in their program. If it costs more than $50 to start, it may be a scam.

7. Check the BBB. No matter which company you decide to use, always check their standings with the Better Business Bureau – excessive complaints are a sure sign that the company may not have its clients’ best interests in mind.

Debt relief companies can seem like a good idea when you find yourself in over your head with creditors, but the truth of the matter is that these companies can often be risky investments at best. At worst, you could see your credit score plummet and interest rates increase due to late fees and other penalties imposed by your creditors. The best advice when dealing with debt relief companies is to do your research and be certain that the services the company offers are worth the potential consequences.

How Taxes Can Affect Your Credit Score

2009-02-26T23:37:00.004-05:00

Tax season is already upon us and for many this time of year can bring increased anxiety as taxpayers try to figure out ways to minimize their tax obligation while still maintaining financial responsibility and integrity. For some, particularly those who owe back taxes, this time of year is a reminder of the potential consequences and pitfalls that can occur when money is owed to the IRS.

Not paying your taxes on time can have a devastating effect on your credit score. In some estimates, your credit score can drop more than 20 points from a single tax lien. And any tax lien on your credit report will remain there for up to fifteen years. Even if you manage to pay off the taxes you owe, the lien will remain on your credit report for 7 years.

Thankfully, there are some things you can do that can minimize the chances of a tax lien on your credit report. The IRS has taken several steps to help people who owe back taxes, and this year, they are offering options for individuals who may be at risk of tax liens and default:

Flexible Payment Options – if you’ve been making payments regularly, but have suffered a financial hardship, the IRS may be able to allow you to skip a payment, or have a reduced monthly payment without suspending your installment plan.

Collection Action Postponement – if you haven’t been able to pay, the IRS may be able to suspend collection actions if you aren’t able to pay for economic hardship reasons. If the economic situation has recently occurred, you may not have to provide documentation for the initial postponement.

Prevention of Defaults – if you have an Offer in Compromise (OIC) with the IRS and cannot make the payment terms, the IRS will work with you to avoid default and collection activity on your tax obligation. However, you must contact the IRS as soon as possible when the economic hardship occurs.

Because your wages can be garnished for back taxes, failure to pay could also affect your ability to pay other bills, leading to a downward spiral in your credit scores that can prove difficult, if not impossible to correct. With so much at stake, it is essential to handle all tax matters in a timely fashion. Even if you know you won’t be able to pay up front, contacting the IRS sooner rather than later will give you time to make arrangements that can help you to maintain financial integrity.

If you file taxes this year and discover you owe more than you can pay, don’t panic – you can still make arrangements and save your credit score in the process. Contact the IRS and discuss payment arrangements as soon as possible after filing, even if you can’t pay the whole amount. By working with the IRS from the beginning, you can avoid a costly lien and preserve your good credit. The worst thing to do in this situation is attempting to avoid the issue, or putting it off until it’s too late to reverse the collection process. By remaining vigilant with regards to your financial situation, and taking advantage of the proposed compromises offered by the IRS, you can avoid having your taxes negatively impact your credit score, regardless of your ability to pay.

Credit Repair and Job Loss

2009-02-22T04:43:00.002-05:00

In the current economy, credit repair can prove more challenging than ever, especially if there is a job loss involved. Many people feel overwhelmed at their inability to pay creditors in this situation, sometimes leading to attempted avoidance of the issue entirely. This can only worsen the situation as creditors report these delinquencies to the credit bureaus, damaging your credit score and making finding a new job that much more difficult. However, there are some steps you can take, even if you have lost your job, to minimize the damage that could be done to your credit score. The key is to be proactive in your dealings with your current creditors, rather than seeking to avoid contact. Honest and open communication with your creditors in this instance can be very helpful in reducing the chances of a delinquent report on your credit score. Here are a few tips to help you deal with creditors and remain afloat if you’ve lost your job:

• Use Unemployment Pay Wisely – if you qualify for unemployment, you may be tempted to try to maintain your current lifestyle for as long as possible while searching for a new job. This strategy may not be in your best interests, as unemployment generally does not pay as much as your typical wage. If you do not have savings to fall back on during this time, your best choice is to scale back on what you spend as much as is reasonably possible. Also remember, you’ll need to continue your job search in order to qualify for unemployment, so be certain to keep records of the places to which you’ve applied.

• Prioritize Debt – if you are unemployed and cannot pay all of your bills, it may be time to prioritize. Pay essential bills first, such as the mortgage, electricity, and grocery bills. Bills for expenses such as the telephone or cable television may have to wait, however, you should always keep your creditors informed of the situation before collection notices start arriving.

• Reduce Financial Obligations – drawing from the example above, if you do have cable service, you may wish to cancel it until you have found employment. Likewise, you may wish to cut back on other non-essentials as well. Sometimes, these companies will let you ‘freeze’ an account rather than closing it. This lets the company keep your information on file for when you decide to reactivate the service. However, keep in mind that there may still be fees involved if you go this route.

• Negotiate with Creditors – once you’ve prioritized your debt and eliminated or minimized non-essential financial obligations, you should contact your creditors in order to negotiate payment arrangements that are more favorable to you. Some utility companies may offer you an extended time period in which to pay. Likewise, the bank may extend your payment options on your mortgage, or offer a revised payment schedule until you find a new job. If you show good faith in your intentions to pay, you may be able to avoid having your debts reported to the credit bureau even if you are technically late with some payments.

Avoid the temptation to try to pay for everything with credit cards while you look for your next job. While some emergency purchases may be necessary, paying off all of your bills with your credit cards may only get you into deeper financial trouble if you remain unemployed for longer than a few months. As interest on the charges build, you will likely end up paying far more than if you simply negotiate new terms with your current creditors up front. By taking a proactive stance with your finances, you can reduce the damage to your credit score, and maintain your financial health while seeking new employment.

Good Debt vs. Bad Debt: How to Balance Your Credit

2009-02-16T17:58:00.002-05:00

Most people realize that the amount of debt they carry directly affects their credit score in terms of whether or not they are seen as a good credit risk. But potential lenders also take into consideration the type of debt you carry when making a judgment call about whether or not to extend credit to you. Having the wrong balance of credit types can mean a significantly lower score, and that can lead to higher interest rates, lower credit limits, and in some cases, denied credit applications.

Good Debt

The term 'good' debt applies to almost any type of credit or loan that helps you to make tangible progress in some way. They may be secured loans, such as for a mortgage or a car loan, or they may be unsecured, as in the case of student loans. In all cases, however, this type of debt demonstrates a commitment, or responsibility that is directly correlated to responsible lending habits. By having a mortgage, you demonstrate stability. Student loans are generally seen as a good thing, as higher education often yields a better job, and thus, an individual who is better capable of paying off his or her debts.

However, you should be careful with this kind of debt, just as you would any other. Falling behind on a mortgage in today’s financial climate can lead to foreclosure and a black mark on your credit report. Student loans that are unpaid will go into default, leaving you unable to further finance your education, along with other detrimental effects, not the least of which being the damage to your credit score.

Bad Debt

So-called 'bad' debt isn't necessarily bad, but like all forms of credit, it should be used in strict moderation. Bad credit encompasses things like credit cards, store credit, and revolving accounts that can be used for purchases of less than essential items. While credit cards are not bad in and of themselves, carrying too many credit cards or too much of a balance on your credit cards can cause your credit score to dip dramatically.

The best advice when it comes to credit cards and store credit is to only use what you need and to keep your balances as low as possible. In this way, you demonstrate responsible credit consumption, and your credit score won’t take a hit from having too much debt on unsecured credit cards.

The Balance

Ideally, you should have a good mix of secured and unsecured credit, which demonstrates both stability and responsible credit consumption habits. As much as 10% of your credit score can be determined by the type of credit you have, so be careful not to open a lot of credit card accounts, especially if you don’t have a mortgage or car loan to offset the difference. You should also avoid going the other route – avoiding credit cards entirely and paying only with cash or debit. If you don’t have any payment history with unsecured loans, some lenders may be reluctant to extend credit on favorable terms.

In general, when considering new credit, ask yourself if you really need it, or if it’s just going to be one more credit card to add to the pile. Taking advantage of a low interest rate to pay down a few balances is more than acceptable, but opening an account just for an introductory discount on purchases might not be – especially if you don’t really need the items you would purchase. Keep your financial goals in sight, and you can take full advantage of both types of credit, while still improving your credit score.

Joint Accounts and Your Credit Report: When They Can Help

2009-02-07T01:46:00.001-05:00

In the current credit crisis facing the nation, some consumers are looking at creative ways to help boost their credit score in an attempt to qualify for necessary credit. Using joint accounts as a means to prop up your credit score may help, but there are definite pitfalls to consider before making the decision to try this option.

Applying for joint accounts or having a cosigner is nothing new in the world of credit. Generally speaking, the idea is that you benefit from the cosigner’s good credit in order to qualify for your loan. Or, in the case of joint accounts, you share the account with a person whose credit is in good standing. In both of these instances, the aim is to give you access to immediate credit, either in terms of a car loan or credit card account, which you then use to build on your own good credit. This can be effective over the long term, assuming that payments are made on time and the account is kept in good standing.

However, with the current credit freeze in place, trying to build credit in this way can prove difficult, as lenders are reluctant to extend new credit in many instances, and FICO may no longer take into consideration authorized users on an account. Because of this, some individuals are looking at joint accounts in a different light. Rather than using a cosigner to help secure a new line of credit, some individuals ask a relative or other trusted associate to add them to an already existing account that has a solid payment history and a low debt to available credit ratio.

This helps in two ways – the solid payment history on the account is now reflected on the individual’s credit report, which may improve the credit score. And the low debt to available credit ratio means that as the individual pays down his or her own debts, the credit score may improve more quickly. In return, the individual generally agrees not to have access to the account, other than in name only. Ideally, the account in question should have at least two years of solid payment history, and a debt to credit ratio of no more than 35%.

If you use this method to improve your credit score, you should be aware that all the standard caveats apply – and this can become particularly risky if the person whose account you are sharing falls behind on the payments. However, as an authorized user of the account, you may be able to remove yourself from the account in question if it goes beyond 30 days past due. This is different from cosigning a loan, in which case you would be fully responsible for the debt, regardless.

While careful use of joint accounts can improve your credit score, it does not take the place of making timely payments on your own accounts, and you may not see as much of a boost with this method as you would by hiring a credit repair company to assist you with removing erroneous information. However, if you don’t have much credit on your report, and you have a friend who is trustworthy and willing to help you with your situation, joint accounts can help to improve your credit score and help you to qualify for credit in your own name. Just remember to monitor your credit report regularly, and make certain that you are free to drop your name from the account without penalty when the time comes.

Divorce and Your Credit: The Facts

2009-01-18T15:06:00.002-05:00

There is no question that divorce is a stressful time in anyone’s life – the emotional turmoil, the upheaval, and the division of properties, accounts and assets can leave anyone feeling drained and disillusioned. During this trying time, your credit score may be the last thing on your mind, but the truth of the matter is that without proactive negotiations during the divorce settlement period, your credit score could take a big hit.

Marriage generally brings with it the mingling of finances. Joint checking accounts, savings accounts, and credit cards are not uncommon. And while most people work to try to divide their assets, some forget the equally important step of dividing up the debts. Unfortunately, joint account liability is not dissolved along with the marriage. Any debt that you’ve accrued as a couple remains the responsibility of both parties, even if a separate payment agreement was reached.

What does this mean? In its most extreme terms, it means that you can be responsible for purchases your ex-spouse makes on a joint account, and vice versa. This is true even if the purchase occurs after the divorce is finalized. For this reason, it is essential to get all the jointly-held debts in order, and either close the accounts, or put a freeze on any new spending so that one ex cannot take advantage of the other.

If one spouse has no separate payment history on his or her credit report, a divorce can cause that person’s credit score to drop dramatically. It’s important to take measures to secure individualized credit as well as joint credit in order to make certain that your credit history is strong, regardless of what happens in the future. Unfortunately, this often happens too late, and the spouse with the least amount of credit history usually has to seek help from credit repair specialists in order to get his or her credit score back to a reasonable level.

Still, there are some things you can do during the divorce process that will minimize the potential for detrimental effects, assuming that you and your ex-spouse are able to work together for your mutual benefit. The first step, if possible, should be establishing at least one or two lines of credit in each individual’s name, while any joint accounts in good standing can benefit each individual. After this, the second step should be closing all joint accounts – this includes credit cards, checking and savings accounts, dividing up the assets and debts fairly. Use some of the cash you receive to pay down your portion of the shared debt and then use the rest to open a checking or savings account in your own name.

While nothing can truly make the divorce process easier, by paying careful attention to your credit and credit score throughout the process, you can prevent some of the more common pitfalls facing couples who are in the process of getting a divorce. With attention to detail, and a willingness to compromise, both parties can come out of the process with minimal damage to their credit scores.

Rebuilding Your Credit Score: 3 Quick Tips

2009-01-08T01:48:00.003-05:00

Your credit score has a huge affect on your day-to-day life outside of whether or not you can get a loan. Insurance rates, employment, billing cycles and interest rates are just some of the areas where your credit score can and often does have an impact on your life. If you’re just getting started with credit repair, finding a quality credit repair company to work with is a good first step to improving your credit score and lowering the daily costs of poor credit. However, even if you are working with a reputable credit repair agency, there are some quick steps you can take that will also have a direct impact on your credit score and potentially improve your financial standing.

Tip 1: Avoid Excessive Hard Inquiries on Your Credit Report

If you are shopping for a loan, avoid applying to several different places and waiting to see what offers you receive. Multiple credit report inquiries in a short period of time can lower your credit score, even if you have an otherwise clean history. If you have your credit score, a better option may be to shop around without filling out the loan application until you’ve narrowed down your choices. If you know where you fall on the credit scale, then you can make a reasonable estimate as to the amount of interest you’ll be expected to pay and the terms of your loan. Regardless, it pays to keep the hard inquiries to your account to a minimum if you are trying to raise your credit score.

Tip 2: Be Alert for Potential Errors in Your Credit Report

This is a tip that may best be facilitated through working with a credit repair company. If you have errors on your credit report that are harming your score, you have the right to dispute these errors and have them corrected and/or removed. If you don’t recognize an account, or if there is erroneous information about the account, a reliable credit repair agency will be able to successfully contest the negative information on your behalf. Cleaning up your credit report will allow you to focus on taking care of any remaining negatives without having to worry about incorrect information having an impact on your credit score. If you believe that you may be a victim of identity theft, then you should also file a police report and notify the credit bureaus as soon as possible – minimizing the damage done by identity theft is essential to any credit repair process.

Tip 3: Work with Your Current Lenders

If you have some accounts that are in less than stellar shape, but that aren’t in dispute, consider trying to negotiate with your current creditors. This can be done through a credit counseling agency in some cases, but you may also be able to work directly with the lender if you have an established relationship that is mostly positive. One particular aspect you may wish to ask about is re-aging. Re-aging is a process that will get rid of your past due account by making it appear as “current” on your credit report. While federal laws dictate how a creditor may re-age your account, in general if the account is over 9 months old, and if you have made 3 consecutive payments and have demonstrated a willingness to continue to make payments, then re-aging should be an option for you. Creditors sometimes use re-aging to make an old debt look new, but if you’re planning to pay, it’s in your best interest to request that the account be re-aged. It’s quick, it’s free, and it gets rid of all the 30, 60, 90, and 120 days late notations for that account if you keep the payments current.

No matter what route you take with regards to repairing your credit, following these tips will help you to improve your score in a manner that is both ethical and long-lasting. Many credit repair companies can provide additional information and counseling about these techniques, and give specific advice tailored to your particular situation.

Available Credit to Debt Ratio: What it Means to Your Credit Score

2008-12-29T01:11:00.002-05:00

Most people understand the basic premise behind building or maintaining a good credit score: pay the bills on time, every month, consistently. Miss a payment, or default on a loan or credit card, and your credit history will reflect that negative information and lower your credit score. However, there are many other factors involved when it comes to determining your actual credit score, and not all of them have to do with whether or not you pay your bills on time each month. Your available credit to debt ratio is a big factor when it comes to figuring up your credit score. Your available credit to debt ratio can impact your score based upon not only your spending habits, but your debt-management plan as well.

Your available credit to debt ratio is, simply put, the amount of debt you currently carry, divided by the amount of your available credit. For example, if you have a credit card with a $1000 limit and you carry a $500 balance, your available credit to debt ratio is 50%. The lower this ratio, the better your credit score will be. Ideally, you should aim for a total credit to debt ratio of 30% or less. A high ratio will negatively impact your credit score even if you make all of your payments on time. This is because people who use most or all of their available credit are seen as having a higher risk of default.

It may seem as though the answer to improving your credit to debt ratio is to open more credit card accounts. In reality, opening multiple accounts in a short period of time will negatively impact your score. Your best option, if you have been making payments on time regularly to your credit card company, is to call and ask for a modest increase to your credit limit. This helps in two ways – first of all, it is an increased limit on a card that has a successful payment history. Secondly, it increases your overall available credit, which will lower your available credit to debt ratio, improving your credit score.

By the same token, if you have credit cards that you have paid off recently, don’t cancel them. The available credit on those cards still counts as part of your available credit to debt ratio. If you’re worried that you might be tempted to spend, take the cards out of your wallet and put them in a safe place that isn’t easily accessible for impulse purchases. Every six months or so, you may want to use the cards for a small purchase such as dinner or a movie, in order to keep the accounts from being canceled due to inactivity. Be sure to pay the full balance on the card when it comes due, in order to keep your debt ratio down.

Another way to improve the available credit to debt ratio is to pay more than your minimum balance each month. Besides being an excellent financial advice, paying more will free up more of your credit, and lower your available credit to debt ratio. One word of caution, however: if you have several credit cards with very high limits that you are not using, and that carry no balance, you may want to ask to have the limits lowered temporarily if you are in the market for a car or other large purchase. Some companies see an excessive amount of unused credit as potential debt, and may be reluctant to loan funds in that instance. In most cases, however, this credit will not work against you, but for you as you continue to build a solid credit history that will keep your credit score climbing.

Cutting Through the Confusion: Statute of Limitations vs. The Reporting Period on Credit Items

2008-12-14T23:29:00.004-05:00

When it comes to understanding your credit score and credit reporting, there are a lot of terms to remember. Because of this, sometimes it's easy to get confused when it comes to knowing your rights and how to manage your credit repair efforts. Two of the most commonly confused concepts in credit repair and credit reporting are the statute of limitations on collecting debt, and the reporting period on credit terms. While these are two separate, non-related concepts, getting the two confused can potentially cause problems with your credit score.

Understanding the Statute of Limitations

Simply put, the statute of limitations for any debt is the length of time a creditor has to bring legal action against you in order to collect the debt. This date varies from state to state, and may be anywhere from three to ten years, and depending on the type of debt. In some instances, such as a domestic judgment, the statute of limitations may be even longer – up to 20 years. However, once this date has passed, if a creditor tries to sue you to collect the debt, you have the means to successfully defend against having to make payments.

An important thing to remember is that the statute of limitations runs out at a set period of time after the last missed payment or activity on the account. This means that if your account is past the statute of limitations, but you make a payment, you’ve reset the clock, and will have to wait another 3 – 10 years for the collection period to expire. In some states, just the promise to make a payment can reset the statute of limitations, whether or not you actually follow through on the payment itself. In the meanwhile, your creditor will be able to legally sue you over the debt and attempt to recover not only what you owe, but interest as well.

Calculating the Statute of Limitations:

1. Add six months to the last date of activity on the account (payment or otherwise).

2. Add the number of years for your state's statute of limitations.

3. After this date, your creditors can no longer successfully file suit, as long as you can prove that the statute of limitations has expired.

Example:

1. You opened an account in May of 2000, and stopped making payments on June 3rd, 2001. Add six months to June 3rd for a date of December 3rd, 2001.

2. Your state’s statute of limitations is 4 years. Add 4 years to December 3rd.

3. Your creditors can no longer sue you for payment of that debt after December 3, 2005.

Understanding the Credit Reporting Period

By contrast, the credit reporting period only states how long the record will remain on your credit report, regardless of the actual time left on the statute of limitations. In most cases, after seven years, the debt will be removed from your credit report, whether or not you actually paid the debt. Here is where things can be confusing: Say the statute of limitations is 3 years in your state, and your debt is 4 years old, with no account activity in the last 4 years. This means that the statute of limitations has passed, even though the debt is still listed on your credit report.

Debt collectors may contact you and try to get you to make a payment on this debt to have it removed from your account, but even if you don't pay anything, the debt will be removed in another three years. However, if you make a payment on that account, and renew the statute of limitations, the debt may also be relisted as a new debt – so any missed payments will once again have a negative impact on your credit score.

If you’re confused about the statute of limitations and the credit reporting period, you aren’t alone. There are several credit repair services that can help you, and that will offer sound advice of when it’s prudent to pay the bill and when it's more prudent to just sit tight. Getting professional advice may help you to avoid unnecessary problems with your credit score.

Three Reasons to Clean Up Your Problem Credit Now

2008-12-07T19:14:00.002-05:00

With the current financial crisis blanketing the United States, many people are wisely trimming down their spending and holding off on unnecessary purchases. If you're one of the millions of people looking more closely at your bottom line and you also have problem credit, you may wonder if credit repair services are worth your hard-earned dollar. While everyone’s situation is unique, there are three good reasons that you might want to consider credit repair a necessary expense rather than a costly luxury.

Reason Number One: You are Moving or Plan to Move in the Near Future

If you're planning on moving into a new apartment, problem credit can often cause unforeseen difficulties and increased expenses. Most apartment managers now run credit reports when you fill out an application for a new apartment. This can mean that you'll be turned down for rent in more reputable apartment complexes, leaving your options for suitable living arrangements limited at best. If you are accepted into the apartment complex, be prepared to pay a higher deposit than most renters – and you may or may not get your deposit returned at the end of the lease period, depending on the terms.

Poor credit scores can also cause difficulties with your utilities. Electric companies, gas companies and phone companies almost always check your credit history, and a poor credit score can mean deposits upwards of $200 or more. This can quickly add up to an unaffordable expense if you're trying to move for financial or budgetary reasons. If you don't have the cash on hand to pay the exorbitant amount charged for deposits and connection fees, you may find you can’t afford to move at all, since utilities are a large part of what makes any residence livable. And if you do manage to pay the deposits, don't expect a refund; some companies will apply the deposit to your balance after several months of payment. Others will hold the deposit as security against your final bill. But rarely will a utility company issue a refund check for a deposit, unless you are turning off the service and have a positive balance.

Reason Number Two: You Plan to Look for a New Job

Unemployment is at an all-time high, and new jobs with decent benefits are becoming more scarce throughout the country. If you are one of the many recently unemployed due to company layoffs and closings, a poor credit score may put you at the bottom of the pile when it comes to job applicants.

More and more, employers are looking at the credit of potential employees when making hiring decisions. Poor credit may put you out of the running for a new job, even if you are highly qualified in other ways. Of particular concern, if you work in management or finance, a poor credit score may be seen as a direct reflection of how well you would manage company funds.

If your current position requires a security clearance, you may find yourself suddenly out of job if your credit scores fall too low and you are classed as a security risk.

Job seekers can give themselves an extra advantage with a clean credit history and strong credit score. Whether accurate or not, your credit history is seen as a gauge of how trustworthy, responsible, and reliable you will be in your new position. If you take the time to clean up your credit score before you start your job search, you may find more opportunities for employment.

Reason Number Three: You Plan to Buy a House/Refinance Your Mortgage

While the banks are not doling out home loans at the levels seen earlier in the year, home buying could prove an attractive option for those who could not afford home prices seen just a few months ago. With the housing markets weakening, many first-time buyers could be in for an attractive first mortgage if they have good credit scores. Interest rates are low, and with foreclosures on the rise, a couple with an average income for their area may be able to afford a larger or nicer home than they would have when the housing market was booming.

If you’re currently a homeowner and thinking of refinancing, having a good credit score can see your mortgage payments drop dramatically, saving you thousands of dollars over the life of the loan. While not everyone can qualify for refinancing, having a good credit score means that you’ll have more options than most people who are looking to downsize their mortgage payments in the long-term.

Those who have problem credit are not likely to find a home loan available for any price in the current market. With so many lending companies burned with the so-called 'sub-prime' lending spree, the market for loans available to buyers with less than perfect credit has diminished dramatically. So even if you have the income for a new home, a poor credit history may prove to be an insurmountable barrier to the American dream.

There are many reasons to consider credit repair as a solution to your current credit score problems, but if you fall into one of the above categories, you may want to take a closer look at procuring credit repair sooner, rather than later. With the amount of money you save in reduced deposits, increased job security, and lower interest rates, the amount you spend on credit repair services will be a drop in the bucket, comparatively.

Identity Theft and Your Credit: Protecting Yourself Over the Holiday Season

2008-11-30T23:29:00.000-05:00

The holiday shopping season is almost upon us, and with it comes the additional dangers of identity theft and credit card fraud. Unauthorized charges, opening new accounts, and transferring cash out of existing accounts are just a few of the ways that identity thieves can wreck havoc with your financial well-being. Though the consequences can be severe – a lower credit score, liability for bills and purchases you did not make, and loss of income – there are steps you can take to preserve your credit and avoid being a victim of identity theft. Here are a few tips to help you maintain your credit:

Online Monitoring – if your credit card company allows you to monitor your charges online, take advantage of that to keep track of your charges. Set up an email alert whenever your credit nears its limit, and check for unauthorized charges on a regular basis. Most credit card companies have a 0% fraud liability in place, but this only works on your behalf if you notice a suspicious charge and report it promptly – it can prove difficult to dispute a charge that you don’t notice until months later.

Set Spending Limits – don’t trust your credit card company to hold you to your credit limit. Many companies will allow you to go over your limit in charges, and then access an over-limit fee for each charge that is above your approved credit line. This could mean that a thief with your credit card number might still cash in, even if your cards are maxed out. The best way to handle this is to tell your credit card company not to allow courtesy over-limit spending. While it means you will have to be more careful about your own spending as well, it can prevent a host of problems with over-limit fees down the line.

Leave the Plastic at Home – unless you’re going on a major shopping spree, you probably don’t need every credit card you own in your wallet. Only take one or two, and you minimize your risk if your cards are ever lost or stolen. By keeping excessive cards out of your wallet, you may also cut down on impulse spending, which can help your budget and your credit score in return.

Be Smart about Online Shopping – only shop at reputable sites that you know you can trust. The holiday season is not the best time to be adventurous with online shopping. A merchant website can be up one day and gone the next, so be sure to deal with companies you can trust – and keep your anti-virus, firewall, and browser up-to-date to minimize security risks overall.

Consider Fraud Monitoring – if you can afford it, consider paying for a fraud monitoring service over the holiday season. This will make it simple for you to know if anyone has opened a new account in your name, or is making large purchases on accounts you may not have used actively in some time. Be sure to choose a reputable company, ideally one that will provide a monthly report, either through the mail or online, about your credit activity. Match what you see in the report to what you know you’ve charged, and if you notice discrepancies, contact your credit card company right away.

With credit card fraud and identity theft, the sooner the fraudulent actions are caught, the easier it is to straighten out any potential damage to your credit history. So be alert, shop safely, and always monitor your statements for unusual activity. If you follow these tips, you can enjoy your holiday shopping without worrying about a nasty New Year’s surprise on your credit score.

Three Common Credit Myths and How They Can Harm Your Credit Score

2008-11-24T18:31:00.005-05:00

With the current state of the economy, having a strong credit score is more important than ever. Unfortunately, common misconceptions about credit and how your credit score can be improved ultimately do more harm than good. With a sea of credit repair companies promising flawless credit, it can be easy to succumb to misinformation. Here are three common credit myths that could potentially damage your credit score:

Myth: Once a Debt is Charged-Off, I Don't Have to Pay It

Charge-offs may seem like a positive at first, namely because the term sounds very similar to a "discharged" debt, which is one that has been cleared. Charged-off debts, despite the similar-sounding name, do not clear you of the obligation to pay the debt. Instead, it is an indication that the company does not believe you will pay the debt and therefore it has been removed from their accounts receivable. It essentially makes your debt an expense on the record books of the company, but that does not relieve you of responsibility. Charged-off debt classifies you as a 'high-risk' to many credit issuing companies, and can severely impact your ability to get future credit.

One Caveat: if the debt is past the time allowed by your state to collect, you don't have to repay the debt, whether it's been charged-off or not. Typically, the age of the debt has to be anywhere from 4-6 years before this is the case, but because these regulations vary by state, it's best to check your local laws to be sure you’re in the clear.

Myth: Credit Repair Services Can Erase All Negative Credit Information, Even if it's Legitimate

Reputable companies won't promise to erase legitimate debts. Under the Fair Credit Reporting Act, you are allowed to challenge debts that you believe to be erroneous or questionable. That does not mean that you should challenge any and all debts. In fact, doing so may result in collection agencies and bill collectors ignoring any legitimate requests you may make to have truly erroneous information removed. This is because if the company feels that your dispute is 'frivolous' they can ignore it, and leave the debt on your credit report.

There are numerous ways to have negative items on your credit report removed. Disputing them is not the only way. If the debt is legitimate and being reported correctly, you may want to try to negotiate a pay for delete. When using this method, remember to always get the terms in writing.

Your best bet is to choose a credit repair service that has a reputation for success, and that uses ethical and legal methods to improve your credit score. You may not be able to get rid of all negative information, but the removal of even a few items could see your credit score improve dramatically.

Paying Off Old Debts Will Improve My Credit Score

Surprisingly, paying off old debts will not always improve your credit score, and may actually worsen it. This is because paying on an old debt can sometimes make the debt appear to be new. If the amount you owe is substantial, this can make it seem as though you’ve just taken on a lot of new debt. While the credit bureaus are working on finding ways to eliminate this setback, currently there is still a chance you could see your credit score fall as a result of old debts being paid. Be particularly vigilant when it comes to knowing when your debt's statute of limitations for collections has run out – you don’t want to pay on a debt that is no longer enforceable by law unless there are very special circumstances.

Keeping the truth behind these three myths in mind can help you to avoid unnecessary declines in your credit score. If you need help improving your credit score, always deal with a reputable agency, and be sure to check the facts to be certain the law is on your side in your quest for better credit.

Credit Cards and Fine Print: Why You May Be Paying Fees, Even if You’re Paying on Time

2008-11-18T22:45:00.003-05:00

Most people who have taken the time to repair their credit are careful about maintaining it. Paying bills on time regularly becomes a habit, and you might assume that your responsible spending will be rewarded in lower interest rates and better terms on your credit card. While this may be true in some cases, more and more credit card companies are factoring fees and steep interest rates into their profit model. This means that even if you pay your card on time, you may be charged more than you realize. Here are some terms you may see in the fine print of your credit card and what it can mean to you in terms of fees, interest and extra payments.

Universal Default

You may notice that if you miss a payment by even a few days with one credit card account, your other credit cards will revert to a default rate. This is what’s termed 'Universal Default' and some credit card companies use it to trap you into higher interest rates. After all, it’s almost certain that you’ll be a little late at some point, and this allows the credit card company to make a bigger profit, even if you aren’t late making payments to their company in particular.

Unfortunately, the only thing you can do to avoid universal default if it is a part of your credit card agreement is to pay all of your credit card bills on time, every time. A better bet is to look for a card that doesn’t have this stipulation in the agreement, and transfer your balances there.

Interest on Late/Overlimit Fees

Some people do not realize that if you are charged a late fee, interest accrues on the fee as if you made a purchase. This essentially means that you are charged more for each time you go over your limit or are late on your payments – and the interest continues to build month to month, so that it becomes more difficult to keep your balances down and avoid more fees and damaging notations to your credit report.

Double Cycle Billing

Double cycle billing is another financial ploy that many credit card holders do not realize is working against them. Essentially, double cycle billing charges interest twice on the same purchases, if you make a partial payment to bring down the balance without paying it off entirely. For example, if you had a zero balance on your card and you made a purchase of $1000 dollars, paying $400 when the bill was due should mean that you would only have interest charges on the $600 that’s left on your bill. This is true with cards that use conventional billing. However, with double cycle billing, you would actually have interest on $1600 the next month. The initial interest would be charged to the $1000 purchase you made, and then additional interest on the $600 balance remaining on the card.

This is another of those instances when it pays to shop around and read the fine print. Be certain your grace period for purchases is spelled out, and if not that the actual interest charges are not double-billed.

"Courtesy" Overdraft

Many times, credit card companies will allow you to keep charging on your card, even if you are over the limit. This means that if you don’t keep a close eye on your balances, you could be charging up a fortune in overdraft fees. While this type of 'service' is usually called a 'courtesy' overdraft, it is actually a disservice that hurts your credit score and makes it difficult for you to obtain more credit, as well as making it difficult to pay off what you already owe.

One of the easiest ways to avoid courtesy overdraft is to set up a reminder that will alert you when you are nearing your credit card limit. Be sure to set the alert at a reasonable amount: $100 to $200 left on your card should give you plenty of notice so that you don’t overspend unknowingly.

If you pay careful attention to the terms on your cards, and plan your credit card purchases accordingly, you can avoid falling into the traps that credit card companies set in order to take more of your money each month. Shop around for fair cards that don’t use deceptive billing practices and you’ll be well on your way to avoiding woes due to fine print.