Thursday, December 25, 2008

Keeping Watch on Credit Card Fees Could Save You Money

Credit card users who haven't bothered to read the fine print in their cardmember agreements could be paying more than they expect, should they incur a late payment fee.

Credit card issuers occasionally update their rates, fees, and penalties, so it requires ongoing diligence to stay informed. Disclosures that were a single page one decade ago now can total 20 pages, on average. Late fees, while hardly new, have increased markedly since the mid-1990s to about $30 on average, and often reach up to $39.

At the same time, other types of credit card fees are important to consider. balance transfer fees are fairly common, which generally amount to about 3% of the transfer amount. The good news is that most credit card issuers cap balance transfer fees at $75, which can make transferring a large balance considerably less painful.

Looking ahead, some credit card issuers are considering a fee for cardholders who pay off their balance in full each month, according to experts. This is because so called "transactors" are unprofitable for most issuers. Additionally, some card issuers are considering interest rate increases automatically triggered by a credit rating decline, even if cardholders make payments on time.

What is a credit card user to do? First on the agenda is a yearly review of their credit cards, especially each card's APR. Find out the reason for rates above 14% by calling the credit card issuer. Be on the lookout for recurring fees. Although the card may have initially been a no fee credit card, a fee could have been added on at some point. Beware of fees for exceeding the card's credit limit and for making payments by phone.

Once fees have been identified, ask the card issuer to have them removed. A good customer may be able to get them reversed one or perhaps even two times. Also be sure to make at least the minimum payment well before the due date if you're not able to pay the balance in full.

While staying on top of credit card fees is not easy, it is worth the trouble in order to save your hard earned money.

Tuesday, December 23, 2008

Let Credit Cards Work Together to Save You Money

With credit cards providing all sorts of benefits, choosy consumers can get a lot of mileage from having a decent assortment of plastic. Issuers are creating credit cards that target different categories of users, enabling smart consumers to apply for a number of credit cards and only use each credit card in a way that provides the maximum benefit.

However, this approach should not be taken by consumers who have trouble paying off their credit card balances each month, paying on time, or who have damaged credit histories. Those individuals who do better to limit the number of credit cards they hold.

To start, consumers should learn about the variety of available credit card options by visiting websites like When considering rewards credit cards, shoppers can drill down into the terms and conditions of the reward plan to find out such things as when the plan expires and if there is an annual limit to the amount of rewards they can earn.

Consumers may want to evaluate their own household needs, picking three to five credit cards that will help the family the most. Perhaps the family could use a cash back credit card, a gasoline credit card, and an airline credit card. Should both members of a married couple each have good credit scores, the husband and wife can separate their card applications, allowing them to take advantage of new deals from issuers who may have already signed up one spouse but not the other.

Consumers can select a main credit card that provides an appealing rebate, making any transactions with this card that do not fall into another category they have a card for.

Perhaps you will decide to use a credit card that provides 0% interest for one year on balance transfers or cash advances. Consumers should call their card issuer to find out the date the balance must be repaid by to avoid any interest charges, marking this date on their calendar. They may then decide to put this credit card aside and not use it for any purchases until the balance has been paid off. Check to see if the card charges fees for balance transfers.

Meanwhile, they can choose a credit card that offers benefits at places they spend a lot of money, such as home improvement stores or at restaurants.

After a year using their selection of credit cards, consumers may want to add up the total of how much they have earned and saved by using the right card at the right time. With card issuers often retooling rewards programs, consumers may also want to review the terms for the plastic they are carrying and decide if they would do better to make some swaps for cards that would provide greater benefits.

When juggling multiple credit cards, it is very important to keep up with payments so you don't get slammed with penalty fees and charges. Online bill payments can help, with consumers making sure they send an automatic payment to each credit card issuer before the payment's due date.

Monday, December 22, 2008

Credit Card Information at Risk When Throwing Away an Old Computer

With the rapid pace of technological innovation today, the computer you just bought a year ago may already seem outdated. So it's likely you regularly buy a new one. But what to do with the "old" computer? While there a number of options for getting rid of a PC, simply throwing away your computer may be the worst idea, as it can provide a danger to the environment and public health, as well as to sensitive personal data, including your credit card information.

Your computer, like most electronic devices, contains mercury, cadmium, and other hazardous materials. These substances can be hazardous if dumped in a landfill. As a result, it is worthwhile to investigate ways to safely recycle or dispose of your PC.

Your credit card information is also as risk when you simply throw a computer into the trash. If you have made Internet purchases on your PC, or perhaps saved budgeting information to your hard drive, sensitive credit card and financial information could be on your computer. Even if you erased files by throwing them into the computer's Recycle Bin, they can still exist on your hard drive.

There is good reason to be concerned about who could get ahold of the information on your old computer. Banking information and credit card details taken from the hard drives of computers that were recycled or put on the used market have been sold in places as far away as Nigeria. Whoever buys the discarded computers can recover data from unerased hard drives, making your credit card information a dangerous tool in the hands of identity thieves.

As a result, smart computer users should take precautions when they throw away their PCs, just as they would with any credit card statements or other paperwork that contains sensitive card information. One way to erase credit card and other information from your hard drive is through the use of commercial software that acts as a digital file shredder by overwriting files and making them not recoverable.

Or, you can literally smash your hard drive. First, you can remove panels from your computer to get at the hard drive. Then, take off the top and use a hammer to destroy the hard drive.

Still, an old computer does not need to be thrown away. An older computer can function as a dedicated file server in a small office or home network, or can be a reliable backup should anything (virus, theft, damage, etc.) happen to your new PC. If you have wiped your computer clean with the type of software described above, you may want to sell the computer, or donate it to a charitable organization (earning yourself a tax deduction in the process). For those consumers looking to recycle a PC, take a look at the webpage of the National Recycling Coalition's Electronics Recycling Initiative:

Remember that while an old computer may simply be trash to you, it could be a potential goldmine for those looking to commit identity theft.

Friday, December 19, 2008

Protect Your Credit Card From the Latest Identity Theft Techniques

Most credit card users are aware that they need to be wary of identity thieves who would like nothing better than to gain the card number from an unsuspecting consumer. So while consumers should continue to be wary about giving out their credit card information in person, by phone, or over the Internet to anyone who they don't know, there are some other things to also look out for.

Many sandwich shops offer coupons for a free sub. Some thieves have taken to buying up a number of these coupons, and then picking up a similar number of credit card applications. These criminals will go to a shopping mall or other highly-trafficked area and ask people to sign up for a credit card to get a free sandwich. Once the person has filled out the application, the thief has all their personal information, including a social security number. To an identity thief, this information is much more valuable than the cost of a hoagie.

To avoid becoming a victim of this scam, consumers can apply for credit cards online at secure Websites like

Another way identity thieves are getting at credit card information is through the use of that popular piece of technology, the camera phone. As the cardholder goes to use their plastic at an ATM or somewhere else the card number is publicly visible, the nearby thief snaps a photo.

Cardholders using an ATM or taking their credit card out in public should notice if anyone nearby has a camera phone at the ready or appears to be getting a look at the card number. Consumers should try and keep the actual card number obscured by their hand when they take it out from a wallet.

Make an identity thief's life tougher by always thinking about ways to protect your credit card information and taking the necessary precautions.

Thursday, December 18, 2008

Credit Cards Provide a Safety Net for Cash-Strapped Consumers

Many people live beyond their means. But for cash-strapped consumers simply looking to get by, credit cards act as a safety net, helping them to make ends meet during tough financial times.

Not everyone who carries a credit card debt is a spendthrift. While some cardholders certainly are compulsive shoppers or buyers with little self-control, this is not always the case. A degree of the massive debt in this country can be attributed to Americans who simply lack the necessary savings to get out a jam. As a result, borrowing money is their only choice when times are hard.

Many Americans, from the middle class on down, find that basic necessities become tougher to pay for each year. With an already-tight budget, the events that can force a consumer to run up credit card debt are by no means unusual.

The cost of medical care can be a huge burden, with many necessary procedures or treatments falling beyond the monetary means of the average person. Likewise, with many U.S. companies scaling back operations or moving them overseas, layoffs are a constant threat to the American worker. Without their main source of income, the unemployed may turn to a credit card as their sole access to funds. Meanwhile, the sky-high divorce rate in the U.S. produces not just broken homes, but difficult financial situations for people accustomed to making ends meet on a combined income.

The critics who charge that the American public are unable to live within their means and are simply too willing to rack up unnecessary debt on credit cards should consider these factors. Challenges like medical costs, job loss, and divorce can leave consumers with little choice but to use their credit card for staples like food, gas, and clothing.

For those consumers who need a credit card to get out of a jam, consider a credit card that offers a low interest rate. That way, when financial pressures do ease up, it will be easier to pay back any outstanding balance on the card.

Wednesday, December 17, 2008

Protect Yourself From Credit Card

By now, most savvy credit card users know to carefully review their bill each month for any unauthorized charges. Scrutinizing you credit card statement for unusual activity can alert you to the activities of fraudsters who have improperly gotten hold of your account information, since even the most careful consumers may have their financial information stolen.

One way thieves are trying to sneak unauthorized charges past credit card users is through the use of smaller transactions. Realizing that major charges will jump out when cardholders examine their credit card bill, thieves hope that lesser amounts (particularly when they appear on lengthy statements) will sneak past the eyes of watchful consumers.

A single thief may place these small unauthorized charges, which some people have labeled "spam charges," on the credit cards of hundreds of different people. While a single major charge in the hundreds of dollars may stand out on a credit card bill, consumers may simply be able to write off a smaller transaction, perhaps deciding it was something a spouse or another family member put on the card.

To prevent spam charges, consumers should take all the usual precautions, including only shopping online at secure websites that begin their addresses with "https" as opposed to "http." When using Microsoft's Internet Explorer, users should look for a small yellow padlock icon in a shaded bar near the bottom of the screen. By double clicking on the padlock, surfers will bring up the site's security certificate, which they should check to make sure it hasn't expired and that the name on the certificate matches the name of the company the purchase is being made from.

Additionally, some experts recommend having one credit card that is used only for online shopping, instead of paying with all your different credit cards on the Internet. When shopping for a credit card for online use, consider the range of options available at, such as low interest, rewards, and cash back credit cards. By using just one card online, consumers will be able to make easily keep track of spending and notice any unusual transactions.

Separately, Internet users can secure their home computers against viruses or by using a spyware detector such as Ad-Aware or SpyBot, which both offer free downloads.

If consumers discover unauthorized charges on their credit card statements, they should be sure to inform their card issuer. Cardholders are not responsible for unauthorized charges -- provided they are promptly brought to the attention of the credit card company.

While it may not be clear how thieves gained access to credit card information, that does not mean consumers should stop using their plastic when buying items online. Credit cards often are a better choice for Web purchases than other payment methods since they provide legal rights, including the ability to dispute payments. Certain credit cards also offer protection such as insurance or extended warranties.

Tuesday, December 16, 2008

Googling Your Name Can Turn Up Credit Card Data

It's a popular diversion: type your name (or a friend's name) into an Internet search engine like Google and see what results pop up. Occasionally, the search results may contain something you wish wasn't publicly available, like your credit card number. With no hacking required, a simple Google search could turn up your credit card number, along with your name and address.

Often, credit card and other data may appear on the Internet as a result of identity theft, and the criminals who traffic in stolen identities for their own illegal gain. These identity thieves are able to snatch cardholder information from online businesses that take credit card orders but do not employ proper security measures to protect customer information from hackers.

Identity thieves then traffic in your personal data, attempting to buy or sell it online, along with thousands of others. They may sell information that includes a debit card PIN and credit card numbers, Social Security number, home phone number, e-mail address and password, and a mother's maiden name -- enough information for a multi-year identity theft outing. Your data could crop up on a Website established for just such a purpose, although, more often, stolen credit card information is traded behind closed doors in Internet chat rooms where information is more difficult to trace.

Criminals may post stolen credit card and other personal information online for a number of reasons. They may want to provide a sample of the information they are looking to sell, allowing others to test the goods to prove they are valid before making a purchase. Or, the thief may be seeking to make it more difficult for law enforcement to trace illegal use of the credit card back to him -- muddying the waters by allowing others to get hold of the data which they too can use to make charges. Additionally, the thief may be trying to simply improve his status in the underground community.

Administrators who run the chat rooms where credit card and other personal data is traded have the ability to kick people out of the room and set passwords, in addition to loading programs onto the page which enable online criminals to check the authenticity of stolen credit card data in real time. Administrators can use hacked merchant credit card accounts to verify the information before posting it in the room. Generally they do not actually charge the credit card, instead running authorization transactions, which do not cost the cardholder anything but confirm whether a specific card is usable. The merchant is charged the minimum transaction fee (generally about $0.10), and the consumer remains unaware their credit card account is about to be compromised.

To prevent your credit card information from becoming another items floating along the information superhighway, be wary of fraudsters employing phishing scams or other techniques that try and get you to reveal personal information. The credit card data that shows up through an online search may have been derived from a phishing scheme. Separately, be sure that you only conduct online transactions through secured websites, with Internet addresses that begin "https" and often display a lock icon.

If searching Google for your name does produce a result containing your credit card number, you can take action. Cancel the credit card, look over statements from your other credit cards for unusual transactions, and get a copy of your credit report from each of the three national credit bureaus: Equifax, Experian and TransUnion. Additionally, you can ask the three credit bureaus to have a freeze or fraud alert put on your account.

Additionally, you should file a report with the Internet Crime Complaint Center. The IC3 will refer your case to the appropriate law enforcement agencies.

While doing a search for your name alone does not put you at risk, the same cannot be said for Googling your credit card number, according to cyber-security experts. Search engines could keep tabs on the search and thus your credit card data. AOL recently ignited an uproar when it provided researchers with the search terms used by over 50,000 subscribers -- including Social Security numbers, medical conditions, and other information that could be used to identify a Web surfer. It pays to remember that once personal information enters cyberspace, it is impossible to know where it will end up.

Monday, December 15, 2008

Be Credit Card Savvy When Shopping for the Holidays

Before you step out the door with your credit card in hand for some holiday shopping, take some time to go over both your credit card statement and the credit card's terms and conditions. Such a review can help you avoid irresponsible spending with your credit card and can help those with multiple credit cards choose the best plastic for making holiday purchases.

One of the first things to consider is the credit limit for the credit card you will use for gift buying. Be sure that your credit limit has enough room to accommodate all the holiday presents you plan to buy. You certainly do not want to go over your credit limit during the holiday season. If your credit card balance is near your limit, even a few gifts could be enough to send you past the limit -- and into the world of penalty fees and higher interest rates, the credit card equivalent of a lump of coal in your stocking.

To prevent this from happening, find out the amount of your credit card balance either by looking at a statement or by calling the credit card issuer directly, and compare this to your credit limit. It may be possible to set up an e-mail alert through your credit card issuer that lets you know when you are nearing your credit limit. If you are getting close, you should try to pay off more on your credit card balances in November and December so that your bill in January doesn't end up including any nasty fees or a steeper interest rate.

Another thing to be careful of when using a credit card at holiday time is the danger of finance charges. For shoppers with several credit cards, avoid charging items on plastic with two-cycle billing. A credit card with two-cycle billing allows the card issuer to charge interest retroactively.

To understand two-cycle billing, let's say your credit card has a zero balance at the start of December. During your holiday shopping, you charge $1,000 on that credit card. You then pay $990 in January toward your credit card balance, with plans to pay interest on the remaining $10 on your next bill. However, two-cycle billing will charge interest on the entire $1,000 although you already had paid 99% of the balance on time. As a result, the amount of interest you pay will be significantly higher than it would with single-cycle billing.

Using a low interest credit card can save you from paying more for those holiday gifts, since carrying a balance means you do not get a grace period on new purchases.

Meanwhile, it's good to plan for the possibility that not every gift will be exactly what everyone on your list wanted. It might be hard for your aunt to enjoy a sweater that is two sizes too small, for example. Therefore, hold onto any credit card receipts as well as the original packaging the gift came in to help your friends and family make any necessary returns. Also, remind whoever gets the gift to leave tags on any presents they would like to return or exchange.

And, when making the initial purchase, you should ask about each store's return policy, since some stores may be tougher about returning merchandise, particularly with items that were on sale or seasonal. While a store should post its exchange or return policy, it is not required to do so by law, so asking the salesperson is a smart move. Gift receipts, offered by many stores, can be enclosed with the present to make returns easier.

Separately, if the gift you just bought later goes on sale, you may be able to ask the store for a price adjustment.

Happy shopping!

Sunday, December 14, 2008

Credit Card Fraud Danger Lurks in Magazine Inserts

Consumers who receive magazines or catalogs in the mail could be the target of credit card fraud. Many magazines and catalogs arrive in the mail with pre-printed, pre-approved credit card applications containing your personal information -- presenting a golden opportunity for identity thieves.

While these credit card applications make it easy for consumers to apply for some extra plastic, they also make it simple for identity thieves to apply for a credit card in your name.

Too often, magazines and catalogs may be thrown away without considering the fact that these credit card applications, along with the consumer's name and address, is easily accessible to any criminal willing to do a little digging. Other consumers may make a habit of giving away old magazines without the possibility of identity theft even crossing their minds.

Experts encourage consumers to tear out these inserts and destroy them, as well as cutting out the name label printed on the publication.

Friday, December 12, 2008

Credit Card

Credit card issuers will often mail out notification of changes to a card's terms along with the bank's privacy policy. But if consumers don't look carefully, the notice of a change in their credit card's terms could get lost in the shuffle.

The bank may keep you up-to-date on its privacy policy when you open a new account, on an annual basis, or when the privacy policy gets changed. The credit card issuer's privacy policy outlines the ways in which the bank collects and uses your personal information, including data on your income, account balance information, and credit history. The privacy policy likely notes the way your personal information is shared both within the bank and externally -- with financial and non-financial companies alike.

Additionally, the privacy policy regarding your credit card may explain when your information is shared, such as to protect against fraud, when reporting to a credit bureau, and with your consent.

You may have the ability to request that certain personal information is not shared in specific cases. Perhaps you do not want non-financial companies to get a look at your data, or maybe you would rather that certain branches of your bank not have access to sensitive information about you. Still, your request may be overridden by the law and certain information may be exempt from your request for protection.

To exercise some power over how the credit card issuer treats your personal information, you will need to get in touch with them. The bank should provide contact information in the mailing so you can inform them of your privacy policy choices.

While all this privacy policy information is very helpful to the cardholder, you are more likely to be concerned about changes to your credit card terms. "Change in term" notices are often enclosed along with the mailing that provides information on the bank's privacy policy. However, the printed material announcing a change to your credit card terms may be easily overlooked if you think the letter only contains privacy policy information.

An issuer may notify you of changes to a credit card's terms involving the interest rate, the events which trigger the credit card's default APR, and various fees.

The notification of a change in the credit card's terms can also offer you the chance to opt out -- that is, the ability to decide you don't want to continue using the card once the new terms take effect. Opting out involves notifying the credit card issuer that you do not accept the changes. You will need to read your opt out information carefully to find out the proper way to opt out.

Opting out of card terms that no longer resemble what you signed up for can be a smart decision. After all, if you applied for a low interest credit card, but the new terms put you in danger of triggering a high default APR, then you may not want to accept the changes to your credit card.

So when you receive a letter from the bank regarding your privacy policy, be sure to also look for information on any changes to your credit card terms.

Thursday, December 11, 2008

Paying Off Credit Card Debt Vs. Funding Your 401k

When we are presented with two options that both seem good, it can be tough to make a decision. This is true in the case of the choice between using extra money to pay off credit card debt or to invest in a 401k retirement program -- both of which are recommended by financial advisers.

In an ideal situation, it would be possible to both pay off credit card debt and contribute the maximum amount to an employer's 401k retirement fund. But for most of us, we have to make the most of a limited amount of money. So for Americans faced with the decision between paying off credit card debt and funding their 401k plan, how should we best put our money to work?

First, consider your credit card debt. According to the Federal Reserve, the average interest rate on credit card accounts is nearing 15%. That is very costly, especially since credit card interest payments are not tax-deductible. So with most credit cards charging 15% interest on whatever balance is owed, paying off credit card debt is equal to earning a guaranteed 15% return on your money.

Next, consider your 401k plan. Many employers will contribute $0.50 for every dollar you put into the plan, for a guaranteed 50% return on your investment. Additionally, the money you invest in your 401k plan grows tax-free until you take it out. That is a major difference from the money used on a credit card, which gets no special tax treatment.

Based on this logic, it looks like the 401k, with its tax-advantaged 50% return, trumps paying off your credit card debt and its regular "return" of 15%. However, when you consider that a 50% employer match on your 401k investment is a one-time deal, while 15% interest on a credit card balance in ongoing, it becomes clear that you should first pay off the credit card debt.

But in order for the math to work in your favor, after paying off the credit card debt, you have to make sure not to run up a balance again in the future. Additionally, once you have erased your credit card debt, you should contribute the full amount to your 401k.

It is almost always a good idea to avoid carrying a credit card balance. But what if you feel you should begin contributing to your 401k immediately, and therefore have to revolve a credit card balance to do so? Could this be a better option for you than paying down your entire credit card balance first?

To do the math, imagine you have $150 each month in extra money as well as a $4,000 credit card balance racking up 15% interest. In this case, the minimum credit card payment each month would be about $90.

If you choose to first get rid of your credit card debt, by using the full $150 each month to pay down your balance, you could eliminate the credit card debt in 32 months at a cost of $756 in total interest. After your credit card balance had been reduced to zero, you could then invest the entire $150 into your 401k each month. With an employer match of 50% and an annual 8% return, your 401k would reach $5,410 in 54 months -- the same time frame we will consider below.

However, if you decide to begin contributing immediately to your 401k, putting $100 a month toward paying off your credit card debt and the other $50 into your retirement plan, it will take those 54 months to eliminate your credit card debt at a cost of $1,341 in interest. With the employer match and an 8% annual return, you would have $4,890.

By first paying off your credit card debt, it would be erased almost two years sooner than by trying to use money for both the debt and the 401k simultaneously. Meanwhile, your 401k would grow by an additional $500 over the 54 months. Therefore, paying off your credit card debt first, then investing fully in your 401k, wins out.

Of course, since a credit card bill is paid with after-tax dollars while a 401k is funded with pretax dollars, a truly real-world comparison must include the impact from taxes.

As an example, if you are in the 25% federal tax bracket, you need to earn $200 to net $150 after taxes to pay off your credit card debt. But if you decide to tackle the debt while also investing in the 401k as outlined above, you need to earn just $183 for the $100 after taxes and the $50 pretax. The difference could then be also invested in your retirement account.

Using this approach of both paying down the credit card debt and investing in the 401k, you would have $6,508 at the end of the multitasking period. But if you first paid off your credit card debt, you would then have more to contribute to a 401k, which would in turn yield $7,188.

Therefore, when given the option, it makes financial sense to first tackle your credit card debt completely before then moving on to contribute the maximum amount to your 401k plan. One way to quickly reduce credit card interest payments (which can save you both time and money) is to apply for a balance transfer credit card with a lower APR than the credit card you are currently using. Lower interest rates mean smaller credit card bills, which in turn mean less time paying off a credit card balance and an earlier start contributing to a 401k.

In closing, to truly make the most of your money, employ good financial behavior. Always pay off your credit card balance, and be sure to take advantage of a 401k plan that offers an employer match.

Wednesday, December 10, 2008

Credit Card Users Need Not Strive for Perfect Credit

Most consumers probably know that credit card applications are approved or denied on the basis of their credit score, that all-important number with a huge bearing on your ability to borrow money. While many of us wish our credit score was higher, experts suggest there is not much reason to concern yourself with striving in vain for a perfect score, particularly if your credit score is already excellent.

For starters, even those people who are exposed to lots of credit scores have to admit perfect scores are very, very rare -- if they are ever seen at all. With the popular FICO score, the range goes from a very poor 300 all the way up to a perfect 850. But even the vice president of public education at Experian, one of the three major credit bureaus, acknowledges that she has never seen an 850.

Rather, she notes that the majority of high scores peak at about 825. As a result, your time may be better spent looking for the Loch Ness Monster or Bigfoot rather than hoping to catch a glimpse of a perfect credit score.

Another reason why credit card users need not struggle to hit the top end of the credit score range is practical -- they just aren't going to see much benefit going from excellent to perfect. Washington, D.C.-based advocacy group Consumer Action explains that consumers who improve their credit score from a 775 to an 850 will not see a difference in their rates.

Therefore, if you are able to get a fair interest rate and enough credit when you apply for credit cards, there are other things to focus your energies on as opposed to battling to get your credit score even higher. For example, try alphabetizing the items in your refrigerator.

However, for those of us who have been denied a credit card or loan due to credit scores below the high 700s, there are ways to get your score up that you may or may not have heard before:

Don't go overboard with your use of credit. Even those consumers who pay off their credit card balance every month could still show debt on the day their credit history gets pulled, explains FICO-score developer Fair Isaac Corp. By always using credit carefully, you can be confident that you credit use will appear sensible no matter when your lenders look at your credit history. Aim to use about 25% of your available credit.

Keep credit card applications to a sensible number. While it may be tempting to fill you wallet with the great variety of credit cards available through, if you want to emulate those people with the highest credit scores, it might be better not to. That is because those consumers with the top credit scores tend to apply for credit much less than the average of twice a year. And, having an excellent credit score means you are more likely to get approved for those credit cards you really want.

Keep your creditors honest. Even if you always pay your bills on time, it won't do your credit score much good if creditors don't report how dependable you are. If a creditor mistakenly hits you with a fee for late payment, be sure to call them and get the situation resolved quickly. Otherwise, you may be not only end up paying unnecessarily, but your credit score may take a hit unfairly.

Don't be afraid to look at your credit report. Like taking a look in your basement, it may be scary to discover what is actually contained in your credit report. Additionally, some consumers may worry that pulling their own credit history could hurt their credit score. But this is not the case. In fact, purchasing or taking a free look at your credit history could actually help your credit score, if you use the supplied information to correct any mistakes in the report and to improve your credit use. While you may not end up with perfect credit by following these recommendations, you can still be content knowing that your improved credit score is the best it can be.

Tuesday, December 9, 2008

Pay by Credit Card to Help Your Credit Score

You might think that just because you are financially responsible, with no debt and a responsible borrowing history, that your credit score would undoubtedly reflect that. But you may actually not be providing the credit bureaus with enough information to help your credit score if you do not use your credit card.

That lack of credit card use could leave your credit report "unscoreable." In fact, some 50 million Americans have too little credit activity to qualify for the most commonly used credit score.

If you do not use any credit for six months, the credit bureaus may be unable to calculate your credit score. While you should still be able to borrow money under these circumstances, any approvals will take longer and you might end up paying a higher interest rate.

Even positive information only stays on your credit history for so long, so it is important to show that you have paid off recent debts. As older auto loans and mortgages disappear from your credit history, replace them with an ongoing display of responsible use of credit cards.

Just a little credit card use is enough to keep your credit score up-to-date. All it takes are some charges on your plastic, and then the quick payment of your credit card bill. These charges could be as small as using your credit card for groceries or gas -- which could also earn you a little something in return if you pay with cash back credit cards or reward credit cards.

You may wonder why credit scores matter if you do not plan to borrow any money. But should you find yourself in an emergency and needing a home-equity line of credit immediately, or you buy a second home and require a mortgage, a solid credit history is crucial. Additionally, the rate on your homeowners and auto insurance could be influenced by your credit history.

As a result, it is a smart move to stay aware of your own personal credit history, which is used to calculate your credit score. You can order a free credit report every 12 months from the three major credit bureaus -- Equifax, Experian, and TransUnion.

Meanwhile, it is not only people who prefer paying by cash, check or debit card that may find themselves without a credit score. If you have lived abroad for some time and have not used a U.S. credit card while overseas, you could find yourself without a credit score on your return home.

Therefore, many Americans will see their credit histories benefited by consistent use of a credit card and prompt repayment of their bills.

Monday, December 8, 2008

Pay Attention to Pennies and Minutes When Paying a Credit Card Bill

Most consumers know that there are penalties for failing to pay their credit card bill in full or on time. But the penalties can be no less severe when you are short a few pennies or late a couple of minutes with your payment.

When paying your credit card bill, you probably know that if you can't pay the amount in full, you should at least pay the monthly minimum. Doing so will spare you the pain of getting walloped by an interest rate that suddenly jumps to a much higher level. However, you could still get hit with a spike in your credit card's interest rate if your minimum payment is even a few pennies shy of the monthly minimum.

Let's say the minimum payment on your latest credit card statement is $230.11, but the check you mail out totals $230. While that $0.11 difference may not be much, it can end up costing you lots of money. That is because your credit card issuer will still consider your payment below the minimum payment due. And, as all wise consumers know, credit card interest rates may go up when the payment is less than is required. That could spell trouble for what may have started out as a low interest credit card.

Meanwhile, you likely make sure to get your credit card payment sent out so that it reaches the bank in plenty of time before the due date. But what if you happen to mail a check or approve an online payment that arrives late, even by a few minutes? In the credit card issuer's eyes, your payment is late nonetheless. And, that could result in a hefty late charge on your next credit card statement.

One way to make sure your full credit card payments get where they need to be on time is by setting up an automatic electronic payment plan. You can do this through the bank you have a checking account with or through the website of your credit card issuer. Most credit cards list a website address on the back, which you can visit to set up a user ID and password. If you encounter any problems, you can dial the toll-free customer service number that is usually listed on your credit card or on your card statements.

Even if you have great credit, a small mistake could tarnish you excellent credit history. So be sure to pay the minimum on your credit card bill (or more) in advance of the due date.

Friday, December 5, 2008

Simple Rules Can Help Prevent Credit Card Debt

Credit Counseling Service has one simple consideration: whether you can manage your credit card properly.

As the CEO of the nonprofit group that helps consumers break free from debt, Richard Skaggs has seen a lot -- including individuals carrying as much as $200,000 in credit card debt.

However, the Consumer Credit Counseling Service's chief executive said following some easy steps can keep consumers from falling into the pit that is credit card debt.

Skaggs urges credit card users to establish a budget and then to follow that budget exactly. In other words, don't be tempted to charge that plasma TV to your credit card on a whim when you haven't budgeted for it this month.

Also, he tells consumers not to carry a balance on their credit cards for longer than six months. Skaggs explains that beyond that point, the compounding of simple interest can produce a very expensive balance to pay off. If it helps, think of your credit card balance as a snowball that grows larger as it rolls downhill.

Furthermore, reward credit card holders might end up spending more than the reward itself is worth if they don't pay attention to the fees and interest associated with their credit card. Visitors to can view such information for a specific credit card by clicking on the "apply here" button, then selecting an underlined link for "pricing and terms" or "terms and conditions."

The CEO also recommends looking for a low interest credit card if your credit card's interest rate is excessive. Still, he tells consumers to be aware of the normal interest rates on any balance transfer credit cards once the low introductory rates expire.

Overall, Skaggs stresses the importance of consumers taking responsibility and managing their finances.

And, should credit card holders get in over their heads, many card issuers will work with customers who take the initiative to call with the goal of working out a payment plan.

Thursday, December 4, 2008

Take Easy Precautions to Avoid Credit Cards Pitfalls

While careless use of a credit card can leave you in debt, approaching your credit cards with a dose of common sense will ensure this doesn't happen. By taking some relatively easy precautions, your credit card will always be a helpful tool.

Having a wallet full of plastic can make it tough to keep track of how much you owe on each -- which can spell trouble when it is time to pay your statements. Therefore, try to keep your plastic at a manageable level. For some consumers, that may mean only carrying one of two credit cards.

But just because you scale back on your credit cards doesn't mean you should go ahead and cancel all your excess plastic. For one thing, canceling numerous credit cards all at once may result in a drop in your credit score. This is because the total balance across your credit cards will increase to a higher percentage of your overall credit limit when you have fewer cards.

Additionally, by holding on to credit cards you have had for a while, you will maintain your credit history. So instead of getting rid of your rarely-used cards, dust off older credit cards and use them occasionally to keep the accounts active.

Meanwhile, many credit card users end up in debt trouble when they revolve a balance from month to month, allowing interest charges to accumulate. Other consumers end up having to pay late fees when they neglect to get a payment in on time or when their check gets tied up in the mail.

Instead, opt to have the balance on each credit card paid by the due date using an electronic funds transfer from your checking account. In addition to helping you avoid late fees, the knowledge that whatever you spend is coming out of your bank account can be a sharp reminder to keep spending in check.

Visit the credit card issuing bank's website to set up an electronic funds transfer. You can get help with this by calling the bank's customer service number printed on the back of your credit card, as well as on statements.

Sometimes, consumers may revolve a balance on their credit card because they do not have enough money to pay their entire bill at the end of each month. To prevent yourself from spending more than you can afford, record the amount of every credit card transaction in your checkbook.

By following these steps, you will avoid the pitfalls many consumers fall into when they use credit cards recklessly. And, if you use a reward credit card or cash back credit card, your careful spending will actually help you come out ahead.

Wednesday, December 3, 2008

Online Search Tool Allows Users to See if Social Security, Credit Card Numbers Available on the Internet

A new free online tool can help consumers find out if their Social Security and credit card numbers are available publicly on the Internet. Using TrustedID's, consumers can search a limited database that includes 2.3 million pieces of information.

Social security numbers, unlike credit card numbers, are widely exposed through public documents. While it is fairly easy to get a new credit card in the case of loss or theft, it is much tougher to receive a new Social Security number. In fact, individuals are limited to three replacements of their paper Social Security card each year and 10 over their lifetime.

Why are Social Security numbers so easily accessible? One reason is the frequency with which they are used. Companies that provide a service first and bill you later (such as utilities and cell phone providers) ask for a Social Security number in order to check your credit report to ensure you are reliable borrower.

Meanwhile, every doctor and dentist's office in the U.S. has a record of patient's Social Security numbers -- the security of which is up for debate. And, up until 2004, states were allowed to include Social Security numbers on drivers' licenses, while before 2001 states could sell lists with those numbers.

Separately, thieves may obtain Social Security and credit card numbers through the use of "key logging" software that is secretly installed on computers to record what is typed, as well as through phishing schemes that trick consumers into entering personal information onto fake websites that are designed to look like those of a bank or credit card issuer.

Luckily, recent developments are working in consumers' favor. States and counties have started to remove images of documents from their websites that include Social Security numbers, or to block out the numbers themselves.

New York is among four states that have taken down links to images of public documents containing Social Security numbers, while the Texas attorney general on February 21, 2007, issued a legal opinion that county clerks could be committing a crime by revealing Social Security numbers online.

TrustedID has assembled a database of compromised Social Security and credit card numbers that could be bought or traded online. While its tool is free, TrustedID sells services to consumers that provide them with greater control over who views their credit reports.

For consumers that find their data has been compromised, ordering a copy of their credit report from three main credit bureaus is the first step. visitors should use /free-credit-report.php to request a credit report from credit bureaus Experian, Equifax, and TransUnion.

Should you turn up any unexplained accounts on your credit report, alert the credit bureaus, credit card issuers, and merchants involved. You can also let the Federal Trade Commission and local law enforcement know, and you may decide to freeze your credit to block anyone from opening new accounts in your name.

But all consumers, regardless of whether their Social Security and credit card information is floating in cyberspace, should request copies of their credit reports each year. Also, computer users should install anti-virus and anti-spyware software on their PCs and make sure it stays updated.

Saturday, November 29, 2008

Getting a Credit Card Early Can Save You Money Later On

Getting a credit card relatively early in life, and then using it responsibly, can help you build a solid credit history. This relatively simple move can provide you with a respectable credit score that can translate into major savings. On the flip side, it can cost you significantly over the course of your life to have a bad credit score, or not have a credit score at all.

Consumers should be aware that their credit score is a major factor when qualifying for a loan, renting an apartment, or even getting hired for a job. Additionally, a credit score impacts how much consumers pay in interest charges, for insurance, and even for cell phone contracts.

There are a number of groups you will encounter during your lifetime that will pay close attention to your credit score. Making a good impression through consistent, conscientious use of your credit cards will build a credit history that they will find impressive and will help you save money.

Lenders make up the primary group who look at credit scores. For lenders, a good credit score can translate into the best rates on a credit card, mortgage, car loan, or small business loan. Meanwhile, without a credit score, qualifying for a loan or credit card might be impossible.

Insurers will also consider you credit score -- among them the majority of auto insurers as well as home insurers. According to a recent Consumer Reports survey of eight popular auto insurers, it was shown that drivers with the highest credit scores could pay as much as 31% less on their premiums than if credit scoring wasn't considered, while drivers with low scores would pay up to 143% more than if credit scoring wasn't considered.

Meanwhile, landlords are increasingly deciding whether to rent out apartments based on the applicant's credit score, since they see a credit rating as a way to determine whether you pay your bills on time. Without a credit score, or with a low credit score, you could end up needing to find a co-signer for your lease. Alternately, you might end up being asked for a higher rent or security deposit.

Job applicants may find that their potential employers give them notice of plans to look over their credit report, with the Society for Human Resource Management reporting that 35% of employers pull credit reports on potential hires. Employers may consider bad credit to signal irresponsibility, or they may worry that employees with financial problems will be distracted while on the job.

Nowadays, even your cell phone provider may use a look at your credit report to guarantee your reliability when it comes to bill paying. With a poor credit history, that could mean you do not qualify for the best cell phone rates. Separately, you might have to pay a deposit, or you could get refused a contract.

So what's a consumer to do in order to build the best possible credit history? Students may want to apply for a student, using the credit card to occasionally make purchases, then paying off the balance every month. It is often easier to qualify for a credit card while in school than after graduation, since credit card issuers assume that parents can lend a hand if their child gets into too much debt.

For those adults who are not in school or are wary of applying for a full-fledged credit card, a secured credit card like the New Millennium Bank Secured Platinum Visa or MasterCard can help them begin building a credit history. After a year of on time payments with a secured credit card, you should have enough credit history to get an unsecured credit card and get your deposit on the unsecured card returned.

There are a number of credit cards for people with bad credit that can also help you to start building or improving your credit history.

Even if you do intend on applying for a loan, renting an apartment, or getting an insurance policy sometime soon, by building a solid credit score now, you have it when the time comes that you need it.

After all, someone who starts their credit history early and makes payments on time, never maxes out their credit cards, and pays more than the minimum balance each month can end up paying thousands of dollars less down the road than a similar consumer who is irresponsible with their credit.

Friday, November 28, 2008

Your Credit Card May Protect You from Rental Car Damage

As anyone without plastic knows, it can be tough to rent a car without a major credit card. However, the benefit of renting a car with plastic is that you may be able to pass on the collision protection the rental agency tries to sell you, since your credit card may automatically provide this coverage.

The protection sold by the car rental agency is generally known as collision damage waiver (CDW), and is an agreement under which you are not liable for loss or damage provided you follow certain conditions. But at $15 to $25 a day, you may prefer to forego this option.

Luckily, you often can. Even if your regular auto insurance doesn't cover your rental car, your credit card may provide ample protection. Many credit cards offer collision protection, at no additional cost, when you pay with plastic. And, if your credit card covers collision damage, it will also include loss-of-use and towing charges.

For American Express, the rules are similar, with a credit card that covers CDW also covering loss of use. A MasterCard may or may not cover CDW depending on the bank issuer. However, a MasterCard that covers CDW will also cover loss of use.

If you rent a car in your home country, most credit card CDW is secondary, paying only what your regular auto insurance won't cover after you file a claim. When you rent abroad, the credit card CDW is primary (the credit card pays your entire claim), so there is no need to ever involve your other insurance. However, be aware that some countries you drive in may require you to purchase CDW from the rental agency, even if your credit card offers coverage, and that not all rental companies accept credit card CDW.

For cardholders that carry one of a few specially negotiated credit cards from American Express, Visa, and MasterCard, primary CDW is provided on all rentals, including those in the U.S.

Consumers who use a personal AMEX credit card but want primary coverage when renting with their plastic can opt for "Premium Car Rental Protection," which provides primary CDW, as well as accidental death and dismemberment insurance and secondary medical and personal property insurance.

Premiums begin at $19.95 per rental, regardless of length, with higher-coverage options available at a higher cost. Enrollment is free and coverage will apply automatically every time you rent. This offering from AmEx can be a good choice is you usually rent cars for two days or more.

If you plan to rent a car, find out if your credit card issuer provides CDW, if it applies in the countries you will be driving your rental car, exactly what is covered (personal injury or personal property may not be included), if there are any restrictions and limitations that apply, the maximum number of rental days CDW will cover, the types of vehicles covered, and how the claim procedure works.

You may want to discuss the worst-case scenario with your credit card issuer. Additionally, you may want to request a copy of the credit card issuer's insurance policy. That way, you have in writing exactly what is and is not covered before you decline CDW from the car rental agency.

By accepting coverage from the car rental agency, you automatically forgo any coverage supplied by your credit card. Conversely, when you decide to use the CDW offered by your credit card, you will need to decline the rental agency's protection. As a result, some rental companies may view you as technically liable for the entire deductible, which may equal the cost of the rental car.

Therefore, these agencies could put a hold on your credit for the value of the car, essentially freezing part of your line of credit. Find out how much any hold will total and when it will be removed. To keep from tying up your credit, you can use one credit card for car rentals and hotels, and another credit card for making daily purchases. If you don't have enough credit left on your card to cover the value of the car, you may have to buy CDW insurance.

Thursday, November 27, 2008

Minimum Payments Are Not Your Friend

If you are like most Americans, it is not uncommon to have spent a bit more on your credit card each month than you have coming in your paycheck. That has simply become a fact of life in our consumer culture. The instant gratification habit has overwhelmed our better judgment when it comes to managing our personal finances.

And, it can be equally common for Americans to rely on the ubiquitous "minimum payments" option to keep the credit card companies at bay for another month. That credit card minimum payment is now averaging 4%, by the way, up from the old industry standard of 2% of outstanding balances. This change was foisted on the banking industry by a congress that was nervous of the financial and political impact of an indebted credit card constituency.

But, even with a doubling of the minimum payment rate, it can still take many, many years before a debt is paid down at that rate. It is simply imperative to begin aggressively attacking the principal of the debt and not just service the interest payments. Otherwise you will be on a perpetual treadmill of credit card debt.

The tried and true credit card debt elimination strategies still hold true, even in today's fast paced world. They are to simply stop adding fuel to the fire and begin chipping away at the core problem. For example, if you have $9,000 of outstanding credit card debt at 14% interest (the national average by the way), the best approach is to stop using your credit cards for new purchases and transfer the balances to a low interest credit card. Then, begin aggressively paying down that new credit card (which you will not use for new purchases, either). Without the burden of interest payments, coupled with a little financial self-discipline, you will be amazed at how quickly you will find yourself coming up for fresh air and becoming debt free.

But what if you think you really need all those existing credit cards to get through life? Well, it's probably okay to keep one in a drawer for emergencies, but having a wallet full of high interest credit cards is not a good idea for anyone. And, it's especially not a good idea for someone in serious credit card debt. Simply put yourself on a credit card diet and begin paying for things with a debit card, check or cash.

And, concerning how to approach financial self-discipline, a good first step is to try writing down everything you spend for 30 days. This can be a very illuminating exercise because it will show you how much money you (like most of us) waste each month on unnecessary purchases. By simply eliminating just a portion of these daily expenditures (whether it is skipping the $3 Starbucks double latte or deciding to eat lunch at your desk instead of going out), you can save an amazing amount of cash each month. And, if you can further discipline yourself to apply these savings to your credit card debt, which by now you have wisely transferred to a 0% APR credit card, you can become debt free in record time.

Wednesday, November 26, 2008

How To Compare Credit Card Options For Those With Bad Credit

Comparing credit card options may seem like a difficult exercise for those with bad or less than perfect credit. It seems like all the major Visa and MasterCard issuers along with Discover Card and American Express prefer to only cater to those with good credit. While the major banks and credit card companies definitely feel comfortable dealing with those with the best credit many offer credit alternatives to those with less credit history or less than perfect credit.

The spectrum of options runs from standard unsecured credit cards with relatively low interest rates to those with higher risk-adjusted rates to secured credit cards and finally to prepaid debit cards. How to determine what is right for you? It's probably best to determine how you plan to use a credit card and then start looking at your product options. If you only need a card for emergencies or to book travel arrangements that require a credit card perhaps a prepaid debit card is the best option. Our section on Prepaid Debit Cards provides a comprehensive listing of leading issuers of these cards.

If you need to use the card as a short-term borrowing vehicle then a standard credit card would best meet those needs. But if your credit isn't the best you might end up paying a fairly high interest rate for that privilege. Make sure the cost of those borrowed funds is worth the expense in the long run because if you revolve a balance for very long and only make minimum payments whatever you purchase on the card will be very expensive. Usually borrowing for discretionary items like clothes, vacations or home electronics doesn't meet the "needs" criteria.

Some banks offer incentives like rewards, cash back or airline miles on their credit cards. Many banks will charge an annual fee for higher risk accounts along with a higher interest rate. If you don't carry a balance and don't incur the high finance charges this type of credit card can be a good option since the rewards you earn will offset the annual fee expense.

Finally, secured credit cards can be a good option if you want a credit card and are willing to make an initial deposit as collateral against the assigned credit line. Once you have established a good payment history the credit card issuer will begin to extend credit so that it turns into a true credit line. And, since your funds on deposit earn interest you are putting your money to work at the same time. Secured credit cards are a good way to initially build or rebuild credit since it is a low risk proposition for the bank and gets you started in the process of making timely payments which are reported to the credit bureaus.

Tuesday, November 25, 2008

Good Credit vs. Bad Credit: Why Is This Important?

There are a lot of misconceptions, even outright lies, regarding credit, especially in terms of what determines good and bad credit. Currently, television is full of commercials for debt consolidation companies and credit counselors. Daytime talk shows abound whose premise surrounds people who have gone bankrupt by using credit cards. Many of these stories are extreme examples of what can happen to people with bad credit, but they still do not answer the million-dollar question: What is the difference between good vs. bad credit and how does this relate to getting a decent credit card deal?

Good Credit

Credit, especially good credit, is very important. It affects almost every major buying decision in our lives. Good credit can help us get a good rate on a credit card, car loan or home mortgage. It can also help us when it comes time to sign an apartment lease agreement or maybe even get a new job. But how do you get good credit?

Getting Good Credit - This may sound odd, but to get good credit, you have to have credit. This is not as confusing as it seems. Good credit ratings are gained when you borrow money from a financial group, such as a bank or credit card company, and pay it back on time and for the full amount. For example, let’s say you have a credit card from a gas station that you use only for gas because you don’t carry a lot of cash around. Each time you go to the station, you use your card to fill up your car. In so doing, you are promising to pay the credit card company back when you get their statement. When the statement arrives each month, you pay off the amount owed on time. The gas company that issued your card then reports to a credit bureau that you have paid on time and for the right amount. The more good reports that go to the credit bureau, the better your credit.

Benefits of Good Credit - Having a good credit report enables you to borrow more money at better interest rates. Why? Because the banks know that based on your credit history you are a responsible person. Many potential employers also look at credit reports as a way to judge a person’s responsibility. Hence, your good credit may even help you land a new job.

Bad Credit

There is nothing good about bad credit. It is the exact opposite of good credit. While good credit helps you qualify for car and home mortgage loans, bad credit could keep you from being able to buy these large-dollar items. It will also keep you from qualifying for credit cards and may possibly hinder your ability to rent a house or apartment.

Getting Bad Credit - It is very easy to get bad credit. Bad credit ratings happen when a person does not pay back money borrowed on time or when that person simply doesn’t pay it back at all. There are varying degrees of bad credit. A person is not automatically given a bad credit rating if he misses a payment or is late a time or two. However, if a person is continually late or he does not make a payment for several months, his credit rating will be affected and could possible hurt him in the future.

Fixing Bad Credit - Credit ratings, even bad ones, can be improved and fixed. Depending on the situation, with responsible credit usage and prompt payments, bad credit can turn into good credit over time. The first step is to understand what your credit rating is by pulling your credit report. Credit reports are available through one of the three major US credit bureaus: Experian, Equifax, and TransUnion. Understanding your credit report will help you determine if there are errors. It will also make you aware of what steps you need to take to improve your credit. Credit is a necessary part of our society. While good credit will help a person improve his quality of life, bad credit can hinder his ability to do so. If you have concerns about understanding your specific credit situation, talk to a financial or tax advisor to help you take the next step and work towards getting and keeping good credit.

Monday, November 24, 2008

How to Dispute Credit Report Errors

Credit Report Basics

Your credit report contains information about where you work and live and how you pay your bills (especially credit card bills). It also may show whether you've been sued or arrested or have filed for bankruptcy. Companies called consumer reporting agencies (CRAs) or credit bureaus compile and sell your credit report to businesses. Because businesses use this information to evaluate your applications for credit, insurance, employment, and other purposes allowed by the Fair Credit Reporting Act (FCRA), it's important that the information in your report is complete and accurate.

Some financial advisors suggest that you periodically review your credit report for inaccuracies or omissions. This could be especially important if you're considering making a major purchase, such as buying a home. Checking in advance on the accuracy of information in your credit file could speed the credit-granting process.

Getting Your Credit Report

If you've been denied credit, insurance, or employment because of information supplied by a CRA, the FCRA says the company you applied to must give you the CRA's name, address, and telephone number. If you contact the agency for a copy of your report within 60 days of receiving a denial notice, the report is free. In addition, you're entitled to one free copy of your report a year if you certify in writing that (1) you're unemployed and plan to look for a job within 60 days, (2) you're on welfare, or (3) your report is inaccurate because of fraud. Otherwise, a CRA may charge you up to $9.00 for a copy of your report.

If you simply want a copy of your report, call the CRAs listed in the Yellow Pages under "credit" or "credit rating and reporting." Call each credit bureau listed since more than one agency may have a file on you, some with different information. The three major national credit bureaus are:

Equifax, P.O. Box 740241, Atlanta, GA 30374-0241; (800) 685-1111.

Experian , P.O. Box 2002, Allen, TX 75013; (888) EXPERIAN (397-3742).

Trans Union, P.O. Box 1000, Chester, PA 19022; (800) 916-8800.

Correcting Credit Report Errors

Under the FCRA, both the CRA and the organization that provided the information to the CRA, such as a bank or credit card company, have responsibilities for correcting inaccurate or incomplete information in your report. To protect all your rights under the law, contact both the CRA and the information provider.

First, tell the CRA in writing what information you believe is inaccurate. Include copies (NOT originals) of documents that support your position. In addition to providing your complete name and address, your letter should clearly identify each item in your report you dispute, state the facts and explain why you dispute the information, and request deletion or correction. You may want to enclose a copy of your report with the items in question circled. Your letter may look something like the sample below. Send your letter by certified mail, return receipt requested, so you can document what the CRA received. Keep copies of your dispute letter and enclosures.

CRAs must reinvestigate the items in question--usually within 30 days--unless they consider your dispute frivolous. They also must forward all relevant data you provide about the dispute to the information provider. After the information provider receives notice of a dispute from the CRA, it must investigate, review all relevant information provided by the CRA, and report the results to the CRA. If the information provider finds the disputed information to be inaccurate, it must notify all nationwide CRAs so they can correct this information in your file. l Disputed information that cannot be verified must be deleted from your file.

If your report contains erroneous information, the CRA must correct it.

If an item is incomplete, the CRA must complete it. For example, if your file showed that you were late making payments, but failed to show that you were no longer delinquent, the CRA must show that you're current. If your file shows an account that belongs only to another person, the CRA must delete it. When the reinvestigation is complete, the CRA must give you the written results and a free copy of your report if the dispute results in a change. If an item is changed or removed, the CRA cannot put the disputed information back in your file unless the information provider verifies its accuracy and completeness, and the CRA gives you a written notice that includes the name, address, and phone number of the provider.

Also, if you request, the CRA must send notices of corrections to anyone who received your report in the past six months. Job applicants can have a corrected copy of their report sent to anyone who received a copy during the past two years for employment purposes. If a reinvestigation does not resolve your dispute, ask the CRA to include your statement of the dispute in your file and in future reports.

Second, in addition to writing to the CRA, tell the creditor or other information provider in writing that you dispute an item. Again, include copies (NOT originals) of documents that support your position. Many providers specify an address for disputes. If the provider then reports the item to any CRA, it must include a notice of your dispute. In addition, if you are correct-that is, if the disputed information is not accurate-the information provider may not use it again. Accurate Negative Information When negative information in your report is accurate, only the passage of time can assure its removal. Accurate negative information can generally stay on your report for 7 years. There are certain exceptions:

Information about criminal convictions may be reported without any time limitation. Bankruptcy information may be reported for 10 years. Credit information reported in response to an application for a job with a salary of more than $75,000 has no time limit. Credit information reported because of an application for more than $150,000 worth of credit or life insurance has no time limit. Information about a lawsuit or an unpaid judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer. Criminal convictions can be reported without any time limit.

Adding Accounts to Your File

Your credit file may not reflect all your credit accounts. Although most national department store and all-purpose bank credit card accounts will be included in your file, not all creditors supply information to CRAs: Some travel, entertainment, gasoline card companies, local retailers, and credit unions are among those creditors that don't. If you've been told you were denied credit because of an "insufficient credit file" or no credit file" and you have accounts with creditors that don't appear in your credit file, ask the CRA to add this information to future reports. Although they are not required to do so, many CRAs will add verifiable accounts for a fee. You should, however, understand that if these creditors do not report to the CRA on a regular basis, these added items will not be updated in your file.

Sample Credit Dispute Letter

Following is a sample letter that could be used to dispute a an inaccurate credit report.


Your Name

Your Address

Your City, State, Zip Code

Complaint Department

Name of Credit Reporting Agency

Address City, State, Zip Code

Dear Sir or Madam:

I am writing to dispute the following information in my file. The items I dispute are also encircled on the attached copy of the report I received.(Identify item(s) disputed by name of source, such as creditors or tax court, and identify type of item, such as credit account, judgment, etc.)

This item is (inaccurate or incomplete) because (describe what is inaccurate or incomplete and why). I am requesting that the item be deleted (or request another specific change) to correct the information.

Enclosed are copies of (use this sentence if applicable and describe any enclosed documentation, such as payment records, court documents) supporting my position. Please reinvestigate this (these) matter(s) and (delete or correct) the disputed item(s) as soon as possible.


Your name

Enclosures: (List what you are enclosing)

Saturday, November 22, 2008

Repairing Credit Card Debt

Having trouble paying your bills? Getting notices from creditors? Are your accounts being turned over to debt collectors? Are you worried about losing your home or your car? Repairing credit card debt isn't as hard as you may think.

You're not alone. Many people face financial crises at some time in their lives. Whether the crisis is caused by personal or family illness, the loss of a job, or simple overspending, it can seem overwhelming, but often can be overcome. The fact of the matter is that your financial situation doesn't have to go from bad to worse.

If you or someone you know is in financial hot water, consider these options: realistic budgeting, credit counseling from a reputable organization, debt consolidation, or bankruptcy. How do you know which will work best for you? It depends on your level of debt, your level of discipline, and your prospects for the future.

Self Help

Developing a Budget: The first step toward taking control of your financial situation is to do a realistic assessment of how much money comes in and how much money you spend. Start by listing your income from all sources. Then, list your "fixed" expenses-those that are the same each month-such as your mortgage payments or your rent, car payments, or insurance premiums. Next, list the expenses that vary, such as entertainment, recreation, or clothing. Writing down all your expenses-even those that seem insignificant-is a helpful way to track your spending patterns, identify the expenses that are necessary, and prioritize the rest. The goal is to make sure you can make ends meet on the basics: housing, food, health care, insurance, and education.

Your public library has information about budgeting and money management techniques. Low cost budget counseling services that can help you analyze your income and expenses and develop budget and spending plans also are available in most communities. Check your Yellow Pages or contact your local bank or consumer protection office for information about them. In addition, many universities, military bases, credit unions, and housing authorities operate nonprofit counseling programs.

Contacting Your Creditors: Contact your creditors immediately if you are having trouble making ends meet. Tell them why it's difficult for you, and try to work out a modified payment plan that reduces your payments to a more manageable level. Don't wait until your accounts have been turned over to a debt collector. At that point, the creditors have given up on you.

Dealing with Debt Collectors: The Fair Debt Collection Practices Act is the federal law that dictates how and when a debt collector may contact you. It states:

  • A debt collector may not call you between 8 A.M. to 9 P.M.
  • A debt collector may not call you at work if the collector knows that your employer doesn't approve of the calls.
  • Collectors may not harass you, make false statements, or use unfair practices when they try to collect a debt.
  • Debt collectors must honor a written request from you to cease further contact.

Credit Counseling

If you aren't disciplined enough to create a workable budget and stick to it, can't work out a repayment plan with your creditors, or can't keep track of mounting bills, consider contacting a credit counseling service. Your creditors may be willing to accept reduced payments if you enter a debt repayment plan with a reputable organization. In these plans, you deposit money each month with the credit counseling service. Your deposits are used to pay your creditors according to a payment schedule developed by the counselor. As part of the repayment plan, you may have to agree not to apply for-or use-any additional credit while you're participating in the program.

A successful repayment plan requires you to make regular, timely payments, and could take 48 months or longer to complete. Ask the credit counseling service for an estimate of the time it will take to complete the plan. Some credit counseling services charge little or nothing for managing the plan; others charge a monthly fee that could add up to a significant charge over time. Some credit counseling services are funded, in part, by contributions from creditors.

While a debt repayment plan can eliminate much of the stress that comes from dealing with creditors and overdue bills, it does not mean you can forget about your debts. You still are responsible for paying any creditors whose debts are not included in the plan. You are responsible for reviewing monthly statements from your creditors to make sure your payments have been received. If your repayment plan depends on your creditors agreeing to lower or eliminate interest and finance charges, or waive late fees, you are responsible for making sure these concessions are reflected on your statements.

A debt repayment plan does not erase your credit history. Under the Fair Credit Reporting Act, accurate information about your accounts can stay on your credit report for up to seven years. In addition, your creditors will continue to report information about accounts that are handled through a debt repayment plan. For example, creditors may report that an account is in financial counseling, that payments may have been late or missed altogether, or that there are write-offs or other concessions. A demonstrated pattern of timely payments will help you obtain credit in the future.

Auto and Home Loans: Debt repayment plans usually cover unsecured debt. Your auto and home loan, which are considered secured debt, may not be included. You must continue to make payments to these creditors directly.

Most automobile financing agreements allow a creditor to repossess your car any time you're in default. No notice is required. If your car is repossessed, you may have to pay the full balance due on the loan, as well as towing and storage costs, to get it back. If you can't do this, the creditor may sell the car. If you see default approaching, you may be better off selling the car yourself and paying off the debt: You would avoid the added costs of repossession and a negative entry on your credit report.

If you fall behind on your mortgage, contact your lender immediately to avoid foreclosure. Most lenders are willing to work with you if they believe you're acting in good faith and the situation is temporary. Some lenders may reduce or suspend your payments for a short time. When you resume regular payments, though, you may have to pay an additional amount toward the past due total. Other lenders may agree to change the terms of the mortgage by extending the repayment period to reduce the monthly debt. Ask whether additional fees would be assessed for these changes, and calculate how much they total in the long term.

If you and your lender cannot work out a plan, contact a housing counseling agency. Some agencies limit their counseling services to homeowners with FHA mortgages, but many offer free help to any homeowner who's having trouble making mortgage payments. Call the local office of the Department of Housing and Urban Development or the housing authority in your state, city, or county for help in finding a housing counseling agency near you.

Debt Consolidation

You may be able to lower your cost of credit by consolidating your debt through a second mortgage or a home equity line of credit. Think carefully before taking this on. These loans require your home as collateral. If you can't make the payments-or if the payments are late-you could lose your home.

The costs of these consolidation loans can add up. In addition to interest on the loan, you pay "points." Typically, one point is equal to one percent of the amount you borrow. Still, these loans may provide certain tax advantages that are not available with other kinds of credit.


Personal bankruptcy generally is considered the debt management option of last resort because the results are long-lasting and far-reaching. A bankruptcy stays on your credit report for 10 years, making it difficult to acquire credit, buy a home, get life insurance, or sometimes get a job. However, it is a legal procedure that offers a fresh start for people who can't satisfy their debts. Individuals who follow the bankruptcy rules receive a discharge-a court order that says they do not have to repay certain debts.

There are two primary types of personal bankruptcy: Chapter 13 and Chapter 7. Each must be filed in federal bankruptcy court. The current fees for seeking bankruptcy relief are $160: a filing fee of $130 and an administrative fee of $30. Attorney fees are additional.

Chapter 13 allows persons with a steady income to keep property, like a mortgaged house or a car, that they otherwise might lose. In Chapter 13, the court approves a repayment plan that allows you to use your future income to pay off a default during a three-to-five-year period, rather than surrender any property. After you have made all payments under the plan, you receive a discharge of your debts.

Known as straight bankruptcy, Chapter 7 involves liquidation of all assets that are not exempt. Exempt property may include automobiles, work-related tools and basic household furnishings. Some of your property may be sold by a court-appointed official-a trustee-or turned over to your creditors. You can receive a discharge of your debts through Chapter 7 only once every six years.

Both types of bankruptcy may get rid of unsecured debts and stop foreclosures, repossessions, garnishments, utility shut-offs, and debt collection activities. Both also provide exemptions that allow people to keep certain assets, although exemption amounts vary. Note that personal bankruptcy usually does not erase child support, alimony, fines, taxes, and some student loan obligations. And unless you have an acceptable plan to catch up on your debt under Chapter 13, bankruptcy usually does not allow you to keep property when your creditor has an unpaid mortgage or lien on it.

Damage Control

Turning to a business that offers help in solving debt problems may seem like a reasonable solution when your bills become unmanageable. Be cautious. Before you do business with any company, check it out with your local consumer protection agency or the Better Business Bureau in the company's location.

Some businesses that offer debt counseling and reorganization plans may charge high fees and fail to follow through on the services they sell. Others may misrepresent the terms of a debt consolidation loan, failing either to explain certain costs or to mention that you're signing over your home as collateral. Businesses advertising voluntary debt reorganization plans may not explain that the plan is a Chapter 13 bankruptcy, tell you everything that's involved, or help you through what can be a complex and lengthy legal process.

In addition, some companies guarantee you a loan if you pay a fee in advance. The fee may range from $100 to several hundred dollars. Resist the temptation to follow up on advance-fee loan guarantees. They may be illegal. Many legitimate creditors offer extensions of credit through telemarketing and require an application or appraisal fee in advance. But legitimate creditors never guarantee that the consumer will get the loan-or even represent that it is likely. Under the federal Telemarketing Sales Rule, a seller or telemarketer who guarantees or represents a high likelihood of your getting a loan or some other extension of credit may not ask for or receive payment until you've received the loan.

You should also avoid credit repair clinics. Companies coast to coast appeal to consumers with poor credit histories, promising to clean up credit reports for a fee. They don't deliver. What's more, they can't deliver: They can't do anything for you that you can't do for yourself. After you pay them hundreds-or even thousands-of dollars in up-front fees, they can do nothing to improve your credit report. Indeed, many simply vanish with your money. Only time and a conscientious effort to repay your debts will improve your credit report.

If you're thinking about getting help to stabilize your financial situation, be cautious. Find out what services the business provides and what it costs. Don't rely on oral promises. Get everything in writing. Check out any company with your local consumer protection office and the Better Business Bureau in the company's location. They may be able to tell you whether other consumers have registered complaints about the business.

Friday, November 21, 2008

Cleaning Up and Repairing Your Credit Rating

It can happen to anyone. You get a credit card and start spending beyond your reach, or someone gets a hold of your social security card or an old credit card and opens up new cards in your name. The question is not how this happened, but what you can do now to clean up and start repairing your credit rating.

As you start to clean and repair your credit rating, be aware that some companies may try to take advantage of you. They may offer programs and books that, for a fee, will "erase" your bad credit. These books and companies cannot efface your credit card debt. There is no one solution or service that will suddenly fix all your credit problems. Good credit comes from good credit practices over time - especially concerning credit card payments.

Cleaning Up Your Credit RatingCheck your credit history. There are three national credit bureaus from which you can obtain a copy of your credit history. This report will give you a complete picture of your current credit situation and will allow you to check for inaccuracies. Any inaccuracies you find should be corrected immediately by contacting the creditor with whom the error resides.

Don't apply for many credit cards over a short period of time – A lot of inquiries in a short period of time looks bad and can impact your credit rating. This doesn’t mean you can’t shop around for the best deal on car loans or other larger purchases, but you should minimize the number of credit cards for which you apply, such as store or other promotionally motivated cards. As long as your inquiries for an automobile or mortgage deal are all within a 30-day period, many credit scoring programs and creditors will disregard the multiple inquiries or consider them as a single inquiry.

Know how much you owe – You should always know exactly how much you owe on your credit cards. If you have several cards with balances close to their limit, creditors might worry that you are living beyond your means. In general, debt of 75% or more of your total available credit does not look good. If you are high on your balances, concentrate on paying them down before charging more.

Close inactive or old accounts – There is no reason to keep an account open that you don’t use anymore. Banks and credit companies look at your total debt potential when determining whether or not to approve you. An old open account could cause you problems; therefore, the fewer accounts you have open, the lower a risk you are to your potential creditors. See Do’s and Dont's of Closing Accounts for more information.

Repairing Your Credit Rating Open a gas or department store credit card – If you have some serious credit issues from the past, a gas or department store can help you start repairing your credit rating. By using the card regularly and making your payments on time, you will establish yourself as a careful credit user.

Pay down balances – Paying down your current credit card balances will go a long way toward repairing your credit rating. If these payments are beyond your means, contact the credit card company directly to discuss your options. It is better to be upfront and honest with them than to avoid payments altogether. Typically, once an account goes to a collection service, the credit card company will not be able to work with you. Instead, you will be causing more damage to your credit rating.

Be responsible – How good your credit rating is or is not depends on you. Be responsible with your spending habits and know when it is good and not good to use credit.

Discuss your options with a financial advisor – A financial advisor can help you determine a strategy for managing your debt. S/he can offer options on how best to repair your credit rating with your current financial resources.

Thursday, November 20, 2008

Have Bad Credit and Need a Credit Card? There is a Credit Card for You

Think that a bad credit rating on a credit report will prevent you from obtaining a credit card? Think again. There are a number of companies that will issue you a credit card even when you have bad credit and need a credit card.

A credit report reflects your credit history. Credit reports are very important when you apply for loans for a mortgage, a car, or when you fill out credit card applications. What are your options if you have poor or bad credit and you need a credit card?

Secure Credit or Pre-Paid Cards
Secured credit cards are a great choice. A secured credit card or a prepaid debit card requires the user to deposit money into the credit card account before the card can be used.

Once money is deposited into the account or you have obtained some credit, the secured credit card can be used to purchase items. The prepaid debit card or secured credit card will not allow you to exceed the amount of money you deposited into the account.

An Option for Students
For high school and college students secured students and prepaid debit cards are great options. A secure student credit card enables a student to begin establishing a good credit rating on his or her credit report while learning good financial planning skills and responsibility. Also, secured credit cards prevent the overspending that often happens with unsecured credit cards since users only have access to the funds that were deposited into the account.

If you have a not so good credit card you are not going to get the best credit card rates and options available to someone with great credit. However, this doesn’t mean you can’t enjoy the benefits of using credit cards or you will always have bad credit. With a little patience, discipline and time you can improve and repair your credit history.

Before beginning any credit repair program or applying for any credit cards, discuss your specific financial situation with your financial advisor.

Wednesday, November 12, 2008

No Credit History? No Problem

It's the Catch 22 of credit – it takes good credit to get new credit. This is especially true in order to obtain low cost credit cards. But how does one get good credit when a credit history is required to even get a credit card? It's true that most major credit card companies try to limit their financial risk by mostly approving those with excellent or good credit. But there are credit card options for those who have not established previous credit history using a credit card.

It's the Catch 22 of credit – it takes good credit to get new credit. This is especially true in order to obtain low cost credit cards. But how does one get good credit when a credit history is required to even get a credit card? It's true that most major credit card companies try to limit their financial risk by mostly approving those with excellent or good credit. But there are credit card options for those who have not established previous credit history using a credit card.

Often, the lack of credit history is equated with bad credit. B, but if you fit this category, you should not despair or feel less worthy than others. It's all a matter of how you look financially to banks and major issuers of credit cards. After all, credit card issuers are for-profit organizations that must lend money and then get that money back plus interest in order to stay in business. Someone with no history of faithfully repaying money that has been borrowed is an unknown quantity and is, therefore, either avoided or assigned a higher degree of risk (and charged higher interest rate to offset that risk).

Students are often in this category due to their age and lack of income. However, major credit card issuers have figured out that most students enrolled in 4-year colleges actually present an acceptable risk profile and generally warrant the risk of being issued credit cards. But if you are not a student, what are the options? As in most areas of commerce, there are also various types of credit card companies that specialize in different segments of the market. Several, such as First Premier Bank and Orchard Bank, offer cards to those without a credit history. Since the banks are taking on more risk and experience higher losses with this customer segment, applicants can expect to pay application, usage and annual fees for many of these products., since the banks are taking on more risk and experience higher losses with this customer segment. However, it can worth the costs involved to finally get that first credit card and begin establishing a solid credit history. And, once you have a strong track record, you can have your pick of cards that will pay you to use them.

Other options for those new to the world of credit can include retail store cards. Examples can include store cards offered by Sears, The Gap or even gasoline retailers like Exxon-Mobil. Retailers will often take a chance on new credit applicants where the major credit card issuers would not. And, once you build up a successful history of repayment you can use these store cards as a stepping stone to general use credit cards, like a Visa, MasterCard, American Express or Discover Card.

So, again, don't despair if you are just starting out and don't have a credit history. It can be like trying to get your first job without any work experience on your resume. Concerning credit, as in the world of work, once you get your foot in the door and pay your dues, you can expect to advance to bigger and better things.