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.

Tuesday, November 11, 2008

When Picking a New Credit Card - Look for an Orchard

Individuals with less than perfect credit, or those with no credit history know the drill. Apply for a credit card online that features great rates and rewards, wait a few weeks and then be told that their credit is not good enough to qualify. Now, that can be quite frustrating to be told you have bad credit and don't qualify. Especially when the credit card issuers keep sending out tantalizing credit card offers in the mail and running ads on television.

There are options for those wishing to establish or rebuild credit, however. Finally, there is a credit card that offers a reasonable interest rate with low fees and is specifically designed for those with less than pristine credit. It's the Orchard Bank MasterCard issued by HSBC! The Orchard Bank MasterCard features a very respectable 14.9% regular APR and initial credit lines up to $1,500.

Of particular value is the fact that the Orchard Bank MasterCard reports cardmember repayment behavior to all three major U.S. credit bureaus. Other payment card options for bad credit do not typically allow customers to rebuild their credit history. This is a critical step in creating a solid repayment record that opens new doors for low cost credit in the future.

With relaxed credit underwriting criteria, applicants are much more likely to be approved. And, getting approved is the name of the game when bad credit is in your history. Once approved, it's just a matter of staying disciplined and making on-time credit card payments to begin building a solid credit record. It's usually best to pay as you go with credit cards and living within your means. But, as we all know, that's not always possible for those of us who are struggling to keep our financial heads above water. And that's where the 15.9% interest rate can help you pay outstanding balances over time without taking too much of a toll on your finances.

Other benefits of the Orchard Bank MasterCard include worldwide acceptance at over 22 million locations and cash access at over 770,000 MasterCard/Cirrus locations around the globe. And, online shopping can be accomplished with peace of mind because the Orchard Bank Card provides complete protection from unauthorized purchases.

So, maybe it's time to finally get your credit back on track. Or, if you are just starting out it could be a great time to start building a good credit rating. Having a MasterCard credit card is essential in today's world if you want to make a hotel reservation, rent a car or book an airline flight. And with the Orchard Bank MasterCard, your chances of getting approved are better than ever.

Monday, November 10, 2008

Bankrupt and Still Getting Credit Card Offers?

If you have filed for bankruptcy in the last few years and still find yourself getting new credit card offers in the mail, you aren't alone. It seems that credit card issuers either don't care or aren't aware of many consumers' credit situations. Well, in most cases, it is probably the latter situation.

The vast majority of credit card issuers, particularly the largest ones, are fairly biased towards those with superior credit. However, there are a few banks and issuers that specialize in providing credit to those with damaged credit or little credit history. But how does this explain the bulging mailboxes of those who have defaulted on previous credit card debt or declared outright bankruptcy? Basically, it boils down to targeting. And, this targeting can be intentional or faulty.

To understand how banks and other large financial institutions choose to whom they mail solicitations, you must first look at how they have traditionally made their money. Credit card issuers have pretty sound business models, which began many years ago by charging 18% interest rates and $20 annual fees to carry their cards. They also made a steady stream of income from major retailers and restaurants that accepted their cards by charging a small fee for each transaction.

Back in the day when these old rules applied, credit card issuers were extremely picky about whom they approved for credit. They simply weren't willing to absorb very much loss from cardholders that didn't pay back what was owed. And, the credit card issuers enjoyed pretty high profit margins in the 1980's and 1990's as a result.

In the early 1990's, however, the credit card issuers acquired the ability to make individual credit decisions based on very detailed credit history information. This information became available through the advent of national credit bureaus like Equifax, Experian and TransUnion. And, it wasn't just the availability of the credit information, but rather the almost instantaneous nature of the data, that made mass individual credit decision making possible.

So, with all this detailed and instant information at lenders fingertips, why do they seemingly send solicitations to everyone (including the bankrupt)? Well, this targeting data isn't free and many issuers find it more cost effective to blanket the nation in direct mail and then pull a credit report on those that actually go to the effort to apply. But, what if the offer you received says you're pre-approved up to a high credit limit amount? If you read the fine print the issuer reserves the right to deny credit if you don't pass their credit quality thresholds upon further review.

The bottom line for those with bad credit or a bankruptcy on file is to avoid the temptation to apply for one of these enticing offers in the mail. That's because it most likely will result in a denial, hurt feelings and confusion. It is probably a better strategy to begin rebuilding a solid credit history with a new credit card that is specifically designed for those with bad credit. First Premier Bank and HSBC offer excellent products to service this market and its special credit needs.

For those who wish to avoid the entire temptation of a credit card can opt for a prepaid debit card, that is accepted everywhere that accepts Visa or MasterCard credit cards. The only difference is that prepaid debit cards are funded ahead of time and act like stored value cards. These can enable students, the bankrupt and those without bank accounts to enjoy the convenience of paying for purchases (even those made online) with a plastic payment card. And, with credit cards such as the Eufora MasterCard, cardholders can build a credit history since card payments are reported to the credit bureaus.

Access to credit and debit cards is an important convenience in American life. And if your credit situation prevents you from getting approved for most credit cards (even those that show up in your mailbox) you shouldn't despair. There are always options.

Sunday, November 9, 2008

Credit Repair: How to Get Back Your Credit

Is your credit in disarray? Are you constantly looking at those ads on TV that promise to help you get back your credit? If so, there are there are a lot of companies that can help you repair and rebuild your credit, but there are many things you can do yourself.

The first and foremost thing you must do is NOT run away from creditors. Don’t wait for them to call you or worse, don’t take their calls or return their messages. Contact them directly as soon as you realize that you are not going to be able to make payments to discuss your options. Most creditors are not as hard on you as you might think. They WANT you to pay them back and will usually work out a repayment plan that realistically fits your budget.

Working with your creditor is the best way to prevent the need for credit repair. Your credit score may drop slightly, but nearly as bad that you would need drastic steps to repair your credit ranking. As long as you show a willingness to pay back a creditor and keep in contact with them, you may never get a blemish on your credit report. It’s when you try to ignore your creditors that they report you to the credit bureaus.

However, it is human nature to avoid conflict. If you have avoided your creditors and are being denied credit you need to take steps to start rebuilding your credit.

If you are unsure about how to proceed with your credit repair, you can get some help from your local credit counseling services. They can help you to work out a plan and a budget. There are also many non-profit groups that offer help. In addition, you can check with your employer, bank, credit union, or credit repair company to investigate options for no-cost or fee-based credit counseling programs.

Before you begin your credit repair, you should know your rights under the Fair Credit Reporting Act. These rights can help you to understand how to proceed.

First of all, you are entitled to a FREE copy of your credit history report if you’ve ever been denied credit, insurance, or employment. But you MUST ask for it within 60 days of that denial. You can also get a free copy if you can prove you are:

  • Unemployed and plan to look for a job in 70 days
  • On welfare
  • A victim of identity theft or fraud
  • Obtaining a copy of your credit report is the first step in credit repair.

If you are denied credit, insurance, or employment because of inaccurate or incomplete credit information, then the company has to give you the name and address of the reporting bureau (either Equifax, Trans Union, or Experian). If there is inaccurate or simply wrong information about credit card or other loan repayments on your credit report, then you can dispute it with the credit bureau to get it corrected. This is free to do this, but you will need to prove why the information is false. Getting this inaccurate information off your report will help your credit repair. If you don't want to take the time or just desire to avoid the potential frustration you can contact a professional and reputable credit repair company such as Lexington Law to help you with this process.

Here are some final facts that will help you to better understand how credit works and what you can and can’t change when you engage in credit repair:

  • A bankruptcy can stay on your credit report for 10 years
  • Lawsuits or judgments against you can be reported for 7 years or until the statute of limitations runs out (whichever is longer).
  • There is no time limit on information reported because of an application for a job with a $75,000 or more salary.
  • There is no time limit on information reported because of an application for more than $150,000 worth of life insurance
  • Applying for a lot of credit at once (e.g. multiple credit cards with multiple credit card issuers) will cause your credit score to go down.

Taking the steps to repair and rebuild your credit is the best way to ensure you can enjoy the benefits and advantages of having a credit card. Remember, your credit card is a privilege not a right. Be responsible when using it.

Saturday, November 8, 2008

Credit Card Debt Collection Problems

In 2005, businesses that specialize in debt for collection purchased $66 billion in delinquent credit card accounts. That amount represented a golden opportunity for debt collectors, but something entirely different for an estimated 8 million credit card users -- who were targeted for repeated phone calls, dunning letters, lawsuits, wage garnishment, property seizure, and sometimes even arrest as a result of their credit card debt.

Debt collectors pay just pennies on the dollar for the right to compel credit card holders to pay up. Debt buyers (many of whom also collect debt) work using different methods. The largest debt buyers purchase vast portfolios of credit card debt written off the books by major credit card companies. Then they divide the debt into smaller blocks for resale. Companies that buy this credit card debt first attempt to collect the money, then re-sell uncollected amounts to others further down the collection food chain.

As credit card debt is sold and re-sold, companies that acquire the right to collect it frequently know little about the debtor, just the name, last known address, card issuer and account number, and amount due. That limited amount of information can result in problems for all involved parties. Unfortunately, many large banks selling off debt have a "buy-it-as-is" attitude, supplying only minimal data when they sell accounts, and charging debt buyers sizable fees if they return for additional documentation. Due to the scant data, outdated addresses can result in consumers receiving no notice that they have been sued. And, increasingly, the wrong individual is targeted by the debt collectors.

Meanwhile, collectors encounter problems as well. Often, they have little evidence to support their claim on a past-due debt amount.

While federal banking regulators have set no rules regarding how much data the banks should provide when they sell a customer's debt, some states are taking action. For example, Maine, West Virginia, and Minnesota are developing reputations for aggressively regulating debt collection agencies that mistreat customers. Separately, judges in several states, including New Jersey, Maryland, and Michigan, consider the imbalance between debt collectors and debtors so troubling that they are seeking change.

Three justices of the Southfield District Court on suburban Detroit, Michigan, are attempting to update court rules to prevent what they describe as "predatory" practices, especially for defendants unfamiliar with the court system and unable to afford an attorney. The judges wrote:

The sale and resale of uncollected debts frequently results in cases involving outdated addresses, so debtors receive no warning when they have been sued.Suits are erroneously filed against the wrong consumers, or against people who have already repaid a debt. Debt collectors often lack evidence of the original debts that they are claiming. Debt collectors frequently misrepresent the amount owed by adding gratuitous interest charges. Even credit card holders who pay off their debts have no guarantee the matter is finished. In numerous states, debt collectors who win court judgments are required to inform the court when a judgment is paid. However, many do not. That leaves consumers powerless to remove negative items from their credit reports when they go to buy a car or refinance a home. As a result, those consumers may have to take on a higher interest rate, and with them larger payments and an increased chance of slipping back into financial difficulty.

Yet regulators, policy makers, and legislators who could intervene to right the balance between collectors and consumers are either unaware of the debt collection problems, and the tens of millions on Americans caught up in them, or are simply unwilling to act. The Federal Trade Commission, responsible for enforcing a federal law that regulates the behavior of debt collectors, has done little despite a surge in consumer dissatisfaction. From 1998 to 2005, the number of consumer complaints regarding debt collectors surged tenfold to 66,627 from 6,678. But in the last six years, the FTC has taken enforcement action against only 10 corporations.

It should be noted that creditors have the legal right to collect what is due. And, consumers usually owe what collectors are after, though they are known to frequently dispute the steep fees and interest that have been tacked on. Often, consumers get into debt by spending beyond their means, whether due to carelessness, unfounded optimism about how much debt they could carry, or extreme need. But most often, debt become unbearable following an unanticipated life obstacle, such as a family member's death, a divorce, illness, or job loss. That is why it is important for credit card users to keep up-to-date with their monthly payments in good times and avoiding unnecessary spending on their credit cards.

Friday, November 7, 2008

Credit Card After Bankruptcy

Consumers who have declared bankruptcy may still need a credit card. And, although a bankruptcy filing will appear on your credit report for up to 10 years, this does not mean you necessarily will have to spend a decade plastic-less.

Following a bankruptcy, the length of time until you get approved for a credit card is up to each individual issuer. Whether you get approved or denied for a credit card (along with issues of credit quality and your credit limit) are entirely up to the banks that issue credit cards. As a result, it is possible that you could be approved for a credit card soon after declaring bankruptcy, but it depends on the issuer.

Still, it is likely that any credit card you are approved for will carry a high interest rate and a very low credit limit, based on the credit risk you appear to present to lenders. Various credit cards for people with bad credit may charge an annual fee, as well. But if you want to begin repairing a damaged credit history, responsible use of a credit card could go a long way toward accomplishing that goal.

Get your spending under control. Once you are approved for a credit card, be sure that you use it carefully, perhaps only charging for things like gas and groceries rather than making unnecessary purchases with plastic. As someone who has declared bankruptcy, you should make every effort to pay monthly credit card statements in full so that you don't end up back in debt.

Another payment card option for people who may have had suffered from bankruptcy woes comes in the form of prepaid debit cards. These cards allow the user to only spend up to the total they have deposited in advance onto the card, making prepaid cards an excellent choice for consumers that are looking to control their spending.

Regardless of which type of card you choose, avoid applying for too many cards at the same time. Multiple credit card applications make you appear desperate for credit and can hurt your credit score.

Thursday, November 6, 2008

Understanding Credit Card Debt Collection

If you fail to pay back your credit card debt, you may find that a debt collector is seeking to recoup the money you owe to the card issuer. The debt collection agency has established some form of a deal with your creditor that allows the collector to get the money from you.

There are basically two types of debt collection agencies. The first type, which represents the vast majority, works on a commission on behalf of your creditor and gets a percentage of the debt they collect from you. The second type of debt collector purchases your debt from the creditor at a discount, often contracting to buy debt for pennies on the dollar.

Among the first category, these commission debt collectors do not own title to the debt. Instead, the agencies collect debt on delinquent accounts referred to them by different creditors, including credit card issuers, banks, hospitals and other health care services, retail stores, or by federal, state, and local governments. According to ACA International, the Association of Credit and Collection Professionals, 33% of the original debt is usually considered a reasonable commission.

When considering the second category of debt collector, a creditor who sells a portfolio of past-due accounts gives up all right, title, and interest to the accounts once the sale of the debt is closed.

To show the value of the collection industry, for the first time, ACA surveyed collection agencies to learn exactly how much is being returned to creditors. In the survey, conducted by PricewaterhouseCoopers LLP, ACA found that third-party debt collectors recovered about $51.4 billion in 2005, out of the $141 billion in bad debt charged off by private businesses that year. Minus the cut the to the debt collection agencies, $39.3 billion was returned to creditors.

Out of that total debt, most was collected on commission. The ACA report discovered that of the debt collected by agencies in 2005, only $2.3 billion was on purchased debt.

The arrangement used by a specific debt collection agency is between that agency and the creditor. Since you are not involved in the deal your creditor cut to get the money you owe or what commission a debt collector may earn for collecting your money, just remember that you are clearly and morally obligated to pay back any debt you contracted.

Wednesday, November 5, 2008

How Errors on Your Credit Report Get Fixed

In looking over your credit report, perhaps you noticed some mistakes. Like any good consumer, you decide it is important to get these errors corrected, so you use the instructions contained in the report on how to dispute any mistakes. This often simply means filling out a "research request" asking the credit agency to investigate the error and correct it. But what happens next?

Once it leaves your hands, credit bureaus must investigate your concerns -- often within 30 days -- unless they regard your dispute as frivolous. Additionally, the credit reporting agency must pass along all relevant information you provide about the dispute to the creditor or lender, also known as the information provider.

When the information provider receives notice of a dispute from the credit reporting agency, it must investigate and review all related information supplied by the agency. Then, the information provider has to report the results back to the agency. If the dispute error is verified, the agency is required to inform other agencies of that resolution under the provisions of the Fair Credit Reporting Act.

If the disputed information cannot be confirmed, it must be removed from your file. The credit reporting agency must fix any incorrect information in your credit report.

Also, the agency must complete any unfinished items. For example, if your credit report indicated that you were late making credit card payments, but did not show you were no longer delinquent, the agency has to specify that your account is now current.

If your credit report shows an account that only belongs to another person, the agency must remove it.

The process of re-investigating your credit report can be lengthy, but once it is complete, the credit reporting agency must provide you with the written results as well as a free copy of your credit report if the dispute results in an alteration to it. Experts recommend that consumers begin following up with credit bureaus and the creditors in question if it has been over 60 days since they began the dispute process.

Consumers should review their credit report at a minimum every two years, since there is a two-year limit on the credit bureau's liability for a mistake from the time that error is introduced into your credit report. There is some room for debate regarding when the two-year limits begins, either when inaccurate information is first filed or when the reporting agency releases a report with the wrong information. Regardless, it is a good idea to keep yourself informed of what your credit report shows and to take action to get any mistakes corrected.

Tuesday, November 4, 2008

Credit Repair

Where consumer credit reports are concerned, the major credit bureaus, Equifax, TransUnion, and Experian, always seem to prioritize profits over precision. Sadly, every major consumer study to date has revealed their breathtaking disregard for ensuring accuracy. Unfortunately, those credit bureaus determine the quality of our lives in so many fundamental ways. Even a single credit report line item can significantly influence everything from how much we'll pay for our homes and cars to how insurance companies gauge our risk to whether or not we'll be hired for certain jobs. So it's no wonder that consumers are fighting back. In fact, many are beginning to demand that their credit reports accurately reflect their true fiscal history and intentions.

It's important to remember that the credit bureaus aren't government-sanctioned entities. Such so-called bureaus are really just privately-owned companies whose business is to buy and sell gossip about you and your neighbors.

In fact, no federal statute mandates credit reporting at all. So despite what Sears or some other credit card issuer says about negatives having to remain on credit reports for seven years, it's simply not true. The governing statute in that regard, the Fair Credit Reporting Act, states simply that most derogatory marks can remain no longer than seven years, but it doesn't sanction any minimum reporting period. In that regard, everything that appears in a credit report is optional. Unlike some credit card issuers, the government doesn't care how long something remains on a credit report, so long as items don't remain longer than the legal limit - which is usually a maximum of seven years except for bankruptcy-related items which can remain for no longer than ten years.

It's that misconception, what I've termed the Myth of Mandatory Credit Reporting, that keeps consumers subjugated to the whims of sloppy credit reporting and, unfortunately, often with terrible consequences.

Fortunately, our federal laws are designed to protect consumers rather than creditors or credit bureaus. So, for example, as I mentioned before, the FCRA places limits upon what credit bureaus can report and for how long. Other protective statutes like the Fair Credit Billing Act and the Truth in Lending Act restrict banks and other creditors with regard to how they can and can't interact with their customers. And perhaps most importantly, the Fair Debt Collection Practices Act keeps abusive debt collectors in check.

The good news is that every one of these statutes can be leveraged in order to ensure that a consumer has the best credit report possible. Remember that any company placing a mark on a credit report must comply with a phalanx of consumer protection regulations, all of which are designed to protect the average citizen. If all requirements aren't met, and if the legal imperative mandating accuracy isn't upheld, then the credit report must be revised. Even credit checks can negatively impact a consumer's credit rating. Fortunately, the governing federal statute stipulates that third parties must establish clear 'permissible purpose' before viewing a consumer's credit report, and that requirement can be enforced as well. Good consumer law firms, like Lexington Law, can assist consumers with seeing such processes through to their logical, and usually favorable, ends. Significant credit score gains can be attained in a fairly short period of time.

Until recently, an accurate credit report's worst enemies were of course the sloppy credit bureaus and those careless creditors who report to them. The sudden ascendance of the Internet during the end of the last century gave rise to something perhaps even more insidious, and that of course is identity theft, a circumstance whose negative consequences can be severe. Too often the major credit bureaus simply don't believe victims of identity theft, and consumer law firms can prove quite helpful in that circumstance.

You can get a free credit report once a year by going to

Monday, November 3, 2008

A Brief History of Credit Cards

Credit cards, as we know them today, have been around for just over half of a century. One of the first credit cards appeared in 1951 when loan customers of Franklin National Bank of New York were screened for credit and those approved were given a card they could use to make retail purchases. Participating merchants copied the customer information from the card onto a sales slip and the bank would credit the merchant account for the loan less a flat fee to cover the costs of providing the loan. In 1958, The American Express Company (a company built on the traveler's cheque business) began issuing a charge card for travel and entertainment charges which was accepted at participating restaurant, hotel and airline merchants.

Cardholders enjoyed the convenience of plastic charge cards (especially when on the road for business) as well as the line of credit offered by the new bank credit cards. Merchants found that credit card customers usually spent more than if they had to pay with cash (which is still true today – the average credit card purchase is 112% more than if cash is used). Accepting bank-issued cards was safer for the merchant than dealing with cash (more secure from internal and external theft and error) and less expensive than creating and maintaining a merchant-specific credit program.

Bankcard Associations
In 1959, Bank of America began issuing the BankAmericard within California, which was the first universal credit card with widespread merchant acceptance. Bank card associations began in 1966 when Bank of America formed licensing agreements with other banks. This enabled them to issue credit cards on a widespread basis and settle transactions among participating banks.

Also in 1966, a group of 14 US banks formed Interlink, a new bankcard processing association with the ability to exchange information on credit card transactions. In 1967, four California banks formed the Western States Bankcard Association and introduced the MasterCharge program (which was later renamed MasterCard in 1979) to compete with the BankAmericard (later renamed Visa in 1976) program. VISA and MasterCard are organizations that both issue credit cards through member banks and set and maintain the rules for processing. They are both run by board members who are mostly high-level executives from their member banking organizations.

As the bankcard industry grew, banks interested in issuing cards became members of either the Visa Association or MasterCard Association. Their members shared card program costs, making the bankcard program available to even small financial institutions. Later, changes to the Association bylaws allowed banks to belong to both Associations and issue both types of cards to their customers.

Credit Card Processing Evolves
As credit card processing became more complicated, outside service companies began to sell processing services to VISA and MasterCard association members. This reduced the cost of programs for banks to issue cards, pay merchants and settle accounts with cardholders, thus allowing greater expansion of the payments industry.

Visa and MasterCard developed rules and standardized procedures for handling the bankcard paper flow in order to reduce fraud and misuse of cards. The two associations also created international processing systems to handle the exchange of money and information and established an arbitration procedure to settle disputes between members.

Other Issuers Join the PartyAs mentioned earlier, American Express was among the first companies to issue a charge card. However, it waited until 1987 before issuing a credit card that allowed customers to pay over time. Their original business model focused on the travel and entertainment charges made by business people, which involved significant revenue from merchants and annual membership fees from customers. While these products are still in their tool chest, they have also developed numerous no-annual fee credit card products offering the same low introductory rates and reward programs as traditional bank cards.

Another relatively recent entry into the card business is Discover Card, originally part of the Sears Corporation. Discover Card Services sought to create a new brand with its own merchant network. The company has been quite successful at developing merchant acceptance, surpassing even Visa in worldwide acceptance locations. A 2004 antitrust court ruling against Visa and MasterCard initiated by American Express, Discover and retailing giant Walmart have changed the exclusive relationship that Visa and MasterCard have enjoyed with Banks. Going forward banks and other credit card issuers will be able to provide customers with an American Express or Discover Card in addition to a Visa or MasterCard. While the bankcard associations have dominated the card business in the past several decades the tide may be turning with the new court rulings.

The credit card has evolved significantly in the past half century and will continue to change with technology as new frontiers in payments develop. What will the payments landscape look like in another 50 years? Only time will tell.

Sunday, November 2, 2008

Glossary of Common Credit Card Terms

There are quite a few terms you may not be familiar with when it comes to credit cards and credit card applications. We have put together a glossary to help you better understand commonly used words, phrases, and acronyms in the credit card industry.

Account Number - A unique number assigned by a financial institution to a credit card customer. On a credit card, this number is embossed and encoded on the face of the plastic.

Additional Cardholder - When you have a credit card, it is often possible to add an additional card to the account for use by someone else. The main cardholder holds responsibility for ensuring payments on the additional card are made. Purchases are shown on the credit card statement, which is sent monthly.

American Express - Also known as AMEX, this company is one of the main international credit card issuing schemes. It issues its own credit cards—unlike Visa and MasterCard—and is responsible for its own relationships with retailers.

Annual Fee - An annual (yearly) fee associated with having a credit card. This is a separate fee from interest rate on purchases.

Annual Percentage Rate (APR) - The yearly percentage rate charged when a balance is held on a credit card. This rate is applied each month that an outstanding balance is present.

Approval Response - An authorization response that is received when a transaction is approved.

ATM - Automated Teller Machines or cash points allow you to access cash with a credit card or other card associated with your bank account. You need to enter your personal identification number (PIN) into the machine to access cash.

Authentication - The process of assuring that data has come from its claimed source, or a process of corroborating the claimed identity of a communicating party.

Authorization - Every retailer has a purchase limit above which they must seek authorization from the card issuer before they can complete the sale. Such authorization can be done by telephone or electronically at the cash till. Authorization is used to control credit card fraud. The cardholder’s available credit limit is reduced by the authorized amount.

Authorization Amount
- Currency amount approved.

Authorization Code - A code that an issuer or its authorizing processor provides to indicate approval or denial for an authorization request.

Authorization Date - Date and time when the transaction was authorized.

Authorization Only - A transaction that is created to reserve an amount against a credit card’s available limit for intended purchases; the actual settlement may occur within three to five days, depending on the card type.

Authorized Amount - Currency amount approved.

Authorized Transaction - Transaction that has been approved.

Balance Transfer - When the outstanding balance of one credit card (or several credit cards) is moved to another credit card account.

Balance Transfer Fee - A fee charged by a credit card company to transfer a balance from one account to another. This fee can be anywhere from 1%-5% of the balance amount. However, many credit card companies do not charge this fee. Contact the credit card issuer for their specific fees.

Bad Credit - A term used to describe a poor credit rating. Common practices that can damage a credit rating include making late payments, skipping payments, exceeding card limits or declaring bankruptcy. “Bad Credit” can result in being denied future credit.

Bank Account - Bank account number for the merchant to which funds will be deposited.

Bank Identification Number (BIN) - The first six digits of a Visa or MasterCard account number. This number is used to identify the card-issuing institution.

Bankcard - A payment card issued by a bank.

Billing Cycle - The time between billing statements, usually 28-31 days.

Business Card (Business Credit Card) - Usually issued to corporate executives or business owners in order to more easily keep business expenses separate from personal charges.

Card Issuer - Any association member financial institution, bank, credit union, or company that issues, or causes to be issued, plastic cards to cardholders.

Card Reader - A device that is capable of reading the encoding on plastic cards.

Cardholder - An individual to whom a card is issued, or who is authorized to use an issued card.

Cash Advance - A cash loan from a credit card using an ATM or bank withdrawal.

Cash Back - Cash back returns to you a percentage of the total amount spent on your credit card over a specific period of time, usually monthly or quarterly. This feature is particularly useful if you normally pay your credit card bills in full each month, as it means you get an effective discount on the products bought with your credit card.

Chargeback - A transaction returned through interchange by an issuer to an acquirer. A transaction may be returned because of it was non-compliant with the association rules and regulations or because it was disputed by a cardholder.

Chargeback Period - The number of days from the transaction’s processing date or endorsement date, during which the issuer may initiate a chargeback.

Co-Branded Card - A co-branded credit card is sponsored by both the issuing bank and a retail organization, such as a department store or an airline. Cardholders may get benefits, such as discounts or free merchandise, from the sponsoring merchant, based on account usage and terms.

Commercial Cards - A general name for cards typically issued for business use and which may include Corporate Cards, Purchase Cards, Business Cards, Travel and Entertainment Cards.
Credit Card Number - Unique number assigned to a credit card.

Credit Limit
- How much total money can be charged to a credit card account, for example $5,000.

Credit History - A partial profile of your financial life, given within a particular timeframe (usually measured in years). Your credit history shows the extent to which you pay your bills on time and how much you may owe particular parties. Credit card issuers use this information to decide whether to provide customers with credit cards.

Debit - A charge to a customer’s bankcard account. A transaction, such as a check, automated teller machine (ATM) withdrawal or point-of-sale (POS) debit purchase that debits a demand deposit account.

Expired Card - A card on which the embossed, encoded or printed expiration date has passed.

Finance Charge - Fees and other costs billed to you on your statement for using the credit cards (i.e., balance transfer fees, cash advance fees, late fees, overlimit fees, etc.).

Fixed Rate (or Fixed APR) -An annual percentage rate that does not change throughout the year, unlike an introductory APR that changes after a specific period of time.

Floor Limit - An amount that Visa and MasterCard have established for single transactions at specific types of merchant outlets and branches, above which authorization is required.

Fraudulent Transaction - A transaction unauthorized by the cardholder of a bankcard. Such transactions are categorized as lost, stolen, not received, issued on a fraudulent application, counterfeit, fraudulent processing of transactions, account takeover or other fraudulent conditions as defined by the card company or the member company.

Fraudulent User - An individual who is not the cardholder or designee and who uses a card (or, in a mail/phone order or recurring transaction, an account number) to obtain goods or services without the cardholder’s consent.

Grace Period - A period of time during which you are allowed to pay your credit card bill without being charged a finance and/or late fee. This period is usually 10-28 days.

Introductory Rate (or Intro APR) - A temporary, lower annual percentage rate, after which the APR is raised.

Issuer - Any association member financial institution, bank, credit union or company that issues, or causes to be issued, plastic cards to cardholders.

Magnetic Stripe - A stripe of magnetic information that is affixed to the back of a plastic credit or debit card. This stripe contains customer and account information that is required to complete electronic financial transactions. The physical and magnetic characteristics of this stripe are specified in the International Organization for Standardization standards 7810, 7811 and 7813.

Mail/Phone Order Merchant - A merchant that transacts business by mail or phone.

Mail/Phone Order Transaction - A transaction where a cardholder orders goods or services from a merchant by telephone, mail or other means of telecommunication, and where neither the card nor the cardholder is present at the merchant outlet.

MasterCard - MasterCard International Inc. and all of its subsidiaries and affiliates.

MasterCard Acquirer - A member that signs a MasterCard merchant agreement or disburses currency to a MasterCard cardholder in a cash disbursement, and directly or indirectly enters the resulting transaction receipt into interchange.

MasterCard Card
- A card that bears the MasterCard symbol, enabling a MasterCard cardholder to obtain goods, services or cash from a MasterCard merchant or acquirer.

MasterCard Issuer - A member that issues MasterCard cards.

Merchant - An entity that contracts with merchant banks or ISO’s to originate transactions.

Merchant Agreement - A written agreement between a merchant and a bank that contains their respective rights, duties and warranties, with respect to acceptance of the bankcard and matters related to the bankcard activity.

Merchant Bank - Bank that has a merchant agreement with a merchant to accept (acquire) deposits generated by bankcard transactions.

Minimum Payment - The lowest amount of money that you are required to pay on your credit card statement each month.

Online Financial Transaction - A transaction that is authorized, cleared and settled in a single online message.

Overlimit - This refers to a cardholder account that has surpassed its credit limit with a transaction (i.e., the cardholder’s outstanding balance is beyond his/her credit limit).

Overlimit Fee - A fee charged when your balance goes over your credit limit.

Password - A sequence of characters that allows users access to a system. Although they are supposed to be unique, experience has shown that most people’s password choices are highly insecure. Humans tend to choose short words, such as names, which are easy to guess.

Per Transaction Fees - Fees paid by the merchant to the merchant bank or other contracted party on a per-transaction basis.

PIN (Personal Identification Number) - A sequence of digits used to verify the identity of the holder of a token. The PIN is a kind of password.

Plastic (Card) - This is a generic term that is used to identify any of the various cards issued to cardholders.

Point Of Sale (POS) - Location in a merchant establishment at which the sale is consummated by payment for goods or services received.

Policy - An informal, generally natural language description of desired system behavior. Policies may be defined for particular requirements, such as confidentiality, integrity, availability, safety, etc.

Posting - The process of updating individual cardholder account balances to reflect merchandise sales, instant cash, cash advances, adjustments, payments and any other charges or credits.

Primary Account Number (PAN) - The number that is embossed and/or encoded on a plastic card that identifies the issuer and the particular cardholder account.

Prime Rate (or Prime Interest Rate) - The interest rate at which banks lend to their most creditworthy (prime) customers. The prime rate is known to change but not on a regular basis.

Processing Date - The date on which the transaction is processed by the acquiring bank.

Receipt - A hard copy document that records when a transaction took place at the point of sale. The receipt contains a description of the transaction, which usually includes the date, the merchant name/location, the primary account number, the amount and the reference number.

Recurring Billing - Transactions for which a cardholder grants permission to the merchant to periodically charge his account number for recurring goods or services.

Reference Number - Number assigned to each monetary transaction in a descriptive billing system. Each reference number is printed on the monthly statement to aid in retrieval of the document, should it be questioned by the cardholder.

Refund – The creation of a credit to a cardholder account, usually as a result of a product return or to correct an error.

Retail Merchant - A merchant that provides goods and/or services in the retail industry, but that is not a mail/phone merchant, a recurring services merchant or a T&E merchant.

Sales Draft - A paper record that evidences the purchase of goods or services by a cardholder.

Secured Credit Cards - Credit cards that require collateral (property, such as a house, car or deposit of money) for approval. Generally, secured credit cards are for people with no credit
or poor credit who are trying to build or rebuild their credit history.

Service Charge - A component of some finance charges, such as the fee for triggering an overdraft checking account into use.

Settlement - The reporting of settlement amounts owed by one member to another, or to a card issuing concern, as a result of clearing. Settlement is the actual buying and selling of transactions between the merchants, processors and acquirers; along with the card-issuing entities.

Settlement Bank - A bank, including a correspondent or intermediary bank, that is both located in the country where a member’s settlement currency is the local currency, and is authorized to execute settlement of interchange on behalf of the member or the member’s bank.

Smart Card - A plastic card containing a computer chip with memory and CPU capabilities. Such a card may be used for identification or to store information, financial amounts or other forms of data. Also called an integrated circuit card or a chip card.

Standard Floor Limit - A floor limit that varies by merchant type. This refers to a currency limit on transactions, above which authorization requests are required.

Statement - A written record prepared by a financial institution, usually once a month, listing all transactions for an account, including deposits, withdrawals, checks, electronic transfers, fees and other charges, and interest credited or earned. The statement is usually mailed to the customer.

Stored-value Card - A stored-value card is a credit-card-sized device that is implanted with a computer chip with stored money value. A reloadable stored-value card can be reused by transferring a dollar value to it from an automated teller machine or other device. A disposable card cannot be reloaded.

Transaction - (1) Any agreement between two or more parties that establishes a legal obligation. (2) The act of carrying out such an obligation. (3) All activities affecting a deposit account that are performed at the request of the account holder. (4) All events that cause some change in the assets, liabilities or net worth of a business. (5) An action between a cardholder and a merchant or a cardholder and a member that results in activity on the cardholder account.

Transaction Identifier
- A unique 15-character value that VISA assigns to each transaction and returns to the acquirer in the authorization response. VISA uses this value to maintain an audit trail throughout the lifecycle of the transaction and all related transactions, such as reversals, adjustments, confirmations and chargebacks.

Unsecured Credit Cards - Credit cards that are not secured by collateral. Customers qualify for such cards based on their credit history, their financial strength and their earnings potential.

User Authentication
- Process of validating that a user is who s/he represents her/himself to be.

Validation Code - A unique 4-character value that VISA includes as part of the CPS/ATM program in each authorization response. This code ensures that key authorization fields are preserved in the clearing or settlement record.

Variable Interest Rate - With variable-rate cards, the APR changes when interest rates or other economic indicators change. Also known as a floating rate.

Visa - Visa International Service Association and all of its subsidiaries and affiliates.

Visa Card - A card that bears the Visa symbol and which enables a Visa cardholder to obtain goods, services or cash from a Visa merchant or acquirer.

Visa Issuer - A member that issues Visa Cards.

Visa Merchant
- A merchant that displays the Visa symbol and accepts all Visa cards.

Voice Authorization
- An approval response that is obtained through interactive communication between an issuer and an acquirer, their authorizing processors or stand-in processing or through telephone, facsimile or telex communications.

Void Transaction - A deletion of the transaction information.

Void(ed) - Nullifies a transaction that has been recorded for settlement, but has not yet been settled. This removes the transaction from the batch of transactions to be settled.