Do's and Don'ts When Closing Old Accounts

It is always important to not have more credit card accounts than you can handle. When you do open a new account because of a better interest rate, a promotional offer or for whatever reason, you should always close any current credit card accounts you no longer plan on using. There are many reasons why you should do this:

• Helps you keep track of your credit cards
• Keeps your credit report cleaner
• Qualifies you for loans by lowering the amount of revolving debt
• Helps you avoid unnecessary fees
• Prevents you from being a victim of identity theft
• To help you understand what you should and should not do when closing old credit card accounts, here are a few tips to keep in mind.

What you should DO when closing credit card accounts…

• Close unused and idle credit card accounts. – Doing so prevents your from being a victim of identity theft and from being charged annual fees for unused cards.
• Cancel credit card accounts with current balances that you want to pay off and no longer use. – If don’t want to use a credit card anymore, you can close the account and then concentrate on paying off the balance. This strategy keeps you from spending more on that account and lowers your amount of available debt when applying for a loan.
• Ensure you still have several credit card accounts open. – Keeping several credit card accounts open will keep your credit score and debt balances healthy. Creditors view signs of activity and responsible credit use positively. However, you must use these credit card accounts responsibly or you could find yourself suffering from a poor credit rating.
• Have one card designated for regular use and pay it off each month. – This one card can be reserved for everyday spending while your other credit cards can be used for emergency or specific purposes, such as vacations, business trips, etc. By paying off this one card each month, you won’t need to worry about carrying a balance when using the other cards for higher priced items.
• Check your credit report. – After closing an account, check your credit report to ensure that the accounts have been marked as closed and to determine whether there are any errors. Look for late payments, high balances and signs of identity theft.
• Destroy canceled credit cards. – It is important to cut up closed credit card accounts by cutting through the account number. This prevents someone else from stealing your credit card and reopening the account.

What you should NOT DO when closing credit card accounts…

• Don’t close your oldest credit card account. - This could cause your credit history to appear shorter and could harm your credit score. Better to keep the account open and not use it or just use it infrequently. If you want to close it because of a higher interest rate, contact the credit card company to see about lowering the APR.
• Don’t expect credit card accounts to close automatically. – The only way an account is closed is if you contact the credit card company in writing asking to close the account. Contact their customer service department if you need their mailing address. Typically, they will confirm that the account is closed within 10-15 days.
• Don’t be pressured into canceling several accounts at once. – It is better to gradually pay down and then close the accounts if you are unsure about the impact doing so will have on your credit score or you are uncertain as to the amount of debt you need to carry. You may need those credit cards again in the future.
• Avoid over-consolidating balances onto one card. - If your credit balances rise to above 50% of your available limits, you may see a drop in your credit score.
• Having a credit card is a privilege and a benefit that many people enjoy. Be smart when closing old accounts to ensure you get the best possible APRs and benefits from your credit cards.

Protecting Your Credit Cards

When most people think of protecting their credit cards, they are thinking about protecting their credit or credit ranking, not the actual credit card. As a responsible credit card user, you want to ensure you will get the best rates and benefits associated with a strong credit rating. However, it is not enough to safeguard your credit card’s usage. You must also ensure that your credit card and credit card number do not fall into the hands of those who do not care about your financial responsibilities. Do not allow your credit card information to unwittingly reach the eyes of those who see your personal credit card as free money.

To ensure that your credit card remains safe from unauthorized charges, here are a few ways you can protect your credit:

• Don’t give your credit card account number out over the phone without knowing why. – Know who is asking for your number on the phone before giving out the number. Make sure that person is employed by a reputable catalogue company, organization or business.
• Don’t use your credit card on an unsecured Website. – Online purchases are fast and easy. However, unless the Website is secure, your credit card number is at risk for being stolen. Use only Websites that explicitly state they are secure and reputable businesses and for which such claims can be verified.
• Don’t put your credit card account number on the outside of an envelope or on a postcard. – Anyone could see this information. If necessary, include any credit card or account numbers on information inside the envelope only and make sure such details can’t be seen through the envelope.
• Don't sign a blank charge slip. – Always know how much the charge will be and verify the amount from the receipt given to you.
• Get and destroy charge carbons from stores. – When you receive your charge receipt, you should also get the charge carbons from the store. Note: some store use carbonless charge slips nowadays to ensure your credit safety. If the cashier does not give you the carbon, ask for it immediately and then tear it up into small pieces before throwing it away.
• Check your monthly statement. – Don’t automatically pay your credit card bill each month or let it sit on your desk. Open your statement immediately and look closely at each listed charge to verify the amount and whether you actually made such a purchase. If something is wrong, contact your credit card company immediately. This way, you will be able to determine if there was an error or whether any other recent unauthorized charges have been made to your card.
• Cut up old credit cards through the account number. – When you get a new card or close an account, cut up the old card through the account number so it can’t be identified.
• Protect your credit card and pin numbers at ATMs or when using the telephone. – If you use your credit card for cash advances or for long distance charges on a payphone, be sure to stay aware of the people around you. Some credit card thieves memorize credit card and pin numbers from the buttons you push on the phone. Use your body to block anyone’s line of vision.
• Carry as few credit cards as possible. – People with multiple credit cards should only carry a few that they anticipate using. For example, if you carry an emergency card and a gas card, you don’t also need to carry another general credit card like a Visa or a store credit card, unless you plan to go to that store. By being selective in the card you carry, if you happen to lose your wallet or purse, only a few cards are at risk of being misused, rather than all of them. If you do lose a credit card, report it immediately.

Though most credit card companies and banks offer unauthorized protection, ultimately, you are responsible for how your credit card is used. Your credit rating is important, so protect your credit the way you would protect a wallet full of cash. For more information on how to protect your credit cards or on how to resolve problems from unauthorized charges, contact your credit card issuer or your financial advisor.

Reviewing Your Credit Report Yearly

It is critical that you periodically review your credit report for inaccuracies or omissions, especially if you're considering making a major purchase, such as buying a home. Checking in advance on the accuracy of credit card and other financial information in your credit file could speed the credit-granting process.

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.

You can request a copy of your credit report by simply calling a credit bureau. The three national credit bureaus are:

• Equifax
  P.O. Box 740241, Atlanta, GA 30374-0241; (800) 685-1111
• Experian (formerly TRW)
  P.O. Box 2002, Allen, TX 75013; (888) EXPERIAN (397-3742)
• TransUnion
  P.O. Box 1000, Chester, PA 19022; (800) 916-8800

Under the FCRA, both the CRA and the organization that provided the information, 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 and all pertinent information. Enclose a copy of your report with the items in question circled. Send your letter by certified mail, return receipt requested, so you can document what the CRA received. Keep copies of your dispute letter.

CRAs must reinvestigate the items in question unless they consider your dispute frivolous. 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. If your file shows an account that belongs 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.

Upon 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.

Second, tell the creditor or other information provider in writing that you dispute an item. When negative information in your report is accurate, only the passage of time can assure its removal. Accurate negative information will stay on your report for seven years, but there are 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.

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. 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. You should, note that if these creditors do not report to the CRA on a regular basis, these added items will not be updated in your file.

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

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Date

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.

Sincerely,

Your name

Enclosures: (List what you are enclosing)

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Taking care of credit history will help you protect not only your future buying power, but will ensure you are not a victim of credit fraud or identity left. If you have questions about how this can affect your specific financial situation, contact your accountant of financial advisor.

What is a Credit Score and How Does it Affect Me?

What is a Credit Score?

You’ve heard of a credit report, but you don’t understand what a credit score is. Furthermore, you’re unsure as to how this affects you when applying for a new credit card. A credit score is a sum that is determined by lenders using a mathematical formula and is derived from information taken from your credit report. This sum is an indicator of how likely you are to repay your loans. In other words, this is how lenders determine if you are a risk for lending money to or if are going to be an ideal creditor who will pay your bills on time and in full.

Lenders have been using credit scores as part of the lending decision for over 20 years. There are several factors the can influence your credit score:

• How you paid previous debts
• How much you still owe to other creditors
• How long you have had credit (length of credit history)
• Number of bankruptcies, charge-offs, and collections
• Current available credit

When all this information is factored together, the lenders determine your overall credit score.

How does my credit score affect me?

A credit score is just a number; however, it is a very important number. It is a vital indicator of your financial health, in the same way that your cholesterol number is just a number until you realize the significance that number has on your overall health. To avoid a financial heart attack, it is important to become familiar with your credit report and to rectify any mistakes or errors that could negatively impact your credit score.

Lenders use credit scores to:

• Determine creditworthiness (whether or not they will give you the loan)
• What Annual Interest Rate (APR) to charge on credit cards

A good credit score can help you get prime rates that will save you money over the long run. A not so good credit score, on the other hand, could cause you to receive an APR that is a couple of points above the prime rate, which will cost you a lot more money over the long haul.

What is a "good" credit score?

Generally, the higher the score, the better. Each lender determines what their “good” credit score range is and what constitutes a risk. Therefore, it is best to discuss with the lender what their criteria for credit scoring is and how this could affect your application.

If you have additional questions about credit scores and how they relate to your personal financial situation, contact a financial advisor or a loan professional.

Credit Reporting Q&A

If you've ever applied for a credit card, charge account, a personal loan, insurance, or a job, there's a file about you. What’s in this file? This file is called a credit report, and it has information about where you work and live, how you pay your bills (especially revolving credit cards), and whether you've been sued, arrested, or filed for bankruptcy.

There are companies called credit reporting agencies (CRAs) that compile this information and sell it. What they do is give companies information about you to gauge your creditworthiness. They give this information about you to creditors, employers, insurers, and other businesses. You probably know the CRAs known as credit bureaus. The three most common ones are Equifax, Trans Union, and Experian.

The Fair Credit Reporting Act (FCRA) is designed to promote accuracy and ensure the privacy of the information used in consumer reports. It is enforced by the Federal Trade Commission.

Below are some commonly asked questions and answers about consumer reports and CRAs:

Q. How do I find the CRA that has my report?
A. Look in the yellow pages under "credit" or "credit rating and reporting." The three major national credit bureaus are:

Equifax
800-685-1111
www.equifax.com

Experian
888-EXPERIAN (888-397-3742)
www.experian.com

Trans Union
800-916-8800
www.transunion.com

If you are ever denied credit, the one who denied you has to tell you which agency they got your information from. You are then able to receive a free copy from that bureau.

Q. Do I have a right to know what's in my report?
A. Yes. But you have to ask for it. They will tell you everything that is in your report.

Q. Is there a charge for my report?
A. Sometimes. If you just want to look at your credit report, then you have to pay for it. But if you are denied for credit, insurance or employment, and you request your report within 60 days, it is free. Fees vary from agency to agency.

Q. What can I do about inaccurate or incomplete information?
A. Under the Fair Credit Reporting Act, there is a process you must follow when disputing information.

• Tell the CRA in writing that you dispute the information. Provide any supporting documentation that you might have.
• The agency will investigate. It usually takes 30 days for this.
• Then the CRA will give you written notice of the results and a free credit report.
• If the information was inaccurate, it will be taken off your credit report.

Q. But what if the CRA says the incorrect information is accurate?
A. A reinvestigation is not always going to solve your credit issue. If the creditor says the information is correct, most likely the CRA will believe them. The best you can do is:

• Ask the CRA to file a statement that you dispute the charge
• Contact your creditor directly and resolve the issue with them first, and then ask the CRA for another investigation.

Under the Fair Credit Reporting Act if you tell the information provider that you dispute an item, a notice of your dispute must be included anytime the information provider reports the item to a CRA.

Q. Can my employer get my report?
A. Only if you approve.

Q. Can creditors, employers, or insurers get a report that contains medical information about me?
A. Not without your approval.

Q. How long can a CRA report negative information?
A. 7 years, with the following exceptions:

• Criminal convictions have no time limit
• Bankruptcy is for 10 years
• No time limit on a job application for a $75,000 or more job
• No time limit on insurance application of more than $150,000
• Unpaid judgments are either for 7 years or when the statute of limitations runs out, whichever is longer.

Q. Can anyone get a copy of my report?
A. No. Only those that the FCRA deems has a legitimate need can get it. For example, an insurance company when you apply for insurance can get it, but not a chicken restaurant when you buy a meal deal with 10 pieces or more.

Q. Can I stop a CRA from including me on lists for unsolicited credit and insurance offers?
A. Yes. Creditors and insurers may use information from your credit report to send you unsolicited offers. But these offers have to have a toll-free number that you can call to get your name removed from their lists.

Q. Do I have the right to sue for damages?
A. You bet you can. You may sue a CRA in state or federal court for most violations of the FCRA. If you win, the defendant will have to pay damages and reimburse you for attorney fees. But it must be for a violation of the Fair Credit Reporting Act, not because of inaccurate information.

Q. Are there other laws I should know about?
A. Yes. If your credit application was denied, the Equal Credit Opportunity Act requires creditors to specify why. But you have to ask. . For example, if you were denied because you have a short credit history, then they have to tell you that. “Just because” won’t cut it.

Q. Where should I report violations of the law?
A. Since the Fair Credit Reporting Act is enforced by the FTC, you can send them information about your experiences and concerns as it related to the Fair Credit Reporting Act. Send your questions or complaints to: Consumer Response Center - FCRA, Federal Trade Commission, Washington, DC 20580.

What is a Credit Report?

You’ve heard other people talk about it, and you know it is important. But, what is a credit report? Put simply, your credit report is what lenders look at when deciding whether or not to approve you for a new credit card or other loan application. A good credit report can get you better credit card APRs or car loan rates. On the other hand, a bad credit report can also cause you a lot of problems.

There are three major credit agencies: Equifax, Experian, and TransUnion. These agencies, or "credit bureaus," collect and report information about your financial habits and put this information into a credit report. Your credit report typically includes:

• Your name
• Your Social Security number
• Your current and previous addresses
• Information about your current and past loans
• Your public record information (bankruptcies, court judgments, liens)
• A list of companies that have reviewed your credit

Your credit report demonstrates to potential lenders how you handle debt and helps them to determine whether or not you are a good candidate to lend money to. That is why it is important to look at your credit report once a year. This way, if there are any mistakes or problems, you can resolve them with the credit bureau before applying for a new loan.

You can visit any of the three aforementioned credit agencies’ Websites to purchase a copy of your credit report.

Credit and Consumer Rights

Know Your Consumer Rights

A good credit rating is very important. Businesses inspect your credit history when they evaluate your applications for a credit card, insurance, employment, and even leases. Based on your credit payment history, businesses can choose to grant or deny you credit provided you receive fair and equal treatment. Sometimes, things happen that can cause credit problems: a temporary loss of income, an illness, even a computer error. Solving credit problems may take time and patience, but it doesn’t have to be an ordeal if you know your consumer rights.

The Federal Trade Commission (FTC) enforces credit laws that protect your right to obtain, use, and maintain credit. These laws do not guarantee that everyone will receive credit. Instead, the credit laws protect your rights by requiring businesses to give all consumers a fair and equal opportunity to receive credit and to resolve disputes over credit errors. This brochure explains your rights under these laws and offers practical tips to help you solve credit problems.

Your Credit Report

Your credit card and other debt payment history is recorded in a file or report. These files or reports are maintained and sold by "consumer reporting agencies" (CRAs). One type of CRA is commonly known as a credit bureau. You have a credit record on file at a credit bureau if you have ever applied for a credit or charge account, a personal loan, insurance, or a job. Your credit record contains information about your income, debts, and credit payment history. It also indicates whether you have been sued, arrested, or have filed for bankruptcy.

The Fair Credit Reporting Act (FCRA) is designed to help ensure that CRAs furnish correct and complete information to businesses to use when evaluating your application.

Your rights under the Fair Credit Reporting Act:

• You have the right to receive a copy of your credit report. The copy of your report must contain all of the information in your file at the time of your request.
• You have the right to know the name of anyone who received your credit report in the last year for most purposes or in the last two years for employment purposes.
• Any company that denies your application must supply the name and address of the CRA they contacted, provided the denial was based on information given by the CRA.
• You have the right to a free copy of your credit report when your application is denied because of information supplied by the CRA. Your request must be made within 60 days of receiving your denial notice.
• If you contest the completeness or accuracy of information in your report, you should file a dispute with the CRA and with the company that furnished the information to the CRA. Both the CRA and the furnisher of information are legally obligated to reinvestigate your dispute.
• You have a right to add a summary explanation to your credit report if your dispute is not resolved to your satisfaction.

Your Credit Application

When creditors evaluate a credit application, they cannot lawfully engage in discriminatory practices.

• The Equal Credit Opportunity Act - (ECOA) prohibits credit discrimination on the basis of sex, race, marital status, religion, national origin, age, or receipt of public assistance. Creditors may ask for this information (except religion) in certain situations, but may not use it to discriminate when deciding whether to grant you credit.
• The ECOA - protects consumers who deal with companies that regularly extend credit, including banks, small loan and finance companies, retail and department stores, credit card companies, and credit unions. Everyone who participates in the decision to grant credit, including real estate brokers who arrange financing, must follow this law. Businesses applying for credit also are protected by this law.

Your rights under the Equal Credit Opportunity Act:

• You cannot be denied credit based on your race, sex, marital status, religion, age, national origin, or receipt of public assistance.
• You have the right to have reliable public assistance considered in the same manner as other income.
• If you are denied credit, you have a legal right to know why.

Your Credit Billing and Electronic Fund Transfer Statements

It is important to check credit billing and electronic fund transfer account statements regularly. These documents may contain mistakes that could damage your credit status or reflect improper charges or transfers. If you find an error or discrepancy, notify the company and contest the error immediately.

The Fair Credit Billing Act (FCBA) and Electronic Fund Transfer Act (EFTA) establish procedures for resolving mistakes on credit billing and electronic fund transfer account statements, including:

• charges or electronic fund transfers that you — or anyone you have authorized to use your account — have not made; charges or electronic fund transfers that are incorrectly identified or show the wrong amount or date;
• computation or similar errors;
• failure to reflect payments, credits, or electronic fund transfers properly;
• not mailing or delivering credit billing statements to your current address, as long as that address was received by the creditor in writing at least 20 days before the billing period ended; charges or electronic fund transfers for which you request an explanation or documentation, due to a possible error.

The FCBA generally applies only to "open end" credit accounts — credit cards, revolving charge accounts (such as department store accounts), and overdraft checking accounts. It does not apply to loans or credit sales that are paid according to a fixed schedule until the entire amount is paid back, such as an automobile loan. The EFTA applies to electronic fund transfers, such as those involving automatic teller machines (ATMs), point-of-sale debit transactions, and other electronic banking transactions.

Your Debts and Debt Collectors

You are responsible for your debts. If you fall behind in paying your creditors or an error is made on your account, you may be contacted by a "debt collector." A debt collector is any person, other than the creditor, who regularly collects debts owed to others. This includes lawyers who collect debts on a regular basis. You have the right to be treated fairly by debt collectors.

The Fair Debt Collection Practices Act (FDCPA) applies to personal, family, and household debts. This includes money owed for the purchase of a car, for medical care, or for charge accounts. The FDCPA prohibits debt collectors from engaging in unfair, deceptive, or abusive practices while collecting these debts.

Your rights under the Fair Debt Collection Practices Act:

• Debt collectors may contact you only between 8 a.m. and 9 p.m.
• Debt collectors may not contact you at work if they know your employer disapproves.
• Debt collectors may not harass, oppress, or abuse you.
• Debt collectors may not lie when collecting debts, such as falsely implying that you have committed a crime.
• Debt collectors must identify themselves to you on the phone.
• Debt collectors must stop contacting you if you ask them to in writing.

Solving Your Credit Problems

Your credit report influences your purchasing power, as well as your chances to get a job, rent or buy an apartment or a house, and buy insurance. A history of timely credit payments helps you get additional credit. Accurate negative information can stay on your report for seven years. A bankruptcy can stay on your report for 10 years. If you are having problems paying your bills, contact your creditors at once. Try to work out a modified payment plan with them that reduces your payments to a more manageable level. Don't wait until your account has been turned over to a debt collector.

Here are some additional tips for solving credit problems:

• If you want to contest a credit report, bill or credit denial, contact the appropriate company in writing and send it "return receipt requested."
• When you contest a billing error, include your name, account number, the dollar amount in question, and the reason you believe the bill is wrong.
• If in doubt, request written verification of a debt.
• Keep all your original documents, especially receipts, sales slips, and billing statements. You will need them if you dispute a credit bill or report. Send copies only. It may take more than one letter to correct problems.
• Be skeptical of businesses that offer instant solutions to credit problems.
• Be persistent. Resolving credit problems can take time and effort.
• There is nothing that a credit repair company can do for you — for a fee — that you cannot do for yourself for little or no cost.

If you can't resolve your credit problems yourself or if you need help, you may want to contact a credit counseling service. Nonprofit organizations in every state counsel consumers in debt. Counselors try to arrange repayment plans that are acceptable to you and your creditors. They also can help you set up a realistic budget. These services usually are offered at little or no cost.

One of the reputable agencies that can help you is the Consumer Credit Counseling Service (CCCS), a non-profit organization that offers free or low-cost financial counseling to families that need to solve financial problems. CCCS can help you analyze your situation and works with you to develop solutions. Currently, there are more than 1,200 CCCS offices in the United States. Call 800-388-2227 for the phone number of the office nearest you, or visit the CCCS website at http://www.cccsatl.org/.

National Foundation for Consumer Credit (NFCC), a not-for-profit organization with 1,450 offices in all fifty U.S. states, Puerto Rico, and Canada. An NFCC member is identified by the "member NFCC" seal. At little or no cost to you, CCCS counselors will work with your creditors to establish a repayment plan that will satisfy both you and your creditors. CCCS can also help you set up a realistic budget and plan for the future. Universities, military bases, credit unions, and housing authorities also may offer low- or no-cost credit counseling programs. Check the white pages of your telephone directory for a service near you.

Store Credit Cards -- Enticing, But Not Always the Best Choice

We've all done it. While standing at a major retailer's register with an armload of purchases you are pitched an irresistible deal – sign up for the store's credit card and you can get an instant 10% discount on your purchase. And, if you are spending a sizable amount of money at someplace like the GAP, the idea of getting $20 or $30 off your purchase is pretty hard to resist.

But it probably is not such a good idea on many levels. First off, ask yourself, "Do I really need another credit card?" If the answer is no or even maybe, then it's probably best to politely decline the offer. Merely having too many of these credit inquiries on your credit report can wreak havoc with your credit score. Some experts have opined that each store card a person opens lowers the customer's credit score by 20 points, and the credit inquiries alone can shave off 5 points. Whether it's that damaging is a matter of conjecture, but it definitely is harmful to some degree if done too often.

Going beyond mere credit inquiries is the effect of having multiple, approved store credit cards in your wallet. The net effect can be quite detrimental. These types of store credit cards provide a way to run amok with purchasing power in very tempting environments whose sole purpose is to get you to spend, spend, spend. And, once you've racked up some serious balances, you will realize these credit cards carry some serious interest rates – typically 50% higher than general use credit cards like Visa and MasterCard.

Unlike general use credit cards, store credit cards can only be used with the retailer that issues the card and therefore have much less utility than cards issued by Visa, MasterCard, Discover or American Express.

Even if you never plan to use a store credit card and simply desire to earn the upfront 10% discount, it's probably a bad idea. By having additional lines of credit open on your credit report you will look inherently more risky to lenders. This type of "risk potential" can trigger all kinds of unpleasant consequences, like universal default pricing on your other credit card accounts. But how can that happen, even without carrying a balance or being late with a payment, you ask? Well, most cardholder agreements provide the bank issuers with the ability to impose penalty default pricing for almost any reason – even the hint of increased credit risk.

Bottom line, store credit cards may look like great deals on the surface. But, rest assured, they are mostly a great deal for the retailer rather than the consumer. Store credit cards drive increased sales, loyalty and profits for retailers, who have realized there is as much money to be made in selling credit as there is in selling their main retail items.

So, before signing up for that new store card at the checkout counter, consider your financial needs. If you truly need additional credit, you should shop around for a low interest rate credit card – even one that offers 0% introductory APR. And if it's rewards that you seek, consider one of the many compelling offers available from Chase, Citi, American Express or Discover Card. All of these issuers provide credit cards that allow consumers to earn a full 5% cash back on everyday items at grocery stores, drugstores and gasoline stations and 1% on all other purchases. And, these cards can be used at millions of location worldwide. When you stop and think, it's not difficult to see how general purpose credit cards offer greater value and utility than their private-label store card brethren.

Universal Default -- What it is and How to Avoid it

Universal default is a relatively new provision that has been added to the credit card member terms and conditions by credit card companies. Universal default basically allows creditors to review a customer's credit report on a regular basis, and if there is any change that has negatively impacted their credit score a new, higher interest rate can be applied.

The customer behaviors that can potentially trigger universal default pricing by a credit card issuer include the following:

• Being late (even once) on a credit card, mortgage, utility or car payment
• Going over the credit limit on any credit card
• Carrying too much debt overall
• Using over 50% of the credit line for an individual credit card
• Having too much available credit and open trade lines
• Making too many credit inquiries
• Getting a new mortgage or car loan

Universal default is not meant to hurt consumers. Rather, it is intended to protect credit card companies from potential losses by charging higher interest to those customers with degrading risk profiles. It is somewhat analogous to a health insurance company charging higher insurance premiums to someone who smokes, even though they haven't filed a claim.

The best way to deal with this new provision is to simply not have it apply to you. The best rule of thumb is to always, always pay your bills on time. That includes your utility and magazine subscription bills. Almost any company that bills for services can report your payment behavior to credit bureaus, who in turn sell this information to lenders. Even if you haven't become a true credit risk, irresponsible behavior can create the perception of increased risk propensity.

Probably the safest course to take is to stay out of debt. By employing fiscal discipline, you can simply not care about silly things like interest rates. If you are not able to do this because of outstanding balances that are priced at high APRs, you may want to consider a balance transfer to a 0% APR credit card. That way, you can start aggressively paying down the balance and become debt free much faster, without having interest charges drag down your finances.

Approximately 45% of credit card issuers have universal default provisions contained within their cardmember agreements. It is important for consumers to understand these types of potential costs by reviewing the terms and conditions beyond the introductory APR prior to applying for a card. And while these policies probably won't go away, it's important to realize that banks are just businesses that are taking steps to protect their bottom line and shareholders. Rather than having these types of charges apply to you, simply exercise a little caution and discipline to enjoy the benefits of credit cards without the pitfalls.

Old Credit Card Debt Can Come Back to Haunt You

Credit card debt can sometimes be like a bad penny that keeps turning up. Obviously, the only wise course of action is to pay bills promptly and never get oneself overextended. But for those who have found themselves drowning in credit card debt with no way out, this hasn't always been an option.

In cases where people have been unable to repay a credit card balance, the lending bank normally is forced to "charge off" the amount owed. The banks will usually do this after a period of time, such as after 3 – 4 months of delinquency. But this doesn't mean that the debt has been erased, by any means. It is more of an interim accounting measure on the part of the bank to reclassify the funds that appear doubtful in terms of repayment.

Credit card issuers will normally try to collect delinquent credit card balances long after the money owed has been reclassified on their books as "charged off". If these collection efforts prove to be fruitless they will sometimes settle with the card holder for some amount less than is owed. But more often they will sell delinquent balances to third party collection companies for pennies on the dollar. Banks consider this type of arrangement better than nothing in terms of repayment. And, it is these third party collectors that consumers must be wary of because they often are much more aggressive in terms of collecting payment from borrowers.

Declaring bankruptcy can normally protect a person from original creditors, but this isn't always the case if the delinquent receivables have been sold to another creditor, such as a collection agency. Consumers are finding out the hard way that past financial difficulty or indiscretion is not actually forgiven or evaded, but is now coming back to insist on resolution. These situations will only become more common as recently enacted bankruptcy reform will make it more difficult to consumers to avoid eventual debt repayment.

In favor of consumers who have declared bankruptcy is a statute of limitations after which a debt can not be legally collected, which is seven years from the date of charge-off. If collection agencies come after someone beyond this period then consumers can take legal action to have the collections stopped.

Another tactic employed by aggressive collection agencies involves the threat of reporting the card holder to the credit reporting agencies unless the amount owed is repaid. For those who have come out of bankruptcy and have rebuilt their credit, this can be a very effective ploy. But, if more than seven years have transpired since the original due date this tactic can be countered with legal action, since the statute of limitations also applies to credit bureau reporting.

So, what should a person do if confronted with aggressive collection efforts for a debt that should have been erased years ago? First, determine if the debt is legitimate. Sometimes collection agencies have inaccurate information and use intimidation to drive their revenue despite the consumer not recognizing the origin of the amount to be repaid.

Second, if the amount is actually owed, find out how long it has been since the delinquency clock started. If beyond seven years, it is up to the consumer whether to settle up with the collection agency, since by law the clock has run out on any legal obligations.

The bottom line with credit card debt is to avoid it if possible. But, if a person finds themselves consumed by card debt (even very old credit card debt), they should use every method possible to dig themselves out of the hole. Methods include stopping new credit card spending, developing a strict budget and transferring balances to a 0% APR credit card (if the person's credit situation will allow them to qualify) or a low interest balance transfer credit card. No hole is too deep to get out of, so with a strong dose of self discipline and a plan of attack, a new financial future can be on the horizon.

What Makes Up Your Credit Score?

If you have ever wandered how the credit bureaus come up with your credit score you are not alone. It is one of the more arcane things in shadows of the financial world. You may have heard about how certain actions or behaviors, like being late with a credit card payment or having too many cards in your wallet, can negatively affect scores. But, that's only a small piece of the puzzle.

There is, in fact, a very definitive algorithm that goes into making up a credit score or “Fico” score. Even the term Fico is enigmatic, for that matter. But it actually is just an acronym that stands for “Fair Isaac Company”, the company that originally developed the credit scoring methodology.

While the exact recipe of the credit score is a tightly guarded trade secret, there are some general guidelines that comprise the final numbers. Listed below are the financial behaviors and related factors along with the percentage weighting that each contributes to an overall credit score:

• 35% - An individual's history of making credit payments on time
• 30% - The total amount of debt being carried along with available credit
• 15% - The age of an individual's open credit lines (more history is better)
• 10% - The frequency with which someone applies for new credit
• 10% - Wild card factors such as the types of credit lines

In general, most of the factors that influence credit scores are within the power of consumers to change for the better. All it takes is a consistent dose of financial self-discipline to always make payments on time, not carry too much debt on any one credit card, don't close older accounts unless absolutely necessary and use discretion when applying for new credit.

If you are curious about your current credit score, you can obtain a free copy once per calendar year. Simply click here for articles about obtaining your credit report or click here to order your free annual credit report.

Credit Scores For Dummies

If you are somewhat or completely confused by credit scores (often called FICO Scores), you are not alone. In fact, you are probably part of the majority that finds themselves befuddled by how credit bureaus compile, calculate and use these scores to determine your creditworthiness - often with the input of credit card companies and other creditors.

A credit score is simply a numeric value that has been assigned to your historical credit habits. The original company that pioneered the creation of this score is called Fair Isaac and Company, which forms the acronym "FICO".

The combination of credit bureaus, credit card issuers and massive databases that warehouse consumer data means that virtually every American now has a FICO score. And, this score is vital to determining whether a person can access low-cost credit, something more expensive or even not being able to get new credit at all.

In general, the higher the score, the lower the interest rate a person will have to pay on a new credit card or consumer loan. Conversely, a lower score will translate to higher interest and less desirable terms.

FICO credit scores can range anywhere from a low of 300 all the way up to 850. Lenders generally segment scores into six ranges for the purpose of determining to whom they will make credit offers and at what terms. Anyone below the sixth tier can usually only obtain credit from a sub-prime credit card lender at very high interest rates. Listed below are the six average credit score ranges used by many of the nation's largest credit card, mortgage and auto lenders:

• 720 – 850
• 700 – 719
• 675 – 699
• 620 – 674
• 560 – 619
• 500 - 559

Individual banks solely determine the credit terms that they offer to each FICO score tier, but in general the best offers go to the top tier. Many of the top credit card issuers specialize in super-prime lending, meaning they target consumers with these tier 1 credit scores. However, competition among the largest issuers could allow those in lower tiers to be considered for leading offers, like those that feature 0% APR introductory rates.

Think Twice Before Canceling an Old Credit Card

With all the negative press about credit cards and credit card debt, it's really tempting for most people to go through their wallet and start weeding out unused or high interest credit cards. But, before you get out the scissors and pick up the phone to call that customer service number, consider a few things first.

First and foremost, is the fact that canceling a credit card that you have had for many years could actually hurt your credit score. That's right, it could actually shave precious points off that magical number that lenders use as a beacon when deciding whether to grant new credit and at what rate. Credit experts agree that canceling a "vintage" credit card that has provided an historical view of your spending and debt repayment behavior could be detrimental to a person's credit score.

Another factor to consider is why you chose that particular credit card as the one to cancel. Is it because of the interest rate? If so, you could call the issuer to request a more reasonable APR and threaten to cancel if they don't grant your request. Or, perhaps it's something more frivolous, like you don't like the way the card looks. If this is the case, many issuers can let you choose from among a number of new and exciting credit card designs that might entice you to pull it out of your wallet or purse more often.

But more than likely, if you are like most people, the reason you choose to cancel a credit card is that you have simply stopped using it and it's collecting dust in some drawer. Even when this is the case, you should stop and think before pulling the trigger on canceling. It is far better to try and get that oldest credit card functioning at an acceptable level, either through renegotiating the rate, adding rewards or changing the design.

If none of these quick-fixes work in making that old plastic welcome again in your purse or wallet, strongly consider throwing it back in that drawer to use as an emergency backup card. While it's bad to have too many credit cards in terms of credit scores, not having enough credit can really put you in a squeeze in an emergency.

Now, all this isn't to say that you shouldn't consider getting a new credit card from time to time. It's important in today's competitive credit card marketplace to take advantage of some the great 0% APR, cash back and reward credit card offers that are available. But in order to keep you credit rating as high as possible, you should be very reluctant to vote your oldest credit card off the island to make room for that shiny new model.

Pulaski Bank Can Fix Your High Credit Card Rates

It can be mighty tempting to pounce on every 0% APR credit card offer that comes in the mail each week. But for those consumers who have grown tired of temporary credit card teaser rates, there is an excellent alternative in the Pulaski Bank Visa or MasterCard credit card.

Pulaski Bank, a relatively small bank headquartered in Arkansas, has successfully differentiated itself by offering the lowest fixed rate credit cards in the nation. Their business strategy isn't entirely altruistic, however. Rather, it is largely mandated by Arkansas state usury laws which prohibit banks headquartered in that state from charging over 10% interest. So, with that limitation in place, Pulaski Bank decided to take lemons and make lemonade. As a result, they have largely captured this particular slice of the credit card market.

The only caveat for consumers with this type of credit card product is that Pulaski Bank requires exceptionally good credit to qualify as a cardmember. This requirement is in place to protect their bottom line because they are operating on fairly thin margins with such low rates (currently 7.99% fixed APR). If Pulaski Bank did not maintain tight control on their credit underwriting, the losses would sink their bottom line.

But, if you are someone who has a squeaky clean credit record and a credit score of which you're unabashedly proud, this could be the ideal card for you. Of course, that is only if you need to occasionally "borrow" money at a low fixed rate. If you are someone who pays off your credit card religiously, then there are probably other options that would allow you to earn cash back rewards or airline frequent flyer miles to boot.

Fixed rates were a staple of the credit card industry in days past, typically 18% when Visa and MasterCard first started becoming widely used by Americans. But then, the concept of variable rates caught on with issuers and consumers alike. And this actually became a marketing bonanza for issuers, since they could then advertise "Prime" plus some small index, and only defining what the prime rate was in the fine print.

So, simply the fact that Pulaski Bank offers such an anachronistic product is boon for consumers, if for no other reason that they are up front with their pricing. Deciding whether it is the best option for you is just a matter of whether you have an appetite for the rate chasing game or like a sure thing.

Consumer Debt Trends

Consumer debt in this country has been on the rise since the 1980's. And, it's no coincidence that this was the beginning of the rapid expansion of credit card use in America. Banks and credit card companies figured out ways to harness the marketing power of direct mail and other forms of mass media to begin promoting their low rate credit cards and create demand.

This era also saw the beginning of the shift of consumer spending from cash and check to credit cards. Just within the last year, according to the Federal Reserve, use of plastic for payments surpassed that of cash and check.

Debit card usage, both bank-issued debit cards and prepaid debit cards, has exploded in recent years. This growth has even eclipsed the growth rates of credit cards. This phenomenon is being driven by two factors. One is the convenience offered by debit cards over writing checks or using cash from an ATM. The other is a backlash to the fear of getting into too much credit card debt.

And, this fear is probably well justified, since a majority of Americans carry substantial credit card debt from month to month. In fact, the average American household has over $9,000 in credit card debt. In order to reduce credit card debt or to become debt free, Americans need to fundamentally change the way they view and use credit cards.

As with debit cards, most people think they are spending their own money when they pull out a credit card for a purchase. But, in reality, they are borrowing money for a short term in order to make that purchase. They should almost think of the process in terms of turning to the person behind them in line and asking to borrow the money.

Using any form of payment other than cash creates a type of psychological barrier to the actual sacrifice needed to make a purchase. This is why many financial experts recommend that people in extreme credit card debt stop using plastic altogether, or at least until they can eliminate credit card debt and become debt free.

Listed below is a graph which illustrates the overall trend in U.S. consumer debt as a percentage of disposable income over the past five years. While consumer debt has increased dramatically over the past decade, the level of debt service has decreased. This indicates that, on average, Americans are paying down less of their credit card debt since 2002 than in previous years.

Consumer debt is only projected to continue rising, unfortunately. This trend is being reflected in the U.S. savings rates, which have become negative for the first time in our nation's history.

To become debt free consumers should stop adding to credit card debt and seek to lower the cost of borrowed funds. A balance transfer to a 0% APR credit card can be a good start, but only if the free interest period is utilized to pay down the outstanding principal.

Online Bill Pay -- Where to Start

One of the truly great things about having a credit card is the convenience that it affords. With a credit card, you can almost completely avoid carrying cash or checks. And, now with the advent of online bill pay offered by most banks, a credit card can even be used to pay routine monthly bills.

Some of the larger banks that offer online bill pay include Chase, Citibank , Bank of America and HSBC. Generally, a checking account must be maintained with the financial institution to set up online bill pay.

But, many allow you to add a credit card as an additional funding source that can be used to pay when you don't have the immediate funds to cover your bills (or if you wish to take advantage of the 25-day free loan offered by the credit card companies). Others may wish to use a credit card for recurring payments to earn rewards, cash back, airline miles or other freebies offered through their particular card.

Regardless of your motivation to explore online bill pay, the place to start is with your bank. The first step will be to set up an online user ID and password with the bank's website. Then it's just a matter of choosing the online bill pay option and entering your checking or credit card account information. Most banks have a standardized list of merchants that accept electronic bill payments, along with options for sending one-off or recurring payments to specific billers.

The Visa and MasterCard credit card associations have been very aggressive in signing up new merchants to accept online credit card payments in recent years. This includes types of companies that traditionally only accepted payment in the form of a check in the past. Monthly billers like mortgage companies, large apartment complex owners, power and electric utilities and cable television companies are joining the ranks of online bill pay acceptance in droves.

And, with the addition of these types of merchants into the online bill pay world, tremendous rewards can be earned by credit card holders. This is because now large, recurring monthly payments can be leveraged to rack up free cash back or airline mileage rewards. People are realizing that it would be like leaving money on the table to not take advantage of free rewards.

Another advantage of online bill payment is that it guarantees on-time payments of life's most critical and time-sensitive bills. Whether it's a mortgage or rent payment, or perhaps a credit card bill, being late is not something you have to worry about each month with online bill pay.

Most banks have made their bill payment services free of monthly service fees, as well. So, there are no more excuses for not taking advantage of one of the greatest leaps in financial convenience to come along in the past 20 years. Bear in mind, however, that regardless of whether you use online bill pay for the convenience factor, or just to rack up rewards, it's critical to pay off the credit card used each month. Non-discretionary spending like rent, mortgage, utilities, etc, can get out of control in a hurry if allowed to pile up month after month on a credit card. As with everything involving credit, discipline is paramount.

Credit Card Cancellation How-To

You are considering canceling a credit card. Perhaps you found a credit card you like better. Maybe you just have too much plastic in your wallet, or you no longer use that individual credit card. But cancelling a credit card the right way involves more than simply cutting it in two with a pair of scissors. Because it can be a confusing undertaking for many consumers, we will outline the important steps in the process.

Before we get to the steps involved, you should consider the possible effect cancelling a credit card may have on your credit score. Even closed credit card accounts can legitimately appear on your credit report for up to seven years after the date of last activity, as they become part of your credit history. Be aware that closing an account is not necessarily a good short-term strategy for boosting your credit score. One method creditors use to evaluate your ability to manage credit responsibly is by looking at how much credit you are using compared to the total amount of credit available to you. So it could look bad to owe the same amount to creditors while having fewer accounts open. Also, you should think twice about canceling your oldest credit card, as having longstanding accounts with good payment histories can help your credit score. If the credit card account has no negative items, there is probably no reason to close it. Also, avoid canceling a large number of credit cards all at once. Meanwhile, you should weigh your personal circumstances. Consumers seeking a loan for a car or home mortgage, for example, may want to wait until they get the loan before cancelling a credit card.

Provided you have considered these issues and have another credit card you can make charges on, you are ready to cancel your credit card. Closing an account the right way takes time, patience, and organization. But it’s important to be thorough in order to cancel your credit card correctly.

The first step is to pay down the balance in full on your credit card. For one thing, credit counselors note that there is no need to cancel an account until you are done with it. Separately, if you inform the card issuer that you are thinking about leaving, it could raise your interest rates to the highest allowable by law as a penalty for closing the account, if you do so with an outstanding balance.

Next, you will need to call the issuer, using the customer service number printed on the back of your card, on the monthly statement, or both. If you do not have that information handy, you can request the bank’s phone number from the toll-free information number: 800-555-1212.

Once you reach a bank customer service representative, you will want to confirm that your balance on the credit card is zero. Then inform them that you are cancelling the card. Be aware that some credit card companies will allow you to cancel without even speaking to a representative. However, others will transfer you to a special department for the sole purpose of trying to convince you not to cancel. After all, it costs the card issuer more to find new customers than to maintain existing ones. You may be offered incentives for keeping the card active, such as a lower interest rate. Even though these offers may sound appealing, consider the impact of keeping the credit card open. If you are convinced you want to cancel, remain firm if the representative tries to change your mind. Request a name and address you can write to with a notice of your cancellation.

Write a short letter to the card issuer, preferably directly to the name you may have been given, informing them of your decision to cancel your credit card and requesting written confirmation of the account’s closure. The letter should include your name, address, phone number, and account number. Also, state that you want your credit report to reflect that the account was “closed by request of the cardholder.” You may also want to include the check number (or a copy of the cancelled check or other payment verification) that you used to pay off your account balance, as well as the date the check cleared with your bank. Make a copy of this letter for your records. Additionally, you can place your destroyed credit card in the envelope with the letter. Send the letter via certified mail or return receipt requested so you can prove the company received your letter.

Then you wait a month, as it could take up to 30 days to close your account. After that time, get a copy of your credit report and make sure it indicates the account was “closed at customer’s request” (meaning you broke off the relationship with the bank, not the other way around) and that the account actually was taken off your credit report. Should the credit report show the account was “closed by creditor,” that reflects badly on you and therefore you will want to get this resolved. If that happens, repeat the process: call the customer service number to report the mistake, follow up with a letter by certified mail (including a copy of your original letter requesting that the account be closed), and check your credit report again. Be sure to keep at it. It is not the credit bureau’s responsibility to make sure your credit report is correct, so you need to check that what the creditors have told the credit bureau is accurate.

As you go through the process of canceling your credit card, you may want to keep thorough notes on who you spoke to, what they said, and when. That way, if anything goes wrong down the line, you will have all the facts recorded. When you get a return receipt from your certified mail, keep it with the log you are keeping and note the date the receipt comes in.

You Might be Headed for Credit Card Debt Trouble If...

There is good debt (such as student loans and home loans) and bad debt (credit card debt, high-interest loans). There is also an acceptable level of consumer debt, as well as just plain too much debt. You could find yourself on the path towards having too much credit card debt if you find yourself in any of the following situations:

• Your wallet contains more credit cards than photos of your kids, grandchildren, boyfriend, girlfriend, spouse, pets, etc.
• You and your credit collector are on a first-name basis and exchange birthday, anniversary, and holiday cards.
• Your mailman sues you for the medical costs associated with his lower back pain after carrying around your credit card statements.
• You have moved residences at least once to keep a step ahead of your creditors.
• Your pay more in interest charges than you do in taxes.
• You start to think the national debt doesn't seem so bad.
• One month of your interest payments could pay for that dream vacation to Hawaii you've always wanted to go on.
• You forget which credit card has a balance that will cover the purchase you are about to make.
• You have to hand the merchant more than two credit cards before your purchase is approved.
• Your credit reports takes three days to download off the Internet.
• You are surprised to see someone else's credit card is one you don't already have.

If these situations sound familiar, then you should take steps to pay off your credit card debt and perhaps cancel some of your many credit cards. Also, you may want to consider a balance transfer to a low interest credit card.