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Seniors in Credit Crisis: Can they Garnish a Social Security Check?

2009-06-26T13:28:00.000-07:00

With so many feeling the crunch in today's economy today, it's not surprising that some who receive Social Security benefits are among those who have defaulted on credit cards and other debts.

While other sources of income may have dried up, most felt secure in relying on those government checks. Unfortunately, some senior citizens and individuals receiving Social Security Disability income have been shocked to find that past creditors had taken their money.

Isn't there a restriction against garnishment of Social Security benefits?

Well, yes there is. But as with most things, it isn't foolproof.

Section 207 of the Social Security Act protects Social Security benefits from assignment, levy, or garnishment, with 5 exceptions. Other than Section 459, which allows benefits to be garnished to enforce child support or alimony obligations, those exceptions deal with debt owed to the Federal Government. And even then, under the Tax Payer Relief Act of 1997, the IRS may not take more than 15% of a person's Social Security benefit per month.

So how can creditors take Social Security benefits for unpaid debts? First, they must obtain a judgment against the consumer. Then they can garnish funds from that consumer's bank account.

The government's obligation to protect these benefits ends when the check is delivered to the recipient. However, they do continue to be protected under Section 207 as long as they are identifiable as Social Security benefits using normal banking practices.

Banks don't keep track of the source of your funds - so unless you tell them, they won't know that the money in your account comes from Social Security.

Consumers should get a letter or other notice when a court has issued a garnishment order against a bank account. This notice will provide instructions for notifying the court that the money is exempt from garnishment.

However, as many citizens have learned, those letters don't always arrive as expected. Even if the letter arrives, it may arrive too late to respond before the deadline. They learn that their money is in danger only after it has been taken.

Since many citizens receiving Social Security benefits need those funds for daily living expenses, it becomes vital to protect them. Three possible solutions are worth consideration:
• Separate accounts: Set up one bank account for nothing but Social Security payments. Make sure the bank knows that Social Security is its only funding source.
• Switch to receiving checks in the mail and use cash or money orders to pay your bills.
• Have your social Security benefits electronically loaded to a debit card not affiliated with a traditional bank account. This is the government's Direct Express debit card. You can learn about it at: http://www.socialsecurity.gov/pubs/10073.html

Author:Marte Cliff
CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news

Your Credit Cards: Should You Carry a Balance?

2009-06-26T13:15:00.000-07:00

Credit cards and their use play an important part in your overall credit scores, but confusion reigns over how to handle them to make the best impact on your credit report.

Because credit history makes up about 15% of your credit score, you should definitely not close any unused accounts. The longer you've held that account, the more it improves your score. And, in order to prevent the credit card issuer from closing them for non-use, you should use each card occasionally.

In addition, it turns out that a little use improves your credit scores more than no use at all. Having a tiny charge on your credit card and paying it off promptly adds to another, even more significant, segment of your credit score: Your payment history.

One practice you should avoid is going beyond about 30% of your available credit in any one month - even if you pay the balance in full each time your statement arrives.

This is how many people who use their credit cards for business have damaged their scores. Because the credit card issuer reports both your credit limit and your balance at the end of the statement period, using the card to the max makes it appear as if you are extended to the limit of your credit. There's no section in your credit report showing that you pay the balance each month.

If you do use your card for business, consider getting another card to spread the charges out, or asking your credit card issuer for a larger credit line. If you're reimbursed each month by your employer, instead of using your personal credit for company business, ask your employer to furnish you with a card that is owned by the company.

In today's credit climate, it's important to do all in your power to keep your credit scores high, so get your free credit report and see what's being reported about you. Make sure there are no mistakes - and if there are mistakes, take prompt action to correct them. Then look over your credit limits and balances and see what you can do to re-arrange your debt for the best effect on your credit scores.

Unless you also have a home mortgage and a car loan, also consider taking out a small consumer loan. 10% of your credit score is based on the number of different kinds of credit you use. Being able to handle multiple bills with a "paid as agreed" notation on each adds to your financial reputation as a good money manager.

Author: Mike CloverCreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news

How long does it take a secured credit card to start working on your credit ?

2009-06-24T15:57:00.000-07:00

Q:
How long does it take a secured credit card to start working on your credit?
Would you consider giving me a hand or at least some advice based on your experience?
Any help appreciated. I really appreciate your help.
Thank you,
Janet

A:
Hi Janet,
Secured Credit Cards usually start taking affect 2 to 6 months on your credit report. This really depends on how much credit you already have. If you have no credit scores , your new secured credit card will take about 6 month to score you. I have helped many people with this and it varies depending on your circumstances. Remember you will need a couple of cards, and maybe one other type of credit once you get established with some secured credit.

Good luck
Mike Clover
CreditScoreQuick.com

An Easy Way to Save on Credit Card Interest

2009-06-23T15:55:00.000-07:00

If you could pluck a $5 bill out of the air each month and apply it to your credit card debt, would you do it? It doesn't sound like much, but it does add up over time. And anyway, $5 is $5 - I'm sure you'd bend over and pick it up if you saw it laying on a deserted sidewalk.

If you're making payments on credit card debt, you can pick up that $5, or possibly more, by making one simple change in the way you pay your bills.

Some look at a credit card bill, check the due date, and plan to pay it on that date. Some even go on line and schedule the payment for that date. The thinking is "Why should I give them my money ahead of time?"

Savings is the reason why.

If instead of waiting for the due date, you check your accounts on line and make the payment the day the statement is issued, you'll save money.

The day your statement is issued, the interest for the previous month is added. From that point you pay daily interest on your previous balance, plus last month's interest.

Say you have a $10,000 balance at 18% interest. When the statement comes out the new balance will be $10,150. Now you begin paying daily interest on that new balance. Your interest, per day, will be $5.075.

If instead, you make your minimum payment of $350 on the day the statement comes out, you'll bring your balance down to $9,800. That will cost you $4.90 per day.

Over the course of a month, that 17.5 cents per day adds up to $5.25. This is extra money you've paid against your debt without taking anything extra from your bank account.

If you're paying a higher interest rate, or paying on a higher balance the savings are even greater.

Making additional payments during the month, even if they're small, can also help you pay off that credit card debt faster. So if you happen to work an hour overtime or you find some great coupons and save on your regular grocery purchases, plunk that extra money down on your credit card debt the day it goes into your bank account. Most card issuers will accept on line payments in any amount during the month, and most will let you make a payment once per day.

Author: Mike Clover
CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news

Your Credit: Ignorance of Errors No Excuse

2009-06-20T11:59:00.000-07:00

When you apply for credit and get turned down because of errors on your report, complaining about it won't help. And it won't get you the credit you seek unless and until you take the necessary steps to correct the errors.

You are not the one who reports your financial life to the credit bureaus - your creditors do that. But you are the one responsible if the information is not accurate.

Until recently, that was a problem. You didn't get to see your credit report until you paid money up front for a mortgage lender or car dealership to order it. At that point, it was too late do anything about it in time to "Make the deal" you were working on.

Now that you have easy access to your own credit report - and getting it is FREE, you can take steps to correct errors well before you need to use your credit.

The odds are strong that your credit report contains errors right now. Industry experts recently revealed that approximately 70% of all credit reports contain some kind of error. Odds are, that error will not work in your favor.

So what can you do about it?

First, it's important to correct all credit errors quickly. This isn't one of those tasks you should put off until next week, and even a small error could bring down your scores. It could also be the red flag signaling identity theft, so the sooner you catch it, the less hassle you'll be in for later.

Seeing that someone has reported your address incorrectly is nothing to ignore!

Write a separate letter to each credit bureau that is reporting the error. Explain in detail and include a photocopy of the report with the incorrect information highlighted.

Errors can come in many forms. Some are typographical errors or errors in math. Some signal a more serious problem, such as an unauthorized charge on your account, a charge for merchandise you returned or that was never delivered, or an incorrect price for something you did order.

The credit bureaus will investigate based on your report, and will get back to you within about 30 days. If they find that the information is correct, but you disagree, file a statement for your report telling why. This information will be given to future creditors.

Along with keeping a close eye on your credit report, you should also watch your credit card statements for any unauthorized or unknown charges. If you don't recognize an item on a credit card bill, call right away to learn what it was - since reporting names don't always match merchant names you'll recognize. If you still don't recognize it, then take action. In this case, start with the card issuer. Call for advice, and follow their instructions.

Author:Marte Cliff
CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news

Does 620 credit score qualify for home loan ?

2009-06-19T16:36:00.000-07:00

Q:
Hi,
Does 620 credit score qualify for home loan? I am not sure what criteria are important. Can you please guide me. A little advice would go a long way right now. Thank you for your help. Thank you, Kim

A:
Hi Kim,
This is a great question since our current lending market is forever changing. Most lenders currently require a credit score of 620 in order to sell their loans on what is called the secondary market. This is where lenders buy and sell mortgage paper. Some lenders will go down to a 560 credit score if they sell there loans directly Fannie Mae. The loan you would qualify for with a 620 credit score is FHA. This loan does have loan limits that differ per state. Use the following link for FHA loan limits by city and state. A 620 credit score will be tough to get done if you need to go Conventional. Conventional loan requirements are very strict currently.

If you discover that you are required to increase your credit score because of loan limits, I would recommend our article on how to do so.

Here is the link to help increase your credit score.

CreditScoreQuick.com

The 5 Components of a Credit Score

2009-06-19T14:56:00.000-07:00

While experts say that at least 50 different kinds of scores are compiled and kept about each of us, the one we hear about most is our "Credit score." The most popular is the FICO score - the one used by mortgage lenders to decide if you can buy a house, and if so, at what rate of interest.

That score is made up of 5 parts, each with a different degree of importance. In order, they are:

1. 35%- Your Bill Paying History
2. 30%- The credit available to you vs. how much of it you use
3. 15%- How long you've had credit
4. 10%- The variety of credit you carry
5. 10%- The number of "hard inquiries" from creditors

Bill Paying History
It's not surprising that would be creditors put a lot of emphasis on how you pay your bills. High-scoring individuals always pay on time, as agreed. Low scores in this category are the result of late payments, accounts going to collection, foreclosures, and bankruptcy.

The good news is that under the new FICO scoring model, an occasional late payment won't carry the weight it once did. The people who analyze these figures have come to realize that even the most responsible person can have a late payment when there's some other kind of crisis in their life - or when the mail is slow.

Credit Available vs. Credit Used
This one is a fine balance - experts say it's good to have plenty of credit and use only about 10% of it - 30% at the most. Others point out that historically speaking, those with plenty of credit tend to use it.

What really hurts is using your available credit to the maximum - and even using it to the maximum on one credit card while others carry no balance at all.

It is important to use at least some of your credit on a consistent basis, because that demonstrates your ability to use credit well. No use equals no history, and that hurts.

Length of time that you've had credit -
Using credit well over a long period of time gives you high marks - especially if you've had credit with the same issuer over that of time. This one makes it tough on young people just starting out.

The Mix of Credit
This part of the scoring formula assumes that using a variety of credit well shows that you know how to handle money. So having a mortgage, a car loan, and credit cards is better for your score than having just one kind of experience with credit use.

Inquiries on your Credit Report
Multiple inquiries on your credit report are particularly harmful if you've recently had credit problems such as late payments, or a bill sent to collections.

Credit issuers assume that if you're making application for new credit, you may be looking for a "life preserver" with which to pay other debts.

Author:Marte Cliff

CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news

Your Credit Report: Who is Looking and Why?

2009-06-19T14:40:00.000-07:00

Credit card issuers looking for new customers routinely order "soft inquiries" on citizens who have not requested credit. Unlike "hard inquiries," these inquiries in to your credit report have no effect on your credit scores.

They're simply out there "fishing" for people with good credit so they can send offers to apply for their credit card. These offers will include low introductory rates, rewards, and even gifts for making application.

Companies with which you already have credit will go looking to see if your credit is still superior before they send you cash advance checks with letters suggesting that you really do need a vacation or a new wardrobe.

They also fish for people with poor credit and credit problems, so they can offer a different kind of credit card.

They know that most of us need a credit card at one time or another - when shopping on line, for instance. So they'll send an offer for a card with a low credit limit, a huge annual fee and a staggering interest rate.

Some of these are the "fee harvester" cards whose gouging techniques have now been reined in by the Credit Cardholder's Bill of Rights of 2009. At the present time, the initial fees charged to gain a $250 credit limit can reach upwards of $175!

When the new law goes into effect, they'll be limited to charging 25% of the card's credit limit in fees during the first year.

You trigger some of this snooping...

Often, those who aren't sure about their credit scores will allow a car dealer or a furniture store to check their credit report - just to see if they can extend credit to them. This is a poor idea, as it triggers a "hard inquiry."

"Hard inquiries" do have an effect on your credit score, so you should not use this method to learn your scores, and instead should take care not to give out your personal information until you're sure you want to ask for credit from a particular merchant.

Your credit report will show the inquiry - it won't show if you were turned down for credit or simply decided to keep shopping because that merchant didn't have exactly what you were looking for, or because you couldn't agree on the price of a car.

There's no longer a reason not to know your own credit scores before you go shopping. You can get your credit report with scores, right here, for FREE. Do it today.

Author:Marte Cliff

CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news

Medical Bill Negotiation Q & A

2009-06-15T13:18:00.000-07:00

I have a question regarding a credit issue and hospital bills. I had a very bad allergic and went to the hospital. I was there about 4 hours and received two seperate bills as usual. I don't have insurance anymore from losing my job like so many others during these times. So ultimately I have a problem paying an outlandish amount of money at once or even in a few months, which 12 is the max apparently anyhow. For the doctors portion I made an agreement to pay 95 dollars a month, and the hosptal emergancy room one would only offer me 12 months as well at 340 dollars a month which I can not in any way come up with that kind of money. I explained that and she very much expressed her lack of concern. OK, however I did send in money, I told her I would try to send between fifty and hundred dollars a month and she told me she would still send me to collections. Now I did send money like I said and unlike other companies who will send a follow up statement or something, I have not received another bill in three months. I don't understand why and I would like to know if my credit will be ruined now, and you probably won't know or be allowed to answer, however is that legal for them to do? I have worked hard to get my credit back up and have not been late on a payment since 2003, if you could also lead me in a direction that might help me better understand my rights and possibly fight to keep what I have worked so hard to get. Thank you for your time.

William

A:
Hi William, this is a common problem with medical obligations. I would call back that emergency room to talk to a manager, to see if they will accept a lower monthly payment. It is unusual that they will not negotiate a lower monthly agreement. If for some reason they will not work with you, yes a medical collection will drop your credit scores. Any collection typically will drop your score around 100 points or so. There is really nothing legally you can do other than pay the the bill since you excepted medial treatment. If I understand your question about the emergency room visit, you sent some money in, not sure if it was the amount requested by the hospital or not. If you just sent in some money, I would assume the money you sent was based on a agreement. If the money that was sent was not based on a agreement, then they probably sent your bill to collection.

CreditScoreQuick.com

You want a lower credit card interest rate, but should you ask for it?

2009-06-15T06:09:00.000-07:00

Two years ago the answer would have been yes. Consumers were advised to contact their credit card issuers as often as twice yearly to request cuts in their interest rates.

Now it might not be such a good idea.

Unless you absolutely can't meet the minimum payment with your current interest rate, it might be best to lay low.

Because of the changes that credit card companies have been imposing on even their most creditworthy customers, your credit scores may have come down. Unless you check your credit report regularly, you might not even know that your once "excellent" rating now only looks "good."

Because any time you ask for a change in terms the card issuer will pull your credit report, asking could backfire. They'll also ask for additional information such as your employment history, monthly income, etc. If your income has come down due to the economic crisis, or if you've changed jobs, it could combine with a lower credit score to work against you.

Your request for a reduction could result in an increase instead - along with a reduction in your credit limit. Then the inquiry on your credit could bring your scores down another notch, which could trigger adverse actions from other credit card issuers.

This is a snowball that is gaining both speed and size, so it's time for consumers to be very careful.

If you're having trouble but feel confident that you will manage to stay afloat with your current minimum payments, you shouldn't draw any attention to your account. Don't let on to the credit card issuers if your income has dropped - and don't ask for a change that will cause them to examine your current financial status.

If you truly can't meet the minimum payments, that's different. In that case you should ask for assistance.

Credit card issuers don't want another charge-off. They want to keep you in a position to keep paying, so they are in many cases willing to work with you toward a solution. In fact, in 2008, they gave some kind of debt relief to approximately 2.7 million cardholders. That relief came in the form of a settlement, temporary forbearance, debt consolidation, a payment plan, or an interest rate reduction.

Interestingly, had the credit card issuers not taken such an aggressive stance in trying to boost their profits, many credit card holders might not have had a problem. In a study by Synergistics last January, two-thirds of consumers who received a change in terms reported that they had trouble making minimum payments as a result.

Author: Mike Clover
CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news

Equifax Joins TransUnion With New Credit Scoring Model

2009-06-13T08:13:00.000-07:00

When FICO introduced the new FICO 08 credit score in January, TransUnion jumped on board, but Equifax and Experian did not.

Now Equifax will also make this newest version of the FICO score available to lenders and businesses. Equifax calls the new score "Beacon 09" and joins FICO in saying that it is the most accurate scoring model yet for predicting a consumer's credit risk.

Some things will remain the same. For instance, the scores will still range from 300 to 850 and consumers will still have to meet minimum criteria to even have a credit score.

In order to generate a score, a consumer must have an account that has been open for six months or more, and that has been updated within the past six months. Since many small companies such as utilities don't report to the credit bureaus, consumers need to have some kind of credit card, car loan, mortgage, or other account that does report.

In addition, your credit report must not indicate the word "deceased." This can be a problem for a spouse who has held all accounts jointly.

Good news for some consumers is that under the new scoring model, a one-time mistake such as late payment won't count so heavily. In fact, consumers whose scores have dropped due to such an entry will probably see their scores go up.

The bad news is that the new model will put more weight on the total debt load a consumer carries. It will become more important than ever to pay down debts and maintain a large margin of unused credit.

"Piggybacking" will once again carry some weight, because of new technology that will help prevent its abuse. This practice, in which an authorized user could "piggyback" on someone else's good credit rating, led to abuses in the past.

The old FICO scoring model will still be available and will be used by companies who choose not to switch over. Predictions are that most users will be smaller lenders because the change will be complicated for large lenders.

Experian is currently in a lawsuit with FICO and there is no word on when or if it will adopt the new model. Since Experian severed ties with myfico.com, Experian's FICO scores have not been available directly to consumers but could still be accessed by banks and other lenders.

Author: Mike Clover
CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news

New Law Restricts Credit Card Issuance to Youths

2009-06-08T14:01:00.000-07:00

Credit card issuers have been targeting college students for years - setting up tables on college campuses and offering everything from teddy bears to pizza coupons to entice them to apply for a card.

Often, in their enthusiasm to obtain the "free" gift, students have applied for cards without reading the fine print. Thus, along with their new cards they got a first statement - one showing that they owed for a variety of fees. This could include an annual fee, an application fee, and possibly even a monthly access fee. If immediate payment of those fees wasn't in the budget, the account immediately began gathering interest charges at a high rate.

Thus, these aggressive card issuer tactics have been helping those students leave college and enter the workforce with a debt that can seem staggering, especially when added to student loans for tuition.

This is about to change, due to the new Credit Cardholder's Bill of Rights of 2009.

Once the law goes into effect, students will need two things to even be approved for a credit card:
• Adequate income and/or a co-signer
• Completion of a certified financial literacy course.

Credit limits will also be limited for students who do not have a co-signer. A student will be able to get a card which is the greater of $500 or 20% of their annual gross income. The total amount of credit extended from all of their credit cards cannot exceed 30% of their annual gross income for the most recently completed calendar years.

Creditors will be prohibited from opening an account for any student who does not have a verifiable annual gross income, or who already has an account with that creditor or its affiliates.

Your high school student will also be prevented from getting a card. The new law prohibits issuance of a credit card to any individual under the age of 18, unless a parent or legal guardian is designated as the primary account holder. (This does not apply if the youth has been emancipated under state law.)

These new regulations are, of course, designed to protect students by preventing them from beginning their financial lives with an overload of debt. But financial analysts fear that this program, like so many others that appear beneficial at first glance, may backfire.

Students in need of fast money may resort to using Payday lenders or pawn shops - both of which charge interest rates that even the most aggressive credit card issuer might find reprehensible.

Author: Mike Clover
CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news

Several Changes in Credit Card Laws Bring Relief to Credit Cardholders

2009-06-08T13:56:00.000-07:00

The Credit Cardholder's Bill of Rights of 2009 makes some significant changes in the way your credit card issuer treats your account. Among other things, the law puts an end to double-cycle billing, gives you more time to pay, and imposes fairer payment allocation.

You may not have been aware that the double-billing cycle was costing you money each month. In most cases, it didn't amount to a lot of dollars, but spread over millions of cardholders, it was an income-booster for credit card issuers. Under this practice, finance charges were imposed on the average balance of both the current month and the previous month. So you paid interest on dollars you no longer owed. This could be significant if you'd made a large payment the previous month.

Under the new law, banks will not be allowed to charge interest on debt already paid.

Another provision, which goes into effect this August, will require card issuers to mail their statements 21 days before a payment is due. The current requirement to mail 14 days before the due date has caused many consumers to incur late payment fees. Cardholders could either mail the payment and hope for the best, or pay a fee to make a payment by phone or internet.

Many credit card issuers charge as much as $15 to take a payment over the phone or on line. (Some do offer free on-line payments.) Under the new law, banks will only be allowed to charge those fees if you are asking for an "expedited payment." Also, if you make a payment at a local bank branch, they will be required to post that payment the same day it was made.

Credit cardholders get a huge break due to the new payment allocation rules. Right now, when your account shows balances at different interest rates, your bank automatically applies all of your payments to the balance carrying the lowest interest rate. You may have charged a $200 purchase that gathers interest at 29.9%, but you can't pay it off because you used a $3,000 cash advance check that was offered to you at 4.9%. Before you can "get to" the $200 purchase, you have to pay off the entire cash advance.

No more - when the new laws go into effect, all amounts in excess of your minimum monthly payment will be applied to the balance with the highest rate of interest.

Author:Marte Cliff

CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news

Credit Card Fee Restrictions Under the New Law

2009-06-02T09:37:00.000-07:00

Fees make up a large part of a credit card issuer's revenue, but that source will be shrinking when the Credit Cardholder's Bill of Rights laws go into effect.

For instance, under the new law you can opt out of the privilege to go over your credit limit. Only if you elect to allow your creditor to approve overlimit transactions, will you be charged the overlimit fee.

Another change is that your credit card issuer will be limited to charging one overlimit fee per billing cycle. So if you make several transactions before realizing you've over spent, you can't be charged a separate fee for each transaction.

Credit card issuers will also be prevented from charging consumers a fee to pay their credit card debt via telephone or internet. At present, some card issuers charge as much as $15 to accept a payment over the phone. You do need to watch the fine print on this one, because they will be allowed to charge a fee for expedited payments. You may still need to pay a day or two prior to your due date.

Payments received on the due date, or on the next day if the card issuer doesn't accept payments on the due date, will no longer trigger a late fee. At present, paying on the correct day isn't always enough - you may also need to pay before a certain time of day.

If the cardholder pays at a local bank branch, the payments must be credited the same day.

Under the new law, consumers will also have more time to receive a bill and return the payment. Present law requires the issuer to mail a statement 14 days before payment is due - which often means it doesn't reach the consumer in time for a payment by return mail to post on time. The new laws requires 21 days.

The new law also sets limits on "fee-harvester" subprime cards. These cards typically have a credit limit of $250 to $500, and are issued to people who can't get a standard card, but feel they must have a card in case of emergency. Unfortunately, the fees can sometimes leave cardholders with a hefty bill, and hardly any credit limit to use in an emergency.

In one example, a card featured a $250 credit limit, but new cardholders were automatically hit with a $95 program fee, a $29 account set-up fee, a $48 annual fee and a $6 monthly participation fee. That's $178 in instant debt, and only $72 in actual credit. On top of that, because Federal laws preempt state laws, the card issuer has no limit on the interest rate it can charge on this balance.

Under the new law, during the first year after the card is issued, such fees may not exceed 25% of the cardholder's initial credit limit.

Author:Marte Cliff

CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news

The Credit Cardholder's Bill of Rights

2009-06-02T05:43:00.000-07:00

A welcome end to retroactive interest rate hikes

When the Credit Cardholder's Bill of Rights go into effect next February, consumers will be protected from a host of money-draining practices.

One that will save consumers the most and cost the credit card issuers an estimated $10 billion is the prohibition on retroactive rate increases.

Banks will no longer be able to raise the rates on your existing balances unless your payment is late by 60 days or more. That means if you're late on Card A, Card B won't be able to raise your rates. This of course doesn't apply to introductory rates, which you accepted with the clear understanding that the rate would raise on a set date.

But even those introductory rates will have restrictions. In order to offer them, credit card issuers must keep them in force for a minimum of 6 months. No more introductory rates that expire and bump to the highest rate within 30 days!

Even better news - if a cardholder becomes 60 days late and his interest rate is increased as a result, he can regain the lower rate by making 6 consecutive on-time payments. This particular provision doesn't take effect until August 2010, however.

Cardholders will also get 45 days advance notice of rate hikes and/or any other key contract changes. Under the current truth in lending law, credit card issuers must only give cardholders a 15 day heads-up. While I haven't seen this in writing, the notice they give must have plenty of leeway, because I know dozens of people whose interest rates and credit limits were changed without them being aware until they received their bills.

Perhaps this is one reason why the new laws will call for the terms of the agreement to be written in a large type size. Hardly anyone actually reads those lengthy notices written in a 4 or 6 point type.

The bad news is that this provision doesn't apply to changes in credit limits, so you will still need to go on line and check your spending limits before embarking on a quest for a house full of new furniture. You could get to the store and find that you don't have the credit limit you expected.

The good news in that bad news is that credit card issuers will no longer be allowed to slash the limit to a level that would trigger a penalty such as an over limit fee. That's a practice that has become common in recent months and could become even more common in the months leading up to implementation of the new laws.

Remember that credit card issuers will be using the next months to ramp up their profits, so be very careful to read everything that comes in the mail from any of your card issuers.

Author: Mike Clover
CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news

Your Credit Card Issuer May Consider You a "Deadbeat"

2009-06-01T13:26:00.000-07:00

Credit card issuers don't make it easy for us to know the right things to do to keep our good reputation with them. In fact, trying to navigate through all the advice we get can make us feel like doing a Yale Jashan Bhangra Dance! If you haven't seen the Bhangra dance, it's a bit on the wild side.

Take, for instance, the fact that your credit card issuer may have you labeled as a "deadbeat." Why? Because you pay your bill in full, never go over limit, and never pay late fees. In fact, because your credit rating and your FICO scores are excellent!

Why do those actions turn you into a deadbeat? Because they aren't making enough money from you, that's why! They want you to carry a balance so they'll earn interest each month. And they don't mind at all if you pay a day or so late so they get to tack on a nice fee. Going over the limit is fine, too, because it also carries a fee.

Because you don't do those things, they may be lowering your credit limits, raising your interest rates, and canceling your unused cards. Those actions, of course, will lower your FICO scores.

You've probably heard that the "Credit Cardholders Bill of Rights" is going to put a stop to many of the consumer-unfriendly practices used by credit card issuers. It is. When the new laws go into effect in February 2010, many of those practices will be forbidden.

But since the card issuers stand to lose billions in profits as a result, they're looking to their most creditworthy customers to take up the slack. Experts are predicting that card issuers will now begin routinely charge annual fees even to their "best customers."

"Best customers," by the way, are those who carry a balance. Typically, they're consumers who charge a few thousand for a major purchase every few months, pay it down, and then start all over again.

Grace periods may also be phased out, so that if you're a "deadbeat" you'll begin paying interest from the day of your purchase. As a result, many will abandon credit card use in spite of the convenience and bookkeeping benefits.

If you'd rather keep your life in order - and make your life more akin to a Foundation Showdance than a wild and crazy Yale Jashan Bhangra - take control now.

If you do carry a balance, begin paying it down. Spend your rewards credits before they fade into the sunset, and try to maintain your credit scores by keeping all credit card accounts open. You may be able to do so by charging a small amount at least once per quarter. Remember that the more available and unused credit you have, the better your credit rating, so if you can get your credit limits increased, do so.

Author: Mike Clover
CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news

Credit Scores May or May Not be Harmed by Utility Bill Charge-Off

2009-05-24T10:00:00.000-07:00

While most creditors do report to the credit bureaus when a bill is charged-off, you may get a free pass if you've had a utility bill charged off.

Something most of us don't realize is that credit bureaus charge a fee to take in data. That's right - you pay a fee for your credit report with FICO scores when you apply for credit, but they also collect from the companies who supply the information.

That being the case, many utilities don't want to pay the fee, so they don't report. You may find the same thing to be true with local businesses where you hold accounts.

If you aren't sure, get a copy of your free credit report and check to see if the charged-off account is listed.

If it is, then yes, it is hurting your credit scores. But if it happened more than 2 years ago, it still may not prevent you from getting a mortgage or other credit, especially if you have since repaid the debt.

In fact, you may be able to negotiate with the utility company to remove the item from your credit report in exchange for payment in full. If so, get their commitment in writing before sending the payment.

If they refuse, it's still to your benefit to repay the debt. Lenders look at your credit scores, but they also look at the credit report itself. If your report shows that you've paid the debt and have had good payment history since then, it may not hurt your chances of getting new credit.

Remember that negative information stays on your credit report for 7 years, but its impact on your credit lessens with each year that you show good payment history.

While you're working to restore your credit after a problem, do be sure to pay all your accounts on time and as agreed. Work hard to keep your credit usage below 30% of the credit available to you, and check your credit report often to assure that it doesn't contain mistakes. If you do find mistakes, take action to correct them immediately.

If you're working on building credit in order to purchase a home, don't make any large purchases such as a car or a house full of furniture within the few months prior to your application for a mortgage. And, since lenders are now returning to the "old rules," don't decide to change employment unless the new job is a move up in the same line of work. This is not the time to switch from a secretarial work to truck driving or to strike out as a freelancer.

Author: Mike Clover
CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news

Divorce After Chapter 13 Bankruptcy

2009-05-23T08:07:00.000-07:00

Often, divorce precedes bankruptcy, and is, in fact the "last straw" that pushes an individual into bankruptcy. While in many cases the financial hardships caused by divorce are legitimate, prior to the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 bankruptcy was often used as a way to completely sever ties with an ex-spouse and avoid financial obligations.

Couples contemplating both bankruptcy and divorce should probably complete the divorce prior to the bankruptcy rather than wait until later. They will not be allowed to proceed with both at the same time.

One reason why couples should divorce first and file second is that their financial status will be clear from the outset. They may be allowed to file Chapter 7 rather than Chapter 13.

Chapter 13 is a bankruptcy that includes a repayment plan of some or all of a person's debt over a three to five year period. It is generally chosen in order to save a valuable asset - such as the family home. In some cases it is the only option available because a couple's income is too high to qualify for Chapter 7.

If you have already filed Chapter 13, your divorce could permit you to alter the terms of your bankruptcy and allow you a lower payment or even a grace period with no payments while you work things out. It could also qualify you to convert to Chapter 7 - in which all debt is wiped out.

Any change in financial circumstances can grant you this leeway. Other instances could be loss of employment or illness.

The important thing to remember is to notify your trustee immediately - especially if the pending divorce means you don't have the money to make the scheduled Chapter 13 payment. Whatever you do, don't just ignore the payment without first notifying the trustee of the reason.

In order to have your case reviewed and possibly alter the terms of your bankruptcy you will have to file appropriate documents, which include proof that one party has moved out and is paying rent and/or utility bills at another location. So it is important to determine that the divorce really will take place and you really will be maintaining separate households.

The increased household expense would be the determining factor in deciding whether the bankruptcy terms can be altered.

Author: Mike Clover
CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news

The Credit and Financial Risk to a Car Purchase

2009-05-20T13:40:00.000-07:00

Purchasing a new car has always been a game. Negotiating the price of the car and then negotiating the value of your trade in usually leaves consumers feeling like they probably could have "gotten a better deal."

Now, because so many Chrysler and General Motors Corporation dealerships are closing, the game has taken on new risks.

First, your routine maintenance and warranty work may not be so routine. As dealerships close in small towns, consumers will be required to drive long distances to find authorized repair centers. Additionally, if part of your purchase negotiation included perks like free car washes or free lube and oil changes for a year or two, those will disappear with the dealership.

More serious is the fact that the records of your routine maintenance could be lost - and without those records your warranty will not be honored.

If your local dealership is about to close, go now and get a print-out of all maintenance done on your car. Then keep your own records of any future maintenance work.

But loss of warranty is only one of the risks. Something even worse is happening, and it can affect your good credit as well as your bank account.

You know that when you trade in a car that you haven't paid off in full, that debt is a factor in deciding how much equity you have in the car - and thus how much credit you will receive toward the purchase price of your new car.

You know that the dealership "has" to pay off that old loan before they can re-sell the car.

But this isn't always happening!

In the wake of poor sales and financial troubles for the dealerships, some of them simply didn't do it. But they did re-sell the cars.

So now both you and the person who purchased your old car are facing trouble.

Until that old loan is paid off, you are still the one responsible for payment. So while you're happily driving your new car and making payments on it, your credit report is showing month after month of unpaid debt on your old loan.

You know what that can do to your credit scores.

The person who purchased your old car has yet a different problem - since the car wasn't paid off, he or she can't get clear title.

If you've purchased a new car recently and traded in a vehicle that wasn't paid for in full, check your credit report today. This could be a tough one to solve, but you do need to get started immediately.

And if you're buying a used vehicle, demand proof of clear title before you part with your money.

Author: Mike Clover

CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news

credit score increase Q & A

2009-05-20T13:26:00.000-07:00

Q:
Hello, I found your site on goolge. I was wondering if there are any tips/advice for quickly boosting my credit score. I'd like to better my score within the next 6-8 months. Thanks.

Lakiesa Jeanlouis

A:
Hi Lakiesa,
This is a great credit question. There are lots of individuals all over the U.S. asking me this question. Here is a article I wrote a while back to help increase your credit scores quickly. I will also refer you to another article I wrote that will help increase your scores if you have collections on your credit report.

Article 1: Go here:
Article 2: Go here:

If you follow these articles you should see good reults.

Author: Mike Clover

CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news

Judgement Case Won Q & A

2009-05-19T18:03:00.000-07:00

Q:
Hello Credit Guru,

I had a court judgment against me for $2500. When I found out about it, I had the case reopened and eventually had the judgment overturned in my favor. I have collected payment. The problem is that I don’t know how to contact Experian, Equifax and Trans Union to have them remove the information and adjust my score. Any suggestions?

Thank you for your help.

Sincerely,

Saji Miller

A:
Hi Mr Miller,
This is a easy fix. Here is a step by step process to get this resolved. I wrote a article a while back, and there are a couple of ways to get this resolved. I would recommend mailing in proof you won the case.

Go here:

Author: Mike Clover

CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news

Should You Consider Bankruptcy?

2009-05-17T08:43:00.000-07:00

Fact: Not everyone who files for bankruptcy does so because they've been irresponsible.

The vast majority of bankruptcy filings occur as a result of illness, death of a provider, job loss, business failure, divorce, or some combination of life-altering events that the consumer certainly didn't plan for. Irresponsibility accounts for only a fraction of the filings.

Between 1.2 and 1.5 million Americans use the bankruptcy courts each year to get out from under unmanageable debt.

Thus, you need not feel hesitant or ashamed if this is the right option for you.

The primary drawback is that filing for bankruptcy is expensive. It not only costs money to file, but it negatively affects your ability to borrow - and the interest rates you'll pay if you do borrow - for the next 7 to 10 years.

Consumers have two options: Chapter 7 and Chapter 13.

Under a Chapter 7 filing, consumers walk out of the courtroom debt free. In order to qualify, however, those consumers must have a modest or limited income.

Those wishing to file for Chapter 7 must provide:
1. A list of all creditors and the amount and nature of their claims;
2. The source, amount, and frequency of the debtor's income;
3. A list of all of the debtor's property; and
4. A detailed list of the debtor's monthly living expenses, i.e., food, clothing, shelter, utilities, taxes, transportation, medicine, etc.

In addition, he or she must provide a list of "exempt" property, because the bankruptcy trustee will dispose of all non-exempt property and use the proceeds to pay debtors. The definition of exempt property varies from state to state, and there is a Federal list as well. Debtors can choose to use the list most favorable to them.

Chapter 13, also known as the "Wage earner plan," is actually a debt consolidation program based on the consumer's ability to repay debt. Payments are made to a trustee, who then distributes funds to creditors.

Depending upon the consumer's income, these payments are set for 3 to 5 years, after which time the bankruptcy will be discharged. Creditors may or may not have been paid in full.

Under the terms of Chapter 13, consumers must live on a limited budget and contribute all "disposable income" to the repayment plan. A "Hardship Discharge" may be granted in the event the wage earner is no longer able to work as a result of illness or accident.

Both plans require the consumer to complete a course of financial/credit counseling. Both types also negatively affect your credit scores. Bankruptcy remains on your credit report for 10 years.

Author: Mike Clover

CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news

Credit Card Loss Not Damaging to Credit Scores

2009-05-12T08:19:00.000-07:00

By now you know your credit score will suffer if you close a credit card account, but what about those times when your account must be closed because your card was lost or stolen - or because of an incident such as the Heartland Payment System's security breach?

Don't worry - this action won't affect your credit scores at all.

When an account is closed due to one of these causes, your credit card issuer will close your account and transfer all of your information to a new account, which is opened simultaneously. This includes your payment history, the date your account was opened, and your interest rate and credit limit.

The card issuer may report this to the credit bureaus as one closed account and one new account with identical information, or they may simply report a change in account numbers.

Either way, as long as your history remains with the new account, it won't affect your credit score. Remember the length of time you've had a credit card does affect your scores. The other reason why this action has no effect is that it doesn't trigger a hard inquiry.

A change that can affect your credit score is a user-generated upgrade to a currently held credit card. This generally results in the closing of one account and the opening of a completely new account. Since your history is then lost, this move may harm your scores.

With this in mind, it might be wise to research credit card offers and apply for a completely different card - while keeping the old card and retaining the history and the credit limit you have established.

Additionally, when you ask for an upgrade you are generally asking for a credit line increase, and this generates a hard inquiry into your credit report. As you know, the more hard inquiries are made, the lower your scores. The good news is, if you are granted the higher credit limit, the additional available unused credit will offset the damage done by the inquiry.

When the upgrade is credit card issuer generated, it is the result of their own soft inquiry, and won't affect your scores.

Before asking for a credit card upgrade or making application for a new card, check your own credit scores. Then research the cards and programs available to make sure that your current scores will qualify you for the card you want.

If they won't, then work at raising your scores before you make an application. That hard inquiry that's turned down will set you back in your efforts to raise the score.

Author:Marte Cliff

CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news

Rent Parties Making a Comeback

2009-05-11T08:59:00.000-07:00

Rent parties were first documented in Harlem in the 1920's - and they're making a comeback all over New York as citizens struggle to meet rent payments.

Young adults, accustomed to good paychecks and moderately affluent lifestyles, were used to spending week-end evenings socializing at dance clubs, concerts, cocktail lounges, and bars.

Now their incomes have shrunk due to layoffs and the reduction in consumer spending. Commission sales people who once brought home nearly $2,000 per week from their jobs at upscale clothing stores are now lucky to see $500. Those who relied on tips are seeing their incomes plummet as consumers order less expensive meals - and thus tip less.

In response to these reduced circumstances, they're inviting their friends to party in their homes - and charging them to get in the door.

The cover charges vary with what is offered. If the party-giver supplies the booze and food, or brings in some live music, the fee is higher. Others charge a minimum, and tell their guests that it's strictly BYOB (bring your own bottle).

Typically, party-givers reap between $250 and $400 for their evening's efforts - but some parties bring in much more.

For their friends, the "evening out" with a cover charge of $5, $10, or $15 is far less expensive than "hitting the bars" where they may also pay a cover charge, and one drink can cost upwards of $5. They also get to socialize with the crowd they know.

Organizing a rent party takes some special skill - and charm. Not everyone has the nerve to ask friends to help pay the rent, even though most friends are more than willing - unless they're in the same boat.

The New York Times interviewed one party giver who sent out invitations entitled “Rob’s Help Me Make My Rent Recession Extravaganza.” The tag line on his invitation said: “because if I can’t pay, on your couch I’ll stay.”

Not everyone gives parties for themselves - sometimes it becomes a collaborative effort to help a friend in trouble. One such party, featuring entertainment by well known hip-hop artists who donated their talents, brought in over $2,000.

This trend toward friends helping friends seems like a good sign in a society that has become known for self-centeredness.

One young entrepreneur is talking of turning this movement into a TV show, or opening a club where membership dues would create a party-based insurance against eviction.

Author:Marte Cliff

CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news

Beware Loan Modification Scams

2009-05-06T13:55:00.000-07:00

Homeowners in financial trouble make an easy target for scammers, and right now they seem to be coming out of the woodwork.

Some legitimate loan modification companies do exist, and they offer a beneficial service to those who may not speak English well enough to understand the steps and requirements of loan modification.

However, the legitimate companies are outnumbered by scammers.

These companies not only fleece worried homeowners - taking money that could be better spent on bill payments - they can actually get those homeowners into deeper troubles.

The truth is, as long as you can speak English and have fair comprehension skills, you can do everything they can do for you. No need exists to have a 3rd party "negotiating" for you.

Your success in having your loan modified will depend entirely upon the facts surrounding your loan - not on "knowing the right people," "knowing what to say," or any other phrase the scammers might use to part you from your money.

Modification rests on your current income, current obligations, and the mortgage payment - along with your ability and willingness to pay the modified mortgage payment. Contrary to what these crooks will tell you, you don't need to pay an up front fee to be considered for modification.

Yet, hundreds, if not thousands of unwary homeowners have forked over $250, $500, $750, and even $1,000 to these companies under the promise of help.

The worst of this, according to one source at Bank of America, is that these companies are advising people to stop making their mortgage payments.

That's the worst thing you could do if you want a loan modification under the Making Home Affordable program. In fact, it could render you ineligible for help.

If you're having trouble keeping up with your payments, call your lender and ask what help is available. Many have special lines set up to handle such calls - check the lender's website to find that number.

You may be as fortunate as one couple I know who merely filled out a few forms to get their payment reduced by nearly half. If your lender is using a different system, you may have to wait for an answer. But either way, you definitely don't need to pay a 3rd party to help you.

Author:Marte Cliff

CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news