Archive for June, 2009

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

Friday, June 26th, 2009

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:

Your Credit Cards: Should You Carry a Balance?

Friday, June 26th, 2009

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 Clover

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

Wednesday, June 24th, 2009

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,

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

An Easy Way to Save on Credit Card Interest

Tuesday, June 23rd, 2009

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

Your Credit: Ignorance of Errors No Excuse

Saturday, June 20th, 2009

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.

The 5 Components of a Credit Score

Friday, June 19th, 2009

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

Your Credit Report: Who is Looking and Why?

Friday, June 19th, 2009

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

Medical Bill Negotiation Q & A

Monday, June 15th, 2009


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.

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.

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

Monday, June 15th, 2009

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

Equifax Joins TransUnion With New Credit Scoring Model

Saturday, June 13th, 2009

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, Experian’s FICO scores have not been available directly to consumers but could still be accessed by banks and other lenders.

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

Disclaimer: This information has been compiled and provided by as an informational service to the public. While our goal is to provide information that will help consumers to manage their credit and debt, this information should not be considered legal advice. Such advice must be specific to the various circumstances of each person's situation, and the general information provided on these pages should not be used as a substitute for the advice of competent legal counsel.