Technologically Advanced Credit Card Theft

September 8th, 2011

Before technology made things easier for credit card thieves, they dug through trash to get credit card statements and carbon copies with card imprints. Now they don’t have to get their hands dirty. Instead, they hack, phish, or skim their way to theft.

Earlier this year, thieves were able to get into the systems of Michaels Stores, Sony, Epsilon, Citibank, and even the security expert RSA. Sometimes they only got names and email addresses, but sometimes they got credit card numbers as well.

Here are 5 of the most common ways thieves use to access your information:

Secret Scanning: Crooks, moonlighting as bartenders, sales clerks, or waitresses use a small hand-held device to swipe and store your credit card information. The scanning device, about the size of an ice cube, fits easily into a pocket. All he or she has to do is have the card out of your line of sight for a few seconds

The fraudulent credit card reader: This one takes a bit of nerve, as well as acting ability.

Generally used in stores with limited staff, a team of thieves stage an “emergency” that takes the clerk away from the register. While the clerk is gone, one member of the team stays behind at the register and switches the credit card reader with a fraudulent reader. This one not only collects data for the store’s charges, it collects data for the thieves.

After several days, the team returns to the store, once again distracts the clerk, and switches the fraudulent reader for the original.

The Skimmer: Any credit card reader that’s unmanned for a portion of the day or night can be compromised by this one. It takes only a few minutes to set up and blends into its surroundings so well that only a trained eye is apt to spot it.

All that’s necessary is a few minutes to work unobserved and a place nearby where a crook and his or her laptop can hole up while the skimmer is working.

This is a small device that fits neatly over the slot at an ATM, a gas pump, or a vending machine. It emits a Bluetooth signal that can be picked up by the laptop and allows the crooks to capture credit card information from every consumer who inserts a card to make a purchase or withdraw funds.

The Hacker: This devious character preys on websites with low security. He installs a bit of software called malware that infiltrates a computer or a network. When you visit the site, it automatically and instantly downloads into your computer and allows the hacker to access your information.

The hacker can go almost anywhere – including the computer systems of banks and other businesses. From there, your personal information becomes his open book.
The Phiserman: Phishing also uses malware, but he sends it to you via email. Once you open the attachment, he’s in. From there he can access all your information. One form of malware, called spyware, allows the hacker to capture every keystroke you make – including your account numbers, PIN numbers, and passwords.

Because this hacker has access to your computer, he can send malware from your name to everyone in your address book – making his malicious message look as if it came from you.

What’s the point of all this? Money, of course. Depending upon the buyer and the information gathered, the thieves can get from $5 to $40 per compromised account.

How can you protect yourself?

  • Set up alerts so you know immediately if there’s unusual activity on your accounts.
  • If you must use public computers, don’t check your email.
  • Use a separate email address for all financial activity – and don’t have other mail sent to that address. You’ll instantly spot a phishing scheme coming to that address.
  • Don’t open unknown attachments. If something appears to be from a friend but doesn’t look like their normal correspondence, call or email them to ask if they sent it. Often, the answer is no.
  • Check your accounts online regularly. The sooner you catch fraudulent transactions, the sooner you can put a stop to further damage.
  • Only shop online with vendors you trust. Even they can be compromised, but they’re safer than dealing with unknown vendors.
  • If you find evidence that your accounts have been compromised, act quickly. Notify your financial institutions, law enforcement, and any one of the “big three” credit reporting agencies: Experian, Equifax, or TransUnion. They’ll set a fraud alert on your credit reports.

Can you absolutely avoid having your credit card information stolen? Not any more. Not if you use your cards. So be careful and be on the lookout for any suspicious activity.

Low Interest Rates and the Housing Market

September 8th, 2011

In mid-August, Freddie Mac reported that the average 30 year fixed-rate home loan had dropped to 4.15%. That put interest rates at their lowest level on record since 1971. Some say they’re the lowest that they’ve been since the 1950′s.

So while home sales remain slower than normal, mortgage lenders are busy refinancing homes and lowering payments for thousands of homeowners. In fact, some lenders have raised their rates in order to slow the flood of refinance applications.

Others are encouraging their customers to get started. While interest rates are expected to remain low over the next two years, home prices could still see a drop. Thus a homeowner who has equity today could find themselves underwater by next year – and unable to refinance without bringing in cash.

In addition, this shaky economy could mean job loss or a drop in income. By next year, they might not qualify even at a low interest rate.

And of course, if they can refinance today, why should a homeowner pay an extra several hundred dollars per month in interest for even one more month?

Since home prices are back to 2002 levels in many parts of the country, home sales should be booming. So why aren’t more buyers jumping on this opportunity?

Buyers are still worried about the economy. If they purchase a home – even with a low payment – will they be able to pay for it later? Few today feel secure in thinking their jobs will still be there next year, or even next month.

Buyers wonder if prices and interest rates will drop even more. This shouldn’t be a concern for a consumer who wants to own a home and live in it for the next several years, but there are those who want to be sure to hit the “bottom of the market.”

Many would-be buyers simply don’t qualify. Banks are making it tougher to get a home loan even with good credit. And those who have gone through a foreclosure or short sale still have a few years to wait before they’ll be eligible for a new loan.

Appraisals are all over the board. When Federal regulations mandated that mortgage lenders must order appraisals through a third-party service, appraisals soon became the major hurdle to home buying or refinancing.

Appraisals are too often assigned to out-of-area appraisers who don’t know local values and have not viewed the homes used for comparables. Thus, their values seldom reflect the true market value of the homes in question, and that can bring the transaction to a halt.

When they come in too low on purchase, the loan is denied. When they come in too high on a short sale or a bank owned property, the asset manager refuses to allow the house to be sold for the fair market value.

What do we need to make the housing market rebound faster? Jobs – and some faith in the economy.

Economic Attitudes and Their Effect on Home Sales

September 1st, 2011

The way consumers feel about the economy plays a large part in the housing recovery – or non-recovery, but overall concern doesn’t seem to quite as strong as one would expect at first glance.

A National Housing Survey conducted by Fannie Mae this summer found that up to 70% of the population believes that the U.S. economy is on the wrong track. This leads to pessimism, concern about job security, and reluctance to commit to debt.

But while we think recovery efforts are misguided, are the majority of us really that worried about our personal finances?

This past April – June, Fannie Mae conducted a telephone survey of over 3,000 people. That survey revealed that while the majority think the economy is going the wrong direction, only 26% were concerned about job security. Of this group, 65% still view this as a good time to buy a house. In contrast, of those who are not concerned about job security, 76% think now is a good time.

If you do the math, you’ll see that overall, 73% of Americans think now is a good time to buy a home.

So why are they waiting? Perhaps they believe they have plenty of time to wait and see what happens next. Only 26% expect home prices to rise over the next year, and few expect interest rates to rise.

In keeping with national statistics, 26% of respondents reported that their mortgage is underwater. 42% of those borrowers are stressed by their debt, and 9% have considered defaulting on their mortgage loan. Overall, only 4% of all mortgage borrowers say they’ve considered defaulting.

When discussing changes from last year, the numbers who reported higher debt (16%) vs. less debt (19%) and an improving financial condition (25%) vs. a worsening condition (26%) were surprisingly balanced.

Looking at the difference in overall financial condition between homeowners and renters, it is the renters who report the greatest improvement: 36% against only 18% of homeowners. Not surprisingly, homeowners who are underwater were more likely to report that their financial situation had deteriorated.

Pessimism seems to rule when it comes to the economy – only 39% of those interviewed expect their financial condition to improve over the next year. This may be why consumer spending almost ground to a halt during the second quarter of 2011. Consumers simply don’t want to take on more debt when they are unsure about having the money to pay those bills.

Renters of single family homes have slightly different opinions about the home ownership than those who dwell in multi-family housing. 74% of the single family renters believe that owning a home is more sensible than renting, while only 68% of the multi-family residents hold that belief.

However, well over half in both groups say they will continue to rent rather than buy the next time they move.

As you’ve seen, it’s not because they don’t believe in home ownership. It turns out that 70% are pessimistic about their ability to obtain a loan, so probably won’t even make the attempt. Respondents cited reasons including debt, down-payment, income, job security, and credit history as blocking their way to home ownership.

Protecting Your Credit During a Divorce

August 14th, 2011

Divorce plays havoc with emotions – and it can also play havoc with your credit.

If you and your spouse have an amicable divorce, settling financial and credit issues can be relatively simple. But as too many have found out, a “spouse scorned” can create financial problems that take years to solve.

The first step should be trying to separate your credit obligations. That begins with getting both credit reports and checking to see which accounts are held jointly and which are in only one name. When some accounts are held separately, look  to see which list the other spouse as an authorized user.

Removing an authorized user is the simplest of all the steps, and should be done by the account holder. If he or she refuses, the authorized user should contact the credit issuer in writing and ask to be removed. If they refuse, file a notice with each credit bureau.

Obviously, the reason for removing a spouse from your account is to protect yourself from “scornful spending.” An angry spouse can max-out your card and leave you to pay the bill.

Why do you want to be removed? Because if your spouse fails to pay that bill, it will show up on your credit report and could be factored in to your credit score.

If you have unused joint accounts – such as a credit card or a home equity line of credit – cancel them so that neither of you can obligate the other.

When listing joint accounts, or accounts which may belong to one but authorize use by the other, remember to consider accounts which may not be listed on your credit report – such as a doctor, dentist, or local retail store.

When a jointly owned home is involved, the spouse who stays should attempt to refinance in their own name only. However, if equity is involved, or if the “staying” spouse can’t qualify for a new loan on his or her income, selling the home may be the only safe alternative.

If you have other current joint accounts, the best course of action is to pay them off by opening new separate accounts and transferring the debt to each spouse according to the divorce agreement. But since income and credit scores often prevent this kind of division, the next best thing is to protect yourself by staying informed.

Remember – even though a divorce decree may deem one spouse responsible for specific debts, the creditors still consider both parties responsible if both parties signed the credit agreement. And in community property states, this can hold true even if only one spouse signed.

Thus, if joint obligations are divided between spouses, the divorce decree should include “what if” provisions for what happens if one of you can’t make the payment.

One common solution is the provision that you must be notified in advance, so you can make that payment.

You can also ask your lender to send you a duplicate copy of the account statement each month, or to give you access to online account records. The important point to remember is that when your credit rating is at risk, you need to know if the payments are being made.

Should you find that your spouse is not making payments as agreed and is putting your credit at risk, contact your divorce attorney immediately. The court will then step in and insist that your spouse pay your legal fees in defending yourself against claims from a creditor.

Credit Card Debt Q & A

August 11th, 2011


Question: had a divorce. still have a lot of equity in my home 58%. have had good credit for a long long time 35+ years. total revolving credit $110K. have a problem. can’t sell home with ex. rented home. it will take 2-4 years for this to resolve. in the meantime I asked the largest ccard account I have for payment plan. FICO is 740-760 has been that way 20+ years.

what is better on credit report. closed ccard account with payment plan. or an open account with payment plan. I want to minimize impact.

called ccard company to arrange something in advance. they want me not to submit a payment so I show up in there system. Asked them is this collections at ccard company or a 3rd party. they hesitated but said collections at the ccard company.

I said I want to work with the ccard company I have been with you 35+ years and I fully intend to clear this debt.  they immediately agreed to zero percent interest. what’s the best way to handle this. they are telling me 5 years- zero interest which is good. but I do not know how that is reported and I do not know (i.e. if longer term on payment plan > 5 yrs is negotiable). I have 3 financial instruments with the lender. I have always made good on them but cash flow dictates I initiate payment plan on one of them. thank you.

A: Hi Mark, it sounds like you have credit card debt that is eating at your pocket book. My recommendation would be to check with some local banks, and see if you can get a loan at a lower interest rate to pay off these cards, so the interest is not killing you. Also you could look at reducing some other expenses to pay off the credit card quicker. If these two options are not a option, then I would go with the payment plan, but ask if they will report it as a payment plan and how it will affect your credit score. I would get something in writing from them on the plan you choose and how that will affect your FICO score. There no exact science with the bureaus in regards to how a payment plan will affect your credit score, but it will lower it because its a trigger that you are having issues. Avoid not paying your credit card, a late payment will destroy your credit scores.

How to Build Credit Q & A

August 10th, 2011

Q:I am very interested in building credit. I am getting married next year and want to get prepared. I make good income and am very responsible. I have a mortgage through PNC,and one minor credit card. How can I clean up my credit and take a diligent approach to cleaning up and approving my credit score?

A: Hi Ryan,

Here is a article we wrote a while back that will give you all the direction you need.

Private Information You Won’t Find on a Credit Report

August 9th, 2011

Fifty years ago, when credit bureaus were local, almost anything could be in your credit file. In fact, credit bureau employees were paid to scan the local newspapers to gather information that the credit bureaus thought potential creditors had a right to know.

That might include anything from a drunk driving arrest to a divorce proceeding to a lawsuit over a property line. It might show that your spouse passed away or that you were hospitalized after a heart attack.

In short, your credit file was a gross invasion of privacy.

But that invasion of privacy is no more. Here’s a quick run-down on the personal information that your creditors and would-be creditors will no longer find on your credit report:

Your employment status. If you’ve lost your job recently, potential creditors won’t find out from your report.

Your credit report may list current and past employers – if you’ve listed them on credit applications. But it won’t show employment dates, or if that employment has been terminated.

Your income. This item was dropped back in the early 1990’s. Now your credit report won’t show income from your employment, unemployment benefits, alimony, child support or public assistance. Individual creditors will ask, of course.

Your arrest record. Credit reports today deal only with financial obligations. So if you were arrested for shoplifting or underage drinking as a teen, don’t worry.

The only time legal matters show up on credit reports is when they involve liens and judgments.

That means child support payments will show up as a debt, and if you’re given a fine and don’t pay it, it could show up as a collection. However, the reason for the debt will not be revealed.

Medical information: The Fair Credit Reporting Act prohibits credit bureaus from listing any information on your report that jeopardizes your medical privacy.

That means that in most cases, medical debt will not show up unless it goes to collections. Even then, it is listed merely as “medical debt” and no details are given. Often, doctors wishing to adhere strictly to privacy rules will report those debts under a company name that “does not appear to be medical.”

Your marital status: Contrary to what many believe, married couples don’t share joint credit scores. You each have your own. However, if you live in a community property state and your spouse defaults on his or her individual debts, those debts could be considered yours also. In that case, a collection action for the debts, could show up on your credit report.

Note: While credit reports lenders use will not show your spouse’s name, some versions will. Thus, the credit report you pull yourself may very well list your spouse.

Signs of a cash crunch: If you’ve gotten into a bind and had to take drastic measures to meet some obligations, don’t worry.

Your creditors won’t know if you’ve taken out a payday loan, pawned some valuables, or signed for a title loan on your car. If you default on one of those loans, that will show up on your credit report, but as long as you make repayment, no one will be the wiser.

Late payment of utility bills: This one depends upon your utility company, but in most cases, your late payment won’t show unless it goes into collection. The reason is that most smaller utilities don’t want to pay the fees associated with reporting to the credit bureaus.

Your net worth: What you’re worth is nobody’s business, so assets you own outright will never show on your credit report. This includes your bank accounts, stocks, bonds, and real estate you own with no mortgage. Even if you do have a mortgage, the value of your home will not be listed.

When Your Credit Score is “Close,” Work a Little Harder

August 8th, 2011

Credit-worthy consumers are paying the price for the sub-prime market collapse, making it more important than ever to build and maintain high credit scores before purchasing a home.

According to FICO, the best rates and terms go to those consumers with all credit scores form the “Big 3” credit bureaus (Experian, Equifax, and TransUnion) at 760 or above. And close doesn’t count.

Even though a score of 756 puts you in a category where only 2% of consumers in your FICO® Score range ever reach 90 days past due, you need those extra 4 points in order to qualify for the best rates. Earning them can save you thousands of dollars per year, depending upon the size of your loan.

How can you inch those scores up a notch?

Your credit report itself will give you some clues. Look for the section that tells you why your scores are as they are. The solution may be as simple as using a dormant account, or transferring part of a credit card balance to a different account, to lower the “use to limit” ratio on one card. Of course, paying down balances is always helpful.

Why use a dormant account? Because your score is based on your bill-paying habits. If you use the account, you can’t demonstrate that you make payments on time.

35% of your score is based on payment history, and you can’t change history. If you have late payments or other negative information, you’ll have to wait for time to lessen the impact.

But another 30% is based on the amounts you owe relative to what you could owe. And this is one area where you can take control. Strangely enough, this is calculated on a per-account basis rather than overall.

Thus, you could have six cards with little to no balance, but if one card is at 80% of it’s limit, your score will be negatively affected. Unless you can pay it down, it’s wise to move that balance to another card or cards to get your usage under 30% on all accounts.

15% of your score is based on the length of your credit history. Obviously, you can’t alter that. But you should be careful not to close an unused account that you’ve had for several years. Instead, use it occasionally to keep it active.

10% is based on “new credit,” and that includes the number of hard inquiries on the file.

A hard inquiry is one made for the purpose of making a credit-granting decision. It counts against your score even if you did not open a new account or take a credit line increase as a result. Inquiries you make yourself are not considered.

This portion of the score is the reason why real estate agents and mortgage lenders advise their clients not to apply for new credit cards or to allow any retailer or service provider to check their credit in the months preceding a home purchase.

The final 10% looks at the kinds of credit you use. For the best scores, you should have a mixture of revolving and installment debt. But if you don’t have it already – now is not the time to go open a new account.

For consumers, the frustrating part of all this is that we don’t know the formula. We can’t say that one specific action will raise (or lower) our scores by 3 points or 5 points.

Why? Because the formula looks at the overall picture and weighs the various parts against each other. And because the gain or damage for one consumer will be different than for another consumer, depending upon their credit score at the time.

For instance, a consumer with a low credit score and a history of 30-day late payments will be slightly penalized for a new 30-day late – while a consumer with high scores and a clean payment history will be penalized severely.

If the proposed QRM (Qualified Residential Mortgage) rules under the Dodd-Frank Act go into effect, standards will be even tighter. So if you want to buy a home,  start now to work on raising those scores.

Why Do 46 Organizations Oppose QRM?

August 5th, 2011

And what is QRM anyway?

QRM is short for Qualified Residential Mortgages.  Under proposed new federal regulations, loans that meet the QRM guidelines would be exempt from the Dodd-Frank risk retention requirement that a bank must retain 5 % of the risk when they securitize mortgages.

Banks would, of course, prefer to avoid retaining 5% of the risk, but since they do want to make loans, they are also opposed to the QRM guidelines.

These guidelines include 20% down payment, stringent debt-to-income ratios, and rigid credit standards.

Organizations such as NAR (National association of REALTORS®) contend that the new regulations would prevent millions of hard-working, creditworthy consumers from owning a home.

Why? According to NAR figures, it would take a family on a median income more than a decade to save the 20% down payment required for a QRM mortgage. However, if the economy turns around and prices begin to rise, that magic 20% could remain forever “just out of reach.”

Non-QRM mortgages (the ones that required banks to keep 5% of the risk) would be subject to higher rates and fees – which many believe would also put home ownership out of the reach of many aspiring home owners.

Regulators believe that the higher down payment requirement would reduce the risk of default. However, NAR and others in the Coalition for Sensible Housing Policy say that the true key to safe lending is sound underwriting and documentation – not the size of the down payment.

By way of illustration, they point to Federal Housing Administration and Veterans Administration loans. These both have low down payment requirements and relatively low default rates.

Ron Phipps, President of NAR, believes the proposed rule should be withdrawn and revised. Then it should be published for comment. A regulation calling for lending standards that ensures a borrower’s ability to repay and avoids product features such as teaser rates and balloon payments would do far more to lower the risk on mortgage loans.

Before swinging the pendulum too far toward preventing home ownership, regulators should step back and remember that it wasn’t sensible lending practices that caused this crisis. It was nonsensical lending practices that encouraged home purchases by consumers with no ability to repay the loans.

The Coalition for Sensible Housing Policy includes 46 organizations representing housing,  consumer advocacy, and banking. Of these groups, the National Association of REALTORS® is the largest, representing  1.1 million members.

When Your Credit Score Drops, But You’ve Done Nothing New

July 27th, 2011

You’ve been taking good care of your credit. You’ve been diligent about paying all your bills on time, keeping your credit card balances low, and avoiding inquiries into your credit. Then suddenly, your previously good scores take a nose dive?

Two possibilities could be the cause of your troubles:
•    You’ve become the victim of Identity Theft
•    A ghost from the past has come back to haunt you

To learn which possibility is causing your credit score reduction, you’ll need to get a copy of your credit report and read it carefully.

Read the section that reports recent inquiries. If you haven’t authorized an inquiry, but someone has made a “hard inquiry,” it means that someone else is attempting to get credit in your name. Explore further, because they might be using your good credit at this very moment. Go over every account listed, checking to see that it actually belongs to you.

If you find an account that isn’t yours, contact the credit reporting agency and follow instructions for disputing the account. You’ll also have to file a report with law enforcement agencies, because you’re now an official victim of identity theft.

Something else you might find is an old ghost – in the form of a collection on a debt you didn’t even know you had.

This can happen when people move and mail is not correctly forwarded. Utility companies send a final bill but payment is not forthcoming because you never receive the bill.

After a while, your account goes into their bad debt file and because utility companies don’t routinely report to the credit bureaus, it never shows up on your credit report. Then, perhaps years later, the debt is sold or forwarded to a collection agency. They still don’t have your current address, so don’t write you. Instead they report it to the credit bureau under your social security number.

The good news is that an old debt such as this is far easier to resolve than identity theft.

First contact the supervisor at the collection agency. Explain that this debt came at you out of the blue and that you intend to pay it off. Ask to have it removed from your credit report in exchange for prompt payment.

Of course, if you believe the debt is not valid, you’ll need to send a request for verification. Use certified mail, with a return receipt requested. If you still believe it is not a valid debt after receiving their response, dispute it with both the collection agency and the credit bureau that reported the collection.

If the bureau can’t confirm it as a valid debt, they’re required to remove it from your credit report.

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.