Wednesday, December 21, 2011
CREDIT DISPUTES AND YOUR HOME LOAN
You will find there's a little-known and debatable practice by home loan titans Fannie Mae and Freddie Mac,( the people who financially back the home mortgage loan business) that will end your next house loan app directly in its’ tracks.
Let’s take a look at an example: You have great scores: in the 780 range. You have great equity in your home. You want to refinance your home to send your child to college. You have been on the job for 20 years and have more than enough income. The rates are great.
But your bank states: Sorry. We're not able to do the loan. Why? What the ……………………………
Fannie Mae's automated underwriting system won't accept any application in which there is a note in the credit report that a consumer has disputed an account or "trade line."
You explain that the dispute -it was for a medical bill --was valid. The account was closed. The creditor promised to eliminate the dispute notation but evidently never did. The loan officer won't budge. The refi application is dead.
What's happening here? Under the Fair Credit Reporting Act (FCRA), you have the right to dispute incorrect information on any account within your file. When you challenge that information, a notation to this effect must be made on the file (as per the FCRA). So long as it remains, most credit scoring systems generally will not factor the disputed account into the calculation of the consumer's rating. Thus, the potential lender does not receive an accurate reflection of the real score.
Does Fannie Mae deny loans to customers because they used their legal rights?
Fannie Mae’s and Freddie Mac’s automated underwriting techniques -- employed by virtually all lenders doing business -- delivers applications with "consumer disputed" items on credit files back to the lender for what is referred to as "manual underwriting."
Freddie Mac and Fannie Mae do not forbid delivery of a loan . . . where the borrower has disputed information" with their credit report. Their underwriting requires the lender to ascertain and document whether or not the disputed information is correct and underwrite the borrower's credit accordingly. Here is the dilemma: The lenders typically won't manually underwrite because then they have the legal responsibility in the event the loan goes into default. And they typically will not keep these loans on their books. They need to sell them to the secondary market.
Whenever trade lines in a consumer's file include a "disputed" notation, most scoring software disregards them for the purposes of calculating the score.
A significantly delinquent account that could legitimately depress a FICO credit score might be taken out of the equation -- at least temporarily -- if a "consumer-disputed" notation is in the file. Fannie and Freddie are attempting to protect themselves from gamesters and frauds. This did happen a few years ago when sham credit repair companies and mortgage companies would challenge an item just to have it removed from credit scoring. At that time, the bureaus would totally remove the item during the dispute, the score would go up, the file underwritten and closed. Then the trade lines would be added back in once the item was validated and the score drops 50 or more points.
But what about the impact on disputed items when the consumer is correct -- or files in which creditors neglected to remove the disputed-account designation? For the time being, it's tough luck for all candidates with disputes in their credit files.
JOHN MACKEY
Monday, December 19, 2011
What Debt Collectors Won't Tell You About Their Phone Calls
What Debt Collectors Won't Tell You About Their Phone Calls
Debt collection ain’t easy. In a few companies, it may be called the distressed accounts or recovery department. Other companies and law firms are debt collection businesses, which is all they do. They generally have a little bit of "desperado" approach about their work. And, occasionally it's more than merely their mindset that is desperado. Although it may seem like they will say almost anything to make you pay, there are statements that violate the Fair Debt Collection Practices Act (FDCPA), which controls the conduct of much of the debt collection agency industry. Plus, there are some things they will not elucidate.
T’was the Night Before Christmas and They Still Call!
A criticism often heard by bankruptcy law firms from clients who are preparing to file for bankruptcy, and those that have files at collection agencies, is that debt collectors call non-stop, call-after-call-after-call demanding settlement. Even though the FDCPA restricts the collection calls between 8:00AM and 9:00PM, many collectors take advantage of the ignorance of the people they call, presuming they will not know much better.
While bankruptcy and its "automatic stay" should stop all the pestering phone calls, in addition to all other collection activity, it is possible to end the string of phone calls merely by sending a letter to the debt collector.
In the letter, identify the debt and you no longer want to be contacted on the phone concerning it. Right after receiving that correspondence, the collector is only permitted to contact you to inform you that they are submitting a lawsuit to collect your debt and/or that they'll no longer contact you by telephone. Keep in mind, this does not eradicate the debt, but it will stop the telephone from ringing.
WHO IS SUE? AND WHY SHOULD I CALL HER?
The Federal Trade Commission (FTC) is in charge of monitoring debt collectors. In 2010, greater than a quarter of all complaints (over 140,000) received by the FTC concerned debt collection. And, if companies violate the FDCPA, you can do more than just complain. If your collection agency ignores the letter, (send it certified mail with return receipt, this way you've got proof when it was sent and signed for, and by whom), carefully document every time they phone. Your solution is to then sue and perhaps receive up to $1,000. You may think, "How can I sue, I'm in financial trouble? I can't afford an attorney."
In this case, it is possible. Besides the $1,000, the collector may have to pay your attorney fees. Paradoxically, should you win, the debt collector would precipitously be in your debt.
Friday, December 16, 2011
Can A Collector Call Me At Any Time Or Any Place They Want?
No. Nope. Nada. Nyet. You will find very specific procedures regulating what a debt collector can and cannot do when trying to collect on a debt. They are restricted in the types of things that can be done, and if the collection company breaks those rules, there are monetary (liquid) damages that may need to be paid for the violation. (This is only if a lawsuit is filed).
(Side note: I am conducting a webinar on DEBT COLLECTORS: LIES, DAMN LIES AND DECEIT. You can sign up for it here).
The area of legislation that governs the activities of a collection company is the Fair Debt Collection Practices Act (FDCPA). This federal government statute regulates how, when, and where they may collect. For example, Section 805 states that '... a debt collector may not communicate with a consumer in connection with the collection of any debt -- (1) at any unusual time or place or a time or place known or which should be known to be inconvenient to the consumer. This typically suggests that the collection company can call between the hours of 8am and 9pm. So if a collection company is contacting you at 6am in the morning, or at 11pm at night, then they are violating the law. Section 805 (2) states the collection company cannot attempt communication "if the debt collector knows the consumer is represented by an attorney with respect to such debt and has knowledge of, or can readily ascertain, such attorney's name and address." So if you tell the collection company that you have legal counsel on the matter, and they continue to contact you anyway, they've broken the law as well as your protection under the law.
Section 805 (3) of the Fair Debt Collection Practices Act states that the collection company may not make contact "at the consumer's place of employment if the debt collector knows or has reason to know that the consumer's employer prohibits the consumer from receiving such communication." This obviously means that in the event the collector calls you at your job, and you tell him/her that they can't call you again as it is against company policy or your supervisor will not allow it, and the collector calls you anyway, your protection under the law has been violated.
There exists a relatively extensive list of what the collection agencies can’t do when they try to collect on a debt. Even calling your cell phone is a violation of law (since you cannot be made to incur charges due to the collector's activities, and most people have a plan with their cellular company through which they are billed for minutes used). But many folks are not aware that such laws exist (needless to say, many of the collection agencies do not want you realizing that). If an infraction can be shown to have taken place, then the debt collector must pay you $1,000 in damages. However, this is not automatic: An attorney must be hired and the appropriate actions taken. Additionally, the debt collector must pay all of the attorney fees. What that means is that there won't be any upfront cost for you for having your case filed by a lawyer.
Monday, October 10, 2011
Get ready for a new wave of bank fees
Get ready for a new wave of bank fees. With the new Durbin Bill that took effect, banks have been looking for a way to regain their profits. Or as they allude to, so they will not lose money. In fact, the CEO of Bank of America says the fees are good for their customers. He says their service will get better! Oh, the audacity of it all. He thinks he can talk to America like he talks to his servants (sorry, employees).
It reminds me of a story. I am a big baseball nut: I eat, sleep and breathe it. I also coach it. But there is a distant story from the LA Dodgers owner who at one time stated that in comparison from this year to last year (which was quite a few years ago) he lost $2,000,000. Well, how could this be? After much discussion and questioning of this owner, he admitted that this year he had made $15,000,000 and last year he had made $17,000,000. In his mind, he had lost $2,000,000! Talk about “spinning” something!
Here is a quote from ABC News: Bank of America customers, vote with your feet, get the heck out of that bank,” Durbin said on the Senate floor. “Find yourself a bank or credit union that won’t gouge you for $5 a month and still will give you a debit card that you can use every single day. What Bank of America has done is an outrage.”
Durbin said consumers are rightfully outraged about last week’s announcement.
“It is hard to believe that a bank would impose such a fee on loyal customers who simply are trying to access their own money on deposit at Bank of America,” he said. “Especially when Bank of America for years has been encouraging their customers to use debit cards as much as possible.”
Most basic checking accounts at Bank of America will see a 40 percent jump in monthly costs and the bank says the debit fee will be waived for customers who upgrade to “premium” accounts that require higher minimum balances.
Here is what we need to do: Take a hike. Run, do not walk. Vote with your feet. Take your business to the nearest Credit Union. There are a lot of things a Credit Union can do that a bank cannot. If you are trying to re-establish your credit, it is much easier to do that there. If you want to find out how, Click here.
Credit Unions are not for profit: They are owned by the customers. Yes, you can be an owner. If you join, you will be. They offer much more competitive rates than banks.
If you want to find a credit union around you, just go here: www.joinacu.com.
John Mackey
It reminds me of a story. I am a big baseball nut: I eat, sleep and breathe it. I also coach it. But there is a distant story from the LA Dodgers owner who at one time stated that in comparison from this year to last year (which was quite a few years ago) he lost $2,000,000. Well, how could this be? After much discussion and questioning of this owner, he admitted that this year he had made $15,000,000 and last year he had made $17,000,000. In his mind, he had lost $2,000,000! Talk about “spinning” something!
Here is a quote from ABC News: Bank of America customers, vote with your feet, get the heck out of that bank,” Durbin said on the Senate floor. “Find yourself a bank or credit union that won’t gouge you for $5 a month and still will give you a debit card that you can use every single day. What Bank of America has done is an outrage.”
Durbin said consumers are rightfully outraged about last week’s announcement.
“It is hard to believe that a bank would impose such a fee on loyal customers who simply are trying to access their own money on deposit at Bank of America,” he said. “Especially when Bank of America for years has been encouraging their customers to use debit cards as much as possible.”
Most basic checking accounts at Bank of America will see a 40 percent jump in monthly costs and the bank says the debit fee will be waived for customers who upgrade to “premium” accounts that require higher minimum balances.
Here is what we need to do: Take a hike. Run, do not walk. Vote with your feet. Take your business to the nearest Credit Union. There are a lot of things a Credit Union can do that a bank cannot. If you are trying to re-establish your credit, it is much easier to do that there. If you want to find out how, Click here.
Credit Unions are not for profit: They are owned by the customers. Yes, you can be an owner. If you join, you will be. They offer much more competitive rates than banks.
If you want to find a credit union around you, just go here: www.joinacu.com.
John Mackey
Friday, September 30, 2011
THE NEGATIVE EFFECTS OF CERTAIN ACTIONS ON YOUR CREDIT
THE NEGATIVE EFFECTS OF CERTAIN ACTIONS ON YOUR CREDIT
Among the questions I am asked a great deal about concerning credit scores is how particular actions, like late payments, bankruptcies, foreclosures and other derogatory items affect credit scoring.
Until recently, nobody really understood. The company that created the leading credit score, FICO, has been very defensive about releasing details regarding their proprietary information. Well that has changed, to some degree. FICO has unveiled information about how specific actions, from filing a bankruptcy to maxing out a credit card, can affect individuals with different credit scores.
FICO was asked to calculate the effects of those actions for two examples: A person with a 780 score on the FICO 300-850 scales, and someone with a 680 score. Here are the results.
The outcomes are shown in a range because FICO is still reticent in disclosing too much about its proprietary system. However, the range is fairly tight and you can clearly see the incongruent impacts of the different actions.
Let's make this clear: Your own outcomes may vary.
People with a similar credit score can have very different credit user profiles: more or fewer accounts, a different combination of accounts, a longer or shorter credit history, use of more or less of their available credit, etc.
Because of those differences, the same action -- maxing out a credit card, say -- is capable of having diverse outcomes on people with the same score, with regards to the details of their individual credit user profiles.
FICO assumed both people had a number of active main cards as well as a mortgage, an auto loan and student loans.
The person with the 780 score:
A. Has at least 10 credit accounts as a whole and a 15-year credit history.
B. Utilizes 15% to 25% of her credit card limits.
C. Has no past due payments on their credit reports.
The person with the 680 score:
A. Has six credit accounts as well as an eight-year credit history.
B. Uses 40% to 50% of her credit card limits.
C. Was 90 days late on an account two years ago.
D. Was 30 days late on another account one year ago.
MAXING OUT YOUR CARD
Using 100% of your limit on any credit card puts you at risk of over-limit fees. It also takes a bite out of your credit score. Our person with the 680 score might lose 10 to 30 points from this one action, while the 780 scorer could shed 25 to 45 points.
The difference points up an important fact: The higher your score, the more points you tend to lose from "bad" actions. That's because the scoring formula is sensitive to any sign you're getting in over your head. Maxing out a credit card is considered one of those signs.
You also should know that it typically doesn't matter to the formula if you carry a balance or pay off that maxed-out card as soon as you get your statement. What's usually reported to the credit bureaus is the balance on your last statement. Even if you pay the debt in full before the due date, the maxed-out card will hurt your score.
LATE PAYMENTS
Sending a check a few days past due usually won't hurt your score, although you may incur late fees and induce higher rates of interest. The big hurt comes when you miss a payment period entirely.
A 30-day-late report would cut 60 to 80 points from our lower-scoring person and 90 to 110 points from our higher scorer. Quite simply, one lapse of attention could drop the 680-scorer into subprime credit terrain, and our 780-scorer could find credit much harder to obtain and more costly.
This is why it is so vital that you set up automated payments to ensure your bills get paid promptly, all the time. Together with credit cards, you can set up automatic payments that make minimum payments from your checking account to protect against a late payment. You can always make a second transaction that decreases your debt or pay it off entirely. You can subscribe to automated payments on the Web site of your card issuer.
SETTLEMENTS
All the commercials about "settling your debt for cents on the dollar" make debt consolidation sound like a great solution. But failing to pay what you owe to a creditor will take a serious toll on your score.
The 680 scorer would lose 45 to 65 points with this option, while the 780 scorer could shed 105 to 125 points.
I hope this clears up some of the questions regarding credit scoring.
Among the questions I am asked a great deal about concerning credit scores is how particular actions, like late payments, bankruptcies, foreclosures and other derogatory items affect credit scoring.
Until recently, nobody really understood. The company that created the leading credit score, FICO, has been very defensive about releasing details regarding their proprietary information. Well that has changed, to some degree. FICO has unveiled information about how specific actions, from filing a bankruptcy to maxing out a credit card, can affect individuals with different credit scores.
FICO was asked to calculate the effects of those actions for two examples: A person with a 780 score on the FICO 300-850 scales, and someone with a 680 score. Here are the results.
The outcomes are shown in a range because FICO is still reticent in disclosing too much about its proprietary system. However, the range is fairly tight and you can clearly see the incongruent impacts of the different actions.
EFFECT ON 680 SCORE | EFFECT ON 780 SCORE | |
MAXED OUT CARD | 10-30 POINTS | 25-45 POINTS |
30 DAY LATE PAYMENT | 60-80 POINTS | 90-110 POINTS |
DEBT SETTLEMENT | 45 - 65 POINTS | 105-125 POINTS |
FORECLOSURE | 85-105 POINTS | 140-160 POINTS |
BANKRUPTCY | 130-150 POINTS | 220-240 POINTS |
Let's make this clear: Your own outcomes may vary.
People with a similar credit score can have very different credit user profiles: more or fewer accounts, a different combination of accounts, a longer or shorter credit history, use of more or less of their available credit, etc.
Because of those differences, the same action -- maxing out a credit card, say -- is capable of having diverse outcomes on people with the same score, with regards to the details of their individual credit user profiles.
FICO assumed both people had a number of active main cards as well as a mortgage, an auto loan and student loans.
The person with the 780 score:
A. Has at least 10 credit accounts as a whole and a 15-year credit history.
B. Utilizes 15% to 25% of her credit card limits.
C. Has no past due payments on their credit reports.
The person with the 680 score:
A. Has six credit accounts as well as an eight-year credit history.
B. Uses 40% to 50% of her credit card limits.
C. Was 90 days late on an account two years ago.
D. Was 30 days late on another account one year ago.
MAXING OUT YOUR CARD
Using 100% of your limit on any credit card puts you at risk of over-limit fees. It also takes a bite out of your credit score. Our person with the 680 score might lose 10 to 30 points from this one action, while the 780 scorer could shed 25 to 45 points.
The difference points up an important fact: The higher your score, the more points you tend to lose from "bad" actions. That's because the scoring formula is sensitive to any sign you're getting in over your head. Maxing out a credit card is considered one of those signs.
You also should know that it typically doesn't matter to the formula if you carry a balance or pay off that maxed-out card as soon as you get your statement. What's usually reported to the credit bureaus is the balance on your last statement. Even if you pay the debt in full before the due date, the maxed-out card will hurt your score.
LATE PAYMENTS
Sending a check a few days past due usually won't hurt your score, although you may incur late fees and induce higher rates of interest. The big hurt comes when you miss a payment period entirely.
A 30-day-late report would cut 60 to 80 points from our lower-scoring person and 90 to 110 points from our higher scorer. Quite simply, one lapse of attention could drop the 680-scorer into subprime credit terrain, and our 780-scorer could find credit much harder to obtain and more costly.
This is why it is so vital that you set up automated payments to ensure your bills get paid promptly, all the time. Together with credit cards, you can set up automatic payments that make minimum payments from your checking account to protect against a late payment. You can always make a second transaction that decreases your debt or pay it off entirely. You can subscribe to automated payments on the Web site of your card issuer.
SETTLEMENTS
All the commercials about "settling your debt for cents on the dollar" make debt consolidation sound like a great solution. But failing to pay what you owe to a creditor will take a serious toll on your score.
The 680 scorer would lose 45 to 65 points with this option, while the 780 scorer could shed 105 to 125 points.
I hope this clears up some of the questions regarding credit scoring.
Saturday, September 24, 2011
CREDIT CARD FRAUD
MASSIVE PROBLEM
Credit card fraud has been a massive problem since the credit card was first introduced in the 1950's.
Prior to the internet, the main method in which this type of theft was committed had been by taking and using the physical card.
Today, this type of robbery has grown to become a lot more complex.
Structured hacking groups strike websites exclusively to steal individual and credit card data.
Illegal websites which are hosted in foreign countries, are used to sell this data to the highest bidder all over the world. These activities generate huge profits for anyone carrying out theft and huge headaches for those that have their data stolen.
Credit card and I.D. fraud has turned into a billion dollar per year dilemma that law enforcement, credit card companies, and consumer groups cannot manage to get a handle on.
It is extremely common for people to have experienced this type of fraud, typically multiple times in their life. Theft can result in loss to finances, decrease in good credit score numbers, and stress from getting through this difficult predicament. Fraudulent charges are usually taken care of by credit card issuers fairly quickly, but consumers always wind up paying for them in the end with higher fees.
How can Fraudsters Get Your Credit Card Details?
One way that credit card thieves can get private information is via a process called phishing. Fraudsters and identity thieves send millions of junk emails under the guise they are from a financial institution or credit card company. The emails make a consumer believe that their is “trouble with their account”. They are then prompted to enter their C.C. number, pin, and/or social security number. Sometimes a link in these phishing emails will redirect users to a site that replicates the exact look of their bank or Credit Card Company. The purpose of these “fake” sites is only to gather usernames and passwords. If you think maybe that you have accidentally entered your username and password into a website that is not genuine, you should contact the fraud department immediately .It is usually very confusing when banks and credit card companies send out genuine emails.
Just how can you tell the difference between a “phishing” site and the real site? One way that you can tell a fake site, is to check the root of the domain.
• For example, the genuine website for American Express is www.americanexpress.com. A phishing site attempting to steal your details might appear to be this: americanexpress.xyz.com.
• Notice how the root domain for the fraudulent website is “xyz.com”, not “americanexpress.com”.
One more indication that you are on the genuine site, is that the url should start with “https://, not http://”. HTTPS (Hyper Text Transfer Protocol Secure) signifies that the site has a security seal. Phishing sites will most likely not have a legitimate security seal. Most browsers will also show a “green lock” to the left of the url, showing that you are on a secure site.
Another way that hackers could possibly get passwords and credit card data is via computer viruses. Viruses known as “keyloggers” track the keystrokes entered into infected computers. If your computer is corrupted from this type of computer virus, passwords and credit card details are recorded and transmitted to some perpetrators via the internet. To stop keyloggers or other types of malware from infecting a computer, it is important to regularly run anti-virus software. The one most recommended is http://www.malwarebytes.com/. You should also try to avoid contamination by not downloading (or executing) email attachments from unknown senders.
How to Spot Scams or Theft
If fraud is caught in its early stages, major problems and damage can mostly be avoided. Keeping track of bank and credit card statements carefully will help you find any fraudulent charges that you did not make. If you notice payments you do not recognize, contact your company’s fraud department immediately.
Another important thing you must do is maintain close track of your credit history. You can monitor this history by obtaining a credit history annually from AnnualCreditReport.com. This website is run by the 3 main credit bureaus (Equifax, Transunion, Experian) in order to comply with the Fair Credit Reporting Act. This act enables all consumers to have access to their credit information and facts totally free, once each year. By going to this website, you can check your reports at all 3 bureaus and ensure no fraudulent accounts have been opened under your name. Checking this information at least each year is advised to look for fraud.
Credit card fraud has been a massive problem since the credit card was first introduced in the 1950's.
Prior to the internet, the main method in which this type of theft was committed had been by taking and using the physical card.
Today, this type of robbery has grown to become a lot more complex.
Structured hacking groups strike websites exclusively to steal individual and credit card data.
Illegal websites which are hosted in foreign countries, are used to sell this data to the highest bidder all over the world. These activities generate huge profits for anyone carrying out theft and huge headaches for those that have their data stolen.
Credit card and I.D. fraud has turned into a billion dollar per year dilemma that law enforcement, credit card companies, and consumer groups cannot manage to get a handle on.
It is extremely common for people to have experienced this type of fraud, typically multiple times in their life. Theft can result in loss to finances, decrease in good credit score numbers, and stress from getting through this difficult predicament. Fraudulent charges are usually taken care of by credit card issuers fairly quickly, but consumers always wind up paying for them in the end with higher fees.
How can Fraudsters Get Your Credit Card Details?
One way that credit card thieves can get private information is via a process called phishing. Fraudsters and identity thieves send millions of junk emails under the guise they are from a financial institution or credit card company. The emails make a consumer believe that their is “trouble with their account”. They are then prompted to enter their C.C. number, pin, and/or social security number. Sometimes a link in these phishing emails will redirect users to a site that replicates the exact look of their bank or Credit Card Company. The purpose of these “fake” sites is only to gather usernames and passwords. If you think maybe that you have accidentally entered your username and password into a website that is not genuine, you should contact the fraud department immediately .It is usually very confusing when banks and credit card companies send out genuine emails.
Just how can you tell the difference between a “phishing” site and the real site? One way that you can tell a fake site, is to check the root of the domain.
• For example, the genuine website for American Express is www.americanexpress.com. A phishing site attempting to steal your details might appear to be this: americanexpress.xyz.com.
• Notice how the root domain for the fraudulent website is “xyz.com”, not “americanexpress.com”.
One more indication that you are on the genuine site, is that the url should start with “https://, not http://”. HTTPS (Hyper Text Transfer Protocol Secure) signifies that the site has a security seal. Phishing sites will most likely not have a legitimate security seal. Most browsers will also show a “green lock” to the left of the url, showing that you are on a secure site.
Another way that hackers could possibly get passwords and credit card data is via computer viruses. Viruses known as “keyloggers” track the keystrokes entered into infected computers. If your computer is corrupted from this type of computer virus, passwords and credit card details are recorded and transmitted to some perpetrators via the internet. To stop keyloggers or other types of malware from infecting a computer, it is important to regularly run anti-virus software. The one most recommended is http://www.malwarebytes.com/. You should also try to avoid contamination by not downloading (or executing) email attachments from unknown senders.
How to Spot Scams or Theft
If fraud is caught in its early stages, major problems and damage can mostly be avoided. Keeping track of bank and credit card statements carefully will help you find any fraudulent charges that you did not make. If you notice payments you do not recognize, contact your company’s fraud department immediately.
Another important thing you must do is maintain close track of your credit history. You can monitor this history by obtaining a credit history annually from AnnualCreditReport.com. This website is run by the 3 main credit bureaus (Equifax, Transunion, Experian) in order to comply with the Fair Credit Reporting Act. This act enables all consumers to have access to their credit information and facts totally free, once each year. By going to this website, you can check your reports at all 3 bureaus and ensure no fraudulent accounts have been opened under your name. Checking this information at least each year is advised to look for fraud.
Friday, September 16, 2011
CREDIT CARD PROTECTION
Credit Card Protection
The next time when you pay with your credit card at check-out, think about this: It is a ritual the rest of the world deems outdated and hazardous. America could be the only developed country still clinging to credit and debit cards with those black magnetic stripes, the kind you swipe through retail terminals. The rest of the developed world has changed -or is in the process of changing- to "smart" chip-based cards.
The problem with that black magnetic stripe on the back of the credit card is that it's about as secure as writing your account information on a postcard: everything is in the clear and may be copied. Card fraud, and the actions taken to prevent it, costs U.S. merchants, banks and consumers billions each year.
The smart cards can't be replicated, which greatly cuts down on the potential for fraud. Smart cards with built-in chips are the equivalent of a safe: they can conceal details so it can only be unlocked using the right key. Since the important information is hidden, the cards can't be duplicated.
But the stripes have been so established within the vast U.S. payment system that banks, payment processors and retailers have failed to attain consensus on how to update it, leaving the U.S. behind the rest of the world. Are you really serious? Retailers, banks and payment processors could make a significant dent in the fraud industry? And they will not. Obviously, there must be monetary gain there for them, somewhere, somehow. Otherwise, they would switch - and fast!!! It is kind of like the petroleum industry - they will switch to an alternative source when they have control of alternative fuels!
There are now significant moves to swap conventional cards for smart cards in a few years. Recently, Visa announced new policies that should give U.S. banks a reason to issue smart cards and stores several reasons to accept them, starting in 2015.
Here's how a smart card works in practice: When it's time to settle the bill at “Billy Joe Bob’s Road Kill Restaurant”, a tiny restaurant just off Hwy 92A in Argentina (go ahead and find it - it is fictitious) the waiter brings to the table a wireless payment terminal. The customer inserts his chip-equipped "smart" credit card and enters his code on the keypad.
Voila! The bill is paid for without the card leaving the customer's sight, and the combination of chip and PIN code kept the transaction protected from fraud.
Research puts the amount of fraud based on stolen card numbers in the U.S. at $14 billion. Fraud based on new card accounts created using stolen identities adds billions more - the total cost of identity fraud in the country is $37 billion.
In an even more momentous shift, in 2015 Visa is shifting the liability for a certain kind of fraud from the banks to stores.
The specific case is this fact: If a customer presents a smart card in a store that can't accept it, then it will fall back to using the backup magnetic stripe on the card. If that transaction turns out to be fraudulent, the payment processor will be liable, and in practice, results in the store taking the loss. Today, the bank would be liable for the fraud. The modification means that banks will have an incentive to put chip-based cards in their customers' hands, since their fraud liability will be reduced once the cards are used.
For their part, stores should have a reason to install smart card terminals, because otherwise, their fraud costs could increase. The price tag on moving to chip-based cards is at about $8 billion, mostly for upgrading payment terminals in stores, research indicates.
The retail federation trade group calls Visa's move a necessary step, however, not a fully satisfactory one. One of the shortcomings is that it doesn't mandate the use of PIN codes with smart cards, so even if the cards cannot be replicated, they could still be used on a signature basis if stolen. Why don’t they mandate a PIN code? Does this seem sensible to anybody?
The next time when you pay with your credit card at check-out, think about this: It is a ritual the rest of the world deems outdated and hazardous. America could be the only developed country still clinging to credit and debit cards with those black magnetic stripes, the kind you swipe through retail terminals. The rest of the developed world has changed -or is in the process of changing- to "smart" chip-based cards.
The problem with that black magnetic stripe on the back of the credit card is that it's about as secure as writing your account information on a postcard: everything is in the clear and may be copied. Card fraud, and the actions taken to prevent it, costs U.S. merchants, banks and consumers billions each year.
The smart cards can't be replicated, which greatly cuts down on the potential for fraud. Smart cards with built-in chips are the equivalent of a safe: they can conceal details so it can only be unlocked using the right key. Since the important information is hidden, the cards can't be duplicated.
But the stripes have been so established within the vast U.S. payment system that banks, payment processors and retailers have failed to attain consensus on how to update it, leaving the U.S. behind the rest of the world. Are you really serious? Retailers, banks and payment processors could make a significant dent in the fraud industry? And they will not. Obviously, there must be monetary gain there for them, somewhere, somehow. Otherwise, they would switch - and fast!!! It is kind of like the petroleum industry - they will switch to an alternative source when they have control of alternative fuels!
There are now significant moves to swap conventional cards for smart cards in a few years. Recently, Visa announced new policies that should give U.S. banks a reason to issue smart cards and stores several reasons to accept them, starting in 2015.
Here's how a smart card works in practice: When it's time to settle the bill at “Billy Joe Bob’s Road Kill Restaurant”, a tiny restaurant just off Hwy 92A in Argentina (go ahead and find it - it is fictitious) the waiter brings to the table a wireless payment terminal. The customer inserts his chip-equipped "smart" credit card and enters his code on the keypad.
Voila! The bill is paid for without the card leaving the customer's sight, and the combination of chip and PIN code kept the transaction protected from fraud.
Research puts the amount of fraud based on stolen card numbers in the U.S. at $14 billion. Fraud based on new card accounts created using stolen identities adds billions more - the total cost of identity fraud in the country is $37 billion.
In an even more momentous shift, in 2015 Visa is shifting the liability for a certain kind of fraud from the banks to stores.
The specific case is this fact: If a customer presents a smart card in a store that can't accept it, then it will fall back to using the backup magnetic stripe on the card. If that transaction turns out to be fraudulent, the payment processor will be liable, and in practice, results in the store taking the loss. Today, the bank would be liable for the fraud. The modification means that banks will have an incentive to put chip-based cards in their customers' hands, since their fraud liability will be reduced once the cards are used.
For their part, stores should have a reason to install smart card terminals, because otherwise, their fraud costs could increase. The price tag on moving to chip-based cards is at about $8 billion, mostly for upgrading payment terminals in stores, research indicates.
The retail federation trade group calls Visa's move a necessary step, however, not a fully satisfactory one. One of the shortcomings is that it doesn't mandate the use of PIN codes with smart cards, so even if the cards cannot be replicated, they could still be used on a signature basis if stolen. Why don’t they mandate a PIN code? Does this seem sensible to anybody?
Monday, September 12, 2011
DOES THIS MAKE CENTS???
DOES THIS MAKE CENTS?
In order to have a high credit score -- which can mean lower loan rates -- then you'll need to do things that don't sound quite right at first.
You pay your bills by the due date, so you expect a good credit score results, right? If only it were that simple.
In fact, your credit score is dependent upon a number of different things, not merely your payment history. Here's where it gets downright strange: A number of the ways to improve your credit rating don't even make sense financially.
Your score improves when you have a lot of loans. 10% of your score is dependent upon the types of credit used. That means that someone with car loans, education loans, and retail store accounts may possibly possess a better score than somebody who has just one type of loan, and way better than someone with none.
More credit cards often mean an improved score. Another 30% of your credit score is set, in part, by the quantity of credit you utilize. Although it makes sense that using less credit may help your score, it's the other part of the equation -- the amount of credit you have -- that leads to this strange impact.
By opening more than just one or two credit cards, you are able to raise your available credit and lower the percentage of credit used. In the same manner that obtaining more credit cards reduces your overall credit usage rate, asking for a higher limit will also achieve the same effect.
Pay off the Credit Card well before the due date. As someone who always pays his credit card balances promptly, I was astonished to see that my credit report demonstrated that I owed money on each of my cards.
The straightforward reason is that your balance on any given day can be reported to the credit bureaus as a debt. I'll still pay my balance only on the due date, but I might pay earlier or avoid credit cards if I was attempting to raise my score to obtain a home loan.
Don't cancel a credit card. Another 15% of your credit score is determined by the length of your credit history. Among the factors that's included in this calculation is the average age of your open accounts.
Shop fast. It's wise to take your time and research prices for the lowest mortgage, car, or student loan, right? Actually, FICO will count repeated inquiries for new credit as a single inquiry so long as they are all done within 30 days. Take more time to request competitive loan offers and you risk harming your credit score by having lots of inquiries.
While credit scores are determined by mysterious formulas which are never fully disclosed, FICO and others give us many clues about what elements are included. By focusing on how the credit agencies view your finances, you can make the best decisions to increase your credit scores.
In order to have a high credit score -- which can mean lower loan rates -- then you'll need to do things that don't sound quite right at first.
You pay your bills by the due date, so you expect a good credit score results, right? If only it were that simple.
In fact, your credit score is dependent upon a number of different things, not merely your payment history. Here's where it gets downright strange: A number of the ways to improve your credit rating don't even make sense financially.
Your score improves when you have a lot of loans. 10% of your score is dependent upon the types of credit used. That means that someone with car loans, education loans, and retail store accounts may possibly possess a better score than somebody who has just one type of loan, and way better than someone with none.
More credit cards often mean an improved score. Another 30% of your credit score is set, in part, by the quantity of credit you utilize. Although it makes sense that using less credit may help your score, it's the other part of the equation -- the amount of credit you have -- that leads to this strange impact.
By opening more than just one or two credit cards, you are able to raise your available credit and lower the percentage of credit used. In the same manner that obtaining more credit cards reduces your overall credit usage rate, asking for a higher limit will also achieve the same effect.
Pay off the Credit Card well before the due date. As someone who always pays his credit card balances promptly, I was astonished to see that my credit report demonstrated that I owed money on each of my cards.
The straightforward reason is that your balance on any given day can be reported to the credit bureaus as a debt. I'll still pay my balance only on the due date, but I might pay earlier or avoid credit cards if I was attempting to raise my score to obtain a home loan.
Don't cancel a credit card. Another 15% of your credit score is determined by the length of your credit history. Among the factors that's included in this calculation is the average age of your open accounts.
Shop fast. It's wise to take your time and research prices for the lowest mortgage, car, or student loan, right? Actually, FICO will count repeated inquiries for new credit as a single inquiry so long as they are all done within 30 days. Take more time to request competitive loan offers and you risk harming your credit score by having lots of inquiries.
While credit scores are determined by mysterious formulas which are never fully disclosed, FICO and others give us many clues about what elements are included. By focusing on how the credit agencies view your finances, you can make the best decisions to increase your credit scores.
Monday, September 5, 2011
Can A Ticket damage My Credit? Yep
Can A ticket damage my credit?
Your driving does not have anything to do with your creditworthiness, so just why should an unpaid ticket torpedo your credit scores? Just like medical bills, they do.
Norman Asks:
,
I got a photo radar ticket in a state besides the one in which I live. I have not yet paid the citation, which is labeled a civil penalty as opposed to a criminal penalty (since photo tickets apparently are difficult to prove beyond a reasonable doubt).
I have received a letter saying that if I do not pay the fees, the county will hire a collection agency, which will then affect my credit. Can my credit actually get dinged for this? What do traffic tickets and credit have to do with each other?
NORMAN, You should pay that traffic ticket. When an unpaid traffic ticket is given to a collection agency, the driver's credit scores could fall, perhaps considerably.
Traffic tickets and credit may not seem related (and really, they are not), but consider that ticket like a debt owed to the county that issued the citation. Even though they are not a lender, the county wants its money and definitely will take steps to collect. Unfortunately, should you not pay, the municipality appears ready to use a powerful technique to more emphatically urge you to do so -- one that isn't limited to traffic citations.
If a municipality turns a consumer debt, such as a moving violation, parking ticket or library fine, over to a collections firm, and the collections firm reports it as being a collection account to the credit reporting companies, it will have an effect on an individual's credit score.
Because lower credit scores make borrowing harder and costly, that risk makes for a more convincing argument for you to pay.
The situation isn't entirely unusual. I am seeing this more and more on credit reports - even library fines! Counties are hurting for funding so they are doing everything possible to capture some of that debt. In other words, receiving a ticket isn't what hurts your credit scores, but waiting such a long time to make a payment that it ends up in collections.
"While traffic citations aren't reported to credit reporting agencies, accounts in collection are often reported to bureaus in some jurisdictions.
Just how bad can the damage get? FICO states the effect varies, depending on such factors as the age of the collections account and other delinquent accounts, but indicates that debtors with high FICO scores (800 and over) could experience nearly 100-point declines.
Your driving does not have anything to do with your creditworthiness, so just why should an unpaid ticket torpedo your credit scores? Just like medical bills, they do.
Norman Asks:
,
I got a photo radar ticket in a state besides the one in which I live. I have not yet paid the citation, which is labeled a civil penalty as opposed to a criminal penalty (since photo tickets apparently are difficult to prove beyond a reasonable doubt).
I have received a letter saying that if I do not pay the fees, the county will hire a collection agency, which will then affect my credit. Can my credit actually get dinged for this? What do traffic tickets and credit have to do with each other?
NORMAN, You should pay that traffic ticket. When an unpaid traffic ticket is given to a collection agency, the driver's credit scores could fall, perhaps considerably.
Traffic tickets and credit may not seem related (and really, they are not), but consider that ticket like a debt owed to the county that issued the citation. Even though they are not a lender, the county wants its money and definitely will take steps to collect. Unfortunately, should you not pay, the municipality appears ready to use a powerful technique to more emphatically urge you to do so -- one that isn't limited to traffic citations.
If a municipality turns a consumer debt, such as a moving violation, parking ticket or library fine, over to a collections firm, and the collections firm reports it as being a collection account to the credit reporting companies, it will have an effect on an individual's credit score.
Because lower credit scores make borrowing harder and costly, that risk makes for a more convincing argument for you to pay.
The situation isn't entirely unusual. I am seeing this more and more on credit reports - even library fines! Counties are hurting for funding so they are doing everything possible to capture some of that debt. In other words, receiving a ticket isn't what hurts your credit scores, but waiting such a long time to make a payment that it ends up in collections.
"While traffic citations aren't reported to credit reporting agencies, accounts in collection are often reported to bureaus in some jurisdictions.
Just how bad can the damage get? FICO states the effect varies, depending on such factors as the age of the collections account and other delinquent accounts, but indicates that debtors with high FICO scores (800 and over) could experience nearly 100-point declines.
Friday, August 26, 2011
5 College Credit Card Gimmicks
5 College Credit Card Gimmicks
In case you are going to college, you're probably considering credit cards for college students. Despite popular belief, credit cards usually are not evil incarnate. Actually, building up a credit history while you're still in college can serve you well when you submit a rental application, take out a car loan, or obtain car insurance. But issuers know that you're probably unskilled in choosing a credit card, so be on the lookout for gimmicks, tricks and slick marketing.
1. No co-signer required
Many college student credit cards promote that they do not require a co-signer. Actually, they're the same as almost every other credit card. If you have an income of your own (usually, you do not earn enough as a full-time student to qualify), you do not need a co-signer on any credit card. On the other hand, if you don't have an income, you'll need a co-signer no matter what. Per the Credit CARD Act of 2009, your credit card application will be considered using the earnings of the people liable for the debt. Without having any money, sorry, you'll need a parent on the card along with you.
2. Good GPA discounts
A few rewards cards will give additional points for those who have good grades. Mind you, extra rewards are extra rewards, though the marketing continues to be a bit misleading. For instance, one credit card promises up to 2,000 points twice a year for getting good grades. Even so, you get the entire 2,000 points only when you have a 4.0. If you're human, just like the rest of us, probably the most you can get is 750 points having a GPA between 3.5 and 3.99. The card advertises $20 in rewards, but if you have a 3.9, you'll just get $7.50.
3. Shiny rewards programs
Credit card issuers would like you to get rewards credit cards. Really. Even though it looks like they're giving away money, they'd actually much prefer that you go with a rewards card over one with a low APR. That's because they already know even though you know you should not carry a balance on a rewards card, you most likely will. Don't be drawn in. If you figure that you will have credit card debt, go with a low interest credit card. Although they're not as enticing as pretty rewards programs, you'll spend less in the long run.
4. Prepaid debit cards
Numerous credit card issuers also offer prepaid debit cards as an alternative to personal lines of credit. They'll bill these as a smart way for college students to learn financial responsibility and money management, since you can't spend more money than what's on the card. What they don't tell you, however, is the fact that prepaid debit cards frequently come packed with hidden fees and charges. These may vary from monthly maintenance fees to a charge each and every time you make a transaction, make an ATM withdrawal or look at balance. In case you are intending prepaid, read the fee schedule carefully. Generally, though, you're better off with a regular old checking account with no fees.
5. If you're considering a credit card...
Be extremely careful. Look into the terms and conditions, particularly the facts about the rewards programs. You might see limits on the quantity of benefits you can earn a year, or high rewards rates that only activate once you have spent a certain amount. Understand your spending behavior. Are you going to carry a balance? Then select a low APR card. Can you handle credit in any way? Be honest with yourself: should your parent is co-signing the card, any missed payments by you will pull your parent's credit score down as well. Like most parts of college, credit cards signify newfound independence but additionally significant responsibility.
Friday, August 19, 2011
PROTECT YOUR KIDS FROM IDENTITY THIEVES
You are probably worn out being advised to take precautions against id theft, but here is a wrinkle may very well not have thought about: Identity thieves have widened their reach by harvesting children's dormant Social Security numbers (SSNs) and utilizing these to illegally obtain jobs, credit accounts, mortgages or auto loans, and a lot worse.
Many affected individuals have no inkling anything at all is wrong until they later apply for a student loan, banking account, job or apartment and are turned down because of bad credit history. Some households have even been hounded by collection agencies or served with arrest warrants because the debts or criminal actions thieves executed were so overwhelming. There is no completely foolproof method to protect your child's identity, but here are some safeguards you can take:
Although it's tempting to simply not register your children for SSNs until they turn 18, that isn't practical in today's world. For one thing, children need one if you want to claim them as dependents for your taxes. Additionally they might need one if you want to obtain medical coverage or government services on their behalf or open banking accounts or savings bonds in their name.
Most parents register their kids for SSNs concurrently when they make an application for birth certificates at the hospital. In the event you wait until later to apply, you must provide evidence of your son or daughter's U.S. citizenship, age and identity, in addition to evidence of your own identity.
Because each person's SSN is unique, it is not uncommon for schools, healthcare providers, and insurance providers, among others, to call for parents to provide one as an identification tool. However, do not be afraid to ask:
-- Why do they need an SSN? What is the legal requirement and if so, what is it?
-- Will they accept alternative identification?
-- What will happen if you don't disclose it?
-- What security precautions do they take with personal information?
-- Will they agree not to use the SSN as your child's personal identification number on correspondence, account statements or ID cards?
Warning signs your child's personal data could have been jeopardized include:
-- Preapproved credit account offers.
-- Calls from collection agencies, creditors or government agencies.
-- You're denied opening a bank account in their name because one already exists with the same SSN.
-- They are denied credit, employment, a driver's license or college enrollment for unknown or credit-related reasons.
There may be legit reasons why your child is receiving credit offers. For example, if you opened a college fund or they signed up for a frequent flyer program.
However, if you strongly suspect an identity theft has been committed, you can:
-- File a police report and keep a copy as proof of the crime.
-- Contact the fraud units at the three major credit bureaus for instructions: Equifax (800-525-6285), Experian (888-397-3742) and TransUnion (800-680-7289).
-- Notify the Federal Trade Commission (877-438-4338). Their Identity Theft site at www.ftc.gov contains information on fraud alerts, credit freezes, working with police and much more.
-- Ask Social Security (800-772-1213) whether anyone has reported income using your child's SSN. Search "Identity Theft" at www.ssa.gov for information.
-- Contact the IRS' Identity Protection Unit (800-980-4490).
Bottom line: Use the same precautions with your child's personal information as you do with your own and make sure you know the warning signs and what to do if it's compromised.
Saturday, August 13, 2011
Riskiest Place to Use your Credit Card
RISKIEST PLACES TO USE YOUR CREDIT CARD
Even if you use the utmost caution, you can still be a victim of credit card scams. Credit card providers and banks are more and more often placing the burden of finding and catching bogus or incorrect credit card charges on the consumer.
The most important thing is to look at your billing statement, needless to say. And there are organizations like Creditcards.com that provide tips on how to maintain your cards safe too. Here, we take a look at 10 of the riskiest spots you might use your card, according to Creditcards.com , and what you can do in order to avoid the hazards.
Even if you use the utmost caution, you can still be a victim of credit card scams. Credit card providers and banks are more and more often placing the burden of finding and catching bogus or incorrect credit card charges on the consumer.
The most important thing is to look at your billing statement, needless to say. And there are organizations like Creditcards.com that provide tips on how to maintain your cards safe too. Here, we take a look at 10 of the riskiest spots you might use your card, according to Creditcards.com , and what you can do in order to avoid the hazards.
NON-BANK-OWNED ATMS
Security at these types of ATMs is often less high-quality than at bank ATMs, meaning some locations are just not as safe. These ATMs also are more likely to be hacked. And perhaps, people have placed devices that look like ATMs but don't give out cash. Instead, these are just card-skimming devices geared towards robbing your credit card or debit card information.
Flea Markets
Flea market merchants are sometimes transient and can be difficult to locate if there is a problem with charges. It's especially true for sellers who don't have online credit card terminals and instead make carbon duplicates of your credit card.
That doesn't mean those vendors are necessarily fraudulent, but it definitely makes the transaction less secure. The credit card company will often have trouble performing a charge back. If you are going to the flea market, take cash. It is also much easier to negotiate that way.
Flea market merchants are sometimes transient and can be difficult to locate if there is a problem with charges. It's especially true for sellers who don't have online credit card terminals and instead make carbon duplicates of your credit card.
That doesn't mean those vendors are necessarily fraudulent, but it definitely makes the transaction less secure. The credit card company will often have trouble performing a charge back. If you are going to the flea market, take cash. It is also much easier to negotiate that way.
Small Shops/Cafes in Foreign Countries
These smaller merchants have a significantly greater percentage of credit card fraud reported by large banks and credit card companies. Many of these transactions end up being written off by the banks since the merchants simply cannot be located. There's just a higher potential for fraud when you are getting outside of the mainstream, so when unsure, use cash.
Non-Secure Online Checkout
Common sense. Any safe, reputable e-commerce website is going to have a secure checkout page, such as the one shown . In the URL, it must show an HTTPS, with the S standing for Secure. In the event that doesn't appear, it ought to be a warning sign. Yo u can almost be sure it's not legitimate, and even if it is, you're opening yourself to that financial transaction being seen by others.
Wi-Fi Hotspots and Public Computers
In case you are gonna be making online transactions over an unsecured wi-fi network like in cafes, parks as well as other hot spots, data may be compromised or seen while in transit, even if you're on a secure page while you are checking out. The same goes for public computers like in libraries. It's not advisable to at any time transmit private data when you are in a public connection environment, particularly on non-secure wireless.
Recurring Bills/Subscriptions
Instead of using automated billing, ask to be billed on a one-time bill by bill basis instead. If you use your credit card for purchases that involve weekly, monthly or annual billings, it is possible to encounter the frustration of over-billings, continued billing once a subscription is finished, etc. Some less-than honest merchants will use automatic billing in hopes you'll forget about it and won't check your credit card statement.
Purchases on Smart Phones
Purchases on smart phones can also be less than secure. If your smart phone connects to a public wi-fi signal, you are much less secure. Someone else could very well see the financial transaction, or malware (SPYWARE) can be placed on your device that could potentially broadcast your financial information.
Unsolicited E-mail Offers
Unless you've signed up for solicitations from particular companies, be wary. Check the URL in the e-mail. If it looks suspect, don't visit it. Yo u can always contact the company through their official Web site to confirm the legitimacy of the offer.
Strange and Foreign Domain Extensions
If you are likely to be shopping on the web, it's best to stick with websites which use a .com file format. And be sure there is a secure checkout. With extensions for countries away from U.S. - like .ru for Russia - use caution and make sure the company you're purchasing from is actually located in the country depicted in the domain extension.
Suspect Swipe Terminals
If there's something that looks suspicious at an ATM or perhaps a gas pump credit card swipe terminal - like a separate stand-alone device for you to swipe your card through - or something appears like it's been added onto the terminal, reconsider using it. More often than not, those types of add-ons are put there by thieves to allow them to take your credit card data.
Friday, August 5, 2011
the top 10 states for credit
Selecting the top 10 states for credit
How did the study identify the best 10 states for credit health? The list considered the following five variables:
• Average credit score (Experian, June 2011)
• Foreclosure rates (RealtyTrac, May 2011)
• Credit card delinquency rates (TransUnion, Q1 2011)
• Unemployment rates (Bureau of Labor Statistics, May 2011)
• Bankruptcy rates (American Bankruptcy Institute, Q1 2011)
States were ranked from top to bottom in each group. The rankings across all five groups were then totaled, and the top 10 states for credit were determined based on those totals.
The 10 states with the best credit overall health
It can be something about the cold weather that makes folks economically conservative, or maybe it is because much of the northern plains and Rockies didn't have the boom-and-bust cycle that continues to trouble many warm-weather locations. Whatever the reason, there is a heavy weighting toward cold-weather states in the top ten states for credit. Here's the list of the top 10, with a description of what stood out about credit conditions in each state.
1. North Dakota. North Dakota turned out on top in this survey by having the best rates of joblessness and credit card delinquency of any state within the U.S., and also by being one of the better five states in all categories used for this study.
2. Vermont. This Northeastern state has the lowest rate of home real estate foreclosures, by a very wide margin. While nationwide one of every 2,370 homes is in foreclosure, there is just one foreclosure for each 39,281 homes in Vermont. Like North Dakota, Vermont was one of the five best states in all five categories examined.
3. South Dakota. The home of Mount Rushmore was just topped by Vermont, but rates within the top six in every five groups, including having the second-best average credit history in the United States.
4. Nebraska. After North Dakota, Nebraska has the second-lowest unemployment rate of any state, and rates among the list of 10 best states for average credit score, foreclosure rates and credit card delinquency rates. However, it falls behind a bit with regards to bankruptcy rates, where it ranks around the middle of the pack.
5. Montana. Montana made this list on the strength of being one of the best ten states for credit scores and low credit-based card delinquencies, and was clearly above-average in all of the five categories
.
6. Wyoming. Wyoming was among the best 10 states in four out of five areas, missing only when it comes to average credit score. Wyoming's average credit score of 703 merely few points greater than the nation's average of 696.
6. Wyoming. Wyoming was among the best 10 states in four out of five areas, missing only when it comes to average credit score. Wyoming's average credit score of 703 merely few points greater than the nation's average of 696.
7. Iowa. Iowa ranked among the 10 best states for credit scores, lower credit card delinquencies, and low joblessness, but fell down to some degree when it came to foreclosure rates. Iowa's rate of one foreclosure for every 878 homes is worse compared to national average, and worse than the foreclosure rates of 28 other states.
8. Pennsylvania. An excellent overall contender, Pennsylvania didn't rule a single type, but made the list because they are continually pretty good overall. Pennsylvania wasn't in the top 10 in any group, but was above average in all five categories.
9. Alaska. Toward the end of the top 10, scores became more of a mixed bag, with good ratings in some groups, but a low enough score in one or more category to pull a state's ranking down. For example, Alaska had the lowest bankruptcy rate in the nation, and the second-lowest rate of credit card delinquencies. Despite that, it was let down by having a below average credit score.
10. Minnesota. Like Alaska, Minnesota had excellent rankings in some categories that were pulled down by below-average performance in one aspect of credit conditions. Minnesotans have the highest average credit scores of any state in the nation, but the state is a bit worse than average when it comes to foreclosure rates.
Friday, July 29, 2011
The 10 Worst Credit States
If one member of a community has bad credit, that's a personal problem. If enough people in that community have bad credit, it can quickly become a problem for everyone in the area...even if you hold one of the best credit cards and are using it responsibly.
credit statistics in all 50 states were analyzed to give a general idea of which states are on a slippery financial slope. Companies looking for places to do business, and individuals looking for places to live and work, need to know whether the environment they choose has a healthy financial foundation, or has some work to do -- which in some cases could mean bargains aplenty for those taking the long view.
How credit health was measured
CardRatings.com looked at five criteria to assess overall credit conditions on a state-by-state basis:
- Average credit scores (Experian, June 2011)
- Foreclosure rates (RealtyTrac, May 2011)
- Credit card delinquency rates (TransUnion, Q1 2011)
- Unemployment rates (Bureau of Labor Statistics, May 2011)
- Bankruptcy rates (American Bankruptcy Institute, Q1 2011)
All 50 states were scored based on each of these criteria. The rankings were then combined, and the states with the lowest combined score were ranked as the worst states for credit conditions.
Based on this analysis, CardRatings.com presents the 10 worst states for credit, along with some commentary on why each state made the list.
The 10 states with the worst credit health
Based on the five criteria listed above, the following are the 10 worst states for credit.
1. Nevada. Normally in this kind of analysis, each state will have some strengths and weaknesses, but when it comes to credit health, it's just bad news across the board for Nevada. Remarkably, Nevada came in dead last out of the 50 states in each of the five criteria CardRatings.com used to measure credit conditions, which of course makes the Silver State dead last overall.
2. Georgia. Georgia is the second-worst state for bankruptcies, and fourth worst for credit card delinquencies. In all, Georgia ranked in the bottom 10 in all five categories of credit factors.
3. California. The Golden State is not shining so brightly economically these days, and those troubles are reflected in California's credit conditions. California has the second-highest unemployment rate in the nation, the third-highest foreclosure rate, and the fourth-highest rate of bankruptcies.
4. Florida. With a score tied overall with California, but leading the Golden State in three out of five categories and thus ranked higher, the most significant credit problem in Florida is having the second-worst rate of credit card delinquencies in the nation. Foreclosures and unemployment are also among the 10 worst.
5. Arizona. Like other warm-weather states on this list, Arizona went through a cycle of boom-and-bust, which has exacerbated economic problems in the Grand Canyon State. This is reflected by Arizona's rank as the second-worst state for foreclosures. Arizona is also among the 10 worst states for credit scores, credit card delinquencies and bankruptcies.
6. Alabama. The foreclosure rate in Alabama is actually lower than in most states, but credit conditions in the state are undermined by being among the 10 worst states for credit scores, credit card delinquencies and bankruptcies.
7. Tennessee. Like Alabama, Tennessee made the overall list of the 10 worst states for credit conditions despite having a lower foreclosure rate than most states. In Tennessee's case, its chief Achilles' heel is having the third-highest rate of bankruptcies out of all 50 states.
8. Michigan. Make no mistake about it: While U.S. automakers have bounced back from the verge of bankruptcy, Detroit is no longer close to the manufacturing powerhouse it once was, and neither is Michigan's economy. Though the state does have a lower rate of credit card delinquency than most states, Michigan is among the 10 worst states for foreclosures, unemployment, and bankruptcies.
9. Mississippi. Mississippi made this list despite having one of the lowest foreclosure rates in the nation. Why? Because like its neighbor Alabama, Mississippi ranks among the five worst states for credit scores, credit card delinquencies, and unemployment.
10. Idaho. Average credit scores in Idaho are actually better than in most states. However, Idaho is below average in every other category, including having the seventh-worst rate of foreclosures in the nation.
What if you live in a bad credit state?
Even if you have good credit, living in a state with generally poor credit conditions can affect you in these ways:
- Local lending institutions may be in weakened financial condition, which could limit the type and quality of financial services available to you.
- Outside financial institutions might be reluctant to extend credit or generally make services available in an area where people have a poor record of making payments on time.
- Living in an area where many people are financially distressed is ultimately likely to affect even those who have avoided excess credit card debt and other credit problems. It can result in a slower local economy, which would affect employment and business conditions, and can drag down real estate values.
So, while maintaining good credit is an individual responsibility, it is also wise to know the general credit health of the people around you as well.
Friday, July 22, 2011
Would it Hurt My Credit Score if I’m Denied Credit?
Would it Hurt My Credit Score if I’m Denied Credit?
Whenever you obtain a loan or credit card, the credit grantor critiques your credit report and score usually using an computerized underwriting system. A credit inquiry is placed on your credit file, which indicates that a business has reviewed your file. The query includes the business name and date of the query. The inquiry doesn't indicate whether your application was approved or denied.
One thought is always to make an effort to match a newly opened account with a recent inquiry as a rudimentary method of determining whether or not the inquiry lead to an approval or denial of credit. However, it is unlikely loan providers would attempt to match the inquiry with an account. The fact that an account wasn’t opened doesn’t necessarily indicate that you were declined; you might have decided not to accept the credit card or loan. And, the lender may choose not to report their accounts to the credit agencies.
Inquiries for credit during the past 12 months could affect your score. To deal with shopping for a mortgage, car loan or student loan, queries of these kinds within the past 30 days are not counted. Prior to that, mortgage and auto inquiries within each 45 day period are combined as one inquiry. It is advisable to do your credit shopping within a Thirty day period.
Applications for other loans or credit cards do not benefit from the same treatment. The fact that you were rejected does not hurt your score, but the query can have an impact dependant on its type. Too many inquiries in a short period of time will have more of an impact than isolated inquiries. By law, you are to receive a written justification of the reason why you were declined and where to get a copy of the information that was used. If it was a credit reporting agency, you would be given the name, address and phone number. And, after July 21, 2011 (yesterday) the denial has to be accompanied by the same credit score used by the lender to make their decision.
Whenever you obtain a loan or credit card, the credit grantor critiques your credit report and score usually using an computerized underwriting system. A credit inquiry is placed on your credit file, which indicates that a business has reviewed your file. The query includes the business name and date of the query. The inquiry doesn't indicate whether your application was approved or denied.
One thought is always to make an effort to match a newly opened account with a recent inquiry as a rudimentary method of determining whether or not the inquiry lead to an approval or denial of credit. However, it is unlikely loan providers would attempt to match the inquiry with an account. The fact that an account wasn’t opened doesn’t necessarily indicate that you were declined; you might have decided not to accept the credit card or loan. And, the lender may choose not to report their accounts to the credit agencies.
Inquiries for credit during the past 12 months could affect your score. To deal with shopping for a mortgage, car loan or student loan, queries of these kinds within the past 30 days are not counted. Prior to that, mortgage and auto inquiries within each 45 day period are combined as one inquiry. It is advisable to do your credit shopping within a Thirty day period.
Applications for other loans or credit cards do not benefit from the same treatment. The fact that you were rejected does not hurt your score, but the query can have an impact dependant on its type. Too many inquiries in a short period of time will have more of an impact than isolated inquiries. By law, you are to receive a written justification of the reason why you were declined and where to get a copy of the information that was used. If it was a credit reporting agency, you would be given the name, address and phone number. And, after July 21, 2011 (yesterday) the denial has to be accompanied by the same credit score used by the lender to make their decision.
Sunday, July 17, 2011
Here is a Secured Card for Almost Everybody
In case your credit was ruined during the Great Recession, using a secured credit card is often a good way to help boost your standing.
That is, if you're able to get a secured card. Read on!
Not everyone may be immediately eligible, particularly if you have a recent bankruptcy on your record. A reader of my blog who recently emerged from bankruptcy wrote to me after she and her husband were denied secured credit cards from Citibank. That, at least in my mind, raised several questions: Are people emerging from bankruptcy unable to obtain a secured card? Are there other situations where you’re likely to end up denied? And is the passing of time the only option for the huge numbers of people whose credit has been ruined in the recession?
Secured credit cards appear to pose minimal risk to the card issuer. After all, the cardholder is required to put a certain amount of money into a bank account, say $250 or $500, which is used as collateral. And the available amount of credit is often equal to the amount on deposit. By using these cards strategically, a person with poor credit can speed up the recovery process by demonstrating positive behavior: charging only small amounts and paying off their balance each month.
I do know that many credit card issuers do deny a secured card based on credit standing. However, there is one that I am aware of that does not and does not charge exorbitant fees to do it:
www.asecuredcard.com.
1. NO CREDIT CHECK REQUIRED!
2. The interest rate, at present, is Prime plus 6.5% Variable APR. It is not an Introductory rate.
3. No upfront or monthly fees: Just a flat $50 annual fee.
4. There are 4 ways to fund your deposit.
5. Accepted everywhere you see the VISA logo.
6. They report to all 3 bureaus!
7. Choose your credit limit from $200 to $3,000.
1. NO CREDIT CHECK REQUIRED!
2. The interest rate, at present, is Prime plus 6.5% Variable APR. It is not an Introductory rate.
3. No upfront or monthly fees: Just a flat $50 annual fee.
4. There are 4 ways to fund your deposit.
5. Accepted everywhere you see the VISA logo.
6. They report to all 3 bureaus!
7. Choose your credit limit from $200 to $3,000.
There is one caveat in the use of ANY credit card: Do not charge more than 50% of the limit or have more than 50% as a balance at any one time, if you want to maximize your credit scoring benefits.
Monday, July 11, 2011
Credit Card Facts you Probably Do Not Know
Here are a few credit card facts you most likely didn't know:
• In 1950, Diners Club became the first company to provide a credit card that could be used at multiple locations. Initially the credit card was accepted at just 14 restaurants in New Yo rk. Nevertheless, inside a year, greater than 20,000 people were using it.
• Diners Club founder Frank X. McNamara came up with the concept one evening after eating at a restaurant -- and noticing he had forgotten his wallet.
• By 1952, Diners Club had been accepted by 400 restaurants, 30 hotels, 200 car rental agencies and four florists. Even so, McNamara, thinking credit cards were only a fad, sold his share of the business that year for $200,000 -- equal to roughly $1.6 million today.
• Unfortunately for McNamara and his heirs, credit cards weren't a fad. Around the world, there are now 10,000 credit card transactions made every second.
• Today, Americans have an astounding 609.8 million credit cards in their wallets. If all those cards were stacked up, they would produce a tower 288 miles high.
• In 1958, Bank of America launched the initial general-purpose credit card by mailing 60,000 real BankAmericard credit cards to the good people in Fresno, Calif. That unsolicited credit card "drop" was the brainchild of bank employee Joseph P. Williams.
• By October 1959, 2 million unrequested Bank Americards had been "dropped" throughout California. Unfortunately, the loose lending standards imposed by Williams' innovative marketing strategy led to more than one of every five accounts being delinquent. Credit card fraud caused even more difficulties for the bank. As a result, Bank of America initially lost $8.8 million on the start of its new credit card -- and Williams lost his employment.
• In case you're wondering, the first BankAmericards were made of paper and had a credit limit of $300. The conditions and terms also held the cardholder liable for all charges -- including those resulting from fraud.
• Today, federal law states that your maximum liability for unauthorized credit card use is $50 per card -- and $0 for any charges that accrue after you report a card lost or stolen.
• Speaking of fraud, MasterCard introduced the first credit card hologram in 1983 to help thwart counterfeit credit card operations.
• In 1976, BankAmericard changed its name to Visa. It wasn't the only credit card to rebrand itself: Until 1979, MasterCard was known as MasterCharge.
• American Express introduced the first credit card made of plastic in 1958. Additionally, it introduced the initial credit card made of anodized titanium: the highly exclusive Centurion card (informally referred to as Black Card).
• Before you get any bright ideas, keep in mind that on top of the annual $2,500 fee, American Express' Centurion card also has a one-time initiation fee of $5,000.
• As far back as the mid-19th century, and up until the modern times credit cards first appeared, high-end merchants issued "charge coins" to their best customers. These coins, usually made of metal, were only available in many different shapes and sizes, and several also had holes that allowed them to be placed on a key chain. The charge coins also had a exclusive client identification number stamped onto them.
• While charge coin identification numbers were usually no bigger than five or six digits, most credit cards today have 16. The first digit in the string is an identifier that denotes the type of industry that issued the card:
o 1 and 2 are for air carriers.
o 3 is for travel and entertainment.
o 4 and 5 indicate a banking or financial institution.
o 6 is for merchandizing and banking.
o 7 is petroleum, or the gas card.
o 8 is for telecommunications.
o 9 is for other assignments.
• Although the first six digits of your credit card number are known as the issuer identification number, you don't need all six digits to necessarily tell what type of card you have. For instance, cards that begin with 34 or 37 are American Express. Visa cards begin with a 4, and MasterCards start with numbers between 51 and 55. Regarding Discover cards, they start with 6011.
• Digits 7 through 15 make up your own personal credit card account number.
• Here's another math trick: Should you have a credit card balance of $2,500 with an interest rate of 18%, and only make minimum payments equivalent to the interest for the month plus 1% of the balance, it will take you 17 years to repay it at a total cost of $5,673.22. Obviously, that's only true if you also cut up the card and never use it again. I bet the credit card companies wish you didn't know that.
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