Small Credit Card Charges Could Mean a Big Problem

View full post on CreditBloggers

You see a small charge on your credit card you don’t recognize.

What do you do?

Small charges you don’t recognize can be a sign of a bigger problem. The New York Times takes a look at a lawsuit filed in March by the Federal Trade Commission, which claims that during the past four years, scammers raked in more than $10 million by putting small bogus charges – ranging from twenty cents to $9 – on consumers’ credit and debit cards. And in a scheme that apparently has dragged out for more than a year, scammers have made fake $1 purchases on iTunes customers' accounts, only to follow up with increasingly larger ones, sometimes totaling hundreds of dollars.

An unknown charge could mean your account was compromised. Or it could just be that you don’t recognize the name of the company billing you for a purchase you made. After all, merchants have a limited number of characters with which to describe their products and services on statements, and those descriptions can be cryptic.

So what should you do when you find an odd charge on your credit or debit card statement? Here’s how I would handle it:

1.    Call the merchant to find out whether the charge is for an item you actually purchased. If the phone call doesn’t clear it up,

2.    Call your credit card company and file a dispute.

3.    If you believe your card number has been compromised – especially in the case of a debit card – cancel the card and ask for a replacement with a new number.

Remember, under the federal Fair Credit Billing Act, the most you can be held liable for is $50 in unauthorized purchases, and that's only if the card was physically presented in the transaction. Most card companies won't even hold you responsible for that if you notified them of the fraud promptly.

However, you have to read your statements to identify fraudulent charges – especially the small ones that are easy to overlook.

tweetmeme_url = 'http://www.creditbloggers.com/2010/08/small-credit-card-charges-could-mean-a-big-problem.html.html';
tweetmeme_service = 'bit.ly';
tweetmeme_source = 'CreditExperts';

Delinquencies Fall As Consumers Focus On Card Relationships

View full post on Collections – Credit Card

During the second quarter ended June 30, the ratio of bankcard borrowers 90 days or more delinquent on one or more of their credit cards was 0.92%, down 19 basis points from 1.11% the previous quarter and down 25 basis points from 1.17% in the second quarter of 2009, according to TransUnion.

How to Protect Your Credit After Divorce

View full post on Credit and Personal Finance Blog | Credit Karma

**Today’s guest blog is by Scott Morgan, an Austin Divorce Lawyer who is Board Certified in family law. In his practice he frequently deals with credit repair issues arising in divorce cases.**.

The end of a marriage is often associated with heartbreak and emotional upheaval, but your former soulmate could also be walking away with half of your assets and leave you in a bad credit situation.

However, there are many ways to protect and rebuild your credit after a divorce, several of which require little effort but help significantly. Here are a few tips to help you rebuild your credit score after divorce:

Review Your Credit Report

The first step to rebuilding your credit is to get a copy of your credit report (you can get a free copy at AnnualCreditReport.com) and find out your credit score (free at Credit Karma) and thoroughly review the report. You want to ensure that your ex’s debts are not showing up on your credit report. If any do, you should contact the creditor to have your name removed from the account so that the debt comes off of your credit report.

Cancel All Joint Cards and Accounts

The last thing you want after your divorce is for your ex-partner to go on a shopping spree with a credit card in your name. Therefore, make sure you cancel all joint credit card accounts after making sure that everything is paid off and cleared. While closing your account can lower your credit score it is a worthwhile tradeoff. You want your credit and your ex’s credit to be as separated as possible.

Apply for a Low Limit Credit Card

If you don’t have any credit in your name because you shared most cards and loans with your spouse, apply for a credit card with a low limit. The low limit will help you avoid temptation to spend money you don’t have, while helping you to rebuild your credit. Begin by purchasing low cost items throughout the month and pay your balance in full and on-time at the end of each month to build good credit history.

Open a Checking Account in Your Name

Opening a checking account solely in your name is a smart decision to make while you are going through a divorce. You need an account to hold funds that your spouse does not have access to, plus it can also help you protect your credit by ensuring that you have funds available to make at least the minimum payments on credit card and other debts held in your name.

Make Timely Payments on Your Accounts

This might seem obvious, but many people forget how important it is to make your payments on time. A “slow pay” credit history (one where the payor habitually fails to pay the creditor on time) can dramatically lower your credit score. When you receive a bill, have a system in place to remind you to pay it by the due date.

If Necessary, Consider Bankruptcy

If you are so deep in debt after your divorce that you cannot keep up with monthly bill payments, then you may need to consult with a bankruptcy attorney. While bankruptcy is extremely damaging to your credit in the short-term, it can be used to deal with being the situation of being so far in debt that it will be nearly impossible to recover from. Once you have had your slate wiped clean after bankruptcy, you can work on rebuilding your credit and avoiding the problems that created the excessive debt you had in the first place.

While a divorce has the potential to significantly damage your credit, it is possible to emerge from a divorce with your credit rating intact. By following these suggestions, you will be on-track to rebuilding your credit after your divorce.

Lessons from the Gilded Age, Part 3: Parties

View full post on CreditBloggers

Today we’re going to party like it’s 1897. So, pretend you’re loaded. No, I mean with money. Though alcohol fueled many of the Gilded Age’s most deliciously decadent moments. Like the evening when former president Ulysses S. Grant was so lit up at a party in New York that he stuck the lit end of his cigar into his mouth.

No, I mean pretend you’re so loaded that you can drop $8.5 million on one big blowout ball, just to show everyone else in society that you could outdo Caroline Astor, as Cornelia Bradley-Martin did. Then, when the press denounces you for this outrageously self-indulgent abuse of privilege, you move to England. But not before throwing a farewell party at the Waldorf-Astoria for your closest friends, and spending $2,668 per plate as one last slap at your detractors. 

      Bradley-Martin Ball of 1897. Harpers image via Wikipedia

This would be an appropriate time to give another tip of my metaphorical top hat to Greg King’s magnificent chronicling of the wonderful and wacky wealthy in his book, A Season of Splendor.

And here’s our lesson: If you’re going to throw a party, realize it’s not about how much you spend on your family and friends, but how much you value them.

What people enjoy and remember most is the engaging company and conversation shared. Yes, you want a few bottles of good wine and some tasty food, but again, this can be achieved without having to close all of your off-shore bank accounts.

If nothing else, our Gilded Ones teach us that too much money can devour all rationality from your brain. By the early 1900s, much to Madam Astor’s abhorrence, her exceedingly rich colleagues had perfected their pursuit of decadence with exquisite relish.

In the here’s-your-brain-on-mad-money category, one couple threw a Circus Ball, where an elephant wandered the house solely so that guests could feed it peanuts. Then there was the acclaimed Dog Dinner. Of the 200 guests, 100 were lavishly costumed canines accessorized with jewels such as a $315,000 diamond-studded collar. Liveried servants, of course, served a three-course feast of “stewed liver and rice, fricassee of bones, and specially baked biscuits.”

Even if you are fortunate enough to earn an income in league with the Astors and the Vanderbilts, just because you make a lot of money doesn’t mean you have to spend a lot of money. Like my cousin’s husband always says, “Save till it hurts, then save some more.”

Or invest, donate, pay down debt… Just don’t go crazy on those cotillions.

After all, our Gilded Agers were so enamored of turtle soup at their constant sumptuous soirees that they are single-handedly credited with driving the terrapin to extinction.

tweetmeme_url = 'http://www.creditbloggers.com/2010/07/lessons-from-the-gilded-age-part-3-parties.html';
tweetmeme_service = 'bit.ly';
tweetmeme_source = 'CreditExperts';

Christopher Johnston has written for American Theatre, Cleveland, Continental, Crain’s Cleveland Business, Editor & Publisher, The Plain Dealer, Progressive Architecture and Urban Design, and Scientific American, among other publications. He is currently writing a biography of Frederick C. Crawford, founding chairman of TRW Inc. As an avocation, he is a playwright and director, and this December, his play APORKALYPSE! will premier at convergence-continuum theatre in Cleveland.

NCLC Updates

View full post on Consumer Law & Policy

Perfect Credit = Almost Impossible?

View full post on Credit and Personal Finance Blog | Credit Karma

A scroll through this Reddit page sparked by our Beyond Your Credit Score infographic shows the colorful rainbow of responses people have to the idea of perfect credit, or that magical 800+ score range.

Some are incensed about the credit industry, like Jawajoey: “That’s so messed up that they used having a credit card as some kind of measure of trustworthiness.”

Others bite back to the numerous postings of people’s high credit score success stories, like Mushpuppy: “I’ve seen more people here claiming to have 800+ than probably actually live in my town… If it’s true, swell. If it’s not, it’s no skin off my nose, right?”

Altogether, there’s a veil of mystery (and a fair bit of controversy) over the idea of perfect credit. Achieving an 850 credit score is a kind of unicorn in the financial world—something everyone talks about but no one has seen. Let’s break down a few myths to shed light on the perfect credit puzzle.

1. Myth: An 850 is the ultimate goal for your finances. Actually, shooting for an 850 credit score is more about your vanity than your finances. Getting an 850, the highest FICO score you can achieve, isn’t really necessary. Anything around the 800 range is good enough to snag you optimum financing options and the lowest interest rates. Such a small percentage of Americans achieve an 800+ credit score that lenders will likely offer you the same deals as they would an 850 scorer. So the obsession over achieving 850 likely won’t even save you more money if you already have excellent credit, but it’s cool for bragging rights.
2. Myth: You need lots of debt to get an 850. Nope. Debt to credit score factors are correlative, not causal. People who can handle lots of debt and have a high credit score doesn’t mean their debt contributed to their score; it may be that their high score gave them more access to borrow money. Really, there is no perfect mix to whip up excellent credit. The infographic of different credit score ranges shows an average of financial attributes for each range, but it’s not a definitive formula to achieve that score. There are over 200+ attributes that go into a credit score, so the recipe for an 850 is a rare and unique combination of your particular attributes. If you glance through the Reddit forum, you’ll find success stories from the 800+ club who recommend a wide range of tips: get a mortgage/don’t get a mortgage, stash your credit cards/use your credit cards, etc. What’s the lesson here? Different things work for different people, but generally speaking, having excellent credit depends on consistent good credit habits over a number of years.
3. Myth: “There is only one way to have perfect credit. Have so much money that you don’t need credit”- Reddit user. Wrong. The only way to build credit is to use credit. Paying cash for everything or never taking out a loan or using a credit card doesn’t build perfect credit– it builds no credit history whatsoever. A big truth of credit scores is that you need good credit to get more credit, which means if you ever plan to take out an auto loan, apply for credit cards, or own a home in your lifetime, it’s in your best interest to start polishing up your credit score now to open these financial doors in the future.

Bottomline: Shoot for the moon so you land in the stars. Perfect credit is not about getting an 850, but getting close as you can to 800 to open the best financial doors.

Let Family be Family, Leave the Lending Business to the Banks

View full post on CreditBloggers

I remember when I was in high school and Friday night rolled around.  As most 17-year-olds, I was as broke as an old clock.  And, WOW, what $20 could buy in 1985.  So like most young kids do, I asked Banco Padres (the parent's bank) for $20 on a regular basis.  And it wasn't a loan for $20, because if it was then I defaulted on every single one of them.

So when is it time to stop asking family and friends for money?  It's my opinion that you should never, ever ask anyone other than a bank or some other form of official lender for money, ever.  Here's why…

1. Most "loans" are paid back under the terms of a promissory note.  Borrowing dough from mom and dad is not.  It's paid back under some loose assumption of terms, which often leads to misunderstandings and hurt feelings.  And nothing makes Thanksgiving dinner more uncomfortable than the elephant in the room, which is "the guy carving the turkey owes me $10,000."  
2. Co-signing is a temptation, which is fraught with peril.  Co-signing for a loan or anything for that matter is the financial equivalent of getting married.  You are officially connected and getting disconnected, which might seem really attractive, is next to impossible.  Lenders love two liable parties instead of just one.
3. "He who gets gypped has the memory of an elephant."  Notwithstanding the fact that I've now mentioned elephants twice in this article, the quote rings true.  I can't remember who gave me what at my wedding, but I sure can remember the folks who gave us nothing.  It's human tendency to remember these things and nothing is worse than the constant memory of getting ripped off, by a loved one.
4. Save the lending to the lenders.  Lenders are expected to be cut throats.  They'll report you to the credit bureaus, hire collectors to track you down, and might even sue you for delinquencies.  Do you really want to put your loved ones in that position?

Here's my suggestion, if you are seriously thinking of letting someone borrow money, just let them have it.  That way there's no expectation of getting paid back so there are no hurt feelings when the checks don't roll in.  But even then I'd think twice.  You're enabling irresponsibility by letting someone borrow or have money, plain and simple.  True example, a buddy of mine's father in-law borrowed $100,000 from my buddy's father.  He did this under the guise of saving his home and business.  Of course after he renewed his country club membership with a sizable chunk of the money it became quite obvious that he had no intention of handling the money as he had represented.

Let the banks be banks.  You be a friend or relative…and neither the two shall (or should) meet.

tweetmeme_url = 'http://www.creditbloggers.com/2010/08/let-family-be-family-leave-the-lending-business-to-the-banks.html';
tweetmeme_service = 'bit.ly';
tweetmeme_source = 'CreditExperts';

John Ulzheimer – Credit scoring and credit reporting expert and author, John is the President of Consumer Education for Credit.com. Formerly with Equifax and Fair Isaac, John shares his unique insight of the inner workings of credit scoring models and the credit reporting industry on CreditBloggers.com.

This Week’s Top Credit Questions – Confused About Credit

View full post on Credit and Personal Finance Blog | Credit Karma

Sometimes there are disagreements amongst Credit Karma consumers about how to handle certain situations—to close or not to close a credit card, to pay off this or that, and more. One thing is for sure—we are proud the Credit Karma community has something to say about it.

Check out some of the conversations buzzing at the Credit Advice Center…

_____________________________________________

By how much does a credit inquiry drop your credit score?
Asked by drod12

A hard inquiry, which is a credit check done by a lender or issuer, can drop your score anywhere between 1 to 25 points, depending on your particular credit history. The inquiry impacts your score up to 6 months or a year, after that, it’s listed on your credit report for 2 years before it falls off. A soft inquiry, which is like a background check done by people like landlords, employers, and also when you check your score with Credit Karma, will not impact your credit score whatsoever. Make sure you know the difference between a hard versus soft inquiry.

Also keep in mind that while a hard inquiry has relatively minor impact on your credit score, racking up many hard inquiries from applying to multiple lenders or credit cards will add up to more significant damage.

Should I close my credit card account if I just want to pay it off?
Asked by env

MissElphe: Depends on your discipline. I would say probably not. Having the account open will help your credit. But you don’t need to use it necessarily. If you’re afraid that in a moment of weakness you’ll charge it up again, cut it up. Make it a party with any friends or significant other who are on the dumping debt band wagon with you.

Dbs1962: I wouldn’t. It will lower your score. Pay it off and keep it and use it once in a while. If it has high interest rate buy small and pay it off on every cycle. I have one like that and use it sparingly but it helps your rating.

What bills do I pay off first when fixing credit?
Asked by KIRONLO

Beno42: Go after your highest interest debt first. This will help eventually pay everything off faster and at less expense.

Bprice: I agree with the other response, pay off highest interest first. Depending on how much your interest rates are, you might be better off consolidating your interest with a balance transfer. The catch is that you have to PAY OFF THE DEBT COMPLETELY before the 0% period ends or else you will be charged back interest at the new rate for the whole period and amount…

KIRONLO: Thanks for the help. Now, it’s time to get started.

Will leaving old, paid-in-full credit card accounts open hurt my credit score?
Asked by cdupriest

PiscesFire: I’m pretty sure leaving old, paid-in-full credit card accounts HELP your credit score. The older your credit is, the better.

_____________________________________________

Stop by the Credit Advice Center yourself to post your own credit question or post some smart answers of your own!

8 Ways to Ease the Student Loan Burden

View full post on CreditBloggers

A friend of mine just graduated from business school with six-figure loans totaling just over $1,000 in monthly payments. That’s more than his car loan, more than his rent, more than his monthly Visa bill.

At present, student loan debt has eclipsed credit card debt. According to a Wall Street Journal report, outstanding student loans – both private and public – amount to nearly $830 million. The report cites Mark Kantrowitz, the publisher of Finaid.org and Fastweb.com.
As a borrower, if you fall into that category, there’s no doubt that you may need help, fast.

Consider this advice:

Pay Down the Principal. The best way to get out of any kind of debt quickly is to pay it off aggressively and chop down the principal. When you boost income (which I’ll discuss how below) or get a lump sum of cash for your birthday or year-end bonus, pre-commit to putting at least 50% of that windfall toward your debt. Make sure you direct that extra payment toward the principal, not the interest (a common mistake).

Stay the Course. If you can only afford the minimum payment, don’t worry. More importantly, don’t ever miss a student loan payment since there is no statute of limitations on how far lenders can go to retrieve your payments, including garnishing your wages or taking money out of your tax returns. This can also put a big dent in your credit score and credit report.

Peg Payment to Income. If you have federal student loans, you may qualify for Income-Based Repayment (IBR), a program that helps borrowers cap their loan payments based on their income and family size. For most qualifying borrowers, IBR loan payments will amount to less than 10% of their income. The program will also forgive any remaining student loan debt after 25 years of making payments.

Work in Public Service. The Department of Education has also begun a program called Public Service Loan Forgiveness (PSLF), again, strictly for federal loan borrowers. If you work full-time for a “public service” employer such as a non-profit, AmeriCorps, PeaceCorps, the military or a government agency, PLSF may forgive your remaining debt after 10 years of employment and making on-time payments. During this time the IBR plan can help make your loan payments affordable.

Get a Gig. If you can’t get a raise at work, try to boost your income outside your 9 to 5 with part-time or freelance work, like child care, pet sitting, adult care, home care and tutoring (try sittercity.com or sitters.com) to online technical work (visit elance.com and freelanceswitch.com) to selling goods online (visit esty.com, ebay.com and gazelle.com). Take it from me: I babysat, bird-sat and wrote freelance articles while working a full-time job out of graduate school, which helped me pay down my student loans in 3 years, instead of 10.

Shorten the Term. See if the bank will reduce the term or repayment period on your student loan. You’ll get out of debt faster but, of course, you’ll need to shore up more money each month. Or talk to your lender to see if there’s an alternative program that can help you keep your head above water temporarily.

Deduct It. You can deduct up to $2,500 in student loan interest from your taxable income and any savings you make can go toward paying down your debt.

Transfer Debt to a Personal Loan. If you get an offer to open a private loan with a lower rate than your existing student loan, consider transferring the debt. This is easier said than done (which is why it’s my last tip). Transferring debt to a loan product with a lower rate will lower your monthly minimums but you’ll need superb credit to qualify. But don’t fall into the trap of paying the lower monthly minimum or you may stretch the life of the loan for several more years, paying more interest in the long run. Psychologically this may not be the best solution for some folks.

tweetmeme_url = 'http://www.creditbloggers.com/2010/08/8-ways-to-ease-the-student-loan-burden-.html';
tweetmeme_service = 'bit.ly';
tweetmeme_source = 'CreditExperts';

Farnoosh Torabi – Credit.com Personal Finance Contributor, nationally recognized author, expert and television host. Her first book, You're So Money, is an acclaimed tell-all for young adults searching for financial independence. Her new book Psych Yourself Rich, gives readers the mindset and discipline to build their financial life.

Confessions of Former Debt Collectors

View full post on Consumer Law & Policy

The CNNMoney website has a fascinating collection of accounts by former debt collectors, describing what they thought of the job (most but not all of them hated it) and why they left it.  Here are a few excerpts:

• I was absolutely ruthless when I first started out as a debt collector. I
  had a black heart. If someone told me they only had $150 to
  their name this month and needed to feed their entire family of five, I
  would say, "I don't care, this is your fault and you owe the money. Pay
  it." I would even use blind threats like, "I know where you work" to
  intimidate them.

• Collectors I knew regularly held contests to see who could make the most
  people cry in one day.  A co-worker at my office overheard
  another collecting agent telling a debtor in Spanish that she was going
  to send someone over to his house to beat him with a tire iron, because
  she didn't think anyone in the office would understand her. You'd
  be surprised what goes on behind closed doors. Every day, you were
  asked to break the law. If you didn't break the law, you were asked what
  was wrong with you.

• One of the guys in a nearby cubicle called up debtors and posed as a
  legal counsel. He would tell them to raise their right hand and promise
  to tell the truth, and then he would drill them with personal questions
  and badger them, saying throughout the conversation, "Do you still have
  your right hand raised? You do realize you're under oath, right?" He
  could get away with things like this because most consumers just don't
  know their rights.

• Unlike some of the other collectors I knew, I didn't try to scare people
  or take advantage of peoples' ignorance by threatening things like
  eviction even though we weren't allowed to evict someone. But it was
  still tough to deal with people who are struggling so much, and it was
  even harder knowing that a lot of people aren't telling you the truth.

• When I started my own collection agency and we had our first big
  customer, I needed to hire 30 collectors. I posted one job opening and
  had 400 to 500 people apply. As soon as I told them we did drug
  screening and background checks, the pool went to less than a hundred
  people. This just shows how much the industry needs to change.