Analysts are cautiously optimistic over predictions that credit card issuers have seen the “peak” in delinquencies and charge-offs.

While there has been a slight drop in delinquencies on loans that are as much as 6 months’ overdue, there is a rise in loans overdue by only one or two months. Since charge-offs occur after a loan has been in default for 6 months or more, analysts are seeing the new wave of 30-60 day late payments as a sign of new charge-offs to come.

They are guessing that the lull in charge-offs was a seasonal reaction to consumers receiving income tax refunds and using them to keep balances current. Now that the tax refund money has been used and unemployment is still rising, more delinquencies and defaults could be in the offing.

Apparently this is a phenomenon to be expected, even in years when the economy is not failing. Banks generally see a few month’s of declines in delinquencies during tax-return season, and then an increase in delinquencies in June.

In other words, consumers are trying to meet their obligations – even when it means using the coveted tax refund to pay a creditor they may not be able to pay the next month.

The state of the economy is making it impossible for many consumers to keep up – especially those consumers who are among the 9.5% of the job seeking population who have lost employment. Unemployment benefits simply don’t stretch to cover all the expenses that a regular paycheck covered.

Charge-offs at U.S. banks offering credit cards have almost tripled in the past 30 months – partially as a reaction to the high unemployment rate. Unfortunately, more job losses are expected in the coming months.

Charge-offs are expected to reach 10% – 14% this summer, putting a definite dent in profits made by major credit card issuers.

Since everything in the economy affects everything else, one must wonder if the credit card issuer’s aggressive tactics to ensure their own profits has played a significant role in their subsequent losses. By dramatically increasing card holder’s interest rates, slashing their credit lines, and acting in a manner that many consumers describe as “bad faith,” card issuers may be directly responsible for those card holders’ inability and lack of desire to keep their accounts current.

When a monthly minimum payment suddenly jumps by $100 or more, and the card holder has already been struggling to meet the lower payment, it stands to reason that he or she might choose that time to simply “give up.”

Ironically, many of the major banks are the direct cause of rising unemployment numbers. Along with other changes, their discontinuation of sub-prime lending led directly to thousands of their employees joining the ranks of the jobless.

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

Credit card issuers say the new laws will hurt consumers across the board. Consumer advocates say they won’t. Who will be proven correct remains to be seen.

We do know that credit card issuers will attempt to regain their profit positions by making consumer-unfriendly changes. They’re already making changes quickly in an attempt to secure their positions before the new laws take effect. They’ve been raising interest rates and slashing credit lines ever since the talk of the new rules began. They’ve also been closing accounts left and right – sometimes even for consumers who have always paid on time.

In the months prior to the law being signed, bank industry lobbyists began issuing warnings about the dire consequences to consumers if banks were limited in their practices. Now bankers are still warning that regulations will harm consumers.

Until now, card issuers have reaped huge rewards from penalty fees, as well as interest rates. Under the new laws, many of those penalty fees will be eliminated. Thus, they are contemplating adding some new fees and changing policies that were not addressed by the lawmakers.

One of those policy changes may be a return to the annual fee – especially for those card holders who pay their bill in full each month. When they use their cards, the only revenue comes from the retailer, and banks want more than that. Thus they may be charged a fee for the privilege of using the card.

Other moves that Credit card issuers have suggested in their warnings:

• Less rewarding rewards – A scaling back on cash-back incentives and other rewards.

• No more grace period – Interest will begin to accrue from the day you use the card, rather than from the statement date. This will allow card issuers to earn interest from those card holders who pay their bills in full each month.

• Variable rate interest on all accounts. No longer will it be safe to purchase a high-ticket item knowing that your interest will only be 9 or 10%. Unless you purchased during a promotion governed by the new laws, your rate could change at any time.

• Rate hikes across the board. The rates offered to banks’ “best customers” will go up along with everyone else’s.

• Dumping riskier consumers. We’ve already seen a move away from banks offering secured cards and high-interest / low credit line accounts. Now that the “fee harvester” cards will be severely restricted in fees they can charge, these may disappear altogether.

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

Q:

Hi Mike,

I just read over your guide to credit repair. I read it after the fact, but thankfully I followed everything you stated in your site on credit repair. My husband and I rent a home, which has just been offered for us to purchase. Our landlord is upside down on her mortgage and the price of the home is too good to pass up, considering where we live. We live in the Bay Area and the home price is about $250K. There are amazing deals right now with all the short sales and foreclosures. So, my immediate reaction was excitement and then realized that our credit was so bad, I didn’t think it could happen.

So I took on the task of cleaning up our credit reports. We each had 7 negative items on our reports. My husband’s FICO score was 577 and then when I got him a high fee credit card it dropped to 560. My credit score was 527. So I made it my full time job to clean it all up. I bought a binder and dividers. Each divider represented a different collection agency. I wrote down in each section the collection agency, the amount owed, the date of last activity to see how old it was for leverage and a few other miscellaneous items. I then began calling. I paid many of them immediately and some I extended out a little bit, as we still need money to live on. We still need to pay our regular bills. I finally got to the two largest accounts which were over $1000.00. I was able to get a loan from my father, negotiated a settlement with one of the collection agencies but the other was very stubborn. I just needed it off my credit report or at least paid, so I decided to pay it. We get a security deposit back when we buy the home, which will go to pay off my father for lending me the money. I started this credit repair three weeks ago and as of August 14th, 2009, our credit reports will be all cleaned up with nothing outstanding. Oh, I left a couple accounts alone because they are over six years old and my lender said they weren’t going to focus on that. They were just too old and too small.

I checked on Credit Karma, which provides TransUnion’s credit score for free. My husband’s credit score went from 560 to 601 in two weeks. This was exciting. I also disputed a couple items and when I did, noticed some of the collection agencies had deleted items, despite saying they wouldn’t. I was quite excited about this.

Our lender said he will re-run our credit reports in 30 days to see what they look like. Our goal is to have the home by November 15th, so we can take advantage of Obama’s tax incentive of $8,000.00. It is the middle of July right now and I am done. I wanted to tell you that you can have success and it can happen in less than a year if you persevere. Granted, most of our collections were not large amounts, but enough of them lowered our FICO score. Mine ha gone from 527 to 537. I do have a MasterCard which is also high fee based. I got it almost two years ago and have never been late on it. They continue to raise my limit. My problem was that I hovered around the high limit, which doesn’t look good on your credit. I have decided not to use the card anymore. I have brought the card down from a $750 limit to $630.00. I am working towards a zero balance or close to it. I have set up online payments for the next few weeks of $50 per month to lower the balance on the card. I know this will help my scores.

I just want to know, is there anything else I can do right now? I do write letters to the collection agency, along with proof that the debt has been paid, via my online bank statement. I request them to notify the credit bureaus and to delete the item from my report. I’m aware they don’t have to, but I still try. I then write a letter to each of the three credit bureaus disputing the entry. I attach proof of payment and ask them to delete the entry. I know they must contact the collection agency to see if the debt is valid. However, this may be so much work that they just refuse to do it since they have my money. I’m just trying to be pro-active in all of this.

I finally see a light at the end of the tunnel. I truly believe that we will be buying this house now and the November 15th deadline is clearly going to happen for us. If you have any feedback, that would be great.

Sincerely yours,

Robyn K.

A:
Hi Robyn,
I am glad you did what our site recommends. Most people think that there is some credit repair miracle out there, and find out quickly its takes what we teach, along with what you have done yourself to make progress. I always recommend to everyone to make sure you have good credit reporting on your credit report. You will typically need a couple of credit cards and maybe an installment loan. Make sure you don’t close out any good credit cards. This will lower your credit scores. You should never close out good credit. If anything you should charge small amounts on your cards and pay them off every month. Its sounds to me the only thing you might be lacking is more credit. You can access all of this through our site. We provide credit cards and loans that will help improve you scores overtime. Also pull your credit report regularly and make sure that the collection companies are reporting your settlements on your collections to the credit bureaus. This is a common problem, you pay off the collection and they don’t update with the bureaus.

In regards to asking the bureaus to delete a debt that was recently paid, I personally believe your time could be better spent. A collection will stay on your credit report for 7 years from collection date. Normally a credit bureau will not remove a paid collection if it’s within that time frame.

Keep up the good work and I hope you get your Dream home in the Bay area……

Mike Clover
CreditScoreQuick.com

You’ve read all the basic advice on how to raise your credit scores – they include actions such as: pay off outstanding debt, use your credit cards sparingly, and pay all your bills on time.

If your scores are low right now and income isn’t coming very fast you may think there’s not much you can do about it, since you don’t have the money to pay off outstanding debt. But that’s not so. Even if you aren’t able to make ends meet right now, you can manage your money in ways that will be less damaging to your credit scores.

Maybe your situation is such that you simply can’t pay all your credit card bills any more. Pay one of them. Stay absolutely faithful and on time with just one account – preferably the oldest one. Also pay your utility bills on time. They used to report only delinquent accounts, but more of them are now reporting “paid as agreed” accounts.

Avoid finance companies. Doing business with them looks bad on your credit report. So if you can manage it, pay them off and then don’t go back. Avoid Pay Day Loan stores – they’ll suck you into a never ending spiral of debt. Resist the temptation to apply for an in-store credit card. Some experts say applying for one of those cards can reduce your score by up to 20 points.

Prioritize: Pay the most important debts first, and pay them on time. Your house, your car, your utilities, and your credit cards.

If your credit scores are suffering because you refused to pay an account in dispute, or if you had a temporary credit problem due to illness or other personal setback, add that information to your credit file. Simply write a letter to each credit bureau that is reporting the negative information, and explain the reason. You have a right to do this under section 611(b) of the Fair Credit Reporting Act. Ask that the information be added to your file exactly as you have written it, then ask for a copy of the updated report.

Not all creditors look at your report entries, so not all will read your note, but some do.

Take care in composing the letter, and don’t write it at all if there isn’t a very valid reason for your delinquencies. Experts disagree over the benefit of such a note, and while some believe it will help, others believe it could be harmful to your credit scores.

This will stay on your report for 2 or 3 years before being deleted and will be seen by anyone who accesses your report. Thus, don’t use foul language or name-calling – simply state the facts as you see them.

Author: Mike Clover
CreditScoreQuick.com

Q:
Where to fax credit dispute to equifax? There are so many factors to consider. Would you be kind enough as to give me some pointers as what to look for or avoid? Please point me in the right direction.
Thank you so much. yours truly, Paul

A:
Hi Paul I will point you to our “how to dispute” article that tells you everything you need to know.
go here.

Mike Clover
CreditScoreQuick.com

Credit cards seem to be the safest alternative when you’re going to be away from home, although you will need some cash, and thus might want to take your debit card.

If carrying large sums of cash makes you nervous, your debit card will allow you carry only enough cash for a day or two, because you can make periodic withdrawals from your checking account. But be careful with that debit card!

Of course you should also be careful with your credit cards – carrying only one and leaving the others locked in the hotel safe or in-room safe. But debit cards carry additional risks.

For safety’s sake, plan ahead so you know where to find legitimate ATM machines. Savvy crooks have figured out how to install phony ATM machines in high-traffic tourist spots, and using one could result in identity theft and an empty bank account. If your hotel has an ATM machine, it is probably legitimate, as are those in airports and banks.

Rather than carry the card for multiple withdrawals throughout the day, plan ahead and make as few withdrawals as possible. This not only helps ensure safety, it cuts down on those $2-$5 ATM fees.

As with your credit cards, let the bank know ahead of time that you’ll be on vacation. Otherwise they could freeze your account, thinking incorrectly that charges made away from home are the result of a theft.

Theft can be more serious with a debit card than a credit card, so if your card had indeed been stolen, you’d be thankful for their interference.

Unless you report the loss to your bank within 2 business days, you could be liable for up to $500 in unauthorized withdrawals. If you report within the 2 days, your liability drops to $50. BUT, while you’re disputing the withdrawals and waiting for the funds to be returned, your bank account is just as empty.

This could have serious consequences if the money for your day to day expenses, such as a house payment, car payment, and utility bills disappears overnight.

Disputing charges is also more difficult with a debit card than a credit card. Say you’re on vacation and see a beautiful painting, so you buy it and arrange to have it shipped home. If it never arrives, having the charge removed from your credit card is reasonably easy. But once the money has been taken from your bank account, getting it returned is not.

Author: Mike Clover
CreditScoreQuick.com

Getting cash back from a credit card is like getting free money – or is it?

It turns out that the words “cash back” are not enough to assure that you will actually get cash back from your purchases. It all depends upon the credit card and the fine print in your agreements.

Some cards charge an annual fee for the privilege of getting cash back. In order for you to know if it makes sense you need to determine how much you’ll spend in a given year.
For instance, if your cash rebate is 2% of your purchases and the annual fee is $35, you’ll need to charge $1,750 per year just to break even.

Some cards offer a tiered cash back plan – wherein their percentage goes up at intervals as they spend more. So it might start at 1% and go up as high as 5%. Again, you need to look at how much you typically spend per year.

Next, unless you can and will pay your balance in full each month, look at the interest rate. If you’re paying 29% interest that 2% doesn’t count for much.

After annual fees and interest rates, check to see if your rewards have an expiration date. Some cards will only rebate your cash back after you’ve reached a specific threshold – say $100. If you don’t reach that by the end of a set period of time, your rewards will dissolve into nothingness.

Low caps are another trap. Some cards limit the amount you can earn, no matter how much you spend. If you use your card for business and run large sums of money through it every year, check to see that you’ll be rewarded for all of your purchases, not just the first few months’ worth.

Merchant restrictions can also limit the value of your cash back credit cards. The advertisement may say that you get 2% back on all grocery purchases but when it comes time for a rebate, disallow the groceries you bought at Wal Mart or Whole Foods because they don’t consider those stores as “grocery stores.”

If the card offers cash back on fast food, read to see which stores are included and excluded. You may find that your favorite fast food place is not on the list of approved establishments.

If it offers money back on gasoline, see if it will honor gasoline purchased at the neighborhood quick stop that just happens to have 2 pumps outside.

Reading the fine print is tedious and time-consuming. Sometimes it requires a magnifying glass. But if you want to get real value from any kind of rewards card, and not spend your time fuming because you didn’t get what you expected, you must read the fine print.
CreditScoreQuick.com

College years are not a time of financial involvement for most students, and credit scores are far from their minds.

They may have student loans for tuition, but most are concentrating on education rather than home ownership or cars. Most students who pay their own way are avoiding extra debt because they simply don’t have the time to hold down a job that will return enough to pay a lot of bills.

But… they should still work at establishing credit, because they’ll need it when they leave school and enter the working world. Unless they’re staying at home for a while, the first thing they’ll need is a place to live – and landlords now want to see good credit reports.

Next, depending upon where they live, they’ll need a car to take them to that new job. Without good credit scores, they’ll pay high interest for that car.

Thus, every student should have at least one credit card. Unless they have some bad credit history, they should be able to get at least a low limit, high interest card. If not, they can get a co-signer, piggyback on a parent’s good credit, or get a secured credit card.

As with everything, students should read the fine print before making application for any card.

Those with little or no credit are often prey for companies promoting “Fee Harvester” cards. These come with a low credit limit, and so many fees that the cardholder is in debt for almost the full balance before using the card even once. Shy away from cards that charge annual fees, set-up fees, transaction fees, statement fees, and inactivity fees.

Right now, card issuers can and do charge as much as 78% of the credit limit in fees. Under the Credit Cardholder’s Bill of Rights, they’ll be restricted to charging 25% of the credit limit – which is still excessive. They also charge interest rates that top the charts. So read the fine print – all of it!

When piggybacking – where the student is simply added to another person’s credit card account – students should choose wisely. Everything about that other person’s use of that card will go on the student’s credit report. So if they maintain balances over 50% or make late payments, the effect of piggybacking can be negative.

Secured cards are another option for students who have trouble getting a “regular” card. By depositing money in a savings account that’s used for collateral, there’s no danger of being harmed by someone else’s credit mishap. Again, be sure to read the fine print for fees, and always, always, always make the payments on time.
CreditScoreQuick.com

Q:
Where to get a loan with a 640 credit score?
How might I best go forward?
Would you consider giving me a couple pointers?
I am very grateful for your help.
Kind Regards, Paul

A:
Hi Paul. I would assume you are talking about a unsecured loan. I would recommend trying out our loan through credit.com. Go here. You can get up to $15,000 dollar loan depending on your circumstances.
CreditScoreQuick.com

Q:
I have poor credit, I paid over 2,000 dollars to pay off my debts that were in collections. My credit score however has stayed the same. Would it be better to get a co signer for a loan, or a secured credit card (been denied for a unsecured card)

A:
Hi Andri,
This is a great question….. When rebuilding credit we always recommend getting a few Secured Credit Cards. This way you are establishing credit on your own, instead of piggybacking someone else s credit primarily. There is nothing wrong with having a co-signer along with some secured credit cards though. Go here to select a couple of good secured credit cards to get started.

CreditScoreQuick.com