Archive for 2009
Saturday, June 13th, 2009
When FICO introduced the new FICO 08 credit score in January, TransUnion jumped on board, but Equifax and Experian did not.
Now Equifax will also make this newest version of the FICO score available to lenders and businesses. Equifax calls the new score “Beacon 09″ and joins FICO in saying that it is the most accurate scoring model yet for predicting a consumer’s credit risk.
Some things will remain the same. For instance, the scores will still range from 300 to 850 and consumers will still have to meet minimum criteria to even have a credit score.
In order to generate a score, a consumer must have an account that has been open for six months or more, and that has been updated within the past six months. Since many small companies such as utilities don’t report to the credit bureaus, consumers need to have some kind of credit card, car loan, mortgage, or other account that does report.
In addition, your credit report must not indicate the word “deceased.” This can be a problem for a spouse who has held all accounts jointly.
Good news for some consumers is that under the new scoring model, a one-time mistake such as late payment won’t count so heavily. In fact, consumers whose scores have dropped due to such an entry will probably see their scores go up.
The bad news is that the new model will put more weight on the total debt load a consumer carries. It will become more important than ever to pay down debts and maintain a large margin of unused credit.
“Piggybacking” will once again carry some weight, because of new technology that will help prevent its abuse. This practice, in which an authorized user could “piggyback” on someone else’s good credit rating, led to abuses in the past.
The old FICO scoring model will still be available and will be used by companies who choose not to switch over. Predictions are that most users will be smaller lenders because the change will be complicated for large lenders.
Experian is currently in a lawsuit with FICO and there is no word on when or if it will adopt the new model. Since Experian severed ties with myfico.com, Experian’s FICO scores have not been available directly to consumers but could still be accessed by banks and other lenders.
Author: Mike Clover
CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news
Posted in fico score | Comments Off
Monday, June 8th, 2009
Credit card issuers have been targeting college students for years – setting up tables on college campuses and offering everything from teddy bears to pizza coupons to entice them to apply for a card.
Often, in their enthusiasm to obtain the “free” gift, students have applied for cards without reading the fine print. Thus, along with their new cards they got a first statement – one showing that they owed for a variety of fees. This could include an annual fee, an application fee, and possibly even a monthly access fee. If immediate payment of those fees wasn’t in the budget, the account immediately began gathering interest charges at a high rate.
Thus, these aggressive card issuer tactics have been helping those students leave college and enter the workforce with a debt that can seem staggering, especially when added to student loans for tuition.
This is about to change, due to the new Credit Cardholder’s Bill of Rights of 2009.
Once the law goes into effect, students will need two things to even be approved for a credit card:
• Adequate income and/or a co-signer
• Completion of a certified financial literacy course.
Credit limits will also be limited for students who do not have a co-signer. A student will be able to get a card which is the greater of $500 or 20% of their annual gross income. The total amount of credit extended from all of their credit cards cannot exceed 30% of their annual gross income for the most recently completed calendar years.
Creditors will be prohibited from opening an account for any student who does not have a verifiable annual gross income, or who already has an account with that creditor or its affiliates.
Your high school student will also be prevented from getting a card. The new law prohibits issuance of a credit card to any individual under the age of 18, unless a parent or legal guardian is designated as the primary account holder. (This does not apply if the youth has been emancipated under state law.)
These new regulations are, of course, designed to protect students by preventing them from beginning their financial lives with an overload of debt. But financial analysts fear that this program, like so many others that appear beneficial at first glance, may backfire.
Students in need of fast money may resort to using Payday lenders or pawn shops – both of which charge interest rates that even the most aggressive credit card issuer might find reprehensible.
Author: Mike Clover
CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news
Posted in credit card | 1 Comment »
Monday, June 8th, 2009
The Credit Cardholder’s Bill of Rights of 2009 makes some significant changes in the way your credit card issuer treats your account. Among other things, the law puts an end to double-cycle billing, gives you more time to pay, and imposes fairer payment allocation.
You may not have been aware that the double-billing cycle was costing you money each month. In most cases, it didn’t amount to a lot of dollars, but spread over millions of cardholders, it was an income-booster for credit card issuers. Under this practice, finance charges were imposed on the average balance of both the current month and the previous month. So you paid interest on dollars you no longer owed. This could be significant if you’d made a large payment the previous month.
Under the new law, banks will not be allowed to charge interest on debt already paid.
Another provision, which goes into effect this August, will require card issuers to mail their statements 21 days before a payment is due. The current requirement to mail 14 days before the due date has caused many consumers to incur late payment fees. Cardholders could either mail the payment and hope for the best, or pay a fee to make a payment by phone or internet.
Many credit card issuers charge as much as $15 to take a payment over the phone or on line. (Some do offer free on-line payments.) Under the new law, banks will only be allowed to charge those fees if you are asking for an “expedited payment.” Also, if you make a payment at a local bank branch, they will be required to post that payment the same day it was made.
Credit cardholders get a huge break due to the new payment allocation rules. Right now, when your account shows balances at different interest rates, your bank automatically applies all of your payments to the balance carrying the lowest interest rate. You may have charged a $200 purchase that gathers interest at 29.9%, but you can’t pay it off because you used a $3,000 cash advance check that was offered to you at 4.9%. Before you can “get to” the $200 purchase, you have to pay off the entire cash advance.
No more – when the new laws go into effect, all amounts in excess of your minimum monthly payment will be applied to the balance with the highest rate of interest.
CreditScoreQuick.com
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Tuesday, June 2nd, 2009
Fees make up a large part of a credit card issuer’s revenue, but that source will be shrinking when the Credit Cardholder’s Bill of Rights laws go into effect.
For instance, under the new law you can opt out of the privilege to go over your credit limit. Only if you elect to allow your creditor to approve overlimit transactions, will you be charged the overlimit fee.
Another change is that your credit card issuer will be limited to charging one overlimit fee per billing cycle. So if you make several transactions before realizing you’ve over spent, you can’t be charged a separate fee for each transaction.
Credit card issuers will also be prevented from charging consumers a fee to pay their credit card debt via telephone or internet. At present, some card issuers charge as much as $15 to accept a payment over the phone. You do need to watch the fine print on this one, because they will be allowed to charge a fee for expedited payments. You may still need to pay a day or two prior to your due date.
Payments received on the due date, or on the next day if the card issuer doesn’t accept payments on the due date, will no longer trigger a late fee. At present, paying on the correct day isn’t always enough – you may also need to pay before a certain time of day.
If the cardholder pays at a local bank branch, the payments must be credited the same day.
Under the new law, consumers will also have more time to receive a bill and return the payment. Present law requires the issuer to mail a statement 14 days before payment is due – which often means it doesn’t reach the consumer in time for a payment by return mail to post on time. The new laws requires 21 days.
The new law also sets limits on “fee-harvester” subprime cards. These cards typically have a credit limit of $250 to $500, and are issued to people who can’t get a standard card, but feel they must have a card in case of emergency. Unfortunately, the fees can sometimes leave cardholders with a hefty bill, and hardly any credit limit to use in an emergency.
In one example, a card featured a $250 credit limit, but new cardholders were automatically hit with a $95 program fee, a $29 account set-up fee, a $48 annual fee and a $6 monthly participation fee. That’s $178 in instant debt, and only $72 in actual credit. On top of that, because Federal laws preempt state laws, the card issuer has no limit on the interest rate it can charge on this balance.
Under the new law, during the first year after the card is issued, such fees may not exceed 25% of the cardholder’s initial credit limit.
CreditScoreQuick.com
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Tuesday, June 2nd, 2009
A welcome end to retroactive interest rate hikes
When the Credit Cardholder’s Bill of Rights go into effect next February, consumers will be protected from a host of money-draining practices.
One that will save consumers the most and cost the credit card issuers an estimated $10 billion is the prohibition on retroactive rate increases.
Banks will no longer be able to raise the rates on your existing balances unless your payment is late by 60 days or more. That means if you’re late on Card A, Card B won’t be able to raise your rates. This of course doesn’t apply to introductory rates, which you accepted with the clear understanding that the rate would raise on a set date.
But even those introductory rates will have restrictions. In order to offer them, credit card issuers must keep them in force for a minimum of 6 months. No more introductory rates that expire and bump to the highest rate within 30 days!
Even better news – if a cardholder becomes 60 days late and his interest rate is increased as a result, he can regain the lower rate by making 6 consecutive on-time payments. This particular provision doesn’t take effect until August 2010, however.
Cardholders will also get 45 days advance notice of rate hikes and/or any other key contract changes. Under the current truth in lending law, credit card issuers must only give cardholders a 15 day heads-up. While I haven’t seen this in writing, the notice they give must have plenty of leeway, because I know dozens of people whose interest rates and credit limits were changed without them being aware until they received their bills.
Perhaps this is one reason why the new laws will call for the terms of the agreement to be written in a large type size. Hardly anyone actually reads those lengthy notices written in a 4 or 6 point type.
The bad news is that this provision doesn’t apply to changes in credit limits, so you will still need to go on line and check your spending limits before embarking on a quest for a house full of new furniture. You could get to the store and find that you don’t have the credit limit you expected.
The good news in that bad news is that credit card issuers will no longer be allowed to slash the limit to a level that would trigger a penalty such as an over limit fee. That’s a practice that has become common in recent months and could become even more common in the months leading up to implementation of the new laws.
Remember that credit card issuers will be using the next months to ramp up their profits, so be very careful to read everything that comes in the mail from any of your card issuers.
Author: Mike Clover
CreditScoreQuick.com
Posted in credit card | 1 Comment »
Monday, June 1st, 2009
Credit card issuers don’t make it easy for us to know the right things to do to keep our good reputation with them. In fact, trying to navigate through all the advice we get can make us feel like doing a Yale Jashan Bhangra Dance! If you haven’t seen the Bhangra dance, it’s a bit on the wild side.
Take, for instance, the fact that your credit card issuer may have you labeled as a “deadbeat.” Why? Because you pay your bill in full, never go over limit, and never pay late fees. In fact, because your credit rating and your FICO scores are excellent!
Why do those actions turn you into a deadbeat? Because they aren’t making enough money from you, that’s why! They want you to carry a balance so they’ll earn interest each month. And they don’t mind at all if you pay a day or so late so they get to tack on a nice fee. Going over the limit is fine, too, because it also carries a fee.
Because you don’t do those things, they may be lowering your credit limits, raising your interest rates, and canceling your unused cards. Those actions, of course, will lower your FICO scores.
You’ve probably heard that the “Credit Cardholders Bill of Rights” is going to put a stop to many of the consumer-unfriendly practices used by credit card issuers. It is. When the new laws go into effect in February 2010, many of those practices will be forbidden.
But since the card issuers stand to lose billions in profits as a result, they’re looking to their most creditworthy customers to take up the slack. Experts are predicting that card issuers will now begin routinely charge annual fees even to their “best customers.”
“Best customers,” by the way, are those who carry a balance. Typically, they’re consumers who charge a few thousand for a major purchase every few months, pay it down, and then start all over again.
Grace periods may also be phased out, so that if you’re a “deadbeat” you’ll begin paying interest from the day of your purchase. As a result, many will abandon credit card use in spite of the convenience and bookkeeping benefits.
If you’d rather keep your life in order – and make your life more akin to a Foundation Showdance than a wild and crazy Yale Jashan Bhangra – take control now.
If you do carry a balance, begin paying it down. Spend your rewards credits before they fade into the sunset, and try to maintain your credit scores by keeping all credit card accounts open. You may be able to do so by charging a small amount at least once per quarter. Remember that the more available and unused credit you have, the better your credit rating, so if you can get your credit limits increased, do so.
Author: Mike Clover
CreditScoreQuick.com
Posted in credit cards | 1 Comment »
Sunday, May 24th, 2009
While most creditors do report to the credit bureaus when a bill is charged-off, you may get a free pass if you’ve had a utility bill charged off.
Something most of us don’t realize is that credit bureaus charge a fee to take in data. That’s right – you pay a fee for your credit report with FICO scores when you apply for credit, but they also collect from the companies who supply the information.
That being the case, many utilities don’t want to pay the fee, so they don’t report. You may find the same thing to be true with local businesses where you hold accounts.
If you aren’t sure, get a copy of your free credit report and check to see if the charged-off account is listed.
If it is, then yes, it is hurting your credit scores. But if it happened more than 2 years ago, it still may not prevent you from getting a mortgage or other credit, especially if you have since repaid the debt.
In fact, you may be able to negotiate with the utility company to remove the item from your credit report in exchange for payment in full. If so, get their commitment in writing before sending the payment.
If they refuse, it’s still to your benefit to repay the debt. Lenders look at your credit scores, but they also look at the credit report itself. If your report shows that you’ve paid the debt and have had good payment history since then, it may not hurt your chances of getting new credit.
Remember that negative information stays on your credit report for 7 years, but its impact on your credit lessens with each year that you show good payment history.
While you’re working to restore your credit after a problem, do be sure to pay all your accounts on time and as agreed. Work hard to keep your credit usage below 30% of the credit available to you, and check your credit report often to assure that it doesn’t contain mistakes. If you do find mistakes, take action to correct them immediately.
If you’re working on building credit in order to purchase a home, don’t make any large purchases such as a car or a house full of furniture within the few months prior to your application for a mortgage. And, since lenders are now returning to the “old rules,” don’t decide to change employment unless the new job is a move up in the same line of work. This is not the time to switch from a secretarial work to truck driving or to strike out as a freelancer.
Author: Mike Clover
CreditScoreQuick.com
Posted in Uncategorized | Comments Off
Saturday, May 23rd, 2009
Often, divorce precedes bankruptcy, and is, in fact the “last straw” that pushes an individual into bankruptcy. While in many cases the financial hardships caused by divorce are legitimate, prior to the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 bankruptcy was often used as a way to completely sever ties with an ex-spouse and avoid financial obligations.
Couples contemplating both bankruptcy and divorce should probably complete the divorce prior to the bankruptcy rather than wait until later. They will not be allowed to proceed with both at the same time.
One reason why couples should divorce first and file second is that their financial status will be clear from the outset. They may be allowed to file Chapter 7 rather than Chapter 13.
Chapter 13 is a bankruptcy that includes a repayment plan of some or all of a person’s debt over a three to five year period. It is generally chosen in order to save a valuable asset – such as the family home. In some cases it is the only option available because a couple’s income is too high to qualify for Chapter 7.
If you have already filed Chapter 13, your divorce could permit you to alter the terms of your bankruptcy and allow you a lower payment or even a grace period with no payments while you work things out. It could also qualify you to convert to Chapter 7 – in which all debt is wiped out.
Any change in financial circumstances can grant you this leeway. Other instances could be loss of employment or illness.
The important thing to remember is to notify your trustee immediately – especially if the pending divorce means you don’t have the money to make the scheduled Chapter 13 payment. Whatever you do, don’t just ignore the payment without first notifying the trustee of the reason.
In order to have your case reviewed and possibly alter the terms of your bankruptcy you will have to file appropriate documents, which include proof that one party has moved out and is paying rent and/or utility bills at another location. So it is important to determine that the divorce really will take place and you really will be maintaining separate households.
The increased household expense would be the determining factor in deciding whether the bankruptcy terms can be altered.
Author: Mike Clover
CreditScoreQuick.com
Posted in bankruptcy | 1 Comment »
Wednesday, May 20th, 2009
Purchasing a new car has always been a game. Negotiating the price of the car and then negotiating the value of your trade in usually leaves consumers feeling like they probably could have “gotten a better deal.”
Now, because so many Chrysler and General Motors Corporation dealerships are closing, the game has taken on new risks.
First, your routine maintenance and warranty work may not be so routine. As dealerships close in small towns, consumers will be required to drive long distances to find authorized repair centers. Additionally, if part of your purchase negotiation included perks like free car washes or free lube and oil changes for a year or two, those will disappear with the dealership.
More serious is the fact that the records of your routine maintenance could be lost – and without those records your warranty will not be honored.
If your local dealership is about to close, go now and get a print-out of all maintenance done on your car. Then keep your own records of any future maintenance work.
But loss of warranty is only one of the risks. Something even worse is happening, and it can affect your good credit as well as your bank account.
You know that when you trade in a car that you haven’t paid off in full, that debt is a factor in deciding how much equity you have in the car – and thus how much credit you will receive toward the purchase price of your new car.
You know that the dealership “has” to pay off that old loan before they can re-sell the car.
But this isn’t always happening!
In the wake of poor sales and financial troubles for the dealerships, some of them simply didn’t do it. But they did re-sell the cars.
So now both you and the person who purchased your old car are facing trouble.
Until that old loan is paid off, you are still the one responsible for payment. So while you’re happily driving your new car and making payments on it, your credit report is showing month after month of unpaid debt on your old loan.
You know what that can do to your credit scores.
The person who purchased your old car has yet a different problem – since the car wasn’t paid off, he or she can’t get clear title.
If you’ve purchased a new car recently and traded in a vehicle that wasn’t paid for in full, check your credit report today. This could be a tough one to solve, but you do need to get started immediately.
And if you’re buying a used vehicle, demand proof of clear title before you part with your money.
Author: Mike Clover
CreditScoreQuick.com
Posted in car purchase | Comments Off
Tuesday, May 19th, 2009
Q:
Hello Credit Guru,
I had a court judgment against me for $2500. When I found out about it, I had the case reopened and eventually had the judgment overturned in my favor. I have collected payment. The problem is that I don’t know how to contact Experian, Equifax and Trans Union to have them remove the information and adjust my score. Any suggestions?
Thank you for your help.
Sincerely,
Saji Miller
A:
Hi Mr Miller,
This is a easy fix. Here is a step by step process to get this resolved. I wrote a article a while back, and there are a couple of ways to get this resolved. I would recommend mailing in proof you won the case.
Go here:
Author: Mike Clover
Posted in Uncategorized | Comments Off
Disclaimer: This information has been compiled and provided by CreditScoreQuick.com as an informational service to the public. While our goal is to provide information that will help consumers to manage their credit and debt, this information should not be considered legal advice. Such advice must be specific to the various circumstances of each person's situation, and the general information provided on these pages should not be used as a substitute for the advice of competent legal counsel.
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