Credit Secrets & Tips

If you’re keen on getting a mortgage, personal loan or a credit card, then you should know that your credit score will play an important role. Credit reports have become increasingly popular these days while getting a new line of credit. Almost all lenders check your credit score while approving a mortgage or a credit card to you. A good credit score determines your ability to repay the loan timely while a bad credit score shows that you’re unworthy of handling credit. If you’ve got a bad credit score and you’re thinking of taking a new line of credit, then first concentrate on credit repair.

Basics of your credit report:

You should be aware of the basics of your credit report in order to go for a credit repair. Repairing your credit is very necessary to become creditworthy to lenders. There are mainly three agencies that provide credit reports to all consumers. They are TransUnion, Equifax and Experian. Each of these agencies will provide a slightly different score as they’ve got their own way of calculation. Have a look at the several things that you should see on your credit report.

* Credit score: Your credit score is the most vital thing that is to be checked in your credit report. You should at least check it every month. It is a numeric value calculated based on many things like your payment history, amounts owed, length of history, types of credits used etc.

* Your personal information: Your credit report also has your personal information, name, address, employer and Social Security number.

* The financial products: The products that you have such as credit cards, non-revolving loans, and lines of credit will also be included in your credit report.

How often should you check your credit report and credit score:

You can well understand that your credit score and credit report is. Small inaccuracies in your credit report can have a huge impact in your life. That’s exactly why you should check your credit report and score in regular intervals. If you check your credit report once every quarter, then you can fix the inaccuracies before it’s not too late.

After the financial reform, you are entitled to check your credit scores if you are denied by your lender. Make use of such changes and go for credit repair to rectify incorrect information that could cause a blunder to your finances.

For most people, their home is their biggest purchase, and they’ll do practically anything to protect it. Unfortunately, that’s the reason why fraud artists target homeowners with high-cost and often illegal mortgage offers.

In one common example, con artists promise to erase a bad credit history or make easy loans to people with bad credit histories. Most of these offers involve exorbitant fees, come with hidden terms or never provide the promised money.

Mortgage foreclosure fraud is on the rise, with thieves posing as lenders or housing counselors offering to “help” people at risk of losing their homes to foreclosure. More than likely, the consumer pays high upfront fees for questionable services, and in the worst cases, thieves have tricked people into signing over ownership of their homes.

How can you avoid these types of fraud? Try to deal only with businesses and other organizations you already know or that have been recommended.

It’s safe to assume that any offer that sounds too good to be true, especially one from a stranger or an unfamiliar company, is probably fraudulent.

Unexpected rate hikes. Over-limit fees. Double-cycle billing. Those are just a few of the credit-card practices that have trapped millions of consumers into a life of constant worry over mounting debt.

In less than a week, these practices will be history.

On Feb. 22, 2010, the Credit Card Accountability Responsibility and Disclosure Act (CARD Act) takes effect.

It puts forth new rules for credit-card issuers that are arguably the most consumer-protective in the history of credit cards.

If you’re the type of person who reads every piece of mail sent by your credit-card companies, then chances are you already have a fair idea of the changes coming. (Credit issuers have been mailing out change-of-terms notifications that explain the details in recent weeks.)

Then again, credit-card rules are hardly ever simple — and the CARD Act is no exception.
Below are the key changes that the new law puts forth, along with some notable exceptions that could still allow consumers to get in trouble with their credit cards

Finance Charges, Interest-Rate Hikes and Notifications

• No rate increases for the first 12 months after opening an account.
• Rate increases can only be applied to new charges.
• Annual and application fees cannot exceed 25% of your initial credit line.
• No more double-cycle billing.
• A six-month minimum promotional-rate period.
• No more over-limit fees, unless the card holder opts in.
• No fees to make credit-card payments online or over the phone, unless you make a payment on your due date.
• Must give 45-day notice of pending rate or fee hikes or any other significant changes to credit-card terms.

Billing Statements, Payments and Disclosures

• Billing statements must be sent 21 days before the due date.
• Your due date should be the same date each month.
• Payments are considered on time when received by 5 p.m. on the due date or the next business day after a holiday or weekend.
• Payments above the minimum must be applied to the highest-rate balance first.
• Each monthly statement must include information on how long it would take you to pay off your balance if you make minimum payments only and the total you’ll pay, including interest and principal; and how much you need to pay each month in order to pay off your balance in 36 months and the total you’ll pay, including interest and principal.
• Statements must also include a warning that by making only minimum payments you will pay more interest and it will take you longer to pay off your debt, as well as a toll-free number to call if you want to be referred to a credit-counseling service.

College Students and Young Adults

• No credit cards for college students unless co-signed by a parent or they can demonstrate “ability to pay.”
• No credit-limit increases if you are under 21 and have a co-signer without that co-signer’s permission.
• No credit-card marketing and freebies on college campuses.

Adjustable-rate mortgages has a very low payments in the early years of the loan that will sharply increase when interest rates reset.

Homeowners with ARMs who are not able to make their monthly payment when the interest rate goes up should contact the lenders as soon as possible to discuss their options.

Defaulting on a home loan means you can lose your home. The lender has the right to foreclose – to sell your home to raise money to pay off your debt if you default.

You would also severely damage your credit record, making it more difficult to borrow money or get a job or insurance in the future.

Consider following steps to avoid that result.

While many lenders and loan servicers (companies that accept borrower payments and help administer escrow accounts) are writing or calling customers who face big rate increases about the possibility of refinancing or restructuring their loans.

The borrowers who anticipate having difficulty making payments to take the initiative and
negotiate the lenders by modifying loan terms or changing from variable-rate loans to fixed-rate loans that may be available at a lower monthly cost.

The borrowers who are delinquent on their mortgage loans should consider getting help from a
housing counselor. These are public and private organizations that offer advice and assistance on everything from buying and financing a home to dealing with debt problems, including avoiding
foreclosure if the borrower misses loan payments.

Some counselors assist consumers by working with lenders on their behalf, but it’s always important for the borrower to be actively involved in this process.

I suggest consider these resources for finding a reputable housing counselor:

- The Department of Housing and Urban Development (HUD) maintains a list of approved housing
counselors who give advice free or at low cost.

To locate a HUD-approved counselor in your area, call 1-800-569-4287 or go to http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm.

- NeighborWorks America, a national nonprofit organization created by Congress, and HOPE for Homeowners, a service of the nonprofit Homeownership Preservation Foundation, have established a toll-free hotline at 1-888-995-HOPE (4673).

Callers can receive immediate free advice and support from nonprofit, HUD-certified organizations 24 hours a day, 7 days a week. Callers who need additional assistance will be referred to reputable local counselors. For more information, visit http://www.995hope.org.

Also be aware of credit-repair scams that target homeowners having serious problems making their mortgage payments. The Phony companies claiming to be housing counselors promise to help negotiate a new loan or perform other services for a hefty fee that is collected up-front.

The companies actually do nothing at all or perform services consumers can do for themselves at little or no cost. Turning to a HUD-approved counselor for assistance is one way to avoid these types of fraud.

Some of credit repair companies are legitimate business that work within the law to help you resolve credit problems and rebuild your credit.

However, they charge excessive fees range from $100 to $2500 to “clean up” your credit record. They claim that they remove your bad credit, even bankruptcies from your credit report.

Some of these are little more than floating con artists. They move into a locale, charge unsuspecting consumers a hefty up-front fee for their services, and then skip out of town, leaving their victims poorer and without the credit record improvements they are promised.

To protect yourself, the following are 7 sure signs of a credit repair company that will rip you off:

1. The contract doesn’t contain the following information:

• The amount you are being charged
• Details about the services being performed on your behalf
• The date by which the services will be performed (or the time period required to perform the services)
• The name and business address of the organization
• A statement letting you know you can cancel the contract within 3 days

2. Recommend that you do not contact a credit bureau directly

3. The company promises to create, or asks you to create, a “new” identity with a new social security number or federal employer identification number (EIN)

4. The companies make big promise about what it can do for you, such as “We can wipe out bankruptcies and other negative information, no matter how bad credit history.”

5. You aren’t given a copy of the “Consumer Credit File Rights Under State and Federal Law”
letting you know your rights to obtain a credit report and dispute inaccurate credit report information and what you can do yourself for free.

6. Ask for a large up front cost without explanation anything, and without any written documentation.

7. You aren’t given a copy of the contract to view before you’re asked to sign it.

1. Have your tax refund direct deposited into your bank account.

The benefits include receiving your tax refund faster and knowing that your refund check will be safe and not lost or stolen.

Direct deposit also provides an easy way to save part of your tax refund, because ‘what you can’t see you can’t spend.’

The large numbers of consumers mistakenly believe that paper checks are safer than direct deposit when, in fact, the opposite is true.

Paper checks account for more than 90 percent of the reported problems with its federal benefit payments.

You also have the flexibility to directly deposit your tax refund in up to three different
accounts at three different U.S. financial institutions.

2. If you need cash and you can’t wait for your tax refund, carefully consider your options and costs.

In particular, “refund anticipation loans” arranged by tax preparers for people who file their returns electronically, will get you cash in just a day or two, and the loan will be paid back
with your tax refund, but the costs are comparable to very high interest rates.

Also remember that people who file their returns electronically using the IRS “e-file” service can receive refunds in two weeks or less.

3. Make good use of your refund.

Consider paying down or paying off your loans and other bills, starting with the ones that charge the highest interest rates on unpaid balances.

Start or add to an existing savings account. Or, fund a retirement account or college savings plan.

4. You can pay your tax bill using your credit or debit card but beware of the costs.

Your financial institution may offer small incentives – such as miles, points, cash back or
other rewards for using your card – but factor in the processing fee, which can be substantial, especially for credit cards.

Other costs also may apply, such as interest if you don’t pay your card balance in full by the due date, and overdraft fees if your debit card withdrawal exceeds your account balance.

5. You can have your payment withdrawn electronically from your bank account.

This service adds speed and convenience. You can also file your tax return early and set the payment withdrawal for a specific date, such as April 15.

Ask your financial institution about any fees it may impose. But make sure you have enough funds in your account when the payment is to be made.

6. If you need to borrow money to pay your taxes, you have several choices but all come with fees and costs.

The cheapest way to pay your tax bill is to tap your bank account. But if you must borrow
the money, options include bank loans, an monthly installment plan and your credit card.
Using a home equity line of credit may be an option, but remember that you could lose your home if you are unable to make the payments.

7. Take advantage of free tax preparation services.

One program helps to promote is the Volunteer Income Tax Assistance (VITA) program, which provides free tax-preparation help to low- and moderate-income taxpayers at various locations. Click here to read more detail.

Some VITA sites even have representatives from banks or other organizations who can assist in other ways, including opening a bank account or obtaining a credit report.

On your first attempt to get credit, you may face a common frustration: sometimes it seems you have to already have credit to get credit.

When you apply your credit, some creditors will look only at your salary and job and the other financial information you put on your application.

But most also want to know about your track record in handling credit–how reliably you’ve repaid past debts.

If you have no credit history, it may take time to establish your first credit account.  Here are 5 ways you can begin to build up a good credit history:

(1).  Open a checking account or a savings account, or both.
 
These do not begin your credit file, but may be checked as evidence that you have money and know how to manage it. 

Cancelled checks can be used to show you pay utility bills or rent regularly, a sign of reliability.

(2). You might borrow a small amount from your credit union or the bank where you have checking and savings accounts.

Some banks may approve your credit application even if you do not
meet the standards of larger creditors.
(3).  Apply for a department store credit card. Repaying credit
card bills on time is a plus in credit histories.

(4).  Ask whether you may deposit funds with a bank to serve as
collateral for a secure credit card. 

The banks will issue a credit card with a credit limit usually no greater than the
amount on deposit.

(5).  If you don’t qualify according to your current credit rating, you may ask someone co-signs a loan to established credit history for you.

Because a co-signer promises to pay if you don’t, this can substantially improve your chances of getting credit. Once you have repaid the debt, try again to get credit on your own.

Most important, before you apply for credit, ask whether the creditor reports your credit history information to credit bureaus.

Most creditors do, but some do not. If possible, you should try to get credit that will be reported. This builds your credit history.

If you’re turned down, find out why and try to clear up any misunderstandings.  There maybe reasons other than lack of credit history. 

Your earning may not meet the creditor’s minimum requirement or you may not have worked at your current job long enough. Time may resolve such problems.

While credit bureaus keep track of how you handle credit, there are other companies that monitor and report how you manage or mismanage your checking account.
 
And, as some of you may have learned, even a single bounced check reported by one of these services may be enough to make it difficult for you to get a credit or get a merchant to accept your check as payment.
 
Check reporting protects financial institutions and merchants (such as retailers and grocery stores) from losses associated with bounced or fraudulent checks.
 
Under the Fair Credit Reporting Act (FCRA), a bounced check or other wrongdoing reported to a check reporting service may stay on your record for as many as seven years!

What should you do if a banking institution turns you away because of an unfavorable report about your banking account?

Ask the bank for the name, address and phone number of the company that furnished the report, so you can request a copy and look for incorrect or missing information.

Under certain circumstances, such as if you’re denied a new account at a financial institution, you are entitled to a free report. 
 
If your financial institution was the source of an error in your check report, it is required by the FCRA to contact the check reporting service and have the record corrected.
 
Also be wary of services on the Internet or elsewhere that offer to help you find a bank or “fix” your check history.  These services usually involve a fee, and some may make
false or misleading representations.
 
Frequently balance and monitor your checking account to avoid bounced checks. Don’t close one checking account before you have established another one.
 
And before closing your account, make sure any outstanding checks have cleared and account fees have been paid.

 

Most of you use credit or debit cards to pay for online purchases.  I encourages you to take steps to make sure your transactions are secure and your personal information is
protected.

Although you can’t control fraud or deception on the Internet, you can take action to recognize it, avoid it and report it. 

Here’s a few tips:

1. Use a secure browser software that encrypts or scrambles the purchase information you send over the Internet to help guard the security of your information as it is transmitted to a web site. 

Be sure your browser has the most up-to-date encryption capabilities by using the latest version available from the manufacturer.  You also can download some browsers for free
over the Internet.

When submitting your purchase information, look for the lock icon on the browser’s status bar, and the phrase “https” in the URL address for a web site, to be sure your information is secure during transmission.

2.  Check the site’s privacy policy before you provide any personal financial information to a web site. 

In particular, determine how the information will be used or shared with others. Also check the site’s statements about the security provided for your information. 

The statements may includes “Privacy Statement”, “Acceptable Term of Use”(AUP), “Anti-Spam Policy”, and “Disclaimer”.

Some web sites.  Disclosures are easier to find than others. Look at the bottom of the home page, on order forms or in the About or FAQs section of a site.  If you’re not comfortable with the policy, consider doing business elsewhere.

3. Read and understand the refund and shipping policies of a web site you visit, before you make your purchase.  Look closely at disclosures about the Webster’s refund and shipping policies.

Again, search through the web site for these disclosures.

4. Keep your personal information private. Don’t disclose your personal information your address, telephone number, Social Security number, bank account number or e-mail address unless you know who’s collecting the information, why they’re collecting it and how they’ll use it.

5. Give payment information only to businesses you know and trust, and only when and where it is appropriate like an order form. 

Never give your password to anyone online, even your Internet service provider.  Do not download files sent to you by strangers or click on hyperlinks from people you don’t know.
Opening a file could expose your system to a computer virus or a program that could hijack your computer.

6.  Keep records of your online transactions and check your e-mail for contacts by merchants with whom you’re doing business.  Merchants may send you important information about your purchases.

7. Review your monthly credit card and bank statements for any errors or unauthorized purchases promptly and thoroughly.

Notify your credit or debit card issuer immediately if your credit or debit card or checkbook is lost or stolen, or if you suspect someone is using your accounts without your permission.

Below are some useful suggestions on how to minimize fees and finance charges:

Help keep the cost of credit down by paying on time and not exceeding your credit limit.  Do you know paying later or exceeding your credit limit will cause early expiration of promotional rates and may cause your APR to increase

- Avoid late payment by checking the due date on your statement when it arrives as it may vary from month to month

- Allow 5-7 days mail time for your payment to reach the credit company

- Ensure the fastest processing by using the remittance slip and envelope provided with your monthly statement.

- Avoid late payments by paying online or enrolling online automated payment service. It is fast and free. 

Avoid Overlimit Fees by never allowing your balance to exceed the credit limit shown on your monthly billing statement (leave room for finance charges).  You can view your balance online or call credit care company at any time at the toll-free number on the back of your credit card.

Reduce your finance charges by paying more than the minimum amount due.  Although you have the flexibility to pay only the minimum amount due, you can significantly reduce your cose of credit by paying in full or making larger payment.

Remember, you can avoid finance charges on your retail purchases by paying the balance in full each month before your payment due date.