At the best of times we have trouble keeping our credit scores within an acceptable range, but with the current debt crisis it is almost impossible. Although the debt crisis is called by a number of different names such as a recession or an economic downturn, the bottom line is still the same. Most of us are literally robbing Peter to pay Paul. If you have any hope of surviving the current debt crisis in order to come out the other end with a decent credit score, there are some things you might want to be aware of.
If You Have a Job Keep It!
Statistics have shown that there is a real jobs crisis. Just take a look at the fact that President Obama and current legislators have extended unemployment benefits and you will see that people just are not finding work as they were a year or two ago. In fact, Great Britain recently decided to eliminate 500,000 government jobs as part of their austerity measures. This was under the premise that it would enable them to cut back on corporate taxes which would then enable companies to snatch up those unemployed government workers. The tax money saved was meant to help them grow their businesses.
This didn’t happen and according to a report in the NY Times and it isn’t about to happen any time in the near future. Companies are going bust by the hour. You may be looking for upward mobility, but current conditions are not favorable for changing jobs. With so many businesses closing their doors, you just might land an employer who is about to be bankrupt. Without access to their books, you have no way of knowing how solid that business is. If you have a job, keep it!
The Great Credit Card Dilemma
It has also been reported by almost every major consumers’ group that people are now using their credit cards to pay monthly bills such as their utilities and to shop for groceries in order to make ends meet. Inflation is skyrocketing but wages are at a virtual standstill. The best advice here is to try to avoid using your credit cards if at all possible. Keep in mind that you will be paying interest on those expenses which is making already high bills even higher! What you might want to do in a situation like this is make sure that the amount you charge can easily be paid within thirty days so that those charges don’t accrue interest.
Of course, that pre-supposes the fact that you have a credit card that doesn’t charge interest if the balance is paid in full within that billing cycle. If you already have a balance which cannot be paid in full it will not work. What most financial advisors are suggesting is that you get rid of all your higher interest credit cards and only keep one on hand for emergencies only. (The operative word here is emergencies!) Most utilities companies and other debtors will gladly set up payment arrangements if you contact them timely before the due date. Once you have passed your due date it becomes much more difficult to get a payment plan.
In the end it is up to you to cut back wherever and whenever you can. Only use your credit cards as an absolute necessity and keep your job even if you feel you are not making enough money. You may find a better job and you might not, but hang on to the one you have until you are certain you have a better position. Take the time to check out a new employer before making the change. Surviving the debt crisis will take extra planning, cutting back on expenses and a little extra fortitude, but it can be done. With a little effort you can come out the other end of these trying economic times with a decent credit score. Save now – spend later.
If you have ever wondered why you don’t seem to be able to stay on top of your bills, a recent report issued by the New York Times can answer that question quite easily. You are probably earning at least 6.7% less than you were during the height of what is being called the Great Recession.
It is difficult enough to keep up with recurring bills such as utilities, rent/mortgage, automobile payments, credit card bills but when you are earning $6.70 less on every hundred you make, it is almost unbearable. Not only are you earning less, but prices just keep on going up. Inflation is at a breakneck speed and it does not appear that it will level off any time soon.
According to a study conducted by two former officials of the Census Bureau, the median household income is now at $49,909 which marks a total decrease of 6.7% from December of 2007 when the recession officially began. During the recession household income only fell 3.2% which is why it is so dismaying that we have fallen so low when Washington tells us the recession is over.
Americans are not only unhappy with the current state of affairs, they are downright angry. When polled, most people state that leaders are letting them down and that it’s politics as usual. This does not appear to be good news for either the Democrat or the Republican parties as the caucuses are in full swing.
President Obama is calling the financial situation an official ‘emergency’ and is asking for Congress to pass his jobs bill. Many analysts feel that it doesn’t stand a chance of passing even though there are some strong spots in the bill. However, at a cost of $477 billion, it is more than Washington is prepared to spend at the moment. The bill itself is a blend of public works, tax cuts and unemployment benefits which Republicans are none too pleased with.
The two men responsible for the report on the current state of household income, John F. Coder and Gordon W. Green, Jr. find that the American standard of living is significantly reduced. Oddly, our standard of living is reduced but joblessness is waning as well. They find that there are two main factors contributing to this situation.
First of all, there are growing numbers of people outside the workforce. These are categorized as those neither working nor seeking a job. The second factor is that hourly pay is being held low and is not in keeping with the rate of inflation. Of note are the rises in the cost of oil and food which have risen significantly. What is most surprising about these facts is that during the recession, wages rose faster than inflation.
The pair noted that a great number of people who became unemployed during the recession had to take a sizeable decrease in pay just to get a job again. In fact, the situation is so critical at the moment that many of the country’s leading economists claim that the recession is far from over.
For the average consumer in the United States, this means tightening our belts and really keeping an eye on our own debt. If all you can make is minimum payments, then at least keep up with them. Economists suggest that we charge less, pay more and watch our own personal finances. We could be in for the long haul if things don’t improve soon.
Also, take the time to keep track of your credit report because hard economic times also tend to lead to rising amounts of identity theft. Make sure to order your annual free credit report and score so that you can make sure that everything on your report is of your making. If not, dispute it as soon as possible. Times are not getting easier and you need to know that any debt on your report is fair and accurate.
One of the reasons why we are urged to monitor our credit reports is because of the huge amount of credit card fraud that has been plaguing consumers around the world. Recent research has indicated that banks are among the easiest to infiltrate simply because their automated tellers on the phone require so little information before giving the caller access to your accounts. New technology which rolled out last month is an effort to ensure the identity of the person using the credit card in an effort to prevent fraudulent use of other people’s credit information.
What many people might not understand is that the thief doesn’t actually need to have possession of your card. Yes, there are times when your credit cards are lost or stolen, but credit card fraud is most often the case of someone gaining access to your account number and your personal identifying information such as your address and/or phone number and sometimes even the three digit security code on the back of the card.
New technology is rolling out almost by the day to help prevent identity theft and the newest ‘gadget’ is something called Netswipe which made its debut in August of 2011. There is also a plug in for Word Press that does much the same thing. The principal behind both innovations is that the person ordering online is able to ‘swipe’ their card with a web cam and the merchant is then able to verify that the person ordering a product or service is actually holding the card and entitled to use it. Remember, the bulk of credit card fraud is the result of unsavory characters getting hold of your credit card info but not actually having the card itself.
For the consumer, this is good news because it is another mode of identity protection that can help them keep their credit score in good standing. For merchants, it could be a good thing as well because the cost of such innovations as Netswipe is significantly lower than traditional card swipe systems merchants currently employ. The developer of Netswipe, Daniel Mattes, is going to charge 2.75% for processing fees which in reality is perhaps less than half what most merchants are currently paying.
The bottom line for consumers is the fact that greater care is being taken to protect their identities. There has been so much identity theft over the past couple of decades that many consumers have unsatisfactory credit scores as a result. It will still be necessary to monitor your credit report from each of the three credit scoring companies (TransUnion, Equifax and Experian) because there still isn’t a foolproof way of protecting your identity 100% of the time.
Some consumers choose to order one report every 4 months so that they can have an idea of what is going on with their report throughout the year, but this may present some inherent problems. One thing which many people aren’t aware of is the fact that companies and lenders do not all report to the same agencies. For example, your mortgage holder may report to Experian whereas your credit card company may report to TransUnion and so on.
In order to monitor your credit report throughout the year, it may be better to contract with a credit monitoring company that charges a monthly fee. These companies notify you by email, text message and sometimes even by phone whenever a change is made to any of the reports they are monitoring. If you didn’t make a recent purchase then you can immediately dispute charges before the damage is done. Until such time as a foolproof identity protection system is in place, take the time to monitor your credit report.
In recent news, there has been a lot of attention given to a new way in which potential thieves are accessing our personal information. Although criminals have been using something known as ‘caller ID spoofing’ for years to defraud consumers out of money, it is now feared that they will be using spoofing to steal our identities in order to charge thousands of dollars against our name.
What Is Caller ID Spoofing?
Anyone old enough to remember back to the days when caller ID first came out will remember the joy we felt at being able to tell whether or not we wanted to answer the phone. “Oh, it’s just my mother-in-law, let’s pretend we aren’t here!” For years this helped us to avoid the ‘bill collectors’ if we didn’t have the money to pay or to avoid those annoying sales pitches during dinner. However, new technology is able to make it appear as though the person calling is other than who they are. In other words, if you subscribe to a caller ID spoofing service you simply tell the program what number you would like to pop up on the recipient’s caller ID and that’s just who they think you are.
How Caller ID Spoofing Can Affect Your Credit
Consider for a moment that with this service it makes it possible for thieves to access your bank account via telephone to gain information such as how much money you have in the bank, where you made your most recent purchases and even what kinds of deposits are automatically made to your account each month – and worse yet, what day of the month they are made! Remember, the bank’s automated system ‘thinks’ the call is coming from your phone number and will then start detailing the items requested.
Chase and Bank of America Not Well Protected
In an article posted in the New York Times, a consumer advocate named Edgar Dworsky put the theory to the test. Armed with just a bit of the consumer’s personal information, Mr. Dworsky called the automated systems of Chase and Bank of America for credit card holders. The article refrained from stating what that information is for fear of unleashing further thieves on an unsuspecting world, but the article did go on to say that Dworsky was successful at both of those financial institutions. The automated systems recognized the spoofed phone number as being that of the consumer and proceeded to give over the information Dworsky requested.
Not Enough Being Done to Protect Consumers
According to the article in the Times, both phone companies and card issuers can do more to protect their consumers but strict enough measures are not being taken. It is reported that their excuse is in terms of customer convenience. Bank of America and Chase are reported as saying that customers use automated systems for the convenience and that if they have to enter too much identifying information it will just defeat the purpose. However, given the choice between being left open to identity theft and a bit of inconvenience, most consumers would probably gladly spend a few extra moments entering identifying info.
At a time when we are having enough problems keeping up with our credit report and maintaining creditworthiness with a decent credit score, caller ID spoofing is the straw that broke the camel’s back. Since there is no immediate solution to the problem, it is recommended that you continually monitor your credit report and make doubly certain you never divulge your information to anyone on the other end of the line unless you are 100% sure you know the identity of the caller. Until stronger security measures are in place, this may be your best line of defense.
Working to restore your credit is not always an easy endeavor, especially if you have more than one account in arrears which is affecting your credit score. With an easy to use online credit score estimator, sometimes referred to as a credit score calculator, you can estimate approximately what your current score is as well as what it will be in the future.
Six Questions to Answer Using a Credit Score Estimator
There are actually six different categories which most online credit score estimators use to calculate a rough approximation of your current score. Of course you will need to know what has been reported to the credit bureaus (Equifax, Experian and/or TransUnion) along with how much money you currently owe in back debts. This will also include current debts, such as outstanding balances on credit cards. The questions usually fall into these categories:
- Negative items listed on your credit report
- Number of open and closed accounts listed on your credit report
- Total of all credit card accounts
- Sum of all current credit card balances
- Within the past 6 months, how often you have applied for credit
- The age of your oldest loan or open credit card
However, the second question usually has multiple parts. The number of open and closed accounts listed on your credit report also fall into rough categories. For example, you may be asked how many of the following accounts are listed on your report:
- Credit Cards
- Finance Accounts
- Auto Loans
- Student Loans
- Other types of loans or revolving lines of credit
Each web site you visit will have a different variation of these questions, but they will be quite similar. The purpose for this is because your FICO score is based on certain criteria and in order to estimate your score it is important to have the information handy for the calculator to evaluate and give weight to.
How to Get a Copy of Your Credit Report
There are a few ways in which to get your credit report, all of which are free but some ways will not reflect on your credit score. The first thing you should realize is that every time a creditor runs your credit history it will reflect on your credit report. If you apply for credit and are denied, you are legally entitled to a copy of your credit report for free but keep in mind that each inquiry is reflected on your report as is the fact you were denied credit. The law also states that each and every consumer in the United States is entitled to a free copy of their credit report from each of the three credit reporting agencies one time per year.
Many people contact each of the reporting agencies individually but this can be time consuming. There are, in fact, credit monitoring companies that can help you get your free credit reports while also monitoring any changes that occur. There is a fee for the credit monitoring service but the reports themselves are free. Every time a change occurs on your credit report you are notified of the change which enables you to keep tabs on whether or not there are any errors or fraudulent entries being made.
Once you have a copy of all three credit reports for free, you simply plug in the information requested on the credit score estimator and you will have a pretty close approximation of what your FICO score will be. Remember, the government entitles you to a copy of your credit report so that you can monitor what is being reported but you would need to pay for a copy of your credit score. For this reason, many people regularly take advantage of free online credit score estimators.
It would seem as though three years of economic turmoil would be enough to send anyone over the edge, but Americans are still being beaten down day after day with the debt crisis that is assailing not only us, but the entire world it seems like.
According to finance professor Werner De Bondt and his associate Richard H. Driehaus from De Paul University Center for Behavioral Finance, we are in a vicious cycle from which there appears to be no end. Americans are starting to feel the weight of the problems besetting them since the mortgage meltdown of 2008 ushered in what is being called “The Great Recession.”
Actually, the pair feels that, for the most part, Americans have three different reactions to the current financial problems besetting our economy. Some are angry at the debt crisis and the way in which government attempted a bailout. Others are expressing anxiety, not only about their own future but the future of our economy on the whole. A third group of people are simply resigned to the situation and feel that there may be no way out.
In a recent article in the Personal Finance section of the MSNBC website, De Bondt is quoted as saying that Americans “have had it…..with this whole thing,” referring to the elite group of Washington politicians and Wall Street big businessmen. He says that our worries are only natural if you look at what has been transpiring over the past few years.
Literally millions of Americans are out of work and have no hope in the near future of finding a job. Companies are downsizing, homeowners have been foreclosed on and millions of loans have gone into default. It seems as though the bubble burst just as many of us were pulling ourselves up out of debt that we incurred when the credit card wars lured us in.
For years, vying for our business, credit card companies were mass mailing credit cards to consumers around the country in order to get them to sign onto high interest rates. Unfortunately, tens of millions of us fell into the credit trap which led to bills we just couldn’t pay. For a while all went well until they kept raising our limits to the point where even paying the monthly minimum was beyond what we could afford.
At some point many people became aware of what they were doing to their credit scores and simply tore up those cards. Now they are paying the price for it because the economy is still on a downward spiral and it is becoming increasingly difficult to keep up with current bills let alone pay off old debt.
Actually, people are behaving fairly rationally, according to George Loewenstein, economics and psychology professor at Carnegie Mellon University. They are spending less, saving more and recognizing that the economy is not recovering as quickly as Washington said it would. The time has come to rely more on our own resources and less on government – a message which appears to have been heeded.
If you are looking for some sound advice to help you weather the current debt crisis, the first thing to do, as Loewenstein observed is save more and spend less. Secondly, keep tabs on your credit report. If you are like 90% of working class Americans, you are probably worried about whether or not your job will still be there tomorrow.
This means it is time to sincerely think about paying down the debt you have without running up any more. Make sure that your report details debt that is truly yours and not an error or case of identity theft. By keeping a tight reins on your finances and monitoring your credit, you should be able to withstand the current problems until the economy bounces back.
There are a multitude of consumer advocate groups up in arms about the way in which the three credit reporting agencies, TransUnion, Equifax and Experian are rating consumers’ ability to pay future debts. It all ties into the new laws pertaining to credit cards and the ways in which those agencies are allowed to rate your income.
According to Liz Weston writing for MSM Money, lenders are now using a new ‘secret’ way to evaluate your creditworthiness, the income estimation model. In fact, there are more than one model for estimating consumers’ incomes as all three of the credit reporting agencies use their own version. This is significant because lenders not only look at your credit history, but how you can be expected to pay further credit. In other words, they look at your income.
However, the problem with this is that the credit bureaus are not required to actually report your creditworthiness based on reported wages. They make their own models based on certain criteria such as how you have paid your bills in the past, the amount of outstanding credit and then they come up with some kind of calculation that will project how much more money you could feasibly borrow and still be able to make the payments on. In fact, you are not even required to report how much money you actually make.
Unless they can get this information from the Internal Revenue Service (you would need to give permission) they have no way of knowing what you make which is why many decisions are based on your history of making payments. Lenders figure if you have been paying your bills on time then obviously you are making enough money and if you have been paying them steadily, then you are probably creditworthy for future loans.
In addition to these unfair methods of evaluating your creditworthiness based on the amount of money the reporting agencies ‘feel’ you are making, they will not provide your actual wages to lenders unless they pay for them. Now consumers are getting what amounts to a double whammy because lenders are not apt to pay extra for the information on your actual income. Instead they will simply base their decision on what the reporting agencies tell them your creditworthiness is for future loans.
When it comes to your credit score, there are certain things which won’t actually count for or against you. While these things may matter to a lender, they are not allowed to base your score on the length of time you were on your job, how much money you make, whether you have been refused credit, how long you have lived at your current address, and whether or not you own your home.
It’s amazing how all this adds up to the fact that lenders can pretty much do what they want when it comes to approving new loans. You could have an exemplary credit history but if the reporting agencies say you are not creditworthy then you may lose the loan. You might only make $8 an hour and be in debt over your head but if you have found a way to pay your bills on time a lender might grant you a loan for $100k.
Because of all these inadequacies in the reporting and decision making processes, consumer advocate groups are calling for tighter reins on the ways in which consumers are evaluated. In the meantime, it is vitally important to monitor your credit report, get a copy of your credit score and make sure that all information is as accurate as possible. Since this is all that a lender has to go on, you want your credit report to shed the best possible light on your ability to pay a loan.
Even the United States government isn’t immune to debt and this is a problem which is all over the news of late. Not only can the government not meet their current debt, but it also looks as if there is a possibility they will go into even greater debt all in the name of stabilizing the economy. Perhaps someone in Washington should have been looking at the government’s annual credit report!
U.S. Economy Cause for Concern in Foreign Markets
Not only are Americans worried about the state of the economy, but foreign nations are also a bit concerned. Those who are especially vigilant in watching what is going on here would be countries such as China to whom we are in debt. The growing concern is that the United States will default on its debt which has a rebound effect throughout the entire world. But what does this say to those of us who are concerned about going to college and the availability of government grants and guaranteed student loans?
Some Grants Already Cut
Although students who will soon be going back for the fall session have already been told what the amount of their Pell Grant will be, there is still concern as to whether or not that money will be available. Summer Pell Grants were already cut which led many students to fall behind in their certification programs while others will need to finish up a degree program after the fall session. More and more students are inundating the financial aid offices of their colleges and universities looking for information on whether or not they will be getting their money which is necessary to continue on in their education.
Uncertainty Grows in the Department of Education
According to CNN Money, the Department of Education is trying to work as closely as possible with the Treasury Department in order to get particulars on how the present state of the economy will affect students who rely on government aid to pay for their education. It is this growing uncertainty which should be teaching us all a lesson.
The Importance of Good Credit Standing
Consider the worst case scenario. What would happen to your college age children if the government did default on their debt and were unable to offer adequate funding to those students who rely on it to pay for tuition, books and even the cost of living? As parents we may not have adequate credit standing to take out a personal loan or even a secured home loan which is based on our credit score and credit history. As is evidenced by the current crisis in the United States government, defaulting on debts would almost certainly affect future credit.
Taking Steps Now to Avoid Future Problems
Even though there is some amount of optimism in the short term, these problems may not soon go away. Parents are advised to keep an eye on their own credit scores by requesting a free annual credit report from the three reporting agencies. Take care of debt problems now in the event that government funds will not be available in the future to help put your children through college.
By requesting your free credit report from the three reporting agencies, Experian, TransUnion and Equifax, it is possible to begin repairing bad credit before it gets any worse. Whether you have fallen behind on bills, have been the victim of identity theft or simply have erroneous marks on your report which can easily be remedied, you can’t begin to fix what you don’t know is broken! Your child’s academic future may very well depend on your credit score if the government is unable to continue offering current grants and student loans.
According to reports released by some of the leading financial analysts in the country, there are an amazing amount of inaccuracies on your credit report that can hold you back from getting what you want out of life. It is not good enough to put your credit report on the back burner until you are contemplating a major purchase or investment of some type because by then the damage could already be done!
Who Has Been Sitting in My Chair?
Your credit report is so much more important than you know because it can have a direct impact on virtually every area of your life, from getting that dream job to renting a condo on South Beach. By the time you clear up errors or fraudulent entries it could be too late. The guy next door is going to work every morning sitting at the desk which should have been yours and you are still stuck ten miles inland on the outskirts of the Everglades while some stranger is sitting on your balcony sipping frozen daiquiris. Perhaps it sounds like a modern day rendition of Goldilocks and the Three Bears, but someone could be sitting in your chair because you were busy looking the other way.
Where Should I Be Looking?
We know that identity theft is a huge issue since we are living in the digital age. You should be getting a copy of your credit report annually to make sure that it contains no inaccuracies which need to be corrected. If you find any blemishes due to charges you didn’t make, it could be a mistake but it could also be identity theft! Unless you know what is there you have no way to counteract human error or downright fraud. Some experts even advise that you check your credit report more often than once a year. According to a recent article found on the MSN Money website, you can space your three annual credit reports from the major reporting agencies, Experian, TransUnion and Equifax, evenly throughout the year. Also, you may wish to join a credit monitoring service that will alert you any time there is activity on your report.
Pay Attention to Details!
Also mentioned in the MSN Money report was the fact that we fail to pay attention to important details. While we are busy looking at what is listed on our credit report we forget to make sure that all of our personal information is accurate. Make sure your contact information is correct as well as any other personal identifying information such your Social Security number or date of birth. You would be amazed at how often these are incorrect on credit reports! This is especially important if you have been working diligently to restore your credit. If your personal identifying information is incorrect then it stands to reason that any progress you make may not be on your free annual credit report! Those clerks in the reporting agencies are not detectives so they more than likely will not hunt down the right person to add positive marks to their credit history.
The key to good credit (in addition to paying your bills on time!) is to keep a watchful eye on what your credit report is saying about you. Reporting inaccuracies are much more common than most of us are led to believe and often the ultimate cause of being denied the things we want most in life. Someone could indeed be sitting in your chair at the moment because you were too busy looking the other way.
Something which consumers should always be aware of is what is on their credit report and in the United States there are three major credit bureaus that have slightly different information. However, the federal government has legislated The Fair Credit Reporting Act (FCRA) which mandates that TransUnion, Experian and Equifax must provide consumers with a free copy of their credit report once a year is it is requested. If you want a copy of those reports you only need contact each company to request a copy by U.S. mail, fax or online.
Without knowing what is on each report it is extremely difficult to know what might be impacting your credit score. The three major credit bureaus have different criteria listed so it is vital to know exactly what potential lenders are seeing and why you should obtain your annual copy of all three reports. Once this information is available you can either begin repairing your credit on your own or utilize the services of a credit counseling agency to help you streamline the process.