Understanding How Credit Card Debt Can Affect Your Credit Score

America has been facing financial difficulties in the past several years. The reason for the financial woes can be attributed mostly to debt. Debt can arise from many different areas such as mortgage loans, student loans and credit cards. Credit cards have for years been a way for people to buy misc. goods and/or services without needing the money up front. This type of consumer spending is what led America to the financial crisis that it faces today.

Credit cards normally charge a reasonable interest rate as long as you pay the balance every month. Conversely, credit cards normally charge outrageous rates when you are late on a payment, sometimes making it impossible for the customer catch up on his or her payments. All the while this is negatively affecting this person’s credit report. A credit report is a numerical assessment of a person’s ability to repay a loan that is not based on a person‘s income. Many credit card companies use this report as a means of determining whether or not they’ll grant customers the card.

Many consumers are unaware of their credit score and don‘t know whether or not they are helping it. The government has made credit reports available to all consumers for free once a year in order to be fair. Credit cards can be a great way to increase your credit rating if you decide to purchase an item and can make the payments on time, every time. In this way you will be able to reap the benefits of having a credit score that will enable you to purchase items of higher value in the future.

Companies that help consumers keep track of their credit report can be a good way to help them become financially responsible. The reason for this is if you have someone that is constantly keeping track of your credit report and whether good or bad it would be easier to go about taking care of unpaid debt. For instance, if your credit score was low it would probably because of poor decisions in the past in regards to credit decisions.

Maybe paying credit card payments late, not paying the bill on a mobile phone service, or becoming delinquent on any kind of loan will negatively affect your credit score. The credit report would detail what areas in your credit file need help in order to progress the credit score to a level more suitable to qualifying for future credit. A good credit repair company could tell you what type of steps you can take in order to create a better score.

If you get your credit report and your credit score is to your liking, a credit monitoring company would be able to aid you in maintaining such a score. Steps to be taken can be to take a small loan in your name and gradually pay back the loan over the course of a year. This type of financial responsibility will show up in a credit report.

Credit reports are normally given out by three main agencies, Equifax, Experian and TransUnion. Most credit reporting agencies base their scores on FICO which is created by Fair Isaacs Cooperation. Some financial institutions use other means of determining whether or not the person will be eligible for the financial services in which they offer. This means that even if your FICO score maybe good that you may still not get approved for the financial service in wish you hope to receive.

If you have not checked your credit score in the recent past, now would be a good time to do so. It is becoming more and more difficult to get credit extended to you based on the current state of the economy and unless you have a high enough score you probably don’t stand a chance of qualifying for anything with a decent interest rate. Get your free credit report and score online and keep track of building better credit. You will be so happy you did.

 

Correcting Erroneous Items on a Credit Report

Credit reports are requested by prospective lenders, credit card companies, and even employers to determine the financial stability of applicants. Whether you’re trying to apply for a profitable job position, obtain financing for your dream home, start a new business endeavor, or simply apply for new credit card, you’ll need to ensure that your credit report is free of negative items and accurately reflects your financial history. Although credit reporting agencies like Experian, Equifax, and TransUnion typically do an excellent job of maintaining the accuracy of their reports, there are some instances in which erroneous items may be filed. Luckily, it is relatively easy to dispute inaccurate information, provided you have the proper documentation and understanding.

Items That Can Be Disputed on a Credit Report

While it is not possible to dispute the credit score itself, you may be able to have negative items removed from your credit report if it can be shown that they are an accurate in any way. After the items are removed your credit score should improve within 30 to 90 days, depending on how long after a new score is issued. The following are items that may be able to be disputed:

  • Outdated Information

It is not uncommon for outdated items pertaining to delinquencies and defaults to be found on a credit report, even after the debt has been fully repaid. In addition, any debts that are older than seven years should not remain on the credit report, and can be removed if brought to the attention of the reporting agency.

  • Inaccurate Late Payments

Many times credit card companies or financial institutions will issue a negative item on a cardholder’s credit report even though the payment was submitted on time. It may be possible to have these notations related to late payments removed if you can prove that they are an accurate. Thus, it’s best to make credit card payments with automated bank transfers or checks that can be recorded and documented in the event that proof is needed during the dispute.

  • Items Caused by Fraudulent Activity

Unfortunately, credit card fraud is becoming increasingly common as fraudsters invent new ways to obtain credit card details over the Internet. Nowadays it is possible for fraudulent activity to go unnoticed for months or even years at a time if you do not closely scrutinize your credit report. Some credit reporting agencies will make the mistake of filing a negative item on your report because someone with a similar name defaulted on one of their loans. Luckily, after being brought to the attention of credit reporting agencies most cases of fraud are removed from the credit report and the credit score returns to normal shortly thereafter.

Filing a Dispute

To maximize your chances of success when filing a dispute with a credit reporting agency it is important to include the proper documentation along with your dispute letter. Although it is possible to file a dispute via e-mail or phone, for the best results it would be advisable to write a formal letter that describes the erroneous/inaccurate item, and why you believe it should be removed from your credit report.  Ideally, you should attach a copy of any statements that relate to the negative item (if applicable), and include a copy of the erroneous credit report with the questionable information highlighted or circled to simplify the job of the person responsible for reviewing your dispute. By filing a dispute in writing with the appropriate documentation attached you can prove that steps were taken to dispute a negative item in the event of a legal suit.

Why Your Credit Rating is So Important

Although we have heard it over and over and over again just how important it is to have a good credit score, somehow we just never seem to take it to heart. If you could count all the opportunities in life that pass you by because you have a less than perfect credit score, you just might be motivated to do something about improving it.

Credit Scores – the Good, the Bad and the Ugly

So then, what is a good credit score and how high does it need to be in order to get the best interest rates on loans, the lowest premiums on insurance and a good chance of getting that apartment rental or job you are applying for. Actually, you should always shoot for a credit score which is above 700, the higher the better. If your score falls below 620 you will be considered a poor credit risk and if you get any credit at all it will be at sub-prime rates. Any score above 760 is considered to be the upper echelon and will qualify you for almost anything.

Credit Applications

As noted above, most people are looking to improve their credit score because they are looking to have credit extended to them. This could be credit cards (revolving lines of credit), mortgages, car loans, personal loans and even installment plans on dental or medical bills. Any time you want credit extended to you, it is imperative that you have a score well above 620 points, over 700 if possible, or you may be denied or subject to extremely high interest rates.

Lower Insurance Payments

Then there is automobile insurance to consider. That auto you are driving is extremely expensive and insurance companies look at your credit rating as a risk factor. Other types of insurance underwriters also base premiums on creditworthiness. If you are looking for private health insurance, for example, your credit score will certainly factor into rates as well as the condition of your health and any preexisting conditions you may have. The lowest possible premiums on any kind of insurance, including homeowners’ insurance, are always offered to those with excellent credit scores.

Apartment Rentals

This is another area where people get into difficulties if their credit score is less than perfect. Apartments, houses and any type of property that is for rent is an investment for the landlord and he/she will want to make money on renting the unit. If you expect to find decent housing, you will need to have a good credit score in order to show that you can afford to pay the rent and that making timely payments is important to you.

Employment Opportunities

Finally, a good percentage of Americans just don’t realize how many employers run your credit before they even call you in for an interview. Along with your work history and criminal records, your creditworthiness indicates what kind of moral character you display. Whether or not you will be handling money or other valuables, your creditworthiness is a reflection of who you are.

It is about time we realized that having a good credit score is of vital importance in almost every area of your life. From applying for loans to getting good premiums on automobile insurance, your credit score will impact how much you pay, and whether or not you are even eligible for credit. Take the time to learn what you can do to improve your score if it is below 700 and also get a free copy of your credit report and score to make sure there are no errors or cases of identity theft. Your whole way of living will improve by building good, solid credit.

 

Caller ID Spoofing Gives Rise to a New Level of Identity Theft

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.

 

The Confusing Language of Credit

Although the laws are changing, there was a time when the only thing consumers were entitled to for free was a copy of their credit report once each year from each of the three major credit reporting agencies. However, as reported by Bloomberg Business Week, now recent legislation is making it possible for consumers to get a free copy of their credit score if they have been denied credit based on that score. As laws continue to change, one thing remains constant and that is our inability to understand just how we are graded in terms of creditworthiness.

Credit Bureaus

One of the first things that confront us is in understanding just what a credit bureau is. There are local credit bureaus that call us whenever we become delinquent in payments but there are also the national credit bureaus (Equifax, Experian and TransUnion) that keep tabs on anything and everything related to what we have and what we owe. Sometimes these credit bureaus are referred to as credit reporting agencies, which is actually a much better name for them. They are not the folks who call us when we are in arrears on payments but they are the ones who tell potential lenders, landlords and employers whether or not we deserve whatever it is we are applying for.

Credit Score, Credit History & Credit Report

Another area which is oftentimes confusing to the average consumer is the difference between a credit score, a credit report and a credit history. Actually, they are all related but a simple way of looking at it is that the credit report details your credit history. Think of it like a report card when you were in school. Your history is all the tests you took, the assignments you handed in and whether or not you were absent or late on any given days. That is all tallied up to give you a ‘report card’ which is your credit report. Based on the history detailed in your credit report, each of the three reporting agencies have some fairly complex mathematical formulas to come up with your credit score. This would be like your final grade at the end of the year.

Benefit of Checking Your Credit Report

Unlike your report card in school, at least you have the option to dispute any errors or fraudulent entries on your credit report. Students usually don’t question the grades their teachers give them. They may complain, but rarely dispute those grades. However, you are given the legal right to dispute any entries on your credit report if you feel they were made in error or that it could be a case of identity theft. In fact, you are encouraged to get a free copy of your credit report from each of the three reporting agencies once a year for just this purpose. If something is not right you can take steps to have it corrected.

The language of credit may be confusing but there are plenty of resources out there to help you have a better understanding of what it all means. Whether you are looking at ways to improve your credit score or are simply looking at how to correct an erroneous entry, help is available. Understanding your credit score may be another matter altogether as each agency calculates your score a bit differently. Even so, if you find a way to keep your payments current, don’t spend more than you make and can show that you use the money you earn wisely, your credit score should not be a problem. The real problem is understanding the language, but have no fear – there are plenty of interpreters out there who are willing to help!

 

Americans Saving More and Spending Less

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.