Manage Your Credit & Identity

Beware of Debt Settlement

Are you working less hours or maybe even unemployed? Are you having trouble paying your bills? You’ve probably heard the TV and radio ads that tell you they can settle your debt for cents on the dollar. These ads are promoting debt settlement companies, and they are in business to make money for themselves.

Well, I am here to tell you that you need to be cautious. Let me say it again be cautious.

Paying Fees When You Could Be Paying Off Debt

Debt settlement companies do try to settle your debt for cents on the dollar They may even be successful at it. But at what cost to you? Many will require that you pay them a fee up front in addition to a monthly fee to administer your account. That means you’ve added an additional monthly payment to your budget.

Debt Settlement Damages Your Credit Rating

Choosing debt settlement will damage your credit rating. If you truly can’t afford your bills, then consider calling each of your creditors to work out an agreement and save your fee money.

It Could Affect Your Tax Return

Lastly, if you are able to reduce the debt you owe, you may have tax consequences come April 15. The amount you save may be treated as income to you So you may owe income tax.

As your parents told you, if it seems too good to be true, then it probably is If you need this type of service, use a consumer credit counseling service, not debt settlement. There is a huge difference between the services. Research your options ahead of time if you are having trouble paying your bills.

What's not on your credit report?

Last week, I told you what was on your credit report This week, I’ll tell you what’s not there.

Your credit report doesn’t say much about you as a person It has your name, address (possibly your past address), and your social security number But, it doesn’t show your age, gender, race, nationality, or religion It also doesn’t list your income, although it might show your employer If you’ve recently changed jobs, that information might not be up to date.

Your credit report is a snapshot of your finances, not your life And, it’s not even a perfect picture of your payment history Credit reports can change daily as your financial life changes: purchases made on credit, new accounts opened, payments made (or not) There may also be errors that will need to be corrected whenever you find them.

Even though your report does not reveal everything about you, it is the most important document that you have to show the world how you handle your money What you do today will stay on your credit for years to come When you make a financial choice, think about how it will affect you in the future.

How to Read Your Credit Report

Last week, I told you how to identify a true credit score. Today, I will be telling you what is on your credit report.

Your credit report is a reflection of your financial life Which credit accounts you have, how much credit you have available to use, how you have used, how you make your payments, and any other information that is relevant.

If you have a credit card (notice, I didn’t say debit card) with a bank, this is what it might say:

(Your name) has a credit card with ABC Bank with the account number xxxxxxx-xx and owes $1,248 with available credit of $5,000 The minimum payment is $45 The account was opened 11/02 and the payments are C, C, C, C, -, C

What does that mean? The letter C means that the account was made “current” each month, which means your payment was made on time The dash means no payment was due that month This is a great entry for anyone’s credit report.

Here is another example of an entry on a credit report:

John Doe has a credit card with ABC Bank with the account number xxxxxxx-xx and owes $4,559 with available credit of $5,000 The minimum payment is $65 The account was opened 11/09 and the payments are 2, 3, 3, 3

What does that mean? It means that John Doe is not paying his account on time A 2 means he was 60 days past due and a 3 means he was 90 days past due (A 1 would be 30 days past due.) Do you see the pattern?

John Doe will have a harder time getting another loan or credit card with good terms Credit reports weren’t created to help you and I, they were created to help creditors decide whether to lend someone money Yes, you can look at your credit report, but almost anyone you do business with can run a credit check on you as well That includes landlords, employers, banks, loan companies and insurance companies.

A great credit report entry can help you, but a late payment account can hurt you A history of late payments will tell businesses that you don’t pay your obligations in a timely manner This is definitely something that you want to avoid.

Next week, learn what’s not on your credit report.

Are you getting the correct credit report?

How do you know if you are getting your correct credit score? This is a dilemma for many people.

Fair Isaac and Company, known as FICO, is what the lenders and creditor use when you apply for credit This is one of the factors that you are judged as creditworthy or not A while back, people tried to introduce a new credit scoring system That wasn’t successful in over taking FICO as far as lenders where concerned.

But when you as a consumer want to know your credit score, you may be getting something totally different Many companies, including the credit bureaus may be selling you a score calculated differently and on a different scale than FICO FICO uses a scale that tops out at 850 If you have a score of 760 or higher, you have an A+ FICO score With others use scales that go well into the 900’s, that 760 or above score isn’t A+ like you are thinking You would be considered a B You see how this is confusing.

To top it off, when you order your FREE credit report form www.AnnualCreditReport.com, you don’t get your credit score To get your FICO credit score, you will need to go to www.MyFICO.com and pay a fee to see your credit score Remember that each of the three credit bureaus, have a score and they are not necessarily the same number at each.

Guarding your personal information

I have been double checking my personal information and making sure that I have opted out with the companies I am dealing with That got me thinking about what happens to my information when a company closes.

So I started to do some research and don’t seem to find any answers I wanted When a company is open and they have your personal non-public information on file (name, address, account number, checking account number etc) most companies are required to comply with the Gramm Leach Bliley Act to protect your personal information They are required to disclose to you what they do with your personal non-public information Then you have the right to opt out so that they don’t share your information with non-affiliated third parties.

With that said, what happens when that company closes? Not much Recently a company that had your personal non-public information on file to expedite you clearing airport security closed There don’t appear to be any requirements of what to do with all the information they have on file.

At this point, the only thing you can do is to check your credit report and accounts on a regular basis to give yourself piece of mind.

Checking for counterfeit bills

In these challenging economic times and with technology being readily available, counterfeit money is in circulation In 2008, $64.4 million was in the US economy.

How to check if your bills are real? According to the US Secret Service, you should be looking for the differences between the same denominations of bills Check the portrait, the Federal Reserve and Treasury seals, border, serial number and the paper If you think the money is not real, refuse to accept it Ask for another bill If the bill is real, the person who has possession can easily exchange it at their bank.

Older bills, before 1996 are still in circulation and do NOT have these new security features and therefore may seem counterfeit to you Older bills are harder to detect Again, you simply refuse to accept them when receiving money.

Counterfeit bills are out there everywhere The person who possesses the counterfeit money is the person who loses So if you accept counterfeit bills and attempt to use them, it’s your loss (regardless of where you got them from) Check your change before you accept it to be safe.

Check Your Phone Bill for Fraudulent Charges or "Cramming"

You may have unauthorized charges on your phone bill.

Phone bills can be confusing There are various services charges and taxes associated with using a phone number You may be tempted to ignore the fine print However, I suggest you check your phone bill carefully Circle any charges you don’t understand and call your phone company for an explanation You may be a victim of “cramming.”

What is cramming? According to the FCC: “Cramming is the practice of placing unauthorized, misleading, or deceptive charges on your telephone bill Crammers rely on confusing telephone bills in an attempt to trick consumers into paying for services they did not authorize or receive, or that cost more than the consumer was led to believe.”

Could cramming happen to you? Yes Here are two common examples:

1 You signed up for a new phone service because they offered a low monthly fee However, you weren’t told that common services, like texting or long distance, weren’t included in the fee and you’d be charge extra for each message.

2 You used your phone to donate money to the earthquake in Haiti They said it would be simple and the charge would appear on your phone It did But then you find a new recurring “membership” fee on your account after that donation That’s a classic example of “cramming.”

Here’s the bad news Unlike a credit card company, you cannot contact your phone provider and dispute the charge Typically, the phone company refuses to get involved and you are left to fight this on your own.

So what are you supposed to do? You can contact your phone company to request to block third party charges on your phone bill Once you do this, you can no longer authorize charges either, so texting donations is out It’s an all or nothing option

You should be aware of your bills and look at them closely for anything unauthorized and take appropriate action Do you remember the telephone days of Ma Bell and the breakup back in 1984? Before the breakup, there was only phone company and charges were easy to trace Shortly after the breakup, it was still easy to track your charges because you were billed on one statement regardless of how many companies you used Those days are over Today, you need to carefully review your phone statements to protect yourself against fraud.

For more information on cramming, visit the FCC at www2.fcc.gov/cgb/consumerfacts/cramming.html

Paying by Check Puts You at Risk

When you want to make a purchase with the money in your checking account, do you actually write a check or do you use a debit card I am not talking about paying bills, which is relatively safe I’m talking about making a purchase at a store or a garage sale.

I recently read that some retailers no longer accept checks as a form of payment At first I thought this was strange, but then I realized that I couldn’t remember the last time I wrote a check at a store I haven’t carried my checkbook with me since I had my purse stolen years back It was a bad experience Did you know that your account number and bank routing number are clearly printed on each check? Not to mention your name and address That’s too much information Instead, I use cash and my debit card It’s easy and more convenient.

When you use a debit card, you give away less personal information No one can see your home address or your phone number Your driver’s license number isn’t written down for all to see You might think, “well it just goes in the register and then off to the bank.” But, that’s not the case If you’ve ever worked retail, you know that closing can be chaotic, with open registers and multiple people accessing each register as they balance the sales for the day Then, your personal information goes to the store office, to bank personnel, and then to the check clearing house They all have access to your information And, I’m not even getting into the computer systems that store this information and what can happen with that Who knows if one of them is taking your information for some fraudulent purpose?

The less people who see your information; the less chance of identity theft We all need to do our part to keep our personal information safe.

Are you confused about where to get your FREE credit report?

The ads tell you that you will get a free credit report, but then you learn you have to pay for a service to get the report. Those ads have confused so many people.

If you have been following this blog, you know to visit AnnualCreditReport.com. This website is the ONLY authorized source for a free annual credit report that’s yours by law.

As of April 1, the Federal Trade Commission has amended their law to combat this confusion. The other websites that offer free credit reports (with the purchase of another item and/or service) will have to have a statement that says you have the right to a free credit report from AnnualCreditReport.com, the ONLY authorized source under federal law and provide a link. Never again will you have to pay for your free credit report.

In addition, the AnnualCreditReport.com home page will no longer display ads from the three credit reporting agencies (Experian, Equifax and Trans Union). Some were lured away with these ads and were charged a credit monitoring fee by the credit reporting agencies. After you’ve ordered your free report, you’ll see the ads, but it won’t be as confusing.

Note that the radio and TV advertisements have until September 1 to comply with this change. Free means free! Remember that anything for free should not have you buying another service.

45 Days Notice for Retroactive Interest Rates

The New Credit Card Act of 2009 takes effect on February 22, 2010. To help you prepare, my blog will feature Nine Tips over the next three weeks.

Tip Number Nine

You credit card company will have to give you 45 days notice before they increase your balance with a retroactive credit card interest rate. This gives you time to transfer the balance or pay it off.

Beware: They don’t have to give you notice if you agreed to pay the balance within a set time period on a promotional offer. It also doesn’t apply if your account is past due.