Filed under: Cards, Debt

Parents used to be able to assist kids with building a good credit score by adding them as an authorized user on a card. In the past when you were an authorized user on your parent’s cards you were able to borrow their good credit rating as well. When giving someone a rating FICO would essentially attach the credit records of people who listed you as an authorized user to your credit history. That way a child who wanted a card could first be added as an authorized user on their parent’s card and then when the child applied for his or her own credit card, the parent’s credit history was used to give that child a good credit score although that child had no individual credit history.

Well that can’t happen anymore. FICO shut that route about a year ago because they found people were actually making money by adding others to their credit cards as authorized users (for a fee, of course) to help people with bad credit ratings get good ones. You might still get a scam email promising to repair your credit score. If someone says they can fix your credit score quickly for a fee, run, don’t walk away.

Unfortunately, if you do have a bad credit score there’s no quick fix unless that score is based on inaccurate information. For example, if you look at a copy of your credit report and see credit items that are not yours or that don’t accurately reflect your payment history, correcting those errors and getting them off your report can improve your score quickly. But, if the information on the report is accurate, the road to improving that score can take a long time.

If you’ve gone through a credit crisis and want to improve your score, you must:

* Begin paying your bills on time each time. One missed payment can lower your score by 65 to 100 points.

* Pay down your debt as quickly as you can. The faster you can get your debt on each card to a 10% to 20% debt utilization ratio (total credit/total credit line), the faster your score will go up.

* Stop charging so you can get your credit paid off.

* Pay yourself first every month and build an emergency fund, so you’ll have cash to cover unexpected emergencies rather than depend on your credit cards.

Lita Epstein has written more than 20 books including the “Complete Idiot’s Guide to Improving Your Credit Score.”

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Filed under: Budgets, Debt, Extracurriculars, Home, Kids and Money, Shopping, Technology

It’s a simple fact that lying in a committed relationship isn’t really a good idea. And lying about money ranks right up there as one of the worst types of lies. Some even equate it to cheating… financial cheating. And almost one-third of adults in committed relationships has lied to their partner about money.

A survey by Lawyers.com found that 24% of adults in relationships state honesty about money is more important than honesty about fidelity. The survey also found that women are more likely to lie about money to their partners.

Results show that 29% of survey participants admitted that they lied to their partner about money, and most often the lies related to personal spending or spending on children.

With money at the root of so many relationship troubles, it is no wonder that this survey found trouble in paradise. As technology and society change, there are several more ways to spend money… think online shopping and auction sites, the proliferation of credit card offers in the mail, and an abundance of retail outlets.

Temptation is high and spending is made easy. A perilous combination when partners are relying on honesty but often not getting it.

Forensic accountant Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations through her company, Sequence Inc. Forensic Record-keeping. The Association of Certified Fraud Examiners honored Tracy as the 2007 winner of the prestigious Hubbard Award and her first book, Essentials of Corporate Fraud, will be on bookshelves in March 2008.

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Filed under: Budgets, Debt, Children and Money, Saving, Shopping, Simplification

With the Christmas shopping season in full gear, it’s important to remember these three basic money rules, so that this shopping season doesn’t bring a lump of bankruptcy coal for your stocking.

Cash is King
While it sounds easy to spend only the money you actually have, in practice it’s much more difficult. With consumers being bombarded from every angle to spend spend, spend and pay the consequences later, the easiest way to ensure that this holiday season doesn’t bring personal economic collapse is to use cash. Make your gift list, and then withdraw cash, and use it to make purchases. This will give you the discipline to spend only what you’ve. Each spending decision will need to be analyzed as to its importance. If you hear the call of the astounding special in aisle four, and decide to impulsively buy the special, you might have no money left to get your best friend a gift. Just like your mother told you; it’s all about consequences.

Don’t keep up with the Joneses
It’s very tempting to try and keep up with our well-off friends. We know that they’re not only going to purchase presents for anyone and everyone, they are going to spend a small fortune in doing so. While we all enjoy the spirit of giving, we can’t get carried away by it. Before you consider shopping, make a budget and see just how much money you’ve to spend this season. If you go into your shopping adventure knowing how much you can spend, chances are that at the end of the day, you’ll be able to stick to that plan. However, If you wing it and make it up as you go along, well that’s when trouble hits. Before you know it, you will have incurred credit-card debt that will take months or even years to pay off.

No Swift Fix
Don’t plan on paying for your holiday excesses by thinking that you’re going to “get rich swift.” Chances are that you aren’t going to win the huge lottery, or pick that stock that will return 1,000% next year. We need to live in reality, and thinking that your financial happiness is going to ride on winning the lottery isn’t particularly rational. The key to growing wealth is to save regularly and invest. There are no shortcuts.

Acting financially responsibly might be the best gift you can give — to your family, and to yourself.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com.

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Filed under: Borrowing, Budgets, Cards, Debt, Simplification

According to CardTrak.com, the average American household now carries a staggering $6,600 in credit card debt. When you consider that the interest rates on credit cards can range anywhere from 9% to 21%, the cost of carrying a balance on those cards can place perilous pressure on personal finances which are already stretched tight. If you really need to use those nasty little plastic debt generators, you need to be smart about it. The following tips, some of which are provided by Investopedia.com can give you an edge in winning the battle against debilitating credit card debt.

• If you have multiple credit card balances, make your largest payment each month against the balance with the highest interest rate.
• Make a budget plan for eliminating credit card debt. Track your spending and avoid frivolous buys until you’ve your credit picture under control.
• Avoid taking on new debts while you address old ones.
• Try to eliminate the practice of taking cash advances on credit cards. Those advances can be the most costly type of credit card use.
• Switch from credit card usage to a debit card. Debit cards are a consumer blessing because they work similar to credit cards but you’re spending money which you already have. The best part is that debit cards have no finance charges attached.
• Once you have your credit cards under control, try to keep your monthly credit purchases at a level that you can pay in full each month.

Credit cards can be a useful and beneficial financial tool but they have the ability to also quickly pave a path to disaster. Keep credit spending within the borders provided by your income. Make a monthly budget which includes a plan for credit debt reduction. Read your credit card agreement and monthly card statements so you comprehend the finance charges you’re paying and if all else fails, destroy those cards before they put you in financial trouble.

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Filed under: Debt, The Dolans

Ken and Daria Dolan are widely known as America’s First Family of Personal Finance.

Dear Ken and Daria: I’m worried that I might be in over my head when it comes to how much debt I’m carrying. How can I tell?

Well, the fact that you’re even asking the question is a good sign in itself that you need to get your debt under control. But most people ignore the warning signs until it’s too late….so good for you for tackling it head on, right NOW!

Here are some signs you are in over your head…

• You’re at or near the limit on your credit cards
• You’re paying bills late that you used to pay on time
• You’re only making the minimum payment on your credit cards
• You are tapping into your savings to cover your bills
• You don’t know how much you owe
• You worry all the time about being able to pay your bills

If any of that sounds familiar, it’s time to take action!

Your very first step is to get a true handle on how much you owe (here’s a handy worksheet that can help).

If you are in over your head, contact a non-profit consumer credit counselor NOW before you end up dealing with collection agencies and damaging your credit long-term.

A good source for help is the non-profit National Foundation for Consumer Credit at www.nfcc.org or 1-800-388-2227 to talk with a counselor near you. The initial consultation is free; after that, you will pay a monthly fee of up to $50 while you are in the program.

Well worth it to protect your credit.

Do you have a question about credit? We’d love to hear from you and will do our ideal to answer it here. Click here to shoot us an email.

Ken and Daria Dolan of Dolans.com have hosted their own national radio program for 22 years, anchored their own TV shows on CNN, authored six books on money matters, served as money contributors on CBS This Morning and have now launched a comprehensive web site and free e-letter at Dolans.com.

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Filed under: Cards, Debt

Some people think they have the ability to fix a credit score problem by putting a statement in their credit file. You can’t and it’s probably a waste of time. While the law does require that credit reporting agencies grant you to submit a statement of explanation when you dispute a negative mark on your credit report, these letters are not coded and used to compute your credit score.

Lenders who request your credit report will get your statement when they ask for your credit score, but many make a decision based purely on your score so it doesn’t help. If you’ve been battling it out with a creditor and don’t want to pay the bill, you could end up severely damaging your credit score. While credit scoring companies must investigate any credit information you challenge, they tend to agree with the vendor in ongoing disputes and will only take the negative mark off your credit report temporarily while investigating a complaint.

If the amount in question is small enough that you can pay it off without financial distress, you may be superior off paying the bill and taking the vendor to small claims court for a refund. Why hurt your credit score over a $30 or $50 dispute with a small vendor?

If the amount in question is much more massive and you want to continue fighting the dispute, be sure you tell a potential creditor to expect the negative report and explain why you won’t pay the bill. In some instances it might help, but don’t be surprised if you can’t get the ideal interest rates.

Lita Epstein has written more than 20 books including the Complete Idiot’s Guide to Improving Your Score.

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Filed under: Cards, Debt

If someone tells you that you shouldn’t shop for the ideal interest rates because it will hurt your credit score, don’t believe them. They’re just giving you a line to get you to sign on the dotted line.

Whenever you shop for rates within a short period of time, the credit scoring agencies lump these requests into one inquiry. For example, suppose you apply to four different mortgage lenders to see who will offer you the ideal rates and you make all these applications in a two-week period. This would be picked up as shopping for rates and would count as just one “hard” inquiry against your score.

Don’t drag out your search too long or the credit scoring company may end up counting the inquiries separately. So when you shop for rates try to keep it to a two week period or less to be sure you won’t hurt your score.

Also, don’t apply for a new car loan or a new credit card just before you apply for a new mortgage. You will lower your score and you’ll likely end up with a higher interest rate on your mortgage. Since you’ll be paying your mortgage over a much longer period than any other loan, put off any major purchases for about six months before applying for that mortgage loan and pay down debt. That’s the ideal way to get the lowest interest rate offers.

Lita Epstein has written more than 20 books including the Complete Idiot’s Guide to Improving Your Credit Score.

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Filed under: Borrowing, Debt, Ripoffs and Scams

I never thought the day would come that I’d be looking for ways to lower my credit score. I’ve always been a responsible borrower, and because of that, I have a very high credit score. That’s convenient when I want to finance a vehicle or open a new credit card.

But thanks to the new subprime mortgage bailout, it’s not so nice anymore. The government isn’t giving money to anyone, but irresponsible borrowers are being “bailed out” of their home mortgage problems. I don’t think it’s fair.

Here’s the solution: Be an irresponsible borrower with an Adjustable Rate Mortgage that is going to reset, and you get your rate frozen for another five years. Yahoo! That bargain rate that you got a few years ago will now continue for five more years, even though interest rates have gone up on the open market.

According to fellow WalletPop blogger Lita Epstein, if you have a credit score above 660 or you have 3% or more equity in your home, this plan is a no-go. Your reward for having good credit and for having built up equity is the chance to go and refinance your mortgage at higher rates.

But if you have a poorer credit score (below 660) and less than 3% equity in your home, it’s bonus time for you! Who would have thought that not-so-good credit and living in a house you can’t afford (as evidenced by your lack of equity) would pay off so big???

Imagine the bonus this is to the irresponsible borrowers. They’re probably going to save anywhere from 3% to 7% per year in interest charges with this rate freeze. On a $200,000 mortgage, that’s a savings of $6,000 to $14,000 per year in interest charges.

Sign me up!

You better believe that between now and the date when my adjustable mortgage rate is scheduled to expire, I’ll be busy doing two things:

1. Borrowing from my home equity line of credit so that I have less than 3% equity.
2. Doing whatever I have the ability to to get that pesky tiny credit score below 660.

Why should I have to refinance at a higher interest rate when the irresponsible people get an annual bonus of $6,000 to $14,000?

Anyone with tips on lowering my credit score, please leave a comment!

Forensic accountant Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations through her company, Sequence Inc. Forensic Bookkeeping. The Association of Certified Fraud Examiners honored Tracy as the 2007 winner of the prestigious Hubbard Award and her first book, Essentials of Corporate Fraud, will be on bookshelves in March 2008.

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Filed under: Debt, Home

Now that the details are available, there are clear winners and losers in the mortgage bailout plan negotiated by the Bush administration. Just to be sure this is clear — the plan does not involve a taxpayer bailout. It’s a negotiated agreement worked out with mortgage servicers and investors and does not involve using taxpayer money.

The agreement lumps the approximately two million people whose subprime ARMs are due to reset to higher interest rates into three groups. About 600,000 of them are expected to lose their homes to foreclosure, 600,000 are expected to refinance or pay the higher rates and about 600,000 will be able to freeze their rates. In order to get any help the home must be owner-occupied.

The group that’ll lose their homes to foreclosure are people who have been 60 days late with more than one payment in the last year. These folks will be assisted with the process of foreclosure by credit counselors. If you fall into this group, you might want to contact an attorney. Judges have denied foreclosures to banks because they can’t prove they actually hold the note. If your mortgage was sold a few times after closing then your current mortgage servicer might not have the original paperwork needed to prove ownership of the note and the banks seem to be having a hard time sorting all this out.

The group that won’t qualify for an interest rate freeze are those with credit scores above 660 and who have 3% or more equity in their homes. These folks will be expected to either pay the higher interest rate or refinance to a different loan.

The 600,000 that are expected to qualify for the interest rate freeze are people who have been making their payments on time, but have a credit score below 660 and less than 3% equity in their home. If you need help, call the Center for Foreclosure Solutions at 888-495 HOPE (4873). This hotline handled more than 50,000 calls in the third quarter of 2007, so you’re not alone. The center is a collaboration of housing counselors, mortgage servicers, investors and other mortgage participants. If you’ve trouble getting through or don’t find the help you want, you should then call a HUD approved Housing Counseling Bureau at 800-569-4287. If you like, you can find one near you using the HUD website.

Lita Epstein has written more than 20 books including “The 250 Questions You Should Ask to Avoid Foreclosure.”

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Filed under: Business, Social Software, web 2.0

With everyone and their cousin busy idea farming for the next monster Web 2.0 social media community site, there are going to be some oddities. And Product Clash, despite the “sounds good on paper” concept, is shaping up to be one of them.

The idea is this: you have a bunch of products like game consoles, cameras, or mp3 players and match them up against a similar product in a 1-on-1 “clash.” After registering for a Product Clash account, you can then vote for your favorite item of consumer merchandise by clicking on a link called “clash this!” You can also leave behind comments and blog about the clashes or click an affiliate link to order the item.

Right. But there are some obvious problems. For one, if the site is attempting to break into the comparison shopping niche by disguising itself as a social media site it’s in trouble because it isn’t any good at either. Besides a rundown of technical data, it has very tiny information on the products. That, and outlets for fanboys/girls of virtually any product are countless.

The Internet already saturated with resouces on consumer electronics, the future of Product Clash looks like a long uphill battle if not outright grim. Although it is still in beta, a huge problem remains: “clashing” products just isn’t very much, well, fun. And a glossy Web 2.0 interface isn’t going to help.

[via TechCrunch]

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