Archive for April, 2009
When and why you should check your credit report
The importance of checking your credit report to make sure there are not any erroneous entries in it. Doing so will help you when you need to apply for a loan, know what you need to do to improve your credit score before you apply one, and even help ensure your identity has not been stolen.
Is Your Business “Red Flag Rules” Compliant?
Beginning tomorrow, May 1, any business that extends money, goods, or services on credit will be required to follow the Red Flag Rules. These Rules, part of the Fair and Accurate Credit Transaction Act, require businesses to take the lead in preventing the rampant crime of identity theft.
Under the Red Flag Rules, more than 11 million financial institutions and service providers - from lenders and creditors to utility service providers and even hospitals - must take extra precautions to prevent identity thieves from applying for a loan, service, or medical attention using others’ personal information. These businesses have one more day to put their plans into writing and into practice. They must have procedures in place for quickly detecting and responding to the warning signs of ID theft - before processing the loan or credit application, or extending goods and services on credit. Supervisors must train staff to follow these new procedures, and the procedures must be periodically updated to combat the latest fraudulent methods and techniques. In short, businesses must prove that they are on perpetual high alert for signs of ID theft.
What are Red Flags?
Red flags can include a fraud alert or credit freeze placed on a consumer’s credit report, altered or forged documents, lack of correlation between Social Security number range and date of birth, and the list goes on. Some of the warning signs seem fairly obvious, but the new law requires businesses to not just identify these flags, but also take immediate action against them - before the credit or service is issued. Identity Theft 911’s latest newsletter provides additional useful information on becoming Red-Flag-Rules compliant.
Mixed response to the Rules from the healthcare community
The American Medical Association and over 20 other medical societies are protesting the new government-mandated requirement. They feel that the Rules should be limited to financial institutions, utility companies, auto lenders, and other true "creditors." But the FTC argues that medical providers are creditors too, since they extend healthcare services to patients before collecting payment. And with 373,000 victims of medical identity theft each year, it seems sensible to require medical providers to do their part in preventing the crime.
Amidst the grunts and groans about the new government-mandated requirement, there are medical offices that are finding the Rules easier to implement than they originally thought. Often, simply tweaking privacy practices already in place through HIPAA (Health Insurance Portability and Accountability Act) will make an office Red-Flag-Rules compliant.
As Janet Compagna of Pediatric Healthcare Associates says, “Your first reaction when you hear about it is ‘This is more work, and who’s going to do it?’ But once you start peeling back the layers of that onion, I think you’ll find that these rules really are just an enhancement of HIPAA. If you have a good HIPAA program in place, you don’t have to start from scratch.”
Of course, time will tell how effective the Rules really are in curbing ID theft, what wrinkles need to be ironed out in their implementation, and how strictly the FTC enforces compliance. As a patient, a consumer, or a borrower, you may experience an additional level of scrutiny before receiving medical care or credit. But know that it’s ultimately for your protection.
Credit Cards for Teenagers: Educational Tool or Gateway Drug?
For many families, cash allowances are so passé. Now, it’s all about loading up a pre-paid card for your child’s wallet, and tracking their purchases online.
VISA has partnered with PAYJr.com to create the PAYJr VISA Buxx card, a reloadable prepaid card designed especially for teens.
"This prepaid card gives teens flexibility and spending independence, in addition to teaching them personal financial management," PAYJr.com says.
How the card works
Teens and parents can load money onto the card electronically, and then the teen can use the card independently. Parents are kept in the loop about their teen’s spending, as the PAYJr system provides SMS text messaging or email notifications to keep parents and teens aware of card activity, including balances and loads to the card.
The PAYJr system also provides a way for parents and teens to track the teen’s earnings, as well as their spending. For example, a parent can load funds onto the teen’s card once a set of chores has been completed. Or parents can set up a regular payment (or "load") to the card for allowances.
The PAYJr VISA card system can tie chores and finances together, and provides extra support to ensure parents and kids are aware of card charges, bill due dates, and more.
Credit education or just keeping us hooked on the credit habit?
The current credit crisis makes it clear that we need a better way to educate people about credit and its true costs. But is doling out more plastic - no matter how parentally monitored - the answer? While the PayJr card isn’t technically a credit card (it’s pre-paid), it still looks and feels like one. It even lets you design your own card using a favorite photo, making it even more fun to use.
Has anyone tried this system? Do you find it’s a good way to teach your kids how to handle credit responsibly, or is it just getting them hooked at an early age?
No Credit Check Loans: Easy and Efficient Finances at Reliable Rates
Lee Jonson asked: Earlier lenders were averse to the idea of providing financial assistance to borrowers with imperfect credit history. The era seems to have finished as lenders are now offering no credit check loans. In other words, the credit profile of a particular applicant has nothing to do while applying for the loans. Bad [...]
No Credit Check Loans: Worry Free Financial Assistance
Mack Grawhill asked: People with blemished credit history find the going tough when the matter comes towards availing loans. They are not usually offered any financial assistance and are considered risk prone. In such a financial state, it is not possible for them to meet some of their key personal demands. However, now the lenders [...]
New Website Tells if You Qualify for Mortgage Relief
Do you know if you’re eligible for help under the U.S. Treasury’s new "Making Home Affordable" plan? 7 to 9 million homeowners in the U.S. will qualify for a loan modification or refinance under this initiative - are you one of them?
The Home Preservation Foundation, myFico, and Money Management International have just launched a new website - MortgageReliefOnline (MRO) - that lets you know instantly if you might qualify for a loan modification or refinance under new government assistance programs. Instead of waiting for a response from your mortgage servicer, check the free and confidential MRO website first. A brief online quiz will instantly tell you your eligibility.
If you are eligible, you can enter your contact information to receive a phonecall within 48 hours. A credit counselor from Money Management International will contact you to explain next steps.
MortgageReliefOnline.com is an efficient, trustworthy way to get a sense of your eligibility, but states that only your loan servicer can tell you for certain whether you qualify for government assistance. Your lender is likely to take you more seriously, though, if it sees that you’ve gone through the MRO website, and that a counselor has helped you to prepare the paperwork needed to complete a refinance or modification.
96% of consumers do not know credit score model that used by lenders
While keeping an eye on your credit report and checking your credit score regularly is a good idea, your credit score alone may not be telling you all you need to know. In fact some 96% of consumers have no way of knowing which credit score model potential lenders will be using, and that can make it difficult to determine the true value of checking their credit scores.
The Right Way to Shop for a Credit Card in the Crisis
One of the key characteristics of the credit crisis is that credit card shopping has gotten harder. Not only have the minimum credit score requirements gone up, but some credit card issuers have stopped offering some of their most attractive perks, like credit card rewards. Indeed, finding a credit card in this economic landscape is different from the times when credit was flowing freely.
Know your credit score
There was a time when you simply needed to have a credit score higher than 620 to get a credit card with a competitive interest rate. But that’s not the case anymore. Now, credit card issuers are scrutinizing credit card applicants with credit scores lower than 720. That’s not to say you won’t get a credit card if your credit score is 680 or 700, but you might not get the best interest rate. Anything you can do to improve your credit score before applying will help you chances at getting a better rate.
It’s not just about you
As credit card default rates increase, credit card issuers look deeper to identify factors that could predict a charge-off. Things like where you work, where you live, and where you shop could affect your ability to get a credit card. If you live in an area where there is high unemployment, you may have a more difficult time getting a credit card. That’s because higher charge-off rates have been linked to high unemployment.
The card you sign up for won’t always be the same
Credit card terms continue to change. Even cardholders with good credit scores are seeing their interest rates increase and their credit limits slashed. Bait-and-switch games are prevalent right now. Chase Bank was recently sued for adding a monthly fee and increasing the minimum payment on credit cards when the original terms didn’t include those conditions. The bank did agree to stop the finance charges, but only after being sued.
Keep in mind that credit card issuers typically have the ability to change your credit card terms at any time, for any reason. When new credit card rules take effect in July 2010, card issuers won’t be able to take advantage of consumers the same way. But for now, what they say pretty much goes.
Where to find the best offers
Shopping around for a credit card is even more important than ever to ensure you’re getting a good deal. But, it’s a good idea to thoroughly review credit card offers before applying for them. Since credit card inquiries hurt your credit score and card issuers are stricter with credit score requirements, you want to keep your credit card applications at a minimum.
Start looking at the bank where you currently hold a checking or savings account. If you have a good balance and few to no overdrafts in the past, you may qualify for a credit card with your bank. You can also review offers that come to you in the mail (making sure to read the fine print before signing up for them), or visit a site like CreditCards.com to compare different cards that you may qualify for.
And remember, when you do get your credit card, make sure you use it correctly. Keep a low balance and pay your bill on time to reduce the risk of having your rate increased or credit limit cut. These actions have the dual benefit of helping to improve your credit score.
Don’t Let Medical Bills Ruin Your Credit
Medical bills are the leading cause of bankruptcy according to AARP, the interest group for people over 50. Unfortunately, many people neglect their medical bills without realizing the impact that those unpaid bills could have on their credit score.
How Medical Bills Can Hurt Your Credit
After you receive medical services, your physician or hospital will bill you for any portion that wasn’t covered by insurance. Just like any other bill, medical bills have a due date. If you don’t pay by the due date, your bill becomes past due. Hospitals will only send you so many past due notices before they give your account to a third-party debt collector to resume collection efforts.
When the debt collector receives your medical bill, one of the first things it will do is report the account to one or all of the three major credit bureaus (Equifax, Experian, and TransUnion). The medical collection account is considered a serious delinquency and can remain on your credit report for up to seven years, the maximum amount of time permitted by law.
Your credit score - the number creditors and lenders often use to approve your applications for new loans and credit - is based solely on information that’s in your credit report. Since having a collection account on your credit report indicates you have a seriously delinquency in your credit history, your credit score will drop when a new collection is added to your credit report. The more medical collections accounts you have, the lower your credit score will be.
Protect Your Credit from Medical Bills
One of the easiest ways to keep medical bills from impacting your credit score is to pay your bills when you receive them. If you can’t afford to make payment in full, contact the hospital’s billing department to make payment arrangements.
Even if you have health insurance, don’t assume that your insurance company will always handle bills in a timely manner. If you receive a bill that should have been covered by insurance, contact your insurance company to find out why the bill wasn’t paid. It could have been a simple oversight by hospital billing or the insurance claims department. Insurance companies often cover only a certain percentage of medical bills, so you might be responsible for some portion of medical debt after the insurance company has covered its part.
To find out whether you have unpaid medical bills out there, check your credit report.
To be doubly safe, you might contact the hospital or physician’s billing department to check the status of your account, especially if you’ve received any medical services within the past year. Sometimes, just because the medical bills aren’t on your credit report doesn’t mean they don’t exist. By contacting the medical provider, you’ll know for sure whether you have outstanding medical bills that could end up hurting your credit.
When Will We See Lower Credit Card Interest Rates?
Remember being called into the principal’s office because you did something bad? That must have been how the credit card companies felt this week, as they made their way to the White House under President Obama’s orders.
Obama offers stern message
The credit card companies have grown pretty unpopular pretty quick among the American people (especially to those who have had their interest rates hiked, their limits cut, or weird fees added to their balances out of the blue). Many of these practices that seem so unfair will go away come July of 2010, when new Federal Reserve regulations kick in. But the people, the President, and many other politicians are saying that’s not fast enough. They want reform now.
It all boiled down to a half hour meeting yesterday in the Roosevelt Room. Obama gave the credit card execs a stern talking to, hoping to prompt voluntary changes (like clear, easy-to-read monthly statements and terms). It remains to be seen what, if any, concessions the creditors will make in response to the lecture.
Lobbyist pressure buys credit card companies more time
Unfortunately, it’s not looking like Congress is going to be able to force changes from the credit card industry anytime soon, either. A House bill and a Senate bill were both originally pushing for stronger reforms on a faster schedule than the July 2010 Fed’s regulations. But both bills have recently had their timelines extended due to increased pressure from the banks.
The House bill, which will go to a vote on the House floor next week, had its effective date pushed out to either 12 months after it passes or July 1, 2010 (whichever comes first). The Senate bill, originally intended to take effect immediately after passage, has now been re-written to allow for a 9-month lag time.
Ultimately, we may end up seeing very little true reform. Credit card companies are using this time before Federal and other government regulations kick in to hike interest rates and set other precedents that will counteract any changes they’ll be required to make next year. As Ed Mierzwinski of the U.S. Public Interest Research Group wrote: “Every day of delay is millions of dollars in unfair fee income. Every day of delay means more families cannot buy things to stimulate the economy (or save to buy things later), as they are forced to pay usurious credit card interest rates.”