Millions have errors

If you review your reports and find credit report errors, you’re not alone. I have seen reports that there are millions of credit reports containing mistakes, some of which are worse than others. This study also revealed that 1 in 20 consumers have errors on their credit reports so serious that they are probably paying higher interest rates on credit their cards and loans. This actually comes from the Federal Trade Commission.

Can cost thousands of dollars

Errors on your credit report can actually cost you hundreds of dollars over the course of a year or two in higher insurance premiums and higher interest charges. The fact is that even if the error seems innocent, it can have a negative impact on you.

You have rights

Several years ago our Congress passed the Fair Credit Reporting Act. This gives you the right to dispute items on your credit report with the appropriate credit bureau. If you find such an error, you will need to write the credit bureau and dispute it. You will need to send documentation supporting your position to both the credit bureau and the company responsible for the erroneous item. This could include any pertinent emails, faxes or letters, canceled checks (both the fronts and backs) and billing statements.

The credit bureau is legally required to respond within 30 business days from the day it received your letter. These 30 days are meant to give the credit bureau time to investigate your claim. However, the word “investigation” is very loosely defined. In fact, all the credit bureau has to do is go back to the entity that provided the information and ask it to verify the item.

The problem

The problem is the credit bureaus (Experian, Equifax and TransUnion) are not in business to determine who is right in these disputes. They will usually go with whatever the company that furnished the information tells them as they believe it’s in the best position to know.

At least three months prior

Most experts recommend that you get your credit reports at least three months before you apply for credit on a big items such as a mortgage. This will boost your chances of quick success. You can get your three credit reports free at the www.annualcreditreport.com. There are two reasons why you need a recent report. You want to see your current information and not information that’s six months out-of-date. Second, the personal report you will get is much easier to read (and understand) than the one the lender gets.

What else you could do

If you cannot settle your dispute with the credit bureau you still have some alternatives available. You can add a statement about your dispute to your credit file explaining why you disagree with the item. If you’re lucky, future creditors may take this into consideration when reviewing your credit applications. You can also involve the Consumer Financial Protection Bureau. The agency takes complaints online regarding credit report disputes but only if you first disputed the item with the appropriate credit bureau. The agency will send your complaint to the credit bureau and ask that it investigate it again.

Hire an attorney

Finally, you could get help from an attorney. Many attorneys will deal with these kinds of disputes on a contingency basis so that you pay nothing unless you get damages as the result of a settlement or from a lawsuit. You can usually get a free consultation upfront and the law firm might even help you draft the letter you would send to dispute the item.

The post How To Handle Credit Report Errors appeared first on National Debt Relief.

Understand the basics

The first thing you need to do to take control of your credit cards is to learn the meaning of the basic terms of minimum amount due, billing cycle and grace period. Taking these in order, the minimum amount due is the amount you must pay that month. You can always pay more but you can’t pay less.

Billing cycle is the days between the last statement and the statement you just received. These cycles are generally from 20 to 32 days.

Grace period is the number of days you have to pay your balance without having to pay a finance charge. This is usually 25 to 30 days.

It’s also important to understand the meaning of APR (annual percentage rate). It is the yearly percentage rate of the finance charge. It will be either a fixed or variable rate.

Stop erratic spending

The second thing you need to do to better manage your credit cards is to stop any erratic or impulse spending. It’s so easy to spend money these days what with all the shopping malls and online shopping marts that have been so cleverly designed to part you from your money. They make it so easy to go on a spending spree and completely lose control of your credit cards. Stop and think about your spending habits. If they’re a bit on the sloppy side and you do want to manage your credit card debt, you have to stop those bad shopping habits.

Pay within your billing cycle

The third step in taking control of your credit cards is to make sure that you pay within your billing cycle (as defined above) and that you pay the outstanding amount due.

Of course, this is much easier said than done. However, many credit card holders do use this effectively by timing their purchases and repayments within the billing cycle. Here’s an example of how this might work.

Let’s say you have credit cards with a due date of the 10th of the month. You could use the card to make a purchase on the 11th or 12th of the month, knowing that it will not show up on your credit card statement until the 10th of the next month, which would effectively give you at least 45 days (your billing cycle plus some grace period) to save enough money to pay it off. And you must pay off that balance before putting another charge against the card or you run the risk of carrying a balance forward, which would mean paying interest and accumulating debt.

If your credit card debt has spun out of control

If you’re so far into debt that it’s making you crazy with worry, the worst thing you can do is to do nothing. There are consumer credit counseling agencies available that could help you deal with the mess. There may be one in your area and if not, it’s easy to find one on the Internet. Just make sure that it’s a nonprofit and that it either offers its services free or at a very low-cost.

Alternately, if you have decent credit you might be able to get a debt consolidation loan and pay off all those credit card debts. You might also elect to hire a debt settlement company to help you reduce and consolidate your debts. Thousands of American families have found it to be the best way to cope with debt that’s gotten totally out of control and you might, too.

The post How To Better Manage Your Credit Cards appeared first on National Debt Relief.

Why choose debt consolidation

The most popular way to consolidate debts is through a debt consolidation loan. This is almost self-explanatory. You just borrow enough money to pay off all of your other debts. If you are able to get one of these loans, you should end up with a lower monthly payment and a lower interest rate.

The negatives of a debt consolidation loan

The biggest problem with a debt consolidation loan is that it does nothing to reduce your debt. If you owe, say, $20,000 to four different credit card companies and take out a loan to pay them off, you would still owe the $20,000. You just owe it to a different lender. In addition, a debt consolidation loan will likely cost you more money over its lifetime. As an example of this, if you were to take out a 7-year debt consolidation loan at 6% to payoff that $20,000, you would end up paying $4542 in interest charges.

Why choose debt reduction

These are two of the reasons why more and more families are choosing debt reduction over a debt consolidation loan. Debt reduction, which is often called debt settlement, is better than debt consolidation in that it can actually reduce the amount of money you owe on unsecured debts. When you owe less money, you can get out of debt quicker. Plus, you should have a much more affordable payment plan.

The cons of debt reduction

The biggest con of debt reduction or debt settlement is that it’s not for everyone. You must owe at least $10,000 and must be six months behind in payments on your unsecured debts to be a good candidate for debt settlement. In addition, debt settlement will have a negative effect on your credit score. Some financial experts believe that debt settlement will drop the average person’s credit score by around 80 points. This could easily move you from having an “average or OK” score to a “low” or even “poor” credit score.

Why people choose professional debt reduction

While there is no reason why you couldn’t do debt reduction or debt settlement yourself, most people choose to hire a professional debt settlement company. There are two good reasons for this. First, many people are a bit leery about trying to negotiate with their creditors or simply don’t consider themselves to be good negotiators. Second, it’s almost impossible to negotiate a settlement unless you have the money in hand to make an immediate cash payment to the creditor. To put this another way, if you are able to negotiate a $5000 debt down to $2500, you would need to have that much money available to immediately send the creditor in the form of a check or wire transfer.

And the winner is

Whether you choose debt reduction or a debt consolidation loan, is totally up to you, given your financial situation and your personal preferences. Would you like to be out of debt in four years or less? Or would you rather take more time to pay off your debt so that your credit score would not take a hit? Do you think you could handle the payments on a debt consolidation loan or do you owe so much you would never be able to make the payments on the loan? These are the types of questions you will need to answer before you can determine which is best for you – a debt consolidation loan or debt reduction.

The post Debt Reduction Vs. Debt Consolidation – And The Winner Is … appeared first on National Debt Relief.

Becoming more and more popular

Prepaid credit cards have become increasingly popular over the past few years. In fact I have seen estimates that $77 billion were loaded onto these cards last year and this is expected to increase to $168 billion by 2015.

Why they are becoming so popular

There are some good reasons why these cards are becoming so popular. For example, parents have found that prepaid debit cards are a good way to give their teenagers money yet keep control of their spending. Prepaid cards make good gifts and are handy for travel as they represent a way to carry cash without really carrying cash. And prepaid debit cards are good for people who do not have bank accounts or who have spotty financial records and can’t get a conventional credit card.

The risks of prepaid debit cards

The biggest problem with prepaid debit cards is that they are a thief’s or money launderer’s delight. This is due to the fact that they are so easy to turn into cash. Plus, they can come with very large fees. The banks that issue these cards charge different amounts for issuing them, reloading them with additional funds or sometimes even when you just check your balance.

Stay safe

If you use or think you will be using prepaid debit cards, there are some things that you can do to protect yourself. You should choose a PIN and then keep it secure. Don’t write it down and put it in your wallet or, worse yet, write it on the back of the card itself. When you use the PIN be sure to position yourself so that others cannot look over your shoulder or photograph it.

Read the fine print

You should shop around for a prepaid debit card just as you would shop around for any purchase. That way you can make sure you get reasonable fees. It’s also important to read the fine print so that you will know what these fees are. They could be everything from a balance inquiry to reloading the card or using out-of-network ATMs.

Know the rules

Make sure you understand the rules for replacing your card in the event that it gets lost or stolen. Be sure to have the card number, security code and customer service number written down and kept in a safe place.

Be return-ready

You may find that when you return an item, the store will require that the funds be added back to your prepaid debit card. This means it’s a good idea to make sure you hold on to it until you’re sure you won’t be returning anything that you bought with it.

Be careful how much you load on the card

A good rule of thumb is to not load any more money on a prepaid debit card than you could afford to lose. Since it’s very difficult to get a lost or stolen debit card replaced, you need to be sure that you could take the loss. In other words, if losing $500 would be a catastrophic blow to your financial life, don’t put $500 on a card. Keep it to something more affordable such as $200 or less. After all, you can always load more money onto the card.

The post How To Protect A Prepaid Debit Card appeared first on National Debt Relief.

Whose fault is it?

Why have we become so enmeshed in credit card debt? Some people blame the credit card industry. The credit card providers make it tempting to load up on cards. After all, if we didn’t have these cards, we wouldn’t be enticed to spend all of this money, right? Wrong.

Are we scapegoating?

Of course, the credit card companies do engage in some unethical practices. But the fact is, we’re really scapegoating the credit card providers for out terrible spending habits. Most experts say that any shady practices done by the credit card companies pale in contrast with how we use our credit cards.

How we mismanage our cards

The problem is that most of use our credit cards as a form of extra income when we want to buy something we really can’t afford. This is why an estimated 160 million people spend more than they earn.

A bad relationship

Putting aside our spending habits, it’s pretty clear that we have a poor relationship with our credit card companies. We tend to not pay off our balances each month. In fact, about 46% of Americans don’t pay their balances in full every month so end up accumulating hundreds or even thousands of dollars in interest and penalties. These penalties are for making a payment late or for going over our credit limits and are meant to encourage us to limit our spending instead of increasing it. Paying these fees is like throwing money down the drain.

How credit cards can help us

Credit cards were never meant to be an extra source of income. They were created to be a convenience and to save us money by giving us an extra 30 days of interest free money on the stuff we buy. Their interest rates were designed to penalize those who failed to pay their balances on time but, at least initially, were reasonable enough that we could use them in times of a financial emergency. If we use our credit cards that way, they can help with our financial health. In addition, many of today’s cards come with some kind of rewards. If you have one of these cards and charge up, say, $10,000 a month and get 2% cash back, that’s $200 of “free’ money a month – assuming you pay your balance in full every month.

When you use your card sensibly

If you use your credit card sensibly by paying off your balances every month, you should have a pretty darn good credit score. Since your score dictates how much interest you’ll be offered or what your credit limits will be, this can also help. For example, if you have a score of 696 and the lender’s cutoff point is 700, you would be missing out a better interest rate by just four points and basically paying additional interest for no good reason.

When credit card debt spins out of control

If you find yourself head-over-heels in credit card debt, there are options for getting it back under control. We here at National Debt Relief have helped thousands of Americans reduce their debt and become debt free in 48 months or less. Don’t let debt rule your life. Fill in the amount you owe under the “How Much Do You Owe?” section above and let us get started helping you get back onto the path of financial freedom.

The post Who’s Responsible For Our Huge Credit Card Debt? appeared first on National Debt Relief.

What happened

What happened is that millions of people did just that and in the past year alone, credit unions exceeded $1 trillion in assets. Maybe you were one of the people who made this move. If not, you might be wondering whether it would make sense or whether you’d be better off sticking with that big bank.

The advantages of a big bank

One of the biggest advantages of a big bank is accessibility. They usually have more branches and more ATMs. Some are even open weekends. For that matter, we have a bank where I live that’s open seven days a week and has branches in the supermarkets where we shop. No credit union I’ve ever heard of could top that.

Credit unions have their strengths

Credit unions are designed to serve local constituencies and are rarely available outside their local areas. Most have no ATMs except for one near or inside its offices. However, most compensate for this lack by reimbursing customers for ATM fees when they’re “out of network.” So, if you belong to one of these credit unions, you could use just about any ATM anywhere for free. Most also offer options for mobile banking. If yours does, you could use it to find ATMs in your area. Unfortunately, some credit unions cap how much they’ll reimburse for ATM fees – generally about $15 a month.

Account fees

Banks are notorious for loading fees onto checking accounts. These can be anything from monthly “maintenance” fees to overdraft fees. In face, according to one report I saw recently, the average monthly maintenance fee on checking accounts has grown by $0.18 to a total of $12.26. They’re also tough on overdraft fees and have actually mis-ordered transactions so that their customers had overdrawn their accounts without even knowing it. Plus, many now charge fees for using out-of-network ATMs, which average $2.60.

The winner

In comparison, credit unions are typically smaller operations, are owned by their members and pass their overheard savings onto them, which translates into fewer fees. In fact, more than 70% of the big credit unions offer totally free checking. On the other hand, only 39% of banks do. Credit Union overdraft fees are $20 to $30 and even those that do have monthly maintenance fees charge only from $2 to $5. So in terms of checking account fees, credit unions are the clear winners.

Customer service

Credit unions generally offer higher-yielding checking and savings accounts than banks. Big banks are doing better in terms of customer service, scoring a 77 on the American Customer Satisfaction Index. While credit unions have historically done better in customer service, they’ve slipped a bit recently. As they’ve been swamped with new customers, their satisfaction ratings have slipped 5.7% to a score of 82 but this still puts them tops overall for banking services.

Hard to beat

Big banks may have flashy commercials and a huge array of products but in general, credit unions are hard to beat. Most financial experts say that if you can get past the lack of ATMs and physical branches, that they’re the best alternative for banking today. If you look just at their fee structures, it’s probably worth opening a savings or checking account at one of your local credit unions. Plus, you’ll likely get more and better personalized services. However, if credit products are very important to you, you might be better off sticking with that big bank.

The post Should You Use A Bank Or A Credit Union? appeared first on National Debt Relief.

What happened to my friend

I have a friend who got divorced while there was $100,000 remaining on a home equity loan. He had promised to take responsibility for half of this and mailed his portion of the payment to her every month. The agreement was that she was then to make the payment using an automatic payment program at her bank. Unfortunately, she somehow muffed on a few of these payments. As a result her credit score dropped dramatically and so did his.

The net/net

Without getting into all the nitty-gritty, suffice it to say that he was ultimately able to persuade his ex to refinance that line of credit. Unfortunately she was unable to do so because of her low credit score. When my friend could no longer stand it, he discussed this with a friend who advised him to start managing both his and his ex’s credit.

Could not directly affect the outcome

My friend soon learned that 35% of a credit score is based on payment history or how well he and his ex handled their credit. There was nothing much he could do to affect that is except to keep reminding his ex-spouse that she should make her payments on time. But of course, he could not control this.

Credit utilization

A second important factor in computing credit scores is called credit utilization. In fact, this accounts for 30% of a credit score. This is an area where my friend could affect his score because was near the credit limits on all his credit cards. What he learned is that credit utilization is based on the amount of credit he had used versus his total credit limits. This is called the debt to credit ratio. For example, if he had total credit limit of $50,000 and debts of $30,000, his ratio would be 60%, which would be much too high. When my friend learned what a mistake he had made, he immediately brought his balances down to zero and his credit score increased dramatically.

Sent a note to the credit reporting bureaus

My friend next wrote to the three credit reporting bureaus and explained that due to a misunderstanding over automatic debits between his ex-spouse and her bank, there were a number of payments reported late to the credit bureaus over which he had no control. In a few months, his credit score was 776.

Didn’t help her score

Of course, this did not help her credit score because credit scores are not transferable. She needed to do a refinance of the loan but her credit was still stuck in the mid 650s. Beyond the late payments, her problem was a $7500 balance spread over a few credit cards that she was required to carry because she was unable to pay them off. This, of course, played a major part in reducing her credit score. My friend ultimately agreed to pay off his ex’s credit card bills and had her write the credit bureaus explaining about the late payments.

What he accomplished

What this accomplished is that my friend’s credit score increased, he is now in charge of his credit score and he and his ex are still friends.

Not for everyone

Don’t take this to mean that if you have credit card debt left over from a former marriage that you should rush out to pay it off. But it does mean that, depending on the circumstances, you and your credit score could both get ahead of the game if you were to pay off some or all of that debt.

The post Surprise – You Might Want to Pay Off Your Ex’s Credit Cards appeared first on National Debt Relief.

Why is your credit score important?

Credit scores are incredibly important because they determine whether or not you can obtain credit and how much you will pay for it. The reason for this is because the first thing any potential lender will look at is your credit score. A bad credit score could stop you from getting a credit card or even renting an apartment. It will also increase how much you have to pay for services such as electricity, cable and your cell phone. It can even have an effect on your auto insurance premium.

40% don’t know how credit scores are used

This article referenced a study done recently by the Consumer Federation of America and VantageScore Solutions. It found that two-fifths of those surveyed were not aware that mortgage lenders and credit card companies use your credit score to decide whether or not to grant credit and how much the credit will cost. Two-fifths thought that their personal characteristics such as marital status and age were used in computing their credit scores, which is totally inaccurate.

What lenders are required to do

Did you know that lenders must inform you of the credit score that was used when they made their decision about lending to you? Between one-quarter and one-third of those surveyed did not know this. But the fact is if you try to get a mortgage, are refused a loan or didn’t get the best terms or price, the lender must tell you which credit score was used in making its decision. This is important because it will tell you which of the three credit bureaus you will need to contact to get and review your report.

Credit repair services

Finally, more than 33% thought that credit repair agencies would always or usually be able to help correct credit report errors and improve scores. This is also not true. You must review your credit reports on a regular basis. If you find errors, the burden is on you to see that they are corrected.

Raising your credit score

If you are interested in raising your credit score here’s what you need to do. First, as noted above, be sure to keep your credit card balances low and never apply for several credit cards at the same time. Maybe most important, be sure to pay your bills on time every month without exception.

How to get your credit score

You can get your credit score free but you will have to jump through some hoops. For example, if you sign up for a free trial of FICOs (www.myfico.com) Score Watch program you can get your score free. But – be alert – you need to make sure that you cancel Score Watch before the end of your free trial or you will automatically be charged for three months’ worth of the service. The website http://quizzle.com will give you your credit score free but it’s not your true FICPO score. It’s called your CE score. And the website http://CreditKarma.com provides what it calls your New Account Score but, again, this will not be your FICO score.

Get and understand your score

If you haven’t seen your credit score recently or ever, you need to get it immediately. This is a case where ignorance is definitely not bliss. What you don’t know about your credit score could definitely hurt you.

The post What You Don’t Know About Your Credit Score Could Hurt You appeared first on National Debt Relief.

But there are limits

There are websites where you can get credit information free but they do have their limitations. Annualcreditreport.com is the government’s official website where you can get your credit reports free each year. You actually have three credit reports as there are three credit reporting bureaus – Experian, Equifax and TransUnion. However, it’s important to understand that you’re not getting your credit scores. You’re only getting your credit reports. However, all three credit reporting bureaus will allow you to see your credit score – for a small fee.

The full report

Many websites will allow you to see a summary of your credit report from Experian but only the website Quizzle provides the complete report. If you want to access your credit report more than twice a year, you will have to enroll in a paid plan. Otherwise, you can get it free every six months. In addition, Quizzle allows you to see your CE score. However, be aware that this is not your FICO score. Plus, it’s not what your lenders will use when they decide whether or not to grant you credit. But this will give you at least a good idea of how creditworthy you are. Just as important, Quizzle will analyze your credit and provide tips as to how you could make it better.

Information from TransUnion

The website, CreditKarma.com provides a summary of your TransUnion credit report, along with what’s called your New Account Score. But, again, this won’t be the same as your FICO score. In addition, CreditKarma provides your Vantage Score. The three credit bureaus developed the model on which this score is based. It’s helpful in that it gives your credit a grade from “A” to “F” and has other useful features such as a credit scores simulator that will show you how certain things you do can affect your credit score.

CreditSesame.com

This website is like Quizzle in that its information is based on your credit report from Experian. However, it does require you to purchase your credit report for nine dollars if you want complete access. You can get your Experian National Equivalency Score as wells as a summary of your credit condition. But, again, this is not the same one the creditors use. CreditSesame also has tips on services and products you could use to reduce the balances on your home loan and credit cards.

Not as good as it sounds

The website FreeCreditScore.com sounds like it would be a great choice. But what it offers is the Experian Plus Score. Seeing that score might be helpful but it isn’t the one lenders use when they decide how creditworthy you are. Another negative is that you must provide a credit card number when you sign up for your “free” credit score. You get a seven-day free trial. But after that, you must pay $14.95 a month.

Where’s Equifax?

Equifax does not have a free credit score service. To get your Equifax information you need to sign-up for a free trial and then enroll in a plan you must pay for . You just can’t find this information free anywhere – except via AnnualCreditReport.com.

In summary

The net/net here is that you should use AnnualCreditReport.com to get your credit reports free once a year. You could then use Credit Karma, Credit Sesame and Quizzle throughout the year. They can’t give you your true FICO score. But the scores they provide should at least give you an idea as to whether you’re headed up or down, as well as things you could do that would improve your credit score.

The post How To Get Free Information About Your Credit appeared first on National Debt Relief.

How you need to think about your rewards

One financial expert has pointed out that the way you need to think about points and miles on your credit cards is that you’re getting back a percentage of what you spent. This means if you’re not maximizing your rewards, you’re actually losing money.

A different way to shop

Here’s an example of what you can do if you view your points and rewards differently. Let’s say that want to maximize your travel points. In this case you should first check your airline’s shopping malls. In most cases you will find the same products at the same prices but if you buy through the mall, you’ll earn extra miles plus those you earn on your credit card. For example, you might earn as many as 2000 miles just by renewing your mobile phone contract through your airline rather than at www.attwireless.com. I also read of one person who earned 10,000 miles by buying a sofa.

How to use those miles

One good way to use those travel miles is not to buy flights but to buy upgrades such as from coach to business or first class. You might be able to buy a fare on United or American for $150 to $180 and then use 15,000 or 17,000 miles to buy an upgrade that otherwise might cost $2500.

Concentrate on one or two cards

Most people who are experts at rewards programs say that you should keep the number of your rewards cards to the bare minimum. If you have many different cards, you could easily lose track of how many points you’ve earned on each, which is something the loyalty programs actually count on. On the other hand, if you have just one or two rewards cards this will keep your points more on the top of your mind and you won’t be as likely to forget about them.

If you never travel

Even if you rarely or never travel you can still take advantage of rewards programs. You could redeem your points for dining out, gift cards, clothing or household items. For that matter, if you have a card that gives you 2% cash back on everything you spend, that’s like getting cash in your pocket.

Even if you don’t have a credit card

There are other rewards programs available for people who don’t have or don’t use their credit cards frequently. For example, there is the Southwest’s Rapid Dining program, which lets you earn points by dining out or going to a club.

Put them into a central credit card points bank

Is also a good idea to accrue all of your rewards points into a central credit card bank, like through American express or Chase. Each of these has a number of different travel partners and redemption opportunities for everything from music to books and groceries. You can then use TripIt or Award Wallet to track all of your rewards points and when they expire.
Don’t get carried away
While earning points, travel rewards or cash back is a good thing, don’t get carried away using those credit cards. If you don’t pay off your balances at the end of each month,

The post Don’t Let Your Rewards Points Go To Waste appeared first on National Debt Relief.