PT Money » Credit Cards and Credit

Not My Debt. What Do I Do?

PT — Thu, 22 Oct 2009 17:32:00 +0000

What should you do when you have unpaid debt in your name that’s not exactly your debt? I recieved this email from a reader and thought I’d share with you guys (my emphasis added):

“I went to work for a man 5 years ago and he wanted me to have a credit card but the bank couldn’t set it up so that he was on the card and have me, a non-relative, as the secondary on the card, so I got the card in my own name and he was supposed to pay it off each month. He did not do so. It now has a balance of $4800 even though I have not worked for him for 2 years. He rarely makes a payment. I have never made a personal charge or personal payment on this account as this was not to be a personal card, only for doing business in his name. I was the nanny for his three girls for three years.

Before I left his employ we did get him added to the account as someone with equal responsibility but then Bank of America would not release me from the account because I have excellent credit and he has bad credit.

The account goes to collections at the end of November. Bank of America says that they will reduce the account to $2400 if someone pays it off before it goes to collections.

I have all the paperwork and his signatures and copies of letters to and from Bank of America showing his taking responsibility for the debt and letters showing that they won’t release me from the debt because of his credit. My desire if for my husband and I to get a home equity loan on our house (which will be paid off in 6 years) in order to redo the kitchen and the bathrooms.

Will the paperwork I have to back up my story allow someone to loan us the home equity money or will it be a detriment to our attempts to get the loan?

If my husband should unexpectedly pass away will my personal credit be so bad that I will be unable to get a credit card or home equity loan under my name?

Do I: A. Continue to ignore it and ignore the collections calls that may come my way? Suffer with a big ding on my credit for 7 years until it is discharged? or B. Make the deal and pay it off myself to save what is left of my credit even though it is not my debt?”

I’m not a legal expert. But I can tell you that if my company (I work for a large software corporation) didn’t reimburse me for my approved business expenses, I’d file suit immediately. This is their debt that I incurred ONLY because I’m trying to do my job.

So obviously, my first thought is to take the former employer to small claims court. The paperwork you have, types of charges incurred, along with the employer/employee relationship will show that he is responsible. I can’t see a reason that a court wouldn’t hold him solely responsible for the debt.

But court will take some time. And BOA has given you until the end of November to settle. It seems like a good deal to me. I’d go ahead and pay them the $2,400 and then take your former employer to small claims court. Sue him for the charges, damage to your credit, and headache. Then, once you’re awarded the judgement. Send that paperwork to the credit bureaus to clean up the dings to your credit. Then you should be able to get that home equity loan, no problems.

UPDATE: I recieved some more info from the reader. This may help clear up some of the questions in the comments.

Thanks for letting me know you answered my question on your blog. I have not paid on the debt yet. I think I’ll call BOA again next week. A few weeks ago I spoke to the man I worked for and he told me again that he would take care of it. Empty words.

While I worked for this man he was sued numerous times. He ignores them. He knows this is his debt. He would just not show up in court. So if he would not show up then what happens?

My understanding from your blog is that if I take him to court, I would have legal, court ordered, proof of my story which I would use to fix my credit.

And if he doesn’t show up to court, what happens to the suit? Do I automatically win? Or is it rescheduled and rescheduled?

Fixing my credit would be a good thing. Paying on the debt just makes me mad.

Right now I am in limbo, leaning toward paying the reduced debt. I don’t want to sue him if it is going to be a long drawn out thing because he will not show up to court.

Thanks so much for taking the time to put this on your blog and send me an email. I really appreciate your time.

I advised her to contact her State’s labor board and pick their brains about moving forward. I told her that they’d likely award her the suit if he didn’t show and she had the proof it was his expenses.

What do you guys think? Do you think the court would award her the money? Should she pay the debt using the deal BOA is giving her prior to going to court? Will she ever improve her credit? Should she expect to do so, given that it was her who actually used her own personal credit card?

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Low Score Got You Down? How to Establish or Rebuild Your Credit

PT — Tue, 06 Oct 2009 11:30:53 +0000

I’m no credit expert, but I know there are plenty of wrong ways to go about trying to establish or rebuild your credit. We hear advertisements for these services on the radio all the time. You may even see ads for their services here on my blog (not my choice). With the help of the NFCC though, today I’d like to share some of the best (scam-free) tips for establishing or rebuilding your credit.

There are many good reasons to have a positive credit history. Scoring a good deal on a mortgage or auto loan are the first two that come to mind. Beyond that, it’s nice to have positive credit when applying for a job, an apartment, auto insurance, even cell phone service. It’s hard to escape the need for good credit in our lives. That being the case, you’ll want to put your best foot forward.

Keep in mind, the following advice isn’t meant for those who find themselves stuck making poor choices with their credit. If you are totally clueless about credit and have trouble reeling in your spending, consider reading some Dave Ramsey.

Establish or Rebuild Your Credit

Here are some things you can do to establish or rebuild your credit:

Get Your Credit Report – You can get your credit report from many different places, but only one, annualcreditreport.com, is truly free.

Open Checking and Savings Account – While not tracked on your credit report, lenders may ask about any checking or savings accounts you may have and use it to help your cause in lending decisions.

Aim for a Mix of Credit Account – Establishing different types of credit accounts, both installment (car loans) and revolving (credit card), can improve your credit score.

Consider Using a Co-Signer

“Obtaining a loan in the absence of any credit history can be difficult, sometimes requiring a co-signer to guarantee payment. The loan is usually structured where the primary borrower is expected to make the payment, with the pay history reported in both names. If the borrower defaults, the lender will approach the co-signer, and missed payments will be reflected on both credit files. There is somewhat of a risk to the co-signer, but if handled responsibly, co-signing can be an effective way to help another person obtain and build credit.”

Consider a Secure Credit Card – This is a credit card that is tied to a deposit you’ve made to the bank or credit union.

Take Out a Small Personal Loan – Hook up with a local credit union and open a small personal loan. Pay it off responsibly and look for your score to improve.

What Not to Do

As a bonus, here are some credit fixes that are no-no’s according to the NFCC:

Don’t Apply for Too Much Credit
Don’t Fall for the Credit Repair Schemes – Building your credit takes time and is hard work. There are no shortcuts.
Don’t Pay to Piggyback

The information in this post was provided by the NFCC. If you need financial advice, consider reaching out to an NFCC Member Agency at www.DebtAdvice.org

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Top 0% Balance Transfer Credit Cards

PT — Fri, 25 Sep 2009 05:46:04 +0000

An updated list of the top 0% balance transfer credit cards is below.

I recently shared my experience with effectively using 0% balance transfer credit cards to help in my debt reduction plan. That was back in the day. These days it’s become a bit harder to find a good deal on a 0% interest rate credit card. The new credit card rules, the economy, and credit card companies wising up have all had a big effect on the kind of deal you can expect to get from one of these cards.

But, the cards aren’t completely off the market. Some cards are still available and may make sense for someone trying to transfer some debt while paying it off. That’s why I’m presenting some of the top 0% balance transfer credit cards available today.

Be careful though, there are plenty of dangers with completing a 0% interest rate balance transfer. You need to be aware of those before you get going with one of these cards. If you’ve read and understand the risks, keep reading.

What Makes a Good 0% Balance Transfer Credit Card?

Deciding which credit card is best depends on your particular situation and the involves examining the following five factors (the first two are by far the most key though):

The Promotional Period – This is the length of time that the 0% promotion lasts. In other words, once you transfer your debt balances, how long will you have before you are charged interest on the debt. The longer the period the promotional 0% interest rate lasts, the better the deal you’re getting. Most promotions are around 6 months these days. It’s important to remember that the promotion doesn’t exclude you from making regular payments. It only helps you to avoid the interest charges associated with the debt.
The Transfer Fee – This is the amount you will pay to make the transfer. You used to be able to make the transfer without a fee. But these days it will cost you 3%-5% of the balance transferred. If you’re lucky, there will be a cap of $75 or $90 on the fee.
Interest Rate on Purchases – In the event that you’re going to use the card to make additional purchases, you’ll need to consider the initial purchase interest rate. Some cards come with an initial 0% interest rate on purchases. I recommend not using this card for new purchases though. After all, you’re trying to get out of debt.
Extras Before and After the Promotion – Some cards come with instant bonuses. And some have nice rewards programs that could be used after you pay off the transferred balance. This is just something extra to consider.
Interest Rate After the Promotion – If you don’t think you’ll be able to pay off your debt by the time the promotional period is over, this is what you’ll have to start paying on the remaining balance. Something to consider if you think the debt will still be around and you can’t make a second transfer.

An Example: Lower the Interest Payments on Your Debt

Let’s say you currently have $10,000 in credit card debt on a single credit card with an interest rate of 20%. You’ve decided to pay off this debt and you’ve established a plan to pay it off in 1 year. Your payments will need to be $926.35 each month to completely pay off the balance. Over that time period, you will pay $1,116.13 in interest payments alone. In effect, you had to pay 11,116.13 to pay off the 10,000 you borrowed. Yikes!

But, if you transferred your balance to a 0% interest rate credit card (12 month promotional period and a 5% balance transfer fee), you’ll pay just $500 extra over the 12 months. That’s a savings of over half your interest payments. That’s a smart move if you’re committed to getting rid of the debt. If you’re in this situation, here’s some cards that might help you out:

Top 0% Balance Transfer Credit Cards

All of these cards offer 0% balance transfers with no annual fees.

Discover® More(SM) Card – American Flag

This is by far the best 0% credit card offer available today. No one else is promoting a 12 month balance transfer rate. Using the example above, you could save over $500 by transferring your debt balances here while you pay them off. It’s a nice reward card too, offering 5% cash back on certain items. Here are the details:

12 months!, 5% transfer fee
no annual fee
5% cash back on travel, gas, restaurants, and more
1% on all other purchases
a standard rate between 11.99% variable and 18.99% variable
it’s patriotic!

Miles by Discover® Card – 6 mo at 0%, 3% transfer fee, no annual fee; a standard rate between 11.99% variable and 18.99% variable; 1,000 miles each month you make a purchase for the first 12 months; book travel through any airline without restrictions; use this card if you only need the 6 months transfer and you want to earn miles on future purchases

Discover® More(SM) Card – 6 mo at 0%, 3% transfer fee, no annual fee; 5% cash back on travel, gas, restaurants; a standard rate between 11.99% variable and 18.99% variable; use this card if you only need the 6 months transfer

Citi® mtvU™ Platinum Select® Visa® Card – 0% APR on purchases and balance transfers for 6 months, if you qualify, based on your application and credit history, 3% transfer fee; no annual fee; 17.24% variable rate after initial 6 months; 10 reward points for every dollar spent on certain items during first three months; up to 2,000 in reward points annually for good grades; points for paying on time and for staying within your credit line; great for students (see more student credit cards)

Citi® Forward™ Visa Card – 0% APR on purchases and balance transfers for 6 months, if you qualify, based on your application and credit history, 3% transfer fee; no annual fee; 17.24% variable rate after initial 6 months; 10 reward points for every dollar spent on certain items during first three months; lots of ways to earn extra reward points; points for paying on time and for staying within your credit line; great for students (see more student credit cards)

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5 Ways to Improve Your Credit Score

PT — Tue, 08 Sep 2009 15:23:53 +0000

Let’s talk credit scores. Today I thought I’d cover why your credit score matters, as well as suggest some ways to improve your credit score.

Why Your Credit Score Matters

Your credit score is an important part of your financial portfolio. We typically spend a great deal more time thinking about our assets (i.e. bank balances, investments, real estate) than we do our liabilities. But there are some big wins to be had on the other side of the balance sheet. It does matter what kind of rate you get on your mortgage, how flexible your business is, and whether you land that next high paying job. Those big wins matter. And they’re all affected by your credit score. Also known as your FICO® Score.

The Fair Isaac Corporation (FICO) set up the FICO® Score so that lenders could quickly determine if you’re to be trusted when it comes to paying back debt. They suggest that the higher the score, the more likely it is that you will be able to pay back a lender for money borrowed.

“FICO® scores help lenders make accurate, reliable and fast credit risk decisions across the customer lifecycle. The scores rank-order consumers by how likely they are to pay their credit obligations as agreed.”

Obviously all kinds of lenders (credit card companies, mortgage companies, banks, etc.) use this score to help decide if they want to work with you. If you need to use those products, then you’ll want the most favorable interest rate possible. A high score can mean a low rate on your mortgage.

Other companies also use the FICO® Score to determine if they want to do business with you. For instance, cell phone and TV service companies often need to determine how credit worthy you are before they invest a great deal of upfront cost in you. A high score can help you avoid a big deposit requirement to set up an account.

Lastly, I have seen reports of employers using the credit score to make hiring decisions. Someone with a high score is apparently more likely to be responsible at work.

Given all those reasons, it’s probably a good idea to at least do some research and try to improve your credit score. Even most people in the anti-credit camp will agree that they need to depend on a nice credit score to get a decent mortgage rate.

See Your Credit Score

Now understand this: there aren’t really any legit ways to quickly boost your credit score that I know of. It takes time to improve your score. Be very wary of any offers to instantly improve your credit score.

Also, the 5 points I make below aren’t new bits of information. You could find all of this information on Fair Isaac’s website. But what I will do is give you some specific action steps, not just generalities.

Take a look at the factors in the chart below that make up your credit score. It’s these 5 factors that my tips will be based on.

Improve Your Credit Score

1. Pay Your Bills On Time – This is the biggest factor that the credit bureau’s use when it comes to determining your credit score. And rightfully so. Most lenders are most concerned with whether you’ll pay them back on time. If you’ve shown a good track record with this in the past, then you’ll be trusted in the future.

Take action: Don’t miss any payments. Review your free credit report and ensure you don’t have payments that were misreported as late. Also, make note of any unusual accounts you see on your report. A late payment on an account that isn’t yours shouldn’t be on your report. Next, take the steps to clean up your credit report by requesting that the items be removed.

If your late payments are legit, then there’s nothing you can do but try and make good payments going forward and work on the other areas.

2. Keep New Credit Request to a Minimum – Requesting new credit often can lower your credit score. Apparently, the lenders see it as a sign that you’re desperate for cash if you’re always requesting new credit. Keep requests to a minimum if you’re planning on needing your credit score soon.

Take action: Don’t make any unnecessary new credit requests. Review your credit report and look for any “hard” inquiries that have been made on your file. If you don’t recognize an inquiry, submit a request for the inquiry to be removed.

3. Grow Your Credit History – Easier said that done right? This is obviously the biggest hurdle for most people starting out. The longer your history with credit, the more comfortable lenders are with relying on that history to determine credit-worthiness.

Take action: Review your credit report for any accounts that aren’t there. You want to get credit for the history that you have. If you see a missing account, request for the account to be added. Also, don’t cancel any old credit cards. Even if you pay off a credit card completely, cut it up and plan to never use it again, don’t close the account. The history and available balance are actually helping your credit score, which leads us to the next tip.

4. Keep Your Credit Balances Low – It’s recommended that you keep the amount that you borrow at or below 25% of your available balance. In simple terms, if you have a $1,000 credit limit on your credit card, you need to only ever show a balance of $250. This should apply to all your revolving accounts.

Take action: Make sure you keep your balances low. Pay down all of your high balances. And like the other points above, make sure your credit report accurately reflects your balances. Consider using a 0% balance transfer credit card to move your credit usage around.

5. Use Revolving and Installment Debt – The key here is to have a decent mix of both revolving (credit cards) and installment (mortgage, car loans) type credit. I was once told I didn’t get the best interest rate on a deal because I didn’t have a mortgage (limited installment credit history). At the time I wasn’t ready to buy a house. So I just had to take the best they would give me.

Take action: If you don’t have installment credit, I don’t recommend that you run out and get any. Just keep in mind your credit score may have a ceiling until you get a car loan or a mortgage. Probably nothing you can do here.

However, if you don’t have a credit card, you may want to consider getting one to help your credit score. I don’t recommend you go into debt. The most beneficial way to use the card would be to use it for a recurring monthly bill (i.e. your electric bill) and then immediately pay off the balance.

—

In summary, I think it’s good to remember that your credit score isn’t everything. It’s not going to kill you to have a 740 versus a 760. But it doesn’t hurt to be aware of the 5 factors that make up your score. And with that knowledge you can slowly start to improve your score over time.

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How to Effectively Use 0% Balance Transfer Credit Cards

PT — Wed, 02 Sep 2009 14:33:56 +0000

Today I want to discuss how you can properly use 0% balance transfer credit cards in connection with a debt repayment plan, or even as a way to make some extra money.

A few months back I warned of the dangers of 0% interest rate credit card balance transfers. I still stand by those points, but at the time I promised I’d follow up with my story of how I successfully transferred my credit card balances. I also promised I’d share some tips for making the balance transfer work for you. That’s why I’m back today to help fill in the gaps on the process.

How I’ve Used 0% Balance Transfer Credit Cards

Back in 2001 I had about $3,000 in credit card debt. Around that time decided it was time to quit spending more than I was earning and pay off the debt completely. I had wised up. Specifically, I realized I was paying a bunch of money in interest by keeping that balance AND that extra outflow was keeping me from achieving other goals.

So, I came up with a plan to pay it off. It was a simple plan that included throwing any extra money left over each month at the debt. I decided a piece of the plan would be to used a 0% balance transfer credit card to help:

lower the amount of interest I was paying while I paid it off,
and motivate me to pay it off quicker (by the end of the term).

It worked. It took me about 6 months to pay it all off.

I’ve also used 0% interest rate deals in other instances. I may go into these more in a later post, but I actually used a 0% credit promotion when I got Lasik surgery and a 0% credit card when I paid for some wedding costs. In both instances I never paid a dime in interest, I racked up a bunch of credit card rewards, and never had to tap into my short-term savings.

Why Use a 0% Balance Transfer Credit Card?

There are a couple of good reasons to consider using 0% balance transfer credit cards:

Paying Down Debt – The first and obvious reason is to help you pay off debt. While the transfer itself isn’t going to pay off your debt, making the transfer will mean you are paying less in interest payments while you pay down your debts. Make sense?

You might currently find yourself in a bunch of credit card debt. Not the end of the world. But maybe you’ve built up a balance over the years and you’ve just been paying the minimums. This is the best reason to use the 0% balance transfer, in my opinion.

Credit Card Arbitrage – Second, you might want to do what’s called credit card “arbitrage”. This is where you apply the transfer to an old card that doesn’t have a balance. You receive a negative balance on your card. You then ask for a refund of that negative balance. The money can then be used to earn more money.

How does that work? Well, in the past people would do this by placing the money in a high-yield online savings account. Since those accounts aren’t paying that much in interest these days, people have turned to riskier strategies, like micro-lending.

The bottom line with arbitrage is that you are using the credit card promotional deal to get free money so that you can earn money with that money elsewhere. I’m not going to address this much more in this post, but I will promise to cover it in a future post and to share some of the better strategies out there today.

Warning: Don’t use this 0% balance transfer credit cards strategy if you are simply planning on consolidating debt in order that you may free up room for more spending on credit. This is the wrong way to use this strategy. Just don’t do it. It will only encourage you to rack up more debt and give you a false sense of security. Only use a 0% balance transfer if you are on a serious debt repayment plan, or you have no debt and want to responsibly take on an arbitrage strategy.

The above word of warning was not meant to discourage people who are in dire straights from using these cards. I realize people often turn to these cards when they are experiencing a temporary financial set back, like a job loss or injury. By all means use these cards to help float you over that down period. Just remember to be aware of the dangers.

How to Evaluate 0% Balance Transfer Credit Cards

So which card should you go for? There are a couple of things to focus in on when looking at credit cards with 0% promotional interest rates:

The length of the 0% promotional period (or term). This can be anywhere from 3 to 18 months. Obviously the longer the period, the better the deal. You know how long it will take you to pay off your debt, so make sure you get a card with a period long enough to cover you.
The balance transfer fee. This is the fee that the credit card companies will charge you to make the transfer. It can be anywhere from 0-3% of the balance you are transferring, and/or a minimum of $75. This is the difference maker. Compare this fee with the amount of interest you’d expect to pay on the card if you did nothing but continue on your debt repayment plan with the old card. If the fee is higher, then don’t do the transfer.

See my review of some of the top 0% balance transfer credit cards.

How to Make the Credit Card Balance Transfer

Understand the dangers.I can’t stress this enough. Playing with credit cards is no amatuer sport. You have to understand the rules and be disciplined throughout the process.
Check your credit. It might be a good idea to check your credit report and score. To get the card and the limit you’ll need, you’ll need a decent score. No sense going through this process if you can’t move that much money.
Find the Right Card. Using the criteria listed above, determine which credit card is going to suit your needs.
Apply for the new card and ask for the transfer. Now that you have decided on a card, complete the application, making special note of the balance transfer section. This is where you will need to put your card number and latest balance. It’s obviously a good idea to have your statement available for reference.
Don’t close out the old card. But don’t use it either. Lastly, after you transfer your balance, make a point to not use the old card. Remember, making the transfer isn’t a license to rack up more debt. It’s a chance to pay down debt without paying interest. Put the old card somewhere where you won’t be tempted to use it. But don’t close the account as the available balance and credit history both positively affect your credit score.

Have you every used a 0% interest rate credit card to your advantage? Share your experience in the comments below…

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Get Your Free Credit Report: Beyond AnnualCreditReport.com

PT — Mon, 24 Aug 2009 11:00:25 +0000

Let’s talk about free credit reports. Today I thought I’d review some of the reasons to get your free credit report, as well as, share some of the websites that will give you your credit report for free.

5 Reasons to Check Your Credit Report

It’s important to occasionally review your credit reports. Here are a few of the reason’s why I do it:

Check Your Reports for Fraud – It happens everyday. Someone uses your personal information to open up a credit line. Then they run up a huge balance and never pay the bill. You don’t find out about it till it’s too late. There’s a big negative on your credit reports. When you try and apply for credit on your own, the lender won’t do it because of the negative history. Checking your reports a few times a year is a good way to ensure you aren’t being taken advantage of by someone.
Review it for Errors – In addition to fraud, there’s actually a good chance that your credit reports have errors on them. The errors could be things like accounts that aren’t yours, missing information, incorrect credit limits, missed payments that aren’t accurate. These errors could be negatively affecting your credit score. It’s important to check your credit reports so that you can fix these credit report errors.
Prepare for a Loan – If you happen to be planning on getting a significant loan in the near future, like a mortgage, then it’s crucial you review your reports for the types of fraud and errors listed above. The rate on the mortgage, car loan, or small business loan are going to be based on what the credit agencies are reporting about you. This could mean thousands in savings by having the score you deserve.
First Time Credit Check – If you’ve never reviewed your credit report, this is the time to do it. It’s easy and free.
Make Sure You’re Getting Credit – Another reason to review your credit reports is to make sure you are getting credit for the history you have. It’s not uncommon for one of the three reports to be missing important information, like an old account that had positive payment history. Take a second to review your report and make sure you’re getting credit for your positive history.

AnnualCreditReport.com

The best and only place to get your free, “no questions asked” credit report from the three reporting agencies is from AnnualCreditReport.com. This website was set up by the three credit reporting agencies (Experian, Equifax, and TransUnion) based on a requirement from the Fair Credit Reporting Act.

The website has done wonders for the individual consumer. AnnualCreditReport.com allows you to freely view your three credit reports once a year. So, you can ensure for yourself that information contained on the reports are accurate. Some people like to space their three free credit reports out so that they get a free report every 4 months. Pretty smart if you ask me.

There are three big problems with only using AnnualCreditReport.com as your source for credit reports:

The Big Up-Sell – When you use the AnnualCreditReport.com website to get your three reports you’ll be pressured to sign up for a bunch of services that will cost you. Now there’s nothing wrong with paying for something of value, but if you’re going there with the intention of just getting your free report, you’ll have to fight through the many sales pitches that are going to be thrown at you. The Fair Credit Reporting Act should have explicitly prevented this. But they didn’t go that far.
No Free Extras and No Free Credit Score – While going to AnnualCreditReport.com will definitely get you a free credit report, it won’t give you anything else for free. There are no credit monitoring services or credit score that can be had for free by going there. All you get is your three free credit reports.
Limited to One Per Year – The biggest limitation of AnnualCreditReport.com is the fact that you can only get one credit report from each of the agencies each year. Most people think to check their reports at the beginning of the year when motivation for budgeting and getting things in order is strong. But then later on in the year, you may be considering a loan, or may suspect some type of fraud. At that point, most people either do nothing, or they fork over money to get their credit report. But you don’t have to pay. You can sign up for a free trial using one of the services listed below. Just make sure you cancel your account prior to the free trial running out. See below for the other ways to get your free credit report.

Free Trials and Credit Reports

Like I said above, there’s no reason to settle for AnnualCreditReport.com as being your only source for a free credit reports. There are other places that will give you a free report AND offer you additional services through a free trial. These places aren’t scams. They’re just not free forever. You have to take advantage of the free trials. But just make sure you remember to cancel your free trial before the time is up. Here are some of the best options available.

myFICO.com

Free 30 Day Trial of Score Watch^®

This deal gives you access to a Equifax credit report and a FICO^®score from Equifax (2 of each are allowed). Again, these reports and scores will have to be viewed over the 30 day free trial so that you can cancel and aren’t charged the annual fee of $89.95. That’s right. myFICO.com gives you 30 days but then automatically charges you the annual fee unless you cancel. Be careful with this one. In addition to the reports and scores, with myFICO you’ll receive credit monitoring and their alert service.

TrueCredit.com

Free 30 Day Trial of 3-Bureau Credit Monitoring

This isn’t a bad deal. You get access to all 3 of your credit reports and a score from TransUnion, alert service, the ability to lock/unlock your TransUnion report, and even $25,000 in ID theft insurance. I would say that this appears to be the best value of the free alternatives. But like the others, you need to set yourself a reminder to cancel your free trial before it expires.

Equifax.com

Free 30 Day Trial of Credit Watch Gold™

With this free trial you get unlimited free credit reports from Equifax. You also get a free 3-bureau credit report, a free FICO^® score, and a free Score Power Report. This is all in addition to their credit monitoring service which covers all three reports. Just remember to cancel the free trial.

FreeCreditReport.com

Free 7 Day Trial of Triple Advantage^SM Credit Monitoring

You’ve seen the commercials. This is easily the most popular free credit report site on the Internets. They have the best marketing campaign hands down. But what can you get from them for free? Well, to start you get your free Experian credit report and credit score. You’ll also receive credit monitoring and alerts of any activity. There’s also a $50,000 triple advantage guarantee that looks interesting. Just remember to cancel the 7 day free trial.

CreditReport.com

Free 7 Day Trial at CreditReport.com

This is a pretty straight forward service. They offer the typical monitoring and alert services, plus you get access to your three credit reports (a 3-bureau report) and you get access to all three credit scores (a 3-bureau score). This seems to be the broadest reaching service provided. But I can’t say that they have all the bells and whistles you get with the other guys. Remember to cancel before 7 days if you use these guys.

CreditReportsandScores.com

Free 7 Day Trial – One Report and One Score

With this free 7 day trial you get access to one of your credit reports and one of your credit scores. To get all three you need to sign up for additional service, which they call their triple bureau credit reporting and credit score monitoring. If you’re looking for just one report and score without the need for any monitoring this is the way to go.

More Options

If none of these options looks interesting to you, you can always check out CreditKarma.com (who offers a free score from TransUnion) and Quizzle.com (a Quicken product offering a free Experian Report and Score).

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Credit Card Tips and The Best Student Credit Cards

PT — Fri, 21 Aug 2009 06:07:51 +0000

With college starting up soon for most students, I thought it’d be a good idea if we discussed the idea of credit cards for college students. Below I provide some smart money tips for students and their cards, followed by a list of some of the best student credit cards available today.

Students and Credit Cards

I can’t believe it’s fall already. Time for students to head back to campus, or move off to college for the first time. Parents often find it convenient to begin the process of educating their kids on the proper use of credit cards during this time. It makes sense because the parent can’t be there for every purchase like they were in the high school days. And a card, along with proper use, will help the student begin to build a positive credit history.

I loved my time in college, but can’t say I was that great at managing the credit card I had when I was there. I got my card without my parents knowledge and used it foolishly throughout my time in college. Studies are showing that college students are still doing this today.

If you’re a parent, don’t let this happen to your student. Set them up with their own card, on your terms, and with your guidance. And if you’re a new student, pay attention to the tips I provide below for using your new credit card.

If you’re absolutely against credit card use, then at least educate your kids. They will be bombarded with credit card offers on campus this fall as the credit card companies make one last push before the Credit Card Act of 2009 kicks in. You don’t want to leave them alone without some of this knowledge.

How College Students Should Use Credit Cards

I’ve put together a quick list of tips for college students and parents when they get their new card:

Emergency Use Only – Parents, you and your college student can decide that the card should be used in case of emergency only. This is a good approach. Especially if the student doesn’t have a job. You don’t have to worry about payments every month, or if your student overspent their credit limit. Have your kid keep it somewhere safe in their dorm room. Put it away and forget about it until that emergency situation occurs.
Set a Low Credit Limit – When you learned to ride a bike, you probably started with training wheels. The same concept should apply to student credit cards. Parents, don’t allow your college student to “fall” by ringing up a huge credit balance. If the limit is low, and they go on a spending tear, they won’t do a ton of damage.
Schedule a Monthly Review - Both parents and the college student should schedule a monthly phone call where the finances are discussed. If you’re using the card for more than emergencies, you should use this time to review the bill and talk about the balance, how you’ll pay it off, interest charges that will occur if you don’t pay,
Pay it Off Monthly – The balance on the card should be paid off every month. This is the most important thing any college student should know when using a credit card. Unless you have an introductory 0% rate, carrying a balance on a card means you are paying high interest on the debt. Therefore, you are paying debt interest payments for something you didn’t have the money for in the first place. This is the wrong way to use credit.
Get the Right Card - Lastly, the card that the student gets should reflect the type of use the card will recieve. A card for emergencies only needs to have a small credit limit, and it need not have an annual fee (for extra services). A card that will be used for a little spending should provide the student some extra benefit from a good reward program.

Best Student Credit Cards

If you decide a student credit card is the right thing for you, check out these options below. All of them come with no annual fees.

Citi® Forward Card - My Top Pick!

10 ThankYou® Points on every dollar spent at bookstores, record stores, restaurants (including fast food), motion picture theaters and video entertainment rental stores for the first 3 months and 5 points thereafter.
You will earn 1 point per dollar on other purchases.
0% APR for 6 months on Purchases & Balance Transfers.
6,000 bonus points after $50 in purchases are made within 3 months of account opening
2,500 bonus points when you sign up for paperless statements within 3 months of account opening
Apply

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Citi® mtvUTM Platinum Select® Visa® Card for College Students

10 ThankYou® Points on every dollar spent at bookstores, record stores, restaurants (including fast food), motion picture theaters and video entertainment rental stores for the first 3 months and 5 points thereafter.
You will earn 1 point per dollar on other purchases.
0% APR* on Purchases and Balance Transfers for 6 months if you qualify based on your application and credit history
Earn 25 ThankYou Points every month when you pay on time and don’t go over your credit limit.
Earn up to 2000 ThankYou Points twice a year for having a good GPA.
Apply

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Discover® Student Card

More Ways to Earn More Cash than Anyone Else(SM)*
Unlimited Cash Rewards, Automatically
Up to 20% Cashback Bonus® When You Shop Online*
Double Rewards with More than 100 Cashback Bonus® Partners*
Customer Service in Less than a Minute, Anytime You Want
*View Discover® Card Rates, Fees, Rewards, and Other Important Information
Apply! Also comes in Tropical, Clear, and Monogram versions (all shown above).

I’d love to hear your experience with these student credit cards if you have one. Let us know in the comments below.

Photo by: bobster855

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Clearing Up Old Credit Report Errors: Reader Q&A

PT — Tue, 23 Jun 2009 15:37:26 +0000

I recently received an email from a reader regarding cleaning up old credit report errors. Here’s the question (my emphasis added):

Does it count as an error on a credit report if there are accounts turned to collections that have actually been paid years ago? When my husband and I were applying for a mortgage, he got turned down because he had supposedly unpaid medical bills–from when he was 19. His parents insurance should have covered the charges, but his mother cannot find paperwork from that far back (my husband is 30 now). The collections agency hasn’t even been helpful when we contacted them for more information. Can we dispute the collections notice on his credit report even if we can’t prove the account was paid?

Here’s a paraphrase of my response:

I think you can claim that this is an error and report it as such. The credit reporting agency will then send the request to the creditor to prove that the account is truly in bad standing. If they don’t come up with proof that you still owe that money then they have to remove it. In other words, the onus is on the creditor to show that it’s valid. I wrote a bit more on this topic here: How to Fix Your Credit Report and Identity Theft.

I also reached out to some other pf bloggers for a response. Here are their replies (emphasis added):

Yes, it’s the responsibility of the collections agency to prove the debt is valid and they must provide written proof on request. Probably the easiest way to go about it is to contact the medical provider themselves and make them prove it. They probably can’t.

-Kyle from Amateur Asset Allocator

Yes, a credit bureau dispute would put the onus on the collections agency, and ultimately back on the medical provider to show proof of delinquent activity. And even if this is a legit collections attempt, at more than seven years old it should come off the husband’s report, unless there has been recent activity (which I doubt for something that far back in the medical field, unless we are talking thousands of dollars).

-Jason from Frugal Dad

The debt is past the statute of limitations of 7.5 years. Therefore the negative remarks will need to be removed, even if there was recent activity. Of course, the laws vary by state, so the reader will need to check in their individual state. Here’s something that might help: Gettin’ Out of Debt: Part II

-Madison from My Dollar Plan

By the way, if you yourself need to check your free credit report, visit annualcreditreport.com.

So what’s your take? Do you have anymore insight into a solution? Do you have experience with this issue that you’d be willing to share in the comments below?

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The Dangers of Promotional 0% Interest Rate Credit Card Balance Transfers

PT — Wed, 06 May 2009 10:00:21 +0000

Many people turn to promotional 0% interest credit card balance transfers to help them consolidate their high-interest debts or to participate in credit card arbitrage (using low interest debt to fund high interest savings accounts). In another post I’ll cover why these types of moves might benefit you. Both basically involve leveraging the interest rate on the card during the promotional period.

I used balance transfers like this when I was paying down my high-interest debt. And I ended up saving some money in the process. I haven’t written on this subject yet because I first wanted to touch on some of the dangers of doing this. While there are some definite financial benefits to using these balance transfers there are some things to watch out for that can make a good deal turn sour pretty quick. After all, credit card companies wouldn’t offer up these deals if they weren’t financially rewarding for them and not you. The truth is, though, that over the past couple of years, credit card users have wised up and started doing these deals the right way or simply avoiding them altogether. Anyway, here’s some things to keep in mind if you ever want to use a 0% balance transfer credit card.

Paying Balance Transfer Fees – The first thing you’ll want to watch out for are the balance transfer fees that the credit card companies are going to want to charge you to make the transfer. A typical fee is around 3% of the amount you are transferring. Some card companies set a cap limit on this around $75. Ideally you’ll want to pay no transfer fees for these deals. But that’s getting harder and harder as the card companies have wised up to users taking advantage of these promotions. How do you avoid the fees? I’d first try calling the card company up and asking them if they will waive it for you, or at least cap it at a lower level. If they won’t budge then look for one of the few remaining cards out there that don’t charge a fee. Fees of course can negate any money you save with doing the transfer. So avoid them at all costs.

Missing a Payment – Okay, let’s say you’ve transferred your balance over to the new card and it’s sitting pretty at 0% interest. A month goes by and you forget to make the minimum payment. Not good. According to many of these deals, your 0% rate could instantly go away and you’re back to a ridiculously high interest rate. Maybe even higher than your original rate. You don’t want to miss a payment. Set yourself a reminder on a work calendar or something. Make this balance a real priority so you stay on top of it and avoid losing your promotional rate.

Paying the New Balance Off Too Early – Paying off your credit card balances are always a good idea right? Well, if you’ve gone through the trouble of making a balance transfer to a 0% interest rate card then you are wasting all that effort if you pay it off too early. There is no penalty usually for doing this (paying it off early), but it has an effect on the amount of money you are saving by doing the transfer. The best thing to do is to divide your balance up into the number of payments you’ll need to make before the promotional period is over. Then, just make that payment each month. That extra cash that you could potentially put towards prepaying this debt could be sitting in a high-interest savings account earning some nice interest for you. This all goes back to leverage. You want your money working for you, not against you.

Canceling the Old Card – You should think twice before canceling an old credit card. Your FICO score is based on, among other things, your credit history. If you close an old account just because you don’t have a balance there anymore, you lose that history and that could lower your credit score. So, once you pay off the old card with the transfer money, consider using it to pay a monthly recurring bill and simply paying the small amount off every month. If it’s a reward credit card you definitely want to make sure you cash in all the rewards before you close it. I understand though, if you’re just looking to get rid of all your cards and want them closed. If that’s your goal, then skip this warning.

Missing the Expiration Date – This is similar to missing a payment. The 0% promotional rate will expire anywhere from 3 to 18 months. Please, make sure you set yourself a reminder to have this new balance fully paid off by the time the promotional period expires. If you miss this date and by then you still have a balance on the card, many cards will void the entire promotional period and make you retroactively pay the interest rate as if the promotional rate wasn’t there. This is not good, and only negates the whole reason you made the transfer.

Don’t Put Purchases or Cash Advances on Top of the 0% Balance – Lastly, here’s another credit card company fine print move you want to avoid. Don’t use the promotional rate card for anything other than the transfer for the promotional period. Why? Because they apply your payments to the purchases or cash advances last. Thus, burying these high interest charges under your 0% balance transfer. This means if you have a large amount transferred, it will be a long time before you can make your way down to the purchases and cash advances to knock those out. During that long wait time, those charges will be racking up big time interest rate charges. Thus, making any cost savings from the transfer null.

What else should you watch out for when it comes to 0% balance transfers?

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Common Credit Report Errors

PT — Wed, 29 Apr 2009 10:00:50 +0000

When you start looking at credit report error statistics it’s easy to quickly get frustrated. There’s a ton that could and that does go wrong with the reporting of your credit information. Did you know that 79% of credit reports contain errors of some kind? Crazy.

Why the Errors in Your Credit Report?

Why does something so crucial to your financial success have to be so darn complicated and just plain messy? Can’t these people get it right? It’s been around long enough, hasn’t it? Reminds me of the IRS tax code. Except in the case of credit reports, we don’t have CPAs to help us figure it out.

But you can’t just leave your credit report alone and expect everything to be okay. Unless you’re debt free and don’t need a loan. Chances are, based on the number above, something is wrong with your report and that something could be lowering your score by enough points to cost you a lot of money, sooner or later.

My Credit Report Errors

I can’t say I’ve ever found a major error on my credit report. I also can’t say I’ve looked really closely at it. Every year I visit annualcreditreport.com and pull one or two of my free credit reports. I scan it to make sure my personal information is correct and that the credit accounts listed on the report all belong to me. I also scan the report for any reported negative items. Honestly, once I realize there are no big, glaring issues, I move on.

The last time I checked my credit report I did find one small error. The report states that one of my aliases is my middle name, followed by my first name initial as the middle name, and then my last name. I don’t think I’ve ever signed up for credit, or gone by that name when applying for credit or holding a job so I don’t know where they got the name from. I’m not terribly worried about the error though because there were no accounts that I didn’t recognize. “TP” Money has yet to sign up for any bogus credit accounts. Still, the stat above suggests I should check my reports a bit closer next time.

Common Major Errors Seen in Credit Reports

So, what are the most common types of serious errors seen on credit reports? I put together a quick list for you based on the information I’ve been reading in Liz Weston’s book, Your Credit Score, Your Money & What’s at Stake (Updated Edition): How to Improve the 3-Digit Number that Shapes Your Financial Future:

Names that are not you (not just misspellings)
Social security numbers that aren’t yours
Address where you’ve never lived
Accounts and delinquencies that aren’t yours
Negative items older than 7 years
Hard credit inquiries that you didn’t authorize

To see more of the types of errors you could have on your credit report, how they affect you, and what you can do about them, I encourage you to check out Liz’s book. You can also read my previous entry on How to Fix Your Credit Report.

Win a Copy of Your Credit Score

The winner from last week is SAH. Look for an email to arrange to ship the book. For the rest of you, I have one more copy to give away. So, if you live in the U.S. and would like to win a copy, simply leave a comment below. I’ll randomly select a winner next Wednesday, the 6th of May. Good luck!

If you know someone that could use to read this post, or who might be interested in this book, use the “share this” or “email this” link below to share it with them. Thanks.

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