Credit scores of the 5 richest neighborhoods in America

By Michael Bratton

A credit score is a number a credit agency assigns to individuals that lenders use to determine risk for repaying loans and credit card debt. According to Spendonlife.com, a website that helps educate consumers about personal finance and credit, credit scores range from 349 to 849. The higher your credit score the more likely you are to secure low-interest bank loans, credit cards and other financial products.

Recently, Spendonlife.com compiled data on five zip codes in the U.S. with the highest credit scores and five zip codes with the lowest. Interestingly, the cities with the lowest scores are in landlocked southern or Midwestern states while the top five are exclusively coastal. To give you some context on where the five most affluent zip codes stand, the average credit score for the entire U.S. population is 683 and the average income per return $55,019.

1. Weston, MA, 02493

Weston, MA, with a population of about 11,787, is located just over 15 miles west of Boston. The average credit score in Boston's wealthiest suburb is 715 with a combined average income of $400,022. Included on CNNMoney's list of America’s best small towns and "Best Places to Live" in 2011, credit card debt in Weston is $1,540, auto debt is $14,854 and the average mortgage balance is $298,028.

2. West Atherton, CA, 94027

A San Francisco Bay Area city located less than five miles northeast of Silicon Valley, West Atherton has a population of about 7,000 residents. With an average credit score of 708, West Atherton has the second-highest credit score in the country. Included on a CNNMoney list of neighborhoods with the highest percentage of million dollar homes, the average mortgage balance is $518,706, average credit card debt is $2,554 - the highest on this list - and average auto debt of $18,224.

3. Greenwich, CT, 06831

Greenwich, CT is an affluent suburb situated just 37 miles north of New York City. With a population of just over 15,000, Greenwich has the third-highest average credit score in the country at 702 and average income of $414,686. This Fairfield county town, which Money magazine ranked number-two in its 2012 "Biggest Earner" category, in part for being home to several financial service companies, has an average credit card debt of $1,856 and auto debt of $16,607. The mortgage balance in Greenwich comes to about $425.887.

4. Palm Beach, FL, 33480

Palm Beach, FL, located 65 miles north of Miami, has the fourth highest average credit score in the U.S. at 691 and average income of $457,517. Originally established as a resort town, thanks to its tropical climate and miles of stunning coastline, residents on this 16-mile long barrier island have an average credit card debt of $1,449 while auto debt averages $16,494. The mortgage balance of Palm Beach’s roughly 10,000 yearly residents averages $314,165.

5. Los Angeles, CA, 90067

Known for being the entertainment capitol of the world, Los Angeles has the fifth highest average credit score in the U.S., at 685. The average income in this west coast paradise is $546,627. Compared to the country's other wealthiest zip codes, L.A. has the second highest average credit card debt at $2,112. But where they falter in debt, they make up for in income with an average income per return of $546,672, making the City of Angels the number-one earner on this list. Auto debt in L.A. averages $19,264 and the average mortgage balance is $407,998.

While the income disparity between the richest and poorest neighborhoods in the country is staggering - the bottom earner of the top five is $400,922 for Weston, MA, and the top average income of the bottom five is $13,951 for San Antonio, TX - the average credit score for wealthiest five zip codes is 700 compared to 676 for the poorest five zip codes. However, since credit score is just one consideration lenders evaluate in a potential borrower's financial profile, clearly those at the top five are in a much more advantageous position when purchasing a home, applying for financing, buying a car and making other big-ticket purchases and loan requests.

The author of this article is Michael Bratton, PR Director of Best Credit Repair Companies.

5 riskiest places to use your credit card

Most of us assume that swiping a debit or credit card is going to be a secure transaction. While that is true in most cases, there are places that are easy targets for identity thieves. Here are five points of sale that can be easy pickings for the dishonest people of the world.

Non-Bank ATMs

There is no way to say enough bad things about ATMs that are not owned by a bank. The encryption is often less secure than at bank ATMs, free standing ATMs can be more easily hacked, card readers have been attached to the legitimate swipe area, and some of these machines are actually fake. Thieves have been known to place defunct ATMs around large cities then sit back and wait for the card information to flow to them.

Flea Markets

Flea markets are great places to shop, but risky places to use a card. Many of these venders travel from market to market making it hard to resolve any card issues. Very few of them have point of sale terminals, so they make carbon copies of your card. While these vendors may be legitimate, there is a chance that they will lose the copy.

Foreign Hole-in-the-Walls

Credit card issuers report that small shops and quaint restaurants in foreign countries have a high percentage of credit card fraud. Issuers generally write off these fraudulent charges with no consequences to customers, because the merchants can't be located. Why take a chance. Use cash if you go to a shop that may not be on the ''beaten path.''

Public WiFi

Buying online can be risky. That is not to say that you shouldn't shop online. Always check to see if the site has a Better Business Bureau stamp of approval and look for a secured shell logo. It is even better if you are directed to Paypal or another online payment system. That will give you an option to request your money back through a third party.

Shopping online is commonplace today. In the vast majority of cases the transactions are secure when made from you home computer. Problems arise if you use Wi-Fi hotspots or public computers. Even if you are on a secure page, your information can be stolen by a savvy hacker using the same Wi-Fi or who uses a public computer after you.

Many identity thieves count on the complacency that most cad users display in their everyday lives. After all, swiping a card is as automatic as breathing. It is up to you to protect yourself and ensure your financial security at every terminal that you approach.

Citations:

• FTC Identity Theft Resources

Taylor Brown's company, Credit Repair Zoom, teaches you how to repair your credit after identity theft.  He hopes this article will make you think twice before swiping your card under high-risk circumstances.

U.S. Debt Collection Abuse On The Rise

Despite regulations including the Fair Debt Collection Practices Act, the Fair Credit Reporting Act and the Wall Street Reform and Consumer Protection Act, enforcement has its obstacles as evident in the following infographic syndicated courtesy of Frugal Dad. According to the infographic, complaints against debtors have increased 66 percent and a Harvard Law Professor is quoted as saying mobsters would be envious of student-loan debt collectors' power.

Source: http://FrugalDad.com

How to read your credit report

 Knowing how to read your credit report can help prevent credit fraud, fix credit reporting errors and assists with building credit. If you have credit errors on your credit report, knowing how to read the report can help you identify and report those mistakes, and knowing how to identify false credit inquiries may protect your credit information and credit score. Knowing how to read your credit report assists with building credit because in cases of credit scores in need of repair, the report summarizes outstanding debt, number of creditors, credit related legal actions, and late payments.

• Credit reports display a financial profile

To know how to read a credit report involves knowing what creditors will look for when they read your credit report. Creditors want to assess how high their lending risk is, and the credit report is a primary way to do this. They do this using a FICO score in addition to a credit report. Fair Isaac Corporation provides a general outline of what is in your FICO score through http://myfico.com and these things include credit history, types of accounts, debt to credit ratio, new credit and amounts owed.

After you know what creditors look for and how those things impact your FICO score you may be able to better identify what you are looking at when you read your credit report. For example,  item 27 of the above sample TransUnion Report shows credit inquiries. By looking at this you can 1) determine who's been trying to pre-qualify or pre-approve you for credit and 2) how many times it has been done.

If the inquires are not directly related to applications you have made this may mean creditors have you on an active marketing list. Knowing this, you can then take steps to be removed from those lists. An effective way to do this is to freeze access to your credit information. However, doing so prevents new credit from being issued from creditors whom you don't currently borrow from according to the Federal Trade Commission.

Knowing how to read your credit report can be assisted by referring to the explanations provided with the sample credit reports in this article. Having done so, you can be better prepared to investigate your credit in the future. Moreover, by knowing how to read your credit report you can repair, contest or improve your credit in a more informed way. The Federal Trade Commission (FTC) provides useful information on how to dispute credit information contained within your credit report.

• How information is presented on a credit a report

Credit reports don't have credit scores on them, but credit grades may be acquired when joining consumer lending networks as they sometimes require a public credit grade with which lenders can assess creditworthiness.

Information is placed and presented differently on each credit bureau's credit report, however some similarities exists between them. For example, Equifax, TransUnion and Experian all have name and date information at the top of the credit report.Some information that is included on credit reports is listed below:

• Account history

• Personal information

• Employment history

• Account activity data

• Disputed credit

• Credit inquiries

• Debt to credit ratio

• What a credit report looks like

Sample credit reports from these three agencies are linked to below. These credit reports can help you know how to read a credit report by familiarizing you with what's on them before you receive them. Also, the sample credit reports have explanatory notes indicating what particular items on the report mean.

1. sample credit report  (TransUnion)

2. sample credit report  (Equifax)

3. sample credit report  (Experian)

Looking at these sample credit reports it becomes evident that address information is not necessarily at the top of the report along with name and date. For example, the TransUnion report indicates this information near the beginning of the report whereas Equifax includes it in the 'Personal Information' section. Depending on how you like to read information, one credit report may be easier for you to read than another.

• Where to get a free credit report

Free credit reports can most easily be obtained from http://www.annualcreditreport.com. This is the government authorized site for accessing free credit reports. Other sites may have purchase or service agreements connected to their 'free' credit reports so being weary about where you get you credit report from can save money.

Sources:

1. http://bit.ly/ggXQt    (MyFico.com)
2. http://bit.ly/7ouzJ     (Federal Trade Commission: Consumer Credit)
3. http://bit.ly/8YghNh (FTC: Credit Freeze)

Credit Repair Companies Versus Consumer Counselling

Credit repair and consumer credit counseling are different forms of financial assistance that help those who face large debt or out of control credit. In the case of credit repair, the goal is to rebuild credit rating or credit score with the help of a third party claiming to be skilled at negotiating with creditors and credit agencies.

Credit counseling is different from credit repair services as there may be a conditional requirement by either a lender or court.  For example, in the United States, consumers who file for bankruptcy are often required to receive consumer credit counseling as part of the bankruptcy filing procedure. Credit counseling may also involve debt management and debt settlement services.

Credit repair

According to the U.S. Federal Trade Commission (FTC), credit repair company's are often scams. The proliferation of such scams led to the rise of the Credit Repair Organizations Act which made it a requirement to receive a copy of any contracts before signing them. Even so, credit repair company's may be apt to creating misleading promises that consumers should be aware of.

The fact of the matter according to consumer advocates is that there's nothing a credit repair company can do for hundreds of dollars that an individual cannot. It may seem intimidating or complicated dealing with poor credit, but that doesn't have to be an excuse to lose money paying for a service that can be done for free. If there's nothing a credit repair company can fix after they receive your money, they don't pay it back.

To illustrate the above point, credit repair company's tout being able to correct erroneous information on a credit report if there is any at all. An individual can do this by visiting www.annualcreditreport.com and obtaining a free credit report then sending a dispute letter such as the one available at the Federal Trade Commission's website.

Consumer credit counseling

Consumer credit counseling generally has a more specific and legal function. In regard to pre-bankruptcy counseling, consumer credit counseling is also required to be free for those who cannot afford according to the FTC. The U.S. Department of Justice provides a search form on its website that allows consumers to find a legitimate consumer credit counseling service.

Bank of America distinguishes consumer credit counseling into two groups. Those two groups are debt management agencies and debt settlement companies. Both may provide consumer credit counseling, but the latter is an alternative to bankruptcy that can have a negative influence on one's credit report and costs more. Debt management companies are more educational and help consumers proactively eliminate debt while building credibility.

Credit counseling and debt management companies can also help individuals avoid foreclosure in some instances. For example, the U.S. Department of Housing and Urban Development sponsors an approved housing counseling agency program nationwide. These approved credit counselors can assist with existing and future credit and debt obligations. Thus, consumer credit counseling is not necessarily exclusive to bankruptcy proceedings, but also serves as a financial planning mechanism that helps individuals manage their debt.

Sources:

1. http://bit.ly/aXYN5p (Federal Trade Commission)
2. http://bit.ly/PtC5l      (Department of Housing and Urban Development)
3. http://bit.ly/bhQe4Z  (Overnight Credit Repair Services)
4. http://bit.ly/cuELwf   (Bank of America)

Credit union credit cards: Why they're better than banks'

Credit Union credit cards are better than bank credit cards in the sense they have lower average interest rates and may be issued more responsibly. Since credit unions are non-profit organizations, the modus operandi is different than for a for profit bank. Moreover, a credit union is a collaborative and cooperative of members who's deposits, fees and interest payments to the credit union assist the credit union in serving the membership as a whole. This is reflected in credit union credit cards because they are generally more cost effective than bank credit cards. Bank credit cards do have some advantages in terms of accessibility, credit limits and product line however, credit union credit cards are on average more cost effective than bank credit cards as this article demonstrates.

Bank credit card(s)

According to indexcreditcards.com, the average credit card rate for the entire credit card market is 14.03%. This market includes credit unions which have a 2.74% lower average interest rate on credit cards than banks (hffo.cuna.org) Banks are also more likely to charge higher fees for penalties such as late payments and over limit fees. According to Judy Dahl, a writer for hffu.cuna.org, banks charge $15-$20 more for late payment fees than Credit Unions in addition to an average $13 higher over limit fee on checking accounts.

• Higher average interest rates
• More late payment fees
• Elevated over limit fees
• Credit card checks may charge transfer fee
• Bank profits from credit card interest 
• Fees do not necessarily lead to lower interest products
• Low credit scores more likely to lead to higher credit card APR
• Additional fees and/or surcharges more likely

Credit Union Credit Card(s)

Credit Union's are interested in serving their members financial interests as a priority rather than meeting the banks profit objectives as first order of business. This leads to overall benefits on credit cards across the board. Junk fees are less likely to be charged, additional or supplementary services related to payment or maintenance of credit cards is more likely to be free or lower cost and penalty fees are more lenient on average.

• Manage credit card payments through credit union
• Lower average interest rates
• More cost effective late payment fees and over limit fees
• Credit Union income serve member interests
• More likely to issue credit responsibly
• Fewer and/or lower supplementary service fees
• Free online credit card bill pay at some credit unions

Summary:

The benefits of credit union credit cards are clear as this article has demonstrated. While some banks may offer better credit card deals than some credit unions, on average, banks are less likely to provide more financial cost advantages to credit card holders based on average statistics. Obtaining a Credit Union credit card may be more difficult than a bank credit card, and credit limits may be lower on average, however other than this, the benefits tend to stack up in favor of credit union credit cards due to the lower costs. There is always some room for disagreement as to which is better as banks may have a wider range of products and services for a higher cost. Moreover, if cost is not an issue for a client, the lower costs provided by credit unions may not be considered an advantage. For budget minded folks however, credit union credit cards present a clear cost advantage.

Sources:

1. http://www.consumersavvytips.org/the_credit_union_vs_the_bank.html
2. http://www.indexcreditcards.com/creditcardmonitor/
3. http://hffo.cuna.org/13856/article/1894/html/

How To Use Payment History Letters To Improve Credit Rating

Payment history letters are issued by companies or organizations with which you have a credit history. When you have a consistent financial obligation, credibility may be established and credit rating may improve. For example, if you borrow money via a peer to peer lending company that has not reported your credibility to a credit bureau, a letter illustrating your credibility can be requested directly from the peer lending facilitator. The company may otherwise be unable to release credit information due to privacy clauses in terms of service, or due to credit bureau reporting restrictions.

Payment history letters can be sent to lenders, employers, organizations and credit bureaus to help improve your credit rating with one or more of those parties. This would constitute a independent rating by the lender and not a credit bureau. For example, if you are applying for a home loan and the lender has already obtained a credit report from credit bureaus they may seek further evidence of your credit history. In such case, a payment history letter from a non-reporting service such as trash removal, or cable companies may be used.

Additional credit history letters or statements may be requested from county and state governments to validate you are up to date with traffic tickets, or taxes such as property tax on a vehicle or previous mortgage. Even a gym membership or club membership for which monthly or semi-annual payments are paid over a period of time represent a payment history. In such case,  a letter may be obtained to improve credit rating. What types of payment history letters are accepted can depend on the specific lender's requirements.

Payment history letters can also be useful to improve your credit score and rating with a credit bureau rather than credibility with an individual lender. To do this the Payment Reporting Builds Credit, Inc. (PRBC) bureau may be a good first stop. This is a more pro-active type of credit bureau in the sense that consumers can directly influence credit  rating by what they report to the bureau. Payment history letters can also be used to dispute existing credit scores at one of the four additional credit bureaus including Innovis. The Federal Trade Commission (FTC) provides tips on disputing credit scores at its website.

An additional way to use payment history letters is via prepaid debit cards. According to getdebit.com prepaid debit cards can be used to improve credit via credit history letters or reports. For example, the Account Now Prepaid Visa Debit Card helps individuals with bad credit build a credit history by collecting payment history data from payments made via the Account Now Debit Card. This information is then sent to the Payment History Builds Credit bureau to generate a credit score.

Letters of Credit  also demonstrate credit history indirectly as financial institutions issue these letters to demonstrate creditworthiness and payment from a client. For example, if an individual or company seeks financing or inventory from a company, that financing may be supported by an Standby Letter of Credit or an Irrevocable Letter of Credit  that in effect secures payment for the lender. Although the financial institution may require a minimum amount of depository funds by the borrower, conditions for the letter may also include a credit history with that financial institution such as with a bank guarantee. The resulting purchase history made possible via the letter of credit may help improve credit further.

Sources:

1. http://bit.ly/99IUgf (Federal Trade Commission)
2. http://bit.ly/biUAoy (Innovis)
3. http://bit.ly/AHjiI (FTC: Credit Score)
4. http://bit.ly/d4dkWq (MicroBilt: PRBC)
5. http://bit.ly/a5H7MG (GetDebit.com)

Pros and cons of the BJs Visa Credit Card

A BJ's Visa card adds 2 percent to the savings already garnered through having a membership at BJ's and any use of manufacturers coupons, and store coupons. In other words, provided a BJ's credit card balance is paid off before the end of each billing cycle, the potential for cheap groceries rises. The overall savings can be well over 10 percent if all the potential benefits of shopping at BJ’s are considered.

Pros:

• Increases potential savings

To illustrate a potential money saving transaction using a BJ’s credit card the following example is used. To purchase 3lbs of coffee $15.00, 1 gallon of milk $4.00, grapefruits $5.00 and various brand name items $30.00 with no savings would cost $54.00 before tax. After applying manufacturer and store coupons the savings is 15 percent for a new total of $45.90. After using the BJ’s credit card the additional savings is  .91 BJ's bucks for a total of $43.99 before tax if one transfers the value of BJ's bucks to the purchase.

• Temporarily lowers existing credit expense on balance transfers

For people with existing credit card balances looking to consolidate and benefit from a BJ’s credit card, a zero percent Annual Percentage Rate applies for the first six billing cycles following credit balance transfer. If a responsible shopper can pay that balance off within the six billing cycle allowance, the remaining cost of that credit card debt can be potentially reduced to little or nothing of the original cost.

• Good for frequent BJ’s shoppers

With no annual fee and bonus points on BJ's specials and promotions, the BJ’s Visa card may be just the credit card for families and budget conscious consumers who regularly purchase items in bulk or through the BJs wholesale club, BJ's online, or at BJ's gas stations. For example, if  a BJ’s shopper spends an average of $295 at BJ’s every two weeks, that’s $7,670 or 76.7 BJ’s Bucks per year. Although it doesn’t seem like much, this type of saving habit can be multiplied when used across a higher percentage of household purchases.

Cons:

• High interest rate

The BJ’s Visa credit card is still a credit card and inherently carries risks associated with credit card use. These risk include accumulation of high interest credit balance, overspending, and potential for a lower credit score. The interest rate on BJ’s Visa card is quite high,  13.99-24.99 percent on purchases not paid before interest is assessed. The penalty APR for late payments, spending over the credit limit and bad payments is a 30.24 percent APR so paying off balances in a timely manner is important with the BJ’s credit card.

• Can cause credit issues

If the possibility of not being a responsible credit card user exists, it may be better to not use a BJ’s Visa credit card as the savings are relatively small in comparison to the savings acquired through the use of coupons. Moreover, since coupons can save 10 percent or more on an already discounted item, the use of a credit card is really more of an added bonus on future purchases than the majority of one’s savings. Potential credit issues include, high interest rate balances, overspending, and credit score damage.

• 30 BJ's bucks must be earned

In order to redeem BJ's bucks, 30 BJ's bucks have been earned. This is the equivalent to $1,500 in spending at a rate of .02 BJ's bucks per dollar spent. For shoppers who don't plan on spending this much on BJ's gas, or other retail items, the card's benefits may be lost. The potential for accumulating enough BJ's bucks may also lead to overspending on un-needed items in order to benefit from the BJ's card and bonus BJ's buck program.  Also, if a BJ's membership expires, a non-member surcharge can negate the advantages of spending with the BJ's credit card.

Source: http://tinyurl.com/34gdro8 (Barclaycard U.S.)

The Top 10 Credit Cards in America

If by 'top credit card' one is referring to 1) low fixed interested rates 2) no hidden fees 3) member benefits and 4) banking services, then there are several credit cards that stand out as being among the best in America. 

That said, banking policies can change and credit card plans compete over time so the following credit cards aren't set in stone as the be all and end all of credit cards. Rather, these credit cards, at the time of this review, meet performance and quality benchmarks that measure quality, usability, service, cost and incentive in 5 categories of 2 cards each and specifically look for the following characteristics.

• Balance transfer rates and periods
• Introductory Annual percentage rate
• Low Annual percentage rate
• No annual fee, and member friendly terms of agreement
• Percentage cash back, airline miles or shopping rewards
• Member services, and additional benefits

Airline miles credit cards:

There are many airline miles credit cards to choose from. The two cards below take into account annual fees, cost per mile and bonus miles. These cards may be beneficial to individuals who frequently plan and purchase travel itiniaries.

Capital One No Hassle Miles Rewards: No annual fee, 2 miles per dollar over $1000.00
Miles by Discover Card: No annual fee, up to 12,000 first year bonus miles, 2X miles options

Low interest rate credit cards 

The following two cards take into account interest rates for purchases only, as purchases often comprise a large amount of credit card use. These rates do not necessarily apply to transfer of credit and cash advances. For those persons who don't plan on paying back all their credit purchases immediately, these cards might be worth considering.

• Simmons First Visa Platinum: 7.25% Fixed APR on purchases, and no annual fee.
• IberiaBank Visa Classic Card: 8.75% and up, no annual fee, long grace period

Cash rewards credit cards:

For those individuals seeking to lower their cash costs, pay off credit balances fast and who don't travel a lot, a cash rewards credit card may be just the thing. Combining cash rewards credit cards with discount store and credit card affiliate stores reduce essential purchase costs and can assist with individual budget goals.

• Chase Freedom Visa: 1-20% cash back, no annual fee, $50 cash back bonus program

• Discover More Card: Up to 1 % -20% for exclusive online purchases, no annual fee

Credit union credit cards

Credit Union credit cards are only available to select members. This limits these card's availability. However, for those persons lucky enough to have access to these types of credit cards the following two offer great interest rates with no annual fee at long established credit unions with assets in excess of $1 billion dollars. These cards may be useful for debtors seeking below average cost of credit.

• Apple Federal Credit Union- Visa Platinum: Prime rate + 0%, no annual fee
• Navy Federal Credit Union-Visa Platinum Master Card: 7.9%, no annual fee

Gas cost savings credit cards

Gas savings are important and with the regular use of automobile gas used by many households, a consistent flow of savings can be achieved through responsible use of a gas rewards credit card. The two cards below offer beneficial incentives for travelers and can lower monthly gas costs.

• Discover Open Road (SM) Card: No annual fee, 1%-5% cash back, Fraud protection

• Capital One No Hassle Cash Rewards: 2% gas and grocery reward, no annual fee

Summary

Identifying the best credit cards in America is dependent on a number of factors such as 1) limited time offers, 2) debtor objectives 3) credit ratings and 4) creditor terms. As with many credit providers, maximum credit benefits often require strong credit ratings, however, for some debtors, the best credit card offers may only be available to those with the highest credit rating. Consequently the above cards may be the best only for specific people.

Additionally, different credit card users can benefit from different cards depending on their credit rating, spending habits, budgeting skills, expectations etc. That said, cards which offer financially optimal rewards for the lowest cost with the fewest terms and best customer service(s) can be considered among the best. The ideal credit card offers can change upon offer expiration making the above card's benefits variable with time and competing offers.

Sources:

1. http://www.creditcards.com
2. http://www.askmrcreditcard.com/
3. http://www.lowcards.com/
4. http://www.creditcardguide.com
5. http://freemoneyfinance.com

Guide to Buyer-Protection Credit Cards

Buyer protection credit terms were recently adjusted by the Credit Card Act of 2009. This act affords consumers additional protection from credit card companies. Specifically these changes pertain to credit card interest rate and fee limitations, disclosure requirements, and age restrictions on credit marketing among other terms. This article will serve as a guide to buyer protection credit terms in regard to legal premises, buyer protection terms, and consumer advocacy.

Image source: Petr Kratochvil

The legal foundation of buyer protection terms

Buyer protection credit terms are legal agreements offered by creditors before and during the providing of credit to consumers. By agreeing to the terms of credit and credit protection, both the buyer and the creditor are acknowledging rules are in place regarding the handling of credit and circumstances surrounding that credit. There are many types of credit terms as credit varies. For example, there are credit cards, mortgages, car loans, leases, lines of credit, home equity loans etc. Since each of these loan products are different, credit terms must be tailored to comply with the nature of each specific loan.

Ultimately buyer protection credit terms are determined by Federal and State regulation and not exclusively by the terms of agreement that come with the credit application. In some cases, terms of agreement may be invalid due to non-compliance with statutory law. Title 15, Chapter 14 of the U.S code outline the Federal requirements regarding credit protection. This covers issues such as 1) disputing debt, 2) debt collection practices, 3) liability of creditors and debtors and more.

The U.S. code is occasionally updated to incorporate Federal laws such as the Fair Credit Billing Act, Consumer Credit Protection Act, Fair Debt Collections Practices Act, Credit Repair Organizations Act and more. According to Title 15 of the U.S. Code, U.S. States must have consumer protections in place that are not inconsistent with Federal regulations, or go above and beyond them in regard to protecting the consumer.

Buyer protection: The credit agreement and rights

Before accepting credit consider consulting The Federal Reserve Board's 'Consumer Handbook to Credit Protection Laws.' This handbook outlines some of the key aspects of credit that should be disclosed by the creditor to the buyer such as how and what interest rates and fees are charged, conditions of the leases, manner of credit terms disclosure, obligations of both debtor and creditor etc. The providing of specific information to consumers from creditors is required to help protect the consumer from misunderstandings that can lead to financial damage. For example a credit card agreement may have the following aspects as required by law.

• Liability protection for unauthorized use of credit
• Payment of credit
• Interest and fees
• Identity theft procedures
• Limitations on credit use
• Enforcement of financial penalty
• Disclosure of creditor lending terms

Larger credit loans such as mortgages may be far more complex as the number of laws governing the credit increases due to the nature of the loan. For example, a mortgage involves multiple parties such as Title company, Realtor(s), Bank, municipal record keepers, insurers, inspectors etc. all of whom have their own terms of lending, contracting, charging and rules they must follow to be legally compliant.

Mortgage agreements can be multiple pages long, written in legalese and difficult to read during a home closing meeting. Due to this, the assistance of an attorney may be helpful when reviewing or contesting the credit terms. Additional credit regulations pertain to credit records for which further protections are afforded to the consumer.

• Credit repair organization requirements
• Consumer credit information provisions
• Dispute procedures and rights
• Credit reporting regulations

Buyer credit terms protection advocacy

Government and private organizations exist to assist consumers in having their buyer protection credit terms properly honored. Additionally, changes to credit laws take place to modernize credit protection. For example, annual free credit reports were not always a consumer privilege.

Buyers may now report and dispute errors found on credit reports and take steps to have errors removed. Consumer advocacy organizations can be contacted in cases where credit fraud, credit repair fraud, credit identity theft, unresolved dispute claims and other credit problems occur. Three of these organizations are listed below.

• State Departments of Consumer Affairs
• Federal Trade Commission: Bureau of Consumer Protection
• The Identity Theft Assistance Center
• American Alliance on Consumer Interests
• Consumer Federation of America

Buyer protection credit terms are often small print agreements written in financial or legal language and at times may be difficult to comprehend. These terms often include information on the cost of lending, liability protections, buyer and lender rights, use of credit, billing procedure etc.

Legislative regulation exists to protect the consumer from credit fraud, abuse, impropriety and other aspects of borrowing and lending. These protections are consist of a number of Federal and State Acts which credit lenders such as banks are required to follow if applicable. Violations of these terms may occur at times, in which case consumer awareness and enforcement of protection laws may be necessary.

The Ins and Outs of Credit Services

Credit services are a commonly utilized by both individuals and businesses around the World. Credit commonly takes the form of electronic money that is recorded in virtual accounts in the form of a loan with interest. This interest is usually 'compounded' at or near the quoted Annual Percentage Rate (APR) on a regular basis. When interest is 'compounded' it is recalculated based on balances during each billing period rather than once a year. This allows the credit card company to charge interest 12 times a year instead of just once.

To benefit from credit services it is important to read the terms of agreement before acquiring the service. The terms of agreement include information on how interest is calculated, whether the interest rate is variable or fixed, annual fees, finance charges, late penalties and so forth. Credit services may increase interest rates in the event of late payment and special rules regarding introductory offers may only be printed in the terms of agreement. Some credit services may offer a grace period and information distinguishing various kinds of credit use.

Several unique advantages can be acquired through proper use of credit services, however understanding the need for and usage of the credit can be quite important to the effective use of the credit. For example, credit services can be used to improve credit scores, manage cash flow and have an alternate form of payment to cash, checks, money orders etc. Use of credit can also assist in transaction security as signatures are often required in making payment by credit except in the instances of smaller payments. A few of key aspects of credit are described hereafter.

• Credit Card Balance Transfers

Credit card balance transfers are often a part of a new or promotional credit card agreement. In a credit card balance transfer a credit card holder pays debt on another credit card with a second card. The transfer may be approved and performed by the second credit service provider. Balance transfers can be used to pay off more than credit card debt and can be made with special checks sent out to credit clients. These checks often have promotional interest rates associated with them to encourage balance transfers from an existing creditor to the creditor offering the transfer.

• Credit Card Services

Credit services may include but are not limited to record-keeping, online credit card processing, billing, special introductory offers, travel insurance coverage, automated teller machine access, and telephone support. Credit card services may be expanded over time to include lower interest rates and/or increased credit limits.

• Fixed-Rate and Low-Rate Credit Cards

Fixed rate credit cards have interest rates that do not change over time and/or the time agreed upon in the credit application. These credit cards can be cost effective if a low fixed rate can be secured. Fixed rate credit cards provide more consistent and predictable credit card expensing. Low-rate credit cards are usually reserved for applicants with good to excellent credit ratings. These cards offer competitive special features such as 1 minute approval, 0% introductory offers, low-rate balance transfers, rewards programs, no annual fees and annual percentage rates between 8%-15%.

• Credit card merchants, Merchant credit cards, and Merchant account services

The businesses that make credit card and credit service offers are credit merchants. Credit card merchants are in the business of offering and selling credit to both customers and businesses alike and facilitate credit services. Additionally, credit card merchants are often banks and/or businesses that also engage in financial services. When a business receives payments from customers who use credit cards, the credit information must be processed using electronic transactions or modem transferred account reconciliations.

The credit card company i.e. merchant account service provider, then credits the merchant with the applicable fees and offers equipment or software technical support. It is also useful to note, a fine distinction exists between merchant credit cards and merchant credit card accounts. The former is an actual card with a credit balance whereas the latter is an account through which a merchant can accept credit card payments. Merchant credit cards are used solely for business transactions.

To summarize, credit services can become quite involved, especially at the business end of the transaction(s) because businesses compete with prices and offer credit card payment options while also having to deal with the credit card merchant at the other end of the transaction. The range of credit services include balance transfers, credit cards with varying benefits and interest rates, business credit cards, merchant credit services, credit card facilitators and account services. Credit agreements outline the details of the credit services in addition to any fees, surcharges, late penalties, benefit rules etc. Such being the case, reading and understanding the credit service terms of service can be beneficial especially with large lines of credit.

How temporary credit cards work

Temporary credit cards include prepaid credit cards and temporary credit card numbers. These cards may require a pin number, expiration or signature for use and in some cases are linked to longer term credit card accounts. The temporary credit cards that are pre-paid do not have credit balances but rather available credit, however, some may be reloaded with new funds. Temporary credit cards offer their holders security, transaction safety and are have less capacity to ruin one’s credit rating than traditional credit cards.

These types of cards are issued by traditional credit card providers such as Visa, Mastercard and American Express, however several online temporary credit card options are also available from financial service providers. An example of a Temporary Gift Credit Card is illustrated at the Visa USA website that provides some of the temporary credit card services discussed in this article.

According to American Express, temporary credit cards that are dubbed credit gift cards are actually ‘prepaid payment devices’. So while an American Express Credit Card may offer a true credit limit, American Express gift cards do not. Nevertheless, these cards are credit cards in the sense they can trace payment history and transaction details like a credit card. Temporary credit cards can be used anywhere where payment for major credit cards are accepted provided the temporary card issue is or is affiliated with these credit service providers and locations.

Advantages and disadvantages of temporary credit cards

There are several advantages and disadvantages to temporary credit cards. Temporary gift cards may restrict use by allowing one time use of the card number only. Moreover, for temporary credit cards linked to real accounts, numbers can be created for one time purchases. Another advantage is the security these cards offer. That is to say, if the card does get stolen, it’s just the card that’s stolen, the money on it and nothing more. Granted, having any card stolen is a disadvantage but payments can still be cancelled and the card replaced according to Visa USA. Some advantages of temporary credit cards are listed below:

Advantages:

• Protect against identify theft
• Require PIN instead of signature
• Safer than cash
• Can be replaced

Gift cards such as the Visa gift card do not have credit limits in the traditional sense of the word. Moreover, temporary credit cards such as plastic Visa gift cards may only be used to purchases as much as the card has been prepaid with. These cards are not necessarily re-loadable as previously mentioned and may carry a small non-refundable balance that requires an exact or larger purchase than the amount of the card to redeem its full value.

Disadvantages:

• Pre-paid credit
• May not always be used for reservations
• Pinless cards can still be used if stolen
• Card expires like regular credit cards

Online vs plastic credit cards

Another version of temporary gift cards are the online version. An example of the online version is illustrated at the Discover card online credit services website. These are not physical cards but rather temporary card numbers that have cash value associated with them. In some cases the numbers are generated when bought and may be have additional value put on the card when its value diminishes. In other cases, the temporary credit card is really an extension of a real credit card number in the sense that it is linked to a real account but not directly and only for a limited time. These temporary credit cards provide security by limiting use of the card especially if a pin number is required to utilize the card for purchases.

Thus, the pin codes that may be present with online temporary credit cards may not be with plastic temporary gift cards which are similar, but not exactly credit cards. Online cards and plastic temporary credit cards may offer liability protection depending on the issuer and processor and there may be a fee associated with both the generation of the online temporary credit card number and the issuance of a plastic temporary credit card. For example, the DeluxeCard Visa gift card from giftcard.deluxe.com has a processing fee for phone orders, card issuance and some shipping services requested with purchases made with the card.

Summary

Temporary credit cards are forms of payment that protect the users identity, may or may not be linked to an actual credit card account and for those that aren’t have a prepaid balance. Plastic temporary credit gift cards are processed by traditional credit card processors and issued by a variety of issuers such as major banks or online financial service providers. Some temporary credit cards require pin numbers for use in addition to the card number whereas others make use of signatures, card number and expiration date for verification and processing.

The fees that come with some temporary credit cards may be a deterrent to their use, but not all fee structures are the same. Such being the case, shopping around for the perfect temporary credit card may be worth it for peace of mind when making large or online purchases over unfamiliar websites.

What Collection Agencies Don't Want You To Know

Debt collection agencies aren't exactly thrilled to reveal what they're not allowed to do under The Fair Debt Collection Practices Act. Instead debt collection agencies may be more likely to avoid mentioning, explaining, or acknowledging the existence of such legislation in a possible attempt to place pressure on those persons who they are trying to collect money from. Consumer protection law is available to the public under Title 15, chapter 41, sub-chapter 5 of the U.S. Code.(1)

Being aware of what these rules disallow certain practices within debt collection, in regard to debt collection agencies can assist people in debt know their rights when their debt is passed to a debt collector. These rights help empower debtors in so far as the law allows, and does so for the purpose of protecting debtors from harassment, manipulation, threat and danger.

• Debt collection agencies can't violate your privacy

According to the privacy rights clearinghouse, debt collectors cannot leave pre-recorded voice mails on cellular phones if a cell phone was not given on a credit application.(4) Debt collectors are also not allowed to leave messages with third parties as per Title 15, chapter 14, subchapter V, section 1692c of the U.S. Code. the Privacy Rights Clearinghouse.

• Communication from debt collection agencies can be terminated

A debt collector can be asked to cease contact with the provision they are allowed one additional communication to notify a debtor of the collection effort thereafter. This does not mean one no longer owes debt, but it does mean that particular collection agency is obligated to cease communication following the defined contact prescribed by law.

• Misrepresentation of debt, business, legal and individual communication

Debt collection agencies must act honestly with their communications so as to avoid coercing, manipulating, harassing or lying to the debtor, all of which are illegal. The debt collector is required to disclose the purpose of their initial communication and may not mislead or contact the debtor before 8:00AM or after 9:00PM in that debtor's time zone.(1)

• Collection fees and assets are prohibited unless authorized

A debt collection agency may also neglect to mention the unfair practice provisions of the aforementioned statutory law. This includes unauthorized collection of debt owed and associated fees as well as personal property. By unauthorized one means as made through agreement with the collection agency or as allowed through other regulatory laws.

• Disclosure of identity

If a debt collection agency calls a debtor directly, they are required to provide "meaningful disclosure" of their identity.(1) This means a debt collector cannot telephone a debtor anonymously and provides the debtor an opportunity to communicate his or her wishes regarding the conduct of the debt collector.

Summary

Debt collection agencies are limited in their range of conduct by statutory law. Being aware of this law is something debt collectors may not want you to know because it empowers consumers and debtors, possibly to the disadvantage of the debt collector.

If debtors are unaware of these laws and how a debt collection agency must conduct itself, this can place clearer restraint on the actions, and communications of debt collectors so as not to seek out or utilize less than savory debt collection methods.

Sources:

1. http://bit.ly/czXTlG (Cornell University: Title 15, Chapter 41 U.S. Code)
2. http://bit.ly/alP2Y (Federal Trade Commission (FTC): Consumer guide)
3. http://bit.ly/VAUo9 (FTC: Consumer credit)
4. http://bit.ly/bBuOTw (Privacy Clearinghouse)

How to correct mistakes and errors on your credit report

A credit report error is an informational and/or quantified inaccuracy on a credit report which is a financial disclosure document containing information regarding creditors, credit inquiries, and credit history. Errors in credit reports can affect credit scores which are used by lenders to determine qualification for credit.

Since the FICO credit score and credit information is used to determine a significant amount of lending and other criteria, it is in one's financial interest to ensure the information on such a report is correct. This article will discuss repairing credit report errors in terms of 1) credit report error cause, 2) error type and 3) method for correcting the error.

Types of credit errors

Many people have credit errors on their credit reports be they minor or major mistakes. The flow of credit information from lender or financial institution to credit reporting agency can be interrupted and/or disrupted by no fault of the consumer who's credit can be affected. For this reason, understanding the type of credit errors that may come up can be helpful both in preventing and resolving credit report errors.

As evident below, the types of errors on a credit report can vary and may include any one of the following. (consumerreports.org). Identifying the error type is important in the tracking down of, and amelioration of the disputed information. The types of credit errors may be anything from an incorrect address to a late payment that was paid off long ago.

• Unresolved credit charges
• Inaccurate late payment
• Wrong personal information
• False billing data
• Data entry errors
• Credit history mistakes
• Computer virus related error

Causes of credit errors

The best way to correct an error on your credit report is to avoid the error altogether. There may be several sources of credit report errors, some may be unresolved reporting ambiguities, where as others may be related to identity theft that has unduly affected credit report information. Whatever the reason(s) for the error, the first step in correcting errors is 1) to limit the probability of the error occurring and then 2) identifying the error to be fixed. The following lists potential causes of credit report errors and solutions for such.

• Identity theft related events: Prevent security violations
• Ambiguous credit data: Review credit report
• Financial institution or creditor reporting mistakes: Utilize functional institutions
• Faulty utility provider credit information: Confirm utility provider data
• Inaccurate bankruptcy related information: Verify documentation
• Credit reporting agency miscalculation: Check credit report

The U.S. Consumer Sentinel Network, comprised of agencies including the Federal Bureau of Investigation and the Federal Trade Commission have reported a disturbing trend in identity theft complaints. Between the years 2000-2008 the network's identity theft complaint count rose from 31,140-313,982. (ftc.gov) Thus, maintaining secure financial practices is a good preventative technique.

Avoiding financial reporting errors can be difficult in some cases as when your credit information is handled by other parties, it is subject to the ability of all those parties and machines capacity to relay credit information properly. Limiting the number of organizations that handle your money and credit information may help in addition to banking with reputable financial institutions.

Ultimately however, checking a credit report is the verification of credit information so that you can handle any mistakes in your credit report if they do exist. What's more since there may be more than one credit reporting agency, there may have to be multiple credit report checks and an increase in the number of potential errors. For example, in the United States, three major credit reporting agencies exist; Experian, Equifax and TransUnion in the U.S.

How to correct errors on your credit report

Correction credit report errors may not always be as quick and easy as a phone call to the reporting agency. This could be because of the volume of customers, bureaucracy, and vagueness in the credit reporting law, systemic inefficiency etc. Thus, patience is a useful ingredient after requesting a credit report from one or all relevant credit reporting agencies.

The following is a list of the three major U.S. credit reporting agencies with their phone contact information as reported by the Federal Trade Commission (FTC). However, according to the U.S. Federal Trade Commission, credit reports should be requested through http://www.annualcreditreport.com

U.S. Credit reporting agencies: (ftc.gov)

Experian: 1-888-397-3742, http://www.experian.com

TransUnion: 1-800-916-8800, http://www.transunion.com

Equifax: 1-800-685-1111, http://www.equifax.com

PRBC: 1-800-884-4747 http://www.microbilt.com/nontraditional-credit-report.aspx

The following credit report correction method is gathered from the Federal Trade Commission (FTC) and Consumerreports.org. Both these organizations advocate for consumers, correction of credit report errors being one of those things.

• Example credit dispute process: (ftc.gov and consumereports.org)

1. Identify credit error(s)
2. Locate evidence supporting dispute ex. Receipts, statements etc.
3. Gather all dispute documents including dispute letter and make copies
4. Mail via certified mail, copies of all relevant credit error disputes
5. Follow up and file a complaint with one or more members of the Consumer Sentinal network if necessary

Additional tips to consider when identifying and/or disputing credit errors involving becoming aware of the process, parties involved, how to communicate with those organizations, and available legal options, reporting agency and creditor obligations, and consumer rights. Below are a few tips that may help with fixing a mistake on your credit report.

• Differentiate disputable from non-disputable errors
• Utilize defensible dispute methods
• Report errors to all parties involved
• Properly document and complete error reporting information
• Be aware of different available options including credit statements, and non-disclosure rights.

Sources:

1. https://www.annualcreditreport.com/cra/index.jsp
2. http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre21.shtm
3. http://www.ftc.gov/bcp/edu/microsites/idtheft/reference-desk/national-data.html
4. http://www.consumerreports.org/cro/money/credit-loan/credit-reports-6-07/overview/0706_credit_reports_ov.htm

Pros and Cons of Paying Off Credit Cards With Home Equity Loans

Equity costs less than credit so financing a credit card debt with equity is cheaper. However, there are a few cursory related issues such as capital for home improvements, amount of credit card debt, and refinancing that can make the interest rate benefit not worthwhile.

This article will discuss the various advantages, disadvantages and factors that may assist with the decision to pay off credit card debt with home equity, and then follow up with a few tips that may prevent one from having to use home equity to pay off debt.

Advantages

The larger the credit card debt, the more practical a home equity loan becomes once all other options are deemed unavailable. In other words, if there is no other cost saving solution, a home equity loan may not be such a bad idea.

• Net Gain on Interest Rate Savings: Equity loans and lines of credit cost in range of 5-8% in interest whereas credit cards charge between 9-20% in compounded interest. Depending on the amount of credit card debt one has, this can make a significant annualized difference in savings. For example, if an individual has $7,000.00 of credit card debt at 14%, the nominal non-compounded interest for one year would be $980.00. At 6% through a home equity loan, that amount would be closer to $420.00 nominal i.e. non-compounded.

• Enhanced Individual Cash Flow: With less debt tied up in credit cards, monthly expenses go down all other expenses held constant. This can place one in a better standing with credit card companies and allow for more cash flow with which to manage monthly costs.

Disadvantages

Since homes are often a source of financial security for individuals and family, utilizing the equity in one's home can be a drain on financial assets that may be needed in the future.

• Refinancing causes Re-Amortization of Mortgage: When a mortgage is refinanced to include a second mortgage via a home equity loan, the mortgage amortization schedule can reset meaning the interest payments will likely rise in proportion to capital contributions. The difference between the newly amortized repayment terms and the savings from paying off the credit card debt may be too low to consider.

• Equity leveraging Declines: Should the need arise for a home improvement emergency or unexpected family cost, one may have be required to resort to credit cards once again making the equity loan redundant. In this case, one should assess the potential for future expenses and individual savings and cash-flow to assure the equity loan doesn't use up too much leverage.

Tips on using equity to pay off credit cards

• Negotiate Credit Card Rates First: One may be able to lower the credit card interest rate through credit counseling services or directly with the credit card company. This can save one's home equity and monthly expenses.

• Finance Large Debt: If the debt is large, the potential savings increase than with smaller debt. It may not be worthwhile to take a home equity loan for small amounts of credit card debt.

• Vehicle Collateralize: In some instances, a newer or luxury vehicle can be used as collateral for a loan with more favorable interest rates than credit cards. By considering a vehicle collateralized loan, one can save with a lower interest rate and protect the equity in one's home.

Home equity loans can be a good idea, if the financial circumstances deem them necessary to cut costs and save money. However, it is important to note such loans may not be worth the effort or the cost after mortgage recalculations, unexpected costs requiring future credit card use.

The primary factors one may think about prior to obtaining a home equity loan to pay off credit card debt are the size of the debt, the potential cost savings, future cash flow needs and other lower cost sources of financing the credit card debt pay-off. Should the equity loan still be favorable after such factors are entered into the equation, the loan may be worthwhile.

How to Eliminate Credit Card Debt

We aren't all millionaires and some of us have to stop living like we think we are. Credit card debt can be eliminated, and it can be reduced even easier. To make a long story short, one may benefit through implementation of one or more of the following techniques to reduce and/or eliminate credit card debt. The first letter of each debt reduction technique spell out SCARY when put together because it is scary to try and face debt.

• (S)top accumulating credit card debt immediately
• (C)onsolidate credit cards into one low interest loan
• (A)pply more money each month to paying off the debt
• (R)eassess and adhere to a personal spending budget.
• (Y)ell out for debt elimination assistance

These steps are common advice for eliminating debt and are easier said than done; after all a really smart monkey might be able to pay off credit card debt if one gave him a spinner with two options; pay off and don't pay off! The reality is many individuals use credit cards to help them live. The clue in this is either one is living a standard one can afford or one isn't. If the former, then paying off debt is more difficult and requires the following additional ingredients.

1. Dedication to the new budget.
2. Commitment to not spend more than one can afford.
3. Understanding of how compounding can cost more than the original debt.
4. Live within your means even if it means moving in with the parents for a while.

The way to eliminate credit card debt is easy, doing it is much harder. If it wasn't hard no-one would have this problem and credit cards would be making less money. If you or someone you love needs help paying off credit card debt, understand the seriousness of the situation and try to follow the above steps as best you can. There are also many references and online guides that can be helpful in developing a debt elimination plan. While this may involve a little thought, the amount of information available on the internet and through non-profit consumer services etc. can be useful.

Eliminating credit card debt essentially means paying off the credit card and if the cards are used thereafter, the new balances are paid of frequently in full. Implementing a credit card debt elimination plan involves making consistent and large enough payments to pay more than interest and costs added to the card. However, other techniques that may lower interest rates, and amounts added to the card(s) every month can also be helpful in eliminating the debt faster.

Learning From Bad Credit

Bad credit can be caused by irresponsible financial practices or via no fault of one's own. The Fair Isaac Corporation reports the average consumer carries 13 credit responsibilities generally consisting of credit cards and installment loans. Moreover, in 2009 the U.S. Federal Trade Commission (FTC) reports 278,078 potentially credit damaging, identity theft complaints were made according to the FTC's identity theft clearinghouse and consumer sentinel.

This doesn't include the 721,418 fraud complaints from the same year. Such identity theft can lead to bad credit in addition to faulty credit reporting and individual factors such as late payment of bills.

Poor credit in an economic system sometimes forces individuals to learn from the resulting situations. However, a bad credit situation isn't always the fault of the individual. If the bad credit is due to individual reasons, it doesn't have to be a terrible thing. Having bad credit can leave one with new options and as the saying goes, "when one door closes, another may open."

Knowing what that new door is indicative of learning from bad credit. More specifically, creditors are more likely to be reluctant to lend to persons with bad credit in effect asking one to improve the credit score before any new money is loaned. How an individual learns from the bad credit may lead to different outcomes. This article will illustrate ways an individual may choose to learn from the bad credit.

Report identity theft and faulty credit reporting

The first step in learning from bad credit is knowing what caused the bad credit. Unfortunately, this may involve some research for no fault of the individual if one's identity, credit cards or other financial information has been stolen and in the case of poor credit reporting on behalf of financial institutions. To find out if the bad credit is one's own fault the following steps may be helpful:

• Check bank statements for erroneous or suspicious charges
• Call the bank or credit card company to report lost or stolen cards
• Request an immediate investigation and reversal of false charges
• Order a free credit report(s) from http://www.annualcreditreport.com
• Request a marketing freeze by calling 1-888-opt-out to minimize financial risk

Allow experience to show the way

In the case of an individual bad credit score, one can either learn to not be so dependent on credit companies, learn to build credit scores or choose renunciation the credit institution altogether. In either one of these cases, one is learning from the experience of bad credit, and making a decision for oneself about how to move forward with life. A first step one may take in learning from bad credit is to acknowledge and identify what is going on. The following are signs of bad credit:

• Low credit score
• Late payments on bills
• High interest rate
• Financial stress

After the bad credit is identified, one may then begin the process of thinking about it, reacting emotionally to the situation, or simply not caring. Which ever method one chooses the bad credit presents some unique opportunities:

• A chance to recognize one's financial situation
• A financial reality, in which one must either act or live without credit
• An excuse to not spend money
• The beginning of a new credit life, and the end of an old chapter in one's life
• A way to learn about protecting one's credit identity and profile

Immediate solutions and building new credit

It is not the end of the world when bad credit strikes. There are several ways to deal with the situation. In the case of identity theft, one can file a identity theft report. The Federal Trade Commission is a Federal organization that may be of assistance in this matter. If the credit problem is due to faulty financial reporting by a financial institution, one may need to produce paper work proving the fault and request the credit reporting agency correct the credit report. To rebuild bad credit caused by personal reasons, a step by step process may be followed. A few tips with which to deal with the bad credit are below:

• Ask the credit company or lenders for debt re-negotiation
• Contact a reputable credit counseling service
• Stop spending as much or re-budget
• Consult people one feels comfortable talking about such matters with.
• Consider legal options

The above methods may provide some immediate assistance to the situation but are not necessarily a long-term fix or cheap. Credit counselors, credit card companies and others may try to help one achieve a second chance, but what one does with that chance is up to the individual. One can learn a number of things from bad credit such as how to deal with credit card companies, what remedies are available and what steps must be taken to report financial reporting problems and theft issues.

After dealing with the immediate problem, one may then learn how to build new credit through obtaining secured credit cards, paying bills on time, identifying the ways credit scores rise etc. The whole process could take weeks to years depending on the severity and how complicated the situation is.

In summary, bad credit is not usually a pleasant experience that may or may not be caused by individual fault. In identifying, acknowledging and reacting to bad credit one may learn either directly or indirectly, how to deal with the bad credit, build new credit and take new approaches in the future. In these ways, bad credit is a learning experience, and in some cases a somewhat involuntary learning experience.

Sources:

1. http://www.myfico.com (Fair Isaac Corporation)
2. http://www.ftc.gov (Federal Trade Commission)