Save Thousands Thanks to Credit Repair

Credit repair can save consumers hundreds of dollars every month in interest payments. That’s because lenders of all types, whether they’re passing out home, auto, business or personal loans, rely on credit scores to determine the interest rates they charge borrowers. Borrowers with high credit scores qualify for the best interest rates. And today, these top rates are truly impressive – throughout much of the second half of 2009, interest rates on 30-year fixed-rate mortgage loans had fallen under 5 percent, a historic event. But borrowers with bad credit scores won’t qualify for these rates, and that’s a distinction that can cost these borrowers a significant amount of money every year.

Why Credit Repair Matters

Here’s an example of why credit repair matters: Homeowners who have a $200,000 30-year fixed-rate mortgage loan with an interest rate of 7 percent will pay $1,330.60 each month. Homeowners with the same loan but with an interest rate of 5 percent will pay $1,073.64 every month. That’s a difference of $256.96 a month, or $3,083.52 a year. Homeowners, who take the steps to repair their credit and boost their credit scores, will qualify for lower interest rates – saving themselves potentially thousands of dollars each year.

The Basics of Credit Scoring

Credit scores, along with yearly income levels, are the most important factors that lenders look at when determining the interest rates that they’ll charge their borrowers. The nation’s three credit bureaus – TransUnion, Experian and Equifax – maintain their own credit reports on U.S. consumers. The information in these reports are used to determine consumers’ credit scores, a single number that represents the way in which consumers have managed their money in the past. Consumers who have a history of missing credit-card payments, defaulting on auto loans or running up large amounts of credit-card debt will have lower credit scores. Those who have scores of 620 or less, will usually have to take out bad credit loans. They’ll then miss out on the nation’s historically low interest rates.

Repairing Credit

Fortunately, it is possible for consumers to repair their credit. They simply have to start paying their bills on time, closing excess credit-card accounts, paying their rent on time each month and slashing their debt. There are no secrets to fast credit repair. Boosting a credit score takes time and diligence. Borrowers will have to weigh their choices: Should they take out a home or auto loan now, even if their credit score is weak, or should they wait a year or more until they’re followed the steps to credit repair? The answer could mean a difference of thousands of dollars each year.

Author: Credit Loan Link:http://www.creditloan.com/blog/2010/01/29/save-thousands-thanks-to-credit-repair/

Board of Governors of the Federal Reserve System

Press Release
Federal Reserve Press Release

Release Date: January 12, 2010
For immediate release

The Federal Reserve Board on Tuesday approved a final rule amending Regulation Z (Truth in Lending) to protect consumers who use credit cards from a number of costly practices. Credit card issuers must comply with most aspects of the rule beginning on February 22.

"This rule marks an important milestone in the Federal Reserve's efforts to ensure that consumers who rely on credit cards are treated fairly," said Federal Reserve Governor Elizabeth A. Duke. "The rule bans several harmful practices and requires greater transparency in the disclosure of the terms and conditions of credit card accounts."

Among other things, the rule will:

* Protect consumers from unexpected increases in credit card interest rates by generally prohibiting increases in a rate during the first year after an account is opened and increases in a rate that applies to an existing credit card balance.

* Prohibit creditors from issuing a credit card to a consumer who is younger than the age of 21 unless the consumer has the ability to make the required payments or obtains the signature of a parent or other cosigner with the ability to do so.

* Require creditors to obtain a consumer's consent before charging fees for transactions that exceed the credit limit.

* Limit the high fees associated with subprime credit cards.

* Ban creditors from using the "two-cycle" billing method to impose interest charges.

* Prohibit creditors from allocating payments in ways that maximize interest charges.


In December 2008, the Federal Reserve adopted final regulations prohibiting unfair credit card practices and improving the disclosures consumers receive in connection with credit card accounts. This rule amends aspects of those regulations to implement provisions of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit Card Act), which was enacted in May 2009.

The final rule represents the second stage of the Federal Reserve's implementation of the Credit Card Act. On July 15, 2009, the Board issued an interim rule implementing the provisions of the Credit Card Act that went into effect on August 20, 2009. In addition to finalizing that interim rule, this rule implements the provisions of the Credit Card Act that go into effect on February 22, 2010. The remaining provisions of the Credit Card Act go into effect on August 22, 2010 and will be implemented by the Federal Reserve at a later date.

What Is Identity Theft Really?

Most people think it has something to do with bank accounts, credit cards and fraudulent purchases. They are indeed correct, but only partially. There are several forms that identity theft can take:

Theft of Character – This is where a person steals someone’s social security number, driver’s license number or commits a crime in a victim’s name. Some of the things that can happen include receiving a DUI, traffic tickets, filing false tax returns, opening new bank accounts, or gaining employment in a victim’s name.

Theft of Medical Benefits – Occurs when a victim’s health insurance identification or social security number is used to get health care. This form of identity theft can have life threatening ramifications if misinformation is included in a victim’s health records. Think about a comatose auto accident victim arriving at the local ER. Computer records say that the victim is a diabetic but has no documented drug allergies. But the victim is really not a diabetic but has an allergy to penicillin.

Theft of Financial Information/Identity Fraud - This is probably the most recognized form of the crime.

This theft occurs when a thief uses a victim’s information for illicit gain. Thieves obtain credit cards, loans, purchase merchandise, vehicles, and even homes posing as someone else. This type of misuse of information is termed identity fraud.

Synthetic Identity Theft – This happens when different pieces of personally identifiable information, typically a real person’s social security number are joined with a different name to create a new person. This crime can be financial in nature, but also can impact a victim in other ways.

For example, a friend of mine couldn’t figure out why every time he went to apply for a job he was being turned down. He ultimately found out he had “a record” with several criminal convictions. His social security number was used each time the other person was arrested.

Business/Commercial Identity Theft –Criminals can establish new credit cards or accounts with a business' name or even make fraudulent purchases in the name of the business. Businesses normally don’t become aware of the activity until they are billed on these accounts. Business owners and executives, employees of the business, and business clients can all be victims or suffer losses, directly or indirectly.

For a small business, this can be devastating to both the business and the owner. Small businesses can be especially vulnerable to this form of crime because the business’ credit and the business owner’s credit are very often one and the same. The business owner may personally guarantee a business loan or line of credit, or may use his or her own personal credit accounts directly to finance the business.

During a recent speaking engagement, I met a gentleman who was victimized in that fashion. Hearing of

my topic, he told me about a current case he was embroiled in. Someone had taken his social security number and opened a business in another state. The only reason he found out was when the thief walked away from the business, and this gentleman was left with $150,000 in debt and a big legal battle on his hands.

At this point you may feel, “I’m pretty safe. I leave my extra credit cards at home; I don’t carry a social security card around with me; I have a firewall on my network, we run background checks on all our new hires…” But think about it. If you’ve purchased a car, bought a home, gone to a doctor’s office, served in the military, applied for a loan or insurance, how many thousands of databases have
you been entered into? How about all those great supermarket key tags: just swipe it and we’ll give you $2 off a gallon of ice cream. Sounds funny, but that purchasing data is associated with you, and who has it?

Face it, our information is irrevocably and irretrievably out in the real world, and it’s vastly outof our control!

According to statistics from the Federal Trade Commission, identity theft results in approximately $50 billion dollars in annual business losses, affects about 10 million victims per year, and results in out-of-pocket expenses for victims of roughly $5 billion dollars each year. This doesn’t even include the incredible investment of personal time to restore their identities, which the FTC estimates could be as high as 500 hours per theft.

As a result of the implementation of many data privacy, security, and identity theft laws, people and businesses have become more aware of identity theft in general. But people don’t fully realize the damage it can cause a victim and their family, or how it devastates a business if it suffers a loss of data, or if its employees become victims. In addition to potential fines, lawsuits, and even worse, permanent reputation damage, there is also the possible responsibility on the consumer’s and/or business’s part for fraudulent losses to employees and other victims. The physical and emotional toll it can take on the victim is outlined in this Wall Street Journal article at http://online.wsj.com/article/SB121807447764219305.html

There are many simple steps a consumer can take to minimize the risk to the information in their possession such as:

* Remove social security number from driver’s License and wallet.
* Don’t leave your car unlocked in a driveway or parking lot (there’s a lot of information about you in the glove compartment).
* Don’t put mail in a basket on the office receptionist’s front desk or a home mailbox, take it to the Post Office.
* Don’t share a computer. If you do, have separate logons and passwords.

Most consumers are rather naïve about the threat and potential damage of being victimized. Many business owners simply take a wait and see approach to implementing some kind of identity theft program within their organizations. But it can be a win-win situation for the employer, employees and customers to add an identity theft preventive plan. It can save dollars to the bottom line if it avoids an employee taking time off to fix the problem, and it can have risk mitigation benefits for
the company to offer a benefit should employees become victims as a result of an internal breach.

Simply put, (and yes, the old adage is still true) an ounce of prevention is worth a pound of cure. Beyond this, the benefits of offering employee education about identity theft and the potential risks to both the employees and the business can deter someone on the inside by letting a potential thief know that the company takes the personal information of its employees, customers and business entity seriously.

As the growth of the crime has skyrocketed, so have the potential offerings available for consumers. But there are many things one needs to look for when selecting one of the products. Some key features to look for in an identity theft protection program are: does it provide credit monitoring, restoration of a victim’s identity as well as access to legal services? Does it cover minor children?

Does it prevent problems or merely clean up after the fact? Is it affordable in light of the risks and potential damages faced? Is it updated as the law changes? Does it identify new threats as criminals adapt to law enforcement efforts?

Even though the Internet receives a bulk of the blame, and crime through this mechanism is indeed growing, it is not the only area of activity. It happens in businesses, in your own home, at your kid’s college campus, over the telephone during a simple “survey”. Does this mean we should stop the use of the Internet, social media, cell phones and wireless devices? No. But it does mean that every
consumer needs to be responsible for things like online activity, not ignoring privacy policies, Tweeting and posting on Facebook properly, and appropriately forwarding and responding to emails.

The crime is not going to “go away” and is only expected to get worse. It is the number one crime world-wide. And the single best thing we can do is raise consumer and business awareness.

Some of our recommendations include

* Take the issue seriously.
* Put appropriate company plans in place.
* Offer an identity theft program (and awareness training) as part of your employee benefits package.
* Encourage people to implement simple personal safety measures.

NCR Credit Plus 866 469 6599

Rising mortgage rates will test housing market

Mortgage rates are continuing their creep upward in a trend that well may choke off a recent refinancing boom and provide a test of the strength of the housing market in 2010.



The interest rate for a 30-year loan ticks up to 5.14%, the fourth consecutive weekly increase.
Freddie Mac's widely watched survey found that rates averaged 5.14% this week on 30-year fixed-rate home loans for borrowers with good credit and a 20% down payment -- or 20% equity for refinancings. That was up from 5.05% last week and slightly higher than at the same time last year.

On 15-year mortgages, the average fixed rate was 4.54%, up from 4.45% a week earlier.

Borrowers paid their lenders upfront charges averaging 0.7% of the loan balance.

Tracking a rise in yields on Treasury bonds, home-loan rates have risen steadily in the last four weeks since 30-year fixed-rate mortgages averaged a record low of 4.71% on Dec. 3.

The climb comes even though a government effort to keep rates low is in place for a while longer. A Federal Reserve program to spend $1.25 trillion to support the market for mortgage-backed securities is scheduled to end in the spring.

Every tick up in loan rates makes it less likely that someone with an existing mortgage will refinance to save money.

But rates in the 5% range remain extraordinarily low by historical standards, offering a huge incentive for buyers.

For example, principal and interest payments on a new 30-year fixed-rate mortgage were about one-third less than they were in May 2000, when rates peaked at 8.6%, said Frank Nothaft, Freddie Mac's vice president and chief economist.

"This translates into almost 50% less in interest payments over the full 30-year term," he said.

New credit card rules add accountability

In a world where shopping online and booking a hotel or a rental car usually demands plastic, few people can survive without a credit card.

But vast changes in credit regulation coupled with a souring economy turned 2009 into the most turbulent credit year in decades, with a record number of rate hikes, consumer cancellations and changes in fees, terms and credit limits. And experts say there's more in store for 2010.

"2010 is going to be the year of accountability," said Adam Levin, chairman and co-founder of Credit.com, a credit-shopping website. "Credit card companies are going to be more accountable to consumers, but consumers are going to have to be more accountable too."

What should you expect in 2010, and how can you put yourself in the best position to lessen the pain, or even profit from the changes?

First it's helpful to recap what's already happened, said Bill Hardekopf, chief executive of LowCards.com. That's mainly because many of the anticipated changes are linked to a consumer protection law that was passed earlier this year but is taking effect in stages.

In May, Congress passed the CARD Act -- short for the Credit Card Accountability, Responsibility and Disclosure Act of 2009. But legislators gave banks time to acclimate to the new rules by putting in three effective dates. The first was in August, the second is in February and a final rule that affects gift cards applies next August.

What happened last August? Credit card issuers were required to give consumers 45 days' notice of rate hikes and bill people at least 21 days' before their payments were due. That was intended to assure that consumers were given adequate time to pay without getting hit with late fees.

In addition, consumers got the ability to "opt out" of a rate hike. The catch on this opt-out provision is that when you say no to the higher rate, the bank can close your account and double your minimum monthly payment, Levin said.

If you do elect to close the account, you can't be forced to pay off your balance all at once. But the new law does allow banks to set up a schedule that guarantees you'll have paid off your debt within five years. On the bright side, you pay off the debt at the old interest rate, not the higher one that the bank wanted to impose.

But most significant changes go into effect early next year.

As of Feb. 22, if you have a consistent history of paying on time your rates cannot be increased on outstanding balances except when a "teaser" rate expires or when you have a variable-rate credit card.

If a credit card company hikes rates on a fixed-rate card, they are only allowed to charge the higher rate on new charges.

Your rate can be increased if you've been irresponsible about your credit use, though. If your payment is more than 60 days late, the issuer can charge a penalty rate that could be vastly more expensive than what you were paying previously and that rate can be applied to an existing balance. However, the credit card company must reinstate the lower rate if you make at least six months of on-time payments.

And then there are those fees for exceeding your credit limit. You cannot be charged an "over-limit" fee unless you affirmatively opt-in to a program that will allow your card issuer to accept charges that put you over your credit limit. If you don't opt in, the bank will simply reject any such charges.

All consumers also must be told how long it will take to pay off their credit balances if they make only the minimum required payments.

Youthful borrowers those under 21 will not be able to get credit cards unless they have a co-signer or can show that they have income to pay their own bills.

Issuers of "subprime" cards those going to people with bad credit histories may not charge customers upfront fees to obtain the card that amount to more than 25% of the credit limit.

These changes have already spurred a flurry of activity. In an effort to maintain their ability to change rates, banks have been converting fixed-rate cards to variable-rate cards and they've hiked rates on millions of customers.

In addition, some 58 million individuals have had credit cards canceled or their credit limits cut, said Craig Watts, spokesman for Fair Isaac Co., the makers of the FICO score. These cuts aren't being imposed only on bad risks, either, Watts said.

The typical cardholder whose credit limit was affected had an excellent credit score, ranging from 760 to 770.

10% of underwater homeowners would walk away, survey finds

A new national survey looking at the phenomenon of strategic defaults, in which homeowners choose foreclosure over continuing to pay on underwater mortgages, has found that nearly one out of 10 homeowners say they would walk away if they felt financially vulnerable and owed more on their homes than they were worth.

The telephone poll of 1,000 homeowners, conducted for Reecon Advisors, publisher of Real Estate Economy Watch, revealed that most would choose other options: 61.7% would talk to their lenders about modifying loan modifications, 44.3% would try to sell and 25% would rent out a room to help meet expenses.

To what extent homeowners are underwater also plays a role in the decision making process. Owners with negative equity of 10% or less rarely default, according to researchers from the graduate schools of business at the University of Chicago’s Booth School of Business and Northwestern University. But once negative equity reaches 50%, close to one in five owners would walk away.

The findings show that one out of four homeowners who default on their mortgages are making a strategic decision.

Whether owners should feel guilty about walking away has also been the subject of recent reports. In "Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis," University of Arizona law school professor Brent T. White urged homeowners to stop paying their underwater mortgages if it was in their best financial interests. Further, he said they should not think of the decision as doing something morally wrong.

It's a subject that's ripe for debate.

One debit-card overdraft can trigger an avalanche

Many banks rack up fees by counting the biggest transactions first and enrolling customers in overdraft programs without their knowledge or consent.

One mistake could cost Trina Lee her Christmas.

Things have been tight for the Arizona-based nursing assistant since she got laid off two years ago and suffered some medical problems that have kept her from working full-time. As a result, she's become meticulous about watching her bank balance, which is often uncomfortably close to zero.

Earlier this month, she was feeling temporarily flush because she has prepaid most of her bills and figured the rest of her December income from child support and a part-time job could be spent on Christmas gifts. So she splurged on a $65 meal with her mom and brother, knowing that it was possible that this one meal could overdraft her checking account. Debit card transactions like this one require a signature and usually take a couple of days to clear, so Lee monitored every purchase after that, copying her daily bank account activity into a computer file each night to make sure she wasn't stepping over the line.

On Dec. 7, the night before her son's child support payment was due, she breathed a sigh of relief. At 10:45 that night, the dinner charge still hadn't posted and wasn't even listed as pending. After subtracting every pending payment, she had precisely 16 cents in her checking account. She went to bed imagining that she'd dodged an overdraft because she would get a $156 payment in the morning.

She got a rude awakening.

Before crediting her account for the child support payment, Chase bank not only put through the dinner charge, it also "reordered" every one of her pending transactions, turning one potential overdraft into four. The mounting overdraft charges of $35 each then triggered two additional overdraft charges for small debit transactions that Lee did that day, before she'd realized that her account had gone into the red.

In total, Chase levied $210 in overdraft charges -- $175 more than Lee imagined was possible.

"I accept responsibility for one overdraft," said Lee, a 29-year-old mother of two. "But they created the rest of these. It's really frustrating."

Bank spokesman Greg Hassell said Chase would not reverse these charges because "Ms. Lee intentionally overdrafted her account, knowing she had insufficient funds for all her purchases."

The fact that Chase in effect created five of the six overdrafts by changing the order of her transactions -- deducting the biggest items first to drain her account faster -- is simply current policy, the spokesman said.

The policy is common among big banks, industry experts say.

Bankers justify the policy by saying that it ensures that big, important transactions -- such as mortgage payments -- are paid first and thus have a lower chance of bouncing. Critics, however, say that argument doesn't hold water because the banks pay all the transactions regardless. In that case, changing the posting order simply magnifies the effect of a single mistake by turning a single overdraft into several, just as it did with Lee. Indeed, an FDIC study completed late last year found that policies like this had caused overdraft fees to quadruple in just two years, ringing up some $24 billion in revenue for the banking industry in 2008.

Industry consultant Michael Moebs estimates that overdraft charges have continued to soar and are likely to account for some $38.5 billion in revenues this year, with roughly 90% of those fees being paid by just 10% of bank customers. Worse, the FDIC study found that most bank customers had no inkling they could suffer an overdraft charge in advance. Why? They'd been automatically enrolled in an overdraft program without their consent or knowledge.

Consequently, millions of bank customers used debit cards for small purchases, assuming that the swipe would be rejected if they didn't have sufficient funds. They learned later that, say, a $2 coffee cost $37 because it triggered a $35 overdraft fee - a practice so common that many experts now say using a debit card has become dangerous.

The Federal Reserve announced this year that it will require banks to get advance permission before enrolling customers in overdraft programs, but the rule doesn't go into effect until July. Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.) and Rep. Carolyn Maloney (D-N.Y.) have also introduced legislation demanding that banks stop this practice of systematically "modifying posting order" and post transactions chronologically.

The overdraft legislation, which has been temporarily stalled while congressional leaders work on health reform and other financial regulations, would also require that fees bear some relationship to the cost of processing an overdraft; prohibit enrolling customers in an overdraft program without their consent; and limit the number of overdraft fees a bank could charge to a single consumer in any given month or year.

"To actively reorder checks to cause a tidal wave of overdrafts is unconscionable," said Ginna Green, a spokeswoman for the Center for Responsible Lending, which has been pushing for the legislative fix. "This is exactly why we still need legislation."

In the meantime, several banks including Chase have announced they will voluntarily revamp their policies.


Chase's new policy, spokesman Hassell said, will eliminate changing posting order the crux of Lee's complaint.

It will also reduce the maximum number of overdraft fees the bank would charge in a single day, reducing it to three per customer from six under current policy, and it will eliminate fees for overdrafts of $5 or less. Any of those changes would have dramatically helped Lee. Unfortunately, none has been implemented to date. The legislation is expected to be voted on early next year. Chase's policies have an amorphous starting date -- "in the first few months of 2010," according to Hassell.

In the meantime, Lee and consumers like her are out of luck.