Beware of being an authorized user on someone else’s account. It can work against a credit score.
Case in point: I just started working on a Bank of America Credit Card for a client who was only an “authorized user” of her husband’s account. In other words, her husband applied for and received a Bank of America credit card and he obtained a second card for his wife as an “authorized user”. The account was in his name only and awarded solely on his credit information. Recently her husband passed away. While trying to refinance her home and get all the financial affairs in order, she contacted Bank of America immediately. Bank of America told her that she was not liable for this debt and that she was only an authorized user. She sent a copy of the death certificate so the estate department could close the account. As my client worked with a mortgage company for the refinancing of her home she found when her credit was pulled that Bank of America appeared to have reported the account on her credit report with a balance and late payments even though she was only an authorized user. Worse, despite closing this account and providing proof of death as well as notice from the bank that she was not liable for the debt, Bank of America is continuing to rack up the 30, 60, 90 day lates from the month of her husband’s death because the debt remains unpaid.
In speaking with Bank of America’s estate department, the debt will continue to remain on my client’s credit report, as an authorized user, on a now closed account. It will be reported every month as late into the 120 days mark it not paid. According to a representative at the Bank of America estate department when pressed about credit reporting, the only way to stop this reporting on my client’s file is for my client to apply for ownership of this account and make arrangements for payment. This was clearly Bank of America’s insurance to avoid a loss on this account through the coercion of my client to pay this balance . In the meantime, B of A insisted that my client is not liable for the balance and when requested, agreed to send a letter stating so. Is this legal and can this happen? In theory yes.
My client did receive the letter of debt relief for her mortgage company. To add to the confusion though, this account went from the Estate Department at B of A to the Recovery Dept where I spoke with a knowledgeable gentleman in an attempt to further reconcile this credit situation for my client. When I indicated that B of A was reporting as an authorized user status on my client’s credit report with lates from the date of death and that she was given a letter of non-liability from B of A, the gentleman was surprised and he flatly and unequivocally denied that B of A ever reports “authorized user” status to the credit bureaus. He stated that B of A reports only on the holder’s social security number. In addition, he indicated that B of A immediately closed the account and removed my client from her husband’s original account. They had no record of her social security.
The solution? He indicated that it would be faster to send a letter to the credit bureaus to challenge this debt. B of A would reply back that this is not my client’s debt and it would be removed. Let’s hope this happens.
My previous question “Is this legal and can this happen?” I answered that in theory, yes it can. Let me explain. At one point individuals qualifying for a credit card had the opportunity to allow one or more authorized users and receive several cards to be used on the account. The account numbers on the two or more cards are the same. There is no way to tell who made the charges. This became a huge credit building tactic that was widely discussed in the credit repair circles. To increase credit scores, unrelated debtors would sell the opportunity to become an authorized user on their cards to those hoping to improve their credit scores. Kind of a piggy backing on positive credit. In a conversation with Fair Issac I was told that at one point authorized user information on a credit report had no bearing on a credit score to stop this wide-spread money making scheme. Now an authorized user may be reported at the discretion of the creditor and it does contribute to the authorized user’s credit score.
In the case of my client the information that was reported was negative and did, in fact, harm her score. The fact that B of A says they do NOT report on authorized users further added to the mystery of where the credit bureau got that information. Nonetheless, time will tell if it can be removed by the credit grantor in this case. So beware of allowing yourself to become an authorize user on any account. Make sure you understand if you will be reported to the credit bureaus and what will happen if there is a default by the original debtor.
Tuesday, September 29, 2009
Sunday, July 26, 2009
YAY Capital One!!!!
“Good News: Because of your on-time payment history, some or all of your Annual Percentage Rates (APRs) have been returned to your Non-Introductory Rate.” (23.5% down to 14.8%)
Someone finally gets it! If you raise your interest rates and fees on your good customers in bad economic times, you will lose them. You will then put yourself at risk by not being able to cover the high defaults by your current customers with reasonable fees from your loyal customers. What the credit industry has tried to do to good consumers lately has been nothing short of irresponsible and the worst business decision ever.
How? First for those good customers who have had their rates jacked to almost 30%, credit limits reduced and fees increased for absolutely no reason other than they can, the strategy is simple. Pay off the balance and close the account. Protest the unfair practices that have become commonplace in this faltering economy of massive default buy paying off these banks and dropping them. Second, if you have to have a credit card, and in order to maximize your credit scores you need at least two, go to the companies that will reward responsible behavior. As you can see Capital One has. Go to your local Credit Unions who have not yet jacked any fees or interest rates. Ditch companies like Chase, Bank of America, and Discover who have generated countless horror stories from good consumers. Get rid of anyone who messes with your interest rate, your credit limit and your fees. Soon these companies will be facing the massive default debt with little income from legitimate fees to counteract the losses. Then and only then will the consumer be back in the drivers seat with their own credit and those who want to remain in business will stop messing with the consumer.
The above reduction in rates actually happened this evening. A client was previously told by Capital One that a review of their account would take place on the July statement, and verified with their customer service rep that indeed their interest rate did drop from the default rate (they missed a payment June 2008 by one day) of 23.5% to the new interest rate of 14.8% for the next billing cycle. The new statement verified it also. So there you have it. Capital One is true to its word and at least in this case was a responsible company to work with. My client was also assured that the next review, if my client kept the account in good standing, the company might raise the credit available, eliminate yearly membership fees and allow balance transfer specials. Now whether these offers are good for a consumer to take is a debate for another time but here is a situation where the opposite to the credit card company trend of squeezing the consumer actually happened and has the opportunity to happen for other responsible consumers.
This does not suggest that you run out and try to qualify for an account with Capital One. Credit is still very tight. But for those of you with Capital One cards, call them and ask them what they can and will do for you. Let's make a statement to the likes of Chase, Bank of American and countless others that we won't be at their mercy by taking our credit business elsewhere. We don't have to settle for less.
Someone finally gets it! If you raise your interest rates and fees on your good customers in bad economic times, you will lose them. You will then put yourself at risk by not being able to cover the high defaults by your current customers with reasonable fees from your loyal customers. What the credit industry has tried to do to good consumers lately has been nothing short of irresponsible and the worst business decision ever.
How? First for those good customers who have had their rates jacked to almost 30%, credit limits reduced and fees increased for absolutely no reason other than they can, the strategy is simple. Pay off the balance and close the account. Protest the unfair practices that have become commonplace in this faltering economy of massive default buy paying off these banks and dropping them. Second, if you have to have a credit card, and in order to maximize your credit scores you need at least two, go to the companies that will reward responsible behavior. As you can see Capital One has. Go to your local Credit Unions who have not yet jacked any fees or interest rates. Ditch companies like Chase, Bank of America, and Discover who have generated countless horror stories from good consumers. Get rid of anyone who messes with your interest rate, your credit limit and your fees. Soon these companies will be facing the massive default debt with little income from legitimate fees to counteract the losses. Then and only then will the consumer be back in the drivers seat with their own credit and those who want to remain in business will stop messing with the consumer.
The above reduction in rates actually happened this evening. A client was previously told by Capital One that a review of their account would take place on the July statement, and verified with their customer service rep that indeed their interest rate did drop from the default rate (they missed a payment June 2008 by one day) of 23.5% to the new interest rate of 14.8% for the next billing cycle. The new statement verified it also. So there you have it. Capital One is true to its word and at least in this case was a responsible company to work with. My client was also assured that the next review, if my client kept the account in good standing, the company might raise the credit available, eliminate yearly membership fees and allow balance transfer specials. Now whether these offers are good for a consumer to take is a debate for another time but here is a situation where the opposite to the credit card company trend of squeezing the consumer actually happened and has the opportunity to happen for other responsible consumers.
This does not suggest that you run out and try to qualify for an account with Capital One. Credit is still very tight. But for those of you with Capital One cards, call them and ask them what they can and will do for you. Let's make a statement to the likes of Chase, Bank of American and countless others that we won't be at their mercy by taking our credit business elsewhere. We don't have to settle for less.
Thursday, July 23, 2009
Down 35% in late 2008… recovered 27% by July 2009
Facebook Consumerwarfare: Remember the panic of the stock market last fall? The retirees losing over 50% of their retirement account values didn’t think they could wait it out. Workers losing over 50-75% in their 401k and IRA values freaked. Stock values were tanking lower than anytime since the great depression and our grandparents’ birth. Banks were either closing or reorganizing prompting a drain on the FDIC (their insurance company). Large financial institutions were taking on defaults the likes of which we have never seen. Wall Street suffered blow after blow as well as exposing some trading weaknesses. Sadness and gloominess was everywhere. Financial worries abounded. Private losses were unrealized but possible.
Conservative financial professionals constantly cautioned us that potential losses were just ”potential” IF action was NOT taken and we waited. They strongly suggested to anyone who could wait to do so. History and past trends suggested and supported that to act based on quick reaction to bad news rather than waiting over time, one would make their potential and paper losses a reality. To wait would most always yield an eventually better outcome. For investors, that meant keeping their portfolios just the way they were despite the appearance of vast lost values on paper. People were strongly encouraged to wait it out if they were able and confident enough in their investments. Not everyone, however, had the confidence, determination and guts to wait.
Part of me wanted to react as well. I was as much in a panic as anyone about the funds I was squirreling away. I was worried for myself, my family, friends and the nation as a whole. I watched what little I had in savings and investments wither away on paper. Before last fall, being a single parent and helping 4 boys into adulthood I had finally started to discipline myself to save and invest on a monthly basis. I couldn’t buy large lots of stock with agents but I did find a place where I could invest monthly and buy portions of shares as I accumulated them. I set up a stock portfolio which was, in effect, my own managed mutual fund. I had a meager 401k from a previous employer that I had monitored occasionally. Like everyone else I started paying much more attention to the financial status of this country. So many of my friends had at one time or another said to me, “I only look at my retirement account once in a while”. Well I guarantee you some of them started looking more often and some not at all to avoid the disappointment.
In the late fall of 2008 I looked at my stock portfolio and saw I was down 35%. Having a finance background I started charting the DOW every business day since the end of September 2008 looking for improvement. Let’s just say I’m curious, a positive thinker and like numbers. Of course I was fairing better than most but still it was disappointing. I can’t stand losing anything. I took some comfort that I had actually picked more secure stocks. I selected stocks I believed had a better than average chance of surviving this uncertain economy. I believed these companies in which I invested would become profitable again. My technique in line with most professional advice, was to try to diversify and be patient. Anyone who knows me will tell you patience is not my strong suit but I learned it well. I know as well as anyone, the cardinal rule of investing is to “buy low and sell high” but selling anything these days was not an option because losses could be deep. So I stayed the course determined that I would also keep investing on a monthly basis at the lowest prices. This is what is called dollar/cost averaging and is an excellent method of investing when you don't have lump sums of money to invest. The current economy, I believed, was a blip in history sure to rally back at some point in the future as it had done in the past. I was determined to learn from history and be patient. I listened, I watched and I monitored progress.
My 401k from a former employer was losing some of its value although I caught it before I would suffer a loss. This company, I believed, was not as strong as it once was and operated already on very low margins. I found a very competent broker who rolled my 401k over into a fund that historically was at one of its lowest points in the last 5 years and yet was strong and in a field that would always be doing well. The growth potential was good.
Today the Dow is over 9000 points, the first time since January. I’ve gradually recovered 27% of losses in my stock portfolio, partially due to continually investing on a monthly basis through the toughest of times. My 401k is up 23% from January when I rolled it over where that too has seen monthly investments on my part. While certain weeks are better than others depending when financial news and infomation gets released, I am optimistic that staying the course was the way to go for me.
This all reminds me of something a friend of mine kept telling me when things looked bleak. “Nothing is ever as bad as it seems”. If we accept losing we will, if we embrace winning we will. I choose to win.
Conservative financial professionals constantly cautioned us that potential losses were just ”potential” IF action was NOT taken and we waited. They strongly suggested to anyone who could wait to do so. History and past trends suggested and supported that to act based on quick reaction to bad news rather than waiting over time, one would make their potential and paper losses a reality. To wait would most always yield an eventually better outcome. For investors, that meant keeping their portfolios just the way they were despite the appearance of vast lost values on paper. People were strongly encouraged to wait it out if they were able and confident enough in their investments. Not everyone, however, had the confidence, determination and guts to wait.
Part of me wanted to react as well. I was as much in a panic as anyone about the funds I was squirreling away. I was worried for myself, my family, friends and the nation as a whole. I watched what little I had in savings and investments wither away on paper. Before last fall, being a single parent and helping 4 boys into adulthood I had finally started to discipline myself to save and invest on a monthly basis. I couldn’t buy large lots of stock with agents but I did find a place where I could invest monthly and buy portions of shares as I accumulated them. I set up a stock portfolio which was, in effect, my own managed mutual fund. I had a meager 401k from a previous employer that I had monitored occasionally. Like everyone else I started paying much more attention to the financial status of this country. So many of my friends had at one time or another said to me, “I only look at my retirement account once in a while”. Well I guarantee you some of them started looking more often and some not at all to avoid the disappointment.
In the late fall of 2008 I looked at my stock portfolio and saw I was down 35%. Having a finance background I started charting the DOW every business day since the end of September 2008 looking for improvement. Let’s just say I’m curious, a positive thinker and like numbers. Of course I was fairing better than most but still it was disappointing. I can’t stand losing anything. I took some comfort that I had actually picked more secure stocks. I selected stocks I believed had a better than average chance of surviving this uncertain economy. I believed these companies in which I invested would become profitable again. My technique in line with most professional advice, was to try to diversify and be patient. Anyone who knows me will tell you patience is not my strong suit but I learned it well. I know as well as anyone, the cardinal rule of investing is to “buy low and sell high” but selling anything these days was not an option because losses could be deep. So I stayed the course determined that I would also keep investing on a monthly basis at the lowest prices. This is what is called dollar/cost averaging and is an excellent method of investing when you don't have lump sums of money to invest. The current economy, I believed, was a blip in history sure to rally back at some point in the future as it had done in the past. I was determined to learn from history and be patient. I listened, I watched and I monitored progress.
My 401k from a former employer was losing some of its value although I caught it before I would suffer a loss. This company, I believed, was not as strong as it once was and operated already on very low margins. I found a very competent broker who rolled my 401k over into a fund that historically was at one of its lowest points in the last 5 years and yet was strong and in a field that would always be doing well. The growth potential was good.
Today the Dow is over 9000 points, the first time since January. I’ve gradually recovered 27% of losses in my stock portfolio, partially due to continually investing on a monthly basis through the toughest of times. My 401k is up 23% from January when I rolled it over where that too has seen monthly investments on my part. While certain weeks are better than others depending when financial news and infomation gets released, I am optimistic that staying the course was the way to go for me.
This all reminds me of something a friend of mine kept telling me when things looked bleak. “Nothing is ever as bad as it seems”. If we accept losing we will, if we embrace winning we will. I choose to win.
Thursday, June 4, 2009
The Case for Cash
I know you don’t want to hear this and neither did I, but we wouldn’t be in a financial mess if we’d only lived within our means…….”cash means” that is and paid close attention to our wealth. Borrowing on time is a gamble. It’s a gamble that you are still living with the same job or better during the agreed upon time it takes to pay a debt back. It’s a risk you and your creditor take that you and/or your family or those you are obligated to will remain healthy and prosperous so that you do have the means to pay back your debt. It’s an assumption that life will stay status quo or just as it is or better when you agree to the debt. Well, for some the gamble pays off but today a large part of the country lost that bet. There are millions of Americans currently are in debt up to their eyeballs either through mortgages some couldn’t afford, high credit card debt, loans borrowed on assets that have lost their value, positive cash positions in investments and retirements lost and that big old ugly word no one wants to hear, unemployment. But it’s not just in these troubled times that we sometimes find ourselves in this predicament. It is our reliance on credit that we have become accustomed to that can create serious problems in any economy.
I could quote statistics all day but I’m not because you already know how dire this economy is. If financial stress hasn’t touched you yet it may one day. The reliance on credit cards is massive. In the wrong hands credit cards can kill a financial future and sometimes even a personal relationship. If you can’t pay for it with the money in your pocket you don’t need it. Sure its tough to wait for “things” that are wanted and not needed but the sense of accomplishment, self worth and less stress are well worth the wait.
The numbers of homeowners who are homeowners no longer are now in positions of renters and some are homeless. Imagine the numbers of children losing the comfort of the only home they have known and not understanding what has happened. Could it have been avoided? While there are many who have no choice through unemployment or illness to let homes go, a whopping group that has single-handedly become victims through their own fault have set our home values plummeting, banks in need of financial help, tightening of future credit and an atmosphere of mistrust in the housing industry.
The Enron workers losing all their savings in the company pensions and stock should have been lesson enough that you can’t invest in just one thing all your lives. The simple physics rule can be applied here as with all things. “What goes up must come down.” And down it has come; some investments worse than others and some little at all. That would indicate that “diversification” or spreading your investments around into different companies, different funds, different classifications might have been a safer bet. You might have lost less had you been watching from the start. And then we have the greedy little Bernie Madoffs of the world who too are scammers. Shame on those who saw but didn’t believe or pay attention. They are the ones who have lost.
The one pass I will give most people today is the rising loss of jobs. Companies just as guilty of aggressive growth and financial gambling have found themselves having to cut out their most important resource….their workers. True while some responsible companies don’t have a choice there are many companies who grew at all costs without regard to eventually running into a financial brick wall. It happens. There’s a cycle for everything. Even the oldest and most sustainable of companies have had their cycles. The question is, has the management prepared for it?
I would have to say that my sympathies, even with myself are not given freely when it comes to viewing this massive financial mismanagement on so many levels. I am not advocating becoming a miser but I am advocating the power of cash. The need to be debt free is what will ultimately save us and our futures.
I could quote statistics all day but I’m not because you already know how dire this economy is. If financial stress hasn’t touched you yet it may one day. The reliance on credit cards is massive. In the wrong hands credit cards can kill a financial future and sometimes even a personal relationship. If you can’t pay for it with the money in your pocket you don’t need it. Sure its tough to wait for “things” that are wanted and not needed but the sense of accomplishment, self worth and less stress are well worth the wait.
The numbers of homeowners who are homeowners no longer are now in positions of renters and some are homeless. Imagine the numbers of children losing the comfort of the only home they have known and not understanding what has happened. Could it have been avoided? While there are many who have no choice through unemployment or illness to let homes go, a whopping group that has single-handedly become victims through their own fault have set our home values plummeting, banks in need of financial help, tightening of future credit and an atmosphere of mistrust in the housing industry.
The Enron workers losing all their savings in the company pensions and stock should have been lesson enough that you can’t invest in just one thing all your lives. The simple physics rule can be applied here as with all things. “What goes up must come down.” And down it has come; some investments worse than others and some little at all. That would indicate that “diversification” or spreading your investments around into different companies, different funds, different classifications might have been a safer bet. You might have lost less had you been watching from the start. And then we have the greedy little Bernie Madoffs of the world who too are scammers. Shame on those who saw but didn’t believe or pay attention. They are the ones who have lost.
The one pass I will give most people today is the rising loss of jobs. Companies just as guilty of aggressive growth and financial gambling have found themselves having to cut out their most important resource….their workers. True while some responsible companies don’t have a choice there are many companies who grew at all costs without regard to eventually running into a financial brick wall. It happens. There’s a cycle for everything. Even the oldest and most sustainable of companies have had their cycles. The question is, has the management prepared for it?
I would have to say that my sympathies, even with myself are not given freely when it comes to viewing this massive financial mismanagement on so many levels. I am not advocating becoming a miser but I am advocating the power of cash. The need to be debt free is what will ultimately save us and our futures.
Wednesday, June 3, 2009
Home Remodeling Savings
With these days of “less is best” in terms of spending money it pays to take a little time to shop and pay attention to what companies have to offer. I found one such company online while looking for a specific faucet to complete my much needed bathroom remodel. I bought an older home (circa 1965) and my old hot water shower faucet died two years ago on Memorial Day weekend. You can imagine I had to pay top rate for an emergency plumber. The shower faucet was shot and the plumbing needed work. The bathroom was uncomfortably grotty at best so we decided it was time to completely redo the bathroom. Being a single mother, trying to be frugal with my money I decided that any home remodel would be done in cash and I would not go into debt over upgrades. I would do as much myself as possible with the help of 3 of my 4 able-bodied boys.
Long story short, it took me 2 years and I am on the finishing touches. The last of my purchases was a matching sink faucet to the shower fixtures. I chose Kohler for their durability, reputation, upgrade and appearance. I was looking for a specific sink faucet and called plumbers who can purchase through Kohler showrooms, contractors with discounts at showrooms and construction companies and then looked online. The prices locally were $340.00 to $270.00. I, of course, was looking for a brushed nickel finish which is more expensive. I was a bit wary of ordering plumbing supplies online but I looked because cash matters. I found the lowest price of $252.66 at a place that, upon review, appeared to have some "unsatisfied" customers. Keeping in mind that any company can find friends and family to go out and plaster great reviews I explored further. I found a few other plumbing suppliers around the country with prices anywhere from $290.00 down to $265.29. Of course you’d like to get the best deal possible but I happened upon a company from New York that listed my faucet at $269.95. However, upon closer look at their website, they guaranteed that if you could prove this faucet listed lower elsewhere they would match it. They had great independent reviews as well.
I called PEX Supply Inc. to ask about the faucet, in-stock status and whether they would meet the price I found on another site. What a friendly and polite customer service person! After giving her the information she professionally got approval to match the price after looking for the website I gave her. We completed the transaction. She also explained (as I’m always wanting things yesterday) that the order is processed promptly and sent to the nearest warehouse to me for fastest delivery. She also made sure it was in-stock for me.
I received my purchase in two business days (I’m sure some other orders may take longer) and I have what I was looking for to finish just in time for a graduation party. I saved $17.29 which may not seem like a gold mine to most but is enough to pay for a full week of lunches for me. Not to mention getting a good price from a good company is somehow so satisfying. Saving money on quality products allows one to get what one wants. My bathroom, I can jokingly say is the nicest room in my house at present and a far cry from the 1965 mess I had. On to the next project!!!!
Long story short, it took me 2 years and I am on the finishing touches. The last of my purchases was a matching sink faucet to the shower fixtures. I chose Kohler for their durability, reputation, upgrade and appearance. I was looking for a specific sink faucet and called plumbers who can purchase through Kohler showrooms, contractors with discounts at showrooms and construction companies and then looked online. The prices locally were $340.00 to $270.00. I, of course, was looking for a brushed nickel finish which is more expensive. I was a bit wary of ordering plumbing supplies online but I looked because cash matters. I found the lowest price of $252.66 at a place that, upon review, appeared to have some "unsatisfied" customers. Keeping in mind that any company can find friends and family to go out and plaster great reviews I explored further. I found a few other plumbing suppliers around the country with prices anywhere from $290.00 down to $265.29. Of course you’d like to get the best deal possible but I happened upon a company from New York that listed my faucet at $269.95. However, upon closer look at their website, they guaranteed that if you could prove this faucet listed lower elsewhere they would match it. They had great independent reviews as well.
I called PEX Supply Inc. to ask about the faucet, in-stock status and whether they would meet the price I found on another site. What a friendly and polite customer service person! After giving her the information she professionally got approval to match the price after looking for the website I gave her. We completed the transaction. She also explained (as I’m always wanting things yesterday) that the order is processed promptly and sent to the nearest warehouse to me for fastest delivery. She also made sure it was in-stock for me.
I received my purchase in two business days (I’m sure some other orders may take longer) and I have what I was looking for to finish just in time for a graduation party. I saved $17.29 which may not seem like a gold mine to most but is enough to pay for a full week of lunches for me. Not to mention getting a good price from a good company is somehow so satisfying. Saving money on quality products allows one to get what one wants. My bathroom, I can jokingly say is the nicest room in my house at present and a far cry from the 1965 mess I had. On to the next project!!!!
Sunday, April 19, 2009
What to do when you receive a collection notice.
Collection Companies are annoying to the consumer and necessary for the companies they represent. If you owe a debt, you are obligated to pay it, unless, of course there are good reasons such as contracts not met, inferior product, unauthorized charges etc. With so many people now laid-off, taking pay cuts and fighting for paychecks from hurting employers, the "past due' situation has gotten much worse. Over 60% of consumers have experienced a collection notice at one time or another in their lives. Sometimes through no fault of their own.
If you should receive a collection notice from a collection agency:
1) Make sure you know who the collection agency is representing. Many times you will receive a notice from the agency itself as though you owe them a debt and no mention of who they are representing.
2) Immediately write a challenge letter asking them for proof that this debt is accurate.
A collection agency, upon first notice must allow you up to 30 days to challenge the debt before they can attach this information to your credit report. ALWAYS make use of that time by challenging your debt whether or not it looks valid. You can buy yourself extra time to pay the debt before it goes on your credit record by asking the collection agency to go back to the creditor and get the information you asked for. Many times it will take that original company over 30 days to get back to their collection agency. You've just bought your self possibly over 60 days that may be helpful for you to accumulate enough money to pay the debt and save your credit.
3) BEFORE you pay your obligation make a phone call to the original creditor. Tell them you do not work with debt collectors and that you will be sending them the check directly IF they can guarantee to you that this will not be recorded on your credit record.
4) If you are forced to pay the collection agency make sure they do NOT record this on your credit record. If they tell you they will report this debt as being paid tell them that is not good enough. What they mean is that they will report the debt as a collection and show that it was paid. This does NOTHING positive to your credit score. You want this removed completely if you pay this debt in full.
If you should receive a collection notice from a collection agency:
1) Make sure you know who the collection agency is representing. Many times you will receive a notice from the agency itself as though you owe them a debt and no mention of who they are representing.
2) Immediately write a challenge letter asking them for proof that this debt is accurate.
A collection agency, upon first notice must allow you up to 30 days to challenge the debt before they can attach this information to your credit report. ALWAYS make use of that time by challenging your debt whether or not it looks valid. You can buy yourself extra time to pay the debt before it goes on your credit record by asking the collection agency to go back to the creditor and get the information you asked for. Many times it will take that original company over 30 days to get back to their collection agency. You've just bought your self possibly over 60 days that may be helpful for you to accumulate enough money to pay the debt and save your credit.
3) BEFORE you pay your obligation make a phone call to the original creditor. Tell them you do not work with debt collectors and that you will be sending them the check directly IF they can guarantee to you that this will not be recorded on your credit record.
4) If you are forced to pay the collection agency make sure they do NOT record this on your credit record. If they tell you they will report this debt as being paid tell them that is not good enough. What they mean is that they will report the debt as a collection and show that it was paid. This does NOTHING positive to your credit score. You want this removed completely if you pay this debt in full.
Monday, April 13, 2009
The 5 ways Insurance Companies View Your Credit
The 5 ways Insurance Companies View Your Credit.
When you purchase insurance there are many factors that go into the premiums you will pay. One of those factors is your Insurance Credit Score. Insurance companies will pull your credit from the credit bureaus and assign what they call an “insurance” score that may be different than your FICO or normal credit score. Some will pull one credit bureau over the next and some may choose all three major reports. Allstate, for example pulls Trans Union reports. The insurance score will help these companies in determining your insurance premium costs along with many other factors of coverage risk. While it is not known exactly how much your credit affects your premiums, it is a factor. .Insurance companies tell you they have been able to predict how likely you are to have a claim in the future by your credit score. They also feel that they can determine better whether you will be able to pay your premiums by your score. Many challenge the validity of the relationship between credit scores and insurance risk but insurance companies still pull your credit. If they determine your score is too low they may either increase your premium to cover the risk of insuring you or along with other factors deny you all together.
What do insurance companies look at regarding your credit? They will offer only generalities. How much this information exactly influences your premium amount is unknown and not divulged by the insurance industry.
1. Insurance Companies look at the number of months since your most delinquent payment, a payment made over 30 or more days late. If you have no lates in the last 5 years you’re good and your score isn’t affected in a negative way. If you have any payments that have been late over 30 days or more within the last five years, your score will be less favorable.
2. The number of revolving accounts where the current balance that you owe is greater thank the largest balance you once owed is also a consideration. Allstate uses a 75% debt limit. For instance, your highest balance (not credit limit) on your credit card (revolving account) was $5000.00. Now you owe $3550.00. For Allstate’s score purposes you now owe 71% of the high balance you once had. Since the threshold to a better premium has fallen under the 75% rule, you will be looked at favorably when calculating your best possible premium.
3. The average number of months your accounts are listed on your credit report is also considered, commonly referred as credit history. The longer the average age of all your accounts, the better your score will be. The insurance industry generally uses 14 years as an average.
4. The number of revolving accounts opened in the last two years influences your insurance credit score as well. Mortgages and car loans are not considered in this calculation. If you have no revolving credit issued to you in the last two years your score is more favorable.
5. The existence of public cases, tax liens, bankruptcies, collections and foreclosures will definitely have a negative effect on insurance premiums you will pay. In general these types of items are thought to predict greater possibility of future insurance losses and pay outs.
Equally as important as the 5 ways Insurance Companies can view your credit report to calculate your premiums, there are also several items of information they cannot use for or against you from your credit files.
They are:
1. The total number inquiries in your file. While this typically will lower your standard credit score for future debt the more inquiries you have in your file, this is not considered in your insurance risk factor.
2. The total amount of unused credit available will not be considered when creating an insurance score. That is where the 75% Allstate rule comes in. You should owe no more than 75% of your highest balance you had on given accounts.
3. Lack of credit history is not to be used against you in determining your insurance premiums. This is unlike banks who may deny you any credit if you have little or no credit to prove your worth.
4. Any vehicle or home purchases are not considered in your insurance premium calculation.
The types or credit and debit cards as well as who has issued them are prohibited from consideration when determining your insurance premiums. The amounts and the payment history, however, is allowed to be considered.
How do I manage my insurance score? The first step is to determine what your insurance company considers in their determination of your premiums you will pay. Contact your agent, your company or look at your insurance policy for an explanation. Get a copy of your credit report from the reporting agencies they use and you should be able to determine where your strengths and weaknesses lie. Those will be the areas you need to strengthen with careful and intended use of your credit.
When you purchase insurance there are many factors that go into the premiums you will pay. One of those factors is your Insurance Credit Score. Insurance companies will pull your credit from the credit bureaus and assign what they call an “insurance” score that may be different than your FICO or normal credit score. Some will pull one credit bureau over the next and some may choose all three major reports. Allstate, for example pulls Trans Union reports. The insurance score will help these companies in determining your insurance premium costs along with many other factors of coverage risk. While it is not known exactly how much your credit affects your premiums, it is a factor. .Insurance companies tell you they have been able to predict how likely you are to have a claim in the future by your credit score. They also feel that they can determine better whether you will be able to pay your premiums by your score. Many challenge the validity of the relationship between credit scores and insurance risk but insurance companies still pull your credit. If they determine your score is too low they may either increase your premium to cover the risk of insuring you or along with other factors deny you all together.
What do insurance companies look at regarding your credit? They will offer only generalities. How much this information exactly influences your premium amount is unknown and not divulged by the insurance industry.
1. Insurance Companies look at the number of months since your most delinquent payment, a payment made over 30 or more days late. If you have no lates in the last 5 years you’re good and your score isn’t affected in a negative way. If you have any payments that have been late over 30 days or more within the last five years, your score will be less favorable.
2. The number of revolving accounts where the current balance that you owe is greater thank the largest balance you once owed is also a consideration. Allstate uses a 75% debt limit. For instance, your highest balance (not credit limit) on your credit card (revolving account) was $5000.00. Now you owe $3550.00. For Allstate’s score purposes you now owe 71% of the high balance you once had. Since the threshold to a better premium has fallen under the 75% rule, you will be looked at favorably when calculating your best possible premium.
3. The average number of months your accounts are listed on your credit report is also considered, commonly referred as credit history. The longer the average age of all your accounts, the better your score will be. The insurance industry generally uses 14 years as an average.
4. The number of revolving accounts opened in the last two years influences your insurance credit score as well. Mortgages and car loans are not considered in this calculation. If you have no revolving credit issued to you in the last two years your score is more favorable.
5. The existence of public cases, tax liens, bankruptcies, collections and foreclosures will definitely have a negative effect on insurance premiums you will pay. In general these types of items are thought to predict greater possibility of future insurance losses and pay outs.
Equally as important as the 5 ways Insurance Companies can view your credit report to calculate your premiums, there are also several items of information they cannot use for or against you from your credit files.
They are:
1. The total number inquiries in your file. While this typically will lower your standard credit score for future debt the more inquiries you have in your file, this is not considered in your insurance risk factor.
2. The total amount of unused credit available will not be considered when creating an insurance score. That is where the 75% Allstate rule comes in. You should owe no more than 75% of your highest balance you had on given accounts.
3. Lack of credit history is not to be used against you in determining your insurance premiums. This is unlike banks who may deny you any credit if you have little or no credit to prove your worth.
4. Any vehicle or home purchases are not considered in your insurance premium calculation.
The types or credit and debit cards as well as who has issued them are prohibited from consideration when determining your insurance premiums. The amounts and the payment history, however, is allowed to be considered.
How do I manage my insurance score? The first step is to determine what your insurance company considers in their determination of your premiums you will pay. Contact your agent, your company or look at your insurance policy for an explanation. Get a copy of your credit report from the reporting agencies they use and you should be able to determine where your strengths and weaknesses lie. Those will be the areas you need to strengthen with careful and intended use of your credit.
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