What Happened to Companies Doing Their Jobs When It Comes To Your Credit? Another reason to stay on top of your credit reports!

     If you think managing your credit and your finances is easy, guess again. And if you think that people you have credit with will automatically report correct information on you, you might be mistaken. MOST of the time your creditors are pretty good but you need to stay vigilant and here’s a great example.

 There are typically three trade lines that credit scoring models like to see to maximize your credit score. Revolving accounts which are your credit cards, unsecured notes from financial institutions and store credit cards with changing monthly payments account for about 30% of your credit score. The other two trade lines are important to your credit score too but not to the extent of revolving trade lines. They are: installment notes which are usually secured by some asset with a fixed monthly payment and mortgages which are also secured by your home with fixed monthly payments over the life of the loan or a fixed period of time. It is a mortgage line that we will talk about today and why it is important to keep tabs on what your mortgage company is reporting about you.  Keep in mind that a maximum high credit score is more likely when you have a all three trade lines of credit; revolving, installment and mortgage.

We had a client pull all three credit reports because we discovered previously that his mortgage company had suddenly stopped updating his mortgage information, balances, payments and payment status over the last six months.  This interestingly coincided with their work on a loan modification for him.  When the modification was approved, the monthly update reporting to the credit bureaus stopped. His information was old and balances higher than they currently were. The client tried to call his mortgage company to ask them to get this updated, found he was only able to speak to their outsourced customer service department and was told he would have to write a letter to their “Research Department”.  So he did that and got no reply.  When we looked at his new reports we found that indeed, the information had been updated on two of the credit bureaus, Experian & Equifax but the Trans Union report did not have the mortgage lines listed.  Trans Union’s report indicated that his score would benefit by having a mortgage but he DID have a mortgage, it just was not showing up therefore his credit score was not maximized and lower than it would have been with the mortgage information.

 TRANS UNION SIDE:Two phone calls to Trans Union yielded the same information.  They told us that for some reason, when the mortgage company reported their information, (yes Trans Union could see it in their file on the client) the mortgage company itself had highlighted the account for suppressing to any outside request for the report.  In other words, if a creditor was to run our client’s Trans Union credit report, the mortgage information would not be included and his score would reflect that..  According to Trans Union that is only a command the credit reporter controls when they send in information.

 MORTGAGE COMPANY SIDE: When calling the mortgage company’s over-seas customer service, we were told that the mortgage company would not suppress anything and only reports the balance and the status of the account.  After a final call to the mortgage company’s customer service line and arguing with very nice customer service reps who read from scripts, we decided the only thing we could do was to fax the “Research Department”as suggested and tell them that apparently someone who was updating our client’s files after letting the ball drop for six months had possibly had forgotten to “unsuppress” the information they reported with Trans Union.

THE MIDDLE: Our client was in the middle of all this trying to get his mortgage company to correct its apparent mistake while the credit reporting agency insisted it was not their doing and only the mortgage company could fix the problem.  Trans Union did suggest having the mortgage company call their Trans Union sales rep to determine the problem, so that is what we requested the mortgage company do in our fax.  If there is anything to be learned from this, it is to be on top of your credit reports and the information in them, hold your creditors accountable for the information that is or isn’t in your file or showing up on your report, don’t be afraid to ask help from the credit bureau in question and be ready to be persistent until resolved because most likely you will be managing two companies who merely point the finger at one another instead of digging into the problem.  You are the owner of your own information so make sure it is right and accurate.  Don’t take no for an answer and follow up.  If we hadn’t pulled this report and noticed the discrepancy or talked to both sides, this situation would have never been resolved.  The consequence of not finding this issue could be the difference on paying higher interest rates or even approval from a potential creditor since the mortgage lines were suppressed from the report and the score.

Financial Spring Cleaning - What to Keep and What to Throw

     It’s that time of year, springtime, when the air is fresh and we’re inspired to clean off the winter grime and dust both inside and outside of our homes. In addition to cleaning your home it might be a good time to clean your files and office although doing this after the first of the year is always a good time as well. If you’ve procrastinated like a majority of the US population, springtime is as good a time as any. You’ve already filed your taxes and you are on your way through a new year.

     
     Whether you keep paper copies or electronic files, the clutter you don’t need should be dealt with, but how do we know what to get rid of? How long do we need to keep our financial records?  What should we keep and what can we throw (shred) or delete?  The chart below is one you should keep in your home/office to use every year when it comes time to purge your paperwork. We’ve listed the type of record, length of time you should keep your original paper/electronic copies and why you should keep them.  Again we encourage you to keep this printable handy list in your office or files for future reference when the time for spring cleaning comes again.
      
     For those of you who are computer savvy and receiving electronic files to save on your computer, this would also apply to how long you should store these files. A quick word to the electronic and online consumers, make sure you either back up frequently using an external hard drive or using any one of the many safe online/cloud back-up services that are available. Services such as i-Cloud, Carbonite, Crashplan, Mozy, Backblaze etc are all affordable, good choices and can be an invaluable investment should you find yourself the victim of a vicious virus, hacker attempt or computer crash. Just remember, the more files you keep, the more space is used for storage. In some cases the more space you use can cost you more money for storage, so all the more reason to purge your files. And if you absolutely feel you must keep old files, save them on a zip drive or an SD disk but also remember that technology changes and after a while you may need to transfer that old storage to newer media.

     For those of you who keep paper everything, the potential for identity theft can be significant if you throw whole pieces of paper with personal and private information in the general garbage for ‘dumpster divers’ to find. To protect yourself, you can shred your paper copies with an affordable shredder purchased from any office supply store. Another option is that some of your banks, credit unions and even local city governments sponsor “Shred It” days throughout the year where a reputable document company will be present to shred your boxes of paper for you confidentially. 

          

     Once you have your financial records under control you might find an office under all that discarded paperwork and relief that you’ve avoided being submitted for the next episode of Hoarders! For an interesting look at how to de-clutter your office and your computer check out Jason Fitzpatrick’s “The End-All Guide to Getting Out From Under Your Office Crap”

 

     For a  printable version of this chart click here.

 

   

Record Type	Length of time to keep	Why
TAXES Returns and all applicable receipts	Seven years	You have three years to claim a refund which is measured from the original deadline of the return. There is also a three year deadline from the original filing deadline if you have made a mistake and decide that you need to amend your return.  You may only amend a return no longer than three years old from the tax date it was due to claim a refund. The IRS has three years from your filing date to audit your return if it thinks you may have made honest mistakes. The IRS may also challenge a return as old as six years if it believes you under reported your gross income by 25% or more. If you fail to file or file a fraudulent return, the IRS can go back indefinitely.
IRA CONTRIBUTIONS	Indefinitely	If you have made non-deductible contributions to an IRA you pay tax on those contributions in the year you contribute on IRS Form 8606. Keep your records to prove you actually already paid taxes on this through the years so that when it comes time to start withdrawing your IRA you have the proof to show the IRS you already paid taxes.
RETIREMENT/SAVINGS PLAN STATEMENTS	From one year to retirement	You probably receive quarterly statements from your retirement and savings accounts..  At the end of the year, make sure the quarterly statements added together match your annual statement.  Then, keep only your annual statements and shred the quarterlies until you start withdrawing your retirement.
BANK RECORDS	From one year to permanently	If you receive your checks back and they apply to your tax deductions, pull them out of the statements and keep them. (Refer to Taxes section)  Reconcile your bank accounts and destroy the statements after 10 years if there is no monetary/tax significance.
Record Type	Length of time to keep	Why
BROKERAGE STATEMENTS	Until you sell your securities and they are reported on tax forms	You need to keep purchase and sales information to determine whether you have capital gains or losses at tax time.
BILLS/INSURANCE DOCUMENTS	From one year to permanently	Once a year go through all your bills.  Many are not needed anymore.  Make sure all payments have been traced to your bank statement and then shred.  However, larger ticket items such as jewelry, rugs, appliances, antiques, cars, collectibles, furniture, computers, home improvement should be kept to prove value in case of loss or selling to another party.  The large ticket items are also kept for insurance purposes.
CREDIT CARD RECEIPTS/STATEMENTS	45 days to seven years	Keep your receipts until they appear on your monthly statements then shred.  If the statements have tax deductions then keep them for 7 seven years.
PAYCHECK STUBS	One year	Each year you are given a W-2 at the end of the year for tax filing.  This should match the last stub “year-to-date” columns.  If the last paycheck for the year does not match your W-2, call your employer for a reason.  They may have one or a mistake was made in which they will owe you a W-2C (Corrected W-2) which you will use for the tax filing.
HOUSE/CONDO RECORDS	At least 6 years to permanently	Keep all records of any improvements and purchases such as remodeling, additions and installations.  All receipts from expenses buying and selling your house, commissions and legal fees should be kept as well.  The reason you want to keep a accumulation of all costs associated with the buying and improvement of your home will help reduce any capital gains when you sell you house.  These expenses are added to the value of the home and subtracted against the sale proceeds for tax purposes.
Financial Spring Cleaning – What to Keep and What to Throw Copyright 2013  Consumerwarfare.com

 

For a printable version of this chart click here.

  

Wouldn’t it be nice to be debt free and have a great credit score? - STEP 1

          Of course it would. However, there are reasons we still need a good credit score.  A good credit score isn’t just used for loans anymore. Did you know, when you apply for a job many employers use our credit record in their background checks? Insurance companies base the rates they charge not just on your driving record but also on your credit score and finally creditors determine whether or not they will allow you a checking account or approve you for loans. How many of us have the cash we need to purchase our own home with no mortgage?  How many of us even have the cash to purchase a new car or even a used car, for that matter with a large chunk of cash. For the newly married young couple to the consumers hoping to downsize to a smaller home, to the young person buying their first car to get to work to the family who needs a larger vehicle or home it seems that credit is the only option.

          One of the most important, if not the very most important things you want to focus on in your financial life is obtaining the best credit scores you can and keeping them. Why? For starters, some very good reasons were cited above.  For our purposes here, take for example, that credit scores will determine whether or not you can get credit in the first place and it may be the difference between paying 15% or 3.5% on a loan, 7% or 3.25% on a mortgage, and 24.9% or 6.9% on a credit card.  Over time, the difference in interest rates that you pay will either cost or save you a lot of money, money that you can keep in your pocket.

             As a consumer you have to put your best financial foot forward and this means making the highest credit score possible a priority in your financial management toolbox. But does this mean that you have to go into debt to achieve a high credit score and dishonor your commitment to become or remain debt free?  If you have established a credit score and just need to improve it, no. If you have no credit score and need to establish one, perhaps. Just as there are no two people who are exactly the same, it’s almost the same with credit histories. Your situation is unique to you and how to get a credit score or improve one is entirely dependent on whom you are in regard to your money management traits.

            The first step towards the goal of achieving the best credit score possible is to either: 1) determine whether or not you have a credit file; or 2) find out what is currently in your credit files.  Every year the federal government says you are entitled to one free report from each of the three credit reporting agencies; Experian, Equifax and Trans Union.  The following article from the federal government: http://www.consumer.ftc.gov/articles/0155-free-credit-reports will be helpful in determining what you need to do, what information you will need and the pitfalls of imposter sites that you need to avoid.  If you haven’t already done this, do it now. If you have no credit file you will not be able to get any report. This will mean that you will need to go to the next step which will help you determine how to establish credit.  If you do have a credit file it costs nothing to get the report but for an added $7.95 or so on each of these sites you can get your current score based on the free report.  Credit scores are NEVER free because they are sales information owned by the individual credit bureaus. This is the information Experian, Equifax and Trans Union sells to potential lenders and marketers. This is how the credit bureaus make their money to stay in business. The purchase of your credit score by potential employers, insurance companies, banks and other creditors makes your credit score and your credit history a necessary investment by you for your financial management and financial well being. It is every bit as important for your financial life as your medical records are for your physical health.   To be continued…..

Questions and comments welcome.