A True Credit Tale of Two Sons

      As parents, we go through life holding our breaths, gritting our teeth and wincing now and again during our children’s most formative years. We can read endless parenting articles…10 Scientific Tips for Raising Your Children, 7 Secrets to a Happy Child, How to Raise Children-A 10-point guide to domestic bliss….and we can harshly judge ourselves when our children make the kinds of decisions that we warned them about. Well, this one is simple.  Let me tell you about the tale of two men with very different credit outcomes, much of it based on what they were or were not taught by their, in both cases, very loving parents.

     Thirty-seven year old Mark was a salesman who was single.  He’d sell anything he could get his hands on. Unfortunately he was a salesman who had a hard time staying with one company for very long.  Mark’s parents were extremely hard working people before retirement and it paid off.  They had managed to put enough away to buy a wonderful cabin in Northern Wisconsin that was their second home in the summer months. It was a home to which they hoped to one day retire. But they also had re-refinanced their main home about five years ago to help Mark out of some debt problems he had gotten himself into and couldn’t handle. Mark had over extended himself with some very high credit card balances, bought a house that he talked his Mother into co-signing and promptly lost his job of six months again.  So Mark’s Mom and Dad decided that they would refinance their home, to bail Mark out of his debt mess, once again.

     Mark eventually found another sales job but after five months he was back to his old habits. Instead of paying off his debts and relieving his Mother from her part in his mortgage, Mark continued to spend everything he had.  He put nothing away for an emergency fund. A friend once asked him what he did with his money and why he didn’t have any saved, Mark laughed and said, “I spent half my money on booze and women, the rest I just wasted.” Of course, he found himself, once again, unemployed, behind on his credit cards and was now being hounded by collection agencies and law firms threatening to sue.

     Instead of finally taking responsibility for his predicament, Mark criticized “the system” as not being fair to him. Today, he went to his bank and wanted to see what he could do. His credit reflected a mid score of 485.  He was again behind on his mortgage which not only showed up as owing on his Mother’s credit report but also spoiled her pristine historic credit record with late payments and a possible foreclosure looming. Mark has no idea what a credit score even was or what their purpose was. Further he couldn’t understand why the family banker couldn’t help him out like his parents have been able to do.

     Mark’s parents also went to their banker to determine how they could get money to help out their son, yet again. Their banker, while intensely sympathetic to this great couple, was sad at his inability to allow them a new refinance note. The parents, who were now drawing social security payments for their retirement and trying to desperately keep their dream cabin, were concerned that their son was defaulting on a loan his Mother had co-signed.  In addition, the banker explained, the debt/income ratio was way out of whack due to the numerous and increasing loans they had been taking out to help their son time after time and the added fact that the Mother had debt from not only one but two mortgages that her credit report showed she was responsible for. There was no way this couple could continue to help their son and protect themselves with another loan. When the banker asked them if they considered selling their beloved asset, their cabin, he could see the tears in their eyes. 

     Korey was a 24 year old man who was working while he was attending school to finish up his bachelors’ degree. Korey’s parents were divorced. When in high school, he moved in with his Mother and four siblings.  Korey’s Mom rented their home until one day an investor came by and offered a contract for deed to her until she had a year’s worth of payments and a down payment to purchase their house herself. In order to obtain a mortgage on her own she understood that she had to have a stellar credit reputation and know how to save money. She knew that additional debt would count negatively against her ability to qualify for a mortgage. That meant there wasn’t extra money for Korey to socialize so, from an early age, Korey worked at part-time jobs as he was going through high school to help out and have his own money. He managed to play high level sports, go to school and still work part-time for equipment and other small necessities. As she did with all of her children, while Korey attended high school and college, Korey’s Mom taught Korey how to handle his money and the value of good credit.

     Korey witnessed his Mother’s struggles and was encouraged by his Mother to pull his financial weight to manage his own finances. His Mother taught him about student loans, personal debt and eventually Korey was able to build his own credit early on. When it came time for Korey to buy a car, the people at the local credit union, having worked with his Mother and siblings, was willing to take a chance on him. 

     During the summers Korey worked several jobs just to pay his debts off early. This way, he proved himself to his Mom and his lenders. At the age of twenty-four, wanting to buy a car from a friend, he applied for a loan and the loan officer about fell off his chair when his credit score came back at 710 which was highly unusual for someone his age. The only debts he had were a few student loans and this car loan. Because of this limited debt, he also had a substantial savings account to help him through the months he worked fewer hours while attending school. Korey’s goal is to become debt free so he never has to make payments again.

     According to MYFICO, a credit scoring company, the average credit score for 18-24 year olds is 638 and the average credit score for 25-34 year olds is 652. Scores typically don’t average above 710 until age 55+ where there has been more history and greater careful credit decisions with experience. Experian, another credit scoring expert said in their study that people in the 18-39 year old groups had the greatest number of late/missed payments.  However, this does not have to be the norm and, for people such as Korey and those who learn financial responsibility at an early age, the trend can be beaten.

     As a parent, the moral of this story is a choice between enabling vs empowering.  Neither stands to define who loves their child more. But, one of these parenting choices clearly serves to teach the young valuable financial lessons and serves to develop wealth building far earlier in life so that when it comes to retirement we can rest easy as parents that our children have a sound and secure future. Debt is a form of bondage and helplessness. Not exactly what we want for our children or ourselves for that matter.  Wealth without debt is personal power. Now that is something for which we strive in our own lives and for our children. Which will you be doing?

 

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.

Garnishments, Levys and other Legal Issues to Your Bank

     Wells Fargo just increased their fees for being forced to attach to a consumer's bank account should the bank receive a Garnishment, Levy, Writ or any other legal document to freeze a consumer's funds due to some sort of debt.  This could mean a levy from any taxing agency, garnishments for past Child Support, taxes due, court ordered payments or restitution, collection debts that have been won through Court Order etc.  While so many people panic and are surprised when they see that their funds have disappeared from their account, in reality it could have all be avoided. 

    The point of this blog is really not to admonish a consumer about getting into this situation in the first place but to forewarn him/her about how costly the banks are now making these issues.  Wells Fargo says that "effective April 1, 2013, the Legal Process Fee which include levy, writ, garnishment and any other legal document that requires funds to be attached will be $125 each."   This was noted in everyone's February 2013 statement. 

     Now think about the fact that maybe an account was attached by the bank for a certain amount but the consumer didn't have enough collected funds to cover the amount requested.  The legal process can be submitted time and time agaion until the full amount of funds are recovered through the bank and that fee will apply each time the request is executed by the creditor.  At a $125 per request, you could have your funds eaten up in no time.

The Case for being Your Own Accountant

“I never balance my checkbook”. “I just pay what they tell me to.” “I don’t have time to be so precise about my statements.” These are all just excuses to be lazy with your money. Did Donald Trump or Warren Buffet make money because they didn’t care if their creditors upheld their end of their agreements or didn’t hire auditors to ensure accuracy for their income and expenses year to year? I doubt it. In their case a mistake could cost them millions but in today’s world a mistake for any one of us could costs us more in lost money than we can afford.

One client found out after several months that the agreed upon interest rate for his credit card was never changed. There were two credit cards available from his financial institution. The first, a $2000 credit limit would give him a 12.99% interest rate for all unpaid balances while the second program allowed a $5000 balance and a 9.99% interest rate. He was approved for the lower program and used that over the last 5 years. This year he applied for and was granted an increased credit limit of $5000 which would drop his interest rate to 9.99%. He’d been busy the last few months and was behind putting his statement activity in his Quicken ™ personal financial software. When he finally gathered his statements, he found that his finance charges were way out of line. He saw that for several months the interest rate stayed at 12.99% and was not changed according to his agreement. He called the financial institution and asked about the mistake. The finance company admitted that the interest did not change as it should and finance charges would be credited on the next statement.

Had this client not paid attention to his own situation no one would have caught this oversight of being overcharged in fees. This would be an unfortunate waste of money. It’s kind of like having a hole in your pocket and losing it along the way. While the monthly amount of a 3 percentage points may seem insignificant to some, simplistically over the course of a year he could have cost himself roughly $150.00 more in finance charge than he should have been paying. Think of what having an extra $150.00 could do for you.

Situations like this occur all the time only with much larger consequences. Just look at the mortgage and foreclosure fiasco. How many poor consumers were led blindly to accept foreclosure when, in some instances, proper legal procedures were not followed? Then there are many cases of unauthorized or duplicate charges in one’s checking account, identity theft issues, fraudulent applications, misappriopriation of loan payments and charges and the list goes on. People make mistakes. Computers are only as smart as those who program them and they mistakes. Sometimes these mistakes are made knowingly and some are not. If no one is left to examine the results frequently, costly errors go unchecked. Nothing is infallible and being a responsible consumer means being aware that banks, credit card companies, mortgage banks, credit bureaus and any company that involves our money and our information must be checked by the very customers who use them.

Copyright 2010
Consumerwarfare.com

Inquiry Dropped Credit Score by Another 5 Points

It’s not much but it adds up! When a creditor or solicitor looks at your credit there are a number of codes that they must fill out to request your credit report. Those codes indicate to the credit bureau why a company is looking at your credit. If used correctly, those codes are designed to indicate whether a consumer is actively seeking credit, more credit, employment, insurance etc. or simply being used to solicit and offer credit. The codes, developed by the credit bureaus themselves help score your creditworthiness.

Typically there are two types of credit inquiries you see on your report depending on the code the creditor uses when they request your credit. One, often referred to as a “hard pull” counts against your credit score. Hard inquiries are supposed to indicate that you are actively seeking credit. These are the inquiries that will start to reduce your score about 5 points each after 3-4 inquiries in a year. The other type of inquiry, often referred to as “soft pulls” should be those that are requested to make financial offers, make solicitations and used for marketing and informational purposes only. These are generally not known by the consumer. These will not count against your credit score according to the credit bureaus.

Fair Isaac Corporation on MyFICO.com, home of the most used FICO score says, “…only inquiries that count toward your FICO score are the ones that result from your applications for new credit.” Well that is not always entirely true. In my case, my second mortgage company pulled my credit but I had not initiated any further credit from them nor had any issues with paying my account. I found that their inquiry dropped my score by at least 5 points and was classified on my report as an inquiry that impacted my credit score. The mortgage company was simply doing a random review but I was docked points as though I was seeking more credit. What happened is that the mortgage company filled out a form and selected a purpose code for them to pull my credit when submitting their request to the credit bureau. Here’s the problem. The type of inquiry selected rests entirely with the accuracy of the code selected by the creditor and at times the integrity of the code selected is subject to personal choice and human judgment. In this case, I wrote to the mortgage company and said they had harmed my score by their inquiry and to please remove it since I believed their pulling my report “ to only review” was misleading the scoring model into determining I was seeking more credit.

They wrote back saying , “Please note that as servicer of your loan, we are authorized to perform inquiries on your credit report. However, pursuant to your request, we have submitted an update with the credit bureaus to remove credit inquiry (if any) made by us on your loan. “

They were right, the Fair Credit Reporting Act allows them to review my credit at anytime. It is the scoring models of the credit bureaus that determine why my credit is being reviewed and whether or not my score will be harmed from such an inquiry. We are at the mercy of whatever code a creditor selects to get the report. It’s highly unlikely the creditor knows which code will harm a score and which won’t normany even care or think about it. Some creditors may just standardize their selection for all their credit inquiries where requests for information are harmful despite whether or not the consumer asked for credit.

While your score may not lower significantly at first, it is nonetheless a lower score and even 5 points can mean the difference in the interest rate you get on any credit you borrow. Your solution? Be diligent and make sure any inquiries that show up on your report are legitimately there because you asked for credit. If not, contact your company directly and ask them to remove the inquiry or recode the inquiry because they mislead other potential creditors into thinking you are seeking credit when you are not. Disputing inquiries with the bureaus themselves will rarely change your report as it is the creditor that leads the bureaus to classify the inquiry as they do.


Copyright
Consumerwarfare.com
October 4, 2010

Banks Stop Foreclosures Due to Botched Paperwork – Is this any surprise?

Can anyone honestly not believe that bad processing, customer service and underwriting were going to be the tip of the day given our mortgage fiasco? It comes as no surprise to me that this inexcusable and unprofessional trend rears its rather ugly head again. Besides approving home loans that should never have been given in the first place causing this housing mess, it follows now that lack of fiduciary duty (responsible financial analysis) might also show up in handling the residual effects of our housing disarray. In the foreclosure process, employees have even admitted their neglect in fulfilling all requirements of proper processing within the financial institutions. Possible Notary signing without signers being present, signatures different from document to document, multiple banks declaring primary ownership of the same property due to unclear documents and I’m sure the list goes on is further insult to stressed homeowners. How do you think all these loans were approved in the first place? And it’s not just the homeowners that “shouldn’t have been” but the now victims of rising unemployment who did everything right that I feel sorry for. Nothing has been fixed. “It reflects the hubris that as long as the money was going through the pipeline, these companies didn’t really have to make sure the documents were in order,” said Kathleen C. Engel, dean for intellectual life at Suffolk University Law School and an expert in mortgage law. “Suddenly they have a lot at stake, and playing fast and loose is going to be more costly than it was in the past.”


In my experience negotiating with the mortgage companies on behalf of clients trying to manage one of the government bail-out programs or re-negotiate an in-house mortgage restructuring, the right hand knows nothing of what the left hand is doing or simply could care less. After a long maze of numbers to press on the phone and a significant wait time, Customer Service is often out-sourced to another country or if in the states, is just not efficient, knowledgeable or in the least helpful. You are told on no uncertain terms that there is nothing they can do to help you. They could care less. They are stressed. They read what is written on your account and offer nothing more. They don’t even document conversations as reference points for the next customer service rep/processor. Only when you demand further explanation or want to complain, are you told you either need to fax or write a Customer Relations/Investigations department and wait for them to send you a note saying they got your letter. Sometimes you receive a letter that won’t even address your particular problem/questions as their final answer. No one is accountable. The processors will not speak with the clients to make sure they have everything they need. They simply process and good luck. And here is the rub. If the processors mess up you are basically out of luck. It suggests to me that the same way we “gave” away potentially default mortgages, we are now taking them away.

I would guess that Banks and mortgage companies are so swamped with their first mess, approving improper loans when they shouldn’t have, that they have forced themselves into inefficiencies and are simply trying to clean up their own mess. Gretchen Morgensen of the New York Times columnist on October 3rd, 2010 agrees with me, “There is no doubt that the enormous increase in foreclosures in recent years has strained the resources of lenders and their legal representatives, creating challenges that any institution might find overwhelming. According to the Mortgage Bankers Association, the percentage of loans that were delinquent by 90 days or more stood at 9.5 percent in the first quarter of 2010, up from 4 percent in the same period of 2008.” And who’s fault was that? We are simply now on the back-end of default tsunami and the clean-up isn’t going very well.

There is no frugally financial excuse for this mortgage mess we are in and there is less of an excuse for the poor customer service, loan processing and proper underwriting of a problem now so vast as to fleece the average consumer out of the one basic need under which all other needs can be met, a shelter, a home.

Freeescore.com - Come now Ben.

Ben Stein, that monotoned, subtly humorous, financially savvy little brother to Shaq doesn't tell it all. He hawks getting your credit reports and scores from Freescore.com and even better tells you to join the monthly subscription because they send you special alerts. Obviously Mr. Stein was rewarded for his kind words in this advertisment but is the script leaving something out?

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Beware of Scavenger Collection Agencies

Just recently consumers have been receiving notices of debts that leave them scratching their heads trying to remember something they may have forgotten. In most of these cases consumers have not forgotten an old debt when prompted by some notice with triggering identification and simply have no clue. However, this new twist leaves many in a state of confusion, checking their backs and their finances for remnants of a possibly long forgotten debt.

Truth is they are victims of scavenger credit and debt collectors who purchase old unpaid debts from other collectors who were unsuccessful in their attempts to collect the debts they purchased from original companies owed. That was a mouthful. These scavengers may have very little information to find the debtor and will look extensively for consumers who fit what little information they have. That may be as little as similar names in the same state as the debt. They then prepare collection notices and send them out to perhaps several matches for the same issue. The hope is either that the debtor will be found or a consumer will pay thinking the debt was forgotten and may be theirs or perhaps both.

Warning. If you get a notice from a debt collector out of the blue for a debt you do not remember then DO NOT pay it. Challenge it. Write them and tell them the debt is not yours. If they believe it is you can demand they provide you with complete documentation that will prove they are correct. In most cases you will never hear from them again. In other cases you may receive documentation that still cannot identify you such as social security number and birthdate along with addresses you can identify. DO NOT volunteer information or call the agencies as you could be giving them information they will use to link you to a debt that is really not yours.

Write them back immediately keeping your personal information private. You must respond to keep them honest. Give no back ground, former addresses, social security numbers, birthdates or any other private information to protect yourself. Make them prove the debt is yours to your satisfaction. If the debt is not yours and they try to report it to any credit reporting agency you have a possible lawsuit available to you against the debt collector. If the debt is yours check first with your state's statute of limitations on debt. They may be trying to collect a debt that is no longer collectible but hoping you are not aware of 1) your rights and 2) the laws.

If you are an "Authorized User" beware!

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.

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.

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.

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.

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!!!!