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Monday, August 10th, 2009

Reclaim Your Credit: What to Do When Your Credit Shrinks

As you may already know, credit card companies are responding to the recent passage of the Credit Cardholders’ Bill of Rights by slashing limits, raising interest rates and even closing cards for many customers.

Here’s what you can do if one of your card issuers gives your account the ax (or even the pruning shears).

Ask the Right Questions on the Phone

The most important thing to remember is that you don’t have to take changes to your credit lying down.

As soon as you notice altered terms on one of your cards, take action:

  • Do your homework. Before calling the credit card company, make sure you know as much as you can about your account: how long it’s been active, your former and current limits, your former and current interest rates, your balance. You’ll be better able to negotiate when you prove yourself knowledgeable about your circumstances.
  • Look outside the box for solutions. Be sure to visit www.annualcreditreport.com to get a copy of your credit report before calling. Inaccuracies on your report could lead to changes in your credit card terms and other problems. Take steps to correct any mistakes you find.
  • Get an explanation. When you call your card issuer, ask for the reasons your account was altered. Common reasons include account inactivity, increased credit risk or diminished profitability – regardless, you have a right to know why your terms have changed.
  • Show off what you know. Here’s where all your work will come into play: if you’re in good standing with the company, emphasize that and your other positive credit action (as displayed on your credit report).
  • Bargain. If your issuer is willing to raise your limit OR lower your interest rate, be ready to accept the compromise. A lower interest rate will likely be best for those who carry a balance; a higher limit may work well for those who pay in full each month.
  • Push it a little. If the representative you’re speaking with won’t budge, ask to talk to a supervisor – as long as you have a reasonable case to support your request.

A bankruptcy attorney may help advise you in your credit situation.

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Posted in Your Credit Score | No Comments »

Wednesday, July 22nd, 2009

Ben Stein and Not-So-Free Credit Scores

The blogosphere has been all over Ben Stein, a financial guru, spokesperson and New York Times columnist, over his involvement with what appears to be a slightly shady "credit-score" site, FreeScore.com.

In advertisements, Stein shills for the group, which claim to offer you a free credit score. As several blogs point out:

  1. Your credit score doesn't tell the full story. While your credit score is important, you'll need more information if you want to take action to improve. In order to see what's bringing your credit score down, you'll need to see your credit report, which includes any claims against you.
  2. FreeScore.com isn't actually free. After giving you a "score" for free, they begin charging you monthly fees.

While some people may want to check their credit score monthly, in most cases you don't need this kind of scrutiny. In fact, simply requesting your credit score or credit report can affect your credit score.

You are entitled to a free annual credit report from the government. And the government makes one available at exactly one - and only one! - Web site: Annualcreditreport.com.

Don't be fooled by similar or imitator sites.

If you're in debt and trying to get out, you may become a target of predatory merchants. These groups are looking to make a quick buck off your troubles.

Avoid this by informing yourself, reading the fine print and sticking to reputable, trustworthy sites and sources.

Trying to repair your credit but can't keep up with the bills? Consider filing bankruptcy.

Filing bankruptcy doesn't have to ruin your credit for life. Learn more: Credit After Bankruptcy.

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Posted in Predatory Lending | 2 Comments »

Tuesday, July 7th, 2009

Choosing a Lender to Rebuild Credit After Filing Bankruptcy

If you’re trying to build or rebuild your credit after bankruptcy, you probably know that using credit responsibly is your primary goal.

Here’s how to set yourself up for success in borrowing.

Choose Affordable Payments: Before signing loan papers or credit card agreements, you’ll need to do a four-part math problem:

  1. Check your budget. Determine exactly how much money you have left over each month (no generalizing!).
  2. Calculate monthly payments for your loan. Again, make sure you know exactly what you can expect from the life of your loan – no assuming, no generalizing.
  3. Compare the two numbers. If your leftover money is less than the monthly payments, you cannot afford the loan. Assuming you’ll get a raise or a bonus is dangerous, especially in this economy.
  4. Leave a cushion. Remember: part of financial stability is saving money for unexpected emergencies, so if you’d have to spend all your income to cover the loan, you can’t afford it.

Beware of Hidden Costs: Make sure you read the entirety of a loan or credit card agreement before signing it.

If you’re not comfortable interpreting legalese, enlist the help of a bankruptcy attorney. Be on the lookout for the following.

  • Fees & costs associated with the account. Yearly charges, overdraft charges, late charges, early payment charges and others add up quickly and can cost more than you realize.
  • Fluctuating interest rates. Credit card issuers are infamous for advertising low interest rates, but not the fact that many such rates last for only a short period. Make sure you understand what events could lead to your paying more in interest (missed payments, going over your limit, etc.).

Avoid Common Predatory Practices: Unfortunately, some lenders will count on your ignorance about lending practices to trick you into paying more than you should.

Watch out for common schemes like the bait and switch, equity stripping, loan packing and loan flipping.

Bottom Line: There’s No Rush

Many people are eager to reestablish credit after a bankruptcy filing, but don’t let this drive to improve your finances lead to poor borrowing decisions.

Right after filing bankruptcy, you can expect to pay a bit more in interest rates and to qualify for lower loan amounts.

But, if the offers you receive seem too expensive, wait a while.

With a year or so of strong credit practices under your belt, you should be able to get more affordable loans – and improve your chances of improving your credit and staying debt-free.

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Posted in Post-Bankruptcy Debtor Education | No Comments »

Monday, June 15th, 2009

Consumer Credit Fairness Act = Hope for Low-Interest Loans?

As too many Americans know, loans with monstrous interest rates can lead to what seems like endless rounds of debt and bills.

And, in some cases, excessive interest rates can push struggling consumers to filing bankruptcy.

The “Consumer Credit Fairness Act,” a bill now before the Senate Judiciary Committee, would give consumers a little help for dealing with such costly loans.

Proposed Terms of the Consumer Credit Fairness Act

As it now stands, the proposed legislation would do two major things for Americans:

  • Limit creditors’ collection rights in bankruptcy: Lenders whose loans came with excessive interest rates (defined by the bill as 15 percent higher than the current yield on a 30-year U.S. Treasury bond) would come last on the list of creditors to be repaid in bankruptcy court.
  • Improve consumers’ chances of bargaining for lower rates: Because of the above change, consumers would likely be able to negotiate lower interest rates with their creditors instead of filing for bankruptcy.

How the Consumer Credit Fairness Act Could Help You

Imagine this scenario: you’ve got one or more loans with interest rates that are through the roof (credit cards, car loan, payday loan, overdraft loan, etc.).

Unless you can get your creditors to lower their interest rates, there’s no way you’ll be able to continue making payments and you’ll have to file for bankruptcy. So you call up your creditor:

  • YOU: Hello, I’d like you to lower my interest rates.
  • CREDITOR: Why should I do that? That means I’d collect less moola from you, a struggling consumer.
  • YOU: Well, you see, if you don’t lower my rates, I’ll file bankruptcy. And, thanks to the Consumer Credit Fairness Act, your loans will be the last on my repayment list. So you might not get any money at all.
  • CREDITOR: Hm. That doesn’t sound too good.
  • YOU: Exactly.
  • CREDITOR: All right. How does [insert lower rate here] sound?
  • YOU: Excellent.

While the above dramatization may illustrate a slightly simpler procedure than you’ll actually go through should this bill pass into law, it does show the essentials of how the legislation may likely work.

Opponents Predict Tighter Credit

Some have criticized the bill as being too generous to consumers, suggesting that, should it become law, it would limit creditors’ overall ability to lend money.

But supporters contradict this claim, insisting that the bill would more likely push lenders to rely more universally on types of loans with more reasonable interest rates.

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Posted in Predatory Lending | 1 Comment »

Sunday, May 24th, 2009

Filing Bankruptcy Prevention: Techniques for Avoiding Identity Theft

Identity theft is a crime that occurs when someone uses another person’s identification information to make credit transactions.

The severity and specifics of identity crimes vary from case to case, but identity theft victims often face frustrating (if not devastating) setbacks to their credit.

In fact, some people are forced to file bankruptcy thanks to these identity thieves.

Although there’s no guaranteed way to prevent identity theft, a new (free) service may help you determine your risk for becoming a victim.

Traditional Wisdom: Check Your Credit Report

Checking your free credit report (www.annualcreditreport.com) is one of the most important ways of making sure your not a victim of identity theft.

By comparing action reported by the three major Credit Reporting Bureaus with action you know you’ve taken, you can see whether anyone besides you has been using your personal information.

But, though such checks can help you discover identity theft before it becomes a huge headache, they can only detect crimes that have already been committed.

Calculating Your Risk

The new service from MyIDScore.com claims to predict how likely you are to have your identity stolen. Here’s how it works:

• Visit www.myidscore.com and fill in the personal information it requests (note: giving your Social Security Number is optional).
• Answer multiple-choice questions to verify your identity.
• View your “identity theft risk” score, which ranges from 0 to 999.

Lower scores indicate a lower risk of identity theft victimization.

How It Works

According to the Washington Post, the service works by identifying warning signs that someone has used all or part of your personal information to take credit action.

The service can reportedly detect suspicious actions before actual purchases are made – for example, if a thief applies for and is issued a credit card using your SSN.

Insiders for the site suggest the service for those who have found out that their personal information was compromised in a data breach (data breach updates).

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Posted in Identity Theft | 2 Comments »

Thursday, May 21st, 2009

The Impact of the New Credit Card Regulations

Earlier this week we reported on the new credit card regulations passed by the Senate that could be signed in to law as early as Memorial Day. This is good news for consumers tired of seeing their rates jacked for no reason and with no notice.

Many banks and credit card companies cried and complained, saying they needed to be able to change rates at will to stay profitable. Abusing your customers is no way to make money, and it seems Mark Gimein over at The Big Money agrees.

He's got a nice read today about why credit companies should take better care of their customers.

For a single bank to raise rates to a sky-high level is a dangerous strategy. When many banks adopt it, however, it gets much worse. Customers who see the rates on all of their credit cards rise become much less able to pay any of them.

We see it all the time: A temporary financial setback can be severely compounded by fees and fines.

Fortunately, the credit companies will have to change their ways.

And for anyone facing the fees and fines, there are other debt relief options available, such as filing bankruptcy.

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Posted in Your Credit Score | No Comments »

Thursday, April 2nd, 2009

Credit After Filing Bankruptcy: Steps to Success

Credit traps are dangerous to everyone, but they can be especially damaging to those trying to rebuild credit after filing bankruptcy.

As you work your way to financial health, make sure you steer clear of these common post-bankruptcy pitfalls.

  1. Failing to Plan: When you receive your bankruptcy discharge, you’ll likely be debt-free; but that will only last as long as you spend less than you make. It may sound simple, but many people forget that continued financial health depends on continual, conscious planning.

Solution: Make sure you develop a budget and stick with it.

  1. Slipping into Old Habits: If you’re like most Americans, you needed bankruptcy protection because some crisis (like divorce, death, layoff, injury or a lawsuit) pushed you over the edge; but you may have also had financial habits that left you unable to weather a storm: over-reliance on credit cards, use of payday loans, having little or no savings, etc. After bankruptcy, it’s more important than ever to avoid such costly sources of credit.

Solution: Take advantage of the tips offered in the financial management course you’ll take during your bankruptcy – they’re designed to help you stay out of debt!

  1. Credit Repair Scams: Solutions that promise to wipe out bad credit, erase your credit history or achieve any other feat that seems too good to be true should be avoided. There’s no quick way to improve your credit and most offers of this type will likely cost you money and hurt your credit.

Solution: Take the slow-and-steady route to better credit: pay off your bills every month, don’t open more credit cards than you need and stick with your budget. Over the course of a couple years, you should see your credit improve.

  1. Picking the Wrong Plastic: As you rebuild your credit, you’ll want to open a credit card account. But be wary of the offers you receive in the mail. Your post-bankruptcy status may mean you’ll have to pay higher interest rates or fees than a borrower with stronger credit, but don’t settle for shoddy terms. Know which credit cards to avoid.

Solution: Consult with your bankruptcy lawyer if you’re not sure about the terms of a credit card agreement and consider visiting a site like bestcreditcards.com to see the variety of options available to you.

With some planning, discipline and perseverance, YOU CAN rebuild your credit after filing bankruptcy.

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Posted in Post-Bankruptcy Debtor Education | 1 Comment »

Monday, March 16th, 2009

What Happens to Your Cosigners When You File Bankruptcy?

A cosigner is someone who signs his or her name along with the primary borrower on lending papers and takes on responsibility for payment of that debt should the primary borrow default.

In most cases, a cosigner has stronger credit than the primary borrower and can help that person get better loan terms, like lower interest rates and monthly payments.

Cosigners can be helpful for:

  • Young adults: Often, a parent (whose credit is better established) will cosign a loan for an adult child to help him or her get more affordable terms.
  • Those recovering from bankruptcy: After filing for bankruptcy, you may need someone with stronger credit to cosign a loan with you in order to get reasonable terms.

What happens to cosigners when you file for bankruptcy?

  • In Chapter 7 bankruptcy, many debts are completely forgiven (discharged). This would mean that the burden of payment is removed from you – BUT your cosigner (or “codebtor”) is still responsible for making payments.
  • In Chapter 13 bankruptcy, payments are made according to the terms of a repayment plan. In this case, as long as you keep up with your payment schedule, your cosigners are protected and not responsible for paying that debt.

Other Cosigner & Bankruptcy Considerations

  1. Remember: before you're filing bankruptcy, any payment you miss or make late will harm both your credit and your cosigner’s credit.
  2. Cosigners for business loans are not protected at all by bankruptcy filings.
  3. When deciding which chapter of personal bankruptcy to file, you need to choose the one that will work best for your finances. Although your cosigners could be negatively affected by your decision, they did take on considerable legal responsibility and personal risk by signing the legal documents.

Friend & Family Cosigners & Your Bankruptcy

In many cases, cosigners are close friends or relations. Filing for bankruptcy has the potential to strain these relationships, so it’s important that you take steps to make sure bankruptcy is the right choice for you and the best way to get you back on your feet financially.

Speaking with a bankruptcy lawyer may be a wise first step.

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Posted in Filing Requirements, Finance 101: Secure Your Future, Your Credit Score | 1 Comment »

Tuesday, November 18th, 2008

Citigroup, Inc. to Slash 52,000 Jobs

Citigroup Inc. just revealed plans to cut 52,000 jobs—15 percent of its workforce—by early 2009.

This mass layoff is in addition to the 23,000 jobs that were cut between January and September 2008.

Expenses will also be cut by as much as 20 percent.

This drastic move is hoped to revive the bank as it fights off the global economic crisis and mounting debt. The bank lost $20.3 billion in the past year and it’s not expected to make money before 2010.

These cuts are the most made by any U.S. company since the global credit crisis began last year.

Want more? Read Total Bankruptcy’s recent article, Mass Layoffs Cause Unemployment Rate to Spike.

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Posted in Economic News: How Are We Doing? | No Comments »

Thursday, August 21st, 2008

Cosmetic Surgery with No Money Down

Free Press out of Detroit published an article yesterday about the latest sales approach in elective medical procedures that is becoming a popular option across the country.

Many medical practices are partnering with financial companies to approve elective surgeries on credit.

Although the new financial plans entice many with the "buy now, pay later" option, experts warn of the high interest rates and late fees that will swamp people if a payment is missed.

The supporters of this approach claim that it will help make procedures more affordable, and while others agree that the credit program has saved the lives of humans and even dogs, they are not sure it's the best financial option in the future for uninsured patients who are in need of immediate, costly medical procedures.

Bottom line: Don't let a face lift send you to bankruptcy court.

To find out more about this up-and-coming financial option, read the following article:

http://www.freep.com/apps/pbcs.dll/article?AID=/20080820/BUSINESS06/808200359

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Posted in Your Credit Score | No Comments »

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