Paul Ferraresi

A great new web site by FraudAvengers (www.fraudavengers.org) has recently started. It is a non-profit group with the goal to educate the public on how crooks use online payment options and technologies to commit fraud.

It is a Texas-based group with the slogan, “Pros preventing cons.”

The site has blog articles to inform individuals and businesses on how to reduce their risk of fraud.

Check it out and sign up. I think it will be very helpful.

The credit card act of 2009 (CARD) mandates that lenders explain how long it will take and how much it will cost to pay off your balance if you make the minimum monthly payment. In addition, the law requires companies to show how much you will save if you pay off your card in three years (36 months). The problem is the three-year payoff date will always be 36 months away. It is a moving target. You see, when you pay this month’s amount for a 36-month payoff, assuming you do not make any more charges, then interest is added. So, in month #2, they calculate the payoff over the next 36 months on the new balances (that would be month 37), and so forth.

Here is an example that we use…assume someone has a $3900 balance at 15.32% APR. It would take 150 months to pay off the debt if you paid the 36-month amount listed on the statement each month.

How do you stay within a 36-month payoff? This month, determine the amount stated to pay off the balance in 36 months; for example, $121. Do not add any new charges and keep paying the exact $121 each month. It will be paid off in 36 months. This way, 36 months does not become 150.

One way to prevent identity theft is to monitor reports from the credit bureaus. You should review the reports at least annually. Ideally it should be every four months. There are three major credit bureaus and you are entitled to one free credit report annually from each one. I suggest you work a rotating system. That is, every four months get a free report from one of the bureaus. It will not cost anything and you will have an up-to-date review. See www.annualcreditreport.com.

Look over the report for credit companies you have never sought an account from or an account balance that you know is not yours. Examine for a past address where you or your children have never lived. This is a flag that the thief may be setting up to get a loan application on that address.

Ah yes, discipline or regret.

The new credit card law was signed into law in May 2009. This blog has previously written about the new terms that will dramatically affect you.

Now the credit card companies have until February 2010 to implement the new Government changes, but, each company can begin to change their programs starting immediately.

You must read every monthly statement and the T & C (terms and conditions). Many people are finding their credit lines are being cut, interest rates increased and payment cycles reduced. It is what it is, so, check your statements each month.

Other people are doing “plasectomies” with chainsaws on their cards. Keep in mind if you eliminate your cards, it will eventually negatively affect your credit scores with no activity. Also, the old adage holds true … it is better to have credit and not need it, than, need the credit and not be able to get it.

If you want to get back at the card company … charge things and pay them off in full immediately. They hate that!!!

A strong credit score can save you thousands in interest expense over your lifetime. There are many myths about how to maintain a strong score. A score of 720 or above will give you access to some of the best interest rates.

There are 3 credit rating agencies … Equifax, Experian and TransUnion. They all produce their own FICO Scores (developed from the Fair Issac Company) with various permutations and combinations of formulas. When you get all three company scores and if they are, say, 630, 721, and 752, then, the credit issuing company will use the middle score, in this case 721.

There are five components that go into your credit score and each makes up a percentage of your final score: Payment History (35%); amounts owed (30%); length of credit history (15%); new credit (10%) and types of credit (10%).

Some important thoughts to consider:
• The fastest way to ruin your credit score is with late payments
• Six months of on-time payments helps to build your score
• If you make a late payment, send a letter to the creditor and explain why it is late. Many times they will make an adjustment for you.
• Your payment history and amount owed is the most important items comprising 65% of your score
• Consistently pay more than the minimum due
• Keep the ratio of amount owed on the card to the credit line at no more than 40%. So with a $5,000 credit line never have the balance higher than $2,000. Yet, if you have a very low balance and you pay it off in full … it does you no good. Go figure!
• If you have a late payment history and pay off the entire balance, it does NOT clean up the late payments dings
• Credit history on a FICO score goes back 99 months (8¼ years for those with weak division skills)
• You can obtain 1 Free credit report per year per rating agency
• It takes 10 years for a bankruptcy to drop off and 7 years for adverse credit reports. Car loans and mortgages drop off in 4 years
• To rebuild credit get a gas card and/ or store charge, use it, but pay it off on time each month.