Monthly Archives: March 2015

What Are Some Credit Products Savvy Consumers Should Avoid With Their Finances

We all need and use credit on a monthly basis. There are many credit products on the market, some are helpful and useful while others are often down right scams. While most credit products on the market are legal, some are misleading. Some of these products or services can put you thousands of dollars into debt, others might only cost you a few dollars a month but are totally unnecessary or do not do what they claim to do. As the age old saying goes buyer beware. Some credit products and services can actually damage your credit score and this damage is not easy to undo. We are always on the lookout for lending news and stories and tips to help consumers save money. I will outline some of the more problematic credit products and services below and let you decide.

Credit repair

Most of these services are a downright scam according to the the Federal Trade Commission. Some of these services are simply not worth what you pay for, while others can actually damage your credit score rather than help it. The tactics that these services use do not work, and often times are illegal, meaning you could land in hot water without even knowing it. Some tactics used could land you a free vacation however, and by free vacation I mean an all inclusive stay in prison for using such glamorously illegal tactics like giving you a new social security number which is highly illegal. They also love to perform credit jamming attacks on the credit bureaus, which is illegal and if it does work it is only temporary in most cases. Credit jamming is where the credit repair service sends in dispute letters to every single debt you owe, even the legitimate ones. It is the disputing of the legitimate debts that is shady, unethical and illegal. You can repair your credit yourself using the helpful advice on this website and none of the advice on this website is illegal or unethical.

Store credit cards
These tend to be the worst credit cards on the market. The interest rates tend to be very high for one. They also rope you in with an offer such as a discount on the spot at the store, but you could likely find a true rewards credit card that works everywhere not just that particular store. Some of these cards come with limited financing deals but this can be dangerous since if you do not repay the balance by the end of the financing due date you will get slammed with interest dating back to the original purchase date.

Paypal Credit

This is the worst line of credit out there. The interest rates are sky high and this line of credit will NOT be reported to your credit report, that is unless you default on payment then you stand the chance of seeing it on your credit report. You do not get rewarded by reporting on your credit report for your good credit behavior such as on time payments. The only way this product would be useful is if you need a short infusion of cash and do not want the credit utilization appearing on your credit report.

Credit score monitoring

You do not need to pay for this service. Many credit cards offer this for free for example, including giving you your FICO score. You can also use Credit Karma for free to track your credit score from TransUnion. Credit Karma will alert you for free should your credit score or credit report change, and it does not cost you a single dime to use this service. At our website we always love free and useful credit products instead of the fancy paid alternative. Why pay on average $20 per month to monitor your credit? That is pretty much flushing that money down the toilet unless you need real time monitoring in the case of identity theft.

Learn How To Protect Children’s Personal Identity From Theft

Important lessons to be learned from infant identity theft case

A three-week old baby boy in Oregon State is one of the latest and youngest victim of identity theft. A drug addict is believed to have stolen baby Andrew’s medical records in order to obtain narcotic pain medication. The parents were first notified of the crime when they received a medical collections notice in their baby’s name for $125.

Child and infant identity theft is sadly becoming increasingly common. In Andrew’s case, medical records were stolen by the identity thief. Other children have school records, sports team records and other sensitive records stolen for identity theft purposes. In the most depressing cases, a parent or relative uses a child’s identity to replace their own destroyed credit. Identity theft crimes against children often go unnoticed largely because parents are not aware of the risk.

Here are some important tips regarding children and identity theft:

• Faking age – You would think a bank would notice a credit card being granted to a 3 year old, but this isn’t the case. Once an identity thief opens an account in a child’s name, their credit report is “started.” A birth date is recorded by the credit bureaus based on the information provided on the application. Since there is no external verification of the consumer’s age, it is easy for thieves to make the child appear much older on their credit report that they actually are.

Credit reports – Parents can check their children’s credit report records whenever they suspect fraud by contact the credit bureau fraud departments. Children should have no credit records (aka: a thin file). If suspicious records appear, work with the credit bureaus to investigate.

• Protect sensitive information – Question the use of your child’s Social Security number as identification. These numbers are often used by medical offices, dental offices, schools and more. Small offices may not have security precautions in place to keep this data safe from theft. Also, keep your child’s Social Security card, birth certificate and more in a secure location.

• Report the crime – Don’t be afraid to report the crime, even in situations where you know the person who has stolen your child’s identity. Reporting the identity theft to the credit bureaus and police quickly will greatly improve your ability to restore the child’s damaged credit. Without reporting the crime, it may be impossible to repair the damages and remove the fraudulent records.

Do you have any more tips for parents trying to keep their children safe from identity theft? Share your ideas and feedback in the comments section below.

How to Establish Credit Without Actually Establishing Credit

One of the most common questions I get is “if I don’t have credit then how can I establish credit?” It’s a catch-22 if I’ve ever seen one.

It seems that some people have a hard time establishing credit. These folks come from several groups. Some are young people who have never had credit. Some are new to this country and don’t have any history of U.S credit to show people. And some folks had credit at one time but, for whatever reason, ended up with trashed credit reports and horrible credit scores. This last group is really trying to re-build credit.

Most reputable lenders in this country want you to have some sort of credit experience before they will start giving you their best deals. Fair enough, isn’t it? I mean, I certainly wouldn’t want to give someone a $25,000 unsecured credit card as their first ever credit account. No way!!

But, if someone had a few years of a credit history and showed that they were able to pay their bills on time and manage their debt well I’d give them a shot. That’s part of being a lender…you have to take on risk that you might not really be comfortable with. Heck, anyone can say “I only want to do business with people who have a 20 year old credit history and FICO scores greater than 780.” Yeah, welcome to the overcrowded party.

Today lenders are so desperate to find new revenue sources that they are more and more willing to offer their products to people with little or no credit history. However, they do draw a line somewhere. And your rates and terms will not be very impressive if you’re new to the credit game.

Here are a few groups of interest. Which group do you fall in?

Students and young people – My first credit card was a Citibank student card. It had a $300 credit limit and the application was sitting in my university mailbox just waiting for me. Their strategy was simple…become the first card in my wallet. Perhaps it would cause me to remain loyal to Citibank since they were my first. Did it work? Well, today 20 years later I still have a Citibank credit card.

Typically it’s more difficult for students and young people to apply for and receive credit at really good rates and terms because they simply don’t have any credit history and few lenders are willing to give their best products to people who haven’t proven that they can manage many different types of credit responsibly over a long period of time.
New to the U.S. – People who are new to this country run into the same problem as the young people and students. They have no history to show anyone. Well, that’s not exactly true is it? They may have years and years of solid non-U.S credit history but there is no way to show anyone in the United States. That’s the real problem.
Unless you are a Canadian moving to the U.S then it’s unlikely that the credit history from your home country will ever benefit you here. There are some lenders who can access your Canadian credit history but that’s where it ends. If you are from any other country then you might as well be starting over because you really are. You have no domestic credit reports and lenders don’t have the time or patience to try and reconstruct your foreign credit history. They’ve got 100 other loan applications to worry about.

The rebuilders – There are more of these people than the other two groups combined. These are the folks who have already established credit and, for whatever reason, abused it to the point where they can’t get approved at anything other than loan shark rates.

It’s likely that if you are in this group you got here because you lost a job, got divorced, had a death in the family or had some sort of major medical disaster that zapped your savings. Or maybe you just screwed up and couldn’t manage your own credit. You may have even filed for bankruptcy. The point is that the reason doesn’t matter. Nobody cares why you are here…the point is that you’re here and that’s what really matters now.
Your challenge is to figure out how to establish credit now that your history has been ruined for the next decade or longer. It’s going to be more difficult for you because you can’t avoid credit use like an 18 year old can. You need a house and a car to survive. And you have a family and children to take care of. It’s going to be expensive for a while until you can convince lenders that you have learned your lesson and won’t screw up again.

The Solutions – The good news is that there are several ways to re-build, establish or re-establish credit. The bad news is that if you don’t do your research then you’ll spend a lot of time trying to establish the wrong credit.

Secured Credit Cards
– A secured credit card is when you open a credit card account but give the issuer a deposit. Normally the amount you deposited will be your credit limit. So, if I send the issuer a $300 deposit then my credit limit will likely be $300. If you don’t pay your bill then they’ll just take it out of your deposit.
Secured cards are great for all of our groups above. They are great because you are essentially buying the credit account. As long as your check clears then most banks will approve your secured card application. And, if you pay your bill on time then it will almost immediately begin to build a solid credit history and solid credit scores.

The drawbacks are important for you to understand too. Most secured cards come with lots of fees. And, those fees are generally charged to the account.

You will also have to make sure that the credit card issuer reports the account to all three of the credit reporting agencies. If not, then you aren’t getting credit for it on all of your credit reports or in all of your credit scores…so what’s the purpose, right? Ask the issuer if they report to all three credit reporting agencies before you open the account.

And last but not least, the credit limits are almost always very low. This is bad for a couple of reasons. First, you can’t really use the card in any meaningful way because your credit limit might only be a couple hundred bucks. And, any usage will likely lead to a very high “revolving utilization” percentage. For example, if your credit limit is only $200 and you go out and buy a $100 worth of groceries on the card then you’ll be 50% utilized according to your credit reports…that’s not good. You’ll want to be very careful with how much you charge or your scores will never be as good as you want them to be. Keep your monthly balance to less than 10% of your credit limit and you’ll be fine.

Do your homework before you open a secured card. If you have to put up with the hassle and fees you, at the very least, will want it to benefit you as best possible.

Borrow someone else’s credit – Does that make sense? Let me clarify. I’m not suggesting that you go out and commit identity theft. I’m also not suggesting that you ask someone to apply for a loan WITH you as a co-signer or joint borrower. What I’m suggesting is almost risk free to everyone involved.

You should become familiar with the term “authorized user.” An authorized user is someone who is allowed to use the credit card of another person but has no real financial liability for that account. You get a card with your name on it but you don’t have to pay the bill…ever!! Someone else is responsible for the bill. How great is that?
The best news is that that many banks and credit card issuers will add the account history to the credit reports of the authorized user even though it’s technically not their account. This immediately conveys the value of that account to the authorized user’s credit reports and credit scores. It’s beautiful.

The drawback is this…if the owner of the account stops making payments or maxes out the card then your credit will suffer just like their credit will suffer. But, there’s good news even in this bad news. If for some reason the owner of the account starts falling behind or has too high of a balance you can easily have the account removed from your credit reports because you are not liable for it.

The best scenario is for someone to add you as an authorized user to their credit card but never let you have a card. You get the benefits of the account being on your credit reports and they don’t ever have to worry about you using (or abusing) the card.

So in these two examples did you establish credit? Yes, you sure did. You have accounts on your credit reports that are helping your credit scores and lenders now have something to look at when you apply for credit.
So, did you REALLY establish credit? No, you didn’t even come close. In one example you essentially paid to open an account and in the other you borrowed someone else’s account. You didn’t establish anything…but you kinda did.

I know it’s confusing…but don’t worry too much about it. Your goal is to get to the point where lenders will offer you their competitive rates and terms. If it takes you borrowing someone else’s credit as an authorized user then so be it. That’s how hundreds of thousands of people build their credit reports every year.

So if you can use either of these two strategies to accomplish your goal then congratulations…you’ve just established credit without actually establishing any credit.

@InstallmentLoansNetwork we are on a mission to simplify the online loan process and help borrowers make good credit decisions.