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eCreditCoach Newsletter - 10-24-2007
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America is quickly becoming a cashless society. Whereas it would have seemed odd, or even in poor taste to do so in the past, people routinely use plastic to pay for even the smallest purchases, such as a Slurpee from 7-Eleven. Almost all gas stations allow you to "pay at the pump," and even fast food restaurants began accepting "debit or credit" a few years ago. And that's not to mention the millions of cashless transactions that occur every day in cyberspace, through web sites like eBay, Amazon.com, and other popular e-tailers.
Clearly, having some form of cashless payment is essential to being a fully functioning American consumer these days, and millions of people are opting to use a debit card attached to their checking accounts rather than traditional credit cards. Is this a wise move?
Dr. Jekyll's Lovely Little Debit Card
The primary advantage of debit cards is that they give you access to cash. A little known fact about cash advances on traditional credit cards is that they begin accruing interest from the moment you get your hands on the money. This means that even if you paid last month's bill in full, you will still have interest charges on your next bill whenever you take out a cash advance. Debit cards allow you access to cash through ATM's at no interest - after all, it's your money.
The other major benefit of debit cards is that they're an option for credit constrained consumers. While it may seem like credit card companies will give cards to anyone, the truth is that once you make a serious mistake - such as falling behind on your card for a few consecutive months, resulting in a "charge off" - it can be very difficult to qualify for credit again anytime soon. Since some form of plastic is required for so many of life's necessities, debit cards offer these people a means of remaining viable members of our cashless society.
Mr. Hyde's "Instrument of Financial Death"
But there is a downside to debit cards, too. Consumer advocate, Howard Strong, even refers to debit cards as "financial death" cards. While his perspective may be a little over the top, he does cite several disadvantages of debit card usage in his 1999 book, What Every Credit Card User Needs to Know.
First, by using a debit card, you lose the advantage of using the credit card company's money interest free. This interest free period occurs from the time you make a purchase until the due date of your bill. If, for example, you used your credit card to buy a $2,500 sofa the day after receiving your statement, you would then have more than 30 days to come up with the $2,500 before being charged interest. If you used a debit card, you would have $2,500 sucked out of your account the moment you made the purchase.
Secondly, using a debit card typically has no positive impact on your credit. Credit card companies report payment information to the three major credit bureaus each and every month. When you pay your bills on time, it has a positive effect on your credit score. Debit cards don't utilize credit, so there's nothing for the bank to report - unless, of course, you overdraw your bank account and then are unwilling or unable to pay whatever egregious fees the bank charges. In this way, using a debit card can have a negative effect on your credit.
Finally, using a debit card puts you at more risk than using a credit card because it is easier to "stop payment" of erroneous or fraudulent charges with a credit card. When Mr. Strong wrote his book in 1999, this was more of a problem than it is today, since much has been done to improve the security of electronic transactions. Still, the fact remains that someone could use your debit card to empty out your bank account, and while you would almost certainly get your money back, it could take some time. Since credit cards have no ability to draw on your savings or checking, this possibility doesn't exist with them.
The Reality - You Need Both
If you can qualify for a credit card, even at a high interest rate, you should almost definitely have one. After all, credit cards help you build credit and the interest rate is irrelevant if you're responsible and pay your bills in full and on time. You should also have a debit card for getting cash quickly and easily without the up-front interest that credit cards charge on cash advances.
If you're really worried about the "Mr. Hyde" effects of debit card usage, consider opening a separate account tied to your debit card. You can set up automatic weekly or monthly transactions that move money from your primary account to this special account, so that the amount you could lose is always limited to $200, $500, or whatever you decide.
Sincerely,
Mike, "The eCreditCoach"
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eCreditCoach Newsletter - 10-24-2007
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Credit Reports - What's On Them, and How to Check Yours
Businesses in the United States buy more than two billion credit reports every year. Since there are currently fewer than 300 million people in the country, this means that the average adult has his or her credit reports examined by someone about once every other month. And yet, only a small percentage of Americans have ever laid eyes on their own credit reports. Viewing your credit reports at least twice a year is a necessity in today's electronic age, and while it may not always be free, getting access to your credit reports is much easier and less expensive than it has been at almost any time in history.
What is a Credit Report?
There are three major credit bureaus in the United States. They are Equifax, Experian, and TransUnion. These three companies are competitors, and therefore they don't share information with one another. As a result, your Equifax credit report may be significantly different from your Experian credit report, and your TransUnion report may be different still. Sometimes this is a good thing - if only one of the credit agencies reports a bad history, for example. But more often than not, it's a headache, since at least one of your credit reports is bound to have some incorrect, negative information on it.
What's On Your Credit Report?
Although each of the three credit agencies record slightly different information, the following is a basic list of what you'll find on each of your credit reports: Your name and your spouse's name. Where you live, where you work, and where you used to live (and used to work). Your social security number, phone number, and birth date. A list of your credit accounts and when you've paid your bills - on time, late, late by more than 30 days, late by more than 60 days, etc. How much total credit you have available. Whether and to whom you've made an application for credit in the past six months. Which companies have requested and obtained your credit report. And finally, dreaded "public records" - bankruptcies, foreclosures, repossessions, court judgments, convictions, and tax liens.
How Long Does Information Stay On Your Credit Report?
Positive information stays on your credit report indefinitely, which is a good thing. Most negative information should be deleted after seven years, with the exception of certain types of bankruptcy, which can stay on your report for ten years. If one of your credit reports is missing positive information or contains negative information that's older than seven years, contact the appropriate credit bureau. Their website addresses are listed at the end of this article.
How To Obtain Copies of Your Credit Reports
Usually, you may have to pay for your credit reports. The fees that the credit bureaus can charge vary by state, but the maximum is $9.50. You can find out more information by visiting the individual sites of the three bureaus: equifax.com, experian.com, and transunion.com.
Mike "The eCredit Coach"
Zen Marketing LLC, 3155 East Patrick Lane, Suite 1, Las Vegas, NV 89120, USA
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eCreditCoach Newsletter - 10-24-2007
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The Larry Rule - Is Applying for Store Credit Cards Bad for Your Credit?
Larry Lindsey is probably not a name that you know, but he is an important figure in the history of personal finance. Currently, Mr. Lindsey is President Bush's chief domestic economic advisor. Prior to that, he was a Federal Reserve Board Governor. But neither of these distinctions are what make Larry Lindsey significant. Instead, it was a little incident at Toys 'R Us that gave birth to "The Larry Rule."
The Larry Rule - What No Retail Clerk Will Ever Tell You
In 1996, Larry Lindsey was a Federal Reserve Board Governor. While it isn't known for sure, it's probably safe to assume that Mr. Lindsey was then, and is now, a millionaire. An even safer assumption is that he always paid his bills on time and should have had a top-notch credit score. After all, he was a member of the most prestigious financial committee in the world, and his personal credit history was undoubtedly vetted by politicians and regulators before he could be appointed to the Fed.
Despite all of this, Mr. Lindsey was denied a store credit card - at Toys 'R Us of all places. The reason? He lacked a sufficient credit score due to too many recent inquiries. You see, Larry Lindsey had been trying to prove a point. Whenever a retail clerk offered him an opportunity to apply for credit, he did so. He filled out the application correctly, even stating that he was a Fed Board Governor under "employment." He listed his six-figure income and all other pertinent data, and until Toys 'R Us came along, he had always been approved.
It wasn't that Mr. Lindsey actually wanted or needed all of these retail credit cards. His objective was to point out this flaw in the credit scoring system - applying for too many retail charge accounts can hurt your credit and prevent you from qualifying for real credit cards. Ask yourself, which is more important - the charge card at JCPenny that can only be used at JC Penny, or a real Visa or Mastercard that can be used at JCPenny and everywhere else, too?
To Apply or Not to Apply - That is the Question
On one level, the Larry Rule makes at least a little sense. After all, someone who is out there applying for credit all over town would seem to be in some form of financial distress. When the credit bureaus created their scoring criteria years ago, they didn't factor in pushy retail clerks who get bonuses for getting people to apply for cards they don't need. You do need a real credit card. Having two or three isn't a bad idea. But department store cards count as lines of credit on your credit report, and having too many of them can make you look like an unworthy applicant in the eyes of real credit card companies.
Armed with the knowledge that applying for and receiving retail store credit can be harmful to your credit, you should think twice before applying. First, ask yourself if you really want the store credit card, or are you just filling out the application so that the clerk will stop bugging you? If the store offers you a discount for applying, ask yourself if the money you'll save is worth the negative impact that the inquiry (or even being accepted) could have on your credit score.
If you actually do want the card or the discount is a real money-saver, then ask yourself this question: Will I need to apply for credit for something important, like a real credit card, a car, or a home loan, in the near future? If the answer is yes, then it is probably best to "just say no" to the retail application. You wouldn't want an inquiry from Toys 'R Us to inhibit your financial future.
We recommend you browse this directory and pick our one or two solid cards that you plan on keeping for the long term. With this sound financial advice, you will be on track for a great credit future.
Sincerely,
Mike "The eCreditCoach"
Zen Marketing LLC, 3155 East Patrick Lane, Suite 1, Las Vegas, NV 89120, USA
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eCreditCoach Newsletter - 11/3/2007
http://quickcards.sitemighty.com------------------------------------------------------
If you're a college student, chances are you've been offered more than a few credit cards. Maybe you have a friend who has already run up credit card bills on par with her student debt, and so you've steered clear of the credit card offers. Or maybe you're one of the few who have received their first credit cards and used them responsibly - so far, at least. Regardless, you probably don't realize just how important responsible use of your first credit card is to your financial future. It could have a significant impact on whether or not you'll be able to get financing for your first new car or house, and increasingly, it could even determine whether or not you get hired for your first professional job.
If you're not a college student, be sure to forward this message to anyone you know who is -- it's that important.
The Importance of Building Credit History
For many people, credit is a Catch-22: They can't get approved for credit because they don't have a credit history, but they can't build a credit history without first being approved for credit. Luckily for them, college students don't tend to have this problem. Credit card companies view them as low risk, at least compared to other young people with no credit, and so they're willing to give them a first chance. As a new cardholder, it's vitally important that you make good use of this first chance.
When you have a credit card, the issuing company reports information to each of the three major credit bureaus - Experian, Equifax, and Transunion. This information includes the amount of credit you've been approved for, how much of that credit you are currently using, and most importantly, your payment history. All payments - both late and timely - show up on your credit report, and even one late payment can hurt you rather badly when you lack a solid credit history. This is why you should always, no matter what, pay at least the minimum due on each of your credit card bills.
Always Try To Pay More Than The Minimum Due
While it's important to always pay at least the minimum due, you should never only pay this amount unless you are completely unable to pay more. In fact, it may not be a bad idea to pay the minimum immediately upon receiving your bill and then pay more later in the month when you have more money.
If you pay less than the total amount due, you will be charged interest on your next bill. Even though the credit card company holds you in higher esteem than one of your high school peers who didn't go on to college, they still regard you as a rather risky proposition - which means you'll probably be paying a very high interest rate. If you only pay the minimum due on a card with a high interest rate, it could take you several years to pay off even a modest amount of debt.
Take Advantage of Your Opportunities - But Use Your Credit Wisely
Believe it or not, it may be easier to get approved for credit while you're in college then after you get out - particularly if you don't start a professional job right away (or at all). The high interest rates you're asked to pay are just part of being a newcomer to the world of adult finance. But then again, if you always pay your credit card bills in full, interest rates will be irrelevant.
Regardless of all the cautionary tales, you should definitely open up at least one credit card account while in college to begin building a solid credit history. If you can show the credit card companies that you're responsible, you'll soon be paying much lower interest rates, and you'll be able to get that new car or house when the time is right. If you ignore or abuse your credit opportunities in college, it could be one of the worst mistakes of your life. You're an adult now - it's time to stand up, take responsibility, and enjoy your share of the American Dream. And it all begins with responsible use of credit!
Not a student? Forward this article to that special student in your life.
Also be sure to browse our complete catalog of cards at:
http://quickcards.sitemighty.com
.
Zen Marketing LLC, 3155 East Patrick Lane, Suite 1, Las Vegas, NV 89120, USA
If you're a college student, chances are you've been offered more than a few credit cards. Maybe you have a friend who has already run up credit card bills on par with her student debt, and so you've steered clear of the credit card offers. Or maybe you're one of the few who have received their first credit cards and used them responsibly - so far, at least. Regardless, you probably don't realize just how important responsible use of your first credit card is to your financial future. It could have a significant impact on whether or not you'll be able to get financing for your first new car or house, and increasingly, it could even determine whether or not you get hired for your first professional job.
If you're not a college student, be sure to forward this message to anyone you know who is -- it's that important.
The Importance of Building Credit History
For many people, credit is a Catch-22: They can't get approved for credit because they don't have a credit history, but they can't build a credit history without first being approved for credit. Luckily for them, college students don't tend to have this problem. Credit card companies view them as low risk, at least compared to other young people with no credit, and so they're willing to give them a first chance. As a new cardholder, it's vitally important that you make good use of this first chance.
When you have a credit card, the issuing company reports information to each of the three major credit bureaus - Experian, Equifax, and Transunion. This information includes the amount of credit you've been approved for, how much of that credit you are currently using, and most importantly, your payment history. All payments - both late and timely - show up on your credit report, and even one late payment can hurt you rather badly when you lack a solid credit history. This is why you should always, no matter what, pay at least the minimum due on each of your credit card bills.
Always Try To Pay More Than The Minimum Due
While it's important to always pay at least the minimum due, you should never only pay this amount unless you are completely unable to pay more. In fact, it may not be a bad idea to pay the minimum immediately upon receiving your bill and then pay more later in the month when you have more money.
If you pay less than the total amount due, you will be charged interest on your next bill. Even though the credit card company holds you in higher esteem than one of your high school peers who didn't go on to college, they still regard you as a rather risky proposition - which means you'll probably be paying a very high interest rate. If you only pay the minimum due on a card with a high interest rate, it could take you several years to pay off even a modest amount of debt.
Take Advantage of Your Opportunities - But Use Your Credit Wisely
Believe it or not, it may be easier to get approved for credit while you're in college then after you get out - particularly if you don't start a professional job right away (or at all). The high interest rates you're asked to pay are just part of being a newcomer to the world of adult finance. But then again, if you always pay your credit card bills in full, interest rates will be irrelevant.
Regardless of all the cautionary tales, you should definitely open up at least one credit card account while in college to begin building a solid credit history. If you can show the credit card companies that you're responsible, you'll soon be paying much lower interest rates, and you'll be able to get that new car or house when the time is right. If you ignore or abuse your credit opportunities in college, it could be one of the worst mistakes of your life. You're an adult now - it's time to stand up, take responsibility, and enjoy your share of the American Dream. And it all begins with responsible use of credit!
Not a student? Forward this article to that special student in your life.
Mike "The eCreditCoach"
Zen Marketing LLC, 3155 East Patrick Lane, Suite 1, Las Vegas, NV 89120, USA
Imagine you had a credit card was a $500 limit, and in the run-up to Christmas, you nearly maxed out your card. Before taking that last shopping trip of the season, you went online to check your balance and saw that you had $19 of available credit. "No matter," you say to yourself, "I'll pay the balance in full when I get my Christmas bonus from the office." The only other charge you made was for a couple of mochachinos at the local coffee house, but two days later you were shocked to learn that you somehow went over your credit limit! Worse yet, your card company hit you with a $29 fee!
The Mochachino That Broke the Camel's Back
This can happen a lot easier than you might expect. In the above example, you may have recently "paid at the pump." Oftentimes a gas station charges your card only $1 at the point-of-purchase and applies the remainder of the charge to your card later that day (or the next day). Let's say you had $17 in gas that you forgot about. That would reduce your available credit to $3 ($19 - $17 + $1 for the refunding of the temporary charge). Then when you bought two $2.50 drinks, you pushed your balance to $502, exceeding your credit limit by $2, and receiving a whopping $29 fine. It happens all the time.
The real question should be, "Why do credit card companies let this happen?" After all, couldn't they just reject your card at the coffeehouse? The gas station reserves the funds on your card even before it charges them, so shouldn't you not be able to buy the coffee and go over your credit limit? It depends. Some people would find this embarrassing fate more horrible than the $29 over-limit fee, particularly if the second coffee was for a romantic interest or client. But the reality is that credit card companies exist in the world to make money. There's nothing wrong with that, but you need to be aware of the fees and expenses associated with your card and do your best to avoid them.
Tips for Avoiding Over-Limit Fees
1. Use a separate card for your gas purchases. Since "pay at the pump" can distort your true balance, it is wise to use one card exclusively for gas. This can be an actual gas card or just a regular card card that you designate as your own gas card. It might be okay to have some recurring charges (cable bill, subscription charges, etc.) also on the card, but don't use it to make "discretionary" purchases. If you have $200 of recurring charges on your card and you typically spend $80 a month on gas, this means you'll only need a card with a $300 limit. Then again, $500 would be better for a little cushion in case you spend more on gas - either because you take a trip or because gas prices to through the roof!
2. Check your balance on a daily basis. If you maximize the benefits of your credit cards by nearly maxing them out each month and then paying off the balance in full, then you need to spend a little more time making sure managing your cards. Check your balance online every day and look at the itemized charges. Sometimes charges don't show up right away, so be on the lookout for anything that's missing. And if you do use your card for gas, make sure you keep your gas receipts so you know how much you really spent when your statement still says "$1."
The Real Cost of Exceeding Your Limit
No one likes paying $29 extra for a couple of coffees, but the even greater cost of going over your credit limit is the damage it does to your credit. Many card companies begin charging you the maximum interest after just one overage - and not the card you went over on. An entirely unrelated company might also jack up your interest rate, even though you've always paid your bills on time with them, so do everything you can to avoid going over.
Credit cards are wonderful tools, but they come with serious responsibilities. You should be using a credit card to your advantage - whether that means getting an interest-free loan every month by paying your balance off in full, or just the simple security and satisfaction that having extra buying power at your fingertips can bring. But when you start paying $29 fees and higher interest, you are letting the powerful tool wield itself against you. Be a smart consumer, but also check the over-limit fees and practices of cards before you sign up for them. No one intends on exceeding their credit limit, but it does happen to most people, so be aware!
Stay safe.
Sincerely,
Mike "The eCredit Coach"
Zen Marketing LLC, 3155 East Patrick Lane, Suite 1, Las Vegas, NV 89120, USA
Credit Reports - What's On Them, and How to Check Yours
Businesses in the United States buy more than two billion credit reports every year. Since there are currently fewer than 300 million people in the country, this means that the average adult has his or her credit reports examined by someone about once every other month. And yet, only a small percentage of Americans have ever laid eyes on their own credit reports. Viewing your credit reports at least twice a year is a necessity in today's electronic age, and while it may not always be free, getting access to your credit reports is much easier and less expensive than it has been at almost any time in history.
What is a Credit Report?
There are three major credit bureaus in the United States. They are Equifax, Experian, and TransUnion. These three companies are competitors, and therefore they don't share information with one another. As a result, your Equifax credit report may be significantly different from your Experian credit report, and your TransUnion report may be different still. Sometimes this is a good thing - if only one of the credit agencies reports a bad history, for example. But more often than not, it's a headache, since at least one of your credit reports is bound to have some incorrect, negative information on it.
What's On Your Credit Report?
Although each of the three credit agencies record slightly different information, the following is a basic list of what you'll find on each of your credit reports: Your name and your spouse's name. Where you live, where you work, and where you used to live (and used to work). Your social security number, phone number, and birth date. A list of your credit accounts and when you've paid your bills - on time, late, late by more than 30 days, late by more than 60 days, etc. How much total credit you have available. Whether and to whom you've made an application for credit in the past six months. Which companies have requested and obtained your credit report. And finally, dreaded "public records" - bankruptcies, foreclosures, repossessions, court judgments, convictions, and tax liens.
How Long Does Information Stay On Your Credit Report?
Positive information stays on your credit report indefinitely, which is a good thing. Most negative information should be deleted after seven years, with the exception of certain types of bankruptcy, which can stay on your report for ten years. If one of your credit reports is missing positive information or contains negative information that's older than seven years, contact the appropriate credit bureau. Their website addresses are listed at the end of this article.
How To Obtain Copies of Your Credit Reports
Usually, you may have to pay for your credit reports. The fees that the credit bureaus can charge vary by state, but the maximum is $9.50. You can find out more information by visiting the individual sites of the three bureaus: equifax.com, experian.com, and transunion.com.
So go ahead and do it now! Find out what your score is, it could make or break your financial future.
Sincerely,
Mike "The eCredit Coach"
Zen Marketing LLC, 3155 East Patrick Lane, Suite 1, Las Vegas, NV 89120, USA
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The Credit Repair Equation
Although credit cards may be what land the most people in credit trouble, they're also the best tool for credit repair. If you find yourself faced with mounting debts and worsening credit, the most important things you can do are always paying your minimum credit card bills, and not exceeding your card's credit limit. If you allow your card to be cancelled or "charged off," you will have a very hard time getting credit in the future, which will make it even more difficult to restore your credit rating.
Or, if it's too late and you've already had your cards cancelled or charged off, you should apply for a card from a company that specializes in servicing clients with not-so-good credit. Even if the card's interest rate is exorbitant and there's a costly annual fee, it's worth it to have an open, active credit account. Otherwise, how are you ever going to rebuild your credit?
Rebuilding + Revamping = Repairing
But rebuilding your credit through the timely payment of your new bills is only half of the credit repair equation. There's also the matter of the items that are already listed on your credit reports. If you can get an item deleted from one of your credit reports, then to that credit bureau and all who use it, it's as if it never happened - the instance of not-so-good credit will have been expunged from your record. Surprisingly, it's easier to have this done than you might think.
Obtain and Review Your Credit Reports
First, you need to obtain your credit reports from the three major credit agencies - Equifax, Experian, and TransUnion. This can be accomplished by visiting their web sites (equifax.com, experian.com, and transunion.com), and paying the necessary fee. If you've been denied for credit, insurance, or employment in the past 60 days, you are entitled to free credit reports. Send documentation of your denial along with your credit report requests.
Once you have your reports in hand, scan for inaccurate information - negative, of course. If some untrue positive information somehow made its way on to one or more of your reports, you are under no legal obligation to identify it as being false. It's probably best to turn a blind eye. But as for the negative information, photocopy your reports and use a highlighter to indicate what you would like to be changed. Send a letter explaining how the information is false and include any corroborating documents that support your claims.
Once you've dealt with the inaccurate information, it's time to move on to the things you only wish were inaccurate. It's important to note that any negative information (excluding a bankruptcy) that's older than seven years old should not appear on your credit report. You have every right to request its removal, and the credit agency must comply.
Set Realistic Goals - And Make Them Concrete
But next you need to decide what you would like to have removed, and how realistic your chances are of having it deleted. If you declared bankruptcy last year, or you have an unpaid judgment against you, there's not much of a chance you'll succeed. But if you got divorced four years ago and your husband stopped making the car payments, which ultimately resulted in a repossession on your credit record, you just might get it expunged.
Other, minor debts aren't as difficult to have removed. For example, if you owe a credit card company $1,100 for a canceled card, you may be able to get them to remove the information from your report if you pay them in full. Normally charges like this go unpaid or end up being settled for pennies on the dollar, so if you have the ability to pay your debts in full (or close to it), you may be able to get your creditor to send letters to the credit bureaus saying that it was all a big misunderstanding.
The key is to evaluate your credit report and decide what can realistically be accomplished. Give yourself three achievable goals and go from there. And in the meantime, make sure you don't repeat the mistakes of your past. Keep two or three credit cards open and active and pay the bills in full and on time. It won't happen overnight, but by following these guidelines, your credit will be rebuilt, revamped, and restored. The sooner you get started, the sooner the process will be complete.
Best of luck in your important journey,
Mike "The eCreditCoach"
Zen Marketing LLC, 3155 East Patrick Lane, Suite 1, Las Vegas, NV 89120, USA