Bankruptcy & Foreclosures

In keeping with the holiday spending tips, I stumbled upon some interesting facts that I suspect you’ll find equally intruiging. Holiday shopping is increasingly becoming online shopping. We all know that it’s convenient and fast, but shopping online is often less expensive. According to a recent survey, a whopping 87.7 percent of us plan to buy some of our holiday purchases online this year.

In addition, the Webroot newsletter revelas that the percentage of total holiday shopping that individuals plan to do this year is on the rise. Of users surveyed, close to 40 percent indicate they plan to do more than half of their holiday shopping online this year, over a 10 percent increase compared to last year. Clearly, Internet shopping is the wave of the future and here to stay.

The article goes on to present some really helpful tips to consider if you fall into the vast majority of us who plan to shop online this year:

Shop from Reliable Retailers.

It’s wise to do business with companies you already know and trust. If the retailer is unfamiliar, look up information on the company with the Better Business Bureau or the Office of the State Attorney General in the state where the seller is located.

Use a Credit Card, Not a Debit Card Online.

Credit cards limit your liability for unauthorized charges to $50. You’re not assured this protection with a debit card.

Ask about Single Use Credit Cards.

Some credit card companies use a new technology that allows them to issue a single use credit card number for online purchases. With this number, you avoid having to use your real credit card number online, so security isn’t jeopardized.

Avoid Buying On Public Computers.

A hacker or thief can easily put a keylogger on a public computer that allows him or her to know everything you’ve typed — including your credit card numbers and passwords. Stay away from public access computers when shopping!

Don’t Save Your Credit Card Numbers Online.

Many reputable sites give you the option to save credit card numbers online to make future purchases easy. However, if the company’s database is ever successfully hacked, your information could be exposed. It’s safer to re-enter your numbers with each transaction.

The entire article can be read by clicking here.

In my last blog post, we took a look at the first five strategies for improving a person’s credit score as excerpted from Jason Rich’s excellent book Dirty Little Secrets: What the Credit Bureaus Won’t Tell You. In continuing with the strategies here are the next five (6-10).

Strategy 6: Correct Inaccuracies in Your Credit Reports, and Make Sure Old Information Is Removed.

One of the fastest and easiest ways to quickly give your credit score a boost is to carefully review all three of your credit reports and correct any erroneous or outdated information that’s listed. If you spot incorrect information, you can initiate a dispute and potentially have it corrected or removed within 10 to 30 days.

Strategy 7: Avoid Excess Inquiries.

Every time you apply for a credit card or any type of loan, a potential creditor will make an inquiry with one or more of the credit reporting agencies (Experian, Equifax or TransUnion). This inquiry information gets added to your credit report and will typically remain listed for two years. For one year, however, the inquiry will slightly reduce your credit score. If you have multiple inquiries in a short period of time, this can dramatically reduce your credit score.

Keep in mind, when shopping for a mortgage or car loan, it’s permissible to have multiple inquiries for the same purpose within a 30- to 45-day period, without those multiple inquiries hurting your credit score. In this situation, the multiple inquiries will be counted as one single inquiry.

Strategy 8: Avoid Bankruptcy, if Possible.

There are a lot of misconceptions about the pros and cons of filing for bankruptcy if you encounter serious financial problems. In terms of your credit report and credit score, filing for bankruptcy is one of the absolute worst things you can do. If your credit score hasn’t already plummeted as a result of late payments, missed payments, and defaults, when the bankruptcy is listed on your credit report, you will notice a large and immediate drop in your credit score. Furthermore, that bankruptcy will continue to plague your credit report for up to ten years.

Strategy 9: Avoid Consolidating Balances onto One Credit Card.

Unless you can save a fortune in interest charges by consolidating balances onto one credit card, this strategy should be avoided. One reason to avoid this is that maxing out your credit card will detract from your credit score, even if you make on-time payments. Assuming the interest rate calculations make sense, you’re better off distributing your debt over several low-interest credit cards. An alternative is to pay off high-interest credit card balances using another type of debt consolidation loan or by refinancing your mortgage with a cash-out option.

Strategy 10: Negotiate with Your Creditors.

Contrary to popular belief, your creditors aren’t your enemies (at least they don’t have to be). Your creditors are in business. The nature of business dictates that they earn a profit. When you don’t pay your bills, that impacts a creditor’s ability to do business and impacts its bottom line. Many creditors are willing to be understanding of difficult financial situations and short-term financial problems, especially if you openly communicate with them in a timely manner.

In other words, instead of skipping a handful of payments or defaulting on a loan, contact the creditor as soon as a problem arises and negotiate some form of resolution that’s acceptable and within your financial means. Forcing a creditor to turn your debt over to a collection agency will simply cause you bigger problems in the future because many collection agencies are relentless when it comes to recovering money. Furthermore, the negative information that’s placed on your credit report will have a long-term negative impact on your credit score.

In case you haven’t read Jason Rich’s excellent book Dirty Little Secrets: What the Credit Bureaus Won’t Tell You, the following excerpt is very useful information and an effective summary of the type of material presented. The actual book contains 10 strategies to improve your credit score. For the sake of space restraints, I’ll break down the strategies presented into two parts (1-5 below and 6-10 in my next blog post).

Strategy 1: Pay Your Bills on Time.

Although this strategy may seem extremely obvious, late payments are the most common piece of negative information that appears on peoples’ credit reports and are often responsible for significant drops in credit scores. When it comes to loans and credit cards, it’s vital that you always make at least the minimum payments in a timely manner each and every month, with no exceptions.

The impact on your credit report and credit score will be considerable if you’re late or skip one or more mortgage payments, however, making late payments on other types of loans or defaulting on any loans will also have a disastrous impact on your credit score that will have an impact for up to seven years.

Strategy 2: Keep Your Credit Card Balances Low.

The fact that you have credit cards impacts your credit score. Likewise, your payment history on those credit card accounts also impacts your score. Another factor that’s considered in the calculation of your credit score is your credit card balances. Having a balance that represents 35 percent or more of your overall available credit limit on each card will actually hurt you, even if you make all of your payments on-time and consistently pay more than the minimum due.

If you have a $1,000 credit limit on a credit card, ideally, you want to maintain a balance of less than $350, and make timely monthly payments on the balance that are above the required monthly minimums.

Strategy 3: Having a Good History Counts, So Don’t Close Unused Accounts.

One of the factors considered when calculating your credit score is the length of time you’ve had the credit established with each creditor. You’re rewarded for having a positive, long-term history with each creditor, even if the account is inactive or not used. The longer your positive credit history is with each creditor, the better.

Strategy 4: Only Apply for Credit When It’s Needed, Then Shop for the Best Rates on Loans and Credit Cards.

If you’re in the market for a bunch of new appliances or other big-ticket items, it’s common for consumers to walk into a retailer and be offered a discount and a good financing deal on a large purchase, if they open a charge or credit card account with that retailer. Before applying for that store’s credit card, read the fine print. Determine what your interest rate will be and what fees are associated with the card.

Strategy 5: Separate Your Accounts after a Divorce.

During a marriage, it’s common for a couple to obtain joint credit card accounts and co-sign for various types of loans. Coming into the marriage, the information on each person’s credit report and their credit score will eventually impact their spouse, especially when new joint accounts are opened or a spouse’s name is added to existing accounts. Consolidating all your accounts once married makes record-keeping easier. If a couple gets divorced, however, this can create a whole new set of credit-related challenges.

First, understand that just because you obtain a legal divorce, it does not release one or both people from their financial obligations when it comes to paying off a joint account. As long as both names appear on the account, both parties are responsible for it.

As your divorce proceedings move forward, be sure to pay off and close all joint accounts, or have one person’s name removed from each account, meaning only one person will remain responsible for it.