Taking control of Your Credit ! by SaltCay Enterprises Inc.
Taking control of your credit information is paramount in these economic times.
Recently I have heard of at lease six acquaintances that have been denied employment due to their credit reports. Federal law states under title 11 of the U.S. Code – employers are prohibited from discriminating against someone who has had a bankruptcy. However, most employers would just find another reason to deny you employment. Employers are supposed to tell you if/when credit information is being used to determine employment, promotion or continued employment.
I have been told of individuals in the financial services industry loosing their jobs because of an adverse credit report. I found this curious since the industry expects you to develop and maintain your business on an ever diminishing compensation package. Some have been denied security clearances because a bad credit score means they would be easy prey for bribery. Let’s say it – Your credit score is being used for more than just a car loan. It is the character reference you give to yourself. So wake up and take care of it like you would your own flesh and blood.
The reason I decided to write this article is simple. A friend happened to go window shopping for a car at a local dealer. Before she knew it she was caught up in the moment. The salesman said something to the effect “do you know how much financing you qualify for?” Of course she said no. Before she knew it she filled out a credit form and the dealer ran her credit with no less that 12 creditors. Generally this would not have been a problem except for the fact she was also going to contract to buy a new house. Of course her final mortgage rate was affected adversely. Had she had some sort of credit lock she could have avoided this. It affected her FICO score to the tune of 100 points lower. It took months for it to return to the excellent credit score she had before she went window shopping for a car. The lesson here is to do your homework. How much credit do you qualify for? How much can you comfortably pay back? With these two questions answered then go window shopping.
Before you shop have a conversation with the bank you do business with. Credit Unions are also a good place to establish credit and acquire low cost loans.
Did you know that by law you are entitled to a free credit report from each of the three major credit reporting agencies annually? The government sponsors a website www.annualcreditreport.com which allows you to look at all three credit agencies. The credit reporting agencies are Trans Union, Experian and Equifax. You will be able to check for all your open balances, adverse credit notes, closed accounts and who’s been looking into your credit.
By contacting each of these by US mail it’s possible to put a password on your information it to prevent anyone from looking at your credit. There is no charge for this. Just remember to call them and give permission when you’re ready to use it. You can also purchase a service that will provide all of the service mentioned here. Be sure to shop around. Not all services are the same and some are dreadfully weak and others might be overkill for your purposes.
These credit reporting agencies will give you all the addresses of who you need to contact should you find something adverse in your credit report. It turns out that they will probably have most all of the same information.
Now that you have your credit report in hand it would be a good idea to review whose credit cards you are carrying. It is said that most Americans have at least 10 credit cards. That’s a lot to worry about. It is a good idea to have a credit card protection plan. This is a service you pay for should you loose your credit cards. If this happens all you need to do is place one call and all the carriers are notified, the cards are canceled and new cards are dispatched to you.
There is a section in the credit report for your long term loans. Make sure that second mortgage has been paid off and was it properly recorded? Otherwise how would you know since the bank you refinanced your mortgage with did the payoff as a courtesy when you rolled up all your debt into that new mortgage!
I bet most people don’t know that some creditors do a soft credit check before they send you that advertisement saying that you have been “pre approved”. Yes they check thousands of individual credit reports and then sort the information into groups and solicit these groups with their so called specials. You can stop this by contacting each credit reporting agency and requesting an “opt out” for these purposes. The additional benefit is a drop off in junk mail from the creditors. It really is noticeable.
How about those checks from the credit card companies for the purposes of balance transfers? I can’t begin to tell you how annoying it is to receive these checks. The next time take a look at the terms. There is usually a minimum transfer fee and the intro rate does not last for the duration of the balance. It usually steps up to a costlier rate in a short period of time. Oh boy does it go up if you miss a payment! The only way I know to stop these checks from coming in the mail is to contact the credit card company themselves and complain. I have not had much success because the checks are “automatically” sent out. At one point I was receiving these checks on a weekly basis from the same credit card company. I complained and they were able to stop the frequency. The only way to stop them completely is to cancel the card. Be careful when canceling or closing your credit card accounts. Make sure it is noted that you are closing the card due to the terms and make sure your balances are zero for at least six months before canceling it.
I was surprised to learn that credit card companies extend credit to the same person giving them multiple credit card accounts. Take a look and make sure you don’t have multiple cards from the same carrier. I was successful in consolidating multiple accounts and transferring my credit limit to one account. I kept the card with the rewards I wish to earn, no annual fee, a somewhat increased credit limit and an interest rate I could live with.
This article is centric to a person with fair and good credit. And want to keep it that way. If you have found yourself in the position where your credit is damaged you have a long haul ahead of you. Find a reputable credit counseling agency and work with them to repair it. If you have not declared bankruptcy see if there is a way to avoid it and work with your creditors to repair your standing with them. Some folks are taking an option to pay a small portion of the debt and then the creditor writes off the balance. It is called many names but the one I have heard it referred to most is “credit forgiveness”.
Let me tell you now that these deals seldom help the consumer in the long run. You will be surprise to learn that they still note your credit report adversly. Another thing they might neglect to tell you or what is often missed or just plainly misunderstood is that when the creditor “writes off” a business debt the borrower inevitably suffers a taxable event. Every tax season I’m presented with the ominous 1099c; AKA the 1099 cancellation of debt. Generally this form requires the taxpayer to add the cancellation amount to their income. This is usually a surprise to the taxpayer and is never a good thing in a year they had to make such a deal. For example a client paid $1500 dollars to cancel a $14750 debt. The client received a form 1099c in the amount of $13250. The tax ramification causes the client to have a federal tax burden or an additional federal tax of $3200 because the $13250 was added into the taxpayer’s income. This pushed the taxpayer into another tax bracket. The additional $3200 tax was due to be paid by April 15th.
Before you agree to a cancellation of debt consider a request for a payment plan and a reduction in interest you are required to pay. I recommend wherever possible you take every option short of bankruptcy and cancellation of debt. In cases where you have no choice but to declare bankruptcy or cancellation of debt, consult your attorney and accountant to make sure you understand how to take action to put this behind you as quickly as possible. Understand how this might affect your job, job search, ability to get credit in the future and your purchasing power.
It is my wish that as consumers we take control of our own destinies. We are in an environment where upside down behaviors have made us slaves to usury. Credit is not your money; it is money for more money that you haven’t even earned yet. The job market is tight, salaries are down if not stagnant and it’s probably going to get worse before it gets better. I have always wondered about how long we can sustain an economy of consumption if jobs keep disappearing. How are we going to buy and keep the economy growing if we can’t earn the money to pay for the things that we need let alone what we want?
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