It's an odd month - Have you checked your credit report?

I decided a few years ago that I was going to check my credit report regularly. Each person is allowed to check once per year with each of the three agencies, and rather than pull them all at once, I like to spread them out. Combined with my wife, we can pull a credit report every other month. So, if you pull reports in odd months (January, March, May, etc), you'll be following my plan.

While there is a commercial with a catchy tune and funny costumes, regardless what they say their credit report isn't free. You end up signing up for a service. Instead what you want to do is go to www.annualcreditreport.com. Once there, you'll fill in your state, then some basic information. One option I highly recommend specifies that on printed reports, only the last 4 digits of your social security number are printed. You may not print your reports (I do), but there's no sense printing on paper, on disk or even on the screen your full social any more than required.

Next you'll select one of the three agencies. This could cause some people some grief. "Which one do I pull first?" you might be saying. The answer is simple - any one you want. If you haven't pulled a report in the last year, my suggestion is to take the one at the top. If you've pulled that report, take the second on the list. The order may change, so don't count on it being the same next time, write down which report you pulled.

Once you've selected an agency, you'll be taken directly to that agency. Here you'll be asked some questions to verify that you really are you. You may be asked about old addresses, old accounts, details on your mortgage or recent credit changes. It might be best to have access to your records at this point, to know what your mortgage payment is, who your banker is and where you have accounts.

Once you get your credit report, you should review it carefully, If you find mistakes, you should call to find out details on the mistake. If you want the information corrected, don't settle for a call, write the owners of the account. My approach is to write to the owners first, then write to the credit agency if I don't get resolution. You could write to both at the same time.

I keep a copy of the credit report, at least until I pull another one from the same agency (a year later). You may decide not to keep a copy on paper, but I'd recommend keeping a copy on disk in that case.

Credit Card Bill

You may have heard that the congress has passed a new bill, changing the way credit cards work. Congress is working to protect consumers, who have been bearing the burdens of the companies (who else would bear the burden? See the bottom of this note). No matter that the Federal Reserve had already tightened a lot of the rules, congress wanted it's name on a bill.

The new law (to be signed soon) will make it harder for people under age 21 to get cards, and "it would also ban rate hikes unless a consumer is more than 60 days late -- and then restore the previous rate after six months if minimum payments are made." (According to CNN) There are other items reported to be in the bill, I found a good list at the Simple Dollar (this site). He even some predictions as to what might come about in the future. Some of bill's line items include restrictions on raising interest rates without a 45 day notice, putting a stop to double-cycle billing, which hit me back in April 2007 (see here). Teaser rates that last a couple of months would be gone for good.

So what do you think of this new bill? I'll share my opinion. I don't think much about it. And neither should you. Not that I think bad about it, just that I haven't wasted many brain cycles thinking about it.

I'm one of the freeloaders, the folks who charge using their credit card, then pay it off each month. I never (except in April 2007) get hit with interest rates, fees, etc. In fact, I get reward points which I trade in on free travel, so I'm making money off the cards (well, not much). I pay no annual fee and therefore, I'm getting a free ride. The credit card companies are making this money by charging fees on other people. They charge interest, late fees and annual fees.

So this sounds like a reverse "tax", much like the lottery (see my note here), a Robin Hood thing - take from the rich, give to the poor. So this legislation seems like a good idea, right?

Actually, I think it's not a good idea. First, there seems to be some hypocrisy here. We're telling credit card companies they've been bad corporate citizens, but we're not telling the consumers they've been bad. Isn't that a little one-sided. Additionally at a time when we're trying to encourage our banks and financial institutions to be cut their expenses and be more liquid, we are cutting one of their tools to increase their liquidity. If they can't make a profit "on the backs of the consumers," how will they make a profit? If they don't make a profit, they will go out of business and then who profits? Certainly not the consumer.

Many conservatives have been saying that a likely change will be increases in annual fees. People like me will suddenly see new fees where they had none before. The Simple Dollar (another reference) disagrees. No problem, I'll change cards or eliminate them all together.

You may say that it's fine for me to suggest I'll change or eliminate cards, what about those who can't afford to do that? They have a super high balance and bad credit and can't get new cards. My answer is simple, if you can't afford the stuff you bought, you shouldn't have bought it. Credit cards are nothing more than a way of deferring payment on something. If you can't afford it today, what makes you think you can afford it a month from now? Instead of paying $25 a month for that big LCD TV, why not save $25 a month and pay for it in cash?

One thing is certain, this new legislation will make credit cards less attractive. Those with poor credit are less likely to get cards, because the companies can't charge the exorbitant fees. And those who pay the cards off monthly are likely to see less benefits. In reality, this is probably a good thing. Which brings me back to the original statement. Why did congress do this? Most of the line items in this bill were already set to take effect next year due to the changes made by the Federal Reserve. So why all the ranting and raving? Because congress wanted to have their name beside something good.

Seems like much ado about nothing.

Free for only $12.95

This morning I saw a commercial on television for a Free Credit Score from Equifax and it piqued my curiosity. I follow my credit report with the real no-charge (I hate to say free) credit report at annualcreditreport.com, but you don't get a credit score. So logging on to equifax.com/freescore, I looked for the catch.

It turns out the score is free, but you pay $12.95 for the other stuff you get for free: Credit monitoring (which you can get for free at annualcreditreport.com),. unlimited Equifax reports (you only get 1 per credit union at annualcreditreport.com) and "An explanation of what your score means and how it compares to national averages."

Annualcreditreport.com gives you three truly free credit reports per year. You can space these out every four months and you will be up to date on your credit report pretty frequently. If you're married, your spouse can check his/her report every four months also. Space these separately and every two months one of you can check their credit report. I check ours in odd numbered months (getting ready for March).

Last year we received a notice from some strange company that they were collecting an old debt. We felt we didn't owe it, so we requested more information. After waiting almost 30 days (the limit the company had to respond), we received a notice asking for more information from us: driver's license, address history, etc. I checked and none of it was required, so I sent a new letter asking for the origin of the debt.

This second letter included a request that the company clean it off my record and reported that I was following the law. I also explained that if I did not get sufficient response, I would send the next letter to the Attorney General.

Within 30 days (barely), I received a letter that the debt was cancelled, my report was cleaned. I've checked a couple times, and nothing unexpected is on my credit report.

So here's the moral to the story: You should check your credit report frequently, but ONLY use the annualcreditreport.com site. It's really free (doesn't have a catchy song and commercial) and is accurate. You can do this three times a year per person and stay up to date.

subprime - a dirty word

I've blogged in the past about subprime lending, but what does it really mean? Is subprime a dirty word?



First, let me answer the last question. Subprime is not a dirty word. People who borrow money are classified as either "prime" or "subprime". Prime borrowers are ones who have a good credit history, pay all their credit on time and have used credit from time-to-time. The exact definition varies based on who does the defining. Subprime borrowers are ones who have a somewhat tarnished credit history.


Of course, foreclosure, legal judgements, reposessions, bankruptcies or charge-offs do massive damage to your credit history. Also late-payments hurt. Wikipedia says "two or more loan payments paid past 30 days due in the last 12 months, or one or more loan payments paid past 90 days due the last 36 months."

So two late payments or one very late payment means you are classified as "subprime".

So, if it's not a dirty word, what's the big deal? Well, depending on HOW subprime a person is, they may get worse terms on any credit. If you don't need credit, it's no big deal. But if you need/want credit, you may see higher fees, higher interest rates. The idea is that the lender needs these higher fees and rates to offset the higher risk. And of course, they wouldn't take this risk if they didn't think they could get a higher return.

But there are a large number of people who are "subprime" who aren't much "subprime". These people have a few late payments and maybe a few other problems with their credit. They may have trouble getting a loan, but it doesn't say anything about their value as a person.




If you want to read my previous posts click on "My take on sub-prime", "Citibank" or "Foreclosure relief"

I lied and committed ID theft

I confess. Tonight I committed ID theft and I lied.

A little over 2 months ago, I helped my wife apply for her free credit report. For some reason, it couldn't be sent online, so we asked for it to be mailed. Tonight I decided to find out what happened to it (it never arrived). So, rather than try to explain it to my wife and have her call, I called them myself and told them I was her. I also gave them her social.

The first person I spoke to passed me onto a second, so I went through the same scenario. This person at least questioned when I gave them my wife's name, but she went ahead and helped me anyway.

They're mailing the reports again. I lied. I confess.

(I told my wife all about it when she came in)