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Credit Laws

Will Your Credit Score Affect Potential Employment?

By | Consumer Rights, Credit Laws, Credit Scores, Your Credit

A small number of states prohibit the use of credit information by employers as a means for making hiring decisions. California is the most recent state to join those that restrict use of credit information for that purpose. Certainly, it makes sense that if you are applying to work in an institution that demands at least average accounting skills, your ability to demonstrate that you have good credit may be important.  However, if you are applying for a job in which money is not an object (other than earning it), your personal business should remain just that.  Fortunately, states in increasing numbers are seeing the wisdom of separating personal business from business business. Unfortunately, the reality is that the oversight does not exist to prevent employers from screening employees as they see fit.

In a 2009 discussion for National Public Radio, evidence is shown to support the claim that employers indeed use credit ratings to determine the trustworthiness of a candidate, as well as to judge the character of a person they consider qualified to work for them.  While you may consider this to be unfair, unethical, and in some instances illegal, as a potential candidate for any job, your goal is to present the best image possible. Right or wrong, if you want to present such an image, one way to do that is to ensure that your credit score is not considered less than acceptable.

Ovation offers numerous financial tools that can help you manage your payments, save you money, and improve your credit score. From the start, a common-sense approach to your finances will help you avoid a poor rating. Credit is a necessary evil in our society, but you can manage credit by using it regularly yet sparingly. Pay your bills on time, and pay more than your minimum balance. If you have multiple credit payments, pay towards the credit card with the highest balance and the highest interest rate. Do not over-extend your credit, and manage your spending habits. By taking these steps, you will be better able to manage your credit score, thereby putting yourself not only in control of your finances, but also in control of your professional future, regardless of where you want to be employed.

Ultimately, legislation may be drafted compelling employers to ignore your credit score.  Regardless, do not take that risk with your future. Your choice today to manage your credit rating responsibly will demonstrate that you are a professional regardless of the circumstances.

New Credit Card Standards – Not So Sweet

By | Credit Cards, Credit Laws, Credit Scores, Debt

You know how it is. You go on a diet –stick with it a few weeks, maybe months. Even lose weight. Then comes a birthday party, holiday, or stressful moment. Out goes the diet and on come the pounds. It’s the same with credit debt. Coming out of this recession, a lot of people were trying to reduce their dependency on credit cards and they were doing a really good job for quite a while. The recent trend is that people are relying on credit card debt again.

Credit card companies are now loosening their standards. They sweeten the deal to make it easy to accrue debt and then profit from unpaid balances. The total number of bank or credit cards issued jumped 27% in May compared to a year earlier, according to credit reporting bureau Equifax. From January and May, nearly 15 million new bank cards were issued — the highest level in three years.

Our position is that credit cards aren’t used to pay for ordinary living expenses unless the balance is paid off every month. We caution people not to use their credit card just because it’s available. Use it responsibly, preferably only for emergencies. We’ve talked about this in the past regarding cell phones, luxury items and other high end items. It’s important to be very sensitive to how much those items really cost if a credit card isn’t paid off each month. People are wasting $9.73 a day (or more depending on the payment plan) in interest payments. Americans actually added $18.4 billion to their debt load in the second quarter, a 66% increase from the debt they accumulated in the same quarter last year.

Tools like those offered by Ovation can help you understand exactly how much of that hamburger you just had to buy on the credit card is actually going to end up costing you. You can login and see how long you are carrying debt for a particular item; for example, if you’re just making minimum payments or paying a certain amount above the minimum each month. We believe these tools help our customers realize that credit cards are an expensive way to pay for something when you calculate the interest that accrues on top of the purchase price. It’s often better to wait until you can pay cash for the item.

If you find yourself falling back into unhealthy financial habits, tighten your belt again. Turn away from the sweet credit offers – like the calories in the cake you’re trying to give up, the interest will cost you more than you want in the end. By overcoming the temptation, your credit score will weigh in at a healthy level and you will have more money available to manage your budget successfully.

“No Reason” Is No Excuse

By | Credit Laws, Credit Repair, Credit Reports

Looking at your credit report is a bit like being in an episode of CSI. You’ll need to carefully pick apart the scene of the credit crime looking for the right clues. “No reason” really means “I don’t know” when it comes to credit score drops, and it usually takes nothing more than a little old-fashioned sleuthing to discover the no-reason reason.

The first step in your CSI Credit Crime adventure is to request copies of your credit report, which are available free to you once per year by law. The first crime you should eliminate is length of credit history. Not having enough of a credit history is an often hidden clue. In the industry this is called a thin credit file.

Have you closed a credit card lately? Recently closed accounts also provide a reason for “no reason” credit drops. Solve this credit crime by opening new accounts and being careful about what accounts you close in the future.

To get away with a credit crime or two, you need to know how to close accounts when you need to. As with all things in credit, there’s a right way and a wrong way. Keeping between four and six accounts open allows you to show companies you are using credit regularly and responsibly. Use one, pay it off in full every month and pay down on the rest. This is what creditors and credit-reporting bureaus want to see.

Don’t, however, close the oldest account you have. This is one of the most serious credit crimes you can commit. It makes your credit history appear shorter than it is and can cause your credit score to take a hit. Definitely don’t cancel several accounts all at once and don’t over-consolidate your cards so that you have too much debt in one place. Another reason your credit score can drop for “no reason” is when you use too much of a single available line of credit. Keep your credit balance below 30% of the total available credit.

Many no-reason credit crimes are committed unintentionally. While it’s often stated that your credit score takes a hit due to inquiries, this is largely overstated. You credit rating likely receives several inquiries per month from people wanting to issue you credit. These have a negligible effect on your credit. Even an inquiry into your credit rating from an employer or credit card application has a minor effect on your credit rating. Don’t spend too many crime scene investigation resources looking into inquiries.

When your credit score takes a dive for “no reason,” chances are it’s taken a dive for a reason – just not one you understand. Investigating your credit report with the attention of a CSI unit allows you to better appraise what “no reason” is the reason for your credit score’s recent dip so you can make the necessary repairs.

Don’t Get Hung Up On Your Credit Report

By | Ask a Credit Expert, Credit Cards, Credit Laws, Credit Reports, Credit Scores

Remember playing Hangman as a kid? There was a lot of guessing involved, and depending on who you played with, the rules of the game could change. Unfortunately, managing your credit can be a little like playing a game of Hangman – your opponent is not necessarily dishonest, but they sure don’t come out with all of the information without you working hard to make sure every letter is there.

On a credit report, the information each lender reports can change the way your credit looks. Say that you have three credit cards, all with the same balance, and all with the same credit limit of $5,000. One of those cards reports the amount of credit that you are using, $2,500 without mentioning your credit limit. Another only reports back 24 months worth of your payment records, despite your faithful payments and responsible spending for 10 years. And, the third one just does not bother reporting anything at all.

We all operate under the assumption that everything is reported to the credit agencies going back 7 years, but when each company can report – or not – what they want to, you’re left with an incomplete picture. Potential lenders evaluate your credit history, and also your debt to credit limit ratio, or utilization without all of the information they need to see all they need.

Fortunately, you do not have to leave your fate up to pencil and paper games. Instead, make sure that you understand how your creditors will be reporting your data, if at all, prior to opening up accounts with them. In addition, make sure that you take the time to pull your most up-to-date credit report from the three big credit reporting agencies.

Credit agencies offer free credit reports to reel in customers to expensive credit monitoring memberships. Don’t fall for it. By law, everyone in the U.S. is entitled to a free credit report every year from annualcreditreport.com. The information can be a little stale, and may not show the up-to-date information that you need, but it’s a place to start.

Or, for no more than $15 from each of the three major agencies, you can obtain the most up-to-date information. This also allows you to establish contact with each of the agencies, where you may pose questions, challenge information that appears on the reports, and dispute inaccurate information. The credit agencies are obligated to investigate and resolve issues and allow you to add comments to the report to explain the situation, so take advantage of becoming a more active participant in your credit profile.

Somebody’s Watching You…

By | Consumer Rights, Credit Laws, Credit Repair, Credit Reports, Credit Scores

No, we’re not reminiscing about the 80’s hit by Rockwell…this is more sinister. From hacking computer systems to trapping codes at ATM machines, identity theft is rampant and can have a devastating impact on your life. It can affect your ability to buy a car or a home, it can prevent you from getting a job, and there have been (albeit rare) cases of innocent people being arrested for crimes committed by an identity thief. Keeping a close eye on credit reports is an excellent way to detect fraudulent activity, and credit monitoring can be a helpful tool to do just that.

The three credit reporting agencies – TransUnion, Equifax, and Experian – are required by the federal government to provide an annual copy of your credit report at no charge. Go to AnnualCreditReport.com to order it and monitor your own credit by reviewing it carefully to ensure all information is accurate. Doing this once a year is the first step toward thwarting thieves.

The next step would be to hire a company to monitor the credit reports real time and inform you, probably via email, of any changes. Most notices would regard changes in account balances on credit cards or an inquiry for a line of credit at a retail store. In an identity theft scenario though, a thief might use your social security number, stolen while dumpster diving at a local bank, to apply for a new credit card. The timely credit monitoring service notification of this fraudulent application for credit could mean the difference between a small hassle and full-blown, financially crippling identity theft.

Sadly though, not all credit monitoring services are created equal. The ones managed by the three credit reporting agencies are typically pretty good, and the timeliness of the information is excellent – which is the most important element in the detection of fraud. Some of the second tier services though report outdated information since they have to pay for the data and retrieve it periodically from the primary agencies. Another potential problem with the second tier services is that they may offer a free credit report (mimicking the government-mandated service), but once the consumer accepts the free report, they are unwittingly enrolled in a potentially expensive service. What a sneaky and underhanded thing to do – it sure doesn’t make us want to trust them with our financial information.

The Federal Trade Commission (FTC) has a program called “Deter, Detect, Defend: Avoid ID Theft.” It is a good program, especially in its education about how to protect personal information (and thereby deter ID theft). Combine this with credit monitoring by a high quality provider and good financial decision-making, and we will stop letting the identity thieves bully us.

Don’t Fall Down the Rabbit Hole!

By | Budgeting, Credit Cards, Credit Laws, Credit Repair, Debt

Once upon a time (2008, to be exact), bankers were shrunken down into little white rabbits, wearing top hats, and sporting coat tails. These joyful little imps foisted one alluring 0% interest rate credit application after another in consumers’ faces, leading them down a financial rabbit hole. Consumers were giddy with dollar signs in their eyes, glowing from the purchase of their HDTV! And then one day, the magic money cards that they used to make such purchases stopped allowing such free spending. Consumers were tossed out of the rabbit hole.

This snapped many back to reality. Consumers could no longer afford the cable bill that gave their TV an even more special glow. They were at their credit limit, paying exorbitant interest rates, and barely capable of making minimum payments. Then, they lost their jobs. Since 2008, consumers have seen the credit card companies and banks not as happy rabbits spreading wealth and joy but as financial sorcerers who schemed to make them part easily with their money.

This whole credit crunch had one unexpectedly positive result (for consumers). It forced them to use credit cards in a more responsible manner, while paying down debts. Credit cards gasped (a bit) for breath, experiencing a drop in usage. Banks paused and stepped back, until they came up with their next scheme.

The financial sorcerers worked on the “responsible” credit card customers this time. Credit utilization beyond 30% negatively impacts a consumer’s credit report. Essentially, consumers are rewarded for having a lot of credit that is not being utilized. Customers with a $10,000 limit on a credit card should stop spending before they hit a $3,000 balance to stay under 30% given interest and fees.

If that wasn’t enough, in 2010, credit card companies diminished the credit limit for many of their customers to equal the actual debt they were carrying. So your $2,800 balance on your $10,000 card was suddenly maxed out. Overnight, these good customers, who were below 30% usage one day, over night were turned into customers worthy of outrageous interest rates. They were now at 100% utilization of their credit and were forced to endure an automatic review from the banks. The higher the debt to limit ratio, the higher the interest rates that banks can charge.

When your credit score is impacted this way, in many states it can impact your reasonable car insurance rates, and result in a consolation letter rather than a “You’re hired” email from potential employers. Insurance companies and employers are just two of the major players outside the credit industry who may look at your credit report.

By 2011, consumers gained ground, reducing credit card spending and their debt to limit ratios. They took into account how much that HDTV costs on credit versus cash. And the credit card companies realized they need their consumers to be more than just hanging on in order to make money.

They’re opening up the credit to consumers again. Fair warning – they aren’t doing this to be nice. They’re doing it banking on the hope that you will be tempted to use the credit they give you and once again fall down the rabbit hole of never ending minimum payments and high interest rates.

This is not an open invitation to dispel all your new fiscally healthy habits you have been grooming. Don’t be fooled again!

Keep Your Plastic Under Wraps

By | Credit Cards, Credit Laws, Credit Repair, Revolving Debt, Your Credit

Making a quick pit stop for gas. Hitting the drive-thru at McDonalds. Picking up toothpaste and deodorant from the store. These are just a few of the everyday purchases we make, and far too often we use credit cards to make them. These small charges add up over time. Before you know it, the balance on your card has gotten out of control and that $5 Hot-N-Ready pizza from Little Caesars ends up costing you much, much more.

So are credit cards altogether bad? Like most financial tools, their benefits and liabilities all depend on how you use them.

Most credit cards offer some type of rewards program. Rewards can be a nice perk, but don’t let them entice you into using your credit card to make purchases that are beyond your financial means. That $25 Amazon gift card might seem like a really sweet deal, but if you have to make $100 in purchases to get it, you aren’t exactly getting a great deal are you? So pay careful attention to your reward terms and requirements.

And, if you want to get the most mileage out of your credit, try to pay off the balance each month. Most cards have a 30-60 day grace period for purchases, which means that during this window you won’t be charged interest for the things you buy on credit. Most consumers carry balances for several months at a time, which means that they end up paying far more than the original cost of their purchases. With interest, that new $1200 high definition flat screen could end up costing you over $3000 by the time it’s paid off.

The best way to use your card is for small purchases for which you might otherwise carry cash. Use it at the pump, at the drug store, even at McDonalds if you want. But be sure to keep track of what you’re spending. And don’t forget to pay it off and the end of the month – if you’re charging more than you can afford to pay off each month, you are living beyond your means.

Paying off your credit card balance at the end of the month helps you build your credit score. It also gives  you the advantage of racking up those reward points without the drawback of having to pay interest on that Big Mac. It might be tasty, but is it really worth $15 or more to you for the privilege of getting to pay for it over time instead of up front?

Didn’t think so.

Fresh Start: Make Sure Your Credit Repair Efforts Count.

By | Credit Laws, Credit Repair, Credit Reports, Credit Scores, Fraud Protection, Save Money

Have you been turn down for a loan recently because your credit score is too low?  Don’t worry – it is very common.  It is also becoming very common for lenders to try to sell you on their own special credit repair programs.  Credit repair can be an extremely rewarding and beneficial experience if done the right way.  If you are seeking a fresh start and intend to embark on the credit repair journey, make sure your efforts count.

So how do you make sure that your credit repair efforts count?  For starters, be informed. If you do a little research, you will find many articles discussing credit repair.  You’ll see many articles that claim that you can do your own credit repair.  This is absolutely correct – you do not have to have assistance.  If you do a little more research, you’ll see that credit repair involves procedures that appear simple on the surface, but become more and more complex as the process unfolds.

Make sure your credit repair efforts count by only working with a professional that truly specializes in credit repair. How will you know?  Consider the following:

How long has the entity been offering credit repair services? It doesn’t matter how long an entity has been selling credit reports, or giving credit reports away for free, or making loans, it only matters how much experience the entity has when dealing with credit repair.   Ovation Credit Services has been addressing credit repair and credit report repair issues exclusively since 2004.  Ovation has extensive disputing experience – we have dealt with everything that you can imagine when it comes to credit reports and credit repair.

Does the entity have any expertise in credit repair? Claiming expertise is not enough.  Ovation Credit Services was founded by attorneys that understand the laws and regulations involved with credit repair.

Can you verify the credit repair services offered? Do a search on the company’s name on Google.   What do you see?  Can you find any information specifically addressing the credit repair services offered?  If you are considering spending money on credit repair services with a company that does not have a definitive and verifiable presence in regards to credit repair, save your money.  It is better spent paying towards debts.

Check the Better Business Bureau profile. If the company does not have a profile, has a poor rating, or does not list credit services and/or credit repair as a service offered, save your money.  Companies that offer synthetic secondary credit repair services as an alternative to their primary service rarely disclose these services to credible consumer protection type entities such as the Better Business Bureau.

If you are really looking for a fresh start, and you are considering hiring a credit repair company to assist you, be sure to hire a company that truly specializes in credit repair.  That is the best way to ensure that your credit repair efforts will truly count.

 

How Long Can Information Be Reported On Your Credit Reports?

By | Bankruptcy, Collections, Consumer Rights, Credit Cards, Credit Laws, Credit Repair, Credit Reports, Fair Credit Reporting Act, Your Credit

One of the first credit repair steps involves removing information that is outdated.  The problem is that many consumers cannot tell when information is outdated.   On the surface, it seems like a simple exercise – just compare some dates.  While that is correct, the more difficult part involves determining which dates to compare.  The answers are provided in The Fair Credit Reporting Act, section 605.  According to section 605, the following items may not be reported on your credit reports:

  1. Bankruptcy: Cases under title 11 [United States Code] or under the Bankruptcy Act that, from the date of entry of the order for relief or the date of adjudication, as the case may be, antedate the report by more than 10 years.
  2. Civil suits, civil judgments, and records of arrest:  Civil suits, civil judgments, and records of arrest that from date of entry, antedate the report by more than seven years or until the governing statute of limitations has expired, whichever is the longer period.
  3. Paid tax liens: Paid tax liens which, from date of payment, antedate the report by more than seven years.
  4. Collections and Chare Offs: Accounts placed for collection or charged to profit and loss which antedate the report by more than seven years.
  5. Other Adverse Items: Any other adverse item of information, other than records of convictions of crimes which antedates the report by more than seven years.

So What Are The Exceptions?

There are exceptions to these general rules.  Most of the exceptions are based upon the use of the report.  The general rules are not applicable in the case of any consumer credit report to be used in connection with the following:

  1. Credit transactions involving, or which may reasonably be expected to involve, a principal amount of $150,000 or more;
  2. Underwriting of life insurance involving, or which may reasonably be expected to involve, a face amount of $150,000 or more; or
  3. Employment of any individual at an annual salary which equals, or which may reasonably be expected to equal $75,000, or more.

If you have ever wondered why there are so many different credit scoring models, this is one of the primary reasons.  The information that is permitted to be included on the credit report can vary depending on what the credit report is being used for.

So When Does The Time Period Start?

In regards to bankruptcy, the 10 year period starts at the date of entry of the order for relief or the date of adjudication.   In regards to the other items, the 7 year period begins, with respect to any delinquent account that is placed for collection (internally or by referral to a third party, whichever is earlier), charged to profit and loss, or subjected to any similar action, upon the expiration of the 180-day period beginning on the date of the commencement of the delinquency which immediately preceded the collection activity, charge to profit and loss, or similar action.   Clear as mud, right?

So What Does This Mean?

In order to understand if items on your credit report are outdated, you need to understand how the dates are calculated.  Remember, you should review your credit reports frequently for errors and signs of identity theft.  It is not uncommon that dates are incorrect.  In fact, in the case of debt collection, errors in the proper dates are very common.  These errors may result in negative items being reported longer than necessary.  Check the dates on your reports and verify that the information is correct.  If you need help, give us a call – we would be happy to assist you.

 

Can An Employer Check Your Credit Reports?

By | Consumer Rights, Credit Laws, Credit Repair, Credit Reports, Credit Scores, Fair Credit Reporting Act, Your Credit

In most states, checking an employee’s credit report is considered a permissible purpose.  Employers check employee’s credit reports to assess the overall risk of the employee.  Employees with better credit reports are generally deemed to be more responsible and organized.  Whether or not you agree with this assessment, you need to be prepared.  If you are currently looking for a job, or your current employer decides to check your credit report, it is imperative that your credit report be as strong as possible.  This includes making sure that your credit report is accurate and also that you manage your credit accounts responsibly (Learn more about credit repair).

 Conditions for Furnishing and Using Consumer Reports for Employment Purposes: 

A consumer reporting agency may furnish a consumer report for employment purposes only if the employer who obtains such report from the agency certifies to the agency that the employer has complied with the disclosure requirements in the Fair credit Reporting Act with respect to the consumer report, and that the employer will comply with the conditions for adverse actions, if applicable, with respect to the consumer report.  The employer is not permitted to use information from the consumer report in violation of any applicable Federal or State equal employment opportunity law or regulation; and the consumer reporting agency must include a summary of the consumer’s rights with the report.

 The Consumer Must Provide Permission in Writing:

Generally, a person may not procure a consumer report, or cause a consumer report to be procured, for employment purposes with respect to any consumer, unless a clear and conspicuous disclosure has been made in writing to the consumer at any time before the report is procured or caused to be procured, in a document that consists solely of the disclosure, that a consumer report may be obtained for employment purposes.  The consumer must provide written authorization to the employer before the employer may procure the credit report.

What if Your Employer Takes an Adverse Action Against You Based on Your Credit Report?

Before taking any adverse action based in whole or in part on the report, the employer intending to take such adverse action must provide to the consumer to whom the report relates a copy of the report.  The employer must also provide a description in writing of the consumer’s rights under the Fair Credit Reporting Act.

Do Not Take Any Unnecessary Chances:

If you have not checked your credit report lately, you should.  Studies show that only about ten percent of consumers check their credit reports regularly.  Before you potentially lose an opportunity for a new job, or even possibly lose the current job you have, check your credit reports and take proactive steps to make sure that your credit reports are as strong as possible.

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