pay off your credit debt Archives | Ovation Credit Repair Services

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 Some of the second tier services though report outdated information since they have to pay for the data and retrieve it periodically from the primary agencies.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!

Windfall Management – Investing in Yourself

By | Debt, Save Money

If your boss offered you a $100 a month raise, would it make a difference in your life? Almost certainly, no matter what your current income level, an extra $100 per month would come in handy.

You don’t have to wait for your boss to offer you a raise to change your standard of living, and tax time gives you a chance to give yourself a raise.

If you have survived the tax season and the check really is in the mail – or more likely, headed by direct deposit to your account within a couple of weeks, think fast – how are you going to spend the money?

Do you have a list of things you’d like to buy? A big screen TV? A used car you’ve had your eye on?

When a windfall comes your way, the first thing you may think of doing is spending the money, but there’s something better you can do with the windfall that is almost like giving yourself $100 a month raise: pay off or pay down a credit card.

Why? Paying off a credit card with high interest rates not only immediately affects how much you’re spending each month on high interest minimum payments, but it also improves your credit rating, and when you improve your credit rating, the money you do have to borrow costs you less.

Consider trying to purchase a new car with a credit score hovering around 560. The car dealership can either laugh you out the door, or offer you a payment plan that includes a 7.5% or higher interest rate. With better credit, you could get a 2.9 – 3.5% interest rate. The difference? $1200 per year or more!

Raising your credit score is a slow process which means that you will have to wait to buy the things you want right now, but consider the things you’ll afford in the future, without going in to debt for them.

Rather than spend the tax refund money immediately, take some time to go through the pile of bills on your desk and make a note of the ones that have the highest interest. Pay as much as you can afford into the one with the highest interest rate, paying it off completely if you can.

One tax return or financial windfall can be enough to get you started on the path to debt freedom. Once there, you can reward yourself by using your free cash to buy that TV or a brand new car. Invest in yourself now, so you can actually enjoy your money later.

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