Monthly Archives: February 2012

Lets face it, you need credit cards in this day and age. You want to rent a car or place a reservation for a hotel? You’ll need a credit card. Cash is quickly becoming a dinosaur and some places refuse to even accept cash. So, if you don’t already have one, get one. But be careful! Credit can be a slippery slope if you aren’t paying attention to what you are doing, and if you aren’t paying attention to what they are doing. Having a credit card is a great responsibility. And if you are new to the credit game, then here are some common pitfalls that newbies can get into when getting new credit cards.

1.      Maxing out your available credit.   Just because your new credit card came with a $5,000 credit limit doesn’t mean you should go out and immediately max out the balance. This actually would be reported as a negative strike on you credit report. On the flip side, having a credit limit of $5,000.00 and not carrying a balance can also be reported negatively on your credit. For the most part you should probably carry a 15-25% balance on your available credit. Meaning, if you have a $5,000 credit limit, maintain a $750-$1000 balance on the card. This will help your overall score. If possible, charge up then payoff every month. Use the card for the necessary expenses such as food and gas, then pay if off at the end of each month.

 2.      Don’t apply for too much credit. This can easily be a trap. First, it’s too easy to exceed the balance that you can actually afford. This will make it very difficult to ever payoff, and before you know it, you are in over your head. Secondly, when creditors run credit reports to see if you are credit worthy, too much available credit is a bad thing. Especially when you got several cards over a small amount of time. Looks suspicious and creditors may shy away from you.

 3.      Do not close an account unless absolutely necessary. When someone is running your credit report, they are looking for several things. Credit-to-debt ratio’s are a big thing. If you close an account and leave open a credit card with a high balance, your ratio lowers and puts into a “risk” category. If you are treated rudely by your credit card or they put some charge onto your account that you do not feel you owe, it is very easy to act out in anger and close the account. A better method may be to payoff the card and leave it open. This keeps your credit-to-debt ratio higher and you are a better risk when applying for that car loan or whatever.

 4.      Check your credit report regularly !!!!  This is very…very important!. Don’t assume that just because you are carrying the right amount of credit-to-debt ratios and you make your payments on time each month, that your credit report is doing fine. It is very common that credit reporting agencies have incorrect or inaccurate information being reported. Wrong credit limits, inaccurate delinquent payments, or debt that might not even belong to you are some of the issues that may be destroying your credit. You may not know you are victim of ID theft until you run your credit report, or worse, when you are applying for that mortgage loan. There are lots of companies out there that offer “free” credit reports, but to get the report you must apply for some sort of credit monitoring service for a monthly fee. So be careful! By law, you are able to run your credit report for free, once every 12 months. is set up so that you can do just this. It gives you the option to run all three of your credit reports-Experian, Transunion and Equifax. You can run them all at once, or toggle them like I do. This way you can get a free report every four months. It is important to monitor your credit, and not find out when it’s too late, that there is a problem that needs to be fixed.

 5.      Check your credit card statements. This is common mistake but only takes a couple of minutes of your time to do. Check the charge history for the month. Make sure it’s correct. Sometimes, you can put an automatic payment onto a credit card and completely forget about it. Remember that gym membership you signed up for in January……three years ago? You haven’t been back since then but you have a payment of $35 per month going onto your credit card! Yikes!  Also, check for $1.00 purchases. This sometimes indicates that someone may have access to your account and is “testing” the waters to see if anyone is paying attention.

 6.      Beware the Cash Advance or Balance Transfers. Cash Advances and Balance Transfers may sound like a good idea at the time, but typically they come with higher interest rates or “one time” fees. Transferring a high interest credit card balance to a low interest card, on the surface, sounds like a good idea. After all, you are going to save a lot on the interest. But, most cards will charge a service fee for this between 5-7% of the balance. Which can sometimes end up costing you more. So do the math and make sure that you are, in reality, actually saving money. 

When it comes to credit, most of it is common sense. Never just assume that simply because the credit card company told you something, automatically makes it true. Do your research, do the math and use the cards carefully to avoid problems with the account in the future.

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I’ve never been one to say “I told you so” but…..okay maybe I am. I told you so. In a recent blog, I talked about the debt collectors and their “shady” collection methods. Well it appears as though the government may be tired of their shenanigans as well.

On Monday, the Federal Trade Commission levied the second largest fine in history against Asset Accpetance in the amount of $2.5 Million for violation of the Fair Trade Act. Apparently Asset Acceptance was……wait for it…….deceiving consumers when trying to collect old debts.  Shocking?  Not these days. Collection agencies will do anything in the hopes that you will send money their way, whether it is owed or not!

The Federal Trade Commission has begun an aggressive patrol of the collection industry. In the last two years they have pursued eight cases in relation to debt collection. “Our attention to debt collection has increased over the past couple of years because the complaints have been on the rise,” said J. Reilly Dolan, assistant director for the F.T.C.’s division of financial practices.

In 2010, over 140,000 complaints were filed against collection agencies! An increase of over 17 percent!

The charges against Asset Acceptance are varied, but include failure to tell consumers that they could no longer be sued for failing to pay some debts because the debts were too old. The Statute of Limitations – the time limit for creditors to collect a debt- can be reset for several reasons, including making a payment. So if a debt was about to expire, they would harass a payment out of a debtor just to extend the deadline. Naughty… naughty. Once the deadline was extended they were then free to sue a debtor for the balance.

The charges also included, inaccurate reporting of debts to credit reporting agencies and failure to conduct reasonable investigation when notified that the debt was disputed or verify that the debt was even valid.

Pursuant to the settlement with Asset Acceptance, they must now inform a consumer whose debt is too old to be collected that they will not sue. They must also investigate the validity of any debt they attempt to collect, and they are barred from putting debts on credit reports without first notifying the consumer.

Okay…so they had the second largest fine levied against them, so who, you ask, was the largest? Well, that honor goes to West Asset Management. In March 2010, they had to pay $2.8 million! The charges? Calling consumers multiple times a day, using rude language and attempting to collect on debts that were not even theirs. Sound familiar? My prior post mentioned a creditor threatening a small child! Good grief. How could that collector sleep at night?

Attempting to collect a debt is not necessarily a bad thing. The money is owed after all. But there must be some sort of professionalism and courtesy when doing it. It is nice to see big brother doing some good for a change and actually coming to the aid of the average citizen in a situation like this. In fact the Federal Trade Commission has recently stated that debt collection enforcement would remain a top priority. But you should still know your rights as a consumer. Do not take anything a collector has to say as gospel truth. Do not agree to anything, sign anything, or certainly make a payment on an old debt without first doing your research.

Some people may think that now that debt collector are being sanctioned for their bad behavior, perhaps they will stop being so aggressive. I believe that their thoughts is more of a “We need to make more revenue to make up for these fines”  The end result of all this may be that the collection agency will be more aggressive now then ever before.

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