COMPLETE GUIDE TO
CREDIT AND CREDIT REPAIR
PRE-APPROVED CREDIT CARDS
Pre-approved cards are the result of one bank who now has you as a customer, and sells
your name to another bank or a series of banks so they can offer you their credit cards.
Here's how it usually works:
Many smaller banks want to be credit card issuers but, because of limited facilities for
credit card processing, it is sometimes difficult for a smaller bank to cash in on the credit
card boom. What's been developed is an interconnect system where large banks will
process credit card applications and issue the credit cards for the little banks.
For example, let's say that Mini Savings & Loan wants to get in on the Plastic Pursuit.
However, Mini does not have the facility or the staff to process credit card applications
and issue credit cards. What Mini has to do is contract the service with Maxi Bank.
Since Maxi has several banks that they provide this service to, Mini Savings & Loan is just
a welcome addition to their roster of client banks for whom they process and issue credit
cards.
When you apply for a credit card at Mini Savings & Loan, your application is actually
forwarded to Maxim Bank who runs a credit check and, granting you have good credit,
issues you your choice of VISA or MasterCard with Mini Savings & Loan's name on it.
However, since Maxi is the issuing bank and since it has your credit on their file, they can
very well send you an application for their own credit card. They can also sell your name
to their other client-banks who can offer you their credit cards on a pre-approved basis.
Another source that sells your name is the credit bureau. Because they can program their
computers to search for names of existing credit card holders with clean and healthy files,
they can provide issuing banks with a premium mailing list of people to whom the banks
can send pre-approved credit card applications.
Don't Use a Credit Repair Clinic
Here's what credit repair clinics claim to be able to do for you:
Remove incorrect information from your credit file. You can do that yourself under the
Fair Credit Reporting Act.
Remove correct, but negative, information from your credit file. Negative items in your
credit file can legally stay there for seven or ten years, as long as they are correct. No one
can wave a wand and make them go away. One tactic of credit repair services is to try and
take advantage of the law requiring credit bureaus to verify information if the customer
disputes it. Credit repair clinics do this by challenging every item in a credit file--negative,
positive or neutral--with the hope of overwhelming the credit bureau into removing
information without verifying it. Credit bureaus are aware of this tactic and often dismiss
these challenges on the ground that they are frivolous, a right credit bureaus have under
the Fair Credit Reporting Act. You are better off getting your file and selectively
challenging the outdated, incorrect and ambiguous items.
Even if the credit bureau removes information that a credit bureau had the right to include
in your file, it's no doubt only a temporary removal. Most correct information reappears
after a 30-60 days when the creditor that first reported the information to the credit
bureaus re-reports it.
Get outstanding debt balances and court judgments removed from your credit file. Credit
repair clinics often advise debtors to pay outstanding debts if the creditor agrees to
remove the negative information from your credit file. This is certainly a negotiation tactic
you want to consider, but you don't need to pay a credit repair clinic for this advice.
Get you a major credit card. Credit repair clinics can give you a list of banks that offer
secured credit cards. While this information is helpful in rebuilding credit, it's not worth
hundreds or thousands of dollars--you can find it out for little or nothing.
Many states regulate for-profit credit repair clinics, or even prohibit them from carrying on
business. Some dubious credit repair clinics have tried to get around these regulations by
setting themselves up as nonprofits, but still take your money and provide poor results.
Before using any organization that claims to be a nonprofit, carefully check the company's
fees, claims of what it can do and its reputation. Call the Better Business Bureau or ask
for the names of satisfied customers.
Here's what credit repair clinics claim to be able to do for you:
Remove incorrect information from your credit file. You can do that yourself under the
Fair Credit Reporting Act.
Remove correct, but negative, information from your credit file. Negative items in your
credit file can legally stay there for seven or ten years, as long as they are correct. No one
can wave a wand and make them go away. One tactic of credit repair services is to try and
take advantage of the law requiring credit bureaus to verify information if the customer
disputes it. Credit repair clinics do this by challenging every item in a credit file--negative,
positive or neutral--with the hope of overwhelming the credit bureau into removing
information without verifying it. Credit bureaus are aware of this tactic and often dismiss
these challenges on the ground that they are frivolous, a right credit bureaus have under
the Fair Credit Reporting Act. You are better off getting your file and selectively
challenging the outdated, incorrect and ambiguous items.
Even if the credit bureau removes information that a credit bureau had the right to include
in your file, it's no doubt only a temporary removal. Most correct information reappears
after a 30-60 days when the creditor that first reported the information to the credit
bureaus re-reports it.
Get outstanding debt balances and court judgments removed from your credit file. Credit
repair clinics often advise debtors to pay outstanding debts if the creditor agrees to
remove the negative information from your credit file. This is certainly a negotiation tactic
you want to consider, but you don't need to pay a credit repair clinic for this advice.
Get you a major credit card. Credit repair clinics can give you a list of banks that offer
secured credit cards. While this information is helpful in rebuilding credit, it's not worth
hundreds or thousands of dollars--you can find it out for little or nothing.
Many states regulate for-profit credit repair clinics, or even prohibit them from carrying on
business. Some dubious credit repair clinics have tried to get around these regulations by
setting themselves up as nonprofits, but still take your money and provide poor results.
Before using any organization that claims to be a nonprofit, carefully check the company's
fees, claims of what it can do and its reputation. Call the Better Business Bureau or ask
for the names of satisfied customers.
How To Dispute Credit Report Errors
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Facts For Consumers, How To Dispute Credit Report Errors
Federal Trade Commission
Your credit report contains important information about you. It
generally includes facts about where you work and live and your
bill-paying habits. It also may state whether you've been sued or
arrested or have filed for bankruptcy. Companies called credit
reporting agencies or credit bureaus compile and sell your credit report
to businesses, which use it to evaluate your applications for credit,
insurance, employment, and other purposes allowed by federal law.
Therefore, it is important that your credit report contain complete and
accurate information.
Some financial advisors suggest that you review your report every
three or four years to check for inaccuracies or omissions. You also
may want to check your report sooner if you are considering a major
purchase, such as buying a home.
This brochure explains how to obtain a copy of your credit report
and how to dispute errors. It also provides resources for additional
credit information.
HOW TO OBTAIN YOUR CREDIT REPORT
If you have been denied credit, insurance, or employment because of
information that was supplied by a credit reporting agency, the Fair
Credit Reporting Act requires the report recipient to give you the name
and address of the credit reporting agency that supplied the
information. If you contact that agency to learn what is in your file
within 30 days of receiving the denial notice, your report is free.
If you simply want a copy of your report, call the credit reporting
agencies listed in the Yellow Pages under "credit' or "credit rating and
reporting." Call each reporting agency listed since more than one
agency may have a file on you, some with different information. You may
have to pay a reasonable charge for each report.
HOW TO CORRECT ERRORS
You have the right, under the Fair Credit Reporting Act, to dispute
the completeness and accuracy of information in your credit file. When
a credit reporting agency receives a dispute, it must reinvestigate and
record the current status of the disputed items within a "reasonable
period of time," unless it believes the dispute is "frivolous or
irrelevant." If the credit reporting agency cannot verify a disputed
item, it must delete it. If your report contains erroneous information,
the credit reporting agency must correct it. If an item is incomplete,
the credit reporting agency must complete it. For example, if your file
showed that you were late in making payments on accounts, but failed to
show that you were no longer delinquent, the credit reporting agency
must show that your payments are now current. Or if your file showed an
account that belongs only to another person, the credit reporting agency
would have to delete it. Also, at your request, the credit reporting
agency must send a notice of correction to any report recipient who has
checked your file in the past six months.
If a reinvestigation does not resolve your dispute, the Fair Credit
Reporting Act permits you to file a statement of up to 100 words to
explain your side of the story. The credit reporting agency must
include this explanation in your report each time it sends it out.
Credit reporting agency employees often are available to help you word
your statement.
Be aware, however, that when negative information in your report is
accurate, only the passage of time can assure its removal. Credit
reporting agencies are permitted by law to report bankruptcies for 10
years and other negative information for 7 years. Also, any negative
information may be reported indefinitely for use in the evaluation of
your application for:
- $50,000 or more in credit;
- a life insurance policy with a face amount of $50,000 or more; or
- consideration for a job paying $20,000 or more.
HOW TO REGISTER A DISPUTE
You must make your dispute directly to the credit reporting agency.
Although the Fair Credit Reporting Act does not require it, the Federal
Trade Commission staff recommends that you submit your dispute in
writing, along with copies (NOT originals) of documents that support
your position.
In addition to providing your complete name and address, your
letter should clearly identify each item in your report you dispute,
explain why you dispute the information, state the facts, and request
deletion or correction. You may want to enclose a copy of your report
with the items in question circled.
Send your dispute by certified mail, return receipt requested, and
keep copies of your dispute letter and enclosures. By doing so, you can
document what the credit reporting agency received.
ADDING ACCOUNTS TO YOUR FILE
Your credit file may not reflect all of your credit accounts.
Although most national department store and all-purpose bank credit card
accounts will be included in your file, not all creditors supply
information to credit reporting agencies. Those not reporting to credit
reporting agencies include, for example, some travel, entertainment, and
gasoline card companies, local retailers, and credit unions.
If you have been told that you were denied credit because of an
"insufficient credit file" or "no credit file" and you have accounts
with creditors that do not appear in your credit file, you can ask the
credit reporting agency to add this information to future reports.
Although they are not required to do so, many credit reporting agencies
will add other verifiable accounts for a fee.
Solving Credit Problems
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Facts For Consumers, Solving Credit Problems
Federal Trade Commission * May 1992
(#F002472)
[Graphic Omitted]
Solving Credit
Problems
fast facts
* Your credit report records your payments on credit cards, installing
loans, and other credit accounts. It helps creditors predict whether
you are likely to be a good credit risk.
* Be wary of ads that promise you "instant credit" or "a major credit
card regardless of your lack of credit history or past credit record."
* If you are rejected for credit, find out why. You can get a free copy
of your report if you request it from the credit bureau that provided
it, within 30 days of being turned down.
* Check to see whether the information in your credit report is accurate
and complete. You are entitled by law to correct inaccurate
information that appears in your credit bureau file.
Bureau of Consumer Protection
Office of Consumer & Business Education
(202) 326-3650
If you are having problems getting credit or paying your monthly
bills, you may be tempted to turn to businesses that advertise quick and
easy solutions to credit problems. But do not be misled. There are no
instant solutions. Although some credit counseling businesses "guarantee
results or your money back," you may find that there are hidden strings
attached or that the company is gone when you want your money back.
There are steps you can take to help solve your credit problems.
However, solving them takes time, patience, and some understanding of
the law. This brochure may help you. It explains why your credit history
is important, how to build a credit history and establish credit, and
what can be done to improve a bad credit history. It also suggests ways
to help deal with debts you may have, possibly by using a nonprofit
Consumer Credit Counseling Service.
Why Your Credit History is Important
Although creditors usually consider a number of factors in deciding
whether to grant credit, most creditors rely heavily on your credit
history. To learn how you have handled credit in the past, most
creditors obtain a report from your local credit bureau. Credit bureaus
gather and sell credit information about consumers and are a principal
source of information about your credit history. Your credit bureau
report is based on information supplied over time by your creditors. It
also provides information on where you live and work and may note other
matters of public record such as judgments or bankruptcies. Your report
records payments you have made on credit cards, installment loans, and
other credit accounts and helps creditors predict whether you are likely
to be a good credit risk. A history of timely credit payments helps you
get additional credit.
Some creditors are reluctant to grant credit to consumers-who have
not established a "track record" with other creditors first. In
addition, many creditors will not extend credit to consumers with a
history of delinquent payments, repossession, judgments, or bankruptcy.
If you are in either situation, be wary of ads that promise you "instant
credit" or "a major credit card regardless of your lack of credit
history or your past credit record." The fact is that all legitimate
creditors want to know whether you are likely to be a good credit risk.
Whether you get credit will depend on whether your qualifications meet
the creditor's criteria. No one can guarantee you credit in advance.
How to Build A Credit History and Establish Credit
Building a good credit history is important. If you have no
reported credit history, it may take time to establish your first credit
account. This problem affects young people just beginning careers as
well as older people who have never used credit. It also affects
divorced or widowed women who shared credit accounts that were reported
only in the husband's name. If you do not know what is in your credit
file, check with your local credit bureaus. Most cities have two or
three credit bureaus, which are listed under "Credit" or "Credit
Reporting Agencies" in the Yellow Pages. For a small fee, they will tell
you what information is in your file and may give you a copy of your
credit report.
If you have had credit before under a different name or in a
different location and it is not reported in your file, ask the credit
bureau to include it. If you shared accounts with a former spouse, ask
the credit bureau to list these accounts under your name as well.
Although credit bureaus are not required to add new accounts to your
file, many will do so for a small fee. Finally, if you presently share
in the use of a credit account with your spouse, ask the creditor to
report it under both names.
Creditors are not required to report any account history
information to credit bureaus. If a creditor does report on an account,
however, and if both spouses are permitted to use the account or are
contractually liable for its repayment, under the Equal Credit
Opportunity Act you can require the creditor to report the information
under both names. When contacting your creditor or credit bureau, do so
in writing and include relevant information, such as account numbers, to
help speed the process. As with all important business communications,
keep a copy of what you send.
If you do not have a credit history, you should begin to build one.
If you have a steady income and have lived in the same area for at least
a year, try applying for credit with a local business, such as a
department store. Or you might borrow a small amount from your credit
union or the bank where you have checking and savings accounts. A local
bank or department store may approve your credit application even if you
do not meet the standards of larger creditors. Before you apply for
credit, ask whether the creditor reports credit history information to
credit bureaus serving your area. Most creditors do, but some do not. If
possible, you should try to get credit that will be reported. This
builds your credit history.
If you are rejected for credit, find out why. There may be reasons
other than lack of credit history. Your income may not meet the
creditor's minimum requirement or you may not have worked at your
current job long enough. Time may resolve such problems. You could wait
for a salary increase and then reapply, or simply apply to a different
creditor. However, it is best to wait at least 6 months before making
each new application. Credit bureaus record each inquiry about you. Some
creditors may deny your application if they think you are trying to open
too many new accounts too quickly.
If you still cannot get credit, you may wish to ask a person with
an established credit history to act as your co-signer. Because a
co-signer promises to pay if you don't, this can substantially improve
your chances of getting credit. Once you have repaid the debt, try again
to get credit on your own.
What Can Be Done to Improve a Bad Credit Report
You are entitled by law to correct any inaccurate information that
appears in your credit bureau file. If a creditor rejects your
application because of negative information in your credit bureau
report, it must identify the credit bureau involved. At your request,
the credit bureau must disclose the contents of your credit file. If you
act within 30 days of being turned down, there is no charge for this
service.
Check to see whether the information in your credit report is
accurate and complete. You have the fight, under the Fair Credit
Reporting Act, to dispute the completeness or accuracy of any
information in your report. When you do so, it helps to tell the credit
bureau, in writing, why you think the information is not correct. Unless
your dispute is frivolous or irrelevant, the credit bureau then must
reinvestigate the matter. The credit bureau must correct any information
that it finds is not reported accurately. Information that cannot be
verified must be deleted. If you disagree with the results of the credit
bureau's reinvestigation, you may file a brief dispute statement
explaining your side of the story. At your request, the credit bureau
will note your dispute in future credit bureau reports.
Be aware that when negative information in your report is accurate,
only the passage of time can assure its removal. Credit bureaus are
permitted by law to report bankruptcies for 10 years and other negative
information for 7 years. There is nothing that you (or anyone else) can
do to require a credit bureau to remove accurate information from your
credit file until the reporting period has expired. Don't be misled by
ads aimed at people with bad credit histories, judgments, or
bankruptcies. Promises to "repair" or "clean up" a bad credit history
can almost never be kept.
How to Deal with Your Debts
A sudden illness or the loss of your job may make it impossible for
you to pay your bills on time. Whatever your situation, if you find that
you cannot make your payments, contact your creditors at once. Try to
work out a modified payment plan with your creditors that reduces your
payments to a more manageable level. If you have paid promptly in the
past, they may be willing to work with you. Do not wait until your
account is turned over to a debt collector. At that point, the creditor
has given up on you.
Automobile loans present special problems. Most automobile
financing agreements permit your creditor to repossess your car any time
that you arc in default on your payments. No advance notice is required.
If your car is repossessed you may have to pay the full balance due on
the loan, as well as towing and storage costs, to get it back. Do not
wait until you are in default Try to solve the problem with your
creditor when you realize you will not be able to meet your payments. It
may be better to sell the car yourself and pay off your debt than to
incur the added costs of repossession.
How to Evaluate Credit Repair Companies
If you are having trouble paying your bills, you may be tempted to
turn to a company that claims to offer assistance in solving debt
problems. Such businesses may offer debt consolidation loans, debt
counseling, or debt reorganization plans that are "guaranteed" to stop
creditors' collection efforts. Before signing up with such a business,
investigate it thoroughly. Be sure you understand what services the
business provides and what they will cost you. Do not rely on oral
promises that do not appear in your contract. Also, check with the
Better Business Bureau and your local consumer protection office. They
may be able to tell you whether other consumers have registered
complains about the business.
Consumers who turn to such businesses for help sometimes encounter
additional problems. For example, debt consolidation or other large
short-term loans may have high hidden costs and may require your home as
collateral. An unscrupulous company may misrepresent the terms of such
loan agreements; if so, you could end up losing your home.
Businesses offering debt counseling or reorganization may charge
substantial fees or a percentage of your debts, but fail to follow
through on the services they sell. Some may do little more than refer
indebted consumers to a bankruptcy lawyer, who charges an additional
fee. Businesses advertising voluntary debt reorganization plans or
"Chapter 13" relief may fail to explain that Chapter 13 debt adjustment
actually is a form of bankruptcy. To qualify for it, you must have a
source of regular income and a plan for repaying your creditors that
meets the approval of the bankruptcy court. Businesses that sell
bankruptcy-related services may not tell you all that is involved or
assist you through what can be a complex and lengthy legal process. Debt
problems can be distressing, but be careful when selecting a solution.
Some "solutions" may only add to your problems.
Where to Find Low-Cost Help
If you need help in dealing with your debts, you may want to
contact a Consumer Credit Counseling Service (CCCS). This is a
non-profit organization with more than 850 offices located in 50 states.
CCCS counselors will try to arrange a repayment plan that is acceptable
to you and your creditors. They will also help you set up a realistic
budget and plan future expenses. These services are offered at little or
no charge to you. You can find the CCCS office nearest you by checking
the White Pages of your telephone directory or by calling from a
touch-tone phone 1-800-388-2227 to get the telephone number. However, if
you have other questions, contact:
National Foundation for Consumer Credit, Inc.
8611 Second Avenue, Suite 100
Silver Spring, Maryland 20910
(301) 589-5600
In addition, non-profit counseling programs are sometimes operated
by universities, military bases, credit unions, and housing authorities.
They are likely to charge little or nothing for their assistance. Or,
you can check with your local bank or consumer protection office to see
if it has a listing of reputable, low-cost financial counseling
services.
Where to Find More Information
The Federal Trade Commission enforces a number of federal laws
involving consumer credit, including the Equal Credit Opportunity Act,
the Fair Credit Reporting Act, the Truth in Lending Act, the Fair Credit
Billing Act, and the Fair Debt Collection Practices Act. It also
provides free brochures explaining these laws. For these or related
publications, such as Building a Better Credit Record, Women and Credit
Histories, and Credit Billing Blues, write to: Public Reference, Federal
Trade Commission, Washington, D.C. 20580.
Although the Commission cannot solve individual problems for
consumers, it can act when it sees a pattern of possible law violations
develop. If you have a complaint that may involve a violation of
consumer protection law, write to: Correspondence B ranch, Federal Trade
Commission, Washington, D.C. 20580.
What's the first step in rebuilding credit?
To avoid getting into financial problems in the future, you must understand your flow of
income and expenses. Some people call this making a budget. Others find the term budget
too restrictive and use the term spending plan. Whatever you call it, spend at least two
months writing down every expenditure. At each month's end, compare your total
expenses with your income. If you're overspending, you have to cut back or find more
income. As best you can, plan how you'll spend your money each month. If you have
trouble putting together your own budget, consider getting help from a nonprofit group
such as Consumer Credit Counseling Service, which provides budgeting help for free or at
a low cost.
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Okay, I've made my budget. What do I do next?
Now it's time to clean up your credit report. Credit reports are compiled by credit
bureaus--private, for-profit companies that gather information about your credit history
and sell it to banks, mortgage lenders, credit unions, credit card companies, department
stores, insurance companies, landlords and even a few employers.
Credit bureaus get most of their data from creditors. They also search court records for
lawsuits, judgments and bankruptcy filings. And they go through county records to find
recorded liens (legal claims).
To create a credit file for a given person, a credit bureau searches its computer files until it
finds entries that match the name, Social Security number and any other available
identifying information. All matches are gathered together to make the report.
Non-credit data made part of a credit report usually includes names you previously went
by, past and present addresses, Social Security number, employment history, marriages
and divorces. Your credit history includes the names of your creditors, type and number of
each account, when each account was opened, your payment history for the previous 24-
36 months, your credit limit or the original amount of a loan, and your current balance.
The report will show if an account has been turned over to a collection agency or is in
dispute.
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How can I get a copy of my credit report?
There are three major credit bureaus--Equifax, Trans Union and Experian (formerly
known as TRW). The federal Fair Credit Reporting Act (FCRA) entitles you to a copy of
your credit report, and you can get one for free if you've been denied credit because of
information in your credit report and you request a copy within 60 days of being denied
credit.
If you weren't denied credit, you'll have to pay about $8 to obtain a report from Equifax
(P.O. Box 740241, Atlanta, GA 30374), Trans Union (P.O. Box 390, Springfield, PA
19064) or Experian (P.O. Box 949, Allen, TX 75002-0949).
Send the following information:
•your full name (including generations such as Jr., Sr., III) •your birth date •your Social
Security number •your spouse's name (if applicable) •your telephone number, and •your
current address and addresses for the previous five years.
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What should I do if I find mistakes in my report?
As you read through your report, make a list of everything out-of-date:
•Lawsuits, paid tax liens, accounts sent out for collection, criminal records, late payments
and any other adverse information older than seven years. •Bankruptcies older than ten
years from the discharge or dismissal. (Credit bureaus often list Chapter 13 bankruptcies
for only seven years, but they can stay for ten.) •Credit inquiries (requests by companies
for a copy of your report) older than two years.
Next, look for incorrect or misleading information, such as:
•incorrect or incomplete name, address, phone number, Social Security number or
employment information •bankruptcies not identified by their specific chapter number
•accounts not yours or lawsuits in which you were not involved •incorrect account
histories--such as late payments when you paid on time •closed accounts listed as open--it
may look as if you have too much open credit, and •any account you closed that doesn't
say "closed by consumer."
After reviewing your report, complete the "request for reinvestigation" form the credit
bureau sent you or send a letter listing each incorrect item and explain exactly what is
wrong. Once the credit bureau receives your request, it must investigate the items you
dispute and contact you within 30 days. If you don't hear back within 30 days, send a
follow-up letter. If you let them know that you're trying to obtain a mortgage or car loan,
they can do a rush investigation.
If you are right, or if the creditor who provided the information can no longer verify it, the
credit bureau must remove the information from your report. Often credit bureaus will
remove an item on request without an investigation if rechecking the item is more bother
than it's worth.
If the credit bureau insists that the information is correct, call the bureau to discuss the
problem:
•Experian: 800-392-1122 •Trans Union: 800-851-2674 •Equifax: 800-685-1111
If you don't get anywhere with the credit bureau, directly contact the creditor and ask that
the information be removed. Write to the customer service department, vice president of
marketing and president or CEO. If the information was reported by a collection agency,
send the agency a copy of your letter, too.
If you feel a credit bureau is wrongfully including information in your report, or you want
to explain a particular entry, you have the right to put a 100-word statement in your
report. The credit bureau must give a copy of your statement--or a summary--to anyone
who requests your report. Be clear and concise; use the fewest words possible.
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What else can I do to rebuild my credit?
After you've cleaned up your credit report, the key to rebuilding credit is to get positive
information into your record. Here are two suggestions:
•If your credit report is missing accounts you pay on time, send the credit bureaus a recent
account statement and copies of canceled checks showing your payment history. Ask that
these be added to your report. The credit bureau doesn't have to, but often will. •Creditors
like to see evidence of stability, so if any of the following information is not in your report,
send it to the bureaus and ask that it be added: your current employment, your previous
employment (especially if you've been at your current job fewer than two years), your
current residence, your telephone number (especially if it's unlisted), your date of birth and
your checking account number. Again, the credit bureau doesn't have to add these, but
often will.
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I've been told that I need to use credit to rebuild my credit. Is this true?
Yes. The one type of positive information creditors like to see in credit reports is credit
payment history. If you have a credit card, use it every month. (Make small purchases and
pay them off to avoid interest charges.) If you don't have a credit card, apply for one. If
your application is rejected, try to find a cosigner or apply for a secured card--where you
deposit some money into a savings account and then get a credit card with a line of credit
around the amount you deposited.
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How long does it take to rebuild credit?
If you follow the steps outlined above, it will take about two years to rebuild your credit
so that you won't be turned down for a major credit card or loan. After around four years,
you may be able to qualify for a mortgage.
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More Information About Rebuilding Your Credit
The Federal Trade Commission, 6th & Pennsylvania Ave., NW, Washington, DC 20850,
202-326-2222, http://www.ftc.gov, publishes free pamphlets on debts and credit,
including Building a Better Credit Record, Cosigning a Loan, Fair Credit Reporting and
Fix Your Own Credit Problems and Save Money.
The Federal Deposit Insurance Corporation, 550 17th St., NW, Washington, DC 20429,
202-393-8400, http://www.fdic.gov, publishes free pamphlets about credit, including Fair
Credit Reporting Act.
Consumer Credit Counseling Service has more than 1,100 offices, and is located in every
state. Look in the phone book to find the one nearest you or contact the main office at
8611 2nd Avenue, Suite 100, Silver Spring, MD 20910, (800) 388-2227.
Obtaining a Mortgage if You've Had Poor Credit
Copyright (c) 1996 Nolo Press
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For many years, conventional mortgage lenders wrote only "A" loans. An "A" loan was
available to a person with flawless credit--someone who had paid every personal loan,
student loan, credit card bill and existing mortgage payment on time. Occasionally, a
person with a minor credit blip, such as a one-time late payment on an otherwise perfectly-
paid loan, would still qualify for an "A" loan. "A" loans typically require as little as 5% to
10% down and charge the most favorable interest rate. Anyone who didn't qualify for an
"A" loan had only two choices: forego buying a home for several years (until all the
negative marks came off the credit report, or borrow from a lender who required a huge
down payment (35% or more) and charged near-credit-card interest rates.
Many mortgage lenders now write "B" and "C" loans for people with somewhat marred
credit histories. ("D" loans, which require a very large down payment and charge very high
interest rates, are still written for people with very bad credit histories.) The following
describes "B," "C" and "D" loans:
•"B" loans. Some lenders require clean credit for the previous 12 months but allow a few
missed payments before that. Others permit one or two late mortgage payments, one late
personal or student loan payment and few late credit card payments during the previous
year. (Late payments cannot be more than 60 days late.) "B" loans usually require 20% to
25% down; interest rates are usually one or two percentage points higher than "A" loans.
•"C" loans. Some lenders require clean credit for the previous 12 months but allow a
serious credit problem, such as a bankruptcy or foreclosure, several years before. Others
permit three or four late mortgage payments, five or six late loan or credit card payments
or late payments more than 60 days past due during the previous year. "C" loans usually
require 20% to 35% down; interest rates are usually one or three percentage points higher
than "A" loans.
•"D" loans. "D" loans are available to people with the worst credit histories--bankruptcy
or foreclosure in the past year, or habitual late payments on loans and bills. "D" loans
usually require 35% to 60% down; interest rates are usually at least 100% higher than
what they are for "A" loans.
Limit the Number of Credit Cards You Carry
Once you succeed in getting a credit card, you might be hungry to apply for many more
cards. Not so fast. Having too much credit may have contributed your debt problems in
the first place. Ideally, you should carry one or two bank credit cards, maybe one
department store card and one gasoline card. Your inclination may be to charge everything
on your bankcard and not bother using a department store or gasoline card. When
creditors look in your credit file, however, they want to see that you can handle more than
one credit account at a time. You don't need to build up interest charges on these cards,
but use them and pay the bill in full.
Creditors frown on applicants who have a lot of open credit. So keeping many cards may
mean that you'll be turned down for other credit--perhaps credit you really need. And if
your credit applications are turned down, your file will contain inquiries from the
companies that rejected you. Your credit file will look like you were desperately trying to
get credit, something creditors never like to see.
Credit Bureau Myths
by Horizon Unlimited Group's Insider Reports
------------------------------------------------------------------------
According to Consumer Reports magazine, 48% of consumers have errors in their credit
files, many severe enough to result in credit denial!
Unfortunately, widely held credit bureau myths derail most consumers from ever even
trying to set their record straight. (Much less doing so correctly!)
------------------------------------------------------------------------
Myth: The information on a credit report cannot be changed.
Fact: Exactly the opposite is true. The Fair Credit Reporting Act requires that items be
removed if they are not fully 100% accurate OR can not be verified within 30 days. Also,
anything a creditor is responsible for reporting and confirming, a creditor can change.
------------------------------------------------------------------------
Myth: Requests (inquiries) for credit reports can't hurt them.
Fact: At the end of each report will be a log of inquiries. An inquiry notation is made each
time someone requests a copy of your credit file from that credit bureau. Any company
that receives a copy of your credit profile will be listed under this inquiry section of your
report.
Lenders don't like to see a lot of inquiries on a credit report. Excessive inquiries can result
in a credit denial as easily as bad credit. But, not all inquires are viewed negatively. Your
personal requests (inquiries) for a copy of your own credit report do not count against
you.
------------------------------------------------------------------------
Myth: When I pay off a delinquent account such as a charge-off or collection account, it
will stop hurting my credit, because it will then be shown as "paid."
Fact: As hard as it might be to believe, sometimes paying off a debt can actually hurt you.
This is one of those occasions. These type of collection accounts are allowed to stay on
your credit for a "maximum" of seven years. See Old Delinquent Accounts for warning
and explanation of how you can unwittingly restart this clock.
However, this does not mean that you never pay these debts. While discussing negotiating
with creditors covered in Chapter 4, you will read how to include in your negotiated
settlement a provision for how it is to be reported. To not do so can severely hurt your
chances of restoring your good credit.
------------------------------------------------------------------------
Myth: Credit reporting agencies are empowered with governmental authority.
Fact: Absolutely Not! Rather, they must adhere to the government authorities and laws
overseeing their operations. Credit bureaus are like any other business. They buy and sell
products and services to turn a profit. No special authority exists.
------------------------------------------------------------------------
Myth: Bankruptcy is a "Fresh Start."
Fact: Unfortunately, many attorneys don't clearly explain the devastating effects to one's
credit when filing bankruptcy. This goes for all types of bankruptcy including Chapter 13,
wage earner.
Bankruptcy is not a clean slate. Every account included in the bankruptcy will be so noted
in your credit file. Additionally, there will be a court record generated that will also be
added. Avoid bankruptcy if at all possible. The time table and the odds of completing
credit restoration are greatly extended due to the number of negative entries that are
associated with such filings.
------------------------------------------------------------------------
Myth: Some types of credit information (such as bankruptcies, judgments and
foreclosures) are impossible to remove.
Fact: Although it is true that some types of information can be more difficult than others
to remove, each of these negative entries have been removed thousands of times, using a
multitude of creative methods.
------------------------------------------------------------------------
Myth: Credit repair is too complicated to do myself. I would have to hire an attorney.
Fact: In some cases involving a stubborn situation, an attorney can be of great assistance.
An attorney can also help with clarifying the finer points of your state's laws. However,
you can accomplish most if not all of the legal and negotiation-based methods in this
report yourself by becoming familiar with your federally given rights and how to enforce
them, as well as other creative methods employed by consumers.
------------------------------------------------------------------------
Myth: It is illegal to have truthful information removed from your credit report.
Fact: Congress has already set the precedent by making special provisions for the removal
of correct information from individuals' credit files by fulfilling certain criteria. Congress
realizes that dangling that carrot in front of college students encourages repayment of
defaulted student loans. It should come as no surprise that creditors in other financial
markets are hip to this. Let's face it; congress had to get the idea from somewhere. Right?
If you need more proof, read section 609(c)(2)(E) of the NEW Fair Credit Reporting Act
that President Clinton signed in September of '96.
"...a consumer reporting agency is not required to remove accurate derogatory
information from a consumer's file, unless the information is outdated under section 605 or
cannot be verified."
Notice the wording above, "is not required to remove." It is very interesting that the law
does not say that accurate information "can not" be removed, but only that the credit
bureau is not required to. Now, there is law that says a creditor can not knowingly add
wrong information to someone's file, but the subject of removing accurate information is
mysteriously avoided. The truth is the FTC and the bureaus themselves spend a lot of
money trying to convince consumers otherwise. Why? Lobbyists and money of course! It
makes more work for the credit bureaus, thus increasing their labor costs. Bureaus save
millions of dollars a year by convincing consumers that the consumer is virtually
powerless. But congress worded things to leave the door open, and in at least one case
drafted law allowing for it, specifically.
Fortunately, creditors make their profits by collecting from their customers, not reporting
negative credit information. Many creditors though, have an agreement with the credit
bureaus that they will not allow a negative listing to be deleted upon settlement. Larger
creditors, such as huge credit card companies or banks will require more pressure before
they will agree to delete a negative listing, but many will give in with the right amount of
convincing. Every creditor who reports to the credit bureaus can also change the
information they report. In most credit organizations, there are several managers with the
authority to make changes on the credit report.
Bottom Line: Anything a creditor is responsible for reporting and confirming, a creditor
can change.
Credit Bureau Myths
by Horizon Unlimited Group's Insider Reports
------------------------------------------------------------------------
According to Consumer Reports magazine, 48% of consumers have errors in their credit
files, many severe enough to result in credit denial!
Unfortunately, widely held credit bureau myths derail most consumers from ever even
trying to set their record straight. (Much less doing so correctly!)
------------------------------------------------------------------------
Myth: The information on a credit report cannot be changed.
Fact: Exactly the opposite is true. The Fair Credit Reporting Act requires that items be
removed if they are not fully 100% accurate OR can not be verified within 30 days. Also,
anything a creditor is responsible for reporting and confirming, a creditor can change.
------------------------------------------------------------------------
Myth: Requests (inquiries) for credit reports can't hurt them.
Fact: At the end of each report will be a log of inquiries. An inquiry notation is made each
time someone requests a copy of your credit file from that credit bureau. Any company
that receives a copy of your credit profile will be listed under this inquiry section of your
report.
Lenders don't like to see a lot of inquiries on a credit report. Excessive inquiries can result
in a credit denial as easily as bad credit. But, not all inquires are viewed negatively. Your
personal requests (inquiries) for a copy of your own credit report do not count against
you.
------------------------------------------------------------------------
Myth: When I pay off a delinquent account such as a charge-off or collection account, it
will stop hurting my credit, because it will then be shown as "paid."
Fact: As hard as it might be to believe, sometimes paying off a debt can actually hurt you.
This is one of those occasions. These type of collection accounts are allowed to stay on
your credit for a "maximum" of seven years. See Old Delinquent Accounts for warning
and explanation of how you can unwittingly restart this clock.
However, this does not mean that you never pay these debts. While discussing negotiating
with creditors covered in Chapter 4, you will read how to include in your negotiated
settlement a provision for how it is to be reported. To not do so can severely hurt your
chances of restoring your good credit.
------------------------------------------------------------------------
Myth: Credit reporting agencies are empowered with governmental authority.
Fact: Absolutely Not! Rather, they must adhere to the government authorities and laws
overseeing their operations. Credit bureaus are like any other business. They buy and sell
products and services to turn a profit. No special authority exists.
------------------------------------------------------------------------
Myth: Bankruptcy is a "Fresh Start."
Fact: Unfortunately, many attorneys don't clearly explain the devastating effects to one's
credit when filing bankruptcy. This goes for all types of bankruptcy including Chapter 13,
wage earner.
Bankruptcy is not a clean slate. Every account included in the bankruptcy will be so noted
in your credit file. Additionally, there will be a court record generated that will also be
added. Avoid bankruptcy if at all possible. The time table and the odds of completing
credit restoration are greatly extended due to the number of negative entries that are
associated with such filings.
------------------------------------------------------------------------
Myth: Some types of credit information (such as bankruptcies, judgments and
foreclosures) are impossible to remove.
Fact: Although it is true that some types of information can be more difficult than others
to remove, each of these negative entries have been removed thousands of times, using a
multitude of creative methods.
------------------------------------------------------------------------
Myth: Credit repair is too complicated to do myself. I would have to hire an attorney.
Fact: In some cases involving a stubborn situation, an attorney can be of great assistance.
An attorney can also help with clarifying the finer points of your state's laws. However,
you can accomplish most if not all of the legal and negotiation-based methods in this
report yourself by becoming familiar with your federally given rights and how to enforce
them, as well as other creative methods employed by consumers.
------------------------------------------------------------------------
Myth: It is illegal to have truthful information removed from your credit report.
Fact: Congress has already set the precedent by making special provisions for the removal
of correct information from individuals' credit files by fulfilling certain criteria. Congress
realizes that dangling that carrot in front of college students encourages repayment of
defaulted student loans. It should come as no surprise that creditors in other financial
markets are hip to this. Let's face it; congress had to get the idea from somewhere. Right?
If you need more proof, read section 609(c)(2)(E) of the NEW Fair Credit Reporting Act
that President Clinton signed in September of '96.
"...a consumer reporting agency is not required to remove accurate derogatory
information from a consumer's file, unless the information is outdated under section 605 or
cannot be verified."
Notice the wording above, "is not required to remove." It is very interesting that the law
does not say that accurate information "can not" be removed, but only that the credit
bureau is not required to. Now, there is law that says a creditor can not knowingly add
wrong information to someone's file, but the subject of removing accurate information is
mysteriously avoided. The truth is the FTC and the bureaus themselves spend a lot of
money trying to convince consumers otherwise. Why? Lobbyists and money of course! It
makes more work for the credit bureaus, thus increasing their labor costs. Bureaus save
millions of dollars a year by convincing consumers that the consumer is virtually
powerless. But congress worded things to leave the door open, and in at least one case
drafted law allowing for it, specifically.
Fortunately, creditors make their profits by collecting from their customers, not reporting
negative credit information. Many creditors though, have an agreement with the credit
bureaus that they will not allow a negative listing to be deleted upon settlement. Larger
creditors, such as huge credit card companies or banks will require more pressure before
they will agree to delete a negative listing, but many will give in with the right amount of
convincing. Every creditor who reports to the credit bureaus can also change the
information they report. In most credit organizations, there are several managers with the
authority to make changes on the credit report.
Bottom Line: Anything a creditor is responsible for reporting and confirming, a creditor
can change.
Credit Repair--Introduction
------------------------------------------------------------------------
If you've gone through a financial crisis--a bankruptcy, repossession, foreclosure, history
of late payments or something similar--you may think that you'll never get credit again.
Not true. Although, in general, a bankruptcy filing can be reported on your credit record
for ten years, and all other negative information can be reported for seven, in about two
years you can probably rebuild your credit to the point that you won't be turned down for
a major credit card or loan. Even in the limited situations in which negative information
can be reported indefinitely, if you successfully rebuild your credit, creditors will ignore
old, negative information.
When reviewing a credit application by someone with poor credit, most creditors look for
steady employment, a recent history of making and paying for purchases on credit and
maintaining a checking and savings account since the financial setback. And many
creditors disregard a bankruptcy discharge, often thought of as the most devastating of all
financial setbacks, after about five years.
Facts For Consumers, Choosing and Using Credit Cards
------------------------------------------------------------------------
Facts For Consumers, Choosing and Using Credit Cards
Federal Trade Commission
* February 1993 (#F024062)
[Graphic Omitted]
Choosing and Using
Credit Cards
fast facts
* Shop around for credit card terms that are best for you
* Make sure you understand the terms of a credit card plan before you
accept the card.
* Pay bills promptly to keep finance charges as low as possible.
* Keep copies of sales slips and promptly compare charges when your
bills arrive.
* Draw a line through blank spaces above the total when you sign
receipts.
* Keep a list of your credit card account numbers and the telephone
numbers of each card issuer in a safe place in case your cards are
lost or stolen.
Bureau of Consumer Protection
Office of Consumer & Business Education
(202) 326-3650
Chances are you have received offers in the mail asking if you
would like to open credit card accounts. Frequently, these offers say
that you have been "pre-approved" for the card, with a line of credit
already set aside for your use. Typically, these offers urge you to
accept quickly, "before the offer expires." However, before accepting a
credit card offer, understand the card's credit terms and compare costs
of similar cards to get the features and terms you want.
Choosing a Credit Card
Credit card offers may seem attractive, but remember a credit card
is a form of borrowing that usually involves a "finance charge" -- a
charge for the convenience of borrowing -- and often other charges as
well.
Credit Card Terms
Before selecting a credit card, learn which credit terms and
conditions apply. Each affects the overall cost of the credit you will
be using. Under the Fair Credit and Charge Card Disclosure Act, you can
compare terms and fees before you agree to open a credit card or charge
card (no interest) account. Be sure to consider and compare the
following terms that direct-mail applications and pre-approved
solicitations must reveal.
Annual Percentage Rate. The "annual percentage rate," or APR, is
disclosed to you when you apply for a card, again when you open the
account, and it is also noted on each bill you receive. It is a measure
of the cost of credit, expressed as a yearly rate. The card issuer also
must disclose the "periodic rate" -- that is, the rate the card issuer
applies to your outstanding account balance to figure the finance charge
for each billing period.
Some credit card plans allow the card issuer to change the annual
percentage rate on your account when interest rates or other economic
indicators (called indexes) change. Because the rate change is linked to
the performance of the index, which may rise or fall, these plans are
commonly called "variable rate" plans. Rate changes raise or lower the
amount of the finance charge you pay on your account. If the credit card
you are considering has a variable rate feature, the card issuer must
tell you that the rate may vary and how the rate is determined,
including which index is used and what additional amount (the "margin")
is added to the index to determine your new rate. You also must be told
how much and how often your rate may change.
Free Period. A free period -- also called a "grace period" --
allows you to avoid the finance charge by paying your current balance in
full before the "due date" shown on your statement. Knowing whether a
credit card plan gives you a free period is especially important if you
plan to pay your account in full each month. If there is no free period,
the card issuer will impose a finance charge from the date you use your
credit card or from the date each credit card transaction is posted to
your account. If your credit card plan allows a free period, the card
issuer must mail your bill at least 14 days before your payment is due.
This is to ensure that you have enough time to make your payment by the
due date.
Annual Fees. Most credit card issuers charge annual membership or
other participation fees. These fees range from $25 to $50 for most
cards, and from $75 on up for premium "gold" or "platinum" cards.
Transaction Fees and Other Charges. A credit card also may involve
other types of costs. For example, some card issuers charge a fee when
you use the card to obtain a cash advance, when you fail to make a
payment on time, or when you go over your credit limit. Some charge a
flat monthly fee whether or not you use the card.
Balance Computation Method for the Finance Charge. If your plan has
no free period, or if you expect to pay for purchases over time, it is
important to know how the card issuer will calculate your finance
charge. This charge will vary depending upon the method the card issuer
uses to figure your balance. The method used can make a difference,
sometimes a big difference, in how much finance charge you will pay --
even when the APR is identical to that charged by another card issuer
and the pattern of purchases and payments is the same. Examples of how
finance charges based on identical APRs can differ are shown on page 4.
Some of the ways card issuers figure balances for finance charges
are described on pages 4 and 5.
Average Daily Balance (including or excluding new purchases). The
average daily balance method gives you credit for your payment from the
day the card issuer receives it. To compute the balance due, the card
issuer totals the beginning balance for each day in the billing period
and deducts any payments credited to your account that day. New
purchases may or may not be added to the balance, depending on the plan,
but cash advances typically are added. The resulting daily balances are
added up for the billing cycle and the total is then divided by the
number of days in the billing period to arrive at the "average daily
balance." This is the most common method used by credit card issuers.
Adjusted Balance. This balance is computed by subtracting the
payments you made and any credits you received during the present
billing period from the balance you owed at the end of the previous
billing period. New purchases that you made during the billing period
are not included. Under the adjusted balance method, you have until the
end of the billing cycle to pay part of your balance and you avoid the
interest charges on that portion. Some creditors exclude prior, unpaid
finance charges from the previous balance. The adjusted balance method
usually is the most advantageous to card users.
Previous Balance. As the name suggests, this balance is simply the
amount that you owed at the end of the previous billing period.
Payments, credits, or new purchases made during the current billing
period are not taken into account. Some creditors also exclude unpaid
finance charges in computing this balance. If you do not understand how
the balance on your account is computed, ask the card issuer. (An
explanation of how the balance was determined must appear on the billing
statements the card issuer provides you and on applications and
pre-approved solicitations the card issuer may send you.)
The following are examples of how different methods of calculating
finance charges affect the cost of credit:
Average Daily Average Daily
Balance Balance
(including new (excluding new
purchases) purchases)
Monthly rate 1 1/2% 1 1/2%
APR 18% 18%
Previous
Balance $400 $400
New $50 $50
Purchases on 18th day on 18th day
Payments $300 $300
on 15th day on 15th day
(new balance = $100) (new balance = $100)
Average
Daily Balance $270 * $250 **
Finance $4.05 $3.75
Charge (1 1/2% x $270) (1 1/2% x $250)
* To figure average daily balance (including new purchases):
($400 x 15 days) + ($100 x 3 days) + ($150x 12 days)
----------------------------------------------------
30 days = $270
** To figure average daily balance (excluding new purchases):
($400 x 15 days) + ($100 x 15 days)
-----------------------------------
30 days = $250
Adjusted Balance Previous Balance
Monthly rate 1 1/2% 1 1/2%
APR 18% 18%
Previous
Balance $400 $400
Payments $300 $300
Average
Daily Balance N/A N/A
Finance $1.50 $6.00
Charge (1 1/2% x $100) (1 1/2% x $400)
Costs and Features
Credit terms differ among card issuers, so shop around for the card
that is best for you. Which one is best may depend on how you plan to
use it. If you plan to pay bills in full each month, the size of the
annual fee or other fees, and not the periodic and annual percentage
rate, may be more important If you expect to use credit cards to pay for
purchases over time, the APR and the balance computation method are
important terms to consider. In either case, keep in mind that your
costs will be affected by whether or not there is a grace period.
When shopping for a credit card, you probably will want to look at
other factors besides costs- such as whether the credit limit is high
enough to meet your needs, how widely the card is accepted, and what
services and features are available under the plan. You may be
interested, for example, in "affinity cards" -- all-purpose credit cards
that are sponsored by professional organizations, college alumni
associations, and some members of the travel industry. Frequently, an
affinity card issuer donates a portion of the annual fees or transaction
charges to the sponsoring organization, or allows you to qualify for
free travel or other bonuses.
Using a Credit Card
Federal law prohibits card issuers from sending you a credit card
that you did not request. (The issuer may send you a renewal or
substitute card without a request.) Card issuers are permitted to mail
you an application or a solicitation for a credit card or to ask you by
phone whether you want to receive a card -- and to send you one if you
say yes.
Credit Card Protections
Federal law protects consumers when they use credit cards. The
protections include the following items.
Prompt Credit for Payment. A card issuer must credit your account
on the day the issuer receives your payment, unless the payment is not
made according to the creditor's requirements or the delay in crediting
to your account does not result in a charge. To avoid delays that could
result in finance charges, follow the card issuer's instructions about
where to send payments. Payments sent to other locations could delay
getting credit for your payment for up to five days. If you lose your
payment envelope, look on the billing statement for the address for
payments or call the card issuer.
Refunds of Credit Balances. When you return merchandise or pay more
than you owe, you have the option of keeping the credit balance on your
account or requesting a refund (if the amount exceeds $1.00). To obtain
a refund, write the card issuer. The card issuer must send you the
refund within seven business days of receiving your request. (Also, if a
credit balance remains on your account for more than six months, the
card issuer must make a good faith effort to refund the credit balance.)
Errors on Your Bill. Federal law provides specific rules that the
card issuer must follow for promptly correcting billing errors. The card
issuer will give you a statement describing these rules when you open
the credit card account and, after that, at least once a year. In fact,
many card issuers print a summary of your rights on each bill they send
you.
You must notify the card issuer in writing at the address specified
for billing errors when you find an error, and you must do so within 60
days after the first bill containing the error was mailed to you. (For
this reason, keep your credit card receipts and promptly compare them
when your bills arrive.) In your notification letter, include your name,
your account number, the amount of the suspected error, and the reason
why you believe that the bill contains an error. The card issuer, in
turn, must look into the problem and either correct the error or explain
to you why the bill is correct. This must occur within two billing
cycles and not later than 90 days after the issuer receives your billing
error notice. During the period that the card issuer is investigating
the error, you do not have to pay the amount in question. (For further
information, write: "Credit Billing Errors," Public Reference, Federal
Trade Commission, Washington, D.C. 20580.)
Unauthorized charges. Under federal law, if your credit card is
used without your authorization, you can be held liable for up to $50
per card. If you report the loss before the card is used, federal law
says the card issuer cannot hold you responsible for any unauthorized
charges. If a thief uses your card before you report it missing, the
most you will owe for unauthorized charges is $50. This is true even if
a thief is able to use your credit card at an automated teller machine
(ATM) to access your credit card account. To minimize your liability,
report the loss of your card as soon as possible. Some companies have
toll-free numbers printed on their statements and 24-hour service to
accept such emergency information. For your own protection, you should
follow up your phone call with a letter to the card issuer. The letter
should give your card number, say when your card was missing, and
mention the date you called in the loss.
Disputes about Merchandise or Services. If you have a problem with
merchandise or services that you charged to a credit card, and you have
made a good faith effort to work out the problem with the seller, you
have the right to withhold from the card issuer payment for the
merchandise or services. You can withhold payment up to the amount of
credit outstanding for the purchase, plus any finance or related
charges. If the card you used is a bank card, a travel and entertainment
card, or another card not issued by the seller of the defective
merchandise, you can withhold payment only if the purchase exceeded $50
and occurred in your home state or within 100 miles of your billing
address. If these conditions do not apply to you, you may want to
consider filing an action in small claims court -- an informal legal
proceeding that can be used to settle disputes. While the maximum
amounts that can be claimed or awarded differ from state to state, most
small claims courts hear cases involving amounts ranging from $25 to
$2,000. Some states have recently raised their limits to $5,000. Check
your local telephone book under your municipal, county, or state
government headings for small claims court listings.
Some Suggestions
* Shop around for credit card terms that are best for you.
* Make sure you understand the terms of a credit card plan before you
accept the card. Review the disclosures of terms and fees that must
appear on credit-card offers you receive in the mail.
* Pay bills promptly to keep finance charges as low as possible.
* Keep copies of sales slips and promptly compare charges when your
bills arrive.
* Protect your credit cards and account numbers to prevent
unauthorized use. Draw a line through blank spaces above the total
when you sign receipts. Rip up or retain carbons.
* Keep a list of your credit card numbers and the telephone numbers
of each card issuer in a safe place in case your cards are lost or
stolen.
Where To Go For Help
The following federal agencies are responsible for enforcing
federal laws that govern credit card transactions. Questions concerning
a particular card issuer should be directed to the enforcement agency
responsible for that issuer.
State Member Banks of the Reserve System
Consumer and Community Affairs
Board of Governors of the Federal Reserve System
20th & C Sts., N.W.
Washington, D.C. 20551
National Banks
Comptroller of the Currency
Compliance Management
Mail Stop 7-5
Washington, D.C. 20219
Federal Credit Unions
National Credit Union Administration
1776 G St., N.W.
Washington, D.C. 20456
Non-Member Federally Insured Banks
Office of Consumer Programs
Federal Deposit Insurance Corporation
550 Seventeenth St., N.W.
Washington, D.C. 20429
Federally Insured Savings and Loans,
and Federally Chartered State Banks
Consumer Affairs Program
Office of Thrift Supervision
1700 G St., N.W.
Washington, D.C. 20552
Other Credit Card Issuers
(includes retail/gasoline companies)
Division of Credit Practices
Bureau of Consumer Protection
Federal Trade Commission
Washington, D.C. 20580
IMPROVING YOUR CREDIT BY PAYING BILLS LATER!
------------------------------------------------------------------------
Every business will get to the point where suppliers will offer terms on bills, rather than
requiring payment up front or on delivery. Their bills will probably be marked "2/10, net
30." This means you get a 2% discount if you pay within 10 days, and the bill is due within
30 days.
Many business owners will jump at the opportunity to save the 2% by paying early, and
rightfully so. However, believe it or not, they can help their credit rating by paying at the
end of 30 days.
How is this so? It's all a matter of your business' CREDIT HISTORY. All of the
companies who offer you terms will be reporting your history to various credit bureaus.
These bureaus are who gets consulted by banks when they decide whether or not to give
you a loan.
By always taking advantage of the 2% discount, a business establishes a paying pattern.
Thus, if you've been paying a company's bills in 5 days for the past year, this is what they
will expect from forthcoming bills. Now, say one month has a tighter cash flow than
normal, and you must take 20 days to pay that bill. This sends up a red flag for the billing
company.
You normally pay in 5 days, why are you now paying in 20? Even though you paid the bill
well within the deadline, you have given a sign that you had a cash flow problem. This
uneven paying pattern can show up on your credit rating. Even though all your bills are
paid on time, an uneven paying pattern can jeopardize your future chances for more and
larger credit limits.
Now, if you always pay your bills on the 25th day of the due period, even when you can
pay them early, that cash poor month won't look any different to the billing company.
Most companies would rather grant terms to a company that always pays on the 25th day,
than one that sometimes pays early, sometimes pays later, as this reflects an image of
disorganization and uneven cash flow.
Also, always paying toward the end of the due period will aid your cash flow. If you pay
your bills consistently, at the same time every month, you will not be surprised by a
sudden cash shortage. For example, say you decide to pay a bill early one month. Then,
the next week, your main supplier calls to tell you about a closeout deal he has that would
double your profits.
Only problem is he can't offer terms, it has to be cash. Because you paid that bill early, you
can't take advantage of the special deal. If you would have waited to pay it, your cash flow
would have allowed the purchase, and the resulting higher profit margin would have
yielded the cash to pay the bill.
So, you see, paying bills later, and not taking advantage of any early payment discounts,
CAN work to your advantage. You need to consider your future plans and decide if
saving 2% now is really worth it.
Consumer Handbook to Credit Protection Laws
------------------------------------------------------------------------
Consumer Handbook to Credit Protection Laws
[Graphic Omitted]
Board of Governors of the Federal Reserve System
Washington, D.C. 20551
12th Printing, April 1993
Contents
INTRODUCTION
THE COST OF CREDIT
Shopping Is the First Step
What Laws Apply?
The Finance Charge and Annual Percentage Rate (APR)
A Comparison
Cost of Open-end Credit
Leasing Costs and Terms
Open-end Leases and Balloon Payments
Costs of Settlement on a House
APPLYING FOR CREDIT
Discrimination
What Law Applies?
What Creditors Look For
Information the Creditor Can't Use
Special Rules
Discrimination Against Women
If You're Turned Down
CREDIT HISTORIES AND RECORDS
Building Up a Good Record
What Laws Apply?
Credit Histories for Women
Keeping Up Credit Records
OTHER ASPECTS OF USING CREDIT
What Laws Apply?
Billing Errors
Defective Goods or Services
Prompt Credit for Payments and Refunds for Credit Balances
Cancelling a Mortgage
Lost or Stolen Credit Cards
Unsolicited Cards
ELECTRONIC FUND TRANSFERS
Instant Money
EFT in Operation
What Law Applies?
What Record Will I Have of My Transactions?
How Easily Will I Be Able to Correct Errors?
What About Loss or Theft?
What About Solicitations?
Do I Have to Use EFT?
Special Questions About Preauthorized Plans
COMPLAINING ABOUT CREDIT
Complaining to Federal Enforcement Agencies
Penalties Under the Laws
GLOSSARY
SUBJECT INDEX
DIRECTORY OF FEDERAL AGENCIES
FEDERAL RESERVE BANKS
OTHER CONSUMER PAMPHLETS AVAILABLE
INTRODUCTION
The Consumer Credit Protection Act of 1968--which launched Truth in
Lending--was a landmark piece of legislation. For the first time,
creditors had to state the cost of borrowing in a common language so
that you--the customer--could figure out exactly what the charges would
be, compare costs, and shop around for the credit deal best for you.
Since 1968, credit protections have multiplied rapidly. The
concepts of "fair" and "equal" credit have been written into laws that
outlaw unfair discrimination in credit transactions; require that
consumers be told the reason when credit is denied; let borrowers find
out about their credit records; and set up a way to settle billing
disputes.
Each law was meant to reduce the problems and confusion surrounding
consumer credit which, as it became more widely used in our economy,
also grew more complex. Together, these laws set a standard for how
individuals are to be treated in their financial dealings.
The laws say, for instance:
-- that you cannot be turned down for a credit card just because
you're a single woman;
-- that you can limit your risk if a credit card is lost or stolen;
-- that you can straighten out errors in your monthly bill without
damage to your credit rating; and
-- that you won't find credit shut off just because you've reached the
age of 65.
But, let the buyer be aware! It is important to know your fights
and how to use them. This handbook explains how the consumer credit laws
can help you shop for credit, apply for it, keep up your credit
standing, and--if need be--complain about an unfair deal. It explains
what you should look for when using credit and what creditors look for
before extending it. It also points out the laws' solutions to
discriminatory practices that have made it difficult for women and
minorities to get credit in the past.
THE COST OF CREDIT
[Graphic Omitted]
Shopping is the First Step
You get credit by promising to pay in the future for something you
receive in the present.
Credit is a convenience. It lets you charge a meal on your credit
card, pay for an appliance on the installment plan, take out a loan to
buy a house, or pay for schooling or vacations. With credit, you can
enjoy your purchase while you're paying for it--or you can make a
purchase when you're lacking ready cash.
But there are strings attached to credit too. It usually costs
something. And of course what is borrowed must be paid back.
If you are thinking of borrowing or opening a credit account, your
first step should be to figure out how much it will cost you and whether
you can afford it. Then you should shop around for the best terms.
What Laws Apply?
Two laws help you compare costs:
TRUTH IN LENDING requires creditors to give you certain basic
information about the cost of buying on credit or taking out a loan.
These "disclosures" can help you shop around for the best deal.
CONSUMER LEASING disclosures can help you compare the cost and
terms of one lease with another and with the cost and terms of buying
for cash or on credit.
The Finance Charge and Annual Percentage Rate (APR)
Credit costs vary. By remembering two terms, you can compare credit
prices from different sources. Under Truth in Lending, the creditor must
tell you--in writing and before you sign any agreement--the finance
charge and the annual percentage rate.
The finance charge is the total dollar amount you pay to use
credit. It includes interest costs, and other costs, such as service
charges and some credit--related insurance premiums.
For example, borrowing $100 for a year might cost you $10 in
interest. If there were also a service charge of $1, the finance charge
would be $11.
The annual percentage rate (APR)is the percentage cost (or relative
cost) of credit on a yearly basis. This is your key to comparing costs,
regardless of the amount of credit or how long you have to repay it:
Again, suppose you borrow $100 for one year and pay a finance
charge of $10. If you can keep the entire $100 for the whole year and
then pay back $110 at the end of the year, you are paying an APR of 10
percent. But, if you repay the $100 and finance charge (a total of $110)
in twelve equal monthly installments, you don't really get to use $100
for the whole year. In fact, you get to use less and less of that $100
each month. In this case, the $10 charge for credit amounts to an APR of
18 percent.
All creditors--banks, stores, car dealers, credit card companies,
finance companies-must state the cost of their credit in terms of the
finance charge and the APR. Federal law does not set interest rates or
other credit charges. But it does require their disclosure so that you
can compare credit costs. The law says these two pieces of information
must be shown to you before you sign a credit contract or before you use
a credit card.
A Comparison
Even when you understand the terms a creditor is offering, it's
easy to underestimate the difference in dollars that different terms can
make. Suppose you're buying a $7,500 car. You put $1,500 down, and need
to borrow $6,000. Compare the three credit arrangements on the next
page.
How do these choices stack up? The answer depends partly on what
you need.
The lowest cost loan is available from Creditor A.
If you were looking for lower monthly payments, you could get then
by paying the loan off over a longer period of time. However, you would
have to pay more in total costs. A loan from Creditor B--also at a 14
percent APR, but for four years--will add about $488 to your finance
charge.
If that four-year loan were available only from Creditor C, the APR
of 15 percent would add another $145 or so to your finance charges as
compared with Creditor B.
Other terms--such as the size of the down payment--will also make a
difference. Be sure to look at all the terms before you make your
choice.
[Graphic Omitted]
Cost of Open-end Credit
Open-end credit includes bank and department store credit cards,
gasoline company cards, home equity lines, and checkoverdraft accounts
that let you write checks for more than your actual balance with the
bank. Open-end credit can be used again and again, generally until you
reach a certain prearranged borrowing limit. Truth in Lending requires
that open-end creditors tell you the terms of the credit plan so that
you can shop and compare the costs involved.
When you're shopping for an open-end plan, the APR you're told
represents only the periodic rate that you will be charged--figured on a
yearly basis. (For instance, a creditor that charges 1% percent interest
each month would quote you an APR of 18 percent.) Annual membership
fees, transaction charges, and points, for example, are listed
separately; they are not included in the APR. Keep this in mind and
compare all the costs involved in the plans, not just the APR.
Creditors must tell you when finance charges begin on your account,
so you know how much time you have to pay your bill before a finance
charge is added. Creditors may give you a 25-day grace period, for
example, to pay your balance in full before making you pay a finance
charge.
Creditors also must tell you the method they use to figure the
balance on which you pay a finance charge; the interest rate they charge
is applied to this balance to come up with the finance charge. Creditors
use a number of different methods to arrive at the balance. Study them
carefully; they can significantly affect your finance charge.
Some creditors, for instance, take the amount you owed at the
beginning of the billing cycle, and subtract any payments you made
during that cycle. Purchases are not counted. This is called the
adjusted balance method.
Another is the previous balance method. Creditors simply use the
amount owed at the beginning of the billing cycle to come up with the
finance charge.
Under one of the most common methods-the average daily balance
method--creditors add your balances for each day in the billing cycle
and then divide that total by the number of days in the cycle. Payments
made during the cycle are subtracted in arriving at the daily amounts,
and, depending on the plan, new purchases may or may not be included.
Under another method--the two-cycle average daily balance
method--creditors use the average daily balances for two billing cycles
to compute your finance charge. Again, payments will be taken into
account in figuring the balances, but new purchases may or may not be
included.
Be aware that the amount of the finance charge may vary
considerably depending on the method used, even for the same pattern of
purchases and payments.
If you receive a credit card offer or an application, the creditor
must give you information about the APR and other important terms of the
plan at that time. Likewise, with a home equity plan, information must
be given to you with an application.
Truth in Lending does not set the rates or tell the creditor how to
calculate finance charges--it only requires that the creditor tell you
the method that it uses. You should ask for an explanation of any terms
you don't understand.
Leasing Costs and Terms
Leasing gives you temporary use of property in return for periodic
payments. It has become a popular alternative to buying--under certain
circumstances. For instance, you might consider leasing furniture for an
apartment you'll use only for a year. The Consumer Leasing law requires
leasing companies to give you the facts about the costs and terms of
their contracts, to help you decide whether leasing is a good idea.
The law applies to personal property leased to you for more than
four months for personal, family, or household use. It covers, for
example, long-term rentals of cars, furniture, and appliances, but not
daily car rentals or leases for apartments.
Before you agree to a lease, the leasing company must give you a
written statement of costs, including the amount of any security
deposit, the amount of your monthly payments, and the amount you must
pay for licensing, registration, taxes, and maintenance.
The company must also give you a written statement about terms,
including any insurance you need, any guarantees, information about who
is responsible for servicing the property, any standards for its wear
and tear, and whether or not you have an option to buy the property.
Open-end Leases and Balloon Payments
Your costs will depend on whether you choose an open-end lease or a
closed-end lease. Open-end leases usually mean lower monthly payments
than closed-end leases, but you may owe a large extra payment--often
called a balloon payment--based on the value of the property when you
return it.
Suppose you lease a car under a three-year open-end lease. The
leasing company estimates the car will be worth $4,000 after three years
of normal use. If you bring back the car in a condition that makes it
worth only $3,500, you may owe a balloon payment of $500.
The leasing company must tell you whether you may owe a balloon
payment and how it will be calculated. You should also know that:
-- you have the right to an independent appraisal of the property's
worth at the end of the lease. You must pay the appraiser's fee,
however.
-- a balloon payment is usually limited to no more than three times
the average monthly payment. If your monthly payment is $ 200, your
balloon payment wouldn't be more than $600--unless, for example,
the property has received more than average wear and tear (for
instance, if you drove a car more than average mileage).
Closed-end leases usually have higher monthly payment than open-end
leases, but there is no balloon payment at the end of the lease.
Costs of Settlement on a House
A house is probably the single largest credit purchase for most
consumers--and one of the most complicated. The Real Estate Settlement
Procedures Act, like Truth in Lending, is a disclosure law. The Act,
administered by the Department of Housing and Urban Development,
requires the lender to give you, in advance, certain information about
the costs you will pay when you close the loan.
This event is called settlement or closing, and the law helps you
shop for lower settlement costs. To find out more about it, write to:
Deputy Assistant Secretary for Housing Attention:
RESPA Enforcement U.S. Department of Housing and Urban Development
451 Seventh Street, S.W. Room 5241
Washington, D.C. 20410
Should you need to phone:
(202) 708-4560
A Federal Reserve pamphlet, entitled "A Consumer's Guide to
Mortgage Closing Costs," also contains useful information for consumers.
APPLYING FOR CREDIT
[Graphic Omitted]
Discrimination
When you're ready to apply for credit, you should know what
creditors think is important in deciding whether you're creditworthy.
You should also know what they cannot legally consider in their
decisions.
What Law Applies?
EQUAL CREDIT OPPORTUNITY ACT requires that all credit applicants be
considered on the basis of their actual qualifications for credit and
not be turned away because of certain personal characteristics.
What Creditors Look For
The Three C's. Creditors look for an ability to repay debt and a
willingness to do so--and sometimes for a little extra security to
protect their loans. They speak of the three C's of credit-capacity,
character, and collateral.
Capacity. Can you repay the debt? Creditors ask for employment
information: your occupation, how long you've worked, and how much you
earn. They also want to know your expenses: how many dependents you
have, whether you pay alimony or child support, and the amount of your
other obligations.
Character. Will you repay the debt? Creditors will look at your
credit history (see chapter on Credit Histories and Records): how much
you owe, how often you borrow, whether you pay bills on time, and
whether you live within your means. They also look for signs of
stability: how long you've lived at your present address, whether you
own or rent, and length of your present employment.
Collateral. Is the creditor fully protected if you fail to repay?
Creditors want to know what you may have that could be used to back up
or secure your loan, and what sources you have for repaying debt other
than income, such as savings, investments, or property.
Creditors use different combinations of these facts in reaching
their decisions. Some set unusually high standards and other simply do
not make certain kinds of loans. Creditors also use different kinds of
rating systems. Some rely strictly on their own instinct and experience.
Others use a "credit-scoring" or statistical system to predict whether
you're a good credit risk. They assign a certain number of points to
each of the various characteristics that have proved to be reliable
signs that a borrower will repay. Then, they rate you on this scale.
And so, different creditors may reach different conclusions based
on the same set of facts. One may find you an acceptable risk, while
another may deny you a loan.
Information the Creditor Can't Use
The Equal Credit Opportunity Act does not guarantee that you will
get credit. You must still pass the creditor's tests of
creditworthiness. But the creditor must apply these tests fairly,
impartially, and without discriminating against you on any of the
following grounds: age, gender, marital status, race, color, religion,
national origin, because you receive public income such as veterans
benefits, welfare or Social Security, or because you exercise your
rights under Federal credit laws such as filing a billing error notice
with a creditor. This means that a creditor may not use any of those
grounds as a reason to:
-- discourage you from applying for a loan;
-- refuse you a loan if you quality; or
-- lend you money on terms different from those granted another person
with similar income, expenses, credit history, and collateral.
Special Rules
Age. In the past, many older persons have complained about being
denied credit just because they were over a certain age. Or when they
retired, they often found their credit suddenly cut off or reduced. So
the law is very specific about how a person's age may be used in credit
decisions.
A creditor may ask your age, but if you're old enough to sign a
binding contract (usually 18 or 21 years old depending on state law), a
creditor may not:
-- turn you down or offer you less credit just because of your age;
-- ignore your retirement income in rating your application;
-- close your credit account or require you to reapply for it just
because you reach a certain age or retire; or
-- deny you credit or close your account because credit life insurance
or other credit-related insurance is not available to persons your
age.
Creditors may "score" your age in a creditscoring system, but:
-- if you are 62 or older you must be given at least as many points
for age as any person under 62.
Because individuals' financial situations can change at different
ages, the law lets creditors consider certain information related to
age--such as how long until you retire or how long your income will
continue. An older applicant might not qualify for a large loan with a 5
percent down payment on a risky venture, but might qualify for a smaller
loan--with a bigger down payment--secured by good collateral. Remember
that while declining income may be a handicap if you are older, you can
usually offer a solid credit history to your advantage. The creditor has
to look at all the facts and apply the usual standards of
creditworthiness to your particular situation.
Public Assistance. You may not be denied credit just because you
receive Social Security or public assistance (such as Aid to Families
with Dependent Children). But--as is the case with age--certain
information related to this source of income could clearly affect
creditworthiness. So, a creditor may consider such things as:
-- how old your dependents are (because you may lose benefits when
they reach a certain age); or
-- whether you will continue to meet the residency requirements for
receiving benefits.
This information helps the creditor determine the likelihood that
your public assistance income will continue.
Housing Loans. The Equal Credit Opportunity Act covers your
application for a mortgage or home improvement loan. It bans
discrimination because of such characteristics as your race, color,
gender, or because of the race or national origin of the people in the
neighborhood where you live or want to buy your home. Nor may creditors
use any appraisal of the value of the property that considers the race
of the people in the neighborhood.
In addition, you are entitled to receive a copy of an appraisal
report that you paid for in connection with an application for credit,
if a you make a written request for the report.
Discrimination Against Women
Both men and women are protected from discrimination based on
gender or marital status. But many of the law's provisions were designed
to stop particular abuses that generally made if difficult for women to
get credit. For example, the idea that single women ignore their debts
when they marry, or that a woman's income "doesn't count" because she'll
leave work to have children, now is unlawful in credit transactions.
The general rule is that you may not be denied credit just because
you are a woman, or just because you are married, single, widowed,
divorced, or separated. Here are some important protections:
Gender and Marital Status. Usually, creditors may not ask your
gender on an application form (one exception is on a loan to buy or
build a home).
You do not have to use Miss, Mrs., or Ms. with your name on a
credit application. But, in some cases, a creditor may ask whether you
are married, unmarried, or separated (unmarried includes single,
divorced, and widowed).
Child-bearing Plans. Creditors may not ask about your birth control
practices or whether you plan to have children, and they may not assume
anything about those plans.
Income and Alimony. The creditor must count all of your income,
even income from part-time employment.
Child support and alimony payments are a primary source of income
for many women. You don't have to disclose these kinds of income, but if
you do creditors must count them.
Telephones. Creditors may not consider whether you have a telephone
listing in your name because this would discriminate against many
married women. (You may be asked if there's a telephone in your home.)
A creditor may consider whether income is steady and reliable, so
be prepared to show that you can count on uninterrupted
income--particularly if the source is alimony payments or part-time
wages.
Your Own Accounts. Many married women used to be turned down when
they asked for credit in their own name. Or, a husband had to cosign an
account--agree to pay if the wife didn't--even when a woman's own income
could easily repay the loan. Single women couldn't get loans because
they were thought to be somehow less reliable than other applicants. You
now have a fight to your own credit, based on your own credit records
and earnings. Your own credit means a separate account or loan in your
own name--not a joint account with your husband or a duplicate card on
his account. Here are the rules:
-- Creditors may not refuse to open an account just because of your
gender or marital status.
-- You can choose to use your first name and maiden name (Mary Smith);
your first name and husband's last name (Mary Jones); or a combined
last name (Mary Smith-Jones).
-- If you're creditworthy, a creditor may not ask your husband to
cosign your account, with certain exceptions when property rights
are involved.
-- Creditors may not ask for information about your husband or
ex-husband when you apply for your own credit based on your own
income--unless that income is alimony, child support, or separate
maintenance payments from your spouse or former spouse.
This last rule, of course, does not apply if your husband is going
to use your account or be responsible for paying your debts on the
account, or if you live in a community property state. (Community
property states are: Arizona, California, Idaho, Louisiana, Nevada, New
Mexico, Texas, Washington and Wisconsin.)
Change in Marital Status. Married women have sometimes faced severe
hardships when cut off from credit after their husbands died. Single
women have had accounts closed when they married, and married women have
had accounts closed after a divorce. The law says that creditors may not
make you reapply for credit just because you marry or become widowed or
divorced. Nor may they close your account or change the terms of your
account on these grounds. There must be some sign that your
creditworthiness has changed. For example, creditors may ask you to
reapply if you relied on your ex-husband's income to get credit in the
first place.
Setting up your own account protects you by giving you your own
history of how you handle debt, to rely on if your financial situation
changes because you are widowed or divorced. If you're getting married
and plan to take your husband's surname, write to your creditors and
tell them if you want to keep a separate account.
If You're Turned Down
Remember, your gender or race may not be used to discourage you
from applying for a loan. And creditors may not hold up or otherwise
delay your application on those grounds. Under the Equal Credit
Opportunity Act, you must be notified within 30 days after your
application has been completed whether your loan has been approved or
not. If credit is denied, this notice must be in writing and it must
explain the specific reasons why you were denied credit or tell you of
your right to ask for an explanation. You have the same rights if an
account you have had is closed.
If you are denied credit, be sure to find out why. Remember, you
may have to ask the creditors for this explanation. It may be that the
creditor thinks you have requested more money than you can repay on your
income. It may be that you have not been employed or lived long enough
in the community. You can discuss terms with the creditor and ways to
improve your creditworthiness. The next chapter explains how to improve
your ability to get credit.
Lost or Stolen: Credit and ATM Cards
------------------------------------------------------------------------
Lost or Stolen: Credit and ATM Cards
Facts for Consumers from the Federal Trade Commission
Lost or Stolen: Credit and ATM Cards -- August 1992
A joint production of the Federal Trade Commission
and Citibank
N.A.
Increasingly, people find it convenient to shop with credit cards
or to bank at automated teller machines (ATMs) with ATM cards. But the
ease with which these cards can be used also makes them very attractive
to thieves.
Loss or theft of credit and ATM cards is a serious consumer problem.
However, two federal laws, the Fair Credit Billing Act (FCBA) and the
Electronic Fund Transfer Act (EFTA), establish procedures for you and
your creditors to follow to resolve problems with credit cards and
electronic fund transfer accounts. This brochure explains what to do if
any of your cards are missing or stolen, suggests how to protect your
cards, and explains what you can expect from a credit card registration
or protection service.
Limiting Your Financial Loss
There are at least two good financial reasons for you to report the loss
or theft of your credit and ATM cards quickly. First, the sooner you
report the loss, the more likely you will limit your liability if
someone uses your card without your permission. Most card fraud occurs
within the first 48 hours after a card is stolen.
Second, the sooner you report any loss, the more card costs in general
can be kept down. You pay higher interest rates and annual fees because
card fraud costs issuers hundreds of millions of dollars each year.
If any of your cards are missing or stolen, report the loss as soon as
possible to your card issuers. Some companies have toll-free or WATS
numbers printed on their statements and 24-hour service to accept such
emergency information. For your own protection, you should follow up
your phone calls with a letter to each card issuer. The letter should
give your card number, say when your card was missing, and mention the
date you called in the loss.
You may wish to check your homeowner's insurance policy to see if it
covers your liability for card thefts. If not, some insurance companies
will allow you to change your current policy to include protection for
card losses.
Credit Card Loss. If you report the loss before these cards are used,
the FCBA says the card issuer cannot hold you responsible for any
unauthorized charges. If a thief uses your cards before you report them
missing, the most you will owe for unauthorized charges on each card is
$50. This is true even if a thief is able to use your credit card at an
ATM machine to access your credit card account.
However, it is not enough simply to report your credit card loss. After
the card loss, review your billing statements carefully. If your
statements show any charges not made by you, send a letter to the card
issuer describing each questionable charge on your account. Again, tell
the card issuer the date your card was lost or stolen and when you
reported it to them. Be sure to send the letter to the address provided
for billing errors. Do not send it with a payment or to the address
where you send your payments unless you are directed to do so.
ATM Card Loss. If you report an ATM card missing before it is used
without your permission, the EFTA says the card issuer cannot hold you
responsible for any unauthorized withdrawals. If unauthorized use occurs
before you report it, the amount you can be held responsible for depends
upon how quickly you report the loss to the card issuer. For example, if
you report the loss within two business days after you realize your card
is missing, you will not be responsible for more than $50 for
unauthorized use.
However, you could lose as much as $500 because of an unauthorized
withdrawal from your bank account if you do not tell the card issuer
within the two business days after you discover the loss. And, you risk
unlimited loss if, within 60 days after your bank statement is mailed to
you, you do not report an unauthorized transfer or withdrawal. That
means you could lose all the money in your bank account and the unused
portion of your maximum line of credit established for overdrafts.
If any unauthorized transactions appear on your bank statement, report
them to the card issuer as soon as you can. As with a credit card, once
you have reported the loss of your ATM card you cannot be held liable
for additional amounts, even if more unauthorized transactions are made.
Protecting Your Cards
The best protections against card fraud, of course, are to know where
your cards are at all times and to keep them secure. For ATM card
protection, it is important to keep your Personal Identification Number
(PIN) a secret. Memorize this number. Statistics show that in one-third
of ATM card frauds, cardholders wrote their PINS on their ATM cards or
on slips of paper they kept with their cards.
The following suggestions may help you protect your credit and ATM card
accounts.
For credit cards:
Be cautious about disclosing your account number over the phone unless
you know you are dealing with a reputable company.
Never put your account number on the outside of an envelope or on a
postcard.
Draw a line through blank spaces on charge slips above the total so the
amount cannot be changed.
Do not sign a blank charge slip unless absolutely necessary.
Rip up carbons from the charge slip and save your receipts to check
against your monthly billing statements.
Open billing statements promptly and compare them with your receipts. If
there are any mistakes or differences, report them as soon as possible
to the special address listed on the billing statement for "billing
inquiries." Under the FCBA, the card issuer must investigate billing
errors if you report them within 60 days of the date your card issuer
mailed you the statement.
Keep in a safe place (away from where you keep your cards) a record of
your card numbers, expiration dates, and the telephone numbers of each
credit-card company for the emergency of reporting losses.
Carry only those cards that you regularly need, especially when
traveling.
For ATM cards:
Select a PIN (personal identification number) that is different from
other numbers noted in your wallet, such as your address, birthdate,
phone, or social security number.
Memorize your PIN.
Do not write your PIN on your ATM card or carry your PIN in your wallet
or purse.
Never put your PIN on the outside of a deposit slip, an envelope, or on
a postcard.
Examine all ATM receipts and bank statements as soon as possible.
Buying a Card Registration Service
Many companies offer card registration and protection services that will
notify all companies where you have credit and ATM card accounts in case
your card is lost or stolen. With this service, you need make only one
phone call to report all card losses instead of calling each card issuer
individually. Also, most services will request replacement cards on your
behalf. Registration services usually cost $10 to $35 yearly.
Purchasing a card registration may be a convenience to you, but it is
not required by card issuers. The FCBA and the EFTA give you the right
to contact credit card companies and ATM card issuers directly in the
event of loss or suspected unauthorized use.
If you do decide to buy a registration service, compare offers and look
for one that will best suit your needs. Read the service contract
carefully to check the company's obligations and your liability. For
example, will the company reimburse you if it fails to notify charge
card loss promptly after you report the loss? If not, you could be
liable for unauthorized charges.
For More Information
For additional information about credit or ATM card fraud or credit card
billing problems, send for: Credit and Charge Card Fraud; Fair Credit
Billing; or Credit Billing Blues. These brochures are available free.
Write to: Public Reference, Federal Trade Commission, Washington, D.C.
20580. The following federal agencies are responsible for enforcing
federal laws that govern credit and ATM card transactions.
Questions concerning a particular card issuer should be directed to the
enforcement agency responsible for that issuer.
State Member Banks of the Federal Reserve System
Consumer and Community Affairs
Board of Governors of the Federal Reserve System
20th & C Sts., N.W.
Washington, D.C. 20551
National Banks
Comptroller of the Currency
Compliance Management
Mail Stop 7-5
Washington, D.C. 20219
Federal Credit Unions
National Credit Union Administration
1776 G St., N.W.
Washington, D.C. 20456
Non-Member Federally Insured Banks
Office of Consumer Programs
Federal Deposit Insurance Corporation
550 Seventeenth St., N.W.
Washington, D.C. 20429
Federally Insured Savings and Loans, and Federally Chartered
State Banks
Consumer Affairs Program
Office of Thrift Supervision
1700 G St., N.W.
Washington, D.C. 20552
Other Credit Card Issuers
(includes retail/gasoline companies)
Division of Credit Practices
Bureau of Consumer Protection
Federal Trade Commission
Washington, D.C. 20580
Using Plastic--Introduction
Copyright (c) 1996 Nolo Press
------------------------------------------------------------------------
Credit cards can amount to nothing other than very expensive loans made by banks,
gasoline companies and department stores. The credit card issuer gives you a card. You
use the card to pay for items and services up to a certain total amount--your credit "limit."
The store merchant or service provider collects what you owe from the card issuer, who
you repay. You're allowed to pay off what you owe little-by-little each month, as long as
you pay a minimum amount each time. You're charged interest on the balance you owe (as
high as 22% a year) at the end of each period unless you pay the full balance when your
bill arrives.
Credit cards yield high profits to their issuers for several reasons. The most important is
the high rate of interest--interest on credit cards alone accounts for 75% of the profits
earned by banks that issue credit cards. Also, many companies charge an annual fee for
issuing a credit card, and most companies charge late fees, over-the-limit fees and other
miscellaneous charges. Finally, the companies profit by charging merchants and service
providers a fee each time a customer uses the company's credit card in the merchant's
establishment.
Charge cards, also called travel and entertainment cards, are a little different from credit
cards. Charge cards, such as American Express and Diners Club, have no credit limit. You
can usually charge as much as you'd like, but you are required to pay off your entire
balance when your bill arrives, with one exception. If you charge air fare, cruise fees or
hotel fees for a hotel room booked through a travel agent on an American Express card,
you can pay off your balance over 36 months. You'll be charged between 19% and 21%
interest and will have to make minimum monthly payments of $20 or 1/36 of your balance,
whichever is greater.
If you don't pay your charge card bill in full (and haven't charged travel expenses on an
American Express card), you'll get one month's grace, when no interest is charged. After
that, you'll be charged interest in the neighborhood of 20%. If you don't pay after about
three months, your account will be closed and your bill sent to the collections department.
The charge card company makes its profit by charging very high annual fees--up to $100--
and by charging merchants fairly high fees each time a customer pays using the company's
charge card.
Many people use their credit or charge cards to obtain cash advances. Similarly, many card
issuers send cardholders convenience checks to use--the amount of the check appears on
your bill as a charge. Card issuers usually treat these checks like they treat cash advances.
Cash advances are generally more expensive than standard credit card charges. Most
banks charge a transaction fee up to 4% for taking a cash advance. Most banks charge
interest from the date the cash advance is posted, even if you pay it back in full when your
bill comes. Finally, the interest rate is often higher on cash advances than it is on ordinary
credit card charges.
ATM cards are issued by banks, essentially to give bank customers flexibility in their
banking hours. In most areas, with an ATM card you can withdraw money, make deposits,
transfer money between accounts, find out your balance, get a cash advance and even
make loan payments at all hours of the day or night.
Debit cards combine the functions of ATM cards and checks. Debit cards are issued by
banks, but are used at stores, not at the banks themselves. When you pay with a debit
card, the money is automatically deducted from your checking account. Many merchants
accept ATM cards as debit cards.
Until the early 1990s, technological disagreements between merchants and banks meant
that the use of debit cards was very limited. More and more merchants, however,
especially grocery stores, convenience stores and gasoline stations, now accept debit
cards. Many consumers prefer them over checks for two reasons:
•They don't have to carry around their checkbook and present identification, but are still
able to make purchases direct from their checking account.•They are paying their bills
immediately, unlike when they use credit cards and get the bill later.
Still, there is consumer resistance to using debit cards. In general, consumers prefer having
20-25 days to pay their credit card bills. Also, consumers don't have the right to withhold
payment (the money is immediately removed from the account) in the event of a dispute
with the merchant over the goods or services paid for. Finally, many banks charge
transaction fees every time you use an ATM or debit card at locations other than those
owned by the bank.
Fresh Start: The Authoritative Guide To Credit Repair
by Horizon Unlimited Group's Insider Reports
------------------------------------------------------------------------
INTRODUCTION
Fresh Start is intended for those who have either been denied credit or anticipate being
denied credit for any of the following reasons:
A creditor has inaccurately or misleadingly reported information to a credit bureau about
you.
A credit bureau has mistakenly entered information into your credit file that is inaccurate,
erroneous, not yours, or otherwise false.
Fresh Start is also intended for those who have negative remarks in their credit file that are
mostly, if not wholly, accurate and desire to pursue alternative methods not specifically
spelled out by law with the goal of improving their overall credit rating.
This report will walk you through EVERY legal remedy available to remove negative
credit, those spelled out by law as well as those that may be applied through negotiations
and other creative strategies.
HOW THE CREDIT REPORTING SYSTEM WORKS
Out Of The Loop
The credit reporting system is a business relationship between two parties: 1) independent
agencies that collect credit information called credit bureaus; and 2) merchants who pay
for a copy of this credit information on an as-needed basis. Credit bureaus refer to these
merchants who pay a fee for their service as subscribers. As with any business, the main
focus of the bureaus is to meet the needs of their customers, the merchant subscribers (not
you).
When you apply for credit with a local merchant, the merchant turns to a credit bureau to
obtain a copy of your "credit reputation" to help him evaluate the risks in extending credit
to you. The bureau doesn't actually approve or deny your credit, but rather supplies the
merchant with your payment history as reported by other subscribers with whom you have
received credit. However, the bureau will use a closely guarded secret formula to assign a
credit score to each individual based on the information in the file. This information is the
most significant factor in the merchant's decision regarding your "ability and willingness"
to meet your future financial obligations. The merchant is counting on the credit bureau's
information to serve as a filter to help separate good credit risks from poor risks.
The shortfall of this system is that the product, you, has little clout in this relationship. The
merchant's primary motivation is to avoid bad credit risks, and the bureau makes a profit
by charging the merchant for helping him do that. The consumer has no positive financial
impact on the bureau. Thus, while you are out of the loop, you are surrounded by it.
If that weren't enough, you also have to compete against human nature. Without
documentation of errors, the bureaus are inclined to report information as reported by
subscribers--assuming the negative. After all, the merchant/subscriber is not going to
complain because he didn't like what he saw on your file and thus didn't extend credit and
didn't lose any money. Any losses for not taking a risk are speculative and argumentative,
certainly not tangible. The only decisions that might draw criticism from the merchant are
the losses as a result of the bureau omitting some negative information that would have
caused the merchant to have declined extending credit.
This is not intended to make the credit bureaus appear the great "evil empire" that some
have made them out to be. They are huge bureaucratic companies whose policies have
evolved from simple business economics and human nature. Every credit bureau desires to
maintain as accurate information as financially feasible, but at the same time they realize
the quality control limitations dictated by competition and operating costs. And they
realize that if they do err, it is better to err on the negative side rather than the positive--if
they are going to serve their subscribers' best interest. Although they want to develop as
truthful a portrait of your credit history as possible, human nature compels them to give
highest priority to recording any remarks that might be true and might keep their
customer-base from entering into a risky credit arrangement. After all, that is their service,
and nothing directly impacts their bottom line any greater.
It's much like having a mechanic check out an automobile before you make a decision to
purchase it. The mechanic is put on the spot. If he tells you it's a good car, and it breaks
down on you, then he looks bad. He'll never be burdened with your complaints about the
three he blackballed, only the one he okayed--if it should break down on you.
Human nature compels him to go into the situation looking for what's wrong, not what's
right. You are about to make a major financial decision based mainly on the information
your mechanic gives you. Similarly, the merchant may be making a comparable investment
based on the information provided by the bureau.
RAMPANT MYTHS ABOUT CREDIT REPORTING
Whether you realize it or not, there is a tremendous battle going on aimed at shaping your
opinion. On one side you have the credit bureaus with a massive public relations campaign
to discourage consumers from attempting to restore their credit by telling them it is
impossible. They do this by limiting their acknowledgment to those methods strictly
outlined in the Fair Credit Reporting Act, such as the dispute method and the consumer
statement.
On the other side you have consumer rights groups pushing for more reform. And
sometimes in the middle, but most often leaning toward the side of the bureaus, you have
the Federal Trade Commission. If that weren't enough, you still have outside voices
(attorneys and credit repair services) whose motives are purely financial and at time such
motives and ignorance add more fog to an already cloudy landscape.
The result is a lot of conflicting and confusing information. It is very easy to get bogged
down in this information glut. But you don't have to muddle in the mire. This resource
strives to shine a bright beam of truth to dissipate this fog of misinformation--so that you
can begin pursuing a clear path, able to discern the good and the bad offered you from
both sides.
As evidence of this ongoing credit war, consider these great myths about the credit
reporting industry. Each of these statements below is false. Nonetheless, almost every
consumer still believes that one or more may be true.
Myth: The information on a credit report cannot be changed.
Fact: Exactly the opposite is true. The Fair Credit Reporting Act requires that items be
removed if they are not 100% accurate or cannot be verified within 30 days.
Myth: When I pay off a delinquent account such as a charge-off or collection account, it
will stop hurting my credit, because it will then be shown as "paid."
Fact: As hard as it might be to believe, sometimes paying off a debt can actually hurt you.
This is one of those occasions. These type of collection accounts are allowed to stay on
your credit for a "maximum" of seven years. See Old Delinquent Accounts for warning
and explanation of how you can unwittingly restart this clock.
However, this does not mean that you never pay these debts. While discussing negotiating
with creditors covered in Chapter 4, you will read how to include in your negotiated
settlement a provision for how it is to be reported. To not do so can severely hurt your
chances of restoring your good credit.
Myth: Credit reporting agencies are empowered with Municipal authority.
Fact: Absolutely Not! Credit bureaus are like any other business. They exist for one
reason: to turn a profit. No special authority exists. Rather, they must adhere to the
government authorities and laws overseeing their operations.
Myth: Bankruptcy is a "Fresh Start."
Fact: Unfortunately, many attorneys don't clearly explain the devastating effects to one's
credit when filing bankruptcy. This goes for all types of bankruptcy including Chapter 13,
wage earner.
Bankruptcy is not a clean slate. Every account included in the bankruptcy will be so noted
in your credit file. Additionally, there will be a court record generated that will also be
added. Avoid bankruptcy if at all possible. The time table and the odds of completing
credit restoration are greatly extended due to the number of negative entries that are
associated with such filings.
Myth: Some types of credit information (such as bankruptcies, judgments and
foreclosures) are impossible to remove.
Fact: Although it is true that some types of information can be more difficult than others
to remove, each of these negative entries have been removed thousands of times, using a
multitude of creative methods.
Myth: Credit repair is too complicated to do myself. I would have to hire an attorney.
Fact: In some cases involving a stubborn situation, an attorney can be of great assistance.
An attorney can also help with clarifying the finer points of your state's laws. However,
you can accomplish most if not all of the legal and negotiation-based methods in this
report yourself by becoming familiar with your federally given rights and how to enforce
them. Many opt to use an attorney as a final source of leverage when their own efforts
have not produced the desired result.
Myth: It is illegal to have truthful information removed from your credit report.
Fact: Congress has already set the precedent by making special provisions for the removal
of correct information from individuals' credit files by fulfilling certain criteria. Congress
realizes that dangling that carrot in front of college students encourages repayment of
defaulted student loans. It should come as no surprise that creditors in other financial
markets are hip to this. Let's face it; congress had to get the idea from somewhere. Right?
If you need more proof, read section 609(c)(2)(E) of the NEW Fair Credit Reporting Act
that President Clinton signed in September of '96.
"...a consumer reporting agency is not required to remove accurate derogatory
information from a consumer's file, unless the information is outdated under section 605 or
cannot be verified."
Notice the wording above, "is not required to remove." It is very interesting that the law
does not say that accurate information "can not" be removed, but only that the credit
bureau is not required to. Now, there is law that says a creditor can not knowingly add
wrong information to someone's file, but the subject of removing accurate information is
mysteriously avoided. The truth is the FTC and the bureaus themselves spend a lot of
money trying to convince consumers otherwise. Why? Lobbyists and money of course! It
makes more work for the credit bureaus, thus increasing their labor costs. Bureaus save
millions of dollars a year by convincing consumers that the consumer is virtually
powerless. But congress worded things to leave the door open, and in at least one case
drafted law allowing for it, specifically.
Fortunately, creditors make their profits by collecting from their customers, not reporting
negative credit information. Many creditors though, have an agreement with the credit
bureaus that they will not allow a negative listing to be deleted upon settlement. Larger
creditors, such as huge credit cards or banks will require more pressure before they will
agree to delete a negative listing, but virtually every creditor will give in with the right
amount of convincing. Every creditor who reports to the credit bureaus can also change
the information they report. In most credit organizations, there are dozens of people with
the authority to make changes on the credit report. Bottom Line: Anything a creditor is
responsible for reporting and confirming, a creditor can change.
TIER ONE DEFENSE - A SMART START
The Subject Of Inquiries
At the end of each report will be a log of inquiries. An inquiry notation is made each time
someone requests a copy of your credit file from that credit bureau. Any company that
receives a copy of your credit profile will be listed under this inquiry section of your
report.
Lenders don't like to see a lot of inquiries on a credit report. Excessive inquiries can result
in a credit denial as easily as bad credit. Thus, you will need to verify the type of inquires
made and take steps to remove any unauthorized inquiries. Not all inquires are viewed
negatively. In fact several types of inquires will not appear on any copy of your file except
for the copy you receive.
*There are six origins of inquiries:
•Your Existing Creditors (okay)
Your existing creditors may do a periodic review of your account for many reasons. These
inquiries are not viewed negatively.
•Yourself (okay)
A notation may be made each time you request a copy of your own file. This notation
does not appear on the copy that goes to your potential lender and does not count against
you.
•The Bureau (okay)
The bureau may compile mailing lists for its subscribers based on the criteria that the
lender specifies. Your report may be reviewed as a candidate for a particular mailing list.
Again, these internal inquiries do not appear on the copy that goes to your potential
lenders and therefore do not reflect negatively.
•Potential Lenders (negative)
Lenders do not have to have your permission to obtain a copy of your credit file. The law
only requires that they reasonably expect to use the information in a credit transaction.
Any member of the bureau can obtain your file. All they need is a social security number
or a name and address. You should be cautious about giving out any such information
until you're serious about doing business.
•IRS (negative)
•Anyone who has a judgment against you (negative)
The most common inquiries are those by lenders with whom you have applied for credit.
A banker will look at them in one of two ways. If they are recent, they are looked at as
potential debt pending approval. Lenders have no way of knowing the status of these
other pending applications and are likely to take the safest action by denying your
application. If they are more than a couple of months old, it looks as if they turned you
down. If there are several previous declines, the banker has to wonder why.
Although inquiries will remain on your file for up to 2 years, those in the last 6 months will
count most heavily against you. Therefore, you should review the log to make certain that
each inquiry was done with "permissible purpose" as explained in Section 604 of the Fair
Credit Reporting Act (FCRA). (See Appendix R)
The FCRA defines the "permissible purposes" for which consumer credit profiles can be
provided to others. A credit report may be supplied if it's to be used for:
•Credit granting considerations
•Review or collection of an account
•Employment considerations
•Insurance underwriting
•Application for a government license
•With your written permission
•Or in response to a court order
•*FBI investigation
So unless someone fits these categories, they should not be viewing your credit file.
Anyone who knowingly and willfully obtains a credit report under false pretenses may be
fined under title 18, United States Code, and imprisoned up to two year.
*The new FCRA, enacted in 1996, allows the FBI to access consumer credit reports in
connection with an investigation of issues such as counterintelligence.
Use the sample letters in Appendix D and Appendix E as a guide to dispute any
unauthorized inquiries into your credit file so that they can be deleted form your report. If
you don't have a lot of items to dispute, go ahead and send your letter to the credit bureau.
However, if you know you are going to be sending the bureau several letters on other
items over the next few months, you should try to take care of this with the creditor who
requested your file. If you can take care of it by having them contact the bureau directly
and deleting the request, then it is just one less letter you will have to send to the bureau
yourself.
Your letter of course will argue for the removal of the inquiry based on the assertion
that...
NEGOTIATING WITH CREDITORS
As effective as [Tier One Methods] may be, they do have their limitations [text
omitted]...In cases where your story conflicts with the reporting creditor, the bureau is
going to side with the creditor--unless you have strong documentation of the error. The
bureau will inform you that their reinvestigation is complete and if you disagree with the
outcome, you can record a 100 word statement telling your side. You are a long way from
done, however. Such a statement is to concede defeat. You still have a few more punches
to throw.
Tier Two of your defense system is to aim directly at the source, the reporting creditor.
These methods are disclosed with two assumptions: a) the reader is a person of integrity
and would not use these methods to commit fraud, and b) the reader is working with very
limited financial resources, and must get the maximum return in exchange for dispersing
those resources to numerous creditors.
VITAL ASSESSMENT OF YOUR SITUATION
If you have a little cash to throw at your credit problems, you should be able to make
good progress with negotiations. Negotiating with the original creditor creates a win-win
situation where the creditor gets a good chunk of the principle back, and you get an
improved reporting of the debt in your file, plus a reduced settlement in many cases.
NOTE: You must negotiate with the firm that reported the item on your credit file, be it a
collection agency or the original creditor. Only they can change the reported status of the
account. To negotiate with the collection agency is a waste of time unless they are the
name on your file.
[text omitted]...Negotiations will take some cash to accomplish, but the good thing is it's a
permanent fix. And it is the most ethical if there is money still owed.
When evaluating your options and the firmness of your negotiations, there are several
factors that you need to consider.
1) Accuracy and Proof
First, look at the accuracy of the information. If you can prove the information is incorrect
with your documentation, then you can afford to be very firm in what you demand.
On the other hand, even if the information is incorrect, but you can not document that
fact, then you must take basically the same negotiating position as you would if you were
attempting to remove accurate, yet negative, information. That would be to posture
yourself as an amicable, good person trying to overcome the aftermath of negative
circumstances through negotiations. In other words, you are trying to go back and, to the
best of your ability, historically undo a very difficult time in your life.
2) Type
Is the debt secured or unsecured?
If secured, that means that the creditor has possession of an asset, or title to an asset
belonging to you. In matters such as this, you have less leverage--with the exception of
disputing inaccurate information. But in situations where you are attempting to link the
size and haste of your payoff to "how the creditor will report it on your file," you have
virtually no leverage. The creditor can just seize and sell your asset in most cases.
If the debt is unsecured, then it's a whole different ball game. Most consumers
overestimate the risk involved with overdue debts. They worry about possible
repercussions such as wage garnishment and property seizure by their creditors. The fact
is very few creditors will push all the way to a garnishment on a small unsecured debt.
Garnishments and seizures are most often used as mental leverage to gain an emotional
edge over the debtor using fear to help collect past due debt. The reality for creditors is
they are expensive and time-consuming. Even if the creditor went all the way to recover
the debt, they probably wouldn't be able to recover enough to offset their collection costs.
At the same time, you need to be aware that the creditor does have the right to pursue
these remedies there are some risk of financial reprisals when a debt goes unpaid. It just
doesn't happen very often.
U.S. bankruptcies are being filed in record numbers, and often for relatively small amounts
of debt. Many consumers, strained by the fear of an unknown future, perceive bankruptcy
as a way of relief.
These consumers are so intimidated by their creditors, that they flee to bankruptcy, even
though bankruptcy can bring total financial devastation for at least the next ten years...
NOTE: If you are in the midst of a financial crisis and are contemplating bankruptcy,
please read HUG Insider Report #107, Cash Now: The Uncommon Sense Guide To
Raising Cash Fast & Rapid Debt Reduction. Money magazine a while back reported that
90% of all personal bankruptcies could be avoided with just an extra $250 in monthly
income. That's nothing! The 7-step recovery plan outlined in this report has helped
thousands avoid bankruptcy and turn things around. You will not find a better resource for
someone in a "cash crunch."
3) Size
Consider the size of the debt. The smaller the outstanding balance, the greater your odds
for success because it becomes less cost effective for a creditor to pursue. Most creditors
will not devote a lot of effort to collecting just a few hundred dollars.
However, if the amount is less than two hundred dollars, a creditor may not even devote
the effort to negotiate.
4) Age
You also must consider the age of the debt and its status. Eventually, a creditor will give
up an attempt to collect on a debt, and in order to gain some financial benefit will write it
off as a loss and take a tax deduction. This is referred to as a charge-off or a profit & loss.
If this is an old debt that was charged off by the creditor, it doesn't mean that you no
longer owe the debt; it simply shows that they have given up hope of collecting it. The
creditor may then collect on the debt themselves, sell or assign the debt to a collection
agency, press for a judgment and garnishment, or temporarily ignore the debt. Most often
this is the end of it.
However, a recent delinquency will be treated with urgency and pressure by the creditor.
It is helpful for you to understand the motivation of the original creditor to settle.
If they turn the account over to their collection agency, there are certainly no guarantees
that the amount will be collected; and even if it is, they will have to share it with the
agency.
They may get considerably less than what you're offering now if you file bankruptcy. If
they don't work with you, and you're in a critical situation, let them know that they are
going to force you into bankruptcy.
If they take legal action and get a judgment, they risk getting nothing, or it may take years
before they get a penny.
Most creditors would much rather have something guaranteed than pursue the expense of
legal action with a risk of getting nothing. A few states won't even allow anyone to garnish
wages which means they would have to wait until you sold a major asset and had to clear
the title before they could enforce their judgment. This is referred to as a debtor's state,
meaning the debtor is at an advantage. For this reason, and the daunting cost, the majority
of creditors just charge off a bad account as a business loss after a few months in the
hands of a third-party collection agency. They then report it on your credit as such and
leave it at that.
Occasionally, a beginner in the collection agency industry may offer to purchase their
charge-offs. So it is possible that an agency may call you after a year or even two years of
silence. Realize then that they are not collecting on behalf of your original creditor; they
simply took a gamble by purchasing a batch of old bad accounts dirt cheap to try to make
some money.
5) Recent Payment History
It may sound strange at first, but if you have been paying your bills on time recently, the
creditor will be less inclined to settle for less. The logic being that they are getting their
money now anyway. If you have been chronically late and it looks like you could go belly-
up any day now, then they will sense a real potential for loss and be much quicker to
accept a reasonable offer.
This is by no means meant to imply that you should stop paying your bills so that your
creditors will be more likely to settle with you. This is merely to help you access your
negotiating position as affected by your most recent payment record.
6) Also, major considerations are things such as the laws of your state, as well as your
prognosis of your ability to repay the debt at some point in the future. Will you have more
money to put toward the problem in the near future, or is this as good a shot as you're
likely to get?
[text omitted] ...The point for you to remember is that you don't have to (and you won't)
win them all. Just a portion agreeing to a settlement will allow you to turn things around.
And the truth is that most types of unsecured accounts will change the way a debt is
reported and treat a partial payment as a full settlement. This includes: department store
cards, credit cards, medical bills, personal loans, collection accounts, student loans,
amounts remaining after foreclosure or repossession, and bounced checks.
A Guide to Business Credit for Women, Minorities, and Small Businesses
------------------------------------------------------------------------
A Guide to Business Credit for Women, Minorities, and Small Businesses
[Graphic Omitted]
The need for financing is a critical and perennial concern for the
owners of small businesses. Indeed, few things are as crucial to the
health of a small business operation. Many small businesses are launched
by the personal resources of their owners. But they can quickly reach
the stage where the owner must look to the credit market for financial
help in expanding operations. The banking industry is an important
source of working capital. However, entrepreneurs may not realize that
applying for commercial credit is a more customized process than
obtaining consumer credit, and requires a great deal of preparation by
the business applicant. This brochure may help to de-mystify the process
and improve your chances of getting the credit you need.
Types of Loans
Banks and other financial institutions can assist you by providing
funds through personal or commercial credit. Examples of personal credit
include automobile loans, credit cards, and home mortgages. Commercial
credit includes business loans; here are some of the options:
Short-term loans are one of the most common types of business loans
and are usually for less than one year. They can provide interim working
capital for a business temporarily in need of cash, and are typically
repaid in a lump sum when inventory or accounts receivable are converted
into cash.
Intermediate-term loans are often used for a business start-up, the
purchase of new equipment, expansion, or an increase in working capital.
The maturity dates range from one to three years.
Long-term loans generally are made for major capital improvements,
acquiring fixed assets, or business start-ups. The term of the loan runs
for periods of three to five years and is usually based in pan on the
life of the asset financed. Repayment is usually made in monthly or
quarterly installments.
A line of credit offers you the ability to borrow money repeatedly,
up to your credit limit, without having to reapply. A line of credit is
particularly important to businesses that experience seasonal
fluctuations. The lender generally will perform a review once a year, at
which time the borrower is asked to provide updated financial
statements.
The Credit Application Process
Applying for commercial credit can be tedious. It calls for more
documentation than you might initially have expected and certainly a lot
more than when you apply for consumer credit. For lenders, extending
credit to an entrepreneur usually means customizing the loan to suit the
credit needs of that business. So don't be disheartened by the amount of
paperwork needed to accompany the application. Instead, be prepared!
Among the best assets you can bring to the lender is a well
thought-out and documented business proposal. You need to clearly state
the purpose of the loan (will the money be used for temporary working
capital, buying equipment, or expanding facilities); the amount of funds
needed and for how long; and a repayment schedule. Your business
proposal should include the following information:
* business description that tells the nature of the business,
describes the product and its market, identifies its customers and
competition.
* personal profile that outlines the background and experience of
each of the principals in a resume.
* proposal that states the type of loan requested and its purpose.
* business plan that outlines your corporate strategy. for the next
three to five years; it will aid you and the lender in determining
whether the business will generate the cash flow needed to repay
the loan.
* repayment plan that tells how you propose to repay the loan or
outlines a repayment schedule. The lender will be expecting you to
repay the borrowed funds from the profits produced by the business.
As a contingency, you might need to develop a plan on how you would
repay the loan if the profits alone turned out to be inadequate.
* supporting documentation will include copies of pertinent papers
that support the information contained in your loan proposal--for
example, a lease, certificate of incorporation, partnership
agreement, letters of reference, contracts, invoices or vendor
quotes.
* collateral that you will use to secure the payment of the loan.
Collateral can include business and personal assets such as
inventory, equipment, and accounts receivable or real estate,
stocks, bonds, and automobiles.
* financial statements, both personal and for the business. The
business financial statement should be provided for the last three
to five years of operation including a year-to-date interim report.
It should contain a balance sheet showing business assets and
liabilities, and a profit-and-loss statement showing revenues and
expenses. The lender uses this information to calculate a
debt-to-worth ratio for the business. Be prepared to provide copies
of tax returns for the business for this same period.
The personal financial statement should list your assets and your
liabilities. Identify the names in which title to each asset is
held and its fair market value. You should be prepared to provide
copies of your personal tax returns. You may be asked for a list of
credit references. Lenders will check your personal as well as your
business credit rating.
Lenders will carefully examine your financial statements and
business projections. As a borrower, you must be fully prepared to
answer questions about them.
* personal guarantees of the owners or other principals usually are
required, even from an established business. The lender also may
request another party's guarantee such as a cosigner or a surety,
or may request a government guarantee from the U.S. Small Business
Administration or other government agency.
In addition to the personal guarantee that you give, under the
Equal Credit Opportunity Act the lender is allowed to require
another person's guarantee should your application fail to meet the
lender's standards of creditworthiness. If all or most of the
assets listed on your personal financial statement are owned
jointly with your spouse, or with someone else, the lender is
likely to require such a guarantee, But the lender may not require
that your spouse be the guarantor,
In the case of secured credit, the lender is allowed to obtain a
spouse's signature on certain documents when the applicant offers,
as security for the loan, property that the two own jointly, In
this case, the spouse or other co-owner may be asked to sign
documents--such as a mortgage or other security agreement--that
would be necessary under applicable state law to make the property
available to satisfy the debt.
Sources of Technical Assistance
Before you approach a lender, you might want to seek the advice of
another, more experienced "set of eyes" to review your business
proposal, particularly if you are a first-time borrower. By doing so,
you'd be getting the loan package in shape to make it easier for the
lender to reach a favorable credit decision. There are some business
support groups whose members could counsel you on how your package
looks. A qualified counselor might even discover that you really don't
need more money, and instead suggest better inventory control, improved
marketing techniques, or other changes that could actually solve your
growth problems. One source of counseling available to small businesses
is the Service Corps of Retired Executives (SCORE), which is sponsored
by the U.S. Small Business Administration. Others might include
accountants and financial advisers.
Once you are satisfied that your proposal is in good shape to
present to a lender, set up an appointment to discuss your application.
You will find that the lender can also be an excellent source of
business and financial counsel.
If Your Application Is Not Approved
Most lenders, banks especially, are conservative in granting
business loans. Given the obligation to their stockholders and
depositors, they need to be sure there's a good chance the loans they
make will be repaid.
If your application for credit is not approved, find out the
reasons why. Some of the reasons that lenders often give for denying a
business loan include, for example, insufficient owner's equity in the
business; lack of an established earnings record; a history of slow or
past-due trade or loan payments; or insufficient collateral. Finding out
the reasons may help you qualify the next time you apply.
The lender will keep you informed about the status of your
application. If you are considered a "small business" (when your
business revenues are $1 million or less, or when you are applying to
start up a business), a lender has 30 days to let you know, either
orally or in writing, whether or not you get the loan. The 30-day period
begins after the lender has received all of the information needed to
evaluate your credit request. If your application is denied, the lender
must give you either:
* a written statement of the reasons for denial, or
* a written notice telling you of your right to obtain the reasons in
writing. This notice may be given to you during the application
process or at the time of the denial.
The lender also will keep for one year the records relating to your
application.
Different rules apply for larger businesses (those with more than
$1 million in revenues}. Within a reasonable period of time after
getting all the necessary information on which to base a decision, the
lender must decide and let you know whether or not you get the credit.
Then you'll have 60 days in which to ask for a written statement of the
reasons why you were denied credit; this is important to remember
because the lender need not notify you of this right. The creditor will
keep records of your application for at least 60 days after telling you
of the credit decision. If you request that records be kept longer, or
ask for a written statement of the reasons for denial, records will be
kept for one year.
Equal Credit Opportunity Act
Obtaining credit can be a difficult process for any business owner
and especially for first-time borrowers. But keep in mind that different
lenders have different standards; if you did not meet the standards of a
particular restitution, you may still qualify elsewhere. If you have a
full understanding of why the initial lender didn't approve your
application, with time and more attention to these areas, you can
improve your proposal as a result and may succeed the next time you
apply.
Women and minority applicants may be concerned that they have
received less favorable treatment which is unrelated to their
creditworthiness. All business applicants have certain protections
against unlawful discrimination under the Equal Credit Opportunity Act.
The Act makes it illegal for lenders to deny your loan application,
discourage you from applying for a loan, or give you less favorable
terms than another applicant because you are a woman or a minority group
member.
Under the law, a lender may not take factors such as sex, race,
national origin, or marital status into account.
In addition, the lender may not ask for information about your
spouse unless your spouse has some connection to the business, or unless
you are relying on your spouse's income to support your credit
application or relying on alimony, child support, or separate
maintenance payments to establish creditworthiness. But the lender may
ask you for information about your spouse if you are living in, or you
are relying for security on property located in, a community property
state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas,
Washington, or Wisconsin).
Whether your business is large or small, if you are not granted the
credit, be sure to discuss any questions you may have with the lender.
If You Need Help
If you are not granted credit by the lender and you believe the
lender may have acted unlawfully, you can seek further assistance from
the regulatory agency that supervises the institution. A list of some of
the agencies is contained in this brochure for your reference. If it
becomes necessary to seek legal assistance, the Act provides some
remedies. If you have been denied credit because of unlawful
discrimination and are able to prove it, courts may award actual damages
and in some circumstances may impose punitive damages against the
lender. If a lawsuit alleging discrimination is successful, the court
also may award court costs and attorney fees.
Federal Enforcement Agencies
All creditors are subject to the Equal Credit Opportunity Act
(ECOA) and Regulation B (issued by the Federal Reserve Board), which
contains specific rules governing credit transactions. The following is
a list of the federal agencies that enforce the ECOA and Regulation B
for particular classes of financial institutions. Any questions
concerning a particular financial institution should be directed to its
enforcement agency.
State Member Banks of the Federal Reserve System
Division of Consumer and Community Affairs
Board of Governors of the Federal Reserve System
20th & Constitution Avenue, NW
Washington, D.C. 20551
(202) 452-3946
Non-Member Federally Insured Banks
Office of Consumer Affairs
Federal Deposit Insurance Corporation
550 Seventeenth Street, NW
Washington, D.C. 20429
(800) 424-5488
(202) 898-3536
National Banks
Compliance Management
Office of the Comptroller of the Currency
250 E Street, SW
Washington, D.C. 20219
(202) 874-4428
Federal Savings Association
Consumer Programs Division
Office of Thrift Supervision
1700 G Street, NW, Fifth Floor
Washington, D.C. 20552
(202) 906-6237
Small Business Investment Companies
U.S. Small Business Administration
409 Third Street, SW
Washington, D.C. 20416
(202) 205-6751
Federal Credit Unions
Office of Consumer Programs
National Credit Union Administration
1776 G Street, NW
Washington, D.C. 20456
(202) 682-9640
Finance Companies and Other Creditors Not Listed Above
Division of Credit Practices
Bureau of Consumer Protection
Federal Trade Commission
Washington, D.C. 20580
(202) 326-3224
Alternative Sources of Capital
The U.S. Small Business Administration (SBA), the federal agency created
specifically to assist and counsel small businesses, suggests the
following sources of capital in addition to banks:
Friends, Relatives, Individuals
Savings and Loan Associations Insurance Companies
Finance Companies
Mortgage Companies
Small Business Investment Companies
Venture Capital Firms
State Government Financing Sources
Pension Funds
Government Agencies (such as SBA)
Private Foundations
To request additional copies of A Guide to Business Credit for
Women, Minorities, and Small Businesses, please send your name, address,
and the number of copies requested to Publications Services, Board of
Governors of the Federal Reserve System, Washington, D.C. 20551.
My credit card debt is consuming my life. How can I cut credit card costs?
If you have more than one card, pay down the balances with the highest interest rates and
then use (or obtain) a card with a low rate. Because there is great competition among
credit card issuers, you might get a rate reduction simply by calling your current bank and
asking.
I can't afford the minimum payment required on my statement. Can I pay less?
Most card companies insist that you make the monthly minimum payment, which is usually
2%-2.5% of the outstanding balance. If you can convince the card issuer that your
financial situation is desperate, the issuer may cut your payments in half. In some cases,
the issuer may waive payments altogether for a few months. This courtesy is usually
extended only to people who have never been late with payments.
Bear in mind that paying nothing or very little on your credit card should be a temporary
solution only. The longer you pay only a small amount, the quicker your balance will
increase due to interest charges.
My checking account and credit card are from the same bank; can the bank take money
out of my checking account to cover my missed credit card payments?
No. A bank that takes money out of a deposit account to cover a missed credit card
payment violates the federal Truth in Lending Act. You can sue for damages--the amount
taken out of your account and any other damages you suffer, such as lost interest or
bounced check fees.
I plan to cancel all my credit cards but one. Any advice on which one to keep?
If you don't carry a monthly balance, keep the card with no annual fee, but make sure it
has a grace period. If you carry a balance each month, get rid of the cards that come with
the worst of the following features:
•High interest rates.•Unfair interest calculations. Avoid cards that charge interest on the
average daily balance, not the balance due. Here's why. Let's say you pay $1,200 of your
$1,500 balance in January. A bank using the average daily balance will charge you in
February interest on the $1,500 average daily balance from January, not on the $300 you
still owe.•No grace periods. This means you pay interest from the time of purchase until
the time of payment even if you pay your balance in full.•Nuisance fees. Get rid of cards
with late payment fees, over-the-limit fees, inactivity fees, fees for not carrying a balance
or for carrying a balance under a certain amount, or a flat monthly fee that's a percentage
of your credit limit.
My wallet was stolen. Will I have to pay the charges the thief made using my credit cards?
No. Federal law limits your liability for unauthorized charges made on your credit or
charge card after it has been lost or stolen. If you notify the card issuer within a reasonable
time--usually 30 days--after you discover the loss or theft, you're not responsible for any
charges made after the notification, and are liable only for the first $50 for charges made
before you notified the card issuer. Rarely will a card issuer even charge you the $50.
I purchased an item using my credit card and it fell apart. Can I refuse to pay?
Maybe. Under federal law, you must first attempt in good faith to resolve the dispute with
the merchant. If that fails, you can withhold payment only if the purchase was for more
than $50 and was made within the state you live in or within 100 miles of your home.
(This limitation applies only if you used a card not issued by the seller, such as a
MasterCard. There is no $50, 100-mile or in-state limitation if you use the seller's card,
such as your Sears card.)
The 100-mile limitation is easy to calculate when purchases are made in person. But if you
order through the mail or over the telephone, the law is unclear as to where the purchase
took place. You can claim that the purchase was made in the state in which you live (even
if the catalogue company is on the other side of the country) because you placed the order.
You have to hope the seller doesn't fight you.
My credit card billing statement has an error. What should I do?
Immediately write a letter to the customer service department of the card issuer. Give your
name, account number, an explanation of the error and the amount involved. Enclose
copies of supporting documents, such as receipts showing the correct amount of the
charge. You must act quickly--the issuer must receive your letter within 60 days after it
mailed the bill to you.
Under the federal Fair Credit Billing Act, the issuer must acknowledge receipt of your
letter within 30 days, unless it corrects the bill within that time. Furthermore, the issuer
must, within two billing cycles (but in no event more than 90 days), correct the error or
explain why it believes the amount to be correct. If the issuer does not comply with these
time limits, you don't have to pay $50 of the disputed balance.
During the two-billing-cycle/90-day period, the issuer cannot report the amount to credit
bureaus or other creditors as delinquent. The issuer can charge you interest on the amount
you dispute during this period, but if it later agrees that you were correct, it must drop the
interest accrued.
Must I give my phone number when I use a credit card?
Several states, including California, Delaware, Georgia, Kansas, Massachusetts,
Minnesota, Nevada, New Jersey, New York, Oregon, Pennsylvania, Rhode Island and
Wisconsin, bar merchants from recording personal information when you use a credit card.
Furthermore, merchants agreements with Visa and MasterCard prohibit them from
requiring a customer to furnish a phone number when paying with Visa or MasterCard.
Nevertheless, many still ask.
About ...Bankruptcy
------------------------------------------------------------------------
About ...Bankruptcy
This Life AdviceSM pamphlet about Bankruptcy was produced by
the MetLife Consumer Education Center and reviewed by the American
Bankruptcy Institute and the Executive Office for United States
Trustees, U.S. Department of Justice. Editorial services provided
by Meredith Custom Publishing.
Each year more than 800,000 Americans file for protection under
the federal bankruptcy laws, according to the American Bankruptcy
Institute. Some are credit abusers or are financially irresponsible.
But average working families who try to pay all of their bills can find
themselves in financial trouble, too. The sudden loss of a job, medical
bills, a divorce or even a natural disaster can quickly wipe out a life's
savings. For many, bankruptcy provides a second financial chance.
Bankruptcy is usually used as a last resort, after other attempts
to solve a financial crisis fail. You may want to talk with a credit
counselor or an attorney to see if you really need to file bankruptcy,
or if an agreement can be reached with your creditors.
What Is It?
Bankruptcy can relieve the honest but unfortunate debtor from
the pressures of excessive debt by providing a fresh start. It allows
you to discharge much of your debt or allows you time to get back on
your feet without harassment by creditors. The bankruptcy laws also
benefit creditors by providing a method for them to obtain at least partial
payment of a debt.
For many, making the decision to file for bankruptcy is difficult.
You may think bankruptcy is a sign of failure and an indication that
you can't manage your own affairs. In truth, most people who file for
bankruptcy intend to pay their bills but can't. By filing for bankruptcy,
you can start again with a clean slate, free of the stress and depression
that result from being just one step ahead of the bill collector.
At the same time, the decision to file bankruptcy should be carefully
considered. It is a Federal court proceeding which can affect your legal
right to keep or to use your property. Once you start a bankruptcy case,
it may be impossible to stop.
There are two main types of bankruptcy available to individuals.
In Chapter 7, your nonexempt assets are sold to pay creditors while
most of your debts are discharged. In Chapter 13 or Chapter 11, you
prepare a reorganization plan to pay off creditors. Once you file a
bankruptcy petition, an automatic stay prevents creditors from starting
or continuing most legal proceedings against you.
Chapter 7
In Chapter 7 bankruptcy, many of your assets are sold by an
appointed trustee, who then makes partial payments to your creditors.
You have the right to retain an interest in certain partially exempt
assets, such as your residence, car, clothing, household appliances
and furnishings, life insurance, pensions and tools of your trade. You
may usually choose either the exemptions provided for in the Bankruptcy
Code or those allowed under your state law. Creditors do retain the
right to any collateral you have pledged to secure a loan.
The first step in bankruptcy is to file a petition and schedules at
the clerks office of the federal bankruptcy court. Your petition must
include a list of all creditors, the sources of your income, a list of all
real and personal property, and a detailed list of your living expenses.
Some of the documents you will need include the following.
* Deeds, mortgages, contracts on your home and mortgage statements.
* Any papers relating to past bankruptcies.
* Copies of tax returns for the past two years.
* All legal papers, summonses, complaints and notices of attachment,
execution or garnishment.
* Credit card bills, medical bills and any other documents regarding
outstanding debt.
* Statements and passbooks for savings or checking accounts for the
past year.
* Student loan papers.
You can obtain the forms to file for bankruptcy from the court clerk.
You'll find the number of the local bankruptcy court in the federal government
listings in the white pages of your phone book. You must pay the appropriate
fee (about $175) at the time you file your petition. Under certain
circumstances, the court may allow you to pay the fee in installments.
In all but the most basic of cases, it is usually advisable to hire
an attorney. Fees may range from $400 to $1,000 or more, depending on
the complexity of your case. Be sure to discuss an attorney's fees up front
and ask whether you can pay in installments.
In a straightforward proceeding, the entire procedure usually takes
four to six months. You can file for Chapter 7 bankruptcy only once every
six years, and notice of the filing will usually remain on your credit
report for at least 10 years. Also note that although your debt may be
discharged, anyone who has co-signed a loan with you will remain responsible
even after your bankruptcy.
Chapter 11
Chapter 11 bankruptcy is generally used to reorganize a business, although
individuals are also eligible. This type of bankruptcy allows a business to
continue operating while repaying creditors through a court-approved plan.
Chapter 13
If you have a regular income, Chapter 13 bankruptcy provides a method
for repaying your debt over a period of time, according to a court-approved
plan. The period of time allowed ranges from three to five years. Only an
individual with unsecured debts of less than $250,000 and secured debts
of less than $750,000 is eligible.
To file Chapter 13, you must file the appropriate schedules and
petitions with the bankruptcy court and pay the filing fee. You must also
file a proposed plan of repayment with your original petition or within
the next 15 days. A trustee will be appointed to supervise your
performance, to make regular payments to your creditors and to provide
the court and other parties with information about your finances.
Nondischargeable Debts
Certain debts cannot be discharged through a bankruptcy proceeding.
These include most taxes, alimony and child support, student loans and
some property settlements. Other nondischargeable debts result from fraud,
willful or malicious injury, certain fines or penalties, and claims
incurred from driving under the influence of alcohol or drugs.
Will It Ever End?
A bankruptcy filing stays on your credit record for seven to 10 years,
but it need not be a permanent handicap. In fact, there are laws that
forbid discrimination against persons who have declared bankruptcy. For
example, you may not be denied a job, be denied or evicted from public
housing or be denied a drivers license just because you filed for bankruptcy.
The emotional impact on you and your family may take some time to heal.
You may want to seek emotional support by contacting a professional
counselor or clergy member or discussing your problems with a friend or
family member.
Making a Fresh Start
Bankruptcy has indeed tarnished your credit report, but it is still
possible to gain renewed confidence from creditors. You can typically
obtain credit if you demonstrate a consistent employment record and signs
of financial rehabilitation. Start by opening a savings account and
obtaining a secured credit card. Make the payments on time to build a
positive credit profile.
During your rebuilding period, it is important to check your credit
rating often to make sure you are getting credit for your good deeds.
Credit bureaus are required to provide a free copy of your credit report
if you are denied credit. Some credit bureaus also provide a free copy
once a year. Be prepared to provide relevant information, including your
Social Security number, date of birth and addresses for the past five years.
Contact the following companies to order a copy of your credit report:
Experian (previously TRW)
National Consumer Assistance Center
P.O. Box 2104
Allen TX 7501-2104
Credit Bureau, Inc. Trans Union
831 S. Main St. P.O. Box 390
Salinas, CA 93901 Springfield, PA 19064-0390
Once you receive your credit report, look it over carefully. Are your
name, address and Social Security number correct? Do the lines of credit
listed belong to you? If you find errors, notify the credit bureaus in
writing and include any backup materials such as canceled checks.
A Final Word
Again, before declaring bankruptcy you may want to seek credit
counseling or talk with an attorney and try to reach out-of-court
agreements with your creditors. For more information see the Life
AdviceSM pamphlet Having Credit Problems.
This pamphlet, as well as any recommended reading and reference
materials mentioned, is for general informational purposes only. It is
issued as a public service and is not a substitute for obtaining professional
advice from a qualified person, firm or corporation. Consult the appropriate
professional advisor for more complete and up-to-the-minute information.
Metropolitan Life Insurance Company
New York, NY
HOW TO GET A VISA/MASTERCARD WITH NO CREDIT CHECK
------------------------------------------------------------------------
SHAPING YOUR APPLICATIONTO FIT THE RIGHT PROFILE
Creditors approve credit to those people who most closely match the right profile. They
arrive at those conclusions by assigning point values to various items of information that
are included either on your credit application or in a credit report.
Credit card companies like scoring systems because as a large volume creditor, they can
replace trained credit personnel with a relatively few employees who can quickly total
number columns and determine if an applicant's point values add up to the right score.
Scoring, of course, is done for one reason. A creditor just wants to know that the odds are
high he will get his money back. Scoring systems are fine for those people who fit right
into the right profile, but what about those who don't but could pay off their monthly
obligations just as easily and reliably as the next person? If you are one of those people
who just doesn't "fit the mold," you'll simply have to make a few adjustments in your
application so that you do fit the scoring profile of what a creditor is looking for in a final
total.
HOW CREDITORS RATE AN APPLICATION
The first thing you should know is that every system is different. That in itself can work to
your advantage. You could be rejected by one company's scoring system and approved by
another. One creditor's system will give you many points for a good ancwer, and totally
ignore a question that gives a negative answer. Another creditor can simply reverse the
process.
Keeping in mind that creditors use different scoring systems, we will list only the most
important questions and briefly review how a response can affect your total score. The
following categories are listed from the highest to lowest points awarded each response.
RESIDENCE - The longer you have lived in one place the better. Stability is given high
points.
HOME OWNERSHIP - The best possible housing situation is to own your own home,
even if itt is mortgaged. The worst is: renting an unfurnished apartment, living with
parents, living in a trailer or motel.
FHA ASSUMABLE HOME LOANS
President Bush signed legislation making credit checks for home mortgages mandatory
after December 1989. Prior to that date however, all loans are fully assumable without a
mandatory credit check. There are four important factors that will allow you to purchase a
home without a credit check and with a minimal down payment:
1) As a home buyer, your application can be pre-approved and your loan without a credit
check provided: a) The original VA loan was granted March 1988, or b) The original FHA
loan was granted prior to December 2) If the original home buyer made a small down
payment on the sale price which was used primarily for closing costs and consequently did
not buy any equity at that time. 3) If most of the payments made by the original owner
were applied to interest during the first 4-5 years and very little went towards the
principal. In that event, very little equity would result from making payments. Or, if there
was any equity it would probably have been reduced by depreciation or other home
market conditions. 4) The last factor would be low- or no-equity conditions that resulted
from low inflation and other economic conditions that can decrease the value of property.
UNDERSTANDING WHAT EQUITY MEANSAS A BUYING FACTOR
In order to understand the buying significance of equity you must understand what it
means. Equity is the difference between what real estate sells for (market value), and the
payoff amount of the loan to a lender on that property. In other words, if you own a home
with a market value or $100,000, but you owe the bank $99,000, your eequity is $1,000.
In tens of thousands of cases, VA and FHA homes can be purchased with little or no
down payment because no equity has been built up.
TENS OF THOUSANDS OF HOMESARE AVAILABLE - INCLUDING YOURSS!
If you have been dreaming about owning your own home someday, Dream No More!
Right now at this very moment there are tens of thousands of homes for you to choose
from that can be purchased with no credit check and no down payment. or with a very
modest down payment.
Sounds incredible doesn't it? But remember, the only reason any seller requires a down
payment in the first place is usually to recover the equity in their home. A small amount of
equity requires a small down payment. No equity means no down payment!
DEAL WITH MOTIVATED SELLERS
Your objective as a smart buyer should always be to buy real estate with little or nothing
down. Even if a seller has equity, you can work out an arrangement that is to your benefit.
For example, a seller may agree to carry all the paper on the transaction. This doesn't
mean that the seller will receive no down payment where there is an equity consideration.
What it does mean is that you shouldn't have to come up with cold cash out of your
pocket.
Extending credit to customers is the way creditors make money. If you convince them you
are a good risk they will give you what you want. Basically, there are two ways you can
achieve that goal.
1) You can bypass the normal scoring methods that are used by impressing the person
processing your application that you are sincerek reliable, stable, and have the ability to
make monthly payments on a loan or credit card account. 2) You can tailor your answers
to the application's questions and in that manner fit into the right scoring mold of what a
good credit risk is, according to the formula they are using.
That doesn't mean you should lie on your application. It simply means you should be
aware that being compatible with certian sterotypes will work in your favor. Remember, a
creditor can still verify the information you list in an application. Still, many people will
twist the truth to put themselves in a favorable position. For example:
1) Some applicants will list their parent's, a friend's, or a relative's address as their own
residence and indicate they have lived there for years, knowing it probably won't be
checked. 2) Provided an applicant has a friend or employer who will go along with them,
they can list a position and salary they don't really receive. Then when the creditor calls to
verify employment the friend will support what the applicant has claimed to be true. 3)
Another way applicants instantly increase their salary is to set up their own corporation.
After issuing themselves private stock with an inflated value, they list the stock as part of
their salary.
MORE HOT TIPS ON HOW YOU CANSTACK THE ODDS IN YOUR FAVOR!
1) If you don't have a telephone get one installed. The alternative is to make an
arrangement with the telephone company and a friend or relative, to have your name listed
with their phone. 2) If you have more than one job, list the one that provides you with the
greatest income. 3) Add up your income from all sources and place the total in your gross
income listing. Be prepared to submit a supplement to your application if they want to
verify your income with your employer.
4) Many banks will have a list of "good" and "bad" reasons for borrowing money. Unless
you are applying for a secured loan, you don't have to spend the money for the reason
specified. "Good" reasons include home improvement, education, loan to establish credit,
medical treatment for you or your family, and secured loans for a home, car, boat, and
other properties. "Bad" reasons include loans that create another obligation such as that
created when you borrow money for a down payment and then have two payments to
make; money to pay aa fine or penaltly; money to consolidate debts, unless you are doing
it to get lower interest rates; an unnecessary luxury item; money to finance politics; and
money that you will loan to someone else. Use a little common sense in determining what
type of loan a creditor may consider bad.
5) Banks use dependent figures to determine what your living costs are. If you have more
than two dependents you should indicate how they earn their own way or are self-
supporting.
6) If you don't own your own home, counteract this by showing how stable you are. For
example, even though you have only rented in a new location for a relatively short time,
you lived at your last residence for many years. You moved to improve yourself in some
way.
7) Even job changes can be counteracted if each change increased your salary and
improved your position.
8) Don't ever let a creditor guess as to whether or not you can afford the extra obligation
you are asking for. Make it obvious by the amount of your income. If you have more
income sources than just your salary, include those amounts.
ALWAYS BE PERSISTENT AND NEVER GIVE UP!
If you complete an application and are still rejected, the very first thing you should do is
be persistent and never give up. There are many reasons why a person may be turned
down for credit, but whatever the reason, you have a legal right to ask a creditor what
their reason was.
By knowing what some of the main reasons are for denying credit you can put yourself in
a position whereby you can make necessary adjustments and avoid negative effects in
advance. If you are turned down, you can then of course concentrate on those points
when you reapply.
When you are dealing with creditors you will know who is the cooperative sort, and who
is not. If an unsecured loan does not appear imminent, turn the conversation to a secured
loan. Then all you do is deposit an amount into savings account to serve as collateral for
the amount of credit you want to secure. In some cases the creditor may take personal
property as security. If you go to one creditor and it's clear he has no imagination to deal,
go to another who is willing.
CONSIDER ASKING SOMEONE YOU KNOW TO CO-SIGN
A co-signer is soneone who generall has better credit than the person he is co-signing for.
He is also the person a creditor will go after first in the event you do not pay off you debt.
Why? Because the know that co-signers don't want their credit ratings ruined and will
quickly settle the obligation.
If you are trying to establish or rebuild credit, co-signers can help you achieve that goal.
Naturally you wouldn't need a co-signer every time you apply for credit. After paying off
one obligation with a co-signer, it should be much easier to acquire more credit on your
own.
Co-signers are usually friends or relatives. When you find someone willing to help they
should be offered some compensation agreeable to both of you. Your application for
credit will be approved primarily on the strength of your co-signer's credit.
HOW TO GET A VISA OR MASTERCARD
The tips and techniques described in this report are meant to increase the odds for anyone
who is absolutely certain they cannot get a Visa/Mastercard through normal channels. You
should make every attempt to clean up your credit report by removing negative items and
replacing them with positive items. If you have no credit at all, open an account at a local
department store. After a few months apply for your bank card. If you are rejected, find
out why and correct the problem. If that doesn't work, cultivate a relationship with your
banker. Open other accounts that are easier to obtain. Increase your income. Buy a home.
Make yourself a better credit risk on your credit report. Ask a friend or relative to co-sign.
After paying off that debt, reapply on your own. Or, the fastest and easiest way to open a
Visa or Mastercard account in your own name, is through a secured account.
SECURED CREDIT CARDS
Secured Visa and Mastercard bank cards are issued by savings and loan associations
throughout the U.S. The lender will ask you to open a savings account. The funds placed
into the savings account are frozen as long as there is an outstanding balance on the credit
card. The savings account acts as security against non-payment of charges made against
the credit card. Then, in the event a cardholder doesn't pay, funds from the frozen account
can be used to pay off the debt. This method completely reduces any risk to the lender.
Requirements are often lowered by lending institutions that have this program. So if you
couldn't obtain a card through your regular bank, chances are you will receive one through
a secured credit card program without a credit check.
The Card You Pick Can Save You Money
------------------------------------------------------------------------
Shop, The Card You Pick Can Save You Money
[Graphic Omitted]
The Card You Pick Can Save You Money
CONTENTS
Introduction 1
Definition of Terms 2
Variables and Impact 3
Survey Results 8
as of January 31, 1995
Board of Governors of the Federal Reserve System
To obtain additional copies of this or any other brochure
published by the Federal Reserve System, contact:
Publications Service, Board of Governors of the Federal
Reserve System, Mail Stop 127, Washington DC 20551.
INTRODUCTION
SHOP. Smart consumers do comparison shopping when looking for
credit such as a mortgage or an auto loan. It is also a good practice
to engage in when shopping for a credit card plan, because the choices
you make could save you money.
SHOP among the various plans of credit card issuers contained in
this brochure. Compare them with cards you already have and with offers
you receive in the mail for the terms that best suit your spending and
repayment habits. The costs and terms of the plan or plans can make a
difference to how much you pay for the privilege of borrowing.
In the disclosure form from the credit car issuer, key credit terms
to consider are the annual percentage rate (APR), annual fee, and grace
period. Also consider credit terms such as cash advance fees, late
payment charges, and over-the-limit fees.
Take these items into consideration along with how you pay your
bills each month, whether in full or only partially. You could save
yourself some money.
DEFINITION OF TERMS
ANNUAL FEE A flat, yearly charge similar to a membership fee.
ANNUAL A measure of the cost of credit that
PERCENTAGE expresses the finance charge, which includes
RATE (APR) interest and may also include other charges, as a yearly
rate.
FINANCE CHARGE The dollar amount you pay to use credit. Besides
interest costs, it may include other charges associated
with transactions such as cash advance fees.
GRACE PERIOD A time, about 25 days, during which you can pay your
credit card bill without paying a finance charge. Under
almost all credit card plans, the grace period only
applies if you pay your balance in full each month. It
does not apply if you carry a balance forward. Also,
the grace period does not apply to cash advances.
INTEREST RATE Interest rates on credit card plans change over time.
Some are explicitly tied to changes in other interest
rates such as the prime rate or the Treasury Bill rate
and are called variable rate plans. Others are not
explicitly tied to changes in other interest rates and
are called fixed rate plans.
VARIABLES AND IMPACT
Calculation of Finance Charge
It is helpful to know how the credit card issuer will calculate the
finance charge on your credit card bill. To determine the finance
charge, an issuer will apply a periodic rate to a balance. Card issuers
use different balance calculation methods such as: the average daily
balance method, the previous balance method, and the adjusted balance
method.
With the average daily balance method (the most common method), the
issuer calculates the balance by taking the amount of debt you had in
your account each day during the period covered by the billing statement
and averages it. With the previous balance method, the issuer uses the
balance outstanding at the end of the previous period--that is, the
period prior to the one covered by the billing statement. With the
adjusted balance method, the balance is derived by subtracting the
payments you've made from the previous balance.
Combinations to Consider
Smart consumers find the best deal for their budgets and repayment
style. For example, if you always pay your monthly bill(s) in full, the
best type of card is one that has no annual fee and offers a grace
period for paying your bill without paying a finance charge.
No annual fee + grace period = best deal [Graphic Omitted]
If you don't always pay off the credit card balance monthly, be
sure to look at the periodic rate that will be used to calculate the
finance charge.
[Graphic Omitted]
Credit card issuers that offer variable interest rate plans derive
the rate to be charged to the consumer by using a formula.
Two of the most common formulas are:
+ Margin Index or
= Variable rate
[Graphic Omitted]
x Multiple
Some of the more common indexes used by credit card issuers are the
prime rate, the one-, three-, or six-month Treasury Bill rate, the
federal funds or Federal Reserve discount rate. Most of these indexes
can be found in the money or business section of major newspapers. Once
the interest rate corresponding to the index has been identified, the
issuer then adds a number of percentage points, the "margin," to this
index rate to calculate the rate charged.
In some cases, the issuer might elect to use another formula to
determine the rate to be charged to the consumer. The issuers multiply
the index or index plus the margin by another number, "the multiple," to
calculate the rate charged.
Possible Savings
The following is an example of the annual savings you could achieve
by switching to a credit card plan with a lower interest rate and no
annual fee.
ASSUMPTION In this example, the average monthly balance carried
forward equals $2,500, which is about the national average for consumers
with credit card debt.
PLAN DESCRIPTIONS:
Terms Plan A Plan B
Average monthly balance $2,500 $2,500
APR x .18 x .14
Amount paid in finance charges
annually $450 $350
Annual fee + $ 20 + $ 0
Total cost $470 $350
In this example, the total possible savings each year achieved by
selecting a credit card plan with a lower interest rate and not annual
fee is ($470 - $350) $120.
Credit Card Owner's Checklist
If you are applying for your first credit card or have several
cards already, here are some helpful tips you might want to follow in
shopping for a credit card.
1. Review all of the information about the plans.
2. Draft a list of desired features that best fit your needs and
rank them according to how you plan to use the card.
3. Call the institutions you've selected to verify the information
and to see if they have any other plans available.
4. If you are a current card holder and have a good credit rating,
see if the institution that your card will lower you current
rate...NEGOTIATE. [Graphic Omitted]
SURVEY RESULTS
Every six months the Federal Reserve System collects and published
a report on the terms of credit card plans offered by financial
institutions. This report includes information supplied by the largest
card issuers in the country, as well as any other financial institutions
that indicate to the Federal Reserve System that they would like to
participate in the report and submit information about their credit card
plans. The credit terms listed in this report are as of the date
indicated below and are subject to change. Consequently, readers are
encouraged to contact the credit card issuer for current rates and to
learn about their other credit card plans.
CODES USED IN THE CREDIT CARD PLAN LIST:
Availability Refers to availability of card to consumers
N = national
R = only in selected states
State abbreviation = only in state specified
Type of F = fixed
Pricing V = variable
T = tiered pricing, with different periodic rates
applying to different levels of the
outstanding balance. The rate shown applies
to the lowest of the balance tiers. 8
Grace Period Indicates that no finance charge will be imposed
for credit extended on purchase if
payment in full is received by the payment due
date after the end of the billing period in which
the purchase was made. Generally, a grace period
allows customers to avoid finance charges on
purchases if they always pay their credit card
bill in full by the due date of the bill. Grace
periods usually do not apply to cash advances,
which begin accruing interest from the day of
transaction.
Other Features Credit card issuers may automatically add
enhancements or other features in the plan without
charging extra fees. Enhancements can include
cash rebates, purchase protections, warranty
guarantees, travel accident or automobile rental
insurance, discounts on goods and services
purchased, and usage incentives such as frequent
flyer miles.
1 = rebates on purchases
2 = extension of manufacturer's warranty
3 = purchase protection/security
4 = travel accident insurance
5 = travel related discounts
6 = automobile rental insurance
7 = nontravel related goods or services
8 = credit card registration
9 = other
N.R. = not reported
Date of Survey The credit terms shown in this brochure were as of
January 31, 1995 9
INSTITUTION, Ann. Type Grc
Credit Card Plan % of In- per. Ann. Oth.
and Availability Rate Prcg dex days fee Ftrs. Telephone
ABBOTT BK
Mastercard,N 17.40 V 1 25 0 2,3,4,6 (800)288-6844
AFBA IND BK
AFBA Industrial
Bank Visa, Master
card,N 14.50 V 1 25 0 N.R. (800)776-2265
AMALGAMATED BK
CHICAGO
Gold Mastercard, 2,3,4,5,
N 13.00 V 1 25 0 6,7,8,9 (800)365-6464
AMERICAN EXPRESS
CENTURION BK 2,3,4,6,
Optima,R 15.50 V 1 25 25 9 (800)635-5955
AMERICAN GEN FNCL
CTR
The More Card
(Visa),N 19.80 F * 25 0 N.R. (800)828-6673
ASMOUTH BK OF AL
Classic Credit
Card,R 19.50 F * 25 15 N.R. (800)231-7493
ASSOCIATES NB DE
Mastercard & Visa,
N 19.80 F * 25 20 N.R. (800)533-5600
BANK IV KS NA
Visa,R 15.90 F * 25 25 1,8 (800)333-5221
BANK OF AMER NA
Visa Classic,R 11.65 V 1 25 18 N.R. (800)243-5562
BANK OF CA NA
Standard Master
Card,R 16.80 F * 30 15 4 (800)544-2920
BANK OF HI
Visa Classic
Card,HI 16.50 F * 25 15 2,3,4,6 (800)543-9611
BANK OF HOVEN
Bank of Hoven-
Visa,N 21.00 F * 25 39 N.R. (800)339-0128
BANK OF MISSISSIPPI
Mastercard,MS 18.00 F * 25 0 N.R. (800)680-2123
BANK OF NY DE
Mastercard,N 13.50 V 1 0 0 N.R. (800)942-1977
BANK ONE OF AKRON NA
Visa,OH 18.40 V 1 25 0 N.R. (216)372-1322
BANK ONE OF AZ NA
Standard Master
Card and Visa,R 16.25 V 1 25 25 2,3,4,9 (800)862-2427
BANK ONE CINCINNATI NA 10
Bank One Visa,OH 18.40 V 1 25 20 N.R. (513)985-5706
INSTITUTION, Ann. Type Grc.
Credit Card Plan % of In- per. Ann. Oth.
and Availability Rate Prcg dex days fee Ftrs. Telephone
BANK ONE CLEVELAND NA
Visa,OH 15.15 V 1 25 20 N.R. (216)352-5993
BANK ONE COLUMBUS NA
Visa/Mastercard
Classic Credit
Card,N 18.40 V 1 25 20 N.R. (614)248-3412
BANK ONE OF DAYTON NA
Visa Classic,N 18.40 F * 0 20 N.R. (513)443-2240
BANK ONE YOUNGSTOWN NA
Visa,R 16.90 V 1 25 0 N.R. (216)742-5018
BARNETT BK OF
BROWARD CITY NA
Classic Visa,R 14.40 V 1 25 0 4,9 (800)323-6276
BARNETT BK OF TAMPA
Classic Visa, FL 16.80 V 1 25 0 4,9 (800)323-6276
BAYBANK
Mastercard
Classic,N 16.80 V 1 25 21 3,4,8 (800)221-3393
BOATMENS CREDIT
CARD BK
Mastercard,R 17.80 V 1 25 0 4 (800)466-6420
BRANCH BKG&TC
Mastercard,R 18.00 F * 25 15 4 (800)476-4228
BROADWAY NB
Visa, TX 13.92 V 4 0 0 N.R. (210)283-6552
CAPITAL ONE BK
Visa,R 14.90 V 1 25 20 9 (800)933-5182
CENTRAL BK
Visa,R 18.00 F * 25 12 N.R. (318)362-8466
CENTRAL CAROLINA B&TC
Mastercard
Gold,N 9.00 V 1 25 20 4,6.9 (800)334-1073
CENTRAL FIDELITY NB
Mastercard,VA 15.60 F * 25 15 N.R. (800)388-5634
CHASE MANHATTAN BK USA
Classic Visa &
Classic Mastercard, 2,3,
N 19.80 F * 30 20 4,7,9 (800)441-7681
CHEMICAL BK
Standard Master 2,3,4,
Card/Visa,N 17.80 F * 25 20 5,7,9 (516)648-3355
CHEVY CHASE BK FSB 11
Visa/Gold,N 14.33 V 1 25 40 1.4 (800)937-5000
INSTITUION, Ann. Type Grc.
Credit Card Plan % of In- per. Ann. Oth.
and Availability Rate Prcg dex days fee Ftrs. Telephone
CITIBANK SOUTH DAKOTA NA
Citibank Classic 2,3,
Card,N 17.90 V 1 25 0 4,5,7 (800)950-5114
CITIZENS TC
Citizens Visa
Classic,N 14.50 F * 0 0 N.R. (800)455-5000
COLONIAL NB USA
Visa,N 13.26 V 1 25 30 3.4,6 (800)544-2028
COLORADO NB
Visa,R 17.40 V 1 25 12 N.R. (800)933-4433
COLUMBUS B&TC
Visa Classic,N 17.90 F 8 25 0 N.R. (800)487-5391
COMERICAN BK-DETROIT
Comerica Classic
Card,N 16.75 F * 25 15 4 (800)841-0012
COMMERCE BK NA
Special Connections
Visa/Mastercard,
R 16.50 V 1 25 0 4,9 (800)645-2103
COMMERCE BK OF OMAHA NA
Special Connections
Visa/Mastercard,
R 16.50 V 1 25 0 4,9 (800)645-2103
COMMERCE BK OF
SPRINGFIELD NA
Special Connections
Visa & Mastercard,
R 16.50 V 1 25 0 4,9 (800)645-2103
COMPASS BK
Mastercard,R 18.00 V 1 30 20 N.R. (800)239-5175
CORESTATES BK OF DE NA
Visa,R 17.80 V 1 25 20 N.R. (800)833-3010
CRESTAR BK
Visa Classic,N 15.90 F * 25 20 4,9 (800)368-7700
DIAL BK
Mastercard/
Visa,N 19.80 T * 25 20 N.R. (605)336-3933
EUROPEAN AMER BK
Visa,NY 17.70 V 1 25 0 N.R. (516)296-6028
FCC NB
First Card Visa 2,3,
Gold,N 18.40 V 1 25 0 4,6,9 (800)368-4535
FEDERAL SVG BK 12
Visa,N 9.72 V 8 25 33 N.R. (800)285-9090
INSTITUTION, Ann. Type Grc.
Credit Card Plan % of In- per. Ann. Oth.
and Availability Rate Prcg dex days fee Ftrs. Telephone
FIDELITY NB
Visa
Consumerscard,N 15.90 F * 25 25 9 (800)753-2900
FIDELITY TC
Mastercard, 2,3,4,
Visa,N 17.65 V 1 25 0 5,6,8 (800)323-5353
FIFTH THIRD BK
Select Visa,R 14.40 V 1 30 18 9 (800)972-3030
FIRST AL BK
Mastercard
(Classic),R 19.50 F * 25 15 N.R. (800)828-0893
FIRST BK SD NA
Visa,N 17.90 V 1 25 20 N.R. (800)285-8585
FIRST CITIZENS B&TC
Mastercard,NC 18.00 F * 25 15 4 (919)779-8540
FIRST CITIZENS B&TC OF SC
Mastercard,SC 14.88 F * 25 20 4 (803)733-2050
FIRST CONSUMERS NB
Mastercard,N 18.90 V 1 30 39 2,3,4 (800)876-3262
FIRST DEPOSIT NB 2,3,
Visa Gold,R 14.90 V 1 25 0 4,6,9 (800)227-6886
FIRST FIDELITY BK NA
Visa,R 17.30 V 1 25 15 1 (800)338-0644
FIRST FNCL BK FSB
First Financial 1,2,3,4,
Visa,N 17.80 F * 25 15 5,6,9 (800)472-7708
FIRST HAWAIIAN BK
Mastercard,HI 16.50 F * 25 15 4.6.7 (*00)847-4444
FIRST INTRST BK OF AZ NA
Visa Standard
Card, AZ 17.90 V 1 25 20 N.R. (800)955-5050
FIRST INTRST BK OF CA
Mastercard-
Standard,CA 17.50 V 1 25 20 N.R. (800)955-5050
FIRST INTRST BK OF NV NA
Mastercard-
Standard,NV 17.90 V 1 25 15 N.R. (800)955-5050
FIRST INTRST BK OF OR NA
Visa Standard
Card,OR 19.50 V 1 25 25 N.R. (800)955-5050
FIRST INTRST BK OF WA NA
Visa Standard
Card, WA 17.90 F * 25 18 N.R. (800)955-5050
FIRST NB OF ATLANTA
Wachovia Bank 13
Visa, N 11.40 V 1 25 39 4 (800)842-3262
INSTITUTION, Ann. Type Grc.
Credit Card Plan % of In- per. Ann. Oth.
and Availability Rate Prcg dex days fee Ftrs. Telephone
FIRST NB OF CMRC
Visa/Mastercard,
N 16.90 V 1 25 12 N.R. (800)826-3390
FIRST NB OF OMAHA
Visa,N 19.75 V 9 0 0 4,5,9 (800)688-7070
FIRST NB SD
Visa,SD 19.75 V 9 0 0 4 (800)688-7070
FIRST NH BK
Mastercard,R 16.90 V 1 25 20 4 (800)852-3719
FIRST OF AMER BK-IL-NA
National Gold
Mastercard/Visa,
N 15.40 V 1 25 0 2,3,4,6 (800)423-3883
FIRST OF AMER BK-MI NA
Classic Variable Rate
Mastercard/Visa,
N 16.90 V 1 25 0 N.R. (8000423-3883
FIRST OMNI BK NA
Visa/Mastercard, 2,3,4,
N 17.20 V 1 25 0 5,6,8 (800)441-8026
FIRST SECURITY BK OF ID NA
Visa,ND 17.40 V 1 25 0 4,6 (800)445-2689
FIRST SECURITY BK OF NM NA
Visa Classic,R 18.00 V 1 25 0 N.R. (800)445-2689
FIRST SECURITY BK OF UT NA
Visa, UT 17.40 V 1 25 0 4,5,6 (800)445-2689
FIRST TENNESSEE
BK NA NMPHS
Visa,R 16.40 V 1 30 0 N.R. (800)234-2840
FIRST UNION NB OF GA
Standard Visa,N 13.90 F * 25 0 4,9 (800)359-3862
FIRST USA BK
First USA Bank
USA,R 14.65 V 1 25 0 3,4,6 (800)955-9900
FIRST VA BK
Visa,R 16.98 F * 25 15 4,8 (800)634-8803
FIRST WESTERN BK NA
Visa,N 15.40 V 1 25 0 4,9 (412)652-7146
FIRSTAR BK MILWAUKEE NA
Elan Mastercard
and Visa,R 18.00 F * 25 15 4 (800)558-3424
FIRSTIER BK NA LINCOLN 14
Visa,R 18.00 F * 25 18 4 (800)432-3209
INSTITUTION, Ann. Type Grc.
Credit Card Plan % of In- per. Ann. Oth.
and Availability Rate Prcg dex days fee Ftrs. Telephone
FLEET BK
Fleet Visa,N 16.15 V 1 25 20 4 (800)537-3777
GE CAPITAL CONSUMER
CARD CO
GE Rewards
Preferred,N 19.80 F * 25 0 N.R. (513)677-6736
GREENWOOD TC
Discover,N 17.40 V 1 25 0 1,9 (800)347-2683
HARRIS T&SB
Mastercard & Visa
Classic,N 18.40 V 1 25 0 N.R. (708)520-6550
HOUSEHOLD BK NV NA
Regular Visa/
Mastercard,N 17.90 V 1 25 25 4,9 (800)477-6000
HUNTINGTON NB
Mastercard,R 16.40 V 1 25 0 N.R. (614)480-2719
IDAHO FIRST BK 3,4,5,
Classic Visa,R 17.67 V 5 25 20 6,8,9 (208)387-3640
INTEGRA BK PITTSBURGH
Mastercard,R 14.90 V 3 25 15 2,3,4,6 (412)644-7554
INTRUST BK NA
Mastercard/
Visa,N 16.80 F * 25 12 N.R. (800)222-7458
J C PENNEY NB
Visa,N 19.50 F * 25 15 N.R. (800)247-4714
KELLY FIELD NB
Visa,TX 13.92 F * 25 0 N.R. (210)681-5100
KEY BK OF NY 2,3,4,
Mastercard,NY 14.11 V 3 25 20 5,6 (800)444-4539
KEY FSB 2,3,4,
Secured Visa,N 18.90 F * 25 35 8,9 (800)539-5398
LEADER FED BK FOR SVG 2,3,4,
Visa,R 14.90 F * 25 20 8,9 (800)874-8771
LIBERTY NC&TC OF KY
Mastercard,R 18.00 F * 30 20 4 (502)589-3111
MAGNA BK OF ILLINOIS 1,2,3,
Mastercard,R 17.90 V 1 23 20 4,6 (800)624-6211
MANUFACTURERS &
TRADERS TC 15
Visa,NY 15.75 V 1 25 25 4,6 (800)724-3222
INSTITUTION, Ann. Type Grc.
Credit Card Plan % of In- per. Ann. Oth.
and Availability Rate Prcg dex days fee Ftrs. Telephone
MARINE MIDLAND BK
Mastercard,N 19.80 F * 25 20 4,5,9 (800)962-7463
MBNA AMERICA BK NA
Mastercard,N 16.90 F * 25 0 N.R. (800)847-7378
MELLON BK DE NA
Interest Back
Mastercard,N 20.40 V 1 25 0 4,5,8 (800)753-7011
MERCANTILE BK OF IL NA
Mastercard,R 17.90 F * 25 20 4 (800)755-4070
METROPOLITAN NB
Visa Classic,N 9.24 V 8 25 25 N.R. (501)570=1021
NATIIONAL BK OF COMMERCE
Mastercard,R 19.80 V 1 25 0 4 (901)529-6259
NATIONAL BK OF SC
Mastercard,SC 16.92 F * 0 0 4 (803)778-8498
NATIONAL CITY BK
Mastercard
Classic,OH 17.90 T * 0 0 9 (800)282-7541
NATIONAL CITY BK
Mastercard 2,3,4,
Gold,N 14.90 V 1 25 0 5,6 (800)727-8686
NATIONAL CITY BK COLUMBUS
Mastercard
Classic,N 17.80 V 1 25 0 N.R. (614)863-8129
NATIONAL CITY BK IN
Mastercard,IN 17.80 F * 25 15 N.R. (800)774-2424
NATIONSBANK OF DE NA
Visa Classic,N 17.90 F * 25 18 4 (800)274-5060
NATWEST BK NA
Visa,N 18.40 V 1 25 20 4,5,6 (800)677-6677
NBD SKOKIE BK NA
Standard Mastercard
& Visa,R 16.90 V 1 25 0 4 (800)766-4623
NORWEST BK IA NA
Norwest Mastercard,
N 17.50 V 1 25 20 1,4 (800)247-8101
NORWEST BK NE NA
Norwest Mastercard,
N 17.50 V 1 25 20 1,4 (800)247-8101
OAK BROOK BK
Prime for First
Year,N 8.50 V 1 25 17 4,5,7,9 (800)666-1011
OHIO SVB BK
Visa/Mastercard, 16
R 14.75 V 1 25 0 4 (216)622-4163
INSTITUTION, Ann. Type Grc.
Credit Card Plan % of In- per. Ann. Oth.
and Availability Rate Prcg dex days fee Ftrs. Telephone
OLD KENT B&TC
Variable Rate
Mastercard &
Visa,N 12.30 V 1 25 38 4,9 (800)245-5353
ONE VALLEY BK NA
Mastercard,WV 16.75 F * 0 12 N.R. (800)342-7343
PEOPLES BK
Visa,N 11.50 F * 25 25 N.R. (800)426-1114
PNC BK DE
Visa/Mastercard,
N 13.99 V 1 0 0 N.R, (800)762-2273
PNC BK OH NA
Visa/Mastercard,
N 13.49 V 1 0 0 N.R. (302)791-2073
PNC NB
Visa/Mastercard,
N 13.99 V 1 0 0 N.R. (800)762-2273
PROVIDIAN NB 2,3,4,
Visa Gold,R 14.90 V 1 25 0 6,9 (800)227-6886
PRUDENTIAL B&TC
Visa Gold,R 16.90 F * 30 29 2,8,9 (800)322-2369
S&T BK
Visa,PA 9.96 F * 0 0 4 (412)479-5030
SEATTLE-FIRST NB
Regular Mastercard/
Visa,WA 18.00 V 4 21 18 4,5 (800)522-7300
SECURITY NB&TC 2,4,5,
Visa,R 15.25 V 3 25 18 6,7 (800)356-8085
SIGNET BK VA
Visa,N 19.80 F * 25 18 9 (800)955-7070
SIMMONS FIRST NB
visa,N 9.75 F * 25 35 4,8 (800)636-5151
SOCIETY NB
Visa,R 15.14 V 4 25 20 2,3,4,6 (216)689-7770
SOUTHERN NB OF NC
Mastercard,R 12.40 V 1 25 18 1,4 (800)289-6404
SOUTHTRUST BK OF AL NA
Visa Classic
Card,R 18.90 V 1 25 15 5,9 (800)292-6538
STAR BK NA
Visa,R 17.00 V 1 25 20 2,3,5,8 (513)762-8836
STATE SVG BK 17
Visa,OH 14.63 F * 25 0 N.R. (800)421-9543
INSTITUTION, Ann. Type Grc.
Credit Card Plan % of In- per. Ann. Oth.
and Availability Rate Prcg dex days fee Ftrs. Telephone
SUNTRUST BANCARD NA
Suntrust Bankcard,
R 17.90 V 1 25 21 N.R. (800)432-4932
TOWN NORTH NB
Mastercard-
Visa,N 14.0 V 4 0 0 4,5 (214)991-9733
TRAVELERS BK
Gold 2,3,4,
Mastercard,N 16.25 V 1 25 0 8,9 (800)772-7775
TRUSTCO BK NY
Mastercard,NY 17.90 F * 25 12 N.R. (518)381-3843
U S BK NA
AAA Visa,N 16.90 V 1 25 0 8 (800)872-2650
UNION BK
Mastercard,Ca 19.80 F * 25 15 1,4 (619)496-5355
UNION PLANTERS NB
Gold Mastercard,
N 13.50 V 1 25 0 2,3,6 (800)339-2121
UNITED MISSOURI BK USA
Mastercard,N 17.15 V 1 25 18 N.R. (800)821-5184
UNITED NB
Visa,R 16.49 V 1 25 0 9 (800)242-7600
UNITED STATES NB OF OR
Classic Visa/
Mastercard,OR 17.90 V 1 25 15 4 (800)291-6687
UNIVERSAL BK NA
Mastercard
Classic,N 17.90 v 1 25 20 2,3,4,6 (800)423-4343
USAA FSB
Mastercard,N 12.50 V 4 25 0 N.R. (800)922-9092
WELLS FARGO BK NA
Visa,N 19.80 F * 25 18 N.R. (800)642-4720
WEST ONE BK ID 3,4,5,
Classic Visa,R 16.67 V 5 25 20 6,8,9 (208)387-3640
WILMINGTON TC
Mastercard,N 17.75 V 4 25 18 4,5,8,9 (302)652-2378
1ST FINANCIAL BK SD 18
Visa,N 19.50 V 1 25 20 N.R. (800)733-1732
FRB-50000-395
BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON,DC 20551-0001
OFFICIAL BUSINESS
Trouble Spots
You can find yourself dealing with some unusual problems when you let a third party,
your bank, pay your bills for you. If your bank doesn't make automatic mortgage
payments on time, for example, it will be you who suffers the consequences: late fees and
a blemish on a credit report.
And what if payments aren't made at all? One man whose life insurance premium was
deducted monthly from his checking account had no idea that the bank, due to a systems
error, had stopped making payments. The policy lapsed, but the family didn't find out until
the man died. They had to fight hard to collect their benefits.
Next | Back
Side Bar--Automatic Debit Scams
Fraudulent telemarketers have caught on to automatic debiting, too. The scams usually
start with a phone call offering a prize. The telemarketer asks for your checking account
number, saying it's needed to make sure you're "qualified" for the offer.
Your checking account information is put on a "demand draft," which is processed by
your bank just like a check, but doesn't require a signature. The bank will pay the
telemarketer's bank, and poof! ....your money is gone.
To reduce this type of fraud, a new federal law requires a telemarketer to obtain a
customer's authorization, in writing or on tape, before debiting an account. So beware if a
telemarketer tells you the call is being taped. You may unknowingly be authorizing an
automatic debit. And never give out your bank account number over the phone.
Back | Top
How to Solve Problems
You have the right to halt unauthorized and most pre-authorized deductions at any time. If
you're having trouble stopping an automatic debit, the fastest way to get results is to
contact your bank, not the business that's receiving payments.
Under federal law, you must call or write your financial institution requesting a "stop" at
least three days before the scheduled debit. If you make an oral request, the bank may
require you to confirm it in writing within 14 days of your call.
If you've been hit with late fees because the bank was tardy, don't just pay up. A mortgage
lender may drop the late fee if you explain what happened. If not, remember that the
penalty was triggered by the bank's mistake, and if you insist firmly enough, you'll
probably get them to pay.
If you fear your credit history has been tarnished because the bank was late or missed
payments, get a copy of your credit file from one of the big credit bureaus (Experian,
TransUnion or Equifax). If you've been labeled an unreliable debtor, demand that the
misleading items be changed. And remember that you always have the right to add a 100-
word statement to your file, explaining anything that might cause lenders to shy away from
you.
Americans learn almost from birth that it's a good thing to buy all sorts of goods and
services. A highly paid army of persuaders surrounds us with thousands of seductive
messages each day that all say "buy, buy, buy." Easily available credit makes living beyond
one's means easy and resisting the siren sounds of the advertisers difficult. But we're also
told that if we fail to pay for it all right on time, we're miserable deadbeats. In short, much
of American economic life is built on a contradiction.
If for some reason, such as illness, loss of work or just plain bad planning, our ability to
pay for the goods or services we need is interrupted, fear and guilt are often our first
feelings. We may even feel we've fundamentally failed as human beings.
Nonsense. There's lots more to life than an A+ credit rating, and lots of better things to
feel guilty about than the failure to pay for a snowmobile or a summer vacation on time.
The importance we have for our families, friends and neighbors should never be forgotten.
Nor should the fact that the American economy is based on consumer debt. In the age of
$50 billion bailouts for poorly managed financial institutions, you really shouldn't feel too
guilt-ridden about the debts you've run up. Remember that large creditors expect defaults
and bankruptcies and treat them as a cost of doing business. The reason so many banks
issue credit card is that it is a very profitable business, even with so many bankruptcies.
Fortunately, for thousands of years it's been recognized that debts can get the better of
even the most conscientious among us. From Biblical times to the present, sane societies
have discouraged debtors from falling on their swords and have provided sensible ways for
debt-oppressed people to start new economic lives. In the United States, this is done
through bankruptcy.
Bankruptcy is a truly worthy part of our legal system, based as it is on forgiveness rather
than retribution. Certainly, it helps keep families together, reduces suicide and keeps the
ranks of the homeless from growing even larger.
If you suddenly find yourself without a job, socked with huge, unexpected medical bills
you can't pay or simply snowed under by an impossible debt burden, bankruptcy provides
a chance for a fresh start and a renewed positive outlook on life.
Bankruptcy can also have its down sides-economically, emotionally and in terms of your
future credit rating. So before you race into bankruptcy court, take some time to
understand what bankruptcy is all about and what your alternatives are.
HOW TO PURCHASE YOUR "DREAM HOME" WITH NO CREDIT CHECK
------------------------------------------------------------------------
Most real estate salespeople will tell you without hesitation that no-one can purchase real
estate without a down-payment or credit check. They will tell you that a credit check is an
essential part of the process and that you better have a fistful of cash before you evxer
think about buying a home. Of course, nothing could be further from the truth!
Everyday throughout America, tens of thousands of people are acquiring homes without
being subjected to a credit check or spending a cent of their own money as a down
payment.
The reason why real estate salespeople don't even want to consider real estate transactions
that are creatively packeged and don't require cash is obvious! They receive their
commissions only when there are cash transactions.
No one should deny a real estate salesperson commisssions. In many cases it is their
expertise in the reaal estate field that can help a person find great buys. They know the
market in their areas and deserve the commissions they earn. However, in times of high
interest rates when money is tight, many are increasingly willing to be creative by allowing
their commissions to be paid via a note or by deferred payment. Still, there are even better
ways if you want to avoid down payments and credit checks.
HOW A DREAM HOME CAN BEPURCHASED WITHOUT A CREDIT CHECK
The Vererans Administration(VA) and the Federal Housing Administration (FHA), a
division of Housing and Urban Development (HUD) have been encouraging and
promoting home ownership through their agencies for years. When people are denied a
home loan by a bank or other lending institution, FHA will insure a home mortgage loan
by giving the lending institution a 100% guarantee against any losses that may be incurred
if the buyer does not repay the loan. Another benefit of getting a FHA loan is that the
interest rates are usually lower than the standard bank rates for home mortages.
The VA will also guarantee a home loan up to 100%, which also allows a buyer to receive
a home loan through a bank or other lender. A credit check is required on the "original"
buyer of the home, but here's the loophole!
While it is true that from March 11988 onward, all asumbble VA loans require credit
approval, the good news is that these changes in credit check approval only apply to those
loans that were made "after March, 1988," ALL VA LOANS MADE BEFORE MARCH
1988 ARE STILL ASSUMABLE BY ANYONE REGARDLESS OF THEIR CREDIT!
GEOGRAPHIC LOCATION - Scoring systems are adjusted for differences in geographic
locations,. For example, home owndership may not score high in an area where there is a
high incidence of credit problems, reoccurring employee/employer differences, low
income, etc.
EMPLOYMENT - The longer you have been on a job the better.
OCCUPATION - Occupationss can be divided into many categories with a high to low
score within each category for different occupations.
AGE - Older is not considered better until you pass age 40. Under 25 to the end of your
30's receive the lowest scores. The rational is that people under 25 haven't proven they are
a good credit risk. People in their 30's are still raising a family, buying a home, and tied
down with emormous expenses. This is also the time most people declare bankruptcy
INCOME - The higher your income the more points you will receive.
TELEPHONE - Having a telephone is an indication of stability. Give yourself more
points.
AGE OF AUTOMOBILE - No auto is a low score, but the newer the vehicle the higher
the score.
DEPENDENTS - One to three indicates responsibility and stability. After three, points
drop rapidly.
CITIZENSHIP STATUS - Non-citizens receive negative points.
BANK ACCOUNTS - You receive high points if you have a checking and savings
account.
CREDIT REFERENCES IN-HOUSE RECORDS - A good payment record will earn you
more points.
CREDIT CARDS - The more major credit cards you have the better.
BANK LOANS - A current bank loan will increase your score.
FINANCE COMPANY LOANS - You will receive negative points for each finance
company loan.
TWO POWERFUL STRATEGIES THAT CANGET YOUR APPLICATION
APPROVED
Credit checks are requested by banks, lenders, and other creditors to see if there are
negative items in your file. The more negative items you have, the less your chances of
credit will be. As we have seen, creditors look for stability and reliability in an applicant. A
steady source of income will receive a high score, but even more important than an income
amount is a creditor's belief and perception that you are both willing and able to pay back
a debt.
In other words, even if you fail to pass certain criteria or formulas, your application can
still be approved on another level that will get you the credit you want no matter what a
scoring system profile says.
Motivated sellers are the best kind to deal with, because they will want to help themselves
by helping you. Lack of money or credit shouldn't be your primary concern when
purchasing a home. Creative negotiating and positive thinking will get you what you want.
CREATE A DEAL THAT BENEFITSBOTH YOU AN THE SELLER
Creative negotiating can lead to financing arrangements that benefit both the buyer and the
seller. There must be a willingness, however, by both the buyer and seller to give and take,
before the most favorable environment for a creative financing situation can be created.
For example, if you want to purchase your dream home with nothing down, you might
consider paying a little more.
On the other hand, if you are investing money out or your pocket on a down payment,
then the sale price and terms should be favorable to you. A smart, yet flexible home buyer
can often afford to pay a premium price provided it's not too far out of line with the
market value, and he can get attractive terms and no down payment.
FIND OUT WHAT THE SELLER WANTS
Many sellers want a steady income and don't need front money in the form of a down
payment. Most buyers never consider asking a seller what they want! If you can guarantee
a nice monthly income to someone who prefers a steady check, you can have yourself a
nothing-down deal. Find out what the seller really wants!
BUYING WITHOUT CASH MEANSBECOMING A SUPER NEGOTIATOR
Sometimes you will require super negotiating skills if you decide to buy a home without
using your own money. After you have found your dream home, you and the seller will
have to sit down and negotiate a final agreement. The following three rules should be
followed to enable you to ge the best possible deal:
1) Get the selling price as low as possible.
2) Negotiate a very low down payment, or no down payment agreement.
3) Be aware of all the methods available to you in buying real estate whereby you would
pay some cash, or no cash up front.
The first five of the following options involve some cash up front, the remaining seven do
not. At the top of the list the buyer buys out the sellers full equity. At the bottom of the
list the buyer pays nothing down and doesn't secure the debt. Somewhere in-between you
should be able to agree on a compromise that benefits both parties involved.
BUYING OPTIONS AVAILABLETO REAL ESTATE BUYERS & SELLERS
1) Cash to existing mortage
2) Cash to down and refinancing 3) Cash down with seller taking bacy the contract,
second mortage, etc.
4) Some cash plus equity in other property
5) Cash plus mortgage on other property
6) No cash but equity in other property
7) No cash, equity plus mortgage on purchased property
8) No cash, equity plus mortgage on othe property
9) No cash, moortgage on purchased property
10) No cash, mortgage on other property
11) No cash, wrap-around where seller carries paper with or without a promissory note.
12) No cash, unsecured note for complete equity
NEGOTIATE "LOW" & "LONG" TERMS
Always think in terms of 1) Low Interest; 2) Low Monthly Payments; and 3) Long-Term
Payoffs as you develop home buying transactions. Make a transaction benefit you by
negotiating hard all the way. Decide ahead of time what your "No-Deal"! cut-off point is.
Be prepared to walk away from any deal that goes beyond your low-interest and low-
payment cut-off. And remember, the longer the payback terms the better off you will be.
High interest rates, high payments, and short-term payoffs can destroy a fledgling financial
situation.
INCREDIBLE BARGAINS ARE EVERYWHERE!
It only requires a simple search to find great real estate buys that require no down
payments or credit checks. You can start your search by picking up newspapers in and
around the area you are interested in. Then carefully review the classified real estate ads
and begin contacting both home owners and real estate agents. Don't be afraid to call
agents! They might provide the lead that leads you to your dream home. Keep a list of
your contacts and note the results. Make a minimum of 3-4 contacts every day. You will
know who the really motivated sellers are through conversation. Then, if you are
interested, take advantage of the situation and follow through.
HOW YOU CAN PROFIT BY OBTAINING OPTIONS
Obtaining an option to purchase real estate can make you some fast and easy profits.
When it comes to real estate, options favor a buyer over the seller 10 to 1!
Here's how an option to buy can make you huge amounts of money:
To begin with, find a piece of property that is priced to sell at under market value. Let's
say that the property you decide on is priced at $99,000 but the actual market value is
$125,000. And remember, these kinds of bargains are available everywhere! Your next
step is to tie up the property with an option, which may or may not require a modest
options fee.
Let's say that the property increases in value by only 10% during the period of time you
hold your option, which in many parts of the country might be a very modest increase.
Now you would have an option to buy property that is now worth $137,500, still for
$99,000. Now you have and incredible opportuunity to make a $38,500 profit!
Options are favorable to the buyer over the seller because at the end of the option period,
the potential buyer can exercise his option if conditions are favorable and make a
tremendous profit from the transaction. On the other hand, he can also walk away from
the deal if conditions appear unfavorable.
USE CONTINGENCY CLAUSES WHEREVER NECESSARY
Contingency clauses can give you many advantages when you are ready to make a deal.
Contingency clauses can stack real estate agreements in your favor. What you are doing in
effect, is specifying certain conditions that allow a contract agreement to be valid.
Basically, there are two reasons for using contingency clauses:
1) The contingency clause is of great importance to the deal; and
2) You simply want more time and are using a contingency clause to get it.
Some of the typical reasons for these clauses include statements such as:1) Contingent on
buyer arranging suitable financing; 2) Contingent on buyer selling his property before the
deal is valid; 3) Contingent on appraisal; 4) Contingent on the buyer's accountant or
attorney inspecting all records; or, 5) Contingent on the seller agreeing to your specific
terms, etc.
DELAYED DOWN PAYMENT CONSIDERATIONS
If the seller absolutely demands all or part of the down payment in cash, don't exclude the
possibility of agreeing on a "Delayed Down Payment." This tactical move should at least
be considered, especially if you have already lined up a buyer for a fast resale
DON'T OVERLOOK SELLERSAS A SOURCE OF INVESTMENT CAPITAL
The same person you are buying property from may also act as your lender. Today, sellers
are lending money to buyers in almost half of real estate transactions. The borrowed
equity is secuured by either a personal note, or a second or third mortgage. This method
amounts to lending money to the buying party.
USE FIRST AND SECOND NOTES INSTEAD OF CASH
When you are ready to purchase your dream home, think in terms of non-cash ways to
obtain it. First and second notes can easily serve as the equivalent of cash money. The
advantage of using notes in place of money is that you receive 100% of the value of the
note. If you wanted to convert a note to cash by selling the note, chances are you would
have to accept a discount price on it. This discount could range anywhere from 10% to
30%, depending on the time left on the note, interest, and the history of payments. When
buying real estate, it is wise to substitute notes for cash. In this way you can receive 100%
value for your paper.
Managing Your Debts
------------------------------------------------------------------------
Managing Your Debts: How to Regain Financial Health
Can't pay your bills?
You're not alone.
Today, millions ofAmericans are having difficulty paying their debts.
Most of those infinancial distress are middle income families with jobs who want to payoff
what they owe.
But it is important for you to act. Doing nothing can lead to muchlarger problems in the
future-even bigger debts, the loss of assets suchas your house, and a bad credit record.
The good news is that there are solutions.
The remedies providedin this brochure can help improve your relationships with
creditors,reduce your debts, and help you manage your money.
In brief, thesesolutions can help give you a new, fresh start.
ARE YOU IN FINANCIAL TROUBLE?
If bill collectors are calling you, you know you're in financialtrouble. But what if you're
just having difficulty stretching yourpaycheck to pay monthly bills?
If you answer yes to any one of thefollowing questions, you should act.* Do you routinely
spend more than you earn?* Are you forced to make day-to-day purchases on credit?*
Are you able to make only the minimum payments on monthly credit card debts?* If you
lost your job, would you have difficulty paying next month's bills?" With budgeting
guidance, we now have peace of mind.
We have learned amost valuable lesson about money management. Our future
looksbrighter." Linda R.
WHAT YOU CAN DO FOR YOURSELFReview your specific obligations that creditors
claim you owe to makecertain you really owe them.
If you dispute a debt, first contact thecreditor directly to resolve your questions.
If you still havequestions about the debt, contact your state or local consumerprotection
office or state Attorney General.Contact your creditors to let them know you're having
difficulty makingyour payments.
Tell them why you're having trouble- perhaps it'sbecause you recently lost your job or
have unexpected medical bills.Try to work out an acceptable payment schedule with your
creditors.Most are willing to work with you and will appreciate your honesty
andforthrightness.The Fair Debt Collection Practices Law prohibits a debt collector
fromshowing what you owe to anyone but your attorney, harassing orthreatening you,
using false statements, giving false information aboutyou to anyone, and misrepresenting
the legal status of your debts.Remember that under other federal laws to collect debts,
creditorscannot seize most government assistance and can only garnish a portionof wages
to collect debts.Budget your expenses.
Create a spending plan that allows you to reduceyour debts. Itemize your necessary
expenses (such as housing and healthcare) and optional expenses (such as entertainment
and vacation travel).Stick to the plan.Try to reduce your expenses.
Cut out any unnecessary spending such aseating out and purchasing expensive
entertainment. Consider takingpublic transportation rather than owning a car. Clip
coupons, purchasegeneric products at the supermarket, and avoid impulse purchases.
Aboveall, stop incurring new debt. Consider substituting a debit card foryour credit
cards.Use your savings and other assets to pay down debts.
Withdrawingsavings from low-interest accounts to settle high-rate loans usuallymakes
sense. Selling off a second car not only provides cash but alsoreduces insurance and other
maintenance expenses.Look for additional resources from governmental and private
sources forwhich you may be eligible. Government assistance includes
unemploymentcompensation. Aid to Families with Dependent Children (AFDC),
foodstamps, low-income energy assistance, Medicaid, and Social Securityincluding
disability. Other resources may be available from churches andcommunity groups.
Often these sources are listed in the Yellow Pages ofyour phone book."Looking closely at
our options helped us realize that we still neededto try self-budgeting before taking more
extreme measures. We think thatperhaps we were giving up too soon."
Alicia A.WHAT OTHERS CAN DO FOR YOUCredit Counseling. If you are unable to
make satisfactory arrangementswith your creditors, there are organizations that can help.
Anorganization that you can call is a Consumer Credit Counseling Service(CCCS) agency.
These local, non-profit organizations affiliated withthe National Foundation for Consumer
Credit (NFCC) provide education andcounseling to families and individuals.For consumers
who want individual help, CCCS counselors withprofessional backgrounds in money
management and counseling can providesupport.
To promote high standards, the NFCC has developed acertification program for these
counselors. A counselor will work withyou to develop a budget to maintain your basic
living expenses andoutline options for addressing your total financial situation. Ifcreditors
are pressing you, a CCCS counselor can also negotiate withthese creditors to repay your
debts through a financial management plan.Under this plan, creditors often agree to reduce
payments, lower or dropinterest and finance charges, and waive late fees and over-the-
limitfees.
After starting the plan, you will deposit money with CCCS eachmonth to cover these new
negotiated payment amounts. Then CCCS willdistribute this money to your creditors to
repay your debts. With morethan 1,100 locations nationwide, CCCS agencies are available
to nearlyall consumers. Supported mainly by contributions from communityorganizations,
financial institutions, and merchants, CCCS providesservices free or at a low cost to
individuals seeking help. To contacta CCCS office for confidential help, look in your
telephone directorywhite pages, or call 1 (800) 388-2227, 24 hours a day, for an
officenear you."I cannot tell you how happy I am to finally to able to control myfinances
now that I have followed a budget.
So far, so good. I actuallyhave a balance in my savings account!" Rodney O.Personal
Bankruptcy. Bankruptcy is a legal procedure which can givepeople who cannot pay their
bills a fresh start.
A decision to file forbankruptcy is a serious step.
You should make it only if it is the bestway to deal with financial problems.
There are two types of bankruptcy available to most individuals.Chapter 13 or
"reorganization" allows debtors to keep property whichthey might otherwise lose, such as
a mortgaged house or car.Reorganizations may allow debtors to pay off or cure a default
over aperiod of three to five years, rather than surrender property.
Chapter 7 or "straight bankruptcy" involves liquidation of allassets that are not exempt in
your state.
The exempt property mayinclude items such as work-related tools and basic
householdfurnishings, among others. Some of your property may be sold by acourt-
appointed official or turned over to your creditors.
You can filefor Chapter 7 only once every six years.
Both types of bankruptcy may get rid of unsecured debts (thosewhere creditors have no
rights to specific property), and stopforeclosures, repossessions, garnishments, utility
shutoffs, and debtcollection activities. Both types also provide exemptions that permitmost
individual debtors to keep most of their assets, though these"exemption" amounts vary
greatly from state to state.
Bankruptcy cannot clean up a bad credit record and will be part ofthis record for up to ten
years.
It can, for example, make it moredifficult to get a mortgage to buy a house. It usually does
not wipeout child support, alimony, fines, taxes, and some student loanobligations. Also,
unless under Chapter 13 you have an acceptable planto catch up on your debt, bankruptcy
usually does not permit you to keepproperty when the creditor has an unpaid mortgage or
lien on it.
Bankruptcy cases must be filed in federal court.
The filing fee is$160, which sometimes may be paid in installments.
This fee does notinclude the fees of your bankruptcy lawyer.
Choosing a bankruptcy lawyer may be difficult.
Some of the leastreputable lawyers make easy money by handling hundreds of
bankruptcycases without adequately considering individual needs. Recommendationsfrom
those you know and trust, and from employee assistance programs,are most useful.
Some public-funded legal services programs handle bankruptcy caseswithout charging
attorney fees. Or these programs may provide referralsto private bankruptcy lawyers.
Keep in mind that the fees of theseattorneys may vary widely."Our bills have been a source
of worry to us. After bringing ourproblem to credit counselors, we have begun to feel
there is a way tocope with it.
We are feeling more confident now." Nelson M.POSSIBLE PITFALLSCredit counselors
who aren't helpful.
Often for-profit or non-credentialed counseling organizations make promises that they
cannot ordo not keep.
Be especially careful when asked for a large sum of moneyin advance.
To check the organization's reputation, contact your stateAttorney General, consumer
protection agency, or Better Business Bureau."Credit repair" clinics and "credit doctors"
have been frequentlycriticized for promising that they can remove negative information
fromyour credit report. But accurate information cannot be changed.
If information is old or inaccurate, you can contact a credit bureauyourself and ask that it
be removed. Risky refinancing options.
When already in financial trouble, secondmortgages greatly increase the risk that you may
lose your home.
Bewary of any loan consolidations or other refinancing that actuallyincrease interest owed
or require payments of points or large fees.
A Final Word: Don't lose hope, even if you despair of ever recoveringfinancially.
You can regain financial health if you act. Pursuing the options presented in this pamphlet
can put you on the road to financialrecovery. "It feels great to be getting my life (and
credit) in order!" Robyn H.The following organizations and individuals worked together in
thepreparation of this pamphlet and endorse its content.
American Association of Retired Persons
Consumer Action
Consumer Federation of America
National Consumer Law Center staffers
National Foundation for Consumer Credit
U.S. Consumer Information Center
U.S. Office of Consumer Affairs
Visa U.S.A..
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ATM Card
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A Consumer's Guide To the Expanding Uses of ATM Cards
Shopping
With Your ATM Card
Which Of The Following Can Happen With An ATM Card Today?
A shopper in Wisconsin pulls up to his bank's drive-through ATM. In
minutes, he deposits his pay check, withdraws cash, and verifies the
balance in his savings account.
Upon landing in London, a traveler from Maine gets a hundred dollars'
worth of British pounds at an airport ATM just as easily as she uses her
ATM card to withdraw cash at her local bank branch ATM near home.
While visiting friends in the next county, a Tennessee resident stops at
an unfamiliar bank's ATM to check her balance and withdraw cash. She
then proceeds to a gas station to fill her tank and pays for it by
sliding her ATM card through the card slot on the pump and punching in
her PIN.
A California school teacher's ATM card also has the logo of a major
credit card company on the front, allowing him to make purchases at any
of the millions of stores that accept that brand of card for payment. He
signs a receipt, and his purchases are automatically paid for out of his
checking account.
Answer
All Of The Above:
Since its introduction over 20 years ago, the ATM (automated teller
machine) card has become part of everyday life, and people are using
these cards millions of times each day. Today, changes in technology
are allowing people to use the now-familiar ATM cards in new ways that
are reshaping the way we handle our money.
ATM Cards Can Give You More Control If Used Wisely:
With an ATM card and a PIN - or personal identification number -
you can virtually set your own "branch hours,"depositing and withdrawing
money from your accounts whenever you wish at your bank or credit union.
What's more, most ATM cards already give you access to your money at
ATMs located not only at all of your bank's locations, but also at other
banks and in stores, airports, office buildings, and street corners
across the United States and worldwide.
Your ATM Card Is Becoming Even More Useful:
But wide access to ATMs is just the beginning. Technology is
enabling banks and credit unions to introduce new services that allow
you to pay for things by making your ATM card work like a check. This
latest improvement can offer conveniences and money management benefits
over cash and checks.
This Brochure Can Help Make You Smarter About ATM Cards:
As you read this brochure, you'll gain a better understanding of
how to take advantage of the conveniences and features of shopping with
your ATM card. And you'll find the information you need to use this new
service wisely. If you have one of the more than 200 million ATM cards
in circulation today in the United States, you may want to take it out
of your wallet and refer to it as you read along.
THE EVOLUTION OF ATM CARD SERVICES
The Beginning - Getting Cash At ATMs:
The first ATM cards gave consumers access to their checking,
savings, and share draft accounts only at teller machines owned by their
bank, credit union, or savings and loan. People commonly call this kind
of card an ATM card, cash card, or banking card, or they use the name
that their bank, credit union, or regional network has given to the
card.
When "regional ATM networks" were created, they linked together the
ATMs of different institutions and offered consumers access to their
money in other neighborhoods and nearby cities, towns, and states. (A
list of many of these ATM networks' names and where they operate appears
near the end of this brochure.) At the same time, two national networks
Cirrus_ and Plus_ emerged, expanding ATM card access to cash, first
nationwide, then around the world. Currently, these are the only two
brands that offer a full range of ATM services worldwide.
ATM cards provide a convenient way of getting cash, making deposits
and transfers, and verifying account balances. It is also easy to tell
where you can use the card by simply matching the logos on your ATM card
with those displayed on the ATM itself.
The Next Step - Paying With ATM Cards:
More recently, many ATM cards have been enhanced so that you can
shop with the cards at merchants that sign up with the same networks
that give the cards wide access to ATMs. (A list of many of these
shopping service networks also appears near the end of this brochure.)
Currently there is only one international service, called Maestro_, that
lets cards work at participating merchants both in the United States and
in more than 50 countries.
Grocery stores and gas stations were among the first retailers in
the United States to install the small number pads, also called PIN
pads, that you may have noticed at the checkout counter or on the gas
pump. It is these devices that make shopping with many ATM cards
possible.
The Latest News - Shopping Wherever Some Major Card Brands Are Accepted:
Another ATM card service makes ATM cards more useful by greatly
expanding the number of retail locations that accept the cards for
payment. ATM cards with the logo of one of two of the major card brands
MasterCard or Visa can be used to make purchases anywhere these cards
are accepted. Today, these kinds of cards are accepted at some 3
million places in the United States and 9 million more worldwide.
Currently, these are the only two major card brands that offer this
service.
If you have the logo of one of these card brands on your ATM card
and want to use it for shopping, your ATM card basically works like a
check. This kind of card is often called a money card, cash-and-check
card, check card, or debit card, or it can have a special name given to
it by your bank or credit union. Regardless of its name, this kind of
card is still also your ATM card. Typically, this kind of card does not
require the use of a PIN to make a purchase. You may already carry one
of these cards. Look at your card to find out.
USING YOUR ATM CARD TO SHOP
Matching The Logos:
Just as the various logos that appear on ATM cards tell you where
they can be used to get cash or make banking transactions at ATMs, they
also indicate where your card can be used to make purchases. Simply
match the logos on your card with those you see displayed at the
entrance to the store or at the cash register. Or just ask whether the
store accepts your ATM card.
Depending on which logos you find on your card and whether the
store has installed PIN pads, your purchases can be handled in one of
two ways: either you will punch in your PIN, just as you would at an
ATM, or you will sign for the purchase, as you would with a credit card.
Making A Purchase:
Let's say you've planned to buy a desk lamp. You need all your
cash for other things and don't have your checkbook with you. At the
entrance to the store, you notice an ATM network logo that matches the
logo on your card. You decide to use your ATM card to pay.
When you present the lamp to the cashier, you will be asked how you
would like to pay for the purchase. You offer your ATM card. The
cashier will confirm that your card is accepted by the store, and if it
is, the following will occur: 1) You will be asked to slide your card
through a slot that reads the information contained in the magnetic
stripe on the back of your card; 2) the cashier will then enter the
amount of the purchase; 3) you will punch in your PIN, or secret code;
and 4) the cashier will press a key that initiates an automatic phone
call to your bank or credit union. This confirms that the money is
available in your account. Once confirmed, your bank or credit union
automatically deducts the purchase amount from your account, just like a
check. You will receive a receipt of the transaction, if you want one,
when the sale is completed. Make sure you record and subtract this
amount from your account immediately.
When A Major Credit Card Logo Is On Your ATM Card:
If you have an ATM card that also has on it one of two of the major
credit card logos mentioned previously, your purchase will be handled as
if you were using a credit card, except for three important differences:
* First, the purchase amount will be deducted automatically from your
account like when you write a check rather than being billed to
you at the end of the month.
* Second, typically, you'll pay no interest charges, since you're
using your own money on deposit, not borrowing it. (However, there
may be other fees associated with using this card, an issue
addressed later in this brochure.)
* Third, you will usually sign for the purchase instead of punching
in your PIN. However, since this is your ATM card, if a store has
installed PIN pads to accept your PIN, and it accepts one of the
other logos on your card, the store clerk may ask you to use your
PIN instead of signing.
LIMITS ON YOUR SPENDING WITH THE CARD
You Can Only Spend What You Have:
When you use your ATM card, whether to withdraw cash or make
purchases, you are using your own money that is on deposit at your bank
or credit union. Naturally, you can only use as much money as you have
available. If you have an overdraft line of credit attached to your
account and your purchase with the card exceeds the amount available on
deposit, your bank or credit union will charge interest on the amount
you borrow from your overdraft.
There May Be Daily Spending & Withdrawal Limits:
Many banks and credit unions set daily limits on ATM purchases and
cash withdrawals, as a deterrent to the use of stolen or fraudulent
cards. Often, these two limits are different and each may vary widely,
from a few hundred dollars a day to the entire amount available in your
account. You should ask your bank or credit union whether your ATM card
will have daily withdrawal and spending limits and, if so, what they
will be.
While limits of this kind may seem like an inconvenience, they are
there to safeguard you and your money from unauthorized use of your
account. They can also serve to govern your daily spending, helping you
to be more disciplined in managing your money and your spending habits.
So Keep Track Of Your Spending:
Always make sure to keep your receipts, and record your purchases
in your checkbook immediately to prevent overdrawing your account. It's
important to remember that regardless of whether you use your PIN or
sign your name, all of your withdrawals and purchases will be
automatically deducted from your account.
HOW TO GET A BASIC ATM CARD & ONE YOU CAN USE TO SHOP
If It's Not Offered Automatically, You Can Ask About It:
Most banks and credit unions across the country offer ATM cards.
They are usually connected to a checking or share draft account. When
you open an account, you may automatically be given an ATM card. But if
you haven't been offered a card, you can ask for one.
You may also want to ask about any additional services available on
the card.
For example, most ATM cards can be used for cash withdrawals and other
transactions at ATMs in the United States and around the world. Your
bank or credit union may offer with your account the additional service
that allows you to use your ATM card to make purchases by using your PIN
or signing a receipt. You May Need To Apply For Some ATM Cards:
In the case of an ATM card with a credit card logo on it, your
ability to obtain this card will depend on the practices of the
individual bank or credit union. The list below contains the kinds of
things a bank or credit union considers to determine whether you qualify
for this kind of service. You may be required to provide additional
information on an application and undergo a credit check.
The length of your relationship with the bank or credit union
The average balance and status of your account
The number of times per year, if any, you overdraw your account
The number of banking products and services you use
Your credit history
COSTS INVOLVED IN USING ATM CARDS
The use of ATM cards naturally involves costs to provide the
services. As a result, there may be fees associated with your use of
the card. These vary, depending on your relationship with the
institution and whether you are withdrawing cash or making purchases.
If a fee is charged at all, it can vary widely. For example, you
could be charged a few cents, such as a dime, every time you use the
card, or you could be charged a flat monthly fee, such as one dollar per
month, or a combination of such fees. In some cases, fees are waived
based on the amount you keep on deposit at your bank or credit union.
But, keep in mind that fees can be higher or lower than those cited
here. Check with your bank or credit union.
Fees Must Be Disclosed To You:
Along with knowing your available balance, you should be aware of
any charges for using the card. Fees are established and charged by the
banks and credit unions that issue the ATM cards. If a fee is charged,
your bank or credit union must fully detail these fees when you get your
card. Every time a fee is charged by the bank or credit union issuing
the card, the fee will appear on your monthly statement.
When an ATM card is used to make purchases, a retailer may add a
fee to your purchase total. If this happens, the store is required by
law to disclose this to you in a display at the checkout counter. In
this case, the fee is added to your purchase amount, not listed
separately on your statement. Questions To Ask When You Sign Up For A
Card:
Before you use your ATM card to withdraw cash or shop, you should
ask your bank or credit union about the costs associated with ownership
and use of the card. Here are some questions you might ask:
What are the monthly or annual fees for this card?
What are the "per use" fees when using this bank's or other banks'
or credit unions' ATMs?
What are the "per use" fees when using the ATM card to shop?
How can I avoid any of these fees?
SAFEGUARDS THAT PROTECT YOUR CARD AND ITS USE
Two features can make using ATM cards safer than cash and checks.
First, their use is covered by federal regulations that protect both
consumers and the institutions that issue the cards. Second, technology
protects the information about your account.
It's smart to be aware of these regulations and protections. Here's
a brief summary of the safeguards that come with your ATM card and what
you must do to take advantage of them. You're Protected If Your Card Is
Lost Or Stolen And If Someone
Uses Your Card Fraudulently:
If you report a lost or stolen ATM card within two business days of
discovering the loss or theft, and report immediately any unauthorized
uses of your ATM card that you find on your monthly statement, your
liability is limited by federal regulations to $50. If you do not
report the loss or theft within two days, you could be responsible for
up to $500.
If you suspect that your ATM card has been used fraudulently, you
must report it to your bank or credit union within 60 days of receiving
the statement on which the questionable activity appears. If you don't
act promptly, you could be liable for the full amount that the
unauthorized user was able to withdraw.
You're Protected From Bookkeeping Errors:
Federal regulations also protect you against errors that may occur
in your bank account during or as the result of an electronic transfer
of funds. Such errors could include:
Omission of a transaction on your statement. For example, a
deposit you make at an ATM does not appear on your next statement.
Incorrect amount deducted from your account. For example, you
discover that a $14.25 purchase that you made last month with your ATM
card appears on your monthly statement as $142.50.
Bookkeeping error. You pay for your $36 grocery order with your
ATM card and find that the total amount has been deducted from your
account twice.
Receipt of incorrect amount. You request $100 from your checking
account at an ATM, but receive only $90.
If you suspect that a mistake has been made in your account,
immediately call the bank or credit union where you have the account.
You may be asked to follow-up your phone call with a written report of
the suspected error.
Resolving Disputes With Retailers:
When you shop with your ATM card, it is important to remember that
your rights relating to refunds and returned merchandise are the same as
when you pay with cash or a check. You must resolve issues of this type
directly with the retailer or store. It is the store's own policy on
refunds and returns that generally governs these transactions.
Retaining your purchase receipts can be important if you do need to
exchange or return any items that you purchased with your ATM card.
(Many stores print their return policies right on the receipts, so this
can serve as a record of the item you purchased.) If your efforts to
resolve these types of issues with the retailer are not successful, you
may be able to obtain help from your bank or credit union. Ask your
bank or credit union if they can help you, and if they can, be sure to
document your discussions. Technology Protects Your Card:
There is a magnetic stripe on the back of your ATM card. This
magnetic stripe contains your account number and other information about
your account. All this information is encoded by your bank.
When you use your ATM card to withdraw money or make purchases at
stores, the entire transaction is also electronically safeguarded to
keep the information about your account completely confidential.
Anytime you use your PIN, it is scrambled electronically and only your
bank or credit union can decode it.
Use A Toll-Free Number To Speed Your Protection:
Many financial institutions provide a toll-free number on the back
of their ATM card. Write it down and keep it in a handy but separate
place, not in your wallet where you keep your cards and other valuables.
Remember: the faster your report a problem, the better your protection.
SOME BENEFITS OF USING YOUR ATM CARD
An ATM Card Is Safer To Carry Than Cash:
If your card is lost or stolen, you can get your card replaced and
prevent the loss of your money by making a simple phone call.
There's No Need To Show Various Forms Of ID:
The common hassles and procedures involved in getting a check
approved at a store are eliminated when you use an ATM card to make
purchases.
An ATM Card Will Be Accepted Far More Readily Than An Out-Of-State
Check:
When you use an ATM card to make purchases, it's easy to tell where
it is accepted just by matching the logos on your card with those at
stores that accept the cards. And the number of locations that accept
ATM cards is constantly expanding, enabling you to shop in more and more
places without cash and checks.
Using An ATM Card Can Give You The Tools To Be A Smarter Money Manager:
All ATM card purchases and transactions appear as line items on the
monthly account statement you receive from your bank or credit union.
You'll find the date of purchase, the transaction total, and the
merchant's name. When combined with the receipt that accompanies each
purchase, these clear and complete records make it easier to track your
spending than when you use cash alone.
ATM Card Purchases Can Offer Convenience Without Interest Charges:
If you use your ATM card to shop, you can get all the convenience
of using a card for purchases, but without being charged interest.
However, if you have an ATM card that's attached to a checking account
with an overdraft line of credit and you overdraw your account using the
card, your bank or credit union will charge interest on the amount you
overdraw, just as they would with a check. If your overdraft protection
is provided by a link to your savings or other account, you may not
incur interest charges. Check with your bank or credit union.
Whether You Use Your PIN Or Sign A Sales Slip, You're Assured
Confidentiality:
The only information provided to the store by your bank or credit
union when you make a purchase with your ATM card is whether or not the
transaction is approved and the amount of the purchase. The store does
not have access to your account information, address or telephone
number, or any other information that may be printed on your check.
SOME CAUTIONS AND TIPS ON USING YOUR ATM CARD SAFELY
Memorize Your PIN, Or Secret Code:
It's usually only a four-digit number. If your bank or credit
union allows you to select your own PIN, pick a number that's easy to
remember. Unfamiliar numbers can be difficult to recall when you're
tired or under stress. But don't choose a number that's easily
associated with you like your birth date, social security or telephone
number, or part of your address. Also avoid using consecutive numbers or
repeating the same number. Your PIN is an important secret code and
should be chosen carefully. Never write that number on your ATM card or
on anything you carry with your card. Only you should know your PIN, so
no one else can use your card.
Protect Your ATM Card From Damage So That It Will Always Work When You
Need It:
Keep it in a place where it won't be bent, scratched, or
overheated. It's important to protect the magnetic stripe on the back
of the card. Should it become damaged, the card may fail to work in an
ATM or at a store. If your place of employment provides magnetic
cardkeys for access to your workplace, never put your cardkey near your
ATM card. Magnetic cardkeys can erase the information in your ATM
card's magnetic stripe, making it useless.
Make Sure The Transaction Or Purchase Amount Is Recorded Correctly:
Before you authorize any transaction with your PIN or signature,
double check that the purchase amount is correctly entered by the store
clerk.
Deduct The Purchase Amount From Your Checking Account Balance
Immediately:
This will ensure that you always know how much money you have
available in your account. Save All Of Your Receipts:
Keep the receipts from every ATM card purchase, deposit,
withdrawal, and transfer you make, and compare them against the
information on your monthly statement. This will help you to verify the
accuracy of your statement, as well as to identify any unauthorized
transactions.
When Using An ATM, Be Aware Of What's Going On Around You:
Have your card ready and be prepared to use it immediately. At
unattended terminals or outdoor ATMs, observe your surroundings before
beginning your transaction. Try to select terminals and ATMs in
well-lighted, busy areas. If you must use an ATM or terminal in an
isolated place, ask a friend to go with you, especially at night.
Prevent Others From Getting Information About Your ATM Card:
Always take your receipts with you to prevent anyone from obtaining
information that could help them access your account. When at an ATM,
always shield the screen and keyboard to keep onlookers from learning
your PIN or the transaction amount as you enter them. If you become
suspicious during a transaction, cancel it, take your card, and leave.
Check Periodically To Be Sure That You Have Your ATM Card:
Report a lost or stolen ATM card and any unauthorized transactions
to your bank or credit union immediately.
SMART MONEY MANAGEMENT HABITS
Your ATM card can be a useful tool in helping you develop good
money management habits if you follow these five simple steps:
* Establish a monthly budget.
* Stick to your spending limits and track your expenses routinely and
carefully.
* Save your sales and ATM receipts and immediately deduct purchases
and other transactions from your checkbook or your account
register. Be sure to note any fees.
* Promptly balance your checkbook against your monthly account
statement, which lists all of your purchases and fees.
* Use your monthly itemized statement as a systematic way to manage
your spending habits and determine whether your budget is
realistic.
MORE INFORMATION ABOUT ATM CARDS
For a copy of "Lost or Stolen: Credit and ATM Cards," write to the
Office of Consumer and Business Education, Federal Trade Commission,
Washington, DC 20580.
Call (800) 999-5136 for free copies of "The ATM Cash Card Quiz," a
brochure developed by MasterCard International in cooperation with the
National Coalition for Consumer Education.
The "Consumer Handbook to Credit Protection Laws" provides
information on your rights when using an ATM card, and how to complain
to federal enforcement agencies. For a copy, send 50 cents to the
Consumer Information Center, Department 340A, Pueblo, CO 81009.
If you have a complaint or dispute that cannot be resolved by your
bank, savings and loan, or credit union, one of the following government
agencies may be able to help you:
* Office of Consumer Affairs,
Federal Deposit Insurance Corporation,
550 17th Street, N.W., Washington, DC 20429.
Phone: (800) 934-3342.
* Office of the Comptroller of the Currency, Compliance
Management Division, 250 E Street, N.W., Washington, DC
20219.
Phone: (202) 874-4820
* Federal Reserve System, Division of Consumer and Community
Affairs, 20th Street and C Street, N.W., Washington, DC
20551.
Phone: (202) 452-3693.
* Office of Thrift Supervision's Consumer Affairs Office, 1700
G Street, N.W., Washington, DC 20552.
Phone: (800) 842-6929.
LISTING OF ATM NETWORKS & Shopping Service Networks
This list will help you become acquainted with ATM and shopping
service networks available in your area. It represents a complete
listing of all networks, to the best of the preparer's knowledge, as of
the publication date of this booklet.
ALABAMA
ALERT
AFFN (Armed Forces Financial Network)
Cirrus
Maestro
MONEY BELT
MPACT
MPACT
Plus
Interlink
SCS Money Center
SCS
ALASKA
Alaska Option
Alaska Option
Cirrus
Maestro
FIServ Shared
Plus
Interlink
SCS Money Center
SCS
THE EXCHANGE
Accel
ARIZONA
Cactus
Cirrus
Maestro
Day & Night Tellers
FIServ Shared
Instant Cash
MAC
MAC
Money Network
Money System
MPACT
MPACT
Plus
Interlink
QUEST
QUEST
Rocky Mountain Bankcard
SCS Money Center
SCS
STAR SYSTEM
EXPLORE
ARKANSAS
ACCESS
Cirrus
Maestro
Express Net
FIServ Shared
GulfNet
GulfNet Point of Sale
MAC
MAC
MONEY BELT
MoneyMaker
MOST
MOST
MPACT
MPACT
Plus
Interlink
PULSE
PULSE PAY
SCS Money Center
SCS
SHAZAM
CALIFORNIA
Cirrus
Maestro
Clover Network Teller
Day & Night Teller
Deputy Teller
FIServ Shared
Instant Cash
Instant Teller
Instant Teller
MAC
MAC
Max Money Center
MOST
MOST
MPACT
MPACT
Plus
Interlink
QUEST
QUEST
Rocky Mountain Bankcard
SCS Money Center
SCS
STAR SYSTEM
EXPLORE
The CO-OP
THE EXCHANGE
Accel
24 Hour Convenience Teller
24 Hour Teller
COLORADO
Cirrus
Maestro
Day & Night Teller
Fastbank
FIServ Shared
Fleet 24
Instant Cash
MAC
MAC
MINIBANK
Money Network
Money System
MPACT
MPACT
NetWorks
Plus
Interlink
PULSE
PULSE PAY
Rocky Mountain Bankcard
SCS Money Center
SCS
STAR SYSTEM
EXPLORE
Transaction
CONNECTICUT
Cirrus
Maestro
Fleet 24
MAC
MAC
NYCE
NYCE
Plus
Interlink
Timeless Teller
XPress24
Yankee 24
Yankee 24 QuickPay
DELAWARE
Cirrus
Maestro
FIServ Shared
MAC
MAC
MOST
MOST
MPACT
MPACT
NYCE
NYCE
Plus
Interlink
SCS Money Center
SCS
FLORIDA
AmBank 24
Bank Atlantic
Cirrus
Maestro
Credit Union 24
Dadeland Bank
Deputy Teller
1st American 24
FIServ Shared
Freedom Machine
HONOR
HONOR
MAC
MAC
MoneyLine 24
MoneyMaker
MPACT
MPACT
Plus
Interlink
Presto
SCS Money Center
SCS
Sun Bank 24
24 Hour Teller
GEORGIA
Cirrus
Maestro
Easy Banker
FIServ Shared
HONOR
HONOR
Instant Banker
Link 24
MAC
MAC
MONEY BELT
MoneyMaker
MOST
MOST
MPACT
MPACT
Plus
Interlink
Presto
P24
Push Button Banker
SCS Money Center
SCS
T24
24 Hour Banker
HAWAII
Bank of Hawaii
IslePay
Cirrus
Maestro
First Hawaiian
OTTO
FIServ Shared
MPACT
MPACT
Plus
Interlink
SCS Money Center
SCS
STAR SYSTEM
EXPLORE
IDAHO
Award
Cirrus
Maestro
Day & Night Teller
FIServ Shared
HandiBank
Instant Banker
MAC
MAC
MINIBANK
MPACT
MPACT
Plus
Interlink
Rocky Mountain Bankcard
SCS Money Center
SCS
STAR SYSTEM
EXPLORE
THE EXCHANGE
Accel
ILLINOIS
BankMate
BankMate
Cash Station
Cash Station
Cirrus
Maestro
Credit Union 24
Easy Answer
EFT Illinois
EFT Illinois
Evergreen Network
FIServ Shared
Instant Cash
MAC
MAC
Magic Line
ML Pay
Money Center 24
Money Network
Money System
MoneyMaker
MOST
MOST
MPACT
MPACT
Plus
Interlink
Shazam
SHAZAM
SCS Money Center
SCS
INDIANA
Access 24 Teller
Bank Machine
Cash Station
Cash Station
Cirrus
Maestro
Day & Night Network
EFT Illinois
1st Place
FIServ Shared
Instant Cash
Inteller
Jeanie
Jeanie
MAC
MAC
Magic Line
ML Pay
Money Station
Money Station
MPACT
MPACT
Plus
Interlink
QUEST
QUEST
SCS Money Center
SCS
Share System
Tellerific
IOWA
Cirrus
Maestro
Day & Night Teller
FIServ Shared
Instant Cash
MPACT
MPACT
NetWorks
Plus
Interlink
SCS Money Center
SCS
Shazam
SHAZAM
KANSAS
BankMate
BankMate
Bankmatic
ChecOKard
Cirrus
Maestro
FIServ Shared
KETS
Store Front
Instant Cash
MPACT
MPACT
NetWorks
Plus
Interlink
SCS Money Center
SCS
SHAZAM
VIA
KENTUCKY
BankMate
BankMate
CAT
Cirrus
Maestro
FIServ Shared
Jeanie
Jeanie
MAC
MAC
MONEY BELT
Money Station
Money Station
Money Tree
MPACT
MPACT
Plus
Interlink
QUEST
QUEST
SCS Money Center
SCS
Tellerific
LOUISIANA
Abby
Cirrus
Maestro
Credit Union 24
Day & Night Teller
Express Net
FIServ Shared
GulfNet
GulfNet Point of Sale
MONEY BELT
MoneyMaker
MPACT
MPACT
NEAR
Plus
Interlink
PULSE
PULSE PAY
SCS Money Center
SCS
MAINE
Cirrus
Maestro
Fleet 24
MAC
MAC
Plus
Interlink
TX
Yankee 24
Yankee 24 OuickPay
MARYLAND
Cirrus
Maestro
FIServ Shared
Fleet 24
HONOR
HONOR
MAC
MAC
MOST
MOST
MPACT
MPACT
Plus
Interlink
SCS Money Center
SCS
MASSACHUSETTS
BayBank X-Press 24
XPress24
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How To Use The Law To Instantly Stop Creditor Harassment
by Horizon Unlimited Group's Insider Reports
------------------------------------------------------------------------
INTRODUCTION
"What is your boss going to think when he finds out you don't pay your bills?"
- Big Bubba's Collection Crew
"If you get a check in the mail postmarked today, then I won't have to mess up your credit
for the next seven years."
- Pay Today Agency
"I think I can still stop the summons from being served at your job tomorrow if you will
send me a postdated check right now."
- Precision Pressure Services
Pinning "Bully" Bill Collectors To The Mat
Mark and Susan are heads of a typical American family. Three children, two cars and a
mortgage require thoughtful budgeting of their two incomes in order to live
"comfortably." Last September, Susan lost her job resulting in an immediate 40% drop in
household income. Shortly afterward their oldest son, Jason, was seriously injured in an
automobile accident. Compounding this tragic loss is the $8,000 in related medical
expenses added to a list of bills already 60-90 days delinquent. Unfortunately, the
Petersons found no mercy in a system that measures success only in terms of results and
looks only at the bottom line. The Petersons were on their own to work out of this terrible
situation and the thing they needed more than anything else was knowledge. They needed
to know their options. They needed to know the laws that have been enacted to protect
them from harassing creditors. The same information that eventually empowered the
Petersons to take some resemblance of control of their situation may also help you today
or at some point in your future.
If you haven't had the unfortunate experience of falling seriously behind on your monthly
commitments, if you haven't found yourself to be occasionally over billed for products or
services, if you have never felt as though you were mistreated by a creditor, then you are
in the minority, so far.
This resource is all about law. The reality is few people begin to drool with anticipation
when they find out that they are going to read a law book. Let's face it. Plucking eyebrows
may rate higher on the preference list than reading law.
But, when you find yourself in a situation where you need to know-must know-the facts-
your rights-a reference such as this will prove itself to be invaluable in the returns that it
will provide. Reading and learning for yourself what laws were enacted to protect your
rights will bring you peace of mind; it will give you confidence to take action with surety.
At the same time, one who remains ignorant of his rights is no better off than he who has
no rights.
You will find yourself referring to this reference again and again as those occasional
situations arise where, in the past, you knew you weren't treated fairly but lacked
knowledge of the facts to take any meaningful action. You'll also see numerous
opportunities where friends and relatives could benefit from your knowledge gained here,
also. And as further encouragement, you will also find that, other than the occasional
paragraph, most of the law text reads pretty straight forward.
If read in a quiet relaxed atmosphere, without interruption, you will find comprehension to
be surprisingly high. To further assist you with understanding and planning, you will find
explanations of critical subjects in everyday language throughout the text.
Virtually everyone, regardless of name, occupation, or surprisingly even income is bound
to experience encounters of the 'harassing kind' at least once in a lifetime. If it's not part of
maturing as a young adult, it's part of a divorce. If it's not part of a dream gone bad, it's
the result of an illness, hurricane or business failure. Financial hardship comes with many
faces, but it stems from two primary sources. It can be the result of mismanaged credit and
not integrating sound principles into one's financial planing, or it can result from a personal
calamity. The bottom line is that financial hardship is not a respecter of persons or
positions. A couple earning $80,000 a year can actually be just as vulnerable as a single
parent earning $25,000 a year. Unexpected, and often undeserved, circumstances can
leave both vulnerable to the harassment of collection agencies.
Before trashing the collection industry, it is important to note that the debt collection
business is very much needed in a free enterprise system. You could call it a necessary evil
if you like. Without it we would all be paying much higher prices for everything we buy as
businesses tried to recoup their losses from all the "deadbeats" who didn't pay. The debt
collectors are the deterrent to see that "deadbeats" do pay their bills. And there are a lot of
them out there, as anyone who accepts checks or extends credit can attest. The "Gripe"
with the system is that it has no way to distinguish a "deadbeat" from an upstanding
individual who has just had an unfortunate turn of events and is eager to rectify their
situation. Thus, everyone gets thrown into the same pile; everyone gets treated as a
"deadbeat".
Add to this the fact that most third party bill collectors get paid a percentage of everything
they collect and you have a formula for real abuse. The lure of big profits in the debt
collection industry has attracted a few unethical agents. There are more than a handful of
bill collectors that will go to any length to collect a debt and earn their commission. They
make their living skillfully applying the techniques of deception and fear tactics to those
who are often most vulnerable emotionally and least prepared knowledge wise .
Fortunately the U.S. Congress has passed laws to limit the tactics bill collectors can use to
extract money from a debtor.
If you are currently experiencing the discomfort of threatening phone calls and letters, or if
you ever do in the future, you can take comfort in the knowledge that you have the
authority to put an immediate end to such harassment. Every citizen has this authority.
The problem is that most don't know it, and as a result they are having their emotions
"played like a string" by unscrupulous seasoned debt collectors.
Your authority was first delegated to you by the U.S. Senate and House of
Representatives in the Fair Debt Collection Practices Act of 1977. This law was
strengthened in 1986 with the Consumer Credit Protection Act Amendments. This piece
of legislation placed strict regulations on the methods creditors and their agents can
employ in an effort to collect a debt. The following is a layman's summery of some of the
key sections of this law. (If you are in a business that extends credit, you should also
become familiar with this information so that you don't unknowingly break the law.)
THE FAIR DEBT COLLECTION PRACTICES ACT
Layperson's Summary: False Or Misleading Representation
A creditor may not use deceptive or misleading means in an effort to collect a debt.
That could include the following:
1) Falsely implying that he is an attorney or government representative.
2) Falsely implying that you have committed a crime.
3) Representing correspondence as being from an attorney when it is not.
4) Implying that nonpayment of any debt will result in loss of personal property, wages, or
arrest unless (a) it is lawful and (b) the creditor intends to follow through with such action.
5) Threatening to take action that is not legal or that the creditor does not intend to take.
6) Implying that the transfer of interest in the debt to someone else will result in any of the
actions in number four.
7) The false representation that you committed a crime in an effort to disgrace you.
8) Misrepresenting your credit or failing to communicate that you are disputing a debt.
9) The use of written communication which simulates or is falsely represented to be a
document authorized, issued or approved by any court, official or agency of the U.S. or
any state, or which creates a false impression as to its source, authorization, or approval.
10) The use of any false or deceptive means to attempt to collect a debt or obtain
information about a consumer.
11) Failure to disclose clearly in all communication that the debtor is attempting to collect
a debt and that any information obtained will be used for that purpose.
12) The false representation or implication that accounts have been turned over to
innocent purchasers.
13) The false representation or implication that documents are part of the legal process.
14) The use of any business, company, or organization name other than the actual name of
the debt collector's business.
15) The false representation that papers being sent to you are not legal process forms
when they are.
16) The false representation that a debt collector is employed by a consumer reporting
agency.
Layperson's Summary: Unfair Practices
1) A creditor may not collect any interest, fee, or charge unless (a) it is legal and (b) it was
expressly authorized in the original agreement creating the debt.
2) If a creditor accepts a check that is more that 5 days postdated, he must notify the
consumer in writing a minimum of 3 days and a maximum of 10 days before depositing the
check.
3) A creditor may not solicit a postdated check for the purpose of threatening or
instituting criminal prosecution.
4) A creditor may not deposit or threaten to deposit a postdated check before its intended
date.
5) A creditor can not cause charges to be incurred by you for the sake of communication
such as a collect phone call or telegram fees.
6) A creditor may not threaten nonjudicial action to take property if (a) there is no right to
the property or (b) he does not intend to take such action or (c) the property is exempt
from such action.
7) A creditor may not use any means of mail that might be embarrassing to you such as a
post card or an envelope with a symbol or wording that indicates that it is a debt collection
letter. He may use his business name on the envelope if it doesn't indicate that it is a debt
collection business.
8) A creditor may never give false credit information about you to anyone.
HOW TO INSTANTLY STOP HARASSING CALLS AND LETTERS FROM THIRD
PARTY BILL COLLECTORS
They say you owe money that you don't think you should owe. Or maybe, you owe the
money but due to financial circumstances you just can't pay it right now. In the meantime,
you've got third party collection agencies harassing you and your family by phone and by
mail. It's gotten to the point that you're losing sleep worrying about it. What do you do?
Options
Well, one option is to make them go away. Yes, you can instantly stop unwanted phone
calls and letters by invoking Public Law 95-109 Section 805-C. It provides that once
notified in writing to cease further communication, a third party bill collector may only
contact you one last time in order to inform you of what action they intend to take on
behalf of their client. Normally, this will be a phone call telling you that they are going to
recommend that their client file a lawsuit to recover the debt and additional fees. That may
sound real scary, but the truth is that the majority of the time the collection agency will
then return your file to the original creditor who often reports the debt as a charge off on
your credit file--The End.
If you invoke the law very early (as soon as you get the first letter from a third party
collection agency) you may prevent an inquiry from a collection agency even showing up
on your credit file or a note indicating that the account was turned over to outside
collections. In other words, they may send it right back to the original creditor without
spending the money to pull your credit file. This is good damage control for your credit
history since either notation on your report would be considered very negative by a
potential future lender.
Even with the slim chance the creditor does file a law suit, it's not the end of the issue by
any means. There is always room to negotiate. The reality for creditors is that judgments
are costly and difficult to enforce in most states, thus unsecured loans such as credit cards,
medical service, etc. are often written off as uncollectible. This may be one viable option
for you to explore in order to get creditors "off your back" until you can settle the debt.
Invoking the Law
1.) Make a copy of the most recent correspondence from the collection agency.
2.) Write or type a letter expressing your desire for #1) the bill collector to cease
communication with you #2) your willingness to deal only with the original creditor and
#3) that you are giving proper notification in accordance with PL 95-109. Include the
account number assigned to you by the collection agency.
3.) Make a copy of your letter.
4.) Mail your letter and the copy of the letter they sent you in an envelope via Certified
Mail - Return Receipt Requested. You must send it certified mail to prove it was received
by them.
5.) Within a couple of weeks maximum you should receive a green card as your receipt for
delivery. File it with your copies of the other letters in case you ever need to take legal
action.
Of course there are other options to get bill collectors off of your back. You may consider
retaining an attorney. Once your debtor is notified that you have an attorney, they may not
contact you or your family further unless your attorney doesn't respond to them in a
reasonable period of time. It is important to note that this method is effective for the
original creditor also and not just third party agents as covered above.
The best and most honorable option in most cases would be to negotiate a settlement. Of
course you don't have the money to pay them in full or you would have already done it.
Try offering 10 or 20% of the total balance as payment in full. Most creditors would
rather have something guaranteed than holding out for the entire balance and risk getting
nothing. Make sure you have everything in writing including how it will be reported on
your credit. Don't agree to their reporting it as a "paid collection account". Instead, you
insist that it say "Account closed- paid in full". Don't allow them to con you into thinking
that they can't do that. They may tell you that they can't change credit history; and legally
this is true. But you are not demanding them to change your payment history; you are
demanding that they report the actual status of the account, "Account closed- paid in full".
The attractiveness of this method is to keep your credit file as clean as possible.
Again the answer is in knowing the law and the facts. When evaluating your options,
consider the legitimacy of the debt, the size, age and type of debt, as well as your
prognosis of your ability to repay the debt at some point in the future.
Also notice that bankruptcy was not listed as an option here. Yes, it is one--probably the
most common option today. Many lawyers are making BIG money selling the idea of
bankruptcy as the solution to everyone's financial problems. Just open a local TV guide or
shoppers news and you'll see dozens of ads, "Stop Creditor Harassment". The reality is
that the majority of bankruptcies are avoidable and bankruptcy is not as painless as it first
appears. Bankruptcy should be a last resort in extreme cases where vital assets are in
jeopardy. A wise negotiator can do far more good than a greedy attorney.
NEGOTIATE!!! Or find an attorney who is willing to negotiate!
LEGAL WAYS TO GET THE BILL COLLECTORS OFF YOUR BACK
------------------------------------------------------------------------
How To Use The Law To Instantly Stop Creditor Harassment
by Horizon Unlimited Group's Insider Reports
------------------------------------------------------------------------
INTRODUCTION
"What is your boss going to think when he finds out you don't pay your bills?"
- Big Bubba's Collection Crew
"If you get a check in the mail postmarked today, then I won't have to mess up your credit
for the next seven years."
- Pay Today Agency
"I think I can still stop the summons from being served at your job tomorrow if you will
send me a postdated check right now."
- Precision Pressure Services
Pinning "Bully" Bill Collectors To The Mat
Mark and Susan are heads of a typical American family. Three children, two cars and a
mortgage require thoughtful budgeting of their two incomes in order to live
"comfortably." Last September, Susan lost her job resulting in an immediate 40% drop in
household income. Shortly afterward their oldest son, Jason, was seriously injured in an
automobile accident. Compounding this tragic loss is the $8,000 in related medical
expenses added to a list of bills already 60-90 days delinquent. Unfortunately, the
Petersons found no mercy in a system that measures success only in terms of results and
looks only at the bottom line. The Petersons were on their own to work out of this terrible
situation and the thing they needed more than anything else was knowledge. They needed
to know their options. They needed to know the laws that have been enacted to protect
them from harassing creditors. The same information that eventually empowered the
Petersons to take some resemblance of control of their situation may also help you today
or at some point in your future.
If you haven't had the unfortunate experience of falling seriously behind on your monthly
commitments, if you haven't found yourself to be occasionally over billed for products or
services, if you have never felt as though you were mistreated by a creditor, then you are
in the minority, so far.
This resource is all about law. The reality is few people begin to drool with anticipation
when they find out that they are going to read a law book. Let's face it. Plucking eyebrows
may rate higher on the preference list than reading law.
But, when you find yourself in a situation where you need to know-must know-the facts-
your rights-a reference such as this will prove itself to be invaluable in the returns that it
will provide. Reading and learning for yourself what laws were enacted to protect your
rights will bring you peace of mind; it will give you confidence to take action with surety.
At the same time, one who remains ignorant of his rights is no better off than he who has
no rights.
You will find yourself referring to this reference again and again as those occasional
situations arise where, in the past, you knew you weren't treated fairly but lacked
knowledge of the facts to take any meaningful action. You'll also see numerous
opportunities where friends and relatives could benefit from your knowledge gained here,
also. And as further encouragement, you will also find that, other than the occasional
paragraph, most of the law text reads pretty straight forward.
If read in a quiet relaxed atmosphere, without interruption, you will find comprehension to
be surprisingly high. To further assist you with understanding and planning, you will find
explanations of critical subjects in everyday language throughout the text.
Virtually everyone, regardless of name, occupation, or surprisingly even income is bound
to experience encounters of the 'harassing kind' at least once in a lifetime. If it's not part of
maturing as a young adult, it's part of a divorce. If it's not part of a dream gone bad, it's
the result of an illness, hurricane or business failure. Financial hardship comes with many
faces, but it stems from two primary sources. It can be the result of mismanaged credit and
not integrating sound principles into one's financial planing, or it can result from a personal
calamity. The bottom line is that financial hardship is not a respecter of persons or
positions. A couple earning $80,000 a year can actually be just as vulnerable as a single
parent earning $25,000 a year. Unexpected, and often undeserved, circumstances can
leave both vulnerable to the harassment of collection agencies.
Before trashing the collection industry, it is important to note that the debt collection
business is very much needed in a free enterprise system. You could call it a necessary evil
if you like. Without it we would all be paying much higher prices for everything we buy as
businesses tried to recoup their losses from all the "deadbeats" who didn't pay. The debt
collectors are the deterrent to see that "deadbeats" do pay their bills. And there are a lot of
them out there, as anyone who accepts checks or extends credit can attest. The "Gripe"
with the system is that it has no way to distinguish a "deadbeat" from an upstanding
individual who has just had an unfortunate turn of events and is eager to rectify their
situation. Thus, everyone gets thrown into the same pile; everyone gets treated as a
"deadbeat".
Add to this the fact that most third party bill collectors get paid a percentage of everything
they collect and you have a formula for real abuse. The lure of big profits in the debt
collection industry has attracted a few unethical agents. There are more than a handful of
bill collectors that will go to any length to collect a debt and earn their commission. They
make their living skillfully applying the techniques of deception and fear tactics to those
who are often most vulnerable emotionally and least prepared knowledge wise .
Fortunately the U.S. Congress has passed laws to limit the tactics bill collectors can use to
extract money from a debtor.
If you are currently experiencing the discomfort of threatening phone calls and letters, or if
you ever do in the future, you can take comfort in the knowledge that you have the
authority to put an immediate end to such harassment. Every citizen has this authority.
The problem is that most don't know it, and as a result they are having their emotions
"played like a string" by unscrupulous seasoned debt collectors.
Your authority was first delegated to you by the U.S. Senate and House of
Representatives in the Fair Debt Collection Practices Act of 1977. This law was
strengthened in 1986 with the Consumer Credit Protection Act Amendments. This piece
of legislation placed strict regulations on the methods creditors and their agents can
employ in an effort to collect a debt. The following is a layman's summery of some of the
key sections of this law. (If you are in a business that extends credit, you should also
become familiar with this information so that you don't unknowingly break the law.)
THE FAIR DEBT COLLECTION PRACTICES ACT
Layperson's Summary: False Or Misleading Representation
A creditor may not use deceptive or misleading means in an effort to collect a debt.
That could include the following:
1) Falsely implying that he is an attorney or government representative.
2) Falsely implying that you have committed a crime.
3) Representing correspondence as being from an attorney when it is not.
4) Implying that nonpayment of any debt will result in loss of personal property, wages, or
arrest unless (a) it is lawful and (b) the creditor intends to follow through with such action.
5) Threatening to take action that is not legal or that the creditor does not intend to take.
6) Implying that the transfer of interest in the debt to someone else will result in any of the
actions in number four.
7) The false representation that you committed a crime in an effort to disgrace you.
8) Misrepresenting your credit or failing to communicate that you are disputing a debt.
9) The use of written communication which simulates or is falsely represented to be a
document authorized, issued or approved by any court, official or agency of the U.S. or
any state, or which creates a false impression as to its source, authorization, or approval.
10) The use of any false or deceptive means to attempt to collect a debt or obtain
information about a consumer.
11) Failure to disclose clearly in all communication that the debtor is attempting to collect
a debt and that any information obtained will be used for that purpose.
12) The false representation or implication that accounts have been turned over to
innocent purchasers.
13) The false representation or implication that documents are part of the legal process.
14) The use of any business, company, or organization name other than the actual name of
the debt collector's business.
15) The false representation that papers being sent to you are not legal process forms
when they are.
16) The false representation that a debt collector is employed by a consumer reporting
agency.
Layperson's Summary: Unfair Practices
1) A creditor may not collect any interest, fee, or charge unless (a) it is legal and (b) it was
expressly authorized in the original agreement creating the debt.
2) If a creditor accepts a check that is more that 5 days postdated, he must notify the
consumer in writing a minimum of 3 days and a maximum of 10 days before depositing the
check.
3) A creditor may not solicit a postdated check for the purpose of threatening or
instituting criminal prosecution.
4) A creditor may not deposit or threaten to deposit a postdated check before its intended
date.
5) A creditor can not cause charges to be incurred by you for the sake of communication
such as a collect phone call or telegram fees.
6) A creditor may not threaten nonjudicial action to take property if (a) there is no right to
the property or (b) he does not intend to take such action or (c) the property is exempt
from such action.
7) A creditor may not use any means of mail that might be embarrassing to you such as a
post card or an envelope with a symbol or wording that indicates that it is a debt collection
letter. He may use his business name on the envelope if it doesn't indicate that it is a debt
collection business.
8) A creditor may never give false credit information about you to anyone.
HOW TO INSTANTLY STOP HARASSING CALLS AND LETTERS FROM THIRD
PARTY BILL COLLECTORS
They say you owe money that you don't think you should owe. Or maybe, you owe the
money but due to financial circumstances you just can't pay it right now. In the meantime,
you've got third party collection agencies harassing you and your family by phone and by
mail. It's gotten to the point that you're losing sleep worrying about it. What do you do?
Options
Well, one option is to make them go away. Yes, you can instantly stop unwanted phone
calls and letters by invoking Public Law 95-109 Section 805-C. It provides that once
notified in writing to cease further communication, a third party bill collector may only
contact you one last time in order to inform you of what action they intend to take on
behalf of their client. Normally, this will be a phone call telling you that they are going to
recommend that their client file a lawsuit to recover the debt and additional fees. That may
sound real scary, but the truth is that the majority of the time the collection agency will
then return your file to the original creditor who often reports the debt as a charge off on
your credit file--The End.
If you invoke the law very early (as soon as you get the first letter from a third party
collection agency) you may prevent an inquiry from a collection agency even showing up
on your credit file or a note indicating that the account was turned over to outside
collections. In other words, they may send it right back to the original creditor without
spending the money to pull your credit file. This is good damage control for your credit
history since either notation on your report would be considered very negative by a
potential future lender.
Even with the slim chance the creditor does file a law suit, it's not the end of the issue by
any means. There is always room to negotiate. The reality for creditors is that judgments
are costly and difficult to enforce in most states, thus unsecured loans such as credit cards,
medical service, etc. are often written off as uncollectible. This may be one viable option
for you to explore in order to get creditors "off your back" until you can settle the debt.
Invoking the Law
1.) Make a copy of the most recent correspondence from the collection agency.
2.) Write or type a letter expressing your desire for #1) the bill collector to cease
communication with you #2) your willingness to deal only with the original creditor and
#3) that you are giving proper notification in accordance with PL 95-109. Include the
account number assigned to you by the collection agency.
3.) Make a copy of your letter.
4.) Mail your letter and the copy of the letter they sent you in an envelope via Certified
Mail - Return Receipt Requested. You must send it certified mail to prove it was received
by them.
5.) Within a couple of weeks maximum you should receive a green card as your receipt for
delivery. File it with your copies of the other letters in case you ever need to take legal
action.
Of course there are other options to get bill collectors off of your back. You may consider
retaining an attorney. Once your debtor is notified that you have an attorney, they may not
contact you or your family further unless your attorney doesn't respond to them in a
reasonable period of time. It is important to note that this method is effective for the
original creditor also and not just third party agents as covered above.
The best and most honorable option in most cases would be to negotiate a settlement. Of
course you don't have the money to pay them in full or you would have already done it.
Try offering 10 or 20% of the total balance as payment in full. Most creditors would
rather have something guaranteed than holding out for the entire balance and risk getting
nothing. Make sure you have everything in writing including how it will be reported on
your credit. Don't agree to their reporting it as a "paid collection account". Instead, you
insist that it say "Account closed- paid in full". Don't allow them to con you into thinking
that they can't do that. They may tell you that they can't change credit history; and legally
this is true. But you are not demanding them to change your payment history; you are
demanding that they report the actual status of the account, "Account closed- paid in full".
The attractiveness of this method is to keep your credit file as clean as possible.
Again the answer is in knowing the law and the facts. When evaluating your options,
consider the legitimacy of the debt, the size, age and type of debt, as well as your
prognosis of your ability to repay the debt at some point in the future.
Also notice that bankruptcy was not listed as an option here. Yes, it is one--probably the
most common option today. Many lawyers are making BIG money selling the idea of
bankruptcy as the solution to everyone's financial problems. Just open a local TV guide or
shoppers news and you'll see dozens of ads, "Stop Creditor Harassment". The reality is
that the majority of bankruptcies are avoidable and bankruptcy is not as painless as it first
appears. Bankruptcy should be a last resort in extreme cases where vital assets are in
jeopardy. A wise negotiator can do far more good than a greedy attorney.
NEGOTIATE!!! Or find an attorney who is willing to negotiate!
Will Bankruptcy Discharge Enough of Your Debts?
Certain categories of debts cannot be discharged in Chapter 7 bankruptcy. These are
called non dischargeable debts, and it doesn't make much sense to file for Chapter 7
bankruptcy if your primary goal is to get rid of them. The main ones are:
•back child support and alimony obligations, and debts considered in the nature of
support, such as an obligation to pay attorney's fees for a child support hearing, or an
obligation to pay marital debts in lieu of alimony
•student loans that first became due fewer than seven years ago (plus any time you
received a deferment or forbearance or were in an earlier bankruptcy case)
•court-ordered restitution
•income taxes less than three years past due
•condominium and cooperative association dues, and
•court judgments for injuries or death to someone arising from your intoxicated driving.
The bankruptcy judge may rule any of the following debts non dischargeable if the creditor
objects in the bankruptcy court:
•Debts incurred on the basis of fraud, such as lying on a credit application or writing a bad
check.
•Debts from willful or malicious injury to another or another's property, including assault,
battery, false imprisonment, libel and slander.
•Debts from larceny (theft), breach of trust or embezzlement.
•Debts arising out of a marital settlement agreement or divorce decree (that aren't
otherwise automatically non dischargeable as support or alimony), such as credit card
debts you agree to pay or payments you owe to an ex-spouse to even up the property
division. The court won't let you discharge these debts unless you prove that you need the
money for basic support or to continue the operation of a business or that the benefit
you'd receive by the discharge outweighs any detriment to your ex-spouse or children.
As a general rule, if more than 50% of your debts are non dischargeable, Chapter 7
bankruptcy's disadvantages probably outweigh the advantages. If you can discharge more
than 50% of your debts, however, Chapter 7 bankruptcy may make sense; after your
discharge, you should be in a better position than before to pay off the non dischargeable
debts.
Even if the bulk of your indebtedness is from debts that are nondischargeable only if the
creditor files an objection with the court, it may still make sense to file for bankruptcy and
hope your creditors don't object.
How Much Property Will You Have to Give Up?
Whether or not you decide to file for bankruptcy may depend on what property will be
taken to pay your creditors (nonexempt property) and what property you will keep
(exempt property).
Certain kinds of property are exempt in almost every state, while others are almost never
exempt. The following are items you can typically keep (exempt property):
•motor vehicles, to a certain value•reasonably necessary clothing (no mink
coats)•reasonably needed household furnishings and goods (the second TV may have to
go)•household appliances•jewelry, to a certain value•personal effects•life insurance (cash
or loan value, or proceeds), to a certain value•pensions •part of the equity in your
home•tools of your trade or profession, to a certain value•portion of unpaid but earned
wages, and•public benefits (welfare, Social Security, unemployment compensation)
accumulated in a bank account.
Items you must typically give up (nonexempt property) include:
•expensive musical instruments (unless you're a professional musician)•stamp, coin and
other collections•family heirlooms•cash, bank accounts, stocks, bonds and other
investments•second car or truck, and •second or vacation home.
Turning the Tables on a Bill Collector
Copyright (c) 1996 Nolo Press
------------------------------------------------------------------------
Many bill collectors sit at their desks with pre-written scripts of what to say to you. Nine
out of ten debtors respond with the same, predictable statements. Often, these are
employment excuses, promises to pay and general admissions of guilt. None of this will
get you anywhere--the collector has heard it all before and is ready to hurl the next
accusation at you. To help the collectors respond to your predictable answers, one
collector wrote a color-coded guide. If you respond with answer X, the bill collector flips
to the green page. If you respond with answer Y, he turns to the blue page.
The key to your success with a bill collector is to be the one in ten who unpredictably
turns the table on the collector. Your goal is to get the bill collector to hang up, tongue
tied with frustration. And engaging the collector in conversation may even be to your
advantage, especially if you have a witness pick up the extension and listen in on the
conversation. (It's illegal for you to tape any conversation without the other party's
consent, however.) If the bill collector says something illegal, you can report the violation
to the federal government, your state government and the creditor. The creditor may be
willing to drop the whole thing.
Here is a made up dialogue between a bill collector ("Betty Collins") and a debtor,
("Donald Drake") that shows you how to turn the tables.
BC: Hello, this is Ms. Collins. Is Donald Drake there?
D: This is Donald Drake.
BC: Mr. Drake, I work for Collins Collection Agency and I'm calling about your Apex
charge account. Your balance of $1,744 is six months overdue. I know you have money
and will send us the full amount today. [At this point, the bill collector will pause. Bill
collectors are trained to outlast debtors--they hope that the debtor will break the silence
and tell the collector something the collector doesn't know. Many debtors are
uncomfortable with the silence and offer to pay.]
D: I can't.
BC: Why not, Mr. Drake? Are you having employment or health problems?
D: Quite frankly, it's none of your business.
BC: Mr. Drake, I am here to help you. Not paying your bill is unacceptable. We need to
receive some payment from you. Perhaps you can take out a personal loan to pay us.
D: What are you, crazy?
BC: Now Mr. Drake, like I said, I only want to help. Have you considered refinancing
your home, or taking a second job in order to raise some cash?
D: Ms. Collins, you have some nerve. I am doing all I can to support my family--it just so
happens that I just can't pay your bill right now. It's awfully insulting of you to tell me how
to manage my financial affairs.
BC: Mr. Drake, we'll be happy to take a post-dated check from you.
D: But Ms. Collins, I don't know when I will have the money to pay. If I write you a post-
dated check, it may bounce. I hope you aren't suggesting that I get into trouble for
bouncing a check.
BC: Mr. Drake, you realize that I will have to report your nonpayment to a credit
reporting agency. Good credit should be your most valued asset, but now your credit
rating will fall.
D: My credit is already damaged and I don't care. I have no interest in buying more things
on credit. In fact, I'd really appreciate it if you report this to a credit bureau--certainly it
would help decrease the amount of junk mail I now receive.
BC: I know you want to do the right--the moral--thing and pay your bill.
D: Yes, and I have a moral responsibility to feed and clothe my family before I pay my
Apex account. I guess you do too or you wouldn't be spending all this time trying to earn
a commission.
BC: You know we can attach your wages and other property.
D: Yes, but not until you get a court judgment and that takes a lot of time. Of course,
threatening to do it before you get a court order is illegal.
BC: Mr. Drake, we can send our lawyer to court in 15 minutes.
D: Oh, I doubt that, Ms. Collins. If your lawyer is any good he probably has other
priorities. Anyway, before you can do much to me you must first serve me with papers,
wait for my response, have a trial and get a court judgment. And that usually takes many
months. Even if you get a judgment, you can attach only my nonexempt property. [Much
of your property is exempt from your creditor's taking, even if the creditor has a court
judgment. This includes most of your wages, public benefits, your clothing and household
furniture and some of the equity in your car.]
BC: Mr. Drake, I will have to call your employer.
D: Contacting my employer would be illegal. You can only call my employer to try and
find me. You have obviously found me.
BC: How did you know that? Oh (mumble, mumble). Well, I'll call you later...
D: Wait, Ms. Collins. Don't hang up. I know you are busy and make most of your money
when people send you payments for their bills. Just because I have no money now and
know my rights is no reason for you to get huffy and hang up on me.
BC: Listen, Mr. Drake, I'm going to get you.
D: Not legally you can't. Ms. Collins, I've had enough of your threats. May I have your
address? I plan to send you a letter telling you to stop communicating with me. I know
this is my right under the federal law.
BC: Collins Collection Agency, P.O. Box 19044, Portland, Maine 00011.
D: And your supervisor's name? I'd like to report this conversation to your boss and the
Federal Trade Commission.
Click--the bill collector hung up.
The bill collector tried to frighten and shame the debtor by mentioning his credit rating,
moral obligation, wages being attached and employer. But none worked. And when the
debtor threatened to report the collector to the FTC, the bill collector hung up.
Chapter 13 Bankruptcy--Introduction
Copyright (c) 1996 Nolo Press
------------------------------------------------------------------------
Most people think of bankruptcy as a process in which you go to court and get your debts
erased. But in fact, there are two types of bankruptcies: the more familiar liquidation
bankruptcy, where your debts are wiped out completely (Chapter 7 bankruptcy) and
reorganization bankruptcy, where you partially or fully repay your debts. The
reorganization bankruptcy for individuals is called Chapter 13 bankruptcy. (There are two
other kinds of reorganization bankruptcy: Chapter 11, for businesses and for individuals
with debts over $1 million, and Chapter 12, for family farmers.) The names come from the
chapters of the federal Bankruptcy Code.
Chapter 13 bankruptcy lets you rearrange your financial affairs, repay a portion of your
debts and put yourself back on your financial feet. You repay your debts through a
Chapter 13 plan. Under a typical plan, you make monthly payments to someone called a
bankruptcy trustee, who is appointed by the bankruptcy court, for three to five years. The
bankruptcy trustee distributes the money to your creditors.
Chapter 13 bankruptcy isn't for everyone. If your total debt burden is too high or your
income is too low or irregular, you may not be eligible. You may be better off handling
your debt problems in another way--such as filing for Chapter 7 bankruptcy, seeking help
from a nonprofit consumer counseling group or negotiating with your creditors on your
own.
Here are some important features of Chapter 13 bankruptcy:
•Chapter 13 bankruptcy is very powerful. You can use it to stop a house foreclosure,
make up the missed mortgage payments and keep the house. You can also pay off back
taxes through your Chapter 13 plan and stop interest from accruing on your tax debt.
•Filing your papers with the bankruptcy court stops creditors in their tracks. When you file
for Chapter 13 bankruptcy (or any other kind of bankruptcy), something called the
automatic stay goes into effect. It immediately stops your creditors from trying to collect
what you owe them. At least temporarily, creditors cannot legally grab (garnish) your
wages, empty your bank account, go after your car, house or other property, or cut off
your utility service or welfare benefits.
•Some people use Chapter 13 bankruptcy to buy time. For example, if you are behind on
mortgage payments and about to be foreclosed on, you can file Chapter 13 bankruptcy
papers to stop collection efforts, and then attempt to sell the house before the foreclosure.
•Chapter 13 bankruptcy requires discipline. For the entire length of your case (three to five
years), you will have to live under a strict budget; the bankruptcy court will not allow you
to spend money on anything it deems nonessential.
•The majority of debtors never complete their Chapter 13 repayment plans. Although most
people file for Chapter 13 bankruptcy assuming they'll complete their plan, only about
35% of all Chapter 13 debtors do. Many drop out very early in the process, without ever
submitting a feasible repayment plan to the court. If you can come up with a realistic
budget and stick to it, however, you should have no trouble completing your Chapter 13
plan.
•Payments may be deducted from your wages during your case. If you have a regular job
with regular income, the bankruptcy court will probably order that the monthly payments
under your Chapter 13 plan be automatically deducted from your wages and sent to the
bankruptcy court.
•Bankruptcy rules vary from court to court. Bankruptcy law comes from the federal
Congress and is meant to be uniform across the country. But when disputes arise about
the bankruptcy laws, bankruptcy courts make the decisions--and they don't all decide the
issues in the same way. The result is that bankruptcy law and practice vary significantly
from court to court and from region to region. This book highlights the different ways
courts have ruled on major issues in Chapter 13 bankruptcy. But this book can't possibly
address every variation. If you research a question yourself or hire a bankruptcy lawyer,
you'll need to be sure the information you get applies in your bankruptcy court.
•Chapter 13 bankruptcy can stay in your credit file for up to ten years from the day you
file your papers, although rarely are Chapter 13 bankruptcies reported for more than seven
years. After your case is over, however, you can take steps to improve your credit. In fact,
some Chapter 13 bankruptcy courts have established programs to help you do just that. In
such a program, if you have paid off around 75% or more of your debts, you may attend
money management seminars and apply for credit from certain local creditors.
Do Nothing
Surprisingly, the best approach for some people deeply in debt is to take no action at all. If
you're living simply, with little income and property, and look forward to a similar life in
the future, you may be what's known as "judgment proof." This means that anyone who
sues you and obtains a court judgment won't be able to collect simply because you don't
have anything they can legally take. (As a famous song of the 1970s said, "freedom's just
another word for nothing left to lose.") Remember, except in unusual situations (being a
tax protester or willfully failing to pay child support) you can't be thrown in jail for not
paying your debts. Nor can a creditor take away such essentials as basic clothing, ordinary
household furnishings, personal effects, food, Social Security, unemployment or public
assistance.
So, if you don't anticipate having a steady income or property a creditor could grab,
bankruptcy is probably not necessary. Your creditors probably won't sue you, because it's
unlikely they could collect the judgment. Instead, they'll simply write off your debt and
treat it as a deductible business loss for income tax purposes. In several years, it will
become legally uncollectible under state law (called the statute of limitations). And in
seven years, it will come off your credit record.
Negotiate With Your Creditors
If you have some income, or you have assets you're willing to sell, you may be a lot better
off negotiating with your creditors than filing for bankruptcy. Negotiation may simply buy
you some time to get back on your feet, or you and your creditors may agree on a
complete settlement of your debts for less than you owe.
Get Outside Help To Design A Repayment Plan
Many people can't do a good job negotiating with their creditors. Inside, they feel that
their creditors are right to insist on full payment. Or, their creditors are so hard-nosed or
just plain irrational that the process is too unpleasant to stomach. In any case, the ability to
negotiate is an art, and involves a number of skills.
If you don't want to negotiate with your creditors, you can turn to a lawyer, a non-lawyer
bankruptcy typing service or a nonprofit credit counselor, such as Consumer Credit
Counseling Service.
Pay Over Time With Chapter 13 Bankruptcy
Chapter 13 bankruptcy lets you discharge most debts by paying all or a portion of them
over a three- to five-year period. In most situations, Chapter 7 bankruptcy is a better
approach to debt problems than is Chapter 13.
If you have steady income and think you could squeeze out a steady amount each month
to make payments on your debts, Chapter 13 bankruptcy may be a good option for you.
Instead of having your nonexempt assets sold to pay creditors (which is what happens in
Chapter 7 bankruptcy), you keep your property and use your income to pay all or a
portion of the debts over three to five years. The minimum amount you must pay is
roughly equal to the value of your nonexempt property. In addition, you must pledge your
disposable income (net income less reasonable expenses) over the life of your plan. The
income you use to repay creditors need not be wages. You can use benefits, investment
income or receipts as an independent contractor or business person.
To file for Chapter 13 bankruptcy, you fill out the same forms as in a Chapter 7
bankruptcy, listing your money, property, expenses, debts and income, and then file them
with the bankruptcy court. In addition, you must file with the court a workable plan to
repay your debts, given your income and expenses. You make payments under the plan
directly to the bankruptcy trustee, who in turn distributes the money to your creditors. As
in Chapter 7 bankruptcy, the act of filing immediately stops your creditors from taking
further action against you.
Usually, the plan is designed so that you make regular payments on your secured debts
and reduced payments on your unsecured debts for three years, at which time any
remaining unpaid balance on the unsecured debts is wiped out. In some cases, a five-year
repayment period is allowed.
You can file for Chapter 13 bankruptcy at any time, even if you wound up a Chapter 7
bankruptcy the day before or just completed another Chapter 13 repayment plan. If you
file more than once, however, you'll be required to pay back a large percentage of your
debts. You cannot file for Chapter 13 bankruptcy, however, if your secured debts exceed
$750,000 or your unsecured debts exceed $250,000.
If for some reason you cannot finish a Chapter 13 repayment plan-for example, you lose
your job six months into the plan and can't make the payments-the trustee may modify
your plan. The trustee may give you a grace period (if the problem looks temporary),
reduce your total monthly payments or extend the repayment period. As long as it looks
like you're acting in good faith, the trustee will try to be accommodating and help you
across rocky periods. If it's clear that there's no way you'll be able to complete the plan
because of circumstances beyond your control, the court might let you discharge your
debts on the basis of hardship.
If the bankruptcy court won't let you modify your plan or give you a hardship discharge,
you have two options:
•You can convert your case to a Chapter 7 bankruptcy unless you received a Chapter 7
discharge within the previous six years.
•You can have the bankruptcy court dismiss your Chapter 13 petition, which would leave
you in the same position as you were in before you filed your petition, except you'll owe
less because of the payments you made. Also, if your Chapter 13 bankruptcy is dismissed,
your creditors may add to their debts any interest that was abated during your Chapter 13
petition case.
What Chapter 7 Bankruptcy May Not Help You
1. You Previously Received a Bankruptcy Discharge
You cannot file for Chapter 7 bankruptcy if you obtained a discharge of your debts under
Chapter 7 or Chapter 13 in a case begun within the past six years. If, however, you
obtained a Chapter 13 discharge in good faith after paying at least 70% of your unsecured
debts, the six-year bar does not apply. The six-year period runs from the date you filed for
the earlier bankruptcy, not the date you received your discharge.
Chapter 13 bankruptcy has no such restriction; you can file for it at any time. So if you are
barred from filing Chapter 7, and you want to file for bankruptcy quickly (for instance, to
stop creditors' collection efforts), Chapter 13 may be an option.
Also, you cannot file for Chapter 7 bankruptcy if a previous Chapter 7 or Chapter 13 case
was dismissed within the past 180 days because:
•you violated a court order, or•you requested the dismissal after a creditor asked for relief
from the automatic stay.
2. You Want to Stop Bill Collector Abuse and Harassment
Usually, it isn't necessary to file for bankruptcy just to get annoying collection agencies off
your back. Under federal law, they cannot threaten you, lie about what they can do to you
or invade your privacy. Under this law, you can also legally force collection agencies to
stop phoning or writing you simply by demanding that they stop, even if you owe them a
bundle and can't pay a cent.
Creditors collecting their own debts (except those that create their own collection
agencies and operate them under a different name) are not governed by this law. While
they cannot harass you, they don't have to stop contacting you because you write them a
letter demanding that they leave you alone.
3. A Friend or Relative Cosigned a Loan
A friend, relative or anyone else who cosigns a loan or otherwise takes on a joint
obligation with you can be held wholly responsible for the debt if you can't pay it. If you
file for Chapter 7 bankruptcy, you will no longer be liable for the debt, but the cosigner
will be left on the hook. If you don't want to subject a cosigner to this liability, explore
paying off the debt over time.
4. You Could Pay Your Debts Over Three to Five Years
A bankruptcy judge who decides that you have enough assets or income to repay your
debts can dismiss your Chapter 7 bankruptcy petition or convert your case to a Chapter 13
bankruptcy. If the value of your nonexempt property exceeds the amount of your debt,
you're at risk of having your case dismissed or converted if you file.
A judge may seriously consider dismissing or converting your case if all of the following
are true:
•a substantial majority of your debts are consumer (not business) debts •you have an
adequate and steady income or other property, and•with little modification of lifestyle, you
could pay off all or most of your debts over three to five years.
Even if a bankruptcy judge wouldn't throw out your case, if you can repay your debts over
time you may be better off negotiating with your creditors or filing for Chapter 13
bankruptcy than filing for Chapter 7 bankruptcy.
5. You Want to Prevent Seizure of Wages or Property
You may not need to file for bankruptcy to keep creditors from seizing all your property
and wages.
Normally, a creditor's only legal means of collecting a debt is to sue you, win a court
judgment and then try to collect the amount of the judgment out of your property and
income. A lot of your property, however, including food, clothing, personal effects and
furnishings, is probably protected by law (exempt) from being taken to pay the judgment.
And, quite likely, your nonexempt property is not worth enough to tempt a creditor to go
after it, as the costs of seizure and sale can be quite high.
Creditors usually first go after your wages and other income. Here too, however, laws
protect you. Only 25% of your net wages can be taken to satisfy a court judgment (up to
50% for child support and alimony). And often, you can keep more than 75% of your
wages if you can demonstrate that you need the extra amount to support yourself and your
family. Income from a pension or other retirement benefit is usually treated like wages.
Creditors cannot touch public benefits such as AFDC, unemployment insurance, disability
insurance or Social Security.
6. You Defrauded Your Creditors
Bankruptcy is geared towards the honest debtor who got in too deep and needs the help of
the bankruptcy court to get a fresh start. A bankruptcy court does not want to help
someone who has played fast and loose with creditors or tries to do so with the
bankruptcy court.
Certain activities are red flags to the courts and trustees. If you have engaged in any of
them during the past year, do not file for bankruptcy until you consult a bankruptcy
lawyer. These no-nos are:
•unloading assets to your friends or relatives to hide them from creditors or from the
bankruptcy court•incurring debts for non-necessities when you were clearly
broke•concealing property or money from your spouse during a divorce proceeding,
and•lying about your income or debts on a credit application.
7. You Recently Incurred Debts for Luxuries
If you've recently run up large debts for a vacation, hobby or entertainment, filing for
bankruptcy probably won't help you. Most luxury debts incurred just before filing are not
dischargeable if the creditor objects. And running up unnecessary debts shortly before
filing casts a suspicion of fraud over your entire bankruptcy case.
Last-minute debts presumed to be nondischargeable include:
•debts of $1,000 or more to any one creditor for luxury goods or services made within 60
days before filing, and•debts for cash advances in excess of $1,000 obtained within 60
days of filing for bankruptcy.
To discharge luxury debts, you will have to prove that extraordinary circumstances
required you to make the charges and that you really weren't trying to put one over on
your creditors. It's an uphill job. Judges often assume that people who incur last minute
charges for luxuries were on a final buying binge before going under and had no intention
of paying.
Creditors, too, are getting aggressive about crying "fraud." Visa and MasterCard lose an
estimated $1.5 billion a year from people who filed for bankruptcy, and Visa claims that
30% to 40% of the losses came from fraudulent debts. In an effort to minimize the number
of last-minute debts that may be discharged, Visa challenges nearly one-half of all
bankruptcy cases filed by people who made large luxury charges or cash advances shortly
before filing for bankruptcy.
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Side Bar--Credit Card Fraud
Bankruptcy courts look to the following factors to determine fraud:
•short time between incurring the charges and filing for bankruptcy•consulting an attorney
before incurring more debt•recent charges over $1,000•many charges under $50 (to avoid
pre-clearance of the charge by the credit card issuer) when you've reached your credit
limit•charges after the card issuer has ordered you to return the card or sent several "past
due" notices•changes in your pattern of use of the card (for instance, much travel after a
sedentary life)•charges after you're obviously insolvent (no job, income or savings); you
could probably defeat a claim of fraud because of no job if you diligently sought
employment•charges for luxuries, and•multiple charges on the same day.
Visa and MasterCard customers may especially find their credit card charges challenged in
bankruptcy. Most banks that issue these cards have recovery programs to attempt to get
some of the money that otherwise would have been discharged in bankruptcy.
These programs are quite aggressive. Bank employees review bankruptcy filings to discern
the date of insolvency, and then challenge credit card charges made after that date. The
banks claim that insolvency is evidenced by any of the following:
•A notation in the customer's file that the customer has met with an attorney.•A rapid
increase in spending, quickly followed by 60-90 days of quiet.•The date noted on any
attorney's fee statement, if the customer consults a lawyer for help with a bankruptcy.
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8. You Expect Debts for Necessities
If you expect to incur more debts for necessities, you should consider delaying filing for
bankruptcy. Most debts you incur before you file will be discharged, but debts incurred
after you file will not. Waiting until after you incur these debts to file will let you include
them in your bankruptcy petition.
A go-slow approach works best in the case of debts for necessities, such as additional
medical costs you anticipate because of an existing illness, the cost of buying your children
new school clothes or substantial heating costs during the upcoming winter.
Federal Trade Commission, Fair Debt Collection
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Facts for Consumers from the Federal Trade Commission, Fair Debt Collection
Fair Debt Collection -- September 1992
If you use credit cards, owe money on a personal loan, or are
paying on a home mortgage, you are a "debtor." If you fall behind in
repaying your creditors, or an error is made on your accounts, you may
be contacted by a "debt collector."
You should know that in either situation the Fair Debt Collection
Practices Act requires that debt collectors treat you fairly by
prohibiting certain methods of debt collection. Of course, the law does
not forgive any legitimate debt you owe.
This brochure provides answers to commonly asked questions to help
you understand your rights under the Fair Debt Collection Practices Act.
What debts are covered?
Personal, family, and household debts are covered under the Act. This
includes money owed for the purchase of an automobile, for medical care,
or for charge accounts.
Who is a debt collector?
A debt collector is any person, other than the creditor, who regularly
collects debts owed to others. Under a 1986 amendment to the Fair Debt
Collection Practices Act, this includes attorneys who collect debts on a
regular basis.
How may a debt collector contact you?
A collector may contact you in person, by mail, telephone, telegram, or
FAX. However, a debt collector may not contact you at unreasonable times
or places, such as before 8 a.m. or after 9 p.m., unless you agree. A
debt collector also may not contact you at work if the collector knows
that your employer disapproves.
Can you stop a debt collector from contacting you?
You may stop a collector from contacting you by writing a letter to the
collection agency telling them to stop. Once the agency receives your
letter, they may not contact you again except to say there will be no
further contact. Another exception is that the agency may notify you if
the debt collector or the creditor intends to take some specific action.
May a debt collector contact any person other than you concerning your
debt?
If you have an attorney, the debt collector may not contact anyone other
than your attorney. If you do not have an attorney, a collector may
contact other people, but only to find out where you live and work.
Collectors usually are prohibited from contacting such permissible third
parties more than once. In most cases, the collector is not permitted to
tell anyone other than you and your attorney that you owe money.
What is the debt collector required to tell you about the debt?
Within five days after you are first contacted, the collector must send
you a written notice telling you the amount of money you owe; the name
of the creditor to whom you owe the money; and what action to take if
you believe you do not owe the money.
May a debt collector continue to contact you if you believe you do not
owe money?
A collector may not contact you if, within 30 days after you are first
contacted, you send the collection agency a letter stating you do not
owe money. However, a collector can renew collection activities if you
are sent proof of the debt, such as a copy of a bill for the amount
owed.
What types of debt collection practices are prohibited?
Harassment. Debt collectors may not harass, oppress, or abuse any
person. For example, debt collectors may not:
use threats of violence or harm against the person, property, or
reputation;
publish a list of consumers who refuse to pay their debts (except to a
credit bureau);
use obscene or profane language;
repeatedly use the telephone to annoy someone;
telephone people without identifying themselves;
advertise your debt.
False statements. Debt collectors may not use any false statements when
collecting a debt. For example, debt collectors may not:
falsely imply that they are attorneys or government representatives;
falsely imply that you have committed a crime;
falsely represent that they operate or work for a credit bureau;
misrepresent the amount of your debt;
misrepresent the involvement of an attorney in collecting a debt;
indicate that papers being sent to you are legal forms when they are
not;
indicate that papers being sent to you are not legal forms when they
are.
Debt collectors also may not state that:
you will be arrested if you do not pay your debt;
they will seize, garnish, attach, or sell your property or wages, unless
the collection agency or creditor intends to do so, and it is legal to
do so;
actions, such as a lawsuit, will be taken against you, which legally may
not be taken, or which they do not intend to take.
Debt collectors may not:
give false credit information about you to anyone;
send you anything that looks like an official document from a court or
government agency when it is not;
use a false name.
Unfair practices. Debt collectors may not engage in unfair
practices in attempting to collect a debt. For example,
collectors may not:
collect any amount greater than your debt, unless allowed by law;
deposit a post-dated check prematurely;
make you accept collect calls or pay for telegrams;
take or threaten to take your property unless this can be done legally;
contact you by postcard.
What control do you have over payment of debts?
If you owe more than one debt, any payment you make must be applied to
the debt you indicate. A debt collector may not apply a payment to any
debt you believe you do not owe.
What can you do if you believe a debt collector violated the law?
You have the right to sue a collector in a state or federal court within
one year from the date you believe the law was violated. If you win, you
may recover money for the damages you suffered. Court costs and
attorney's fees also can be recovered. A group of people also may sue a
debt collector and recover money for damages up to $500,000, or one
percent of the collector's net worth, whichever is less.
Where can you report a debt collector for an alleged violation of the
law?
Report any problems you have with a debt collector to your state
Attorney General's office and the Federal Trade Commission. Many states
also have their own debt collection laws and your Attorney General's
office can help you determine your rights.
If you have questions about the Fair Debt Collection Practices Act, or
your rights under the Act, write: Correspondence Branch, Federal Trade
Commission, Washington, D.C. 20580. Although the FTC generally cannot
intervene in individual disputes, the information you provide may
indicate a pattern of possible law violations requiring action by the
Commission.
To obtain a free copy of Best Sellers a listing of all the FTC's
consumer and business publications write to: Public Reference, Federal
Trade Commission, Washington, D.C. 20580.
Businesses Can't File for Chapter 13 Bankruptcy
A business, even a sole proprietorship, cannot file for Chapter 13 bankruptcy in the name
of that business. Businesses are steered toward Chapter 11 bankruptcy when they need
help reorganizing their debts.
If you own a business as a sole proprietor, however, you can file for Chapter 13
bankruptcy as an individual. You can include in your Chapter 13 bankruptcy case
business-related debts you are personally liable for.
There is one exception: Stockbrokers and commodity brokers cannot file a Chapter 13
bankruptcy case, even if just to include personal (nonbusiness) debts. (11 U.S.C. §
109(e).)
You Must Have Stable and Regular Income
You must have stable and regular income to be eligible for Chapter 13 bankruptcy. That
doesn't mean you must earn the same amount every month. But the income must be
steady--that is, likely to continue and it must be periodic--weekly, monthly, quarterly,
semi-annual, seasonal or even annual. You can use the following income to fund a Chapter
13 plan:
•regular wages or salary•income from self-employment•wages from seasonal
work•commissions from sales or other work•pension payments•Social Security benefits
(although one court has ruled that Social Security payments do not constitute regular
income to fund a Chapter 13 plan)•disability or workers' compensation
benefits•unemployment benefits, strike benefits and the like•public benefits (welfare
payments)•child support or alimony you receive•royalties and rents, and•proceeds from
selling property, especially if selling property is your primary business.
You Must Have Disposable Income
For you to qualify for Chapter 13 bankruptcy, your income must be high enough so that
after you pay for your basic human needs, you are likely to have money left over to make
periodic (usually monthly) payments to the bankruptcy court for three to five years. The
total amount you must pay will depend on how much you owe, the type of debts you have
(certain debts have to be paid in full; others don't) and your court's attitude. A few courts
allow you to repay nothing on debts, that legally, don't have to be repaid in full, as long as
you repay 100% of the others. Some courts push you to repay as close to 100% of your
debts as possible. Most courts fall somewhere in between.
To determine if your disposable income is high enough to fund a Chapter 13 plan, you
must create a reasonable monthly budget. If you are not proposing to repay 100% of your
debts and the court, the trustee or a creditor thinks your budget is too generous--that is, it
includes expenses other than necessities--your budget will be challenged.
Your Debts Must Not Be Too High
You do not qualify for Chapter 13 bankruptcy if your secured debts exceed $750,000. A
debt is secured if you stand to lose specific property if you don't make your payments to
the creditor. Home loans and car loans are the most common examples of secured debts.
But a debt might also be secured if a creditor--such as the IRS--has filed a lien (notice of
claim) against your property.
In addition, for you to be eligible for Chapter 13 bankruptcy, your unsecured debts cannot
exceed $250,000. An unsecured debt is any debt for which you haven't pledged collateral.
The debt is not related to any particular property you possess, and failure to repay the debt
will not entitle the creditor to repossess property. Most debts are unsecured, including
bank credit card debts, medical and legal bills, student loans, back utility bills and
department store charges.
In this technological age, it's easy to run but hard to hide. Collectors use many different
resources to find debtors. They may contact relatives, friends, neighbors and employers,
posing as long-lost friends to get these people to reveal your new whereabouts. In
addition, collectors often get information from post office change of address forms, state
motor vehicle registration information, voter registration records, former landlords and
banks. To avoid being found, follow these rules:
•Don't reveal your new address, city or state to anyone except a few trusted people who
won't tell anyone else.•Don't send the post office a change-of-address form; instead,
directly write to the people who need your new address.•Keep your new phone number
unlisted.•Don't re-register to vote if you are required to provide a previous address.•Close
your old bank accounts; open new ones at different banks--not at the banks closest to
where you work or live. It's best to pick a bank clear across the other side of town.•Don't,
under any circumstance, apply for new credit.