Posts Tagged ‘credit monitoring’

Secured Credit Cards Could Reduce Credit Score Damage

August 23, 2010, by FreeScore

secured or prepaid credit cardsIn a world where Internet access is available around virtually every corner, it’s hard to resist the temptation to do everything from shopping to bill-paying on a computer. Many consumers now rely on online bill-payment systems that automatically use linked bank accounts or credit cards to make the transaction. However, by using automatic payment systems, consumers put themselves at risk of overdrawing their accounts. This can result in penalty fees, debt, and even credit score damage.

The Chicago Tribune reports that while running errands via the Internet may be convenient, there are ways consumers can play it safe. Secured (also known as “prepaid”) cards have the same characteristics of debit or credit cards, but they allow holders to use them within a set limit. This eliminates the risk of accumulating debt and triggering penalty fees.

The Tribune notes that some companies may charge an activation or application fee, but they’re typically one-time payments.

Prepaid cards are ideal for inexperienced credit card holders and those who want to want to impose greater discipline on their financial management habits.

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Credit CARD Act Misconceptions Can Hurt Consumers

August 12, 2010, by FreeScore

credit card misconceptionsWhile the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009 was signed with the intention of bringing relief to American consumers, The Coloradoan found that some consumers misunderstood the new legislation and, as a result, now find themselves in debt.

The act, which is aimed at restricting abusive practices by credit card issuers, took effect on February 1, 2010. Because companies can no longer hike interest rates and penalty fees on a whim, some consumers have been under the assumption that their interest rates can’t be raised at all. The Coloradoan notes that while the bill provides new protections, it doesn’t guarantee that consumers will be immune to new credit card company gimmicks.

Because card issuers are now on a tighter leash, they’ve been forced to get creative in finding ways to work around the new restrictions. The law has put general limitations in place, but companies seem to find more loopholes every day. According to The Coloradoan, the most common tactic taking consumers by surprise is the hiking of interest rates after the first year. Bill Hardekopf, CEO of lowcards.com, feels that this is perhaps the biggest misunderstanding of them all.

“There is a misconception out there that interest rates can’t go up because the CARD Act passed, and that is not true,” Hardekopf told the newspaper. “They can go up. What the credit card act did restrict is [companies] from increasing rates on a new card for one year.”

Credit card rates have increased since the act went into effect, but analysts aren’t sure whether this is due to current economic factors or the new legislation. Regardless, misconceptions can result in harm to a consumer’s finances.

Ultimately, consumers have to make responsible decisions regarding their debt before they’ll see any signs of improvement in their finances. While the Credit CARD Act’s actual effect on the credit card industry may not have been clear to some consumers, it’s still the consumer’s responsibility to educate him- or herself on how the new legislation affects credit card holders.

As a credit card holder, you should take a pro-active approach to protect yourself from the loopholes that credit card issuers continue to find. Companies are required to inform you of changes to your lines of credit, interest rates, and other fees. You’re advised to hold on to any and all letters from your credit card companies to keep track of rate fluctuations and to determine how any such changes will affect your finances.

Staying on top of changes to rates, fees, and other credit card clauses can also help you better manage your credit behavior. Reviewing statements and factoring credit card company changes into your budget can help you maintain a responsible, on-time payment pattern. Consumers with a responsible credit history tend to earn higher credit scores and are therefore more likely to qualify for affordable interest rates on loans and lines of credit in the future.

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Co-signed Credit Cards Can Teach Teens Financial Responsibility & Build Credit Scores

August 10, 2010, by FreeScore

credit cards and college studentsDuring the upcoming fall semester on college campuses nationwide, credit card companies will have to find new ways to lure young adults.

Under the Credit Card Accountability, Responsibility and Disclosure (CARD) Act, credit card issuers are no longer allowed to target teens with free gifts on or near campuses. Instead, people under the age of 21 must now have a parent’s consent in order to open a line of credit, giving issuers less room to prey on the minds and wallets of uninformed young adults, who typically have little or no experience in managing money.

Allowing a teen to have a credit card isn’t necessarily a bad thing, MarketWatch reports. In the wake of new consumer protections, there’s an opportunity to introduce the concept of credit cards to young adults. Parents have direct access to the account for which they co-sign; this will allow them to monitor activity in the account. Card holders can also opt to eliminate overdraft fees in exchange for having transactions rejected when a transaction pushes the overall balance on the card past the established limit.

These new options still give young adults the chance to build a credit score for the first time. Parents wary of the idea of putting credit cards in their children’s hands can opt for prepaid or debit card options first until their children grasp and demonstrate better money management skills.

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Credit Card Issuers Reduce Vulnerable Data for Consumer Protection

July 30, 2010, by FreeScore

In response to pressure from the National Retail Federation, Visa has agreed to reduce the amount of personal data they store in merchant systems. Retailers typically store credit card information in their systems to avoid having to repeat the process of inputting data every time they complete a transaction. Many corporations, however, have been victims of security breaches in which customer information was stolen. Credit card numbers can be used to access personal data and eventually lead to identity theft.

“By reducing the amount of vulnerable data in merchant systems that must be protected from compromise, merchants can see greater security as well as more streamlined compliance needs,” said Eduardo Perez, who heads Visa’s Global Payment System Security.

credit card fraudAccording to Perez, the latest objective of the company will be to expand security measures that are already intact. BusinessWeek notes that Visa will be encouraging more banks and merchants to disguise consumer security numbers and passwords when they’re used in public. They’ll also try to optimize their tokenization methods, which substitute proxy numbers for priority account numbers (PANs). PAN data is often used to resolve disputes and for other purposes.

BusinessWeek says that in the coming months, Visa will look to their shareholders for feedback on their security efforts. The company will be relying heavily on banks to follow through on their new measures and keep consumer data from falling directly into the hands of merchants.

While retailers typically try to implement best practices to secure personal data, no one can prepare for the unexpected. As technology continues to evolve, people are finding easier ways to hack into even the toughest security systems. The risk of identity theft runs high once personal information has fallen into the wrong hands. According to SpamLaws.com, approximately 10 million Americans are victims of identity theft every year, and less than half of all victims realize the theft has occurred within the first three months. For this reason, it’s more important than ever to use caution when swiping a credit card.

Credit card fraud can result in long-term credit score damage. After stealing your personal data, a thief can go on a reckless spending spree and do severe damage to your credit card or bank account. It can take years to rebuild your credit history after an identity theft incident, and you may have difficulty obtaining loans, lines of credit, and even employment or a rented residence once your credit score has been tarnished.  Reviewing your credit card statements thoroughly and regularly monitoring your credit reports can help you keep an eye out for possible signs of credit card fraud and identity theft.

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Mortgage Companies, Credit Card Issuers Return to Risky Lending

July 27, 2010, by FreeScore

It seems like just yesterday that Fannie Mae and Freddie Mac were seized by the government, but in actuality, the effort to save the mortgage giants from going under took place in 2008. Two years later, the Wall Street Journal is finding that Fannie Mae is just one of the many companies reverting to its old ways, and the outlook is dim for consumers. Risky lending is back in the forefront of the housing market, according to the Journal, and borrowers are cautioned to look before they leap into a mortgage.

A new program launched by Fannie Mae in January awarded loans to some first-time homebuyers to buy property with down payments as low as $1,000. The Journal found that brokerage operations, such as Morgan Stanley Smith Barney, were giving out home-equity lines as large as $2.5 million. In an economy that’s taking months to show signs of recovery, a rise in predatory lending will only send consumers down the wrong track.  risky lending

According to the Journal, credit card issuers have mailed offers to 84.8 million sub-prime borrowers so far this year. That’s 43.7 million more offers than in 2009, an increase of over 100 percent. The Journal also notes that eight percent of auto loans issued in the latest quarter of 2010 went to consumers with low (i.e., high-risk) credit scores. The housing market is the only section where lenders are showing particular caution, perhaps because housing prices were a main factor contributing to the recession.

Although many consumers are now considered a risk for lenders, the latest American Bankers Association report found that delinquency rates are falling across the country. Late payments fell to 3.88 percent in the first quarter of 2010, according to MarketWatch. This is the first time the rate has dropped below four percent since 2002, and it has given lenders reason to believe that now is the perfect time to sell.

The weekly survey released by Bankrate on July 15 showed that mortgage rates are beginning to climb. The average 15-year fixed rate mortgage is up to 4.23 percent, while the five-year adjustable rate is up to 4.12 percent. In general, borrowers should steer clear of adjustable-rate mortgages. Monthly loan bills can balloon as a result of changing rates, causing homeowners to fall behind on their payments and increase their debt.

Homeowners who are already finding it difficult to make payments should consider refinancing before mortgage rates grow steeper. Refinancing can help reduce mortgage payments and even achieve a lower fixed rate.

In order to qualify for refinancing, however, a homeowner must have a good credit history. Lenders are more inclined to approve applicants who have high credit scores, which indicate that they can repay their debt in a timely manner. Bankrate recommends that consumers monitor their credit three to six months before attempting to refinance or apply for a big loan for the best chances of being approved.

As always, you should be cautious of incentives from credit card issuers and loan lenders. In general, payments should be affordable, and you should be comfortable with the terms and conditions prior to applying. Falling into credit card debt or failing to repay a loan can result in long-term harm to your credit score.

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Monitor Credit Activity to Prevent iTunes Hackers

July 26, 2010, by FreeScore

itunes hackers and credit monitoringApple has become a global leader in technology with their outstanding development of easy-to-use software. Unfortunately, their iTunes software seems to provide this same easy use for hackers looking to hijack members’ accounts. A number of customers have recently complained that their accounts have been violated, resulting in thousands of unwanted purchases. In early July, Apple confirmed that their security was in fact breached by an iTunes application developer.

The Wall Street Journal reported that Apple considers this breach a small incident, in that only “400 of its 150 million iTunes users were affected.”

But while Apple tries to lessen the blow by emphasizing the small numbers, the fact is that their security system is flawed.

iTunes requires users to create a user name and password to shop on their online store, linking purchases to credit card accounts. Many users pay with debit cards, making it easy for hackers to access their personal information. Apple claims that it’s now working to beef up their security measures, but users should remain alert for any applications that require them to enter their personal data.

Identity theft is difficult to recover from and may result in long-term credit score damage. By routinely checking your credit scores and credit reports to monitor your credit activity, you increase your chances of detecting fraud before it’s too late. This precautionary measure may help you avoid considerable stress and debt in your financial future.

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Credit Card Owners Warned by FTC After Money-Laundering Scam

July 15, 2010, by FreeScore

prevent credit card scamsAn international money-laundering scheme involving credit cards was recently uncovered by the Federal Trade Commission (FTC). Bank accounts in Bulgaria, Cyprus, Kyrgyzstan, and other countries were used to channel minuscule amounts of money out of over one million bank accounts since 2006. About $10 million was stolen by the scam artists behind this scheme, who have yet to be caught. A federal court froze the criminal assets, but the FTC is urging credit card owners to keep a close eye on their monthly statements.

“Just because it’s on the bill doesn’t mean it’s legitimate,” FTC spokesman Frank Dorman told the Baltimore Sun. “Consumers should check every single item on their bill before they write a check to their credit card company.”

The FTC found that the launderers withdrew amounts between $.20 and $10 from over a million different consumers. While a charge that low might seem like little more than pocket change to each individual person, the combined activity added up to millions of dollars’ worth of fraud.

Credit monitoring is a proactive way to detect scams like this. You’re advised to thoroughly review your credit card statements and review your credit reports regularly to look for any suspicious activity. Becoming a victim of a scam can result in long-term damage to your credit scores.

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Parents: Monitor your kids’ credit card purchases to track their travels

June 24, 2010, by FreeScore

credit monitoringSending a son or daughter abroad for the summer can be nerve-racking for parents, especially if their children don’t plan to bring cellphones. But some parents have found a measure of comfort in tracking their children’s whereabouts — and spending habits — by monitoring their credit card transactions online.

Credit monitoring is one of many methods that parents can use to make sure their children stay on budget and spend wisely when they’re traveling abroad for school or on vacation, according to ABC News. But more importantly, parents can make sure that their children made it safely to their destination by examining train and hotel bills on their credit card accounts.

Credit monitoring is one of the most effective ways for consumers to ensure that they’re staying on track and budgeting correctly. This strategy can also help people ensure that they’re making at least the minimum required payment — on time — to avoid receiving a negative mark on their credit reports.

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