Your Black World: Setting The Record Straight On Credit Reports

MILLY’S MONEY

Somebody Lied to You: Let’s Set the Record Straight

By: Milagros DuBouchet

YourBlackWorld.com

Lie #1: Freecreditreport.com

Have you ever seen those charmingly annoying freecreditreport.com commercials? The commercials with the French guy who lip-synchs melodies in an attempt to capture your heart and most importantly, your credit card? You would think a site called freecreditreport.com would actually give you a credit report for free but sadly, that’s not the case. Next time you watch the commercial, listen closely to the “fine print” that’s narrated afterwards. To make a long story short, you‘ll get a free credit report if you sign up for “Triple Advantage”—a product you actually have to pay for. I hope this justifies your desire to throw your remote control at the TV screen every time these commercials are on.

The truth is, if you would like to obtain a copy of your credit report from each of the three major credit bureaus (TransUnion, Experian, and Equifax), make sure to visit annualcreditreport.com. We are all entitled to obtain a free copy of each report every 12 months. Keep in mind that you will not receive a credit score. Unfortunately, you do have to pay for that. I hope I set that record straight for good!

Lie #2: I’ve never had credit, so I don’t need to worry about checking my credit report.

One should check their credit report about 3 times a year—whether you have established credit or not. Since 8 out of 10 credit reports have mistakes on them, you always want to make sure your credit report houses accurate information. Aside from that, identity theft is a HUGE issue nowadays, and it always saddens me when one of my clients obtains their credit report for the first time, and to their surprise, they find numerous established (and typically delinquent) accounts on their report. The sooner you spot these things, the better. Trust me; you don’t want that to be you.

Lie #3: I use my credit card and never exceed my available limit, so my credit should be good.

The second most important factor to determining one’s credit score is the amount of debt you are utilizing. Lets keep it simple. You should never exceed 30% of your available limit. So, if I you have a credit card with a limit of $1.000, you should not utilize more than $300. If you do, then you’re immediately triggering an adverse effect on your credit score. Of course, no one tells you this when you apply for the card. FYI—the most important component to a good credit score is making your payments on time.

Lie #4: I made some late payments on my credit card and my interest rate was increased. As long as I don’t mess up with my other cards, then those interest rates should be fine.

The “Universal Default Clause” indicates that the interest rate on your credit card may be increased if you make late payments to other lenders, even if you pay your credit card bill on time. So, if you mess up with one lender, then all of your other cards can also be negatively affected. The law’s only requirement is that lenders disclose this in writing, so you know what that means. Read the fine print.

Lie #5: I always pay a little more than the minimum every month, so I’m using my credit wisely.

You know what credit card companies call people who pay off their entire monthly balance every month? “Deadbeats” –and no, I did not make that up! This is because they don’t get to make any money in interest from them, so naturally, that makes creditors unhappy. When you don’t pay off your monthly balance every month, you’re considered a “revolver”. Simple math says that if you charged $50 on your credit card this month, and your statement says your minimum payment due is $20, you should pay $50 before the month is over. Not $20, not $30, but $50! Credit card companies add interest to the difference that goes unpaid every month. Basically, anything you charge this month, you should pay off this month. Change your spending habits and use your credit wisely. You’ll notice the difference in your pockets!

Your Black World: Six Secrets About Bill Collectors

6 Secrets Debt Collectors wish you never knew

By: Milagros DuBouchet

YourBlackWorld.com

The world of debt collection is a mystery to most people. One thing we do know is that they can be very aggressive when it comes to collecting money. We know all about the annoying phone calls at 8am and the letters that cause nothing but anxiety. Some debt collectors are easy to work with; others can be incredibly difficult. In my work, I speak to debt collectors on a daily basis. I speak on behalf of my clients when they’ve been too intimidated, or are unsure how to communicate with them. The key to getting the most out of a situation with a collection agency is to learn their secrets, and use them to your advantage.

Secret #1 – They can reduce up to 50% of your original debt. This is the rule of thumb. Debt collectors know when they’re speaking with someone who doesn’t know the tricks of the trade. They will lie and tell you that you need to pay the full balance. This is not true! Tap into your negotiation skills and ask them to make a “settlement offer” so that you can save some money while you reduce your debt load.

Secret #2 –The amount of debt “forgiven” is added to your taxable income for the year. If you receive a debt settlement for over $600, the forgiven amount is then added to your taxable income for the year. Essentially, you can save money now with a debt settlement, but you must eventually pay taxes on this amount!

Secret #3 – Negotiate near the end of the month and you may get a better deal. Debt collectors get paid on commission for every payment agreement made with someone during the month. This easily explains their ruthless tactics to rake in as much cash as possible. Their monthly bonus depends on how good they are at getting you to pay—no matter what your financial situation is. With that said, they are more likely to make better settlement offers if you negotiate with them towards the end of the month.

Secret #4 – You can negotiate what they place on your credit report. When your debt collector is willing to accept less than the full balance, they usually note this on your credit report as well. As you can imagine, having a remark such as “paid collection” on your credit report is better than having it say “settled for less than full balance”. This is also negotiable. You should ask them to accept your partial payment as a payment in full, and have them note this on your report as well. If they agree, make sure you get that in writing.

Secret #5 – You can potentially pay NONE of the amount they claim. Debt Validation is a legal loophole that simply states that if you ask the debt collector to send you physical proof that the debt in question is in fact yours, they have 30 days to do so. If they cannot locate any original mitigating documents (which most collection agencies cannot), or if they fail to respond within the 30-day time frame, they must remove the item in question from your credit report. They are no longer able to collect on this debt. One the other hand, beware—they may end up selling your account to another collection agency instead!

Secret #6 – Anything you say can be used against you. A debt collector may ask you some personal questions and you may feel obliged to answer them. Questions such as “Do you have a bank account?” “Are you currently employed?” “Do you own a home or car?” are all part of their ploy to get more ammo to use against you. If you’re employed, they can potentially sue you and garnish a portion of your wages. If you have a bank account, they can sue you and freeze the funds in your account. If you own a home or car, they can sue you and put a lean on your assets. If asked any of these questions, answer with a simple no, or tell them you don’t feel comfortable sharing that information.

Milagros DuBouchet is a personal Financial Counselor in New York City. Her focus is to provide formal financial education training and personal financial counseling services to low-income Americans.