Archive for the ‘Your Credit Score & More’ Category

7 Common Misconceptions about Credit Reports

There are a lot of misconceptions about what information (about you) becomes part of your credit report. Some of it is “urban legend”—passed on from person to person—but not necessarily true. So here are 7 of them that I’d like to clear up for you.

1. MYTH – Your free credit report includes your credit score.
TRUTH – most free credit reports do not include a credit score. You usually have to pay to get one. And, even if you pay, it may not be the type of score that mortgage lenders use. There are many different types of credit scores—for auto loans, home improvement loans, credit card applications, etc.

2. MYTH – Your race, income or medical history appears on a credit report.
TRUTH – Your credit report includes information that is debt related. It does include your social security number, birth date, and address. It COULD also include the name of your employer, and previous addresses.

3. MYTH – Checking your own credit score will decrease your score.
TRUTH – You could check your own credit score every day—and it will have no impact on your credit score. However, if you give permission to a lender to pull a credit report on your behalf, it may decrease your credit score by a few points. However, you get a break if you are “shopping” around for a car loan or a mortgage. If the credit bureau sees that you have many companies ordering a credit report (for the same loan) within a 30-day time period, it only counts as one inquiry.

4. MYTH – If you pay off a past-due account, it will be removed from your credit report.
TRUTH – Time is the only thing that will clear up a negative account, judgment or collection from your credit report. It can take up to seven years for it to completely disappear. However, as time goes on, and you have minimal negative accounts, your credit score will eventually increase.

5. MYTH – The credit report will merge when you marry, or split up if you divorce.
TRUTH – Everyone has their own credit report. Getting married does not cause the information on the credit report to be combined. So, if your spouse has problems on their credit report, it won’t show up on yours. However, if you and your spouse divorce and you have joint accounts—where both of you have signed to be responsible for the loan—it will appear on both of the reports. Just because you split up and the judge says that one (or the other) person is “responsible” for paying the debt, both of you are still obligated to pay the debt.

6. MYTH – If you pay your bills on time, you don’t need to check your credit report regularly.
TRUTH – Your credit report is changing all the time. A creditor may make a mistake and report that you missed a payment. Or a new loan may accidentally be added to your report. Even though you know you pay on time every month, the loan company may not be reporting it correctly.

7. MYTH – The credit bureau is the one who approves or denies your loan.
TRUTH – They are merely a reporting agency—gathering information from your creditors. The lender is the one who makes the ultimate decision based on what’s in the report.

Also, by knowing your credit score, by knowing what’s in your credit file, you can avoid working with unscrupulous lenders who tell you that your credit score is “low” in an attempt to charge you a higher interest rate or unfavorable terms.

Tips to Protect Against Tax Identity Theft

Wow, I just read where the FTC said that tax identity theft has tripled over the last few years!

Identity theft occurs when someone “steals” your personal information (social security number, birth date, name, address, etc.), files a phony tax return and gets your refund.  You’ll never know it until YOU file your tax returns and the IRS claims that they already have one on file from you.

If you complain to the IRS, it may fall on deaf ears as they think they already have a send you your refund check.

This is a certain procedure that you’ll need to follow:

  • Complete and submit IRS Form 14039 – Identity Theft Affidavit
  • Provide proof that the Social Security Number is yours
  • Your complaint will be reviewed, which may take several months
  • If approved, you will receive your refund
  • You will receive a special “filing” number that you must use to file future income tax returns
  • You will receive a “filing number” each year after that from the IRS

You must use that special filing number each year on your returns.  If the person who stole your identity tries to file in the future without the special ID number, your file will be red flagged and investigated – and you can expect your tax refund to take several months again.

How to Protect Yourself:

  • Memorize your SSN and keep it locked up in a safe place
  • Shred all personal and financial documents
  • Never provide your SSN to anyone online
  • If mailing your tax return, take it to the inside of the post office; never drop it in a public mailbox or your home mailbox.

If you have an accountant, CPA or tax service prepare your return, make sure they are licensed, bonded and have encryption software that they use if they file your tax return electronically.

All About Your Newly Issued Credit/Debit Card:

You may have noticed recently that your bank, or Credit Card Company has sent you a new card with a metal rectangle on the front of it. No need to worry, your account has not been compromised; your card has just been upgraded!

The magnetic strip cards, that a majority of us use, have been around for about 50 years. This card uses the swipe-and-sign method that we are all familiar with. Unfortunately, with these cards your personal information is very vulnerable. Once your information has been stolen a new magnetic strip card can easily be made and imprinted with your information. So large credit card companies are now requiring banks to make the switch to cards with chip technology, or chip cards.

Chip cards have replaced the magnetic strip cards in most other countries. This chip technology was developed to make duplicating a card more difficult, and has been successful in reducing the amount of compromised accounts. Rather than approving your purchase with your individual card number and a signature, this chip will assign a unique code associated with each transaction you make. Someone looking to steal your credit card information will only find the unique transaction code, which cannot be used for any other purchases.

The procedure for “swiping” your card at the checkout counter will change a little bit as well. With chip cards, you will insert your card into a machine, just like at the ATM, and then sign for your purchase. This requires all merchants to upgrade their payment equipment, which will be a slow process. There is a “soft” deadline for all merchants to have the compatible equipment by October 2015, but it can be hard for some businesses to cover the cost. Currently, all chip cards still have magnetic strips, just in case the merchant does not have the proper equipment. If the option is available, you should always use the chip-and-sign method.

This switch from magnetic strip cards to chip cards is a large undertaking, both for banks and businesses. You may not experience the change immediately at the checkout counter, but be aware that this more secure payment method is on the horizon.

– Jill