Dedicated to bringing you some of the best information to help you survive tough economic times
December 2010 - Posts
by Jim Sloan
Our family loves the holidays, but every year after the tinsel and pine needles have been vacuumed up, we find ourselves with a couple of small problems: Too much credit card debt and a couple of heart-felt gifts we really don’t want and can’t return.
The answer for us has been pretty simple: eBay. By selling some of our unwanted stuff (sometimes it’s Christmas gifts and sometimes it’s just items we find in the garage when we put the decorations away), we’re able to put a dent in that debt, even when we’ve used zero percent credit cards.
If this sounds like something you’d like to try, here’s a 12-step program to help you use eBay to whittle down that credit card debt:
- Start small. If you’re new to eBay, begin by selling something that’s easy to price, easy to photograph and easy to ship. This way you can practice setting up an auction, monitoring your sale, and making sure you get good feedback from your first buyer right off the bat. This small transaction will also give you an idea about how costs and commissions work on eBay.
- Sell something new. New goods are easier to price and sell than used goods. If your Aunt Florence gives you linen napkins every year and you’re starting to run out of drawer space, sell them on eBay.
- Factor in the costs of selling on eBay. It costs between $0.25 and $4.80 to list an item, and then eBay charges a 5 to 8 percent commission on the selling price. Make sure you’ve checked how much it will cost to ship and include that cost in your listing price.
- Take good photographs of your product. One photo is usually enough, although you can add more for an extra charge or even direct buyers to a website to find more photos of your item.
- Take your time writing a description. It’s important to write a good, accurate listing that contains the keywords a shopper might use when searching for an item. Headlines should also contain the keyword, and some eBay veterans also include common misspellings of their keywords. Avoid cheesy sales pitches or exclamation points. If you keep getting the same question from buyers, add the answer to your listing.
- Describe the item in detail and don’t overlook any defects. Offering next-day shipping or money-back guarantees will help separate you from competitors selling similar items. This will also push your item higher up in the “Best Match” search results on eBay, as will high feedback ratings.
- Price it right. Check previous sales to see how much similar items have sold for. You can do this by searching “completed listings” on the Advanced Search page.
- Make sure bidders know you are fair and trustworthy. Don’t overcharge for shipping or ask for a mysterious “handling fee,” as these fees can make buyers inclined to shop elsewhere.
- Time your auction to expire when activity on eBay is high. This can result in a bidding war on your item, which is something that isn’t likely to occur at 4 a.m. on a Tuesday morning. You can research the best times to sell by visiting on such websites as Terapeak.com and HammerTap.com, which require a subscription.
- Include your contact information and answer all inquiries quickly. If buyers can get in touch with you, they’ll feel more comfortable bidding on something or paying the price you’re asking. Ship your items as quickly as possible and keep the customer informed about when it went out and when it’s expected to arrive. All of this will help give you a good rating.
- Don’t get nervous if the bids don’t roll in right away. Most buyers wait until the last few minutes of an auction before making a bid. If you need reassurance, include a “counter” for your auction so you can see how many people view your item.
- Use PayPal. It’s fast, secure, and easy to use.
In no time at all, these tips should help you rid yourself of post holiday clutter while helping you get extra cash to tackle that holiday debt.
Jim Sloan is a free-lance business writer and a higher-education communications specialist. He has worked as a business editor and writer for various newspapers and magazines. He is the author of two books, and his stories have been selected for a number of anthologies. He has a degree in journalism and environmental science from the University of Maine. Visit Money Blue Book today!
by Alan Riley
All new parents fear for the safety of their baby at night. Worries about the location and structure of the crib, what type of bedding to use, and the temperature of the room are common and well-grounded. With these tips, you can create a space that is safe and cozy.
1. Choose the Right Bedding
A tight-fitting sheet is a must for your baby’s comfort and safety. For example, lady bug crib bedding may be all the rage, but it should be lined with elastic on all four sides so it won’t come loose. Other styles attach to the mattress directly or slip on the mattress as a pillowcase would. Use sheets made with 100% organic cotton for babies with sensitive skin since these do not contain traces of pesticides.
Opt for the firmest mattress you can find. This will keep the sheets secure and taut and reduce the possibility of gaps near railings. The mattress should fit snugly and you shouldn’t be able to fit more than two fingers between the crib and mattress.
Keep the crib clear of any unnecessary items at bedtime. Comforters, toys and pillows can cause your baby to rebreathe stale air, a common factor in Sudden Infant Death Syndrome (SIDS). Many designs have eliminated the need for covers at all. Properly fitting baby sleeping bags prevent your baby from slipping beneath the covers. Sleeping suits move with your baby and make it impossible for the face to become covered.
2. Regulate the Temperature
Since infants are unable to regulate their own temperatures, you have to decide how to keep your baby comfortable. Baby bedding manufacturers use a Tog rating to determine the amount of heat emitting from each layer. Ideally, taking clothing and bedding into account, the total should equate to 8 Togs.
3. Place the Crib in a Safe Area
The crib should be set out of reach of windows, curtains, or other objects that your baby might be tempted to climb, as he or she gets older. Babies do not understand the danger associated with climbing and falling, so you need to pay careful attention to what is near.
Place the crib near where you sleep so you can quickly attend to your baby, but never sleep in the same bed as this increases the risk that baby is accidentally be smothered or crushed. Starting to sleep separately now also eases the transition to a new bed or room later.
Even before you bring your baby home, make sure that there is no smoking in the room you choose for the crib. The SIDS First Candle Alliance has shown that smoking around your baby heavily increases chances of SIDS.
4. Use a New, Safe Crib
New and modern cribs are worth the investment. Although the use of lead paint has decreased throughout the years, your safest bet is to purchase a new crib. Over time, used cribs could become structurally unsound leaving gaps in which babies could get stuck.
Safety regulations on modern cribs ensure that your baby won’t be able to climb out or get limbs stuck between railings. The side of the crib should be at least 26”, according to the American Pediatric Association. They also require slats on the railing to be no more than 2 3/8” apart. Since all sides are stationary, the safest type of crib has no moveable parts.
5. Avoid or Properly Use Bumpers
Although bumpers are included in most crib bedding sets, they do pose the risk of entanglement, strangulation or smothering. Health Canada, SIDS First Candle Alliance, and the American Pediatric Association all argue against the use of bumpers for those reasons. With modern safety standards, it is impossible for your baby’s head to become trapped between slats of the crib and babies do no have enough power to injure themselves by hitting their heads on the sides of the crib.
Many companies have created bumpers that lessen the risks while safely enclosing the crib. BreatheableBaby has designed mesh bumpers that allow the free flow of air. Alternatively, bumpers that attach around each slat, like those from Go Mama Go Designs, soften the interior of the crib without enclosing it.
Since you will probably have a bumper if you purchased a set, you can still use it with the proper safety precautions.
- The pad should be firm and well constructed; soft, fluffy bumpers increase the likelihood of rebreathing stale air.
- There should be 12 to 16 ties that attach the top and the bottom of the bumper.
- Ties should be no less than 7” and no more than 9” long. This amount secures the bumper to the crib without leaving excess material that could lead to choking.
- The bumper should fit perfectly within the crib. Gaps or overlapping could lead to entanglement.
6. Properly Put Your Baby to Bed
Always place an infant on his or her back for sleep. The potential for SIDS increases dramatically if a baby is put to sleep on his or her stomach. Sleeping on the back also eliminates the potential that your baby will rebreathe stale air through excess bedding material that has bunched near the face.
During the night, it is likely that your baby will wriggle towards the bottom of the crib, which could cause bedding to cover his or her face. To prevent this, place your baby’s feet as close to the bottom of the crib as possible.
Alan Riley is the publisher of www.beautifulbeddingsets.com, a site devoted to helping people find the perfect bedding for their needs, and highlights many beautiful crib bedding sets by JoJo Designs Bedding. The Riley family lives in leafy Melbourne, which is in the far South East corner of Australia. Alan loves to spend his leisure time out sailing, an activity that is very conducive to sleep by the end of the day!
by Bob Hartzell
If you have graduate school in your sights, the last thing you need when you reach that threshold is academic debt. Grad school in any discipline is an increased challenge; for some students, it may require full time study, which in turn may require a student loan. That prospect has held back too many students who come out of college with undiminished ambition but carrying a debt load that destroys the ability to rise further on the academic ladder. Marshalling your resources is the key to any planning process, including plans for completing an education. The two keys to graduate education are getting accepted and having the funds to continue.
It’s the economizing during the undergraduate years that allow you to reach graduate school with a financial situation that doesn’t burden you to the point of paralysis. There are things you can do in high school that will contribute to college economies, notably the completion of AP classes. If you don’t know what your major is going to be, take AP courses in the liberal arts that will count as the core courses for any college major. That alone can reduce your undergraduate obligations by a semester, before you have spent dollar one on college tuition. When you look at completing an undergraduate degree that is both credible and affordable, include some economizing tactics in your planning.
Community College: Best Deal in Higher Education
In many states, the overburdened state university systems have turned to public community colleges for support. Students who complete their first two years of a four year academic plan at a community college are students that aren’t clogging up the freshmen and sophomore classes at the universities. In California, a decent academic performance at the community college level guarantees acceptance as a junior transfer into the state university system. The degree will be from a quality university and the cost will be substantially less than four years of tuition at the university level. A year’s tuition at Hudson Valley Community College in Troy, NY is $3,400. The same year at one of the State University of New York (SUNY) schools is over $14,000 with fees. In California, current enrollment fees are $624 per year. Add $1,500 for books and the annual cost is less than $2,200 for a full time student. The current cost for tuition and books at Cal State University in San Francisco is about $6,700 and at UC Berkeley about $12,800.
In New York, you can save twenty thousand dollars in undergraduate costs by using the community college system. In California, you’ll save at least eighteen thousand dollars in those first two years, and that’s if you opt for the best deal in overall post secondary education, the public university in your home state in this case, if your home state is New York or California. Those same economies apply in most states however, and the degree you exit college with looks pretty much the same to graduate schools whether you went to the university for two years or for four years. Grad schools tend to look at academic performance for the last two years of college because that’s when the upper level courses for your major are completed.
Finish your Bachelor’s Degree Part Time
If you need to work during your undergraduate years, finishing the degree utilizing a part-time schedule or online courses or both may provide a sane option. Public universities and many private schools charge tuition by the credit hour. If you’re taking eight credits instead of twelve per semester, you’ll cut your tuition cost by a third as well as your academic workload, making employment and school a reasonable option. If you utilize the summer semester, you’ll finish on time.
Online Courses can Make Work/Study Easier
Online courses are also an option for students who are working during class hours. That option is increasingly available through traditional universities as well as through community colleges. Penn State has hundreds of courses online and over sixty degrees. Northeastern University has a similar program with seventy undergraduate and graduate degrees. The University of Massachusetts, Arizona State, University of Florida all are examples of public universities with a major online presence. The professional online schools like University of Phoenix and Walden University offer fully accredited degrees and courses that are priced competitively with many traditional schools on a per-unit basis.
Completing your undergraduate degree on the cheap requires planning and discipline and a frugal lifestyle, but first and foremost is the planning. If your goal is graduate school, know what you need to accomplish in order to be considered for admission. That’s going to require meeting GPA and test benchmarks more than anything else; and for many people, graduate school is no option at all if the preceding four years have resulted in a crushing academic debt.
Bob Hartzell is an in-house writer covering topics for undergraduate and graduate students, for would-be college students and for professionals returning to college trying to recreate a career track in our tumultuous economy by obtaining a master’s degree. He recently covered top 10 Masters in Nursing by US News & World Report.
by Cynthia Waverly
Setting up a budget is more than just figuring out how to pay off all of your bills and living expenses; it's about finding out how to live the lifestyle you want on the amount of money you have to work with. While a good budget should cut out unfrugal spending, it doesn't mean you need to give up everything you love. It just means knowing where they fit into your budget.
Set Aside Money for Frivolities
The first step to achieving financial stability is to create a budget for an entire year. The reason you want to plan for a year is because there are several annual costs, such as holidays, doctor's appointments and taxes that must be taken into consideration. When planning an annual budget, you should have a category for your entertainment needs and frivolous spending. By committing to a budgeted amount of money for this type of spending, you can limit how much overspending you do.
When creating an entertainment budget, you need to define what costs you can consider entertainment. For some people costs like the cable and Internet bill can be put in the entertainment category, while others consider them necessary expenses that deserve their own separate portion of the annual budget. You could consider going out to eat once a month with your family an entertainment expense, but the meal you share with your partner on an anniversary as part of your holiday budget. Likewise a canister of coffee is included in the grocery budget while expensive blended coffee drinks can be considered a frivolous expense.
Creating a budget is not so much about cutting out what you like, but knowing what you're going to spend your money on. Therefore, you should tailor it to your own lifestyle, though there are a few rules of thumb you should always follow. You should never sacrifice being able to pay for bills or other needs in order to fund your entertainment account. You should be realistic and honest about what you spend on entertainment and frivolities so that you can effectively plan your budget. Your overall goal should always be to create a surplus in your entertainment category.
Prioritize Your Spending
Once you have a rough idea of how much money you would like to spend each year on your frivolous expenses, you need to figure out how you would best like to utilize that money. Do you want to go on an expensive vacation once a year, go on a shopping trip once a month, eat out once a week or get a coffee every morning? Breaking down all of the things you would like to be able to spend your entertainment money on gives you the ability to categorize and compartmentalize each by cost so that you can figure out an effective way to spend the money.
This requires some honesty on your part about how you like to live your life. Are you the type of person who could go without an annual vacation as long as you can splurge on shopping every now and then or do you not mind eating cheap for awhile in order to save up for that dream car you've always wanted? Making a budget without sacrifice is about knowing what's most important to your quality of life and giving those frivolous expenses priority over your other wants in order to stay happy.
Maximize Your Money
You can have your cake and eat it too if you are willing to find ways to trim the fat. Setting aside money to be frivolous with doesn't mean you actually have to spend it as such. For example, you can cut your cost of seeing movies in the theater nearly in half by attending a matinee show instead of an evening. Looking for deals, finding the best prices, using coupons and splitting the costs with others can help to create a surplus of funding in your entertainment money, which can be put into your savings or tucked away for bigger ticket frivolities like a vacation fund.
While your entertainment and frivolities should have a lower priority than other expenses in your budget, it is necessary to plan for them so that you don't become overwhelmed by unexpected splurging. Think of your entertainment fund as a safety net for the spending you were likely to do anyway. This way, you can hopefully create a surplus, which can be applied elsewhere in your budget.
Cynthia Waverly is a stay-at-home mom of two. Frugal living is a forte of hers, as she loves finding coupons, deals and giveaways.
by Lori Woodward
When one is confronted almost every other day by the circulars from the big retail chains coming into the house, and ads on the television, and all of the other ways that we are exposed to ads, it soon becomes difficult to put a rein in on your spending.
Whatever your personal passion, there are always more innovations and different upgrades to products (more features and more benefits), coaxing you to part with your hard-earned dollars. What is tricky is how not to regret parting with those dollars, and having financial grief over purchasing that latest knick- knack because the ads drew you to it.
This is where learning to control your spending comes into play. When one is on the frugal journey, one need not go without, but one learns to be that little more creative and adopt some strategies of ingenuity in order to satiate the passions that drive us.
The first point goes without saying. Create a budget for yourself. If you don’t like the word budget (and it can sounds awfully restraining and restrictive), then call it a spending plan. Make sure you also put into your spending plan all the essentials, including savings and debt reduction. Then with whatever amount you have left over, that can be your allocated cash allowance per week.
Using cash is mechanism for controlling your spending. If you put your purchases on plastic, it doesn’t “hurt” as much, because you can’t actually visualise yourself parting with money. Whereas when you use cold hard cash, it will be more real as you see the cash dwindling out of your wallet. There is a certain comfort in having some money still retained in your wallet. It provides a psychological buffer against being completely broke.
If you don’t like the idea of carrying cash about, or you are more of the online kind of shopper, consider getting a debit card. Get one that you can use as a credit card for online transactions or over-the-phone transactions, but the money that you spend out of it comes out of your monetary funds, not the financial institutions, so you will avoid the interest trap.
The other option you have, if you are not able to obtain a debit card, is to go and get a prepaid Visa card. These are available in various places, including some post offices or gift card outlets.
If you do have a credit card, the most useful thing you can do with it is to send it back to the issuer or put it on ice. Get an old ice cream container, put your credit card (or multiple credit cards) into the ice cream container, fill it with water, and pop into the freezer.
If you do have credit card debts, it is wise to go an access some independent financial advice, such as a financial counsellor. They can help you negotiate with your creditors, and sit down with you to formulate a fair and reasonable spending plan for yourself.
If you have difficulty saving, open up a separate bank account, and get your employer to deduct money out of your pay, and put it into your separate bank account. You are not likely to notice the money if it isn’t in your main account, and all the while your account will slowly be building up.
If you have serious issues trying to avoid getting access to your savings account, consider getting an account with a passbook rather than an ATM card. Remove the convenient access to that account. Also if you have a trustworthy partner and you have the same goals to save, get an account where you both have to co-sign to get money out of the account. This is recommended only in situations where you have voluntarily done this and you will not be in a situation where you will be subject to exploitation. If you can maintain your own independent savings, then do that first.
Finally, when it comes to actually spending, there are a number of tips that can help you reduce the money coming out of your weekly cash allowance, and help you to stretch those spending plan dollars further:
- For big ticket purchases (anything over $100), consider the 24-48 hour rule. If you really want it/need it, wait 24 to 48 hours before purchasing the item. That will give you enough time to really consider whether you can afford your purchase, and also to compare prices elsewhere.
- Consider lay-by or lay-away. This is an option where you can go into a larger discount chain who offer this, and put a minimum percentage of your purchase down as a deposit, and then make small weekly or fortnightly payments while they hold your purchase. There may be a small administration fee associated with this, but it can help you to slowly purchase those larger items, or put items away when you have purchased them on sale. You have a number of weeks to pay for the item completely. Some stores may offer longer payment times for seniors or people with disabilities.
- Put together a wish list. When you get paid every week, you may get the temptation to go out and blow it all at once, regretting that you have wasted the dollars you were going to put towards your wish list purchases. If you see something in the circulars or on television that you really want to buy, put it on your wish list. Then when you get your weekly cash allowance, you have the freedom to prioritise where you will spend your money, and be less likely to regret what you purchased.
- Avoid impulse buying where you can! Folks have often gone straight into a store to purchase something, only to find out a few days later they could have gotten it cheaper elsewhere. Always try to be creative and stretch your weekly cash allowance further by seeing what prices are elsewhere.
- There is an exception to the impulse buy rule. With some of your weekly cash allowance, you could consider putting away for those small, indulgent impulse buy luxuries. For example, consider putting away several dollars here and there for your favourite magazine, a great bottle of wine, or the Sunday newspaper.
Other ways to control your spending are by considering other ways of saving. For example:
- Reduce, re-use, recycle. Join Freecycle. You will more than likely have access to a local Freecycle network where you can offer your old stuff to others, and make requests for things that you may need or want. This helps the environment also by reducing consumption, and stopping things from unnecessarily going to the landfill.
- Look up books on DIY home repair and restoration. Scour places like the second hand furniture stores, junk shops, garage sales, and flea markets. Even some local council landfills have stores where you can access stuff that has been salvaged before it ended up as possible landfill. You can find plenty of books at your local library, or do online searches for how to creatively restore different items.
- Don’t ever forget to comparison shop. Check out websites for different prices. For example, in Australia, there is Shopbot or there is Getprice . Check out online auctions sites like eBay for available prices as well.
- Don’t forget to check out the dollar stores. Sometimes they have parallel imports that can be of a suitable quality for your use. Make sure that the store has a guarantee that if you find that the product is substandard, you have the rights to return it and get a refund.
- If you feel so inclined, make it yourself. Do a web search for an article that explains how you can make something for your own use, or check out books from your local library.
As you can see, there are a number of ways to consider how to control your spending. Controlling spending does not have to be a painful exercise. It can unleash your creative and ingenious side, and you can be a model for others in how to maintain a great lifestyle on a shoestring budget. There are a myriad of frugal living websites on the Internet. Find the information that you need and will help and set yourself a challenge of living the good life without financial headaches.
Lori Woodward began to look at The Dollar Stretcher website a number of years ago, and was inspired to become financially independent, despite her husband’s low income, and disability pension, and having two children with special needs and large medical and therapy bills. Lori has managed to come a long way, been able to finally budget well and start to pay off debt, keep up with her mortgage payments, despite having a mental illness where at times it is difficult to manage to be financially wise. She has learned how to make things from scratch and has halved her grocery bill, despite the cost of living going up, and is interested in living a life of voluntary simplicity without resorting to being cheap! She has discovered that there are indeed financial pitfalls out there, and if something is too good to be true, it usually is. Now she and her husband plan and save for things, rather than deciding to put something on credit. They believe that by showing their children how to be creative with their spending and purchasing less, but better quality, they will help set them up for a good financial start with budgeting, investing and savings skills. Check out her blog at The Aspie Good Life
by Bill Hardekopf
On 11/29/10, the Kardashian prepaid debit card was abruptly pulled from the market by the issuer due to poor sales, negative publicity and high fees. But the Kardashians were not the only "celebrities" being used to promote prepaid debit cards to young adults. Now we are seeing cartoon characters.
Today, Myplash started selling Teen Prepaid MasterCards and this introduction seems to coincide with the holiday season. Launched by Plastic Cash International, there are almost 100 different card designs with cartoon characters, movie characters, athletes, and musicians. These images include So So Happy, Skelanimals, Paul Frank, Emily Strange, Plain White Ts, Rich Boy, Flo Rida, surfer Kassia Meador, and characters from "Twilight Saga: Eclipse."
Myplash gift cards with images of the Twilight characters went on sale in the summer of 2010. The company uses this branded content to connect with teens and young adults "in a cool and relevant way."
Fees for the Myplash cards are lower than fees for the Kardashian Kard, but they still add up. The activation fee is $6.95. The monthly fee $4.95 and the reload fee from a credit or debit card is $4.95 (there is no fee for direct deposit reloads). The ATM transaction fee is $1.50 per withdrawal. There is a $1.95 fee for inactive accounts and $2.00 fee for a paper statement. Disputing a transaction costs $15 per transaction. Electronic bill pay costs $0.50 per transaction. Contacting a customer
service agent will cost $1.50 by email and $1.95 to speak with a live customer service agent (free for first three minutes). Transferring money to another Myplash card costs $0.50 per transfer. Text message and email alerts are free.
Myplash requires teenagers ages 13-17 to have parental consent and agreement to the terms and conditions.
There is nothing illegal about using cartoon characters to promote a financial product to teens, but it sure bothers me as a parent and seems to cross over the line of what is good taste.
It seems that prepaid cards are trying to fill the void for credit cards for teenagers and young adults that was created by the CARD Act. These regulations made it difficult for anyone under 21 to get a credit card. It is much easier for teenagers to get a prepaid reloadable card. Issuers are using celebrities, cartoon characters, and personalization to attract teenagers.
If you are too young for a credit card, or have poor credit, then a prepaid reloadable card is one of your options. But you may be much better off getting a debit card with your checking account because the fees are much lower. If you get a prepaid card, make sure you compare the fees and find a card that reports to credit agencies. This can help you build or re-build your credit score.
Prepaid cards are primarily marketed to people with little or no credit, damaged credit, or young adults. Prepaid reloadable cards look and act like a credit or debit card, including personalization with the name of the user. The credit limit is set by the amount of the deposit. It is not a loan and does not accrue interest charges. They are used everywhere that debit cards are accepted, even for international purchases. Prepaid reloadable cards are subject to account holds at gas stations, restaurants, hotels and car rentals, just like debit cards. The cards usually carry significant fees, such as processing fees, monthly fees, transaction fees, and extra ATM fees.
While reloadable prepaid cards may sound like a good alternative to debit and credit cards, the fees make them very costly. The issuers of prepaid cards make all of their revenue from the fees. The regulations that restrict fees for credit and debit cards do not apply to prepaid reloadable cards.
Bill Hardekopf is CEO of LowCards.com, a site that simplifies the confusion of shopping for credit cards. It is a free, independent website that helps consumers easily compare credit cards in a variety of categories such as lowest rates, rewards, rebates, balance transfers and lowest introductory rates.
by Bill Hardekopf
In 2010, the Federal Reserve has introduced a number of new credit card rules and guides to help protect and educate consumers. The latest, a Consumer's Guide to Credit Reports and Credit Scores, was published last week.
This guide describes some basic information for consumers on credit scores, such as what a credit score is, where it can be used and why it is critical for consumers to protect their credit history. The guide is part of the final rules in the Fair Credit Reporting Act (FCRA) that go into effect on January 1, 2011. FCRA was passed seven years ago in 2003.
The FCRA will require lenders to inform consumers when negative information on credit reports causes a higher interest rate on a loan. This notification also applies if a consumer is denied insurance or employment because of information in the credit report.
Once a consumer is negatively affected by a credit report, the lender, insurance company, or employer must send a notification providing the name, address, and phone number of the credit bureau that provided the credit report that was used to make the decision. The consumer can get a free credit report from this credit bureau, but it must be requested within sixty days after receiving the notice. The Fed hopes this will encourage consumers to review their credit reports and correct inaccurate or incomplete information.
The new Consumer's Guide to Credit Reports and Credit Scores was created to help consumers understand the notices and new information they may get from lenders under the FCRA. Why does this matter?
Your credit report identifies who you are, where you live, and summarizes your financial story. It reveals more to lenders and businesses than you probably tell your closest friends. It provides details of current and some past loans, including mortgage, credit card, and student loans. It shows how much you owe, the terms, and your history of making payments. It also lists any liens, court judgments and bankruptcies, and companies or persons who have recently requested a credit report.
People are surprised when they discover how deeply and broadly credit reports can affect their lives. Every consumer needs to understand how their actions affect their credit report.
Lenders use credit reports to make lending decisions and set interest rates. Employers can look at credit reports during the interview process, and landlords use it to screen renters. Utility companies use them in applications for service. A bad credit report can make it difficult for you to get a job, an apartment, or even government benefits.
While most of the information in the Federal Reserve's Guide has been outlined in other measures, it is a message that is beneficial due to the weight of the Federal Reserve seal. It not only tells how to get a copy of your credit report from the three credit bureaus, but also how to correct errors in credit reports.
However, even the powerful Federal Reserve can't provide some of the answers that will clear up the darkest mysteries and frustrations of credit reports. How many points does a negative action affect the credit score? How long does this drag down the score? What real steps can a consumer take to significantly rebuild and recover?
Find the link to the Federal Reserve's Consumer Guide to Credit Reports and Credit Scores here.
Bill Hardekopf is CEO of LowCards.com, a site that simplifies the confusion of shopping for credit cards. It is a free, independent website that helps consumers easily compare credit cards in a variety of categories such as lowest rates, rewards, rebates, balance transfers and lowest introductory rates. It also gives an unbiased ranking and review for each card.