Credit Education
How to Establish Immediate Credit
Good credit can be achieved without working your way back into it by the usual method of applying with small firms and then to the larger firms. This technique was developed by a former security chief of one of the major credit bureaus. The FBI wanted to establish instant credit history for one of its undercover agents. It has worked for the FBI, and it can work for you.
The method to establish AAA-1 Credit in 30 days is to use the credit history of a trusted friend or relative. It is important that you review the credit file of your person before using this method. Someone whose credit history is AAA-1 and does not have any problems with it is who you’re looking for. Ask a friend to act as a guarantor for a card with a company he has an account with. The creditor should issue the card without hesitation because the person guaranteeing the second card has a good payment history with that account.
This method will bring complete history of that credit card account, which also includes the state the account was opened and the payment record, into the new file without any indication that it is a secondary card. This can result in an excellent credit history on your brand new credit file in a matter of weeks. You should let the person whose credit you are using know that immediately upon receiving the cards you will return the cards to him, so they can be destroyed. Make sure you let the friend know you will not charge on the account.
The creditor receives the letter, and once that happens, one of two things will occur. The creditor will send out a new card or he will send you a credit application. If you get an application, have your friend or relative complete the primary information and you complete the secondary information, using your new file information. All you have to do now is send the application and wait for the card. After about 30 days, request a report from the credit bureau. The credit information of your friend should be on your file.
You can repeat this process on as many credit cards your friend has. With the new credit file you can then apply for other credit cards with other banks on your own. You should take precautions, though. Do not put more than 3 to 5 of your friends’ information on your new file. Use only secondary information from Visa and MasterCard and one or two department stores and one or two oil cards. You do not want to overwhelm your credit file if you want to secure some new credit cards.
Keep in mind, this no longer works for the certain industry scoring models, like the mortgage industry. The mortgage industry uses FICO 2, 4 and 5.
How to Protect Yourself and What to Do if You Are Affected by Data Breach
In the world today, technology is weaved through everything we do. According to Pew Research, about three-quarters of U.S. adults say they own a smart phone, while 50% of young adults say they live in a home with three or more. As the use of technology increases, the way technology is used also changes.
Most banks have an app for mobile banking, stores have apps for shopping so with a click of a button you can have almost anything delivered to your door. With these conveniences comes the danger when entering your payment and personal identifying information into these apps and saving your payment information to make future transactions more convenient. Earlier this month, Equifax announced hackers stole more information than was previously reported, approximately 2.4 million more Americans’ were affected, making it even more evident that it’s important to act to secure your information.
Below are the steps to take to help protect yourself from the worst consequences of data breach and identity theft, and what to do if you become a victim.
It is always a good financial habit to your credit reports regularly throughout the year. They can be accessed at no cost on the www.annualcreditreport.com website which allows people to view their credit report from each of the three bureaus once every 12 months.
One of the best ways to know if someone is using your personal information to access your money is to frequently monitor your checking and savings account activity. Most banks and credit unions allow account holders to set passwords and add additional security measures that help reduce the chance of unauthorized transactions.
Although retailers encourage shoppers to store credit card and other personal information online as a convenience, we advise against saving your credit card information on those websites and always keeping your password secure. Time is critical when reacting to identity theft or credit fraud, and a good way to react quickly is to take advantage of email or text alerts that notify you as soon as transactions are processed. This is helpful for credit cards, checking and savings accounts. Even with alerts in place, you should review your regular monthly statements and report suspicious activity as quickly as possible.
- You should be contacted by email or postal delivery with details about the time the incident may have occurred and details about your exposed personal information.
- Financial institutions are required by federal law to inform their customers of any known breach activity.
- As of now, there are 46 states that have laws requiring other businesses to take similar action.
Here are some steps you can take in situations where different types of personal information are exposed:
A Password
- Take immediate steps to change that password and consider using a different password for all your other accounts if that is not something you are already doing.
- Avoid using simple passwords that are easy for others to figure out, like “12345” or “abcde,” and always include a variety of letters, numbers and non-alphanumeric characters whenever possible.
Your Credit Card Account Number
- If you have a technology enabled account that allows you to remotely control the card via an app, use that feature to lock access top that card. Otherwise, call the credit card issuer to request a new card with a new account number. Following a major data breach, your credit card company may automatically send you a new card as a proactive measure. Keep in mind that you are not liable for any authorized purchases under the Fair Credit Billing Act when you card number is stolen.
Your Debit Card Number
- You are not liable for any unauthorized transactions if you report them to your bank or credit union within 60 days of receiving your statement.
- Immediately change your personal identification number (PIN) and cancel the card.
- Don’t take any chances if your checking or savings account number was exposed. Request a new account with a different number.
- Request additional layers of security like verbal passwords and photo identification to prevent your bank or credit union from discussing your account with anyone unable to provide the correct password or match your photo on record.
Your Social Security Number (SSN)
- Place a fraud alert on your account by contacting one of the three major credit bureaus (Equifax, Experian or TransUnion).
- The credit bureau you contact will then reach out to the other two agencies to inform them of the fraud alert.
- The fraud alert cautions lenders to take extra care verifying personal information before issuing credit and entitles you to a free credit report from each agency after the alert is in place.
- Although not an ideal solution for every circumstance, consider placing a credit freeze on your account. Once in place, a freeze will prevent a credit bureau from releasing your report or score without your permission.
Some companies have been known to offer free access to credit monitoring services when notifying customers of a data breach. These free offers are typically time sensitive and the service will convert to a fee-based program after a year or two. While most monitoring services offer nothing more than you could do for yourself for free, it doesn’t hurt to consider taking advantage of an offer while you don’t have to pay anything for the product. Having your data stolen or at risk of being used for theft can be a very stressful event. Know that you are not alone. Patriots Credit Services can help you sort through the mess and make recommendations as to what steps to take!
Be Wary of Credit Card Offer Perks
Competition among credit card issuers means good news for consumers. Especially with the Federal Reserve moving to raise interest rates and make carrying a credit card balance more expensive – which would presumably discourage borrowing – card companies have to do what they can to attract and retain customers. That’s spurred an uptick in big sign-up bonuses, including cash-back offers and travel rewards, which are at near-record highs, according to personal finance site WalletHub’s 2017 Credit Card Landscape Report.
“There are so many card issuers in the market presently that the competition to get new and keep existing cardholders is an extremely fierce one,” says Jill Gonzalez, a WalletHub analyst. “[Rising rates] further strengthens the competition – card issuers are even more inclined to offer better rewards to retain their customers.”
Indeed, initial cash-back bonuses in the second quarter of 2017 averaged about $109, 10.3 percent more than a year ago, and ranged from $10 to $500.
Travel rewards, on the other hand, are coming down a bit after last year’s spike in big offerings. For example, when JPMorgan Chase & Co. introduced the Sapphire Reserve card in August 2016, it offered a whopping sign-up bonus of 100,000 travel points – worth $2,100, according to travel site The Points Guy – if you spent $4,000 on the card in the first three months. That offer is now just 50,000 travel points.
On average, the initial travel bonus in the second quarter of 2017 was 14,114 miles or points, down 0.5 percent from last year and 9.4 percent from last quarter (but still an impressive 30.2 percent higher than it was just five years ago).
Why are card issuers reining in travel rewards while making it rain cash back? “Travel perks cost issuers more than cash back when they’re actually used,” Gonzalez says. “They’re also widely complained about due to third parties – airlines, hotels, etc. – that the credit card companies can’t control, even though they’re the ones getting the complaints and bad ratings.”
Also, issuers are trying to limit the number of times an individual can score initial perks. Some people have really taken advantage of sign-up bonuses, collecting cards and rewards with a strategy called churning. But issuers are getting wise to this game and implementing rules to stop it. For example, Chase has a 5/24 rule – which is unofficial, but frequently grumbled about by travel connoisseurs online – that seems to reject applicants for many of their cards if they have opened five credit cards or more from any issuer in the past 24 months. American Express only allows you to get a sign-up bonus on the same type of card once in a lifetime.
“A number of issuers now are starting to clamp down on the number of bonuses and rewards you can get,” says Nate Matherson, co-founder of LendEDU, an online marketplace for loans and other financial products. “They don’t want to offer these big sign-up bonuses to individuals who are just trying to game the system.”
So should you pounce on all these generous offers while you still can? It depends. “For some people, some of these perks make sense,” says credit card expert John Ulzheimer, formerly of Equifax and FICO. “For other people, they don’t.”
Basically, whether these deals can benefit you depends on how you use credit already. For example, many sign-up offers require you to spend $3,000 to $4,000 within 90 days of your opening the account to get the bonus. If you typically charge that much – and pay off the balance in full every month – then this deal makes sense for you. “In the short term, it might hurt your credit [score] a tiny bit, but in the long term, as long as you’re keeping your credit utilization at a reasonable level and making the payments on time each month, having three or four credit cards is not a problem,” Matherson says. “In fact, it can be a very lucrative strategy.”
But if you rarely use your card, increasing your card usage just for the bonus can be dangerous. You can easily wind up with more debt than you can manage. “The worst thing you can do is carry a balance on these cards because you’re subsidizing the rewards program for you and someone else,” Ulzheimer says.
And remember that there’s more to a credit card than just a sign-up bonus. You also need to understand the ongoing terms of the card before you apply. Consider the annual and monthly fees, annual percentage rate, penalty charges and any ongoing rewards, Gonzalez says. If you’re not careful, you could wind up paying more in fees and interest than you stand to earn in rewards.
“To the extent [initial perks] benefit you, that’s great,” Ulzheimer says. “But never lose sight of the fact that all of these perks are carefully designed and marketed for the purpose of pulling you in.”
FICO vs. Vantage Score
FICO now competes with Vantage Score but Equifax, Experian and TransUnion still offer both score options. This is partly because FICO is so widely used and accepted.
The goal of the credit bureaus is to wean users off the FICO model and start using Vantage Score instead. Due to the overwhelming majority of lenders and credit issuer’s familiarity with the FICO model, the Vantage Score has not taken the credit world by storm as fast as the “Big 3” would have liked.
All three credit bureaus now offer Vantage Score in addition to FICO score to calculate the credit score, instead of only offering FICOs.
In reality, it really makes no difference in credit score variations. Credit score variations are inevitable because the data the credit bureaus collect is still derived from different sources, not all data furnishers report their information to all of the credit reporting agencies. So the problem of varying credit scores will not be solved by the new Vantage Score.
The three bureaus are branding the Vantage Score as something that will help banks and lenders further hone the subprime categories. Subprime lenders are those banks and lenders dedicated to borrowers with poor credit or harder to approve loans. Subprime loans have higher interest rates and fat lending fees.
In today’s credit crunched economy, this is a fast growing market and the credit bureaus are hoping to use that as a selling point for Vantage Score. Slick marketing!
Unlike FICO’s traditional 300 to 850 scale, the Vantage Score goes from 501 to 990. Here is a breakdown of the scores with the respective rating:
A: 901-990
B: 801-900
C: 701-800
D: 601-700
F: 501-600
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