Ask The Money Coach

Archive for the ‘Credit Limit’ Category

My bank lowered my credit limit and that hurt my credit. Help me Money Coach!

Q: One of my creditors, Bank of America, decided to decrease my credit limit from $4,000 to $500. At the time when they lowered my credit limit, I had a balance of $700. So, that put me $200 above the limit at the time of the change. They didn’t even call me, I called them. Representatives I talked to at Bank of America said no over the limit fee would be imposed, but nevertheless, I put my balance under $500 within a couple of days. I later pulled my TransUnion credit report and noticed that there was a remark stating that I went over my credit limit in the month of January. No one at Bank of America has been willing to do anything about it. I want to know this: why is it my fault that Bank of America lowered my credit limit? They are the ones who put me over the threshold and made me look as if was an over spender when I was not. What are your thoughts on all of this?”

A: First let me say that I’m sorry for the situation in which you find yourself in, and you’re definitely not alone. You know that amid the ongoing credit crunch — and especially after the Credit Card Reform Act that just became effective in 2010 — that banks all across the country, have been very strict and severe in their policies and procedures of late. Certainly not just Bank of America, but all kinds of credit card issuers, banks and lenders. Some are adding fees to credit cards. Some are lowering credit limits. Others are closing accounts outright.

I’m not surprised, frankly, that they didn’t email you or place a call to you. One of the ways that you can get around that in the future, certainly, is to enroll in a credit monitoring service. A lot of times, credit monitoring will alert you to a change, whether it’s a change to your credit limit or something else. You’ll often get that credit-monitoring alert before you’ll get that snail mail notice from the lender or the credit card issuer. So, keep that in mind for future purposes.

They obviously did notify you by mail, which was important. But to get to the heart of your question, this is what I would recommend you do because you’re grappling with some information being reflected on your credit report that, frankly, may or may not hurt you from a credit scoring standpoint. Here’s why: Your payment history shown on your credit report lists something called the “account status” for any particular account.

A “status” notation on your account, when it’s in good standing, is going to say something like: “current,” “pays as agreed,” or “never late,” those kinds of notations. Those are all showing accounts that are in good status. Obviously, if it was something negative, it would’ve said, “30 days late,” “was in collections” or something like that. You don’t have to worry about those kinds of issues.

However, “status” comments can make a difference when it comes to your FICO credit score, so you always want to be sure that the status comment shown is, in fact, current and accurate. Since you referenced your TransUnion credit report specifically, here’s what I would do if I were you. First, I would make sure that the “status” listing on your account is currently correct. Even if it says on that other, sort of sidebar comment that you went over the credit limit in January, make sure that your current status is shown as “up to date” or “current.” That’s the key determinant that’s used to look at your credit score.

Additionally, I would make sure that the credit limits reflected on your account are, in fact, accurate. Your credit limit will be shown on various reports in different ways. Again, you referenced TransUnion only, but you should know that some credit reports list a “credit limit” or “original amount.” If you see something that says “credit limit/original amount,” this number should reflect the amount of credit you were granted when the account was first opened.

Other references on your credit report that reflect your balance might be notations like “high balance.” This figure would show the highest amount of credit you’ve ever used for each one of your accounts. Some credit reports might simply say “balance” or “recent balance.” Of course, this dollar amount would indicate the last balance owed on your account as reported by the credit card issuer or the credit grantor.

Remember, though, that this information can take a month or so to wind its way through the system because creditors report at different times, usually when your statement has a closing date, and then the credit bureaus take a week or so to go ahead and update that information and to display that information to you. If you find that your “status” account or your “credit limit” or “original amount” is inaccurate, by all means, dispute it directly with TransUnion. Here’s where you can go, just hop online and use the online dispute service that TransUnion offers.

I’ve used online dispute services in the past and they’re very fast. Typically, if you go by mail, it’ll take 30 to 45 days, but online disputes are much faster. Log on to http://transunion.com/investigate. If you find your information after you’ve looked at your credit report is inaccurate, by all means, dispute the status notations, the amount shown, or the credit limits indicated with TransUnion.

If you don’t see a specific box that basically says “there’s something wrong with my account status,” you can check a box that says “other,” and indicate to TransUnion that the “over the limit” information is inaccurate or the terms listed are inaccurate. When you go online to dispute this, you also don’t need to buy another credit report. If you go through that web link that I gave you, transunion.com/investigate, specify that you’re disputing information and you should get access to your credit report free of charge.

I hope this information is helpful to you, and I know how frustrating it can be to deal with these changes in the banking industry. Keep doing the things that you’ve been doing, in terms of being a wise consumer, managing your credit and debt wisely, and begin monitoring your credit on a regular basis. All of those are going to put you in good financial stead, and you’ll find that you will be a valued customer to banks and other credit card issuers if you maintain that great credit rating, as you already have been doing.

Paying Off Your Debt: How One Woman Paid Off $30,000 in Credit Card Debt

Author: The Money Coach

Lori Meyer has been debt-free for more than two years. For the 37-year old former teacher, it’s a feat she once thought impossible. “Between credit cards, student loans and car payments, I was $30,000 in debt with no hope of ever paying it off,” says Meyer, who now lives in Los Angeles.

Meyer’s debt didn’t happen overnight. It was a slow-growing, painful process. “I’d been in debt continuously since I was 23,” says Meyer, pictured at right, “and it just kept growing and growing and growing.”

She admits that she made a lot of bad choices. “A lot of the stuff I spent money on was clothes or things that weren’t necessary,” she says.

And it added up, all those the little purchases, and the big ones, too: “I paid for my Lasik surgery with credit cards, and I spent maybe $2,000 on a vacation to Alaska.” And while she enjoyed Alaska (“It was gorgeous; I’m glad I did it”), her debt was spiraling out of control. That’s when Meyer, who by then was in her late 20s, started thinking more responsibly about her financial situation.

“I started thinking I’d like to buy a house and get married at some point, and I started thinking I should get my finances in order,” says Meyer. So Meyer opened an MBNA America card (MBNA is now owned by Bank of America), not to get herself further into debt but to dig herself out of it by consolidating all of her debts onto one card.

“The payments were around $289 a month,” explains Meyer, “and they told me that if I made those payments every month, and I didn’t add to the debt, I’d be paid off in five years.”

At first, everything went according to plan. “The balance went down, but slowly,” says Meyer. But then she decided to move to Colorado. Read the rest of this article on WalletPop
This article written by Geoff Williams for Walletpop

How to stop falling deeper into debt

Author: The Money Coach

Famed billionaire investor Warren Buffett once said that if you find yourself in a hole, the first thing you must do is to “stop digging.” It may sound basic, but every day, people with massive amounts of consumer debt continue to dig themselves deeper into the red by spending as if there’s no tomorrow. If you know you’ve been over-spending, you must vow to end negative spending habits. This is crucial to fixing your finances. Let me put it another way: if you’re serious about chucking your credit card debt, you have to put an end to frivolous or excessive spending – starting today!

So many of us tend to make empty promises to ourselves and others: promises that we’ll spend less and save more; promises that next year we’ll get our act together; promises that with the next promotion or the next bonus or the next money that comes in we’ll make good use of that cash – anything related to whipping our finances into shape. It especially happens at the beginning of the year. Have you ever made a New Year’s resolution concerning your finances? More to the point, if you have such a resolution going forward, chances are you’ll need all the help you can get to stay on track. The December holiday season is the time of year that many of us tend to overspend – leaving us with big credit card bills, and the equivalent of a shopper’s hangover that lasts well into the following year.

For those of you determined to better manage your money, you don’t have to live a life of deprivation in order to get into the black. The best way to turn your financial resolutions into lasting changes is to take some concrete steps that won’t cramp your style, but will definitely improve your personal finances.

Here are some ways you can do just that: Read the rest of this post on The Zero Debt Online Course. It’s free!

How to stop the flood of credit card offers

Author: The Money Coach

Ever notice how your mailbox seems to be flooded with credit card offers every week? If your residence is like the average U.S. household, you probably get dozens of credit card solicitations in the mail each year. To put an end to them, simply call 888-5-OPT-OUT or go online to www.optoutprescreen.com.

The toll-free number I’ve given you, 888-5-OPT-OUT is an automatic phone service that’s run by the four main credit reporting agencies: TransUnion, Experian, Equifax, and Innovis. (Many of you may be thinking: “What is Innovis?” I’ll tell you more about that company – and the credit report you’ve probably never even heard of – later, in Day 4. For now, though, let’s stay with this OPT-OUT number).

The reason this number works is because it takes you out of the credit bureaus’ databases for pre-screened mailings. This will force the credit bureaus to stop selling your name and address to banks and other institutions that send you credit card offers each month.

Research companies and public-interest groups, such as the Consumer Federation of America in Washington D.C., track the rate at which banks and other credit card issuers send out credit card offers. What they’ve discovered is that some six billion credit card solicitations are sent to people like you and me every year. Imagine that: a whopping six billion credit card offers, or roughly 60 per U.S. household! And the numbers keep rising every year. According to the Mail Monitor report from Synovate, a Chicago-based research company, 90% of credit card mail comes from the 10 largest credit card issuers. If you’re wondering why in the world banks send out so many darned solicitations, the obvious answer is because they’re hunting for new clients. But the less obvious reason is that financial institutions are also responding to changing customer demand. When interest rates rise, banks often increase their mailings because with higher interest rates, people often start looking for fixed rates products on things like credit cards and mortgages. As a result, consumers are more likely to be receptive to new offers for credit. Still, if you’re like most people, you probably tend to give credit card offers the cold shoulder – perhaps tossing them in the trash can without even opening them. That’s why the average response rate to credit card solicitations is miniscule – just 0.2% in 2006 – a record low, according to Mail Monitor and other industry trackers. For all the mail being sent out, direct mail doesn’t seem to be the most profitable way for credit card companies to do business. For starters, they have to send out more than 250 solicitations just to acquire one new customer. That means up to $200 spent to attract every new cardholder.

Read more on The Zero Debt Online Course – it’s free!