Archive for March, 2010

With increasing rates of identity theft, many consumers choose to freeze their credit reports so that the credit report cannot be shared with potential creditors. When you freeze your credit reports, a lender or creditor who makes an attempt to check your credit history will not be able to order a report using your name and Social Security number.

How a Credit Freeze Works

To freeze your accounts, you will need to contact each of the three credit reporting agencies — Equifax, Experian and TransUnion — and provide them with identifying information such as your name, current and former address, Social Security number, birth date and a copy of your driver’s license. The request for a freeze can be made by certified mail or online.

Initiating a credit freeze costs between $3 and $10 per person per bureau, and you will likely receive written confirmation that the freeze is in effect after the credit bureau has received all the information they need. Check your state’s security freeze requirements and fees schedule for specific fees.

If you want to open a new credit account or apply for a loan, you have the ability to lift the freeze for a certain period of time so that the creditor can pull your credit report. Each credit bureau charges a fee (approximately $5 to $10) to lift the freeze temporarily, so you need to select a specific date and let the credit reporting agency know which creditor will be ordering a credit report.

Keep in mind that freezing your accounts will not lower your credit score, and will not prevent you from receiving pre-approved credit offers. If your spouse shares a credit account with you, both parties need to freeze their individual credit files separately for the entire account to be frozen.

When to Freeze Your Credit

You probably should freeze your credit if:

• You’ve been a victim of identity theft and had your accounts compromised.
• You’ve lost your credit cards and Social Security card or driver’s license.
• You simply suspect that you have been the victim of identity theft and want peace of mind that your credit report isn’t in the wrong hands.

When Not to Freeze Your Credit

There are some situations where it’s not a good idea to freeze your credit. If your job requires you to access your credit reports regularly to open new accounts, it can be very costly to lift the freeze every time you need to pull your report. If you’ve lost a single credit card or had a credit card stolen, you may only need to contact your credit card issuer to investigate the account and close it as needed.

Another drawback of freezing your credit report is that your credit report won’t be updated with your current name or address until you personally send that information to the credit bureaus. You will need to update your contact information on your own any time you move or make a name change.

Sabah Karimi

If you’re into social gaming, there’s a new form of payment for the variety of virtual goods available in many online games: Kwedit.

The Concept

Here’s how it works. Gamers create a Kwedit account, complete with a Kwedit score. Just as in real life, the score enables them to take on debt. However, in this case it is virtual debt, established by purchasing “items” online such as enhanced abilities for their characters. Upon purchase, the user agrees to pay a certain amount of real money within a few days. Money can be paid through the mail, or users can print out a bar code that can be scanned and paid for at 7-Eleven convenience stores. If a user is unable to make a Kwedit payment, they can opt for the “pass the duck” option, where the user asks a friend or family member to make the payment on their behalf.

With more completed purchases, the user’s Kwedit score goes up. Conversely, if a user simply looks at this as a great opportunity for stealing virtual products and doesn’t make good on their Kwedit promise, that user’s Kwedit score goes down. In that case, the user will find it harder and harder (just as in real life) to take on debt in the online gaming world.

So, what’s in it for game designers looking for a payout? Kwedit does actually encourage gamers to keep up a high Kwedit score if they want to continue using the system. It is also a payment system for users (especially young users) who may not have a credit card or other online payment system available to them. And if those users end up not paying? Likely not a big deal, since the goods purchased were virtual anyway, so no money is actually lost in that instance.

The Kwitic

Kwedit was recently skewered on the Colbert Report. To defend themselves, the company removed its duck mascot Kwedie and the CEO posted a response on the site’s blog.

Will Kwedit become the new PayPal? Probably not. For one, it deals strictly with the virtual world, hence the ability to easily buy now but pay later (or skip payment altogether). Because of this, it doesn’t scale well to a real world application. But for younger computer users looking to experience what earning an actual credit rating is like, and the effects of poor credit management, it may indeed be a popular choice. However on March 3rd, 2010, Kwedit received $3.3 million in a second round of financing led by Maveron.

Currently, games powered by Social Gold accept Kwedit payments, including FooPets, Puzzle Pirates, Greenpatch, Tetris Friends, Island Paradise and hundreds more.

Eric Fleming

With lenders tightening their standards, and with new credit card rules, many are finding that it is not as easy as it once was to get a credit card. Indeed, proof of income is needed, and for the best credit cards you will need a credit score that is at least fair to good. If you do not meet these qualifications, you may need a co-signer to get a credit card.

What is a Co-signer?

A co-signer is someone who accepts responsibility for the loan or credit card if you cannot pay. If you do not have good enough credit or a high enough income to qualify for a credit card or some other type of loan, a co-signer will vouch for you, taking on the responsibility for the loan. This person should have good credit and sufficient income.

When someone co-signs for a loan, it means that he or she is basically taking on the debt. You should still make your payments on time, but if you don’t, the creditor can come to the co-signer to fulfill the debt. Additionally, the co-signed debt shows up as part of the co-signer’s debt burden, so their debt-to-income ratio rises. A co-signer is taking on risks when he or she backs you up, agreeing to pay on the loan if you default. If there is a chance that you will default, or if there are doubts about whether you are responsible enough to pay on time, you may have a hard time convincing someone to co-sign for you, since most of the risks are taken on by the co-signer.

Choosing a Co-signer

If you are responsible but you do not have established credit or a full-time job, you might be able to convince someone to co-sign for you. This person is usually a relative, often a parent. You might also find a very good family friend to co-sign on a credit card for you. When looking for a co-signer, you should find someone who has good credit, a low debt-to-income ratio, and who is not planning major purchases for at least six months. This is someone who is likely to handle the debt well, and who can afford to co-sign for your credit card.

Once you have your credit card, you should show your appreciation to your co-signer by using it responsibly, paying on time, and in full.

Jean Marquit

If you are trying to reduce your credit card debt, you may be tempted to start cutting up your credit cards. However, this is not the best option for properly closing a credit card account. To begin with, there may be unaccounted for charges on your credit card. Left unpaid, these can result in late fees and even collection agency notices. Such oversights are not only costly but may also negatively impact your credit score.

How, then, do you properly close a credit card account? Here are 10 simple steps to ensure the smoothest account closing possible.

1. Assess the costs and benefits of your current credit cards. Which cards have the highest APRs, fees and other costs? Do any cards offer benefits such as cash back or airline miles? Close those credit cards that are the least beneficial or the most expensive to maintain.

2. Pay off your balance in full. Do not continue using that credit card just because it is now “clean.”

3. Wait at least one billing cycle after you pay off your credit card before you close it. When the next billing cycle starts, check your credit card statement to make sure that the balance is indeed zero. Sometimes there may be leftover charges, interest and fees that still need to be paid off.

4. Obtain the customer service phone number and mailing address of the credit card issuer. This information is usually printed on your billing statement.

5. Make the call. Most credit card companies require that you call them to cancel a credit card. Set aside at least 20 minutes to properly cancel your credit card.

6. Maintain your resolve. The credit card customer service representative may try to dissuade you from closing your account. You may be offered a lower interest rate, additional rewards, etc. If the only reason you are closing your credit card is because of its high interest rate, you could use this occasion to negotiate better terms.

7. Obtain written confirmation. Request that the credit card issuer send you written (or e-mailed) notification of your cancellation. Also obtain the name of the agent you spoke with and a cancellation number.

8. Define the reason for the cancellation. Request that your credit report state that the credit card account was “closed at the consumer’s request.” Some agents may not input the correct reason for your credit card’s cancellation, resulting in your credit report stating that a credit card was closed at the issuer’s request.

9. Check your credit report. Once a month has passed, obtain a copy of your credit report. Look over the portion of the credit report that mentions your closed credit card. Make sure all information regarding this credit card is correct, and that the card has indeed been canceled.

10. Keep records. Maintain a file with the contact information of the credit card issuer, a copy of the final payment made on the balance, and the cancellation notice from the credit card issuer. Such information will be vital in case of future discrepancies.

If you feel that you’ve done everything necessary, yet the account remains open, the Federal Reserve can help mediate your particular situation.

Hally Z.