Geico Platinum Mastercard Reduces Credit Lines

I've recently joined the group of folks who have had their credit negatively impacted by a credit card company that indiscriminately reduces credit lines. Geico Platinum Mastercard notified me that they were reducing my credit card line of credit significantly, down to the balance that I had carried on the account. How can this effect ones credit negatively?

A large part of ones credit score is determined by the amount of credit available. Earlier this month, I had a $10,000 limit on this card. If I carried a $1,000 balance, then I had 90% of my credit line available. When the credit limit is reduced, in this case to $1000, the available credit is now $0, making it appear as though I've 'maxed out' my credit line.

When the credit bureaus receive my balance information showing that I now have a $1000 balance on a $1000 credit line, my credit score will be recalculated and will likely drop significantly, for no fault of my own.

How can the credit card companies do this? I have made all of my payments on time, never late, never missed. Managed my account with stellar diligence. Still, I run the risk, again by no fault of my own, that my credit score will suffer. If my score drops, I run the risk of paying higher interest rates for future credit needs. You would think that there would be a law against this!

Read you account agreements carefully. There is almost always a clause that gives the card company the right to reduce or cancel the credit line at their discretion, regardless of your payment history.

What's the solution? I called Geico Platimum Mastercard and asked that they reconsider. They acknowledged that I had always paid my account better than agreed, but that there wasn't anything that they could (or would) do. Because it was a corporate business decision, they could not increase the line so that I would have only 50% utilization, nor would they reduce the APR on the account. My options were very limited.

I could; (1) decide not to pay them, or (2) pay off the balance in full. Fortunately, I was in the financial position that I could chose option 2. In addition, I will be looking for a new insurance company to handle my motor vehicle insurance needs. Note: I did not close the account because I want to keep my available credit lines open in order to preserve my credit rating.

Have you had this happen to you? What did you do?

Sale of Experian based FICO scores discontinued on myFICO.com

Want to know what Experian is reporting about your credit history? It's going to be a little more difficult now!

Experian has announced that this action is specific to their consumer business unit, and will not impact their relationship with lenders.

Fair Isaac has received notification from Experian of its decision to terminate the agreement which allows the distribution of Experian-based FICO® scores and reports from www.myFICO.com.

While it is our desire to continue informing consumers of FICO® scores from all three credit bureaus, FICO® scores from Experian will no longer be available to consumers. FICO® scores from Equifax and TransUnion continue to be available.

There are three myFICO® products which will be impacted by this change:

* FICO® Credit Complete: No longer available after February 13th, 2009.

* FICO® Standard: The single Experian FICO® score and report will no longer be available after February 13th, 2009. You will still be able to obtain FICO® scores and reports from Equifax and TransUnion.

* Suze Orman's FICO® Kit: The single Experian FICO® score and report will no longer be available after February 13th, 2009. You will still be able to obtain FICO® scores and reports from Equifax and TransUnion.

It is important to understand that the majority of lenders will continue to use FICO® scores based on Experian data to make creditworthiness decisions, but those FICO® scores based on Experian data will not be available via www.myFICO.com, nor any other public venue.

We sincerely regret any inconvenience this causes to our loyal customer base. For the affected services, we will provide a smooth and thoughtful transition. Please know we are committed to giving clear and continued communications on this issue.

For more details on this change, especially if you currently own any of the three products mentioned above, we have provided a thorough FAQ, which is found on the FICO® Forums page.

Here is a link to the FAQ

How to correct an error on your credit report- Free e-book

As mentioned in yesterdays post, sometimes there are errors on your credit report. How do you correct them and have them removed?

One way would be to work with a credit repair company. However, you can save money by doing it yourself.

Step One
You'll need to have a copy of your credit report (Click here to learn how to get a free credit report). With this, you'll be able to reference the exact information and how it is being reported should you need to provide it for documentation. Get any other proof of the error that you have (paid receipts, etc.) and make copies of them. DO NOT SEND ORIGINALS because if they become lost....

Step Two
You need to tell the consumer reporting agency (CRA), in writing, what you believe the error is and how it should be corrected. Your letter needs to include your complete name and address and clearly identify the items on your credit record that you are disputing. You need to state the reasons why you believe the information is incorrect and ask that the information be removed from your credit file. Mail COPIES (no originals) of any documentation that you might have. If you are mailing a copy of your credit file, mail only the page that has the trade-line that you're disputing, and highlight or circle the item that you're disputing. Here is a sample dispute letter from the FTC that you can use:

Date
Your Name
Your Address, City, State, Zip Code
Complaint Department

Name of Company
Address
City, State, Zip Code

Dear Sir or Madam:

I am writing to dispute the following information in my file. I have circled the items I dispute on the attached copy of the report I received.

This item (identify item(s) disputed by name of source, such as creditors or tax court, and identify type of item, such as credit account, judgment, etc.) is (inaccurate or incomplete) because (describe what is inaccurate or incomplete and why). I am requesting that the item be removed (or request another specific change) to correct the information.

Enclosed are copies of (use this sentence if applicable and describe any enclosed documentation, such as payment records, court documents) supporting my position. Please reinvestigate this (these) matter(s) and (delete or correct) the disputed item(s) as soon as possible.

Sincerely,
Your name

Enclosures: (List what you are enclosing.)

Step Three
Make copies of the letter and all of the documents that you're including. Mail the letter Certified and request a Return Receipt to the CRA. This will give you formal record of both mailing the letter and the CRA's receipt of the letter. Once the CRA has the letter, by law they must act on it unless they feel that it is lacking basis or otherwise does not have merit, completing an investigation usually withing 30 days.

Here is the address and contact information for the credit bureaus:

Equifax
P.O. Box 740256
Atlanta, GA 30374
(800)-685-1111
Web site: www.equifax.com

Experian
PO Box 2002
Allen, TX 75013
(888) 397-3742
Web site: www.experian.com

TransUnion LLC
P.O. Box 2000
Chester, PA 19022
(800) 888-4213
Web site: www.transunion.com

Mail copies of the information that you sent to the CRA to the creditor or other information provider that you dispute the item. Read this post for more information about disputing a billing error.

The CRA will contact the organization that provided the information that you are disputing, forwarding any relevant documents that you might have provided. If the information provider determines that there is an error, they must notify all three of the repositories (Equifax, Trans Union, Experian) of the error and have it corrected. They must report their actions back to the CRA who in turn will notify you in writing of the outcome. You will be provided another free copy of your credit report if any changes are made to it as a result of the investigation.

Step Four
Ask the CRA to send notices of the corrected information to anyone who has received a copy of your credit report in the last six months, just to set things straight with those that might have made a decision about you based upon the incorrect information contained in your credit report. For example, the loan that you received might be priced higher because of the error (read here for more information about how errors can effect your credit score). If the correction has a material effect on your credit score, then you should ask the creditor to reconsider your situation.

Step Five
If the investigation does not result in the item being removed or corrected, then you can ask that a statement about the account be included on your credit file and on future reports. This gives you an opportunity to have your statement appear on the credit report along with the trade-line information that you are disagreeing with.

If the information provider fails to respond to your dispute letter, the CRA will remove the information from your file. This may mean that if you bombard the CRA and information provide with dispute letters, the information provider may give up and not respond or change the information just to make you go away.

Otherwise, if the information is correct, and the information provider is unwilling to change it, the only other way for it to be removed is through the passing of time. Most negative information will be reported for 7 years, bankruptcy information is reported for 10 years. Other information like judgments can be reported for 7 years or until the statute of limitations runs out.

Get this free eBook from the FTC on Building A Better Credit Report

Related Posts
Disputing Credit Card Charges
Get Acquainted With Your Credit Score


You can read this and many other informative personal financial posts at the Broke Grad Student who is hosting the 141st Carnival of Personal Finance!

Get Acquainted with your Credit Score

Get acquainted with your credit score

I was looking at some of my previous posts tagged credit score, and this one caught my attention. If you're not sure what a credit score is, then you've come to the right place! In the next few paragraphs, I'll try to summarize for you what a credit score is, how it is used, and, how it is developed. Click here to see a video on the topic.

What a Credit Score is and how it is used

Your credit score is your financial lifeblood. Whether your applying for credit, a job, or insurance, chances are that somebody is looking at your credit score. A credit score is a number assigned to your credit history that helps lenders, employers, and, insurers determine the level of risk that your credit history represents. The lower your score, the higher the risk. The higher the score, the lower the risk. Although each user of the credit score has different cut off levels where they determine that anything below a score of XXX is too much risk, credit scores really even the playing field for all of us.

• People can get loan decisions faster
• Credit decisions are fairer
• Older credit problems count for less

Your credit report and the information that it contains directly impacts your credit score. For this reason, it is very important that you monitor the information that appears in your credit report. Recent changes to the law entitle you to a free credit report every year. You can start the easy process of getting your free credit report by clicking here.

Your credit score is calculated (developed) base upon five criteria:

1. Your payment history- 35% of your score is weighted on how you have historically handled your credit obligations
2. The amounts that you owe- 30% of your score is calculated based upon how much credit do you have available to you. Put another way, are you maxed out on your credit cards? The more credit that you have available to you, the better the effect on your credit score.
3. Length of Credit History- 15% of your score is based upon much of your history is available. In other words, are you just starting out with credit, or have you had a long history of using credit?
4. New Credit- 10% of your score is calculated based on how long it has been since you opened a new account. If you're opening a new credit account every month, this may have an adverse impact on your score. However, because only 10% of your score is based upon this factor, the overall impact here is small.
5. Types of Credit in use account for the final 10% of your score calculation. Do you have a good mix of retail accounts (store cards), credit cards, and installment loans? Again, this is a small percent of the calculation, so the types and mix of accounts will not have a huge bearing on your score.

Keep in mind that items 3, 4, and, 5 by themselves won't have a big impact on your credit score. However, these items will have a big impact when all are considered together.

To get more facts about your credit score, get this free ebook from myFICO.com .

How does info get on a credit report?

If you're reading this, then you're probably curious about how information gets into your credit report. How does your payment history and public records end up in a credit report? How does it translate into a credit rating?

How is information reported to the consumer reporting agency?

Your repayment history is the single most important factor in determining a credit score. This information is transmitted electronically from your bank, credit union, or finance companies, through the data processing system that the institution tracks your account with.

There is a system of codes that is used to universally transmit and decipher the information about your repayment history. These codes are referred to as the Metro II codes. These codes ensure that all lenders report information in a consistent manner. In addition to providing the status of the account (current, past due, delinquent) it also provides for reporting of the ECOA Codes (joint account, single account), Compliance Condition Codes (bankruptcy, legal, etc.), and, Consumer Information Indicators (account disputed, etc.).

As payments are received and posted to the financial institutions data processor, the payment due date is advanced and the status is updated to current, or past due, delinquent, etc. Note that past due is not the same as delinquent. 'Past due' or late payments will not show up on a credit report unless or until they are at least 30 days past due. Some financial institutions will not report late payments until you are 60 days past due.

After the payments are posted and the financial institutions data is updated, the information is sent to the credit repositories, primarily to Equifax, Trans Union, andor Experian. This data is transmitted electronically in Metro II format on a regular, usually monthly, basis.

How do public records get reported to the consumer reporting agency?

Before we talk about how a public record gets reported, let's first define what a public record is. Simply put, a public record is any information about you that is available to the public. For example, property transfers are public record. The status of your real estate tax bill is public record. Whether or not you have filed for bankruptcy is public record. Wage garnishments are handled through the sheriffs department and are public record. If you are party to a lawsuit, etc. All of this information is available in the public records area in your county clerks office.

There are those that visit the county offices, known as abstactors (one who gather and summarizes information), who gather this information and provide it to the credit reporting agencies.

The credit repositories then take this information and sell it to others in the form of a credit report. This credit report is used to determine any number of things. Employers use this information when considering you as a candidate for employment, obviously lenders use the data to determine your credit worthiness, and, insurance companies use the information to determine your eligibility and to price your premiums.

Sometimes the information that a lender reports is wrong. For example, you made your loan payment through the mail but is was mistakenly posted to another persons account. Maybe your account numbers are very similar and the person that posted the payment made a data entry mistake.

Other times, the public records are incomplete or inaccurate. If you have a common sir-name (Baker is very common in our area) information about another person with the same or a name very similar to yours may be picked up by the abstractor and reported on your credit report.

How does my new address and employer get reported to the CRA's?

Each time you apply for a loan or request credit, you're usually required to provide some personal information like your social security number, your date of birth, your address, and, your employer. The finance company or lender enters this data into its loan origination system usually before they order a credit report. When they order the credit report, the information that you provided is transmitted to the CRA that they are ordering the report from.

Here are a couple of other resources that I hope you find helpful.

How Credit Reports Work

Your Credit Report Brochure from the FRB of San Fransisco

Whats in your credit report from myFICO.com

What is a FICO Score?

This week, I'll be writing about your credit score, how creditors report to the repositories, what they report, when, and what you can do if you disagree.

In this video clip from the Suze Orman Show, Suze explains what a FICO Score is and how it used.

So, take me to court then!

What happens to your credit if you are sued by someone and they win? Do lenders know? Does it matter?

If you are sued, and the other party wins, a money judgment will be entered in their favor. This judgment is a public record and therefore can and probably will become public knowledge. Anyone that wants to know can go to the county office (the county in which you reside) and search your name against the public records. This record will remain 'active' for 10 years unless it is renewed. If it is renewed, it will remain active for another 10 years. However, it can be renewed only once.

This judgment will likely appear on your credit report, and if you own real estate, it will become a lien against the real estate. When a lender looks at your credit report and observes this judgment record, it is likely they will want an explanation at best, at worst they will deny your loan request without any questions asked. Of course, they will take into consideration a number of things like how old the judgment is and whether or not you've been sued successfully by anyone else and whether or not there are any other collection items reporting on your credit file.

Because this is a public record, if it is picked up on your credit report, it will have an adverse effect on your credit score. Public records of any kind will drag your credit score down. This will impair your ability to get credit with reasonable terms, if at all.

If a creditor (or anyone else for that matter) receives a money judgment against you, they can move to garnish your wages and assets. If they are able to track down your bank accounts, their attorney can lawfully demand that the deposit institution relinquish your money, and the deposit institution is required to do so.

If you're an employee and your income is above a certain level, the judgment creditor can garnish your wages by turning the matter over to the county sheriff. If you're self employed, the sheriff can seize your cash register, or seize payment(s) from your customers.

Does any of this matter? To the creditor, absolutely! To the judgment debtor? Depends I guess! If they don't have a job or any assets, and their credit history is already bad, then I guess it wouldn't really matter too much. But if the person is of good credit character, they might look for another way to resolve the matter to avoid the judgment.

If someone owes you money, a money judgment might be able to help you. Remember, you can't get blood from a stone, and it's no fun trying. It's a waste of time; impossible! Don't waste your time and resources, and don't throw good money after bad trying to get blood from a stone. Depending upon how much you're suing for, the court might require that you hire an attorney to represent you. Check with your local court to find out the maximum amount that you can bring a lawsuit for in small claims court.

Should you pay an old collection account appearing on your credit report?

Alright, so they probably did something that made you mad. I can relate! Once I was a cellular customer with the same company for over 6 years. Each year, my contract would 'automatically' renew. Anyway, when I ultimately switched carriers (yes it was before the anniversary date of my contract) I was charge a $175 cancellation fee.

To say that I was upset is an understatement! The way that I see it, the early termination fee applied if I were to cancel during the first 24 months, not the first 60 months!

Anyway, I didn't pay it. As a matter of fact, they referred the account to collections, and ultimately it wound up on my credit report for seven years.

I didn't feel it was right of them to charge me this fee. Because I wasn't willing to see the forest through the trees, I wound up paying more in higher interest rates than I would have had I just swallowed my convictions and paid the fee.

So, that is my story. Do you have collections on your credit report that for one reason or other you don't feel you should pay? Is this really helping you or hurting you?

Is it hurting your credit score? Yes, absolutely. The more recent the collection item is, the bigger the impact it has on your score. But, just as importantly, a collection item might mean that your receiving calls from a collection agency. This can make you feel like your finances are in trouble (maybe they are) and this can take an emotional toll on you.

Do you need a loan? All lenders are different, but many will want to see that your paying or have paid the collection accounts before lending you any money. Paying these collections could improve your creditworthiness. Are these collection items on your credit report keeping you from earning a preferred interest rate from the lender? Is your credit costing you more just because of these accounts that you've overlooked ?

Here are some free educational booklets from MyFICO that help you understand how collections play a role in your credit score.

The verdict? Well, that is for you to decide. My thoughts are that if it is a debt justly owed, then pay it. If you feel that it is unjust, then pursue getting it amicably resolved. Any account on your credit report is disputable. So if it isn't right, you can contact the credit reporting agencies and file a dispute. If the party reporting the account fails to respond to the investigation (many of them do not respond) then the account will automatically be removed from your credit file.

In the end, like so many things in life, it's up to you!

Co-Signer or Co-Borrower: What's the difference

Occasionally, we bankers find ourselves looking at loan applications where the borrower isn't quite qualified on their own to borrower money. In most cases, this is because of a limited credit history or a slightly blemished credit record. When this happens, we might ask for a co-signer to help support the loan request.

The co-signer on a loan agrees to be legally obligated for the repayment of the debt. The co-signer must have an established and very good credit history. And because they will be legally obligated to repay the debt in the event that the borrower defaults, the co-signer must be able to qualify for the loans on their own merits.

This is in contrast to a co-borrower. A co-borrower credit history, income and assets are considered together with a primary borrower to qualify for a loan. Instead of qualifying individually, the primary and co-borrower are able to combine their income and assets into one in order to meet the lenders borrowing criteria.

To summarize, a co-signer is someone who is willing to take over the repayment of the loan should the borrower default. A co-borrower is someone who is borrowing money together with someone else. The co-borrower receives the proceeds of the loan while a co-signer does not.




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