In the beginning of 2010 there will be sweeping credit card reform finally put into action to benefit consumers.

However, since last August when a few of the new credit card laws went into effect, the major credit card banks have been trying to stick it to us! This is due to changes the credit card companies have made in an effort to reduce potential losses due to the new regulations. If you’ve been hit with any of the following tactics, there are a few things you can do to help improve or maintain your credit scores.

As many readers of this blog have heard before, one of the best ways to improve credit score is to monitor your balances and used credit limit on your credit cards.

Here’s how to fight back:

Last Minute Interest Rate Hikes – Many credit card companies sent out notifications detailing higher interest rates and other terms in advance of the new credit card laws. Some of these notifications may be confusing to consumers, due to the fact that the listed changes may not take effect for several months. Here’s the bottom line: if you received a notice of a change to your credit card’s terms before August 20th, you only have 15 days to opt out, even if the proposed changes don’t take effect until months later. Don’t wait to take action, and be sure to read the fine print in order to avoid having your account closed, or assessed additional fees.

Changes to Minimum Payments – Some credit card companies are also raising the amount you have to pay each month if you carry a balance – up to 5% from the typical 2-2.5% seen in years past. While you can’t always opt out of these changes, in some cases you may have the option to write in and retain your old rates. Be careful with this option, however, as some companies will close your account if you opt out of their new terms.

Increased Penalties for Late-fees and Over-limit Fees – While these types of penalties are easy to avoid if you pay your bills on time and stay within budget, credit card companies are also reducing consumers’ credit limits without providing any notice. Because the credit card companies aren’t required to inform you about changes to your credit limit, you could rack up over-the-limit fees without realizing it until your statement arrives in the mail. Your best defense against this is to sign up for alerts that will let you know when you are approaching your limit, coupled with regular vigilance through online access or customer service, so that you always know your limit before you go shopping.

Another way to avoid paying extra: Opt out of over-limit purchasing altogether.  Companies are now required to allow you to do this, but you will have your credit card declined for any purchase if that purchase would take you over the limit. If you typically keep your balances low, but aren’t sure about your credit limit, this is one way to avoid getting hit with additional fees.

Most credit card companies allow for automatic payment of your bill, either in full or the minimum balance, monthly. By taking advantage of these programs, you can eliminate the chance that you’ll be charged a late-payment fee on your accounts as well. Just keep track of your due dates and be certain that you have the funds readily available to cover the automatic bank draft, or you could wind up paying just as much, or more, in overdraft fees from your bank.

Remember, to learn more about how to repair credit report , visit CrushingTheCreditBureaus.com

Mark

I want to clear up some confusion about credit repair and how it affects your credit scores.

As many of my readers know, your bad credit doesn’t just improve when you delete negative information from your credit file. You must also add positive information and the right types of accounts in your file to achieve the highet possible FICO scores.

You also know that Fair Isaac Corporation or FICO keeps the credit scoring algorithm Top Secret!

Under pressure from both the governmental watchdogs and consumers, FICO has been releasing limited information about how credit scores are impacted by common events in one’s personal finances.

Recently they disclosed for the first time ever the extent of damage done to a credit score with some of the most common credit mistakes that happen to most Americans.

Borrowers already knew that late payments hurt their credit scores, but for the first time, they now know the true extent of that damage.

Thinking of “maxing out” your credit card? Expect a credit score drop of 10 to 45 points. Declare bankruptcy? Your score will plummet by up to 240 points, and your odds of getting credit will nosedive with it. (at least that what some people think  )

The “damage points” data, unveiled recently by FICO, are part of the most revealing glimpse into the firm’s once-secret — and still mysterious — credit scoring model. The new information discloses how many points borrowers’ scores will drop when they make the most-common mistakes.

Here is a sample of that chart from Fair Isaac -

FICO’s information shows that bankruptcy does the most serious damage to a credit score (up to 240 points), followed by foreclosure (up to 160 points) while maxing out a credit card has the least numerical impact (as few as 10 points).

Those with good or excellent credit — so-called prime borrowers — put more points at risk with each mistake. For example, someone with an average credit score of 680 who pays a bill 30 days late will see a drop of 60 to 80 points. But for someone with an excellent credit score — 780 — that same delinquency can send a FICO score tumbling by 90 to 100 points.

The Real Cost Of Bad Credit in Dollars –

In order to show just how badly a drop in your FICO score can hurt your wallet, below are some examples from the home mortgage, auto, and credit card lending institutions.

The examples represent hypothetical scenarios of a consumer who decided to apply for a $200,000, 30-year mortgage; a $20,000, five-year auto loan and a credit card. While all the industry insiders stressed that a FICO score isn’t the only factor in determining who gets credit and at what cost (other factors they cited include the borrower’s debt-to-income ratio and whether they have already established a relationship with the lender), they were able to provide an idea of what a borrower who had the following credit scores could expect.

For a Consumer Who Started With a FICO Score of 780:

• Following a 30-day late payment, the consumer’s car loan rate would jump nearly 3 percent, costing the borrower $26 more each month.
• Following a debt settlement, the consumer would pay as much as $109 more each month on a home mortgage.

For a Consumer Who Started With a FICO Score of 680:

• Following a 30-day late payment, the consumer would pay $41 more each month for a car loan.
• Following a 30-day late payment, the consumer would pay as much as $95 more each month on a home mortgage.
• Following a debt settlement, the consumer would no longer qualify for a credit card.

So as you can see, learning how to improve credit scores puts REAL dollars in your pocket and can save you thousands of dollars over the life of any loan or credit card you may have.

Until next time,

Mark

Many of my real estate investing colleagues have asked where I learned how to get my lines of credit for real estate investing. I share many of those techniques in my book Crushing The Credit Bureaus

One of the techniques I use is called “seasoning”. For those of you who don’t know, the term refers to having a large amount (around $50,000) sitting in your personal or business bank accounts earning interest and “seasoning” for a time. Usually 3-6 months untouched. When you are in the process of going for your 7 figure lines of credit, your bankers will love the fact that you have a significant amount of money in place that isn’t being used or tapped into on a monthly basis.

It’s the old story of “you get money when you don’t need it”.

Well that is exactly what happens here, once you build that relationship and history with a bank, they literally fawn all over you to give you money. Remember though, your credit scores will come into play no matter what anyone tells you. Yes, even if it is going to be in the name of a corporation.

Stay tuned

Mark