The Hidden Agenda of Extended Free Transfer Rates

More and more no interest charged credit card offers are sprouting like mushrooms in the present. However, customers should be wary because as more offers like these pop out, the higher covert fees and expense fees, which are attached to the cards, are becoming too.

In perspective, customers look like they are having a great deal compared to the credit card deals in the past because the interests of the cards are free and the balance transfers have increased.However, this is really not the case; in fact credit card owners are paying more for deals nowadays through hidden balance transfer fees and high standard interests.

According to watchdog, back in 2009, 16 months was the longest that a credit card does not charge any interest. But now, in 2012 the longest that major banks deal is 22 months and among these cards are the Barclaycard Platinum Credit Card with Extended Balance Transfer and the Halifax Balance Transfer Card.

But back in 2009, the most you have to pay for debt fees is 3% in 2012 it has increased to 4%. The Mastercard offered by the Amazon.co.uk even charges 5% from its customers as a transferring balance fee.

Consumers should be wary about the interest rates that their credit cards charge them and not merely look at how long transfer rates are extended. For instance, the Barclaycard Platinum Credit Card only charges a 2.05% fee. This is much lesser than the 3.5% charge of Halifax.

The periods that interest rates are free can extend from 16 months to 18 months. RBS and Natwest offer the longest interest rate free deals at the moment. Others that offer 16 months are the Tesco Clubcard Credit Card, the American Express Platinum Cashback Purchase Card and the American Express Rewards Credit Card.

But then, these companies are finding ways to silently make up for the extended free transfer rates that it offers customers. According to the Bank of England, the APR (annual Percent Rate) of the interest that credit cards generate has grown to 17.3 compared to the 16.5 back on May 2010.

Bankruptcy Scores: Another Measure of Credit-worthiness

According to experts, another way for lenders and credit-card issuers to estimate the ability of applicants to pay their debts is through their bankruptcy score. Your bankruptcy score determines your possibility, as a potential borrower, to file for a bankruptcy.

Sylvia Bronner, spokesperson of Citizens, said that a bankruptcy score is one of the many factors that are considered to assess the credit-worthiness of a borrower. Citizens not only use the credit scores of borrowers but also their bankruptcy scores to aid in the decision of what loan to give and to decide whether or not to issue credit cards.

Anthony Sprauve, spokesperson for Fair Isaac Corp. (Fico), said that a bankruptcy score is an instrument for lenders to distinguish borrowers who have a high probability of bankruptcy. Fico is the top third-party provider of credit, bankruptcy and other scoring systems.

In addition, Sprauve said that over 90 of the nation’s 100 biggest banks use the Fico scores.

Similar to a credit score, a bankruptcy score provides an assessment of a loan applicant’s payment and delinquency history, credit amounts, number and types of credit, and so on. However, a larger weight is given to the current debt load of the applicant.

Based on information from finance experts, bankruptcy scores have been present for more or less 20 years already, but it is usually hid from consumers’ view.

According to Scott Dressler, associate professor of economics at Villanova School of Business, depending on who produces the bankruptcy score, it may have a scale from 1 to 800 or from 50 to 950 or from 1 to 300. The higher the bankruptcy score, the more credit-worthy the applicant is.

Barry Robinson, executive vice president of consumer banking said that bankruptcy score are usually used by bigger lenders who make automated, less judgmental decisions and by credit card companies who handle a large scale of unsecured credit.

Tips on How to Dispute Errors on Your Credit Report

Your credit score determines the terms on your mortgage, auto loans, or credit card. Any erroneous information will either result to rejection of your application or a higher interest rate. It is important to take corrective actions about these errors and the following are some tips on how to do so.

If you discover an error, the first thing you should do is to determine its degree of seriousness. Examples of serious errors are credit accounts you never opened, and overdue payments or bankruptcy you never had.

Next, if the error is serious, file a dispute with the credit reporting agency. Moreover, if there are errors on more than one of your credit reports, then file a dispute with every credit reporting agency. You can file a dispute either online or by mail.

According to credit experts, while online is the easiest, it is not the best way, particularly if the error is recurring. If you choose to file online, you should classify your dispute by picking from a pull-down menu and not given the chance to provide an explanation. In contrast, filing in writing allows you to explain the whole situation and also attach copies of supporting documents.

The credit reporting agency then investigates by asking the creditors whether the erroneous information is correct or not, generally within a period of 30 days. If the information is confirmed to be erroneous or the creditor fails to respond within the given period, then it will be removed on all your credit reports.

However, if your efforts failed, you can try filing a dispute again directly with the creditor. Most of the time, creditors are responsible for the errors in the credit reports and not the bureau.

Your last option would probably be to hire an attorney, especially if you cannot persuade the creditor to amend the error.

A Guide on How to Repair Your Credit

To compute your credit score, points are added when you make on time payments and points are subtracted when you pay late. Some other things that can have a negative impact on your credit score include large amounts of debt, making minimum or zero payments, repossessions or filing for bankruptcy. The following is guide on how you can repair your credit.

One way to remove the debts on your credit report is to file for a bankruptcy, which results to a clean slate in terms of your debt. Moreover, you will no longer have debts, and no longer lose points due to those debts and late payments. However, only a few creditors check the actual credit report.

Although you will lose points for filing a bankruptcy, it is not like having a large amount of debt where you lose points every month. For this reason, a few people consider filing for bankruptcy as a way to rebuild your poor credit.

In contrast, you can build positive information in your credit report by paying your current accounts on time or even before due. Paying on time also means having enough money available. To be able to have available money, you must also modify your spending habits or lifestyle.

Your credit score is a number that is somehow an assessment of your ability to pay your debts. In fact, paying off a small account will earn you as many points as making your monthly payments.

Contrary to belief of some people, repaying delinquent debts will not increase your credit score. It will even decrease your credit and remains in your report relative to the date of your last payment, unless you can eliminate it by discussing with the creditor.

In addition, marriage does not have any effect on your credit score. However, if you apply for credit as a couple, the person with poor credit will harm the one with good credit. It is recommended to wait for the completion of the repair process and not apply for joint credit.

Private Student Loans Compared with Subprime Loans

According to a study conducted by the government, there has been a massive increase in private student loan debt in the last ten years, which resulted to a lot of Americans in trouble of not paying back their loans.

In addition, the study, which was released last Friday, revealed that most private lenders gave loans without thinking whether or not the borrowers would be able to repay, and then resold the loans to investors in order to prevent loss of money.

Those actions are almost related with subprime mortgage lending, which increase the housing bubble and aided in causing the financial crisis in the year 2008.

Arne Duncan, secretary of the Department of Education, conducted the report together with the Consumer Financial Protection Bureau. Duncan said that subprime-style lending went to college and the students at present are paying the price.

Duncan added that the government should do more to guarantee that people who were given the private loans have the same protections with those who received federal government loans.

The study also said that private student loans have a higher risk than federal loans because they are charged with variable interest rates, which can trigger monthly payments to increase all of a sudden. In contrast, federal loans are charged with fixed interest rates.

Moreover, while federal loans can be postponed or reduced if a borrower is not able to repay, private loans do not offer those options.

Most of the times, students are not aware of the difference between federal and private loans which lead them to apply for expensive student loans, even though they were qualified for more affordable and safer government loans.

One feature of a student loan which was emphasized in the study was that it cannot be cancelled by filling for bankruptcy, not like other credit card balances or debt. As a result, a lot of borrowers are either trapped or overdue on loans that lenders are reluctant to alter.