Clean up your credit

WASHINGTON — The IRS has issued a consumer alert warning consumers about an Internet scam where they receive a bogus email claiming to be from the IRS, informing them of a tax refund. The e-mail provides a link that requests personal information, such as a Social Security number and credit card information.

This scheme is an attempt to trick the e-mail recipients into disclosing their personal and financial data, a practice commonly known as “phishing.”

The information fraudulently obtained is used to steal the taxpayer’s identity and financial assets. Generally, identity thieves use someone’s personal data to steal his or her financial accounts or run up charges on the victim’s credit card(s), fraudulently apply for loans, credit cards, services or other benefits in the victim’s name and even file fraudulent tax returns.

The bogus e-mail, which claims to come from “tax-refunds@irs.gov” tells the recipient that he or she is eligible to receive a tax refund for a specific amount, and to access a form for the tax refund, the recipient must use a link provided.

One think to remember is the IRS never asks for personal identifying or financial information via unsolicited e-mail. They always use US Mail. Taxpayers never have to complete a special form to obtain a refund.

If you receive an unsolicited e-mail purporting to be from the IRS, take the following steps:

Never open any attachments in the e-mail, in case they contain viruses.

Contact the IRS at 1-800-829-1040 to determine whether the IRS is trying to contact you about a tax refund.

The IRS has seen numerous attempts over the years to defraud the public and the federal government through a variety of schemes, including abusive tax avoidance transactions, identity theft, claims for slavery reparations, frivolous arguments and more. More information on these schemes may be found on the criminal enforcement page at IRS.gov

American consumers are being ripped off to the tune of over $45 Billion by identity theft. For more victims, by the time one discovers they’re a victim it’s often too late. According to polls, Americans are more worried about identity theft than corporate fraud or losing their jobs. Most people agree, the credit cards and banks could do a much better job protecting consumer’s privacy.

Scan your computer for spyware. There are a few excellent freeware spyware/adware removal software tools you can download.

AdAware
Spybot Search & Destroy

Beware of spoof emails. Paypal seems to be a popular target for these “phishing” scams, but ISPs such as Earthlink and banks including Chase are often targets as well. You receive an email warning you that your account will be terminated or expire if you do not fill out their form online to renew your personal information. They usually always ask you for your social security number, date of birth and sometimes your Mother’s maiden name. Upon close inspection of their link, you will see it’s not paypal, but to some unkown IP address.

Before you apply for credit for a major purchase such as a house, you should always check your credit score for problems.

Credit scores at the 3 credit bureaus are all about risk. You must have at least one account such as a credit card, that has been open for at least 6 months, which is usually not a problem for most people. While banks love customers who keep a high balance and just make the minimum payments at sky-high interest, it’s better for your credit report and certainly your pocketbook to pay off your balance in full every month so that you don’t get socked with finance charges.

There are 5 items evaluated in credit scores.

Payment history comprises about 35% of what goes into building your credit score.

Owing a lot of money on credit cards tends to suggest to creditors that you are overextended, or otherwise maxed out on your credit cards and are therefore more likely to make late payments, or miss one alltogether. Money owed vs credit limit figures in 30% of your credit score.

Opening a large number of new credit line accounts within a short amount of time is not recommended. This tends to make you appear as a likely credit risk, especially when you have a short history of established credit. Frequent inquiries to your credit report within a short amount of time, tends to look bad.

Average account age is calculated on your total number of accounts, so opening a new one, shortens the average account age, which negatively effects your credit score.

Types of credit only comprises about 10%. The easiest and most popular way to build credit is to get a credit card. If you can quality for an unsecured card, that’s always the better choice over a secured card.

By the end of 2006, Equifax, Experian and TransUnion will begin using a new standardized credit score system instead of their own individual systems, that should help consumers eliminate confusion about credit scores.

The old FICO score system you’ve probably seen on freecreditreport.com TV commercials operates on a scale of 300 to 850. The new credit score system rates from 501 to 990, with a letter grade similar to school grades.

901-990 = A
801-900 = B
701-800 = C
601-700 = D
501-600 = F

A credit score is based on financial responsibility. Best advice on maintaining good credit score is to always pay your bills on time, including insurance, phone, as well as credit cards. On credit cards, keep your balances within reason so that you can always afford pay off your balances in full every month, and you won’t risk exceeding your limit. Except in emergencies, it’s a bad idea to charge more than you can afford to pay off in full. Transferring debt from one credit card account to another account, known as “robbing Peter to pay Paul.” This is a common warning sign of debt that’s out of control. Avoid frequently opening and closing credit card accounts. Don’t overextend yourself.

Before the Tax Reform Act of 1986, you could actually declare credit card interest as a deduction. Without this deduction, anyone who’s making the minimum payment on a balance in essence, is paying it off with “after tax dollars,” basically money you have already paid taxes on. So this means you are getting ripped more than you probably realize, especially if you are using a “bad credit” credit card which always charges sky-high interest.

Consider if you’re lucky enough to have a 7.9% Bank Card due to an excellent credit rating, making the minimum payments on a large balance will really end up costing you 11.6% after factoring in taxes.

If you are in the process of rebuilding your credit after bankruptcy, the rate on your secured credit card might be 16%, could easily turn into 24% if you live in a state with average taxes.

If you end up paying 30% due to late payment penalties, or other similar bill, you could be getting really ripped - at 43.8%!

Always pay off your balance in full, if are able to afford it. Financing charges can usually be avoided, although some bad credit cards such as Providian/Emerge will frontload their finance charges immediately upon any charge or purchase.

At one time filing for Chapter 7 Bankruptcy was the equivalent of a “Scarlet letter.” Something to be ashamed of, not unlike a criminal record, but not anymore. In recent years, with millions of new people filing for bankruptcy every year, breaking new records, it’s just not the big deal it once was. It no longer carries the stigma it used to. People from all walks of life, from low-life bums to highly successful business people have filed at one time or another.

Bankruptcy is also not the worse thing to have on your credit report. A bank repossession, default on a student loan, or mortgage forclosure, or eviction is actually far worse. Bankruptcy is simply a legal way out for many Americans who got in way over their heads and need a fresh start.

For most people who filed for personal chapter 7 or 13, the most common and easiest way to rebuild credit is by getting a credit card, and using it responsibly. Those with really bad credit may only be able to quality for a secured credit card, while those who’s credit is otherwise not too bad, should be able to qualify for an unsecured card, allbeit, it will always usually come with an annual fee and high interest.

Household/Orchard Bank is an excellent place to begin.

If you’re chapter 13, then you were required to make payments to your creditors. Unfortunately, banks and loaning companies do not consider this rebuilding your credit. The credit rebuilding phase actually begins from the date your bankruptcy was discharged.

If you’re chapter 7, then rebuilding your credit is actually much easier and won’t take as long, since in chapter 7, you owe your creditors nothing, so discharge of bankruptcy occurs just a couple weeks after you filed. This is one of the big advantages of filing chapter 7. In chapter 7, you can choose to keep some of your lines of credit to help you rebuild your credit.

For whatever chapter you choose, a day will come when you’re fully discharged.

Since bankruptcy is public records, creditors looking for your business will likely mail you “pre-approved” credit card offers, but beware of scams! There are unscrupulous companies who use false or deceptive advertising to make you think you’re getting a major credit card when you end up getting a merchants card that you can only use to buy their products. Make absolutely sure you are getting a real “Visa” or “Mastercard.”

Avoid companies with names like “First National Credit,” etc.. It’s always highly recommended you first check them out at ripoffreport.com or bbb.org.

Make sure the credit card will report your payment history to the 3 credit bureaus, else what’s the point? Your credit history should always be reported to all 3 bureaus.

The easiest way to rebuild your credit after bankruptcy is to get a credit card and use it responsibly. Most people who have been through a Chapter 7 Bankruptcy should be able to qualify for an unsecured credit card, although usually with a small limit at first - usually $500.00, and very high interest.

A big percentage of the US population will have to deal with an identity theft.

Credit report problems are already a problem even without identity theft. 79% of credit reports had a mistake or errors as of 2004.

Practical advice on how to preserve the integrity of your credit reports:

Check your credit reports every 90 days, all 3 credit bureaus.

Dispute a problem in writing, certified mail. The online disputing system is not recommended. Doing so uses binding arbitration and waives your rights to a jury trial for items that went uncorrected.

If you are a victim of identity theft, contact law enforcement and file a police report, and send the copies to all 3 credit bureaus.

Always use certified mail return receipt when corresponding with the credit bureaus.

Good identity theft protection begins with your wallet. Your wallet might be full of old sales slips and credit cards you forgot about. “What’s in your wallet?” Aside Capital One, you might have items you shouldn’t have, and can do without. There’s no need to carry your Social Security Card, as you can easily memorize your number and you will likely never need it, unless conducting financial business or applying for a job. The fewer items you have in your wallet the better off you are.

Throwing away sales slips containing account numbers is a serious mistake, as dumpster diving still accounts for the vast majority of identity frauds. They should be shredded in a good paper shredder.

Get rid of your Visa Debit card, unlike a credit card, there are no protections. A debit card is a direct pipeline to your checking account. Get an ATM that doesn’t have the Visa or MasterCard logo from your bank instead.

Watch out for video rental cards and library cards. Even those can cause you a lot of problems if stolen.

Many stores used to ask you to put your social security number on your check when paying by check. If asked for this, politely explain to the sales clerk that you do not wish to give it out due to your concerns about identity theft.