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Credit card companies are always looking for new customers. They use whatever enticement they can to draw you to their companies. They may offer you a low interest rate credit card or give you incentives such as air line miles, discounts on certain items, long distant telephone privileges, reestablishing credit, and so on. People have problems because they don’t read the fine print. There are usually specific things that you must do to comply with the credit card company’s terms. A lower interest rate credit card offer would require you to move your higher interest rate credit card balances to the new card. If you don’t follow their guidelines, the credit card company can increase the interest rate on the new card to an interest rate higher than you were paying on your old cards. The lower interest rate is usually temporary, leaving you to move your balances again when another new low interest rate credit card is offered. Unless you are making your payments over and above the minimum payment requested on the low interest rate card, it still would take you several years to pay your balance off. A problem that you can run into when accepting too many credit offers is acquiring too much debt. It is easy to lose track of what credit cards you have by adding several new credit cards. If you don’t cancel the credit cards that you have and are not using, this will hurt you when you are trying to establish new credit. By not keeping track of what credit cards you presently have, you risk the danger of being overextended and sinking into more debt. Consumer advocates blame banks and other credit card offerers for inundating consumers with more than 2 billion credit card solicitations, tempting creditworthy and not-so-creditworthy individuals to live beyond their means. JANE’S STORY Jane’s and her husband had recently married. Both came from previous marriages and Jane’s divorce had not been amicable. Her credit report had been damaged as a result of disputes over who would pay the credit card bills. It was hard for her to get new credit. When Jane received a preapproved credit card for 5.99 percent interest rate, she was thrilled. She transferred all her high interest rate credit card balances to the new low interest card. Several months went by and Jane made it a point to pay her credit card payment on time. One month, the bank did not receive a payment by the due date. As a result, the credit card company in creased her interest rate to 22 percent, which was higher than the original interest she had transferred her balances from. The payment skyrocketed! The small print of the application stated that the company could increase the interest rate should a payment be received late. There was no recourse for Jane except to make the payments. When Jane contacted me, she was in the market to consolidate her debts with a home equity loan. She explained her situation with this high interest rate credit card. By doing a debt consolidation loan, she was able to save hundreds of dollars per month and pay off her high interest credit card. TOO MANY SOLICITATIONS Q. My husband and I keep receiving unsolicited preapproved credit card offers. How did we get on these different mailing lists? There are several ways that your name is distributed to credit card companies looking for new business. Believe it or not, the credit reporting agencies issue names of individuals to mailing companies who request certain categories for solicitation of credit cards. Companies will outline the type of individuals they are seeking to so licit for these preapproved credit cards or applications. For example, if you have excellent credit, your name may be given to banks and credit card companies offering low interest rates. If you have had past credit problems, you would be solicited by companies who are offering secured credit cards or unsecured credit cards with high interest rates. Other ways your name will be shared with others are magazines you subscribe to, ordering merchandise through mail order, contributing to charitable organizations, and credit card companies who you have accounts with. These organizations sell their membership or customer lists to mailing list companies. This is another source of income for these companies. Lists of names sold to mailing list companies are periodically updated. Be careful whom you give your name to. Find out prior to your order if your name will be placed on a mailing list. DENIED A PREAPPROVED CARD Q. I received an announcement stating I had been preapproved for a credit card. I turned in my application and was denied. What happened? Most of the preapproved applications are not what they appear to be. People who receive these preapproved offers rarely read the whole letter, nor do they read the full application. If you read the small print, it will usually have a disclaimer stating that the pre-approval is subject to acceptance of the application. If you read the small print in the application, you will discover it states that you will be approved subject to a credit report review and verification of information from the application. There could have been several reasons you were denied the credit card. Your credit report may not reflect a good credit history. Your income may not be high enough. The credit report may show too much debt. The length of your current residence may not be long enough. A preapproved application will use the same qualification factors as if you had solicited the application yourself. Never complete any application unless you have read every word in the letter and application. This will help you avoid sending in an application that you know would be turned down and eliminate an inquiry being placed on your credit report. Too many inquiries on your credit report can hurt your chances of new future credit. STOP SOLICITATIONS Q. It seems like daily Jam getting unsolicited preapproved credit card offers. How can I stop this? You can contact each of the three credit reporting agencies to request that they remove your name from all mailing lists. The addresses are: Experian, P.O. Box 2106 , Allen , TX 75013-2106 Trans Union , P.O. Box 7245 , Fullerton , CA 92834 Equifax Options, P.O. Box 740123 , Atlanta , GA 30374 -0 123. Include in your letter your name, complete address, Social Security number, and signature. To reduce the number of direct marketing mailings, you can write to: Direct Marketing Association, Mail Preference Service, P.O. Box 9008 , Farmingdale , NY 11735-9008 . To request that your name be removed from Direct Marketing Association member lists, include your complete name, full address, Social Security number, and signature. If you write to the Direct Marketing Association, you’ll be removed from its lists for three years. You should contact your existing credit card companies and other creditors to demand that your name be removed from their mailing lists. REGULATIONS OF PREAPPROVED CREDIT CARDS Q. I heard there was a new regulation regarding a person who receives a preapproved credit card offer being turned down. Are there any reasons I could be turned down? The Fair Credit Reporting Act recently made changes allowing creditors to reject your preapproved credit card application if they conclude that you are unemployed or your income is not high enough. Formerly, the company was required to make an offer of credit. The preapproved credit card usually had a high interest rate or a very low credit limit. The Fair Credit Reporting Act allows creditors to consider any substantial changes in your financial condition. This could be a sudden drop in your income or a sudden increase of debt. If anything should occur between the time you make application to the time of the review of the application you can be denied. Many credit institutions are replacing their preapproved offers with invitations to apply. It is always wise to read all the fine print on any solicitation to apply for credit. Many times the offer is not what it appears to be. INQUIRIES ON CREDIT REPORTS FROM PREAPPROVED CREDIT CARD COMPANIES Q. I heard that when a credit card company sends a preapproved offer that it doesn’t show up on your credit report as an inquiry. I have received several preapproved applications. I requested a copy of my credit report and there were at least 15 inquiries made by companies that I never heard of. I did recognize a few companies who had sent me a preapproved letter. Are all these inquires going to hurt me? Credit reports are very confusing because they list inquiries in two separate ways. Inquiries made from creditors you applied to, or have current accounts with, will reflect inquiries on your credit report. The date, name of the creditor, and reason for the inquiry is reported. These inquiries are viewed by anyone who receives a copy of your credit report. Inquiries will stay on your credit report for two years from the date the inquiry was made. Excessive inquiries will hurt your credit score and can cause you a denial of credit. Inquiries made from creditors for purposes of offering preapproved Credit cards or for other solicitations are not shown to other companies viewing your credit report. The inquiries will only show up on the version of the credit report that you receive. An inquiry made from a preapproved credit card company will not affect your credit rating or credit score. Each credit report that you request on yourself will have an explanation of the inquiries and will separate the inquiries that were for preapproved credit cards or other solicitations, and those inquiries for purposes of obtaining new credit. CREDIT SOLICITATIONS AFTER CREDIT PROBLEMS Q. Several years ago I went through a divorce. My ex-husband ruined my credit. I have been trying to reestablish my credit with a secured credit card. Recently I received an offer for an unsecured credit card with a $500 credit limit. I got the card without any problems. By getting these solicitations, does this mean that my credit is looking better? If you are receiving unsolicited credit card offers, you have begun to re build your credit history and enough time has passed since your previous credit problems. Many companies are looking for people like yourself who have had past problems but have rebuilt their credit histories. Usually the interest rates are higher and low credit limits are offered; however it is a way to reestablish your credit. SECURED CREDIT CARDS Q. Several years ago I had severe financial problems. I have not applied for credit, assuming that I would be turned down. Recently, I have been getting offers from companies stating I am preapproved, but they want me to deposit money into their bank to get the credit card. What is the catch? Secured credit cards are an excellent way to reestablish credit. It also is a good way to control your credit card charges because you are using your own money. A bank offering a secured credit card requires that you deposit a certain amount of money into a savings account at its bank. In exchange for the deposit you will be issued a VISA or MasterCard. The bank would pay you interest on the money you deposited into your savings account. The amount that you deposited would be your credit limit. Any purchase or charge that you made with the credit card would be charged interest. For example, your deposit may be $500. A VISA or MasterCard would be is sued to you with a credit limit of $500. You would receive interest on the amount you deposited, however you would be paying interest on your balance. To avoid paying interest, pay the balance off every month. With a secured credit card, you will pay an annual fee as well as a one time set-up or processing fee. The interest rates are high, but it is a good way to establish or reestablish your credit. Some individuals who have not had credit problems will still opt to have a secured credit card. They may deposit the maximum amount allowable into a savings account, draw interest on the balance, use the credit card, and pay the balance off each month. Many people find this is a good way to keep control of their own money and earn interest while doing it. QUALIFICATION FOR AN UNSECURED CREDIT CARD WITH PAST CREDIT PROBLEMS Q. Four years ago, I became late on several credit cards. They were all charged off I never paid them back. I haven’t tried to get new credit, knowing that my credit report was bad. I have begun receiving letters with applications offering credit cards to people with past credit problems. They are not requiring a deposit. Are these offers any good? Many banks have found a new way to help individuals with past credit problems reestablish their credit with unsecured credit cards. The VISAs and MasterCards being offered have a low credit limit and extremely high interest rates. The banks do not offer a grace or float period, which means the interest begins to incur once the purchase is made and continues on a daily rate until the balance is paid off. The initial processing fee is very high and there is an annual fee. Usually the initial processing fee and annual fee is added to your credit card once you have an approval. For ex ample you are approved for a $500 credit limit. The processing fee is $149 plus an annual fee of $50. Your credit card would be charged these fees leaving you with a balance of $199. The interest would begin immediately until you paid the balance off. It’s a great moneymaker for the bank. Banks offering this program have certain criteria they look for prior to approving your application. You can’t have any credit problems or blemishes on your credit report at least six months prior to making the application. You will need to include a copy of your pay stub and a copy of your telephone bill listing your telephone number with your application. These types of credit cards are good for individuals who don’t want to set up a secured credit card with a deposit. It is a way to reestablish your payment history. Once you have reestablished your credit history, pay the credit card off and try for a lower interest rate credit card. |