7 Items Your Credit Report Won't Reveal
By Dana Dratch | Bankrate.com – Mon, Apr 9, 2012 3:00 AM EDT
Do you feel like your credit report is spying on you?
Sometimes it seems like just about everything personal is included in your credit history, including your name, address and Social Security number. Even your birth date is on it.
But you still have a few things that even your credit report doesn't know.
Here are seven items that lenders won't see when they pull your credit report.
Salaries haven't "been on a report since the early 1990s," says John Ulzheimer, president of consumer education for SmartCredit.com. Even then, it was "highly dubious" because the information came from the consumers themselves, he adds.
If you ask someone what they will make this year, there are "too many variables," such as layoffs, raises, commissions and bonuses to get an accurate answer, says Ulzheimer.
Another reason you won't see salaries on credit reports: "Income really isn't a measure of creditworthiness," he says. "It's a measure of capacity."
Your credit report and your credit scores are meant to tell "a creditor whether or not you're going tomake a payment, not whether you can make a payment," Ulzheimer says.
Other income sources that also don't appear on your credit report: unemployment benefits, alimony, child support or public assistance.
Your employment status
Lose your job and you probably feel like the bad news is tattooed on your forehead. One place no one will see it: your credit report.
Even if you tell individual lenders, such as your mortgage holder, that information won't make it onto your credit report.
Employment information, though, could be there and will vary slightly depending on which of the three credit bureau reports a lender pulls.
Names of your employer or past employers could be on the report if you applied for credit and listed them on applications, says Rod Griffin, director of public education for Experian, one of the three major credit reporting agencies. But an Experian report won't list your job title or dates of employment, he says.
Your Equifax report will list your last known employer and occupation, but not your dates of employment or whether you're still employed, says Jennifer Costello, director of public relations with the credit bureau.
Your TransUnion report will list, "if available," your current employer and occupation, plus the date employment was verified, the hiring date and/or the date the information was reported, says Clifton O'Neal, spokesman for the bureau. It also lists the same information for the previous employer, he says.
Your spouse's credit history
Merging lives doesn't mean merging credit files.
Contrary to popular belief, marriage doesn't result in one joint credit file for both parties, says Ulzheimer.
When someone pulls your credit, whether you're married or not, the lender will see only your individual credit history, along with the debts and accounts with your name on them.
Some of those obligations may show that you're a joint account holder, co-signer or authorized user on certain accounts, says Ulzheimer. However, your report won't show the names of the other people on those accounts, or your relationships to them.
If you live in a community property state and your spouse defaults on his or her individual debts, then a collection action for the debts, which could be considered yours also, could show up on your credit report, he says.
One thing you might notice no matter where you live: When you pull your own credit report, some versions will include your spouse's name, says Ulzheimer. But the reports lenders and others view won't have that.
Your criminal past
Relax: That arrest for trespassing when you were a teenager won't affect your credit. That's because it won't show up on your credit report.
Credit bureaus don't include criminal conduct on credit reports, says Ulzheimer.
Three exceptions: First, if you have a financial snafu that also involves the court system, such as a judgment or lien, it will show up on your credit report.
Child support payments can also show up as a regular debt on your credit report, says Costello.
And if you receive a fine or ticket, don't pay it and it goes to collection, then that collection activity could show up on your report. But it would appear as a debtor trying to collect an overdue debt. There wouldn't be any details on the initial infraction, says Costello.
The Fair Credit Reporting Act prohibits listing information on your report that jeopardizes your medical privacy. Often, this means medical debt doesn't appear unless it goes to collections, says Ulzheimer.
One possible exception: Pay with a credit card or through a third-party lender and the balance could show as a regular debt, minus any medical information, he says.
In collections, medical debt can pop up on a credit report. But privacy rights are still in effect.
For Experian, the report lists the item as medical debt, along with the balance, default date and collection status. There is "no information on the type of condition treated, where you received the treatment, the name of the medical collection company -- anything that would be of concern," Griffin says.
For Equifax, the report includes "the name of the creditor (i.e., medical corporation, treating agency, doctor's office) but would not include information denoting that it is for medical services," says Costello. If the provider's name breaches confidentiality, the provider more than likely would report using the "parent company or holding entity" instead, she says.
For TransUnion, says O'Neal, it includes the balance in collections and that it's medical debt, with no information on providers or services.
Pawned some valuables? Taken out a payday loan? Signed for a car title loan?
Those transactions don't show up on your credit report, says Ulzheimer.
"But if you default and the lender enlists a collection agency to come after you for the balance, that action likely will go on your report," he says.
Another item that doesn't show up on credit reports: reloadable debit cards. "They are not on your credit report because they are not credit," Ulzheimer says.
One "lender" that's also often missing from credit reports: utility providers.
While some power, gas and phone companies routinely report to credit bureaus and as a result, show up on your credit report, more often they don't, Ulzheimer says.
When that can change: If you dodge a bill that goes into collections, you can probably expect that notation to end up on your report.
Your net worth
A credit report is basically a list of all your current and recent past debts and obligations.
What's missing from the report: assets that you own outright.
Which means it can't include your net worth. That surprises some consumers, says Ulzheimer. "A lot of people think their net worth is on a credit report."
"There's nothing on a credit report that talks about how much money you have in the bank, the money you have in a brokerage account, your stock options" or any other assets, he says. "And if you own a piece of property free and clear, there's nothing on your credit report."
Also not on the report: the worth of your home or home equity, says Ulzheimer. "The value of your home is not on your credit report."
The only related item that you could see: your mortgage, plus any loans or liens you have on the property.
Retirement May Be Mission Impossible for Gen X
By Jessica Rao | CNBC – Mon, Apr 16, 2012 10:55 AM EDT
As kids, they sat on gas lines in the backs of their parents’ cars. As young adults, they saw the stock market crash, and when it finally came time to settle down, they bought a house at the peak of the housing bubble and then were faced with the worst economy since the Great Depression. It’s no shock that Generation X — those born from 1965 to 1981 — may get short changed in their golden years.
Though they’ve watched parents and grandparents nestled with pensions, Social Security and strong economic growth, these are no longer guarantees. On the other hand, longer life spans with more medical bills and greater need for cash are the reality for many.
Gen X is the first generation to deal with the fact that the models of American retirement are changing — and its members are flustered. The generation once called “slackers” has been true to form with retirement planning.
“Gen X is a transition generation,” says Carol O’Rourke, a certified financial planner and Executive Director for the Coalition for Debtor Education in New York City. “Gen Xers were young during the tech bubble, and when they came of age, housing was a lot more expensive. With all the talk about whether Social Security is going to survive, there is a sense of not having something to look forward to.”
According to a 2012 Insured Retirement Institute , IRI, report, only one-third of Gen Xers are "very confident" about having enough money to live comfortably during retirement, cover their medical expenses, and pay for their children’s higher education.
Just 41 percent of the group have tried to figure out how much money they will ultimately need to save for retirement, and among those who have saved, half have amassed less than $100,000.
“Even though they have a longer time horizon toward retirement, there has been a tremendous emotional impact on their confidence in the future. What are they going to do to be sure that they have enough?” adds Cathy Weatherford, IRI president and CEO.
Along the same lines, a November 2011 report from the Guardian Life Insurance Company of found 82 percent of Xers believe the economy is headed in the wrong direction.
Skepticism is one of the defining X characteristics, says Robert Wendover, managing director at the Center for Generational Studies in Littleton, Colo.
“Many of the institutions that they were taught as children didn’t play out, whether it was political or social or economic. They just kind of unraveled for a variety of reasons,” says Wendover.
With the complexity of financial products on the market, Xers are not investing like other generations because they can’t find advice, say experts.
O’Rourke points out that, “while you used to be able to start small, private banks these days are looking for large clients and you need something like $250,000 to open an account.” Though Xers might be comfortable with online banking, they're not the type to invest in the Internet.
Gen Xers have been burned and are more hesitant, agrees Shalyn Courtenay, a Senior Associate at a Cambium, a full service financial advisory firm in Purchase, NY. In some cases, Courtenay encourages clients to put money in the stock market, but frequently suggests annuity products and cash value whole life insurance that provide guarantees.
The IRI study also revealed that during the recession, 15 percent of Xers made early withdrawals from their 401(k) plans, 23 percent stopped contributing to their retirement accounts, and 22 percent stopped contributing to college savings plans.
“The leakage out of their 401(k)s to meet current needs is what is most worrisome,” adds Weatherford.
9 Ways to Cut Summer Energy Costs
By Kimberly Palmer | U.S.News & World Report LP – Mon, Apr 9, 2012 10:34 AM EDT
With energy costs on the rise, this summer could be sweaty--and expensive. But there are some easy ways to trim your cooling costs without suffering through 90-degree evenings, sans air conditioning. In fact, if you start preparing for the coming heat wave now, you can probably save a few hundred dollars. You'll also be doing the environment a favor, since the Energy Department estimates that half of a household's overall energy usage goes toward heating and cooling costs.
Plug up any holes. The cool air spewing out of vents should be treated like a precious vapor that must not escape. Inexpensive plastic film available at hardware stores can boost insulation around older windows where drafts are most likely. Foam and caulking can also help seal problem areas, as can extra insulation in the attic. Professionals can help with any installation challenges.
If you use window-unit air conditioners, make sure they fit tightly so air can't escape around the unit. The Energy Department recommends that window units have their own electrical circuits to reduce the risk of overloading the system. The agency estimates that creating a proper "thermal boundary" around your home can shave up to 20 percent off heating and cooling costs. Shutting the doors and vents of unused rooms can also lighten the load of your air conditioning unit.
Close those shades. Anything that keeps the sun from coming in and creating a greenhouse effect will make it easier for your air-conditioning unit to maintain cooler temperatures. For the longer term, consider planting leafy trees or bushes in areas that give your home more coverage.
Keep the filters clean. It's a dirty job, but somebody's got to do it. In fact, Geoff Godwin, division vice president of Emerson, the country's largest provider of heating and cooling systems, says it's important to clean out air conditioning filters once a month, which usually involves running water through them and letting them air-dry.
Program the thermostat. If your cat is home alone all day, he probably won't mind if things heat up a bit before you get home. Programmable thermostats, which allow the temperature to automatically rise during the day when no one is home, can lead to annual savings of 30 percent, Godwin estimates. Even though most systems today have programmable thermostats, people only use them half the time, which means a lot of systems work harder than necessary. (If setting the thermostat leaves you scratching your head, the step-by-step videos on the government's Energy Star website, www.energystar.gov, can help.)
Unplug, unplug, unplug. Even television sets, DVD players, and computers that are turned off can suck power out of outlets (aptly referred to as "vampire power"). That's why you should either unplug your electronics or use a Smart Strip, which cuts power when it's not needed. One exception: Overhead fans, especially at night, can cool air more cheaply that turning down the thermostat.
Step away from the oven. Here's your excuse to order take-out, or at least rely more on pre-prepared meals. Turning on the oven heats up the rest of the house, too, which forces your air conditioner to go into overdrive. If you still want to cook, consider an outdoor grill, toaster oven, or even the stovetop, which gives off less heat than the oven.
Take cold showers. Sure, you might need to crank up the water heater during those frigid winter months, but cooler showers in the summertime will let you turn down the temperature setting for a few months, which reduces energy costs. Godwin estimates that turning down the temperature on a 50-gallon tank from 130 degrees to 115 degrees can save more than $50 a year.
Bring in the professionals. Most experts suggest getting your unit serviced once a year, to check for potential problems such as mold, rusting, or grime build-up, all of which can hamper efficiency. "A lot of people don't do that--they ignore the AC system until something goes wrong," Godwin says. You can also give your home an overall check with an energy auditor, who can look for any air leaks and other inefficiencies.
Upgrade your systems. The Alliance to Save Energy suggests replacing older light bulbs with compact fluorescents. Doing so saves electricity directly, and fluorescents generate less heat. If you're buying other major items, such as washers, dryers, dishwashers, or even televisions, don't forget to take energy efficiency into account. The Energy Department's Energy Star rating helps consumers navigate those purchase decisions, so look for products with the label.
If you're in the market for a new air conditioning unit, the Energy Department recommends paying close attention to size. Some consumers mistakenly choose bigger units, thinking they'll be more powerful, but in reality, they can make too much noise and use up excess electricity. A unit that's the right size for the home will last longer and be more efficient, the agency says.
Taking these steps will not only reduce your monthly energy bills, but also create some room in your budget for more entertaining types of summer fun.
Should Mortgage Rates Even Be Lower?
By Matt Phillips | The Wall Street Journal – Wed, Feb 22, 2012 11:08 AM EST
Mortgage rates are the lowest on record. But by a key historical measure, they should be even lower. Over the past year, a wide gap ripped open between the mortgage rates house hunters see and a benchmark interest rate investors demand to buy bonds backed by home loans.
In normal times, this obscure metric would only be of interest to bankers, brokers and traders of mortgage-backed securities. But with housing still dragging on the economy, the spread is potentially slowing the recovery—and important to everyone from top Washington policy makers to strapped homeowners who could use a few extra dollars each month.
For months, a key interest rate on mortgage-backed securities—known as the current coupon yield—has tumbled faster than average U.S. 30-year mortgage rates.
In recent weeks, the difference between the two has flirted with levels seen in the aftermath of the financial crisis.
Some say the wide spread shows the large banks that dominate the mortgage market are flexing their muscle by keeping prices relatively high. Others argue the gap reflects increased regulatory costs, risks and new realities of mortgage making.
Either way, the spread is wide. Tuesday afternoon, it was 0.96 percentage points—almost double its average over almost 30 years. It has been as high as 1.20 percentage points this year.
"To me what it tells us is that traditional monetary-policy measures to help get the housing market rolling again…are weaker than they normally would be," said Columbia University's Frederic Mishkin, a former Fed governor.
The effort by the Federal Reserve and others to boost housing depends on the mechanics of the banking system to pass along savings and benefits to consumers. The wide spread between the mortgage rates and mortgage-backed bonds suggests the gears of that mechanism are gummed up.
"This is not a rounding error, this is something to take note of," said Susan Wachter, a professor of real estate and finance at the University of Pennsylvania's Wharton School.
To be sure, consumers are seeing the lowest rates in several generations already. The 30-year fixed mortgage rate averaged 3.87% for the week ended Thursday, down from 5% the previous year. That is the lowest in Freddie Mac's survey data, which stretches back to 1971.
If history is any guide, it should be a lot lower. With yields on mortgage-backed securities at these levels, the 30-year fixed rate mortgages would be roughly 3.40% if the spread was around its historical average of 0.50 percentage points.
That rate would save a U.S. homeowner with the average outstanding loan balance of $155,000 about $41 in mortgage payments each month, versus the current rate.
Over the seven-year period someone usually holds a 30-year mortgage, that translates into a roughly $3,446 difference, according to numbers provided by trade publication Inside Mortgage Finance.
Wider spreads generally translate into better margins for banks and brokers. And some lenders have seen profitability on mortgage origination improve as the spread has widened.
Some mortgage-finance observers suggest that increased concentration among the large banks that dominate the mortgage market better helps explain the wide spreads. They argue that because there are fewer banks doing the bulk of the mortgage lending than in years past, it is easier for them to capture market share without offering rock-bottom prices.
"It's a lack of competition. We really haven't seen a competitive marketplace since 2008," said Guy Cecala, publisher of Inside Mortgage Finance.
In 2011, the top five banks had a hand in 59% of the mortgage loans packaged into government-guaranteed mortgage-backed securities, up from 45% in 2004, according to Inside Mortgage Finance. Recently, major banks have cut down on their mortgage business sharply.
Bankers push back against any notion of oligopoly.
"The mortgage business is extraordinarily competitive," said Franklin Codel, head of mortgage production at Wells Fargo Home Mortgage.
There are other factors at work. For one thing, fees charged to lenders by government-controlled mortgage-finance companies Fannie Mae and Freddie Mac are set to rise this year. The increases paid for the payroll-tax break passed by Congress in December.
Analysts stress it is difficult to disentangle how much of the spread is due to pricing power from banks with more control of the market, and how much might represent structurally higher costs of doing business in the U.S. mortgage market reshaped by the crisis.
Banks and mortgage lenders point out that costs of underwriting loans—conducting the detailed scrutiny of financial statements and employment background—has gotten more expensive and time consuming.
In part that reflects the experience of some banks, which have been forced by Fannie and Freddie to buy back loads of loans that soured, making them more cautious. Others say Fannie and Freddie have grown much tougher over the documentation they accept on loans.
9 Things You Should Always Buy With Your Credit Card
The Perks of Plastic
By Jeanine Skowronski | MainStreet – Tue, Mar 20, 2012 1:54 PM EDT
Generally speaking, it’s never a good idea to charge something that you’re unable to pay off in full since you’ll have to pay interest on the purchases. But there are some items that are definitely worth charging when you intend to make them without having to utilize the line of credit.
In addition to straight rewards, “there are some nice perks associated with using a credit card,” says Curtis Arnold, founder of CardRatings.com. “But all these perks never get utilized because people don’t know about them.”
To help you maximize these perks and protections, MainStreet breaks down the scenarios when putting your purchase on plastic can prove worthwhile.
Many credit cards entitle cardholders to an extended warranty and price protection on items, such as electronics and appliances, that carry a warranty already.
Visa and MasterCard both offer complimentary extended warranty and purchase protection with many of their cards, and American Express provides coverage for all cardholders. Discover cards offer warranty protection as well, though only for a fee that varies based on the product and the card.
However, generally speaking, “most networks double the time of your warranty,” Arnold says. This can obviously save you money on repairs, should the item break after the original warranty expired, or the price of extending the warranty at the point of sale.
Some cards also additionally feature price protection, which means “if you see the product advertised at a lower price within a certain window of time, the issuer will refund the difference,” says Ben Woolsey, director of marketing and consumer research with CreditCards.com.
A few credit cards carry certain secondary travel insurance coverage that can spare the added expense when you are planning a trip. This can include trip cancellation service, accidental death or dismemberment coverage as well as emergency assistance services, so check with your issuer to see what they may cover, Arnold says. Other cards, like the Chase Sapphire Preferred, entitle cardholders to concierge service while planning or taking their vacation.
Keep in mind that these perks are typically associated with travel rewards cards, which offer points back on airline and hotel accommodations as added incentive. The Discover Escape cardholders, who earn 2% back in miles on travel purchases, for instance, are eligible for up to $500,000 of Flight Accident Insurance.
Woolsey adds that “there are certain types of travel reservations you’ll need a credit card to even make.” For instance, many hotels require a credit card upon arrival to cover incidentals.
When it comes to making online purchases, “It’s just safer to use a credit card,” says Chris Mettler, founder of CompareCards.com. “There are more protections in place.”
You can find more specifics about these laws in MainStreet’s look into debit card fraud, but the basic rule of thumb is that debit card users are given a shorter amount of time to discover fraud if they hope to recoup any of the funds that were lost. They also can be held liable for the entire sum of money they claim was stolen if they fail to report the illegitimate activity within 60 days.
Woolsey agrees that it’s a good idea to use a credit card when purchasing goods on the Internet if you want “the credit card to serve as a firewall.” It’s also generally a good idea to use the credit card on products you are going to have shipped since many cards offer guaranteed returns on items that get lost, stolen or broken within a certain time frame.
Purchases From Service Providers
Along the same lines, Woolsey says it’s often a good idea to pay service providers, such as home contractors, hair dressers or landscaping companies, with a credit card (provided they accept them) since it offers certain protections if you’re ultimately dissatisfied with their work.
“With a credit card, it’s much easier to stop payment, withhold payment or work out a dispute with the merchant,” Nazari says.
Many credit card issuers have relationships with certain concert venues that entitle their cardholders to first dibs on tickets. Citi, for example, is currently running a presale on tickets to see Collective Soul in California and Jane’s Addiction in Texas.
Sometimes, credit card issuers will also offer the opportunity to get VIP access to an event. They also periodically offer discounts on the price of tickets, Arnold says.
It’s not a bad idea to link monthly bills you are going to have to pay on a regular basis, such as a cellphone or a utility bill, to a credit card as opposed to a debit card.
“If I pay through my bank account, I get nothing for it,” says Adrian Nazari, CEO of Credit Sesame. However, if you pay with a credit card, you can earn rewards off the purchases. (Those who are fearful that this will lead them to lose track of their spending can pay the credit card off each day using a linked debit card account.)
What makes a cellphone bill an even better candidate for credit card payment is that some cards feature cellphone replacement to cardholders who pay their monthly bill with the card, Arnold says. The Citi Forward card, for example, features cellphone protection, which will cover up to $200 of the difference when the replacement charge associated with your cellphone insurance plan exceeds $50.
In addition to the better fraud protections, many credit cards exempt cardholders from paying foreign transactions fees on purchases, which can be as high as 3% of each transaction. Examples of cards that do this include Capital One’s Venture Rewards card, the Chase Sapphire Preferred, the PenFed Premium Travel Rewards American Express Card and the American Express Platinum Rewards Card.
However, “lots of times, even if you pay the fee, you can come out more ahead than if you converted your cash,” Arnold says.
Tax Deductible Items
It’s a good idea to charge items you plan on writing off on your taxes at the end of the year since the credit card bill itself can serve as a receipt of these charges.
“It’s great for record-keeping,” Nazari says. “You don’t have to worry about losing a little receipt. At the end of the month or even the end of the year, you can open up the account and scan for charges.”
For instance, you might want to charge gas if you’re driving two hours to and from your office and are claiming it as a work expense or you can charge home repairs made to travel rentals, which, in certain cases, can also be written off on your taxes.
You might also want to use a credit card as a firewall on a recurring charge you have to automatically link to a piece of plastic, like a gym membership. This will also entitle you to certain protections if at any point in time you have to dispute the charges.
There’s also a chance that you could earn extra points or cash back from working out, as many issuers include gym memberships in higher cash-back categories, says Mettler.