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Is Your Credit Report Accurate?
The Federal Trade Commission (FTC) announced findings of their credit agency accuracy study on Monday, the first national study of its kind. One in five consumers had an error in one of their credit bureau reports according to the study.
That's 42 million Americans who could pay higher loan, credit card or insurance rates because of bogus information.
The report went on to indicate that only 20 million credit reports in error were significant enough to lower someone's credit score. Whew! That's a relief, isn't it? Really lowers your chance of being affected.
Consumers are entitled to one free copy of their credit report annually from each of the three major reporting firms under the Fair Credit Reporting Act. Yet Mint.com reports that only 4.16 percent of the free credit reports available have been claimed.
Keep closer tabs on your credit standing by claiming one bureau's report at a time and spacing them out over the course of the year. Married couples can double that up and check one report every two months. Not much can slip by if you keep close tabs on the data reported.
There is only one authorized source for your free credit report. Download it from AnnualCreditReport.com.
Any other entity claiming this service comes with strings attached. Most will give you a free credit report if you enroll in their monitoring service. Something you can easily do yourself.
But if you know you won't, or can't, then it's worth the fee to enlist a service. Do your homework first to find a reputable provider. You're trusting these folks with your identity. It should take more than a catchy jingle to earn that trust.
Whether it be you or a monitoring service, your credit report is something that needs to be reviewed on a regular basis. Mistakes happen.
Lenders can make errors when they send reports to the credit bureaus. Records belonging to someone with the same name as yours or a similar name misspelled can get misdirected. This can be a nightmare with families who honor the previous generation by sharing their name with a Junior or III.
An identity thief could have opened an account in your name. Your credit standing is at risk until you know about it and can correct it.
If you learn of an error in your report, submit a dispute with the proper firm. Disputes can be submitted online, by mail or phone. If the error is reported by more than one bureau, each agency will need to be contacted separately. You'll find contact information for all three major credit bureaus on our website.
Credit bureaus must respond to your dispute within 30 days. This gives them opportunity to contact the lender that provided the information and have them research the matter. If they find the information they reported in error, the lender must notify all three credit bureaus.
Once the investigation is complete, the credit bureau must send you written results along with a free copy of your corrected report. This is in addition to your free annual report.
Don't wait for the credit bureau to respond. After you file the dispute, contact the lender yourself. Ask them to correct your file and report it to the credit bureaus.
The FTC's study found that only four out of five consumers who reported the error to their respective credit bureau actually had the corrections made to their credit report. What happens if you're the fifth consumer who is left hanging?
Report the credit bureau to the Consumer Financial Protection Bureau (CFPB). This federal agency oversees compliance of the credit reporting bureaus and enforces their rules. You can file a complaint on their website or by phone calling 855-411-2372.
Agencies have 15 days to respond to a CFPB complaint with a plan for fixing the problem. Consumers can dispute their response.
Say no to credit repair firms. They can't do anything you couldn't do yourself. Except collect a fee for their service. Credit bureaus are required to check disputed information. These services will often spam the bureaus in hopes they'll drop the negative items without investigating. Those items often reappear the next time the creditor updates your file since they weren't properly identified and removed.
What you don't know can cost you money. Don't fall victim to something that has an easy fix.
|On The World Wide Web
Credit concerns differ as you pass through different stages in life. Bankrate offers good advice for retirees and empty nesters at Bankrate.com/finance/.
Improve your credit score using these five tips offered by the Federal Reserve.
The U.S. government has dedicated a website to teaching Americans the basics about financial education. Find it here.
Is It Time To Refinance?
With the incredibly low mortgage interest rates that are available these days, you may have been wondering if it is the right time for you to refinance. There are many reasons why someone might consider refinancing. Lowering your monthly payment, shortening the length of your loan, obtaining cash out, or eliminating Private Mortgage Insurance (PMI) are some of the most common reasons. Unfortunately, the decision of whether or not to refinance is not always easy to make. There are a lot of factors you should carefully consider in your decision making process.
Refinancing can be just as expensive as your original mortgage. Occasionally, a title company may offer you a discount on the new policy. But aside from that, the fees, expenses, and process will be very similar.
In addition, depending on the mortgage you have now, you may have to pay a prepayment penalty or early closure fee. A typical prepayment penalty can be 2-3% or more of the loan amount. Refinancing a $100,000 mortgage with a 3% penalty will cost you an additional $3,000 at closing.
The old "rule of thumb" was that you should refinance if you are going to lower your interest rate by at least 2%. However, that percentage has been lowered over the years. Today, if you are lowering your interest rate by even .50% to 1%, it may be worth it depending on the overall benefits of the deal and depending on your reason for wanting to refinance.
How much interest will you save over the life of the loan? Will you be able to shorten the term of the loan so you can pay it off before you retire or before you kids begin college? How much is it going to cost to refinance? And how quickly will you make up in monthly savings what you had to pay out in fees for the new mortgage? These are all questions you should consider before you make your decision.
To calculate how much interest you could save over the life of the loan for a fixed rate loan, you will need to know your current principal balance, current interest rate, and monthly principal and interest payment. Once you have this information, you can plug these figures into a financial calculator to determine how much interest you will pay over the remaining life of your current loan versus how much interest you will pay with the new loan. We have financial calculators available on our website. Use a calculator that will compare your old loan to your new loan, such as our calculator titled "Is refinancing my loan a good idea?" in the Home Finance section.
For example, if you have 25 years remaining on a 30-year loan at 3.625% with a current principal balance of $90,000 and a current principal and interest payment of $457 per month, and you refinance to a 25-year loan at 3.25%, you will only save approximately $5,000 in interest. If your closing costs for the new loan are more than your savings, it might not be in your best interest to refinance. However, if you can take that same loan and refinance it into a 20-year loan at 3.25%, you will save approximately $14,000 in interest, provided you can afford the higher monthly payment of $511.
If what you really want to do is lower your monthly principal and interest payment, refinancing to a lower interest rate but keeping the same term or extending the term should accomplish that. However, you should consider how long it will take you to recover your costs.
To calculate how long it will take you to make up in savings what you paid out in costs, take your old monthly principal and interest payment and subtract it from the new principal and interest payment you will have if you refinance to calculate your monthly savings. For example, if you old payment was $650, and your new payment will be $500, your monthly savings is $150.
- Next, add up your prepayment penalty (if any) and your closing costs to obtain your total costs. For example, a $1,000 prepayment penalty plus $5,000 in closing costs equals $6,000 in total costs.
- Divide your total costs by your monthly savings to get the length of time it will take you to recoup your costs. In this example, $6,000 divided by $150 equals 40 months (3 years, 4 months) to recoup your costs.
If you do not plan to stay in your house long enough to recoup your costs, it is probably not the right time to refinance.
Just a quick word about adjustable rate mortgages. When interest rates are dropping, people with adjustable rate mortgages can generally stay with the mortgage they currently have and be happy. However, they should think carefully about what may happen if and when rates go up again. Will they be able to make their monthly payments? Is it worth the cost of refinancing to a low fixed rate mortgage to have the peace of mind of not having to worry when rates are on the rise?
Deciding whether or not to refinance is ultimately your decision. If you are unsure if refinancing is right for you, seek out a financial advisor or mortgage professional for assistance. The loan department at GCF would be glad to answer any questions you might have. Contact us at 856-589-6600.
Tip of the Week
Your credit score varies by agency. Each of the major credit bureaus offer their own version, making it hard to compare your score when searching for the best loan terms. The FICO Score is the one most commonly used by lenders. Learn about scores and find credit resources at MyFICO.com.
"We must reject the idea that every time a law's broken, society is guilty rather than the lawbreaker. It is time to restore the American precept that each individual is accountable for his actions." - Ronald Reagan
Today in History
1980 - The Lake Placid Winter Olympics open in New York.
The U.S. has had some very talented presidents. Jimmy Carter could read 2,000 words per minute. James A. Garfield could write with both hands at once. And Gerald Ford once worked as a fashion model.
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