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Previous Questions
Q: What will happen if I don’t pay my credit card bill?
A: Keeping up with your credit card payments is very important. If you don’t pay it will appear on your credit history for the next seven years, making it hard to obtain credit when you really need it. The worst case scenario is that your debt will then go into collections and legal action can be taken against you. If you cannot pay your bill, call your credit card company and explain the situation. In some cases they give you several options on paying off your bill.
Q: There are debts on my credit report that I know are not mine. What can I do to fix these before I apply for new credit?
A: A recent study found that over half of all credit reports contain some errors and that over 25% contain errors serious to deny consumers access to credit, favorable loan rates, and in some cases even jobs and housing. In order to correct errors on your credit report you must tell the consumer credit reporting company that provided you with the report, in writing, what information you believe is inaccurate. You should include any copies of documentation that supports your position. You should also notify the creditor that reported the information that you are disputing this debt and provide them with copies of any documentation supporting your position. The creditor typically has 30 days to prove the validity of the information on your credit report or it will be permanently removed from your credit report. If an item is removed from your credit report, the credit reporting agency must notify every person who has received a copy of your report in the past six months, to show that the errant information has been removed.
Q: What is a home equity-interest only loan?
A: A home equity loan is a type of loan in which the borrower uses the equity of their house, or the difference between the amount of the mortgage still owed and the current market value of the house, as collateral to assure a line of credit. An interest only loan is one in which the borrower is only responsible for making payment on the interest of the loan for a set period of time, not having to pay down the principal. The benefit of this type of loan is that it leaves borrowers with additional funds, saved from not paying down the principal on the debt, that can be invested, used to pay down other higher interest debts, or used for home repairs. The risks involved in interest only home equity loans are if the value of the house does not raise the borrower will have no equity in the house and significantly larger monthly payments at the end of the interest only period of the loan.
Q: How can I get a credit card if they say I don't have enough credit history?
A: Consumers with little or no credit history are often denied for credit cards because lenders have no way of judging the likelihood that the borrower would make timely payments. A consumer in this situation can build their credit history by getting a secured credit card. Secured credit cards are available from most banks and credit unions and act like a regular credit card with one major exception: you “secure” the card with money before ever making a purchase. The lending company holds the money the consumer puts down to secure the card and in the event that the consumer fails to pay the debt they can use this money to pay off whatever charges the consumers failed to. These cards are usually issued with small limits, as low as a few hundred dollars, and the consumer is required to put up in cash the limit of the card at the beginning. For example, to get a $500 secured credit card a consumer would have to put down $500 to secure the card. The consumer could then use the card to make purchases and pay the debt down when the bill comes due once a month. This allows a consumer to build a positive credit history without lenders having to take risks on consumers who do not traditionally qualify for unsecured cards. Consumers should be careful to not get secured credit cards with high fees, yearly membership rates, or excessive interest rates.
