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These days, it’s not about who has the flashier designer clothes or the faster car – it’s about who has the higher credit score! That’s because the better your score, the better position you’re in to manage your financial future.

Why? Believe it or not, have a strong credit score is one of best ways to save money, says financial lifestyle expert Denise Winston, founder of Money Start Here, which produces financial seminars and DVDs. “Your credit score can determine if you get your dream job, your auto insurance rates, the cost of future loans, if a landlord will rent you an apartment, and much more,” she says.

In order to become a “first class” credit user, start by adopting the strategies of these top-tier score holders.

Credit is No Laughing Matter: Jim Dailakis
Credit Score: 760

New York City-based actor/comedian Jim Dailakis may be a clown on stage, but when it comes to his financial status, he’s straight as an arrow. The Australian-born performer owns two homes and pays his bills on time without fail.

His strategy: “I see when the due date is and then put it on my electronic calendar on my computer,” Dailakis explains. Then, he says, he makes sure he has enough to pay the total amount, to the penny, every time.

Why you should try it: “It’s very liberating not to feel the ‘wolf’ pounding at my door,” says Dailakis. “I’ve definitely acquired financial discipline.”

Lesson learned: Keeping up with your credit can be a challenge, says credit consultant Wayne Sanford of YourCreditSpecialist.com. He suggests setting up an online auto-pay. “This way, you can have the amount you need transfer directly to your creditor and not pay any extra fees.”

Extra Credit: Anna del C. Dye
Credit Score: 804

Anna del C. Dye, a new-fantasy author from Salt Lake City, UT, is proud of her long-lasting marriage as well as her financial acumen over the years.

Her strategy: “When my husband got a raise 10 years ago, we opted to add it to the principal in our mortgage rather than our monthly expenses,” says Dye. “We lived on the same income as before and paid our house faster.”

Why you should try it: “Our house is ours and so is everything in it,” says Dye. “Now we can eat out more often, help others, go to the movies more often, and travel around the world. We get to play and have fun when we are still young.”

Lesson learned: “Our culture’s lenient attitude toward debt is harmful,” says Peter Dunn, personal finance expert and author of 60 Days to Change. “If you want great credit, you must develop an urgency to become debt-free.”

Divorced from Bad Credit: Tammie Aaron-Barrada
Credit Score: 789

Tammie Aaron-Barrada’s first husband essentially ruined her credit just by having his name on her cards, and running her into debt. After they broke it off, she was left to claim bankruptcy. The entrepreneur and inventor from Ruffs Dale, PA, has since made rebuilding her credit top priority.

Her strategy: Aaron-Barrada had to made wise decisions to reestablish her credit standing. She took out 90-day same-as-credit accounts to buy new furniture that she could afford, as well as made sure she put utilities in her name and paid those bills on time.

Why you should try it: Aaron-Barrada says having great credit gives her peace of mind, should an emergency ever arise. Building back up to a high credit limit means she won’t be left high and dry ever again, and has a better credit score to show for it.

Lesson learned: “When you make someone a joint-account holder or you co-sign a loan, you become fully responsible,” warns Denise Winston. She recommends checking your potential spouse’s credit report and finding out if he or she owes back taxes.

“Your credit score has the potential to determine the quality of your life,” says Winston. “It can potentially cost you thousands, if not hundreds of thousands, of dollars over your lifetime.”

Are You a Credit Score Wannabe is provided by Experian.com

The World Is Yours… If You Don’t Get Cocky

“Say hello to my little friend.” ~ “Scarface”

Like the submachine gun Tony Montana wielded in “Scarface,” your credit cards are powerful. They can open doors, but they don’t make you invincible.

Denise Winston, money expert for Money Start Here, says, “Just because you own a gun doesn’t mean you know how to use it.” The same principle applies to credit cards. “Respect it, practice using it, clean it, and keep it in a safe place… maybe even under lock and key.”

Having credit cards can lure you into a false sense of security. The best financial protection is a good credit score, which can “dictate the quality of your life – where you live, what job you have, and what you drive,” says Winston.. “Managing and protecting your credit score can make deals happen and command respect.”

Be Wary of Favors

“I’ll make him an offer he can’t refuse.” ~ “The Godfather”

Unless you have a gun to your head, think twice before signing up for a rewards credit card. Real-estate lender Todd Huettner, president of Huettner Capital, says, “Card promotions can lower credit score more than other cards.” Plus, every new card requires a credit inquiry and disturbs the average age of your file, both of which ding your score, says credit education expert Solomon Algazi of Credit Servicez.

Most interest-free periods are costly, with rates over 20 percent if the balance isn’t paid in full by the end of the promotion, says Huettner. “They offer these discounts to make money on finance charges.”

No doubt “The Don” will collect on his favor, so “Only use the promotional card that saves you money if you have money to pay off the purchase immediately,” says Huettner. Miss the drop-dead payoff date – it’ll cost you an arm and a leg.

If It Looks Like a Rat, It Probably Is

“If you had any idea of what we do, we would not be good at what we do, now would we?” ~ “The Departed”

“This quote sounds like the guys who created credit score algorithms,” says Huettner, who acknowledges that the ways to improve your score are often opposite of what you might think:

• Do open a new account. If you don’t have much credit, add some. You need breadth and depth – at least three cards open for at least two years. Boost your score further – get approved for a limit that’s double or triple what you plan to charge on the card.
• Do close accounts. You don’t need a charge card for every store at the mall. Open accounts will show you can manage credit, but too many cards (more than 10 or 15) are suspect.
• Do use a credit card. Make a charge to one or two cards twice a year. Pay them immediately. Demonstrate that you can manage your credit.
• Don’t use a credit card. Having unused cards helps your utilization rate, showing you can have access to credit and not use it.

“It’s never the amount of money you owe that tanks your credit score,” says Algazi. “It’s always your debt utilization ratio – the amount of your overall available credit you’ve used up. The higher your ratio, the lower your score.” For example, a $10,000 combined credit limit on three cards and $7,000 in credit card debt means your utilization ratio is a high 70 percent. “The ratio gives a general idea of the leverage of the individual along with the potential risks the individual faces in terms of their debt load,” says Algazi.

Unlike gangsters, credit cards don’t honor a “code of silence.” Misuse them and they’ll go straight to the credit bureaus to ruin your financial reputation.

You’re on Your Own

“Everybody had their hands out. Everything was for the taking. And now it’s all over.” ~ “Goodfellas”

“Until recently, money was easy to come by,” says Gail Cunningham, vice president for the National Foundation for Credit Counseling. “Now interest rates have gone up, credit lines have been lowered, annual fees have been added on, and accounts have been closed.”

As “Goodfellas’” Henry Hill says, “Your murderers come with smiles… as your friends… and they always seem to come at a time that you’re at your weakest and most in need of their help.” Says Cunningham, “The credit scoring model is similar to the Mob – pay on time or you’ll suffer immense pain!” But it’ll be a lower credit score – not the muscle – that comes knocking.

When you’re strapped, you might be tempted to utilize payday loans and non-traditional forms of credit that are willing to do business with you… for a price. Instead, create a budget, track spending, and try to save. “Lack of savings often delivers the financial knock-out punch, causing people to make decisions that aren’t in their best interest,” says Cunningham.

Don’t Gamble with Credit

“The longer they play, the more they lose, and in the end, we get it all.” ~ “Casino”

Credit card companies are out to make dough. Don’t gamble with your score. Play by the rules. Aaron Patzer, vice president of personal finance at Intuit, offers tips to stay alert for anyone who might try to blow up your credit score… or your car:

• Hire informants to watch your back. Set up bill reminders with lenders to prevent late payments, which have the biggest impact (up to 35 percent) on your credit score.
• Steal your credit report. It’s free, so there’s no crime. Check carefully for errors – they can be like brass knuckles to your score.
• Diversify your operations. A good mob boss diversifies. About 15 percent of your score depends on your credit mix – credit cards, auto loans, and mortgages.

Whatever your credit situation, don’t be afraid to go to the mattresses to win the financial war. Keep a close eye on what’s yours and never underestimate the other guy’s greed.

5 Things You Can Learn About Credit from Gangster Flicks is provided by Experian.com

They argue with their husbands, care for their kids, and pamper their pets. They get makeovers and remodel already-extravagant homes. And they spend, spend, spend. They’re the Real Housewives of Bravo TV’s successful reality series, and watching them offers an entertaining glimpse of living large. If you look beyond the glam though, the “Real Housewives” are just real women – with lots of credit lessons to learn. We spoke to some “real” housewives who found out the hard way just how important it is to keep an eye on their finances.

Clueless about Credit?

Gretchen Rossi, the youngest “housewife” at 32, is a member of the cast of “The Real Housewives of Orange County.” Rossi was a realtor when she quit to care for her fiancé until he succumbed to leukemia. Though he left Rossi a sizeable gift in his will, she contends that as an independent businesswoman who purchased her own home, car, and other possessions, she doesn’t need a man to take care of her – or her finances.

Cassandra Ladd found herself taking the financial reins from her husband early in their 18-month marriage. The 24-year-old public relations agent from Austin, TX, admits she had limited experience paying bills but quickly discovered her groom was in much worse shape. “He went six months without paying his cell phone bill in college. Luckily for us, it was in his mother’s name.”

Ladd switched all bills to her name but has noticed finance charges increase when she made a late payment. “That’s a mistake I only made once,” says Ladd, although she’s unsure how it has affected her credit score because she’d never obtained a credit report. She speculates, “My credit score can’t be good as I’ve got lots of college debt, even though I pay everything on time… now.”

Credit Lesson Learned: Know the Score

Your credit score is a three-digit number that speaks volumes to lenders about your ability to repay a car loan, mortgage, or credit card debt. All scores are calculated on payment history, amount owed, length of credit history, and types of credit used.

The best way to know your own score is to request one personal credit review a year from any of the three main credit scoring bureaus. It won’t hurt your credit, and the results may surprise you. While Gretchen Rossi’s ability to purchase a home and a car indicate that she has a reasonable score, Cassandra Ladd’s youth and the amount she owes are all factors in how she’ll rate.

Budget, What’s a Budget?

Sheree Whitfield of the “The Real Housewives of Atlanta” is a divorced mother of three who appears to juggle her business and social lives with aplomb. But Whitfield’s confession that she doesn’t budget her money did come back to haunt her. When the hefty settlement from her former husband failed to materialize, Whitfield’s mansion fell to foreclosure. Though she managed to send her debut fashion collection down the runway, Whitfield’s financial future may be at risk.

Clarky Davis wasn’t big on budgeting, either. The self-professed “Debt Diva” with a money management blog to match, says, “I was the poster child for poor financial decisions,” buying clothes, shoes, and nights out on credit. It wasn’t long before the North Carolina native had closets full of clothes and $10,000 in debt. But careful budgeting and a strict payment schedule pulled Davis out in three years.

Credit Lesson Learned: Play Your Cards Right

You have to be in it to score. Lenders want to see that you’ve established a good payment history and having one or two credit cards are essential for building a financial profile. Just don’t bite off more than you can chew.

Paying your credit card bills on time each month is a must to keep your credit score strong, advises Davis, noting the goal should be to reduce your debt to available credit ratio. Those payments must fit your budget while allowing you to maintain living expenses without relying on more credit. Davis says, “Payments should be significant enough that you’re whittling down your principal, not just covering interest. Try to always pay more than the required minimum monthly payment and if possible double that payment.”

I Don’t Want to Talk About It

Though Tamra Barney, the 42-year-old stay-at-home mom of four on “The Real Housewives of Orange County” is often outspoken, she and her husband don’t know how to talk constructively about money. The result? Their finances have taken a hit and their decade-long marriage may be on the rocks.

This doesn’t surprise Darshanna Hawks, who knows first-hand how difficult it is for couples to talk about money. Hawks, a relationship coach in Charlotte, NC, says she and her husband did not discuss their finances the first few years. “We lost money due to mismanagement and not tracking anything in the past,” admits Hawks. The couple implemented a “prosperity plan” that Hawks says is a positive spin on a budget. Now she helps other couples navigate their way through these highly charged conversations, and recommends finding a financial advisor or credit counselor. “[Find] someone who has no bias to help facilitate a conversation, go over the what-ifs, and make a plan.”

Credit Lesson Learned: Seek Professional Help

Though the credit problems that land you in the office of a credit professional will be reflected in your credit report, don’t worry about credit counseling affecting your score… it won’t. Even with assistance, it is important to scour your report for errors, keep an eye out for identity theft on dormant accounts, confirm your credit line(s) with creditors, and review your spending habits.

Whether you are affluent or just getting by, draw up a sensible budget, pay your bills on time, and set reasonable financial goals. If you establish good financial habits you’ll be well on your way to maintaining a good credit score.

Credit Lessons from Real Housewives is provided by Experian.com

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Forget making changes to your credit card usage – it’s what you don’t do that can increase your credit score (or at least keep it from going south).

Just as you can’t buy happiness, you can’t buy a high credit score – the only way to get one is to demonstrate financial responsibility. “Creditors don’t care about how many millions you may have in your investment account, it’s how you use your credit,” says Maxine Sweet, vice president, public education for Experian.

Steer clear of these 10 things experts say can mangle your score.

1. Thou Shalt Not Avoid Using Credit. If you don’t use credit, you won’t have much of a credit score. “A credit score is an important tool companies use to protect themselves,” Sweet says. The lower the score, the higher the risk, and this can affect whether or not a loan is approved.

2. Thou Shalt Not Miss Payments. Paying a bill late will hurt your credit, but missing a payment will damage it even more. “If you do so, you can’t make it up,” Sweet says. In other words, making two payments in the next billing cycle will not remove the blemish from your credit history. Whether or not you pay your bills on time determines 33% of your score.

3. Thou Shalt Not Limit Loan Types. Despite what your bank account may think, a car payment and a mortgage may not be enough. Also managing an installment debt, such as a credit card, is a good indicator of credit savviness. There are five elements to the credit score model and revolving credit, which allows consumers to charge and owe different amounts each month, is one of them. “It’s 10% of the score,” says Gail Cunningham, vice president of public relations for National Foundation for Credit Counseling.

4. Thou Shalt Not Close Unused Credit Card Accounts. Actually, just use caution, says Sweet. A factor in credit score models is your utilization, which is your debt vs. how much is available. For instance, if you owe $4,800 on a card with a $5,000 limit, you’re using most of your available credit and this “utilization” will have a negative impact on your score. Counting toward 30 percent, your utilization is the second highest factor in your credit score. You should charge no more than 30% of your available credit, recommends Cunningham.

5. Thou Shalt Not Be A Credit Tease. Don’t run up charges all over town or apply for several cards at once while looking for the best rewards program. Recent inquiries means that you have accessed your credit and this can affect your score negatively. “This signals that you’re desperate for credit and don’t have enough cash available for your purchases,” says Cunningham. She adds that if you are shopping for a major purchase, such as a mortgage or car loan, the inquiries will usually roll together into one.

6. Thou Shalt Not Rob Peter To Pay Paul. Don’t charge anything unless you know how and when you are going to pay it back. One of the benefits of credit is the ability to spread out payments on a big purchase, not to delay paying with hopes that the money will come in – from somewhere. If you need to use a credit card for convenience, use a prepaid card or a secured card that enables you to make payments to your own line of credit.

7. Thou Shalt Not Get On The Call List. When a debt turns into a collection account, it’s an indication that you got yourself in hot water. Once a collection agency jumps into the arena, it becomes the owner of the debt, which will show on your credit history. Trying to make payments to the original debtor will not make the collection agency or the negative mark on your credit go away.

8. Thou Shalt Not Forget The Little Things. That library fine you didn’t pay or the health club contract you signed but didn’t honor can show up on your credit report. Any debtor has the right to report unpaid bills to the credit bureaus, and many of them exercise that right.

9. Thou Shalt Not Negotiate. On paying less than what you owe, that is. If you cannot repay a debt in full and a creditor agrees to settle for less than you owe, you haven’t won the battle. The transaction will be reported as a settled account and this will hurt your credit score. Instead of negotiating to lower the overall amount of the debt, ask to have your interest rate or monthly payment lowered so that you can continue to pay the debt off in full.

10. Thou Shalt Not Give Up. If you have late payments, missed payments, defaulted loans, and similar credit mess-ups in-between, don’t give up and think that your credit history is ruined. Although offenses like these generally stay on your credit history for seven years, the recovery clock doesn’t start ticking until you have one full month of paying all of your debts on time, says Sweet.

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See your credit report and score today

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Foreclosed on? Just because you may have lost one home doesn’t mean you’ll never be able to buy another. But first, you need to engage in some credit score Rx.

“A foreclosure will cause a credit score to drop sharply, typically by 200 to 300 points,” says Andrew Housser, co-CEO of Bills.com, a free consumer portal of personal finance information. “That would drop a score of 700 – considered a ‘good’ score – to as low as 400 – considered pretty terrible.” The minimum FICO score is 340. This drop can affect your ability to not only purchase a home, but also to secure a car loan and even gain employment. “Lower credit scores can result in being denied credit, such as credit cards and car loans, and facing much higher rates for loans and even other items, such as insurance, that rely on credit scores,” notes Housser.

Don’t lose hope, though. While a foreclosure can remain on your credit report for seven years, it won’t ruin your credit score for life, adds Housser. “If you keep all of your other credit obligations in good standing, your FICO score can begin to rebound in as little as two years. The important thing to keep in mind is that a foreclosure is a single negative item. If you keep it isolated, it will be much less damaging to your FICO score than if you had a foreclosure in addition to defaulting on other credit obligations.”

In fact, The Federal Housing Administration will allow a new mortgage to be approved if a past foreclosure was more than five years old,” explains Alan M. White, assistant professor at Valparaiso University School of Law in Indiana. “The impact of foreclosure on your score diminishes over time, depending on whether you have other active, on-time accounts,” he explains.

Of course, it’s preferable to avoid foreclosure altogether. Here are some ways to accomplish that goal. (Keep in mind, however, that many of these options require you to resume normal mortgage payments at some point. If you can’t afford to resume payments, it may not be worth the effort required to stop or reverse the foreclosure process.)

• Lender negotiation: If there is a reasonable expectation that you will be able to resume making regular mortgage payments within a relatively short time frame, the lender may be willing to work with you to establish a payment plan to bring the loan current. “Especially in today’s market, this is a greater possibility,” says Housser. “Many individuals are having trouble due to an unexpected job loss, medical expenses, divorce or other personal trauma. If the situation has some resolution so that the regular payments may be able to be met again, it is worth it to call the lender.”

• Forbearance agreement: For a temporary hardship, the lender might grant you a forbearance agreement to lower – or eliminate – payments for a limited time.

• Loan modification: This entails a permanent change to the loan, such as lowering the payment and extending the loan’s term or incorporating any delinquencies into future payments. “Lenders are more willing to discuss this now than they were before,” adds Housser.

• Deed-in-lieu of foreclosure: In this case, the lender takes ownership of the home, but that will not eliminate the negative impact of a payment delinquency or foreclosure that has already begun. “Bankruptcy remains on a credit report for 10 years, but it can offer a way to become current in payments, which will improve the credit score,” White notes.

• Refinancing: It may be possible to refinance a mortgage for a lower interest rate and/or lower monthly payment. But if you have already had late payments on a mortgage, the interest rate offered may be too high to lower your monthly payment. Housser recommends using online rate comparison sites and calculators to determine the “real costs of refinancing.”

• Short sale: In a short sale, the lender accepts less than the mortgage debt when the property value has declined. “A short sale will prevent foreclosure,” says White. “However, if it takes place after foreclosure was initiated, the foreclosure and the related delinquency in payments will be reflected on the credit report.” The only way to protect the credit score fully is to maintain monthly payments until the house is sold.

• Chapter 13 bankruptcy: If the loan default is past the point of being resolved with the lender, you may file for chapter 13 bankruptcy protection. This protection requires you to resume making regular mortgage payments but allows the arrearage (being overdue in payment) to be repaid over the course of the chapter 13 plan.

All things considered, a foreclosure won’t ruin your credit rating forever. It will lower your credit score and remain on your credit report until you’re able to re-establish good credit — which takes time and careful planning. Consider your home purchase wisely.

Provided by FreeCreditReport.com, a part of Experian. -
See your credit report and score today

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Your relationship with your credit card provider may seem pretty cut-and-dried. But your credit cards may offer hidden benefits and secret perks that you may not be aware of, which go well beyond frequent flyer miles. Some special offers are listed in the fine print of your credit card agreement, but many others aren’t public knowledge at all. These special offers are only available to customers who know exactly what to ask for and how to negotiate.

From avoiding fees to scoring free hotel stays, here are 10 secret or little-known perks that you may be able to score from your credit card provider.

1. Get an immediate credit limit increase. Though credit providers are less likely to increase your credit limit in the current economic climate than in days past, you can still negotiate a higher balance under the proper conditions, says Ken Clark, a certified financial planner and author of The Complete Idiot’s Guide to Getting Out of Debt.

“The biggest trick is to ask for it in conjunction with a large purchase,” says Clark. If you can make the case that you want a balance increase because you want to make repairs on your home or you’re buying a new laptop, says Clark, your request is more likely to be approved than if you’re simply planning to use the card for everyday expenses. It’s also important to be a long-term customer in good standing. If you’ve skipped out on several payments in the past, the request is sure to be denied.

In addition to providing you with more credit to spend on large purchases, this can be a good strategy to instantly increase your credit score, too. “30% of your credit score comes from what is called the ‘utilization ratio,’” says Clark, which is “calculated by dividing your total outstanding balances by your total possible limits.” So, if the credit limit increase is substantial, “or if paired with paying down your existing balances, it can have a significant effect on your credit score (FICO) in a relatively short amount of time.”

2. Delay a payment. “If you’re having difficulty paying, skip a month,” says Sara Petty, vice president of The Members Group payment consulting firm. Times are tough for everyone these days, and sometimes it can be difficult to even make the minimum monthly payment on your credit card if you’ve just incurred a big expense. If you know in advance that you’re not going to be able to cover a monthly bill, call your credit card provider and ask for permission to delay payment until the following month. Assuming that you’re a customer in good standing without a history of late payments, your provider is likely to waive your late fee and continue to report a “current” payment status to credit bureaus until the following month when you can make the full payment. While it’s never ideal to miss a payment, you can reduce your risk of hurting your credit rating by being honest and open with your provider.

3. Waive your late fee. If you attempt to make an online payment that doesn’t go through, or you never receive an invoice from your credit card provider, you have a good excuse to request that the credit company remove the resulting late payment fee on your next statement. Simply call your provider and explain the circumstances, and the fee will likely be waived. Even if the error is your own fault, you may still be able to get the fee removed from your bill “if you’re a great consumer and haven’t missed a payment in a year or two,” says Clark—however, this request will probably only work once, so be careful about paying on time in the future.

4. Negotiate a lower interest rate. This one is easy, says Clark: “Simply call in with another offer in your hand, and negotiate with them for a better rate.” Be polite, and tell your credit card company that you’ve enjoyed using their service, but you’ve found a better value option. Your credit card provider doesn’t want to lose your business, so you can leverage another provider’s offer to reduce your interest rate significantly, matching or even beating the competitor’s offer.

5. Transfer credit card funds into your bank account. “Consumers who have excellent credit, assuming the bank has a zero percent interest balance transfer offer, can ask for blank balance transfer checks,” says Oren Milgram, CEO of StudentMarket.com, an online shopping and credit resource for college students. There is often a $50 to $75 fee associated with the transfer, but if you don’t have any major upcoming expenditures, depositing the credit in a high-interest online savings account, short-term CD, or Money Market mutual fund can be a way to earn interest on your credit card balance until you need to use the card again. However, be sure to repay the initial funds by the end of the grace period (typically six to twelve months), or you’ll face massive interest fees.

6. Get merchant surcharges for credit card transactions removed. With the exception of schools and government offices, it’s generally illegal for merchants to charge an additional fee for credit card users, regardless of the purchase price. When making your purchase, tell the store manager to waive the surcharge. If your credit card statement still shows an additional merchant fee, you can report the incident to your credit card company as a violation according to the instructions listed in their Merchant Abuse Policy, and the fee will be removed.

7. Double your warranty on new purchases. When you make an expensive purchase like a new computer or refrigerator, there’s no need to buy the extended warranty that you’ll be offered at the store. As long as you use a major credit card to make the purchase, “your provider will automatically match the warranty up to a year on new purchases,” says Clark.

8. Take advantage of your card’s free car rental insurance coverage. Many cards offer free protection against damage on rental cars, so call your card provider to find out if you’re eligible.

9. Get discounted stays or complimentary upgrades at hotels, discounted meals at restaurants across the United States, and other travel perks. Major credit card providers offer many little-known discounts and upgrades on food and travel expenses that are each worth hundreds of dollars. Pull out your original welcome packet, or log onto the card issuer’s Web site for specific deals and offers.

10. Some cards, including American Express Gold, provide Best Value Guarantee (BVG) protection on new purchases made with the card. If you see a print advertisement listing an eligible item for a lower price, send the company your receipt and a copy of the ad to receive a refund of up to $250 against your original purchase price.

Provided by FreeCreditReport.com, a part of Experian. -
See your credit report and score today

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Fresh off of the heels of Congress’s passing of the Credit Cardholders Bill of Rights, President Obama sent a proposed law to Congress, which if enacted, would create a shiny brand new Consumer Financial Protection Agency (CFPA). The agency would not only help enforce the Credit Cardholders Bill, it would expand into the broader scope of consumer protection. Treasury Secretary Geithner summarized the agency by saying, “This agency will have only one mission – to protect consumers”.

Knowing exactly what the proposed CFPA would mean for you is based largely on speculation at this point, and the full effects may not be seen for years (and the bill isn’t expected to go to vote until this fall or beyond). However, it’s fair to say that the primary reason behind the proposed creation of the new agency would be to police and put an end to the type of greedy and unfair predatory practices by financial institutions (mostly banks and credit providers) that has resulted in many borrowers suffering from undue financial hardship.

Citing the agency’s crackdown on predatory mortgage lending techniques, President Obama states, “You’ll be able to compare products and see what’s best for you. The most unfair practices will be banned. Those ridiculous contracts with pages of fine print that no one can figure out – those things will be a thing of the past.” Although, I find it hard to imagine that my next mortgage closure will result in anything less than a headache and a mild case of carpal tunnel, having an agency focused on enforcing simple, concise, and clear terms is certainly a step in the right direction.

According the White House’s official press release on financialstability.gov, the CFPA would

1. Provide protection against unfair credit card rate increases and late fee traps: The agency will enforce the credit card bill enacted by Congress and President Obama this spring, taking responsibility for enforcing the ban on unfair rate increases and for the implementation of new rules preventing late fee traps.

In other words, the Credit Cardholders Bill of Rights that was passed recently, but doesn’t go into effect until mid 2010 needs a governing body. The CFPA would be that governing body.

2. Set guidelines for simple “Plain Vanilla” products: The agency could create guidelines for standard mortgages without prepayment penalties; that are fully underwritten with documented income; that collect escrow for taxes and insurance; and have predictable payments.

Remember all of those funky ARM’s, jumbo loans, and other sleek mortgage names masking a product that is designed to rip you off? The CFPA would seek to put an end to these type of products.

3. Duties of care for mortgage brokers: The agency could require mortgage brokers to owe a duty of best execution among available mortgage loans to avoid conflicts of interest between themselves and the homeowners, and a duty to help ensure that only appropriate loans are offered.

A colleague who once worked for one of the nation’s largest mortgage lenders once told me that ‘in the good ole days’ mortgage underwriters would look for any possible reason to offer the largest loan possible and ignore little technicalities such as the borrower not providing proof of income. The goal of the CFPA would be to put an end to this type of practice and ensure that financial institutions are offering the right loan amounts to the right people in the right situations.

4. Ban unfair side payments: The agency could ban unfair practices such as “yield spread premiums” – side payments from lenders that encourage mortgage brokers to push consumers into higher priced loans.

Essentially, what the press release is trying to say here is that the CFPA would monitor and attempt to put an end to broker/institution side arrangements that are designed to steer you into a mortgage that may not be the best for you, but results in the mortgage broker getting a commission.

If you’d like to curl up and read the full version of the CFPA-Act bill, you can check it out here.

The Opposition

The financial industry will surely be up in arms over the bill, because it provides the type of oversight that they have been able to evade for so long. Opponents argue that the CFPA would limit product innovation and dictate what type of loans consumers should receive in certain situations.

Didn’t product innovation and offering ‘customized’ loans mostly get us into this mess?

For more of GE Miller’s writing, visit personal finance blog 20somethingfinance.com.

Madonna

Anirudh Koul

For a material girl, she sure did make a silly financial blunder. She’s been coined as a marketing genius, keeping her career and her image alive for more than twenty years. Madonna faulted, however, by entering into her marriage with Guy Ritchie without signing a prenuptial agreement. Putting her $500 million dollar fortune at risk, Madonna’s divorce cost her a reported $75 million.

Lesson Learned: Keep your financial assets your own. If you have something you wouldn’t want to give away, sign a prenup’.

Nicholas Cage

totsie14

Nick Cage has never played the victim in his film career, but in real life, he seems pretty good at it. Especially, when the tax man cometh. In February of 2008, it was widely reported that the actor used his production company, Saturn Productions, to hide some personal extravagance — $3.3 million, in fact.

Lesson Learned: Personal expenses are personal expenses. Keep your taxes on the straight and narrow. Need help? Invest in a personal accountant. It’s worth the time and your fee for services can be deducted off your next year’s tax return.

Michael Jordan

simplistic.designs

There’s a competitive desire to win, and then there’s a desire to lose all your money to a friendly game of golf. In 1993, Jordan lost $57,000 to his gambling frenzies, and claims exist from Jordan’s colleagues and friends that he lost more than $1.25 million in one golf game alone.

Lesson Learned: Gambling should be a delightful misadventure of sorts, not an “I need money and have to win” sort of obsession. Keep it fun.

Heath Ledger

Howie Berlin

Rest his soul – his death was untimely and unexpected, which is exactly why he should have had an updated will! The Oscar-nominated star of Brokeback Mountain wrote his will leaving everything to his family in 2003. With the birth of his daughter in 2005 he neglected to make an update. When you’re worth an estimated $20 million, it’s advisable to keep your will updated and signed.

Lesson Learned: As lifestyle changes occur and relationships evolve, it’s important to update your will regularly. Set a time once a year to review and update if necessary.

Ed McMahon

Alan Light

“Heeeeere’s Trouble!” Housing foreclosure is becoming all too common of a term these days and celebrities are no exception to it. There’s an irony that exists in Ed McMahon – the man who delivered oversized checks to lucky winners of the sweepstakes – facing foreclosure. After falling $664,000 in the hole on mortgage payments, McMahon found himself in a mountain of debt.

Lessons Learned: In the words of Ed McMahon himself, “Well, if you spend more money than you make, you know what happens…” Don’t buy a house you can’t afford.

MC Hammer

superseven

We know he’s Too Legit to Quit, but he should’ve quit spending a while ago. MC Hammer is infamous for his overspending which led him to file for bankruptcy in 1996, with $13 million in debt. With a net worth of $30 million dollars, Hammer spent a majority of his funds paying over 300 people to work for him, to the tune of $500,000 in monthly wages.

Lesson Learned: No matter how popular, how successful, or how business savvy you may find yourself, a lavish lifestyle can only last so long.

Britney Spears

Cesar Pics

You’re young, you’re rich, and you’re spending it all. Britney Spears entered the entertainment world at the ripe age of eight and has been a force to be reckoned with ever since. When you earn $737,000 per month and don’t allocate a penny toward savings or investing, you are not planning for the future particularly well.

Lesson Learned: Plan now for the long-term. Living in the moment is a dangerous trend.

Examples of financial missteps are everywhere, and the celebrities have done a good job of showing us what not to do. From foreclosure and bankruptcy to investments and tax evasion, the examples are endless. Follow these lessons learned to keep your finances from putting you at risk.

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Andres Rueda

This Friday, President Obama is expected to sign the ‘Credit Cardholders Bill of Rights’ into law. The House of Representatives passed their version of the bill on April 30th by a 361-64 margin. In similar overwhelming fashion, the Senate passed their version of the bill in a 90-5 rout. The House has agreed to collaborate and adopt the Senate’s version of the bill, which has been deemed to be more strict on credit card providers than the House version. So what does this mean for you?

If you’re a student or a minor, you will see the highest level of direct impact:

Students:
For college students that don’t have a co-signer, the max amount of credit extended will be limited to the greater of 20% of the student’s annual gross income or $500 dollars. The aggregate amount of credit extended from all of their credit cards will be limited to 30% of the student’s annual gross income (for the recently completed calendar year).
Creditors are prohibited from opening a credit card account for any college student who does not have any verifiable annual gross income or already maintains a credit card account with that creditor, or any of its affiliates.

Minors:
For consumers under 21 years old, the signature of a parent or another responsible adult who will take responsibility for the debt is required, or proof must be found that the under-21 consumer can repay the credit.
Creditors are prohibited from providing credit to consumers under age 18. (unless they are emancipated under state law, or the consumer’s parent or legal guardian is designated as the primary account holder).

But…Everyone with a Card has a Chance to be Impacted by the Following Rules

Existing balances:
Creditors cannot retroactively change the rate on an existing balance unless the account is 60 days delinquent.

Payments:

A consumer payment above the minimum applies first to the balance with the highest rate.
Creditors are required to provide a grace period for payments even if the cardholder takes advantage of a promotional rate balance or deferred interest rate balance.

Bill Receipt:
Creditors must send a bill at least 21 days before the due date.

Terms Disclosure:
Cardholders must get at least 45 days notice of any change in terms.
Creditors are required to post their written credit card agreements online.
Creditors need to provide a 30-day advance notice of an account closure.

Credit Scores:
Creditors must remove information provided to a consumer reporting agency about newly established credit card accounts if the holder has not used or activated the account and and if they contact the creditor within 45 days of its opening to close it.

Fees:

Payment fees – Creditors can’t charge fees to pay by mail, phone, and electronic transfer or online, except for expedited service on the due date or the day prior to the due date.

Double billing fees – Creditors are prohibited from charging a finance charge based on the double billing cycle method.

Interest fees – Creditors can no longer charge a fee on an outstanding balances at the end of the billing period if the fee is attributed to the interest accrued on an outstanding balance that was fully repaid during that preceding billing period.

Over-limit fees – Creditors cannot charge over-limit fees unless the cardholder has signed up to allow them. This is something that you’d be a little crazy to sign up for.

Rate Increase Limitations:

Promotional (teaser) rates - Creditors must extend promotional rates to at least six full months.

New accounts – Creditors can’t increase the annual percentage rate (APR) during the first 12 months of a new account being opened.

Rate changes - Creditors must provide consumers with a 45-day advance notice of changes in rates and significant contract changes.

Gift Cards:
All credit card gift cards must have at least a 5 year life.

I’m a Responsible Cardholder who won’t Benefit from any of the Above. I Pay my Bills on Time. Should I Fear Credit Card Company Retaliation and Benefit Decreases?
Credit card providers have been threatening to do away with all of those nice perks (air miles, cash back, free dog food, etc.) and even start re-instating annual fees again. They claim that with all the revenue loss from the aforementioned changes, they will have to make up revenue somehow.

Ah, but not so fast guys. Let’s not forget that credit card companies make money off of everything that we purchase (~2%) through merchant fees. At the same time, most companies limit their perks benefits to 1% or less. And other fees and interest are not going away any time soon, regardless of the bill of rights. Therefore, they need customers to prosper from , and not many companies are limiting who they providing cards to.

The consumer, not the companies, has all the leverage in the marketplace. If my card company tries to take away my perks, I’ll switch. The odds are there will be more than a few providers that won’t take away perks. If they all come to an agreement to eliminate perks, then I will simply switch to a debit card.

In an ironic reversal of fortunes, they’ll have to take it and like it.
For more of GE Miller’s writing, visit personal finance blog 20somethingfinance.com.