Authorized user on your credit report: Does it help or hurt?
What is an authorized user?
Being sued by an original creditor (credit card company, car company, hospital, etc) is no fun and it is somewhat different than being sued by a debt collector or debt buyer.
Different rules can apply to debt buyers (Asset Acceptance, Midland, etc) than to original creditors (AMEX, Bank of America, Capital One, etc).
1. The first tip makes the very important point that paying off your credit card debt is more so about behavior modification and not just math. Dave Ramsey, author of “Total Money Makeover”, suggests paying off smaller debts first, regardless of interest rates, so you will feel motivated to keep paying off more debts, which he calls the “snowball” effect. He also says that you should only pay off a large debt first if it’s to stop a foreclosure or if you owe the IRS.
2. However, if you’re a numbers person, paying off a large debt with a high interest rate first could be more motivating for you.
“Also, if the account with the highest interest is utilizing more than 30 percent of that credit line, focus on paying that one off first to get it under that threshold,” she says. Doing so will improve your credit score since debt utilization, which is how much you owe compared to how much available credit you have, is an important factor in determining your score. The lower your utilization is, the better.
1. Check your credit report.
The best way to start trying to improve your credit score is to examine your credit report. Check it carefully to be certain that all the debts listed on it are actually yours. If you see any debts or accounts listed that aren’t yours you need to report the error to the credit bureau so you won’t be penalized for it. You can obtain a free copy of your credit report every 12 months from each of the credit bureaus- Experian, TransUnion, and Equifax.
The New York Times has posted an article that gives some helpful tips on how to repair your credit score. So many people have lost their jobs, are overwhelmed by bills piling up, or were hurt by the housing crisis or filed for bankruptcy that millions of peoples’ credit scores have plummeted.
The best thing you can do to improve your credit score is to focus on the information that FICO uses to determine your credit score. FICO is the most commonly used method of credit scoring by lenders to determine a consumer’s “creditworthiness”. A credit score ranges from 300 points up to 850 points, the higher the score the better.
The first thing you can do is to assess your situation. You need to make sure you will be able to pay your bills on time and not go further into the hole. You could call the credit card company and explain your situation and see if the two of you can work out a payment that you can afford. But if you do so, be sure to ask how the credit card company is going to report it to credit reporting agencies. Even though you’re paying an amount agreed on by the credit card company, they could still report it as you aren’t paying as agreed, which will further damage your credit score. Be sure and get the agreement in writing.
CNN Money has posted an article that discusses a credit card offer from First Premier Bank with a huge 79.9% interest rate. The card is geared toward people with little credit or bad credit and starts out with a $300 limit and a 29.9% interest rate. Six months after opening the account, the interest has been known to jump from 29.9% to 79.9%, but the card was still popular with consumers, nearly 700,000 people have signed up for it and about half of them carry a monthly balance.
Because so many cardholders were defaulting due to the high interest, First Premier dropped the interest rate down to 59.9%.
“We also tested it at 23%, 33%, 45%, but 59.9% is the one that shows the best performance and where the organization can market the product,” said First Premier Bankcard CEO Miles Beacom.
The New York Times has posted an article about new regulations the FDIC, which monitors 4800 banks, has put on banks to monitor the debit card industry. Congress set an excellent example in 2009 with the new credit card law that the FDIC could have followed to address the outrageous overdraft fees some banks charge on their debit cards.
The credit card law says that late charges or other penalties have to be “reasonable and proportional,” which would have been a good place for the FDIC to start with overdraft fees. Some banks charge as much as $35 per transaction, sometimes several times a day, for overdraft fees. This only succeeds in driving the consumer even further in the hole over a purchase that can be as small as a newspaper.
An analysis issued last year by the Center for Responsible Lending found that it was “common policy among banks” to process the largest transactions first, regardless of when purchases were made, to increase overdrafts.
The Arizona Bankruptcy Lawyer Blog has posted an article about the Credit Card Accountability Act that President Obama signed back in May 2009. The Act changes several credit card stipulations, and might even save people with serious credit card debt from bankruptcy, as suggested by Michael S. Anderson, writer of the article.
Here are a few of the changes:
– Credit card companies cannot charge a penalty fee that is more than the amount associated with the violation.
USNews has posted an article that discusses how your credit cards can actually be hurting your credit score. If you have a credit card, such as a Visa Signature, World MasterCard or Amex Charge Card, that is set to No Preset Spending Limit (NPSL) it sounds like you can charge as much as you want to. Although not advertised by credit card companies, NPSL cards do have a limit and since most consumers don’t know this it can hurt them in several ways.
There are two kinds of NPSL cards: charge and credit/charge “hybrid” cards. Most NPSL charge cards allow consumers to charge up to an undisclosed amount and require the balance to be paid in full each month. The charge/credit “hybrid” card has a set limit but encourages consumers to surpass the limit as long as they pay off the excess at the end of the month.
Even spending with credit cards like Visa and MasterCard is capped off at an undisclosed amount and if a consumer hits the limit their card will be declined. The same is true with NPSL cards, although credit card companies make it sound like there isn’t a limit.