RALEIGH, NC : January 8th, 2016 - By Attorney General Roy Cooper
With each New Year, new ads pop up promising to reduce debts, lower monthly payments, and fix bad credit. But the fine print often reveals hefty, hidden fees required upfront, and the reality is that these services usually do little to help. If you're one of many North Carolinians resolving to get out of debt and improve your credit in 2016, there are resources and help available--but also scams to avoid.
Under North Carolina law, it's illegal to charge advance fees for debt relief or credit repair. Consumers who pay for this kind of help usually wind up even deeper in debt, as money goes to the scammers instead of to pay bills. In recent years, my Consumer Protection Division has taken action against more than a dozen of debt relief schemes and credit repair scams to stop the fraud and win refunds when possible.
We've also cracked down on the three established credit reporting bureaus, Equifax, Experian, and TransUnion, to get them to do a better job making sure credit reports are accurate, and fixing them when they're not.
To manage your debt and protect your credit wisely, try the following:
o Contact your creditors directly to learn about your repayment options. They may work with you to set up a manageable repayment plan.
o Talk to a non-profit credit counselor. Visit nfcc.org or call 1-800-388-2227 to find a legitimate credit counselor near you.
o Before committing to a payment plan with a credit counselor, remember that under North Carolina law, they can charge no more than $40 in setup fees and no more than 10 percent of your monthly payment in administration fees, up to a maximum of $40 per month.
o Consider going over your options with a bankruptcy attorney if repayment plans won't work for you.
o Protect your credit from future damage by keeping an eye on your credit report. You're entitled to one free credit report per year from each of the three credit reporting bureaus. Look for unusual activity or unfamiliar charges and lines of credit, which are signs of identity theft.
o Dispute errors on your credit report immediately and in writing, and contact our office if you have problems.
As you pay down existing debt, keep your guard up against scams that try to trick consumers into paying fake debts. Age-old frauds like the phony tax collector telemarketing scam have been on the rise in recent months. If you get a phone call from someone claiming to work with the IRS who tries to pressure you into paying back taxes immediately, remember that they're trying to rip you off. Hang up on the caller and report them to my office.
Dispute Your Credit Report
By law, you are entitled to a free credit report each year from each of the three national credit reporting bureaus.
Notice something on your credit report that looks wrong? You can ask to fix mistakes on your credit report for free. Here's how:
o Ask the credit reporting agency for a dispute form or submit your dispute in writing along with copies of any supporting documents. Keep a copy of what you send for your records.
o Clearly identify each item in your report that you think is wrong, explain why you disagree with the information, and request a reinvestigation.
o If the credit bureau investigation changes your credit report, the credit bureau must give you the results in writing and a free copy of your report.
o Ask that a corrected version of the report be sent to anyone who got your report within the past six months. Job applicants can have corrected reports sent to anyone who got a copy for employment reasons in the past two years.
o The credit bureau cannot put the disputed information back in your file unless the creditor verifies the information. If that happens, the credit bureau must write to you and give you the name, address and phone number of the creditor.
o You can dispute the information with the creditor in writing. Many creditors, like credit card companies or banks, have an address where you can send your dispute. If the creditor reports the information to the credit bureau, it must tell them that you dispute it.
o If the reinvestigation doesn't fix the problem, have the credit bureau include your version of the dispute in your file and in future reports.
For more help and tips, or to report a scam to the Consumer Protection Division, visit www.ncdoj.gov or call 1-877-5-NO-SCAM toll-free within North Carolina.
Many people assume that marrying someone automatically makes you responsible for their past debt. This is absolutely not the case, but its a myth that wont seem to die.
Lets say your fiance has poor credit after taking out a massive student loan, and he or she has had a tough time paying it back. Their financial history and habits might affect you indirectly, but youre not on the hook for anything they incurred prior to your marriage, including that student loan. The Wall Street Journal explains that, unless you refinance that debt together, your credit histories remain separate and you dont take on their debt:
Many couples think marrying each other means merging their debt loads, but that generally is not the case. While many couples opt to pay down debt together, neither spouse is usually legally obligated to pay off debt that the other incurred before marriage, says John Ulzheimer, president of consumer education at credit-monitoring service SmartCredit.com.
However, be aware that a spouse could lose that protection. If you refinance a loan with your significant other and put your name on the loans promissory note, or add yourself as a joint account holder of a credit card, youll likely become responsible for those debts, even if your spouse took them on before marriage, he says.
People probably get tripped up on this myth because once you are married, yes, you may be responsible for any debt your partner incurs during the marriage. That depends on a number of different factors, namely, whether you live in a community or common law state. Weve outlined the details in this guide on how to protect your credit when you get married. And yes, refinancing means taking on a new debt, so if you refinance an old debt into a new one, that could make you liable.
In general though, no, youre not legally responsible for your new spouses old debt.
For more debt myths, head to the Wall Street Journals full article below.
12 Debt Myths That Trip Up Consumers | Wall Street Journal
Photo by NGDPhotoworks.
You probably ran up charges on credit cards over the holidays. Enjoy the goodies. And now, make sure to avoid damage to your credit score. In fact, you should aim to beef up your score, says Benjamin Glaser, features editor with DealNews.com.
Why? Very few consumers understand how a good credit score can save them big bucks and buff their financial profile.
It can also turbocharge your retirement planning, Glaser says.
One key step for protecting your score is to make payments on credit-card bills on time. Most people are aware of that.
Another key step is to use as little of your available credit as possible. Few people know the value of what lenders call low utilization, Glaser adds.
Many people think that the best way to have a good credit score is not to take out credit at all, Glaser said. The truth is actually the opposite. You need to have open credit that you are not using to help boost your score.
One way to achieve it is to open a no-annual-fee credit card in 2016. Then spend very little with it. This will increase your open credit while decreasing what banks call utilization, which is the percent of your available credit that youre actually using, Glaser said. Lower utilization is good.
The portion of available credit that you utilize is just one part of your credit score, but its a key part. And most consumers are not even aware that its part of it, let alone that high utilization hurts your score, Glaser said.
Many consumers think its perfectly OK to use as much credit as the lender or card issuer offers you. It isnt, Glaser said. Your credit limit is not a goal or a suggestion. Just the opposite. Keep utilization under 30% is your real goal.
If a lender or card issuer says that you can borrow up to, say, $10,000, dont let your balance rise above $3,000, Glaser suggests.
Most credit scores range from 300 to 850. Generally, the higher your score, the less a lender or card issuer will charge you in interest.
A score below 600 is poor, Glaser says. A score of 700 is good. And a score above 750 is excellent.
In 2012, credit card holders with scores of 620 to 659 paid interest rates that averaged 20.3%, Glaser says. Consumers with scores above 720 paid interest rates averaging 12.9%.
Take a consumer with a $5,000 balance that he paid down by $150 per month. Consumers with the best credit paid a cumulative total of $1,235 in interest, Glaser says. Consumers with scores of 620 to 659 ended up paying about double, $2,421.