Archive for the ‘Manage your Credit’ Category

When Wall Street executives don’t think twice about the morality of selling their billion-dollar clients securities that are designed to go bust, and even joke about it, there’s little hope for the little guy in our financial system.

Anyone who has held a credit card account in the last few years knows that the banks who issue them are masters of the omission, the bait-and-switch and even the outright damn dirty lie.  Even after the passage of the CARD Act, banks are finding new ways to make reality a lot less attractive than what they pitched you.  The latest trend is pulling the rug out from under cardholders who thought that they had a great rewards program and now find that  it’s increasingly difficult to cash out those benefits.

Even before the days of 10% unemployment it wasn’t hard to find employers offering what seemed like dream jobs, only to deliver fewer hours, more grunt work or deplorable conditions after they got you to accept.  A month in to my first job I learned this firsthand when my business cards arrived with a different title than the one that I was promised.  A mini revolt by my training class corrected things, but taught me a valuable life lesson about how corporations treat people who don’t have leverage.

So in a world where everyone you do business with seems to operate with the shady deal as their default, it makes very little economic sense for you to always play things on the up-and-up.

In our current version of capitalism, winners and losers are often determined by what’s known as asymmetrical information, or both parties not having access to the same data.  While employers and creditors have access to your credit file, education records and other goodies, you can still work the shades of gray to your advantage.

Now I don’t advocate telling whoppers in your dealings with businesses, especially when it can make matters worse than telling the truth.  Don’t lie about where you worked or your dates of employment, because it’s too easy to verify. Don’t lie about your income to get a mortgage you can’t afford because like so many Americans, you’ll end up in foreclosure.

But do hint at other job offers you have if you think it can get you a better salary or benefits and you’re willing to lose the offer at hand.  Do tell the car dealer that you’re interested in another company’s make and model, even if your heart is set on the red Chevy with the headlights that you must have.  You will get negotiating leverage.  Do tell your credit card company that you’re considering moving to a new bank, even if you have no intention of ever doing that.  These are all things that are impossible to verify, and all give you a leg up in negotiations.

There are a million things that we don’t do because our moms told us it was wrong, but it’s time to think about what the other guy may be willing to say or do to get at your hard-earned dollars.  Don’t be a chump.  Leave your ethics at the door of the finance office and work the system.

Like Denzel Washington said in Training Day, “It’s not what you know, it’s what you can prove.”

No longer content to simply monitor your credit limit and on-time payment, credit card companies are getting all George Orwell Big Brother on your ass to make sure that you stay worthy of the credit limit and rate you currently have. Banks are using internal and external data sources and information such as where you shop and other spending patterns to decide how they’re going to treat you as a customer.

Some banks are even contracting with risk-management firms to leverage information about you (and your friends) on social media sites like Twitter and Facebook to factor into their credit decisions.

After the CARD Act went into effect this year, credit card companies lost the power to arbitrarily jack up rates and change terms and conditions without proper notification and chance to opt out. As a result, banks are working harder than ever to minimize their downside exposure and make life difficult for customers who may not be able to pay their bills on time in the future.

Banks are on the lookout for major life changes and other bad behavior that can signal an impending financial meltdown. One key red flag is a pending divorce, so paying for marriage counseling or attorneys’ fees on their plastic can get dropped faster than Tiger Woods got dropped by his sponsors. Also avoid paying for speeding tickets and court costs with your credit cards may also convince the bank that you’re reckless and a bad risk. Even downgrading your favorite shopping places can get you in trouble.  If you used to be a Jimmie Choo girl and are now slumming it at Nine West, that’s a sign not that you’re frugal, but that your income may be slipping.

Of course banks deny doing this, but it’s not illegal, so assume that they are.

One of the most ingenious (or insidious) ways they are doing this kind of create credit underwriting is with the help of a company called Rapleaf, a San Francisco-based data mining firm that proffers its ability to predict your behavior through the online posts on social networking websites. Rapleaf’s Web site even suggests that clients “use friend networks to enhance … credit scoring.” Rapleaf offers real-time access to its databases via a custom API, allowing their clients in the credit business to incorporate this information at any point in the account review or decision process.

These guys are good. You need to be better. Don’t blindly accept any interest rate hikes, credit limit reductions or new fees without a fight. Get on the phone, get satisfaction, or get a new credit card. Regardless of what data banks are using to judge you, the power to fight back as a consumer will always be with you.

I don’t know how I missed this, but you shouldn’t.

I recently came across a documentary called Maxed Out that offers the most eye-opening looks into our debt culture that I have ever seen. Made in 2005 it shines a harsh light on American consumerism and our self-inflicted credit woes.

The film’s website describes it more succinctly than I can:

Maxed Out takes viewers on a journey deep inside the American style of debt, where things seem fine as long as the minimum monthly payment arrives on time. With coverage that spans from small American towns all the way to the White House, the film shows how the modern financial industry really works, explains the true definition of “preferred customer” and tells us why the poor are getting poorer while the rich keep getting richer. Hilarious, shocking and incisive, Maxed Out paints a picture of a national nightmare which is all too real for most of us.”

Interviewed for the film were bankers, borrowers, economists, bill collectors and a cast of characters up and down the economic ladder. And all are complicit in the shameful ways we abuse credit. The film is a history lesson (spanning several decades) as well as a sociological study. Not to mention a perfect primer in basic and advanced finance. And it manages all of this while still somehow staying wildly entertaining from start to finish.

Anyone looking to get out of debt will probably find the film emotionally tugging as well as they see themselves in many of the film’s players.

It’s painful to bear witness to the fact that even those borrowers who obviously had no idea what they were signing off on (losing homes and hope in the aftermath) seem to be in part victims of their own envy and desire to live above their station in life.

If you needed any more motivation to become debt free, this film will more than serve that purpose. Buy it or rent it and let us know what you think.