3 Steps to Protect Your Credit after the Target Data Breach

The reported number of consumers who were victims of the Target data breach is continuing to rise. Original estimates indicated that 40 million Target customers had their payment information compromised. Now, reports are as high as 110 million consumers who may be victims of the data breach – a breach which includes personal data in addition to payment information. Whether or not we ever know the real number of victims, we can be sure that the data breach is the largest in history.

If you shopped at Target over the holidays then your data was almost certainly compromised. However, it appears that the damage may be even more severe than originally believed. In fact according to several reports, Target customers who had their information stolen may include online shoppers and customers who have shopped at the store at “any point in the past.” Concerned that you may have been a victim of the data breach? Here are 3 steps that you may wish to consider to protect yourself from future fraudulent activity.

1. Step One: Get new credit cards, debit cards, and PIN numbers…yesterday!

Banks are currently issuing millions of new debit cards and credit cards to their customers in the wake of this enormous data breach. Yes, changing your PIN numbers and plastic may be a bit of a hassle but it is nothing compared to the hassle which comes along with fighting fraudulent charges or identity theft. You might have to make a few calls to update your payment information for any reoccurring bills (i.e. gym memberships, satellite television, coffee of the month club, etc.) but the hassle is well worth the protection it will afford you. If any fraudulent charges do occur you will want to be sure to call your bank immediately to alert them. Next, take a deep breath and try not to freak out. You can rest assured that, as long as you notify your bank in a timely fashion, you will not be responsible for the fraudulent charges thanks to a number of consumer protection laws. You should not have to lose a penny out of your pocket.

2. Step Two: Consider a credit freeze, but count the cost.

A credit freeze is a proactive way to help protect your credit reports before identity theft occurs. (NOTE: a credit freeze will protect your personal data, but not your credit card or debit card information.) When you freeze your credit reports you are actually taking the reports out of circulation. Therefore, no future lender will be able to access your credit reports when taking an application for a loan or a credit card. If a scam artist is trying to steal your information to open fraudulent accounts a credit freeze will stop him in his tracks. Keep in mind that you will want to freeze your credit reports with all 3 credit reporting agencies – Equifax, Trans Union, and Experian. There is a small fee to freeze the reports per credit bureau, but that fee can be waived in most states if you have already been the victim of identity theft. It is also possible for you to contact the credit bureaus to remove the freeze from your reports if you need to have your credit pulled for a legitimate purpose in the future. Credit freezes are certainly a hassle, but nothing compares to the effectiveness of a credit freeze for preventing identity theft from occurring.

3. Step Three: Consider credit monitoring, but recognize the limitations.

Credit monitoring offers a reactive type of protection for your personal information. However, like the credit freeze, credit monitoring does not offer any protection from fraudulent charges on your debit cards or credit cards. Credit monitoring does not actually do anything to prevent identity theft either, but rather informs you that identity theft has already occurred. Target recently announced that it will be offering free Experian credit monitoring to the victims of its data breach for one year. Unfortunately, credit monitoring with one credit bureau is simply not enough to help identity theft victims properly monitor for fraudulent accounts since it is important to monitor all 3 credit bureaus for any unauthorized changes. (CLICK HERE to compare a list of credit report and credit score monitoring services currently available.) Being the last to know that your information has been stolen is not always terribly helpful. However, it is certainly better to know last than not to know at all.

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About the Author

Michelle Black is an 12+ year credit expert with HOPE4USA, a published author, the credit blogger at www.HOPE4USA.com, a recognized credit expert on talk shows and podcasts nationwide, a contributor to the Wealth Section of Fort Mill Magazine, and  a regularly featured speaker at seminars up and down the East Coast. She is an expert on improving credit scores, budgeting, and recovering from identity theft. You can connect with Michelle on the HOPE Facebook page by clicking here.  

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How to Remove Federal Tax Liens from Your Credit Reports

“Michelle, I recently paid a federal tax lien with the IRS. I am having a problem though because the IRS is still reporting the lien on my credit reports. The lien says it has been released, but aren’t they supposed to remove the lien from my credit altogether now that it has been paid? This is really hurting my credit – help!”

I receive questions like the one above on an almost weekly basis from HOPE4USA clients, Realtors, loan officers, and from Facebook followers. Typically, just because a negative item on a credit report has been paid or settled, that does not mean that the item will be removed from the credit report. The Fair Credit Reporting Act (FCRA) allows for negative items to remain on a consumer’s credit report, even if the item has been paid, until the credit reporting statute of limitations has expired. (Check out my article “How Long Will Items Stay on My Credit Report?” to see the specific statutes of limitation for different types of credit report items.) Released tax liens are able to remain on your credit reports for 7 years from the date the lien is released. Unpaid tax liens can remain on your credit reports indefinitely – yikes!

How Liens Show Up on Your Credit Reports

Thankfully, when it comes to federal tax liens there IS a way to have paid liens removed from your credit reports prior to 7 years from the release date. Before I explain how the lien can be removed from your credit, let’s take a quick look at the way tax liens show up on credit reports in the first place. It is important to understand that tax liens (federal or state) are not reported to the credit bureaus. The IRS does not notify the credit bureaus whenever a lien is placed against a consumer. However, liens are public records and the credit bureaus proactively search courthouse records and add them to consumer credit reports. 

How to Remove Paid Federal Tax Liens

In February of 2011, the IRS adopted a new policy regarding federal tax liens known as the Fresh Start Program. The new policy states that if a taxpayer will pay their bill in full, the lien will be withdrawn by the IRS once it has been paid. Eligible taxpayers may even be able to have a lien withdrawn if they simply enter into a payment arrangement call a Direct Debit Installment Agreement – wow! Of course, when it comes to a having a lien withdrawn under a payment arrangement there are a lot of rules (i.e. the lien balance must be $25,000 or less, you must have made at least 3 consecutive payments, etc.). 

Remember how I mentioned above that the credit bureaus proactively search public records and report liens on consumer credit reports? Well, the credit bureaus only choose to report filed and released liens to on consumer credit reports. If you send the credit bureaus proof that your tax lien has been withdrawn then they will remove the lien from your credit reports. 

If you are a current member of HOPE4USA with a paid federal tax lien or a federal tax lien currently involved in a repayment plan, please contact your case manager. You may be eligible to request for the lien to be withdrawn! Unsure if a tax lien is currently lowering your credit scores? CLICK HERE for a list of websites to compare where you can see a copy of your credit scores today.

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Michelle Black is an 11+ year credit expert with HOPE, the credit blogger at www.HOPE4USA.com, a recognized credit expert on talk shows and podcasts nationwide, a contributor to the Wealth Section of Fort Mill Magazine, and  a regularly featured speaker at seminars up and down the East Coast. She is an expert on improving credit scores, budgeting, and recovering from identity theft. You can connect with Michelle on the HOPE Facebook page by clicking here. 

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The Cost of Bad Credit

Dawn of the Debt.....the Zombie Debt!

 In most cases, debt does not live forever. That is wonderful news for anyone who has made overwhelming financial management mistakes in the past. There are laws which govern how long a lender has the right to sue you when you default on an account. The length of time will vary depending upon the state in which you lived when the debt was initially established. The Fair Credit Reporting Act (FCRA) also governs how long a delinquent account is legally allowed to remain on your credit reports. The 2 statute of limitations (SOL) “clocks” are different, so let’s take a look at each.

Time Barred Debt Clock

The term “time barred debt” signifies that a creditor can no longer sue you for in an attempt to collect on an unpaid financial obligation. The statute of limitations clock which governs when a debt will become time barred varies per state. Here is a chart to help you out.

How Many Years a Collector Has to Sue: State Where You Lived When Debt Was Established:

• 15 Years: KY and OH
• 10 Years: IL, IN, IA, LA, MO, WV, WY
• 8 Years: MT
• 6 Years: AL, AK, AZ, AR, CO, CT, GA, HI, KS, ME, MA, MI, MN, NV, NJ, NM, NY, ND, OR, SD, TN, UT, VT, WA, WI
• 5 Years: FL, ID, NE, OK, RI, VA
• 4 Years: CA, PA, TX
• 3 Years: DE, MD, MS, NC, NH, SC, Washington D.C

Credit Reporting Clock

The credit reporting SOL clock is much easier to understand since it is the same for all 50 states. The FCRA states that a defaulted debt can remain on your credit reports for 7 years from the date of default. Period. If an account is sold to a collection agency, the SOL clock for credit reporting cannot legally be restarted. 

Resurrecting “Dead” Debt

If you have defaulted on past debt which you could not afford to pay then it is important to beware of “zombie debt” coming back to bite you. Collection agencies have been known to try a variety of tactics to resurrect old debts which should be dead and gone due to the fact that the debt was part of a discharged bankruptcy, the debt is the result of identity theft, or the SOL clock has expired and the debt has become time barred. Here are 2 of the tactics often used by zombie debt buyers of which you should beware:

1. Default Judgments

Even if a debt has become time barred in your state, a creditor may still attempt to sue you for the debt. If you fail to show up in court and defend yourself then you will automatically lose and the creditor will be awarded a default judgment. The moral of this story is that, if a creditor is suing you for a old debt and you believe that the debt should be time barred, show up to court. Better yet, show up with an attorney.

2. Tricking Consumers into Resetting the Clock

It is surprisingly easy for consumers to accidentally restart the statute of limitations so that a creditor can regain the right to sue you and attempt to force collection. (Note: nothing can legally restart the SOL clock for credit reporting. If you have heard otherwise, you have heard a myth. Of course, you should always keep an eye on your credit reports for mistakes since some collection agencies are known break the law quite often, but that is a story for another article.) Collection agencies trick many consumers into acknowledging that a debt belongs to them and, once the debt has been acknowledged verbally or in writing, that acknowledgement may be enough to remove the debt from a time barred status, depending upon your state. 

A second way that consumers get into trouble with zombie debt is by making a small payment on an old, time barred account. For example, a debt collector might contact you regarding an old account and ask you to make a small payment in good faith. Unbeknownst to the consumer, once any payment has been made on the account then the clock has been reset and the creditor once again has the right to sue. 

Please do not misinterpret the previous paragraph as advising you not to pay a legitimate, albeit old debt. If you find yourself in a better financial situation where you can now afford to settle past mistakes then, by all means, go for it. However, you should be sure to settle any time barred debts in full rather than scheduling small, monthly payments. If you settle or pay the account in full then there will be no deficiency balance left for a creditor to come after and you can protect yourself from a potential lawsuit. Paying off your debts is admirable, and may be the right thing to do even if the debt has become time barred. 

About the Author:  Michelle Black is an 11+ year HOPE Credit Expert, the credit blogger at www.HOPE4USA.com, a recognized credit expert on talk shows and podcasts nationwide, a contributor to the Wealth Section of Fort Mill Magazine, and  a regularly featured speaker at seminars up and down the East Coast. She is an expert on improving credit scores, budgeting, and recovering from identity theft. You can connect with Michelle on the HOPE Facebook page by clicking here.

The Ideal Credit Card Balance to Optimize Credit Scores

As a reader of our HOPE4USA Credit Blog you already know that credit cards can potentially be a very powerful tool - when used properly - to help drive your credit scores upwards. A credit card with a $0 or very low balance can potentially help to give your credit scores a substantial boost. If you need some more great credit boosting tips check out this article for some of my favorite suggestions.

Lately I have noticed a lot of confusion regarding whether or not it is best for a consumer to carry a balance on a credit card in order to receive a potential score boost from FICO. For a long time, I have held the opinion that carrying a $0 balance on a credit card is always the best way to go. However, as I have consulted with professionals whom I respect within the mortgage industry I have found that many of them have the opinion that a consumer should carry a $10 balance to achieve the maximum score increase possible. So I set out to research the topic. What I have found is that the truth is actually somewhere in between the 2 opinions.

FICO rewards consumers (with points added to their credit scores) when the consumer has a 0% utilization ratio on a credit card or, in laymen's terms, a $0 balance. However, FICO rewards consumers just a little bit more when they have a 1% utilization ratio. What does a 1% utilization ratio look like? Here are a few examples:

1. On a credit card with a $300 credit limit a balance of $3 = a 1% utilization ratio.
2. On a credit card with a $500 credit limit a balance of $5 = a 1% utilization ratio.
3. On a credit card with a $1,000 credit limit a balance of $10 = a 1% utilization ratio.

This means that if a consumer has a credit limit of only $300 and they are carrying a $10 balance then the consumer is above the 1% utilization ratio and, therefore, is not receiving the full potential score benefit from that card. In fact, the consumer is losing some of the points that he or she would receive if the same card had a $0 balance. However, on a credit card with a $1,000 credit limit then carrying a $10 balance is a good idea in order to receive the maximum points available. Don't look at a zero balance as a bad thing. It is awesome. But, a 1% balance on a credit card is awesome + 1.  

Another factor to consider is how difficult it is to actually have a precise 1% balance show up on a consumer's credit report vs. a $0 balance. Let me give you another example. Joe Consumer wants to boost his credit scores as much as possible before applying for an upcoming mortgage loan. Joe has a VISA with a $300 limit. Joe knows that 1% credit card utilization ($3 on his $300 VISA) can help to improve his scores. So Joe goes to his local mall on July 1st and charges $50 on his VISA. Unbeknownst to Joe, VISA reports the $50 balance on July 3rd. On July 5th Joe pays the $50 balance down to $3 which equals a 1% utilization ratio on his VISA card. However, on July 10th when Joe's loan officer pulls his credit report the balance on his VISA is being reported as $50 NOT $3. Joe's limit of $3 will not be reported to the credit bureaus by VISA until August 3rd (assuming that Joe does not use the card for any additional purchases in the meantime). Because Joe's VISA is at a $50 balance, which is a little over a 16% credit utilization ratio, Joe lost potential points that he could have gained with a $0 limit.

Therefore, my recommendation in most cases is still that a $0 balance on a credit card is the best way to go to help boost credit scores. If you have time to play around with your balance for at least 60 days prior to a loan to try to reach the perfect 1% credit card utilization ratio - go for it! Never turn down extra points. However, if you know that you are going to be applying for a large auto loan or mortgage within the next 45 days then your best bet is to keep a $0 balance.

Either way you go - $0 balance or 1% credit utilization ratio - you will be showing the credit bureaus that you are a good credit risk. While you have the right to fully utilize the entire credit limit on your credit card accounts you are choosing to exercise discipline and financial restraint. In other words, you are not maxing out your credit cards each time the shoe store comes out with its hottest new releases. Showing the credit bureaus that you have this discipline and restraint will result in a reward - extra points for your credit scores!

Have credit card debt that you need to consolidate? Click here to compare consolidation options.

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Michelle Black is an author and a credit expert with over a decade of experience, the credit blogger at HOPE4USA.com, a recognized credit expert on talk shows and podcasts nationwide, a contributor to the Wealth Section of Fort Mill Magazine, and  a regularly featured speaker at seminars up and down the East Coast. She is an expert on improving credit scores, credit reporting, correcting credit errors, budgeting, and recovering from identity theft. You can connect with Michelle on the HOPE Facebook page by clicking here. 

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Credit Reports

Knowing exactly what is on your credit reports and where your credit scores fall currently is the first step for anyone looking to build healthy credit.

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Credit Cards

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Credit Repair Tool Kit

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Real Results

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How to Spot a Scam!

How to Spot a Credit Repair Scam

I recently saw a sign that said:  “720 scores in 30 days guaranteed.” Since no one can truly and legally make this kind of guarantee I naturally knew that something was wrong. My team and I immediately investigated to find out more information. The company was selling alternate social security numbers. These types of numbers are illegal, even though the company in question promised otherwise on their website, and something you want to stay away from. (By the way, I sent out a secret agent, aka “Credit Man,” to remove these fraudulent signs from the side of the road so no one else would have the chance to be taken advantage of or to fall for this scheme.) Another common credit scam that has gained popularity in recent years is used by companies who will sell you seasoned credit cards to falsely elevate your credit scores. This practice is also illegal and you want to stay away from these companies as well. It is 100% possible to fix and improve your credit with a little time, a good plan, and some hard work. In the business of credit improvement, shortcuts are always either a scam or illegal. If it sounds too good to be true, then you want to avoid it.

Many people want help correcting inaccurate and erroneous information on their credit reports. Many others want help building excellent current credit but don’t who they can trust. It is important to be careful who you trust when it comes to correcting your credit report. There are a lot of companies out there who are scamming customers. These companies will take your money, will not help you to legally correct the errors, and – in the worst of cases – you may never even see them again.

Another factor to keep in mind when choosing a company to help you with your credit is that many companies desire to keep you in their program as long as they can. Why do these companies desire to keep you in their program so long? The reason is so they can continue to collect a monthly, residual fee for as long as possible. These companies are in no hurry to help you reach your goals. Our goal at HOPE, for over 12 years, has been to help you graduate from our program as quickly as possible. Because of this fact, our clients are our best referral source. When a HOPE client hears of a friend or family member having credit problems they are quick to say: “I know who can help you because they helped me.”

At least 25% of our clients have had a bad experience with ‘credit repair” companies in the past before they come to see our credit experts at HOPE. We love these customers because know we can restore their confidence that someone is doing things correctly. Integrity is at the center of all we do.

Remember, you always have the right to try to fix your credit on your own. However, most people simply do not have the time or the knowledge on the subject to do so. Also, those who try to fix their credit on their own usually pay more money in the long run than they would if they hired a reputable, professional company to assist them. If you would like to know more about the HOPE Program, please give us a call at 704-499-9696. Our team would love to hear from you and to answer your questions. You can be sure that the HOPE team will take great care of you.

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Personal and Business Credit Expert, Ron Lambright

About the author: Ron Lambright has been a credit expert for over 12 years and is the Executive Director of HOPE - a company he helped to found after struggling to overcome personal credit issues on his own twice before. He is a regular guest on radio talk shows and is featured weekly as the premier credit expert at training seminars in the Charlotte, NC region and up and down the East Coast.  Ron is an expert on teaching consumers how to achieve a "loan ready" credit report, improving credit scores, and an expert in the fields of business financing and business credit as well. You can connect with Ron on the HOPE Facebook page by clicking here.

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