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Consumer Watchdog

Consumer Watchdog: Credit Score Scams

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At MagnifyMoney, we harp on the importance of credit scores a lot. Primarily because a healthy credit score of 700+ can help keep the rest of your financial life much, much cheaper. A strong credit score means lower interest rates on mortgages and auto-loans, zero percent financing on a new car and eligibility to get the best credit cards on the market. In fact, people in the 700+ credit score range belong to an exclusive club: Club “Prime”.

Those striving to achieve prime status, or just staying in the club, must be diligent about monitoring both their credit scores and reports. Historically, people purchased credit scores directly from FICO or an approximate score could be bought from one of the three credit bureaus (Experian, Equifax and TransUnion). These days, sites like Credit Karma, Quizzle and Credit Sesame offer free credit scores – although these scores are not the FICO score but an approximation from the credit bureaus.

Unfortunately, people’s desires to obtain their free scores created an opening for thieves to create credit score scams.

Next time you see an email in your inbox offering a free credit score, take a moment to ensure it isn’t a scam.

How to spot a credit score scam

Hallmark traits of a scam email include a request for:

  • Social Security Number
  • Bank Account Information
  • Credit Card Details

Legitimate businesses offering free credit scores don’t ask for a credit card to be kept on file in order to see your score. They’ll only request a card on file if you’re using the site for credit monitoring.

Phishing emails often mirror emails sent from legitimate sites, so look for small changes like “Quizzles” instead of “Quizzle” or “Credit Carma” instead of “Credit Karma”.

[Read up on other ways to spot and report a phishing email]

But credit score sites ask for my Social Security Number

Credit score sites do request your social security number in order to do a soft pull of your credit score. Protect your personal information by going directly to the site yourself instead of clicking a link via email.

Also look for https:// at the beginning of the URL and a lock to display it’s a secure site.

Quizzle lock

“Free” Annual Credit Score Scam

No one is entitled to a free annual credit score.

This scam is used to confuse the general population into handing over personal information and possibly credit card or bank account information.

Everyone is entitled to pull a free annual credit report from each of the three credit bureaus, but these reports do not come with scores. There is no government mandate to provide the public with free annual credit scores.

Bear in mind, it is just as important – if not more so – to check your credit report as it is to monitor your credit score. The credit report determines the credit score, so any mistakes on your report will impact a score. Misreported information happens more often than you think, so be diligent about monitoring your credit report.

If you find incorrect information on your credit report(s), you can dispute it directly with the credit bureau:

Ways to get your credit report and score for free

The only government-endorsed site for a free annual credit report is conveniently named annualcreditreport.com. You can choose to pull all three credit reports at once or space them out throughout the year by pulling one at a time.

In recent years, many credit card lenders, banks and other financial companies have started offering free credit scores, both FICO and other versions.

Some credit card companies provide access to your credit score.

[Disclosure: LendingTree is the parent company of MagnifyMoney.]LendingTree, a loan comparison site, offers free credit scores to users.

View a comprehensive list of credit card lenders and companies offering customers a free credit score by clicking here.

Be diligent and proactive

Protecting your credit score and report is an important aspect of financial health. If you have any questions on how credit scores and reports work, be sure to explore our “Building Credit” section of the blog.

Follow us on Twitter @Magnify_Money for regular updates and recent financial news. 

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Erin Lowry
Erin Lowry |

Erin Lowry is a writer at MagnifyMoney. You can email Erin at [email protected]

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Outreach

Banking On Our Military: Protecting Service Members from Abusive Financial Practices

Uncle_Sam_(pointing_finger)

Today we honor the men and women who defend our freedom. In this country, we are extremely fortunate that so many brave Americans volunteer to serve in our armed forces. At incredible personal sacrifice, they go to some of the most dangerous corners of the world to make sure that we remain safe here at home.

My father served in the Army, and I have quite a few extended family members who have also served. I often think about my cousin, who is a nurse in the Navy. I very rarely see her, because she is constantly being sent all over the world. She has served in Afghanistan a couple of times, and often disappears without being able to tell us where she has been. I have so much respect for her willingness to drop everything and do what is asked of her. And, when I thank her, she tells me it is no big deal. And in her mind, it is not a big deal because so many other people who are ready to risk their lives, without hesitation, surround her.

On behalf of the entire team at MagnifyMoney, I want to thank all of the men and women of the armed forces for their service.

Although so many of us show our gratitude for the service of our veterans, there are some people who take advantage of our men and women in uniform, particularly in financial services. Some of the worst offenses include:

  • Debt collectors, who engage in illegal and abusive practices, targeted particularly at service members
  • Payday loan companies, who often use patriotic imagery and set up shop near bases, and charge extortionate prices
  • Banks, particularly targeting service members, with outrageous overdraft fees (a form of payday lending)
  • Mortgage companies (particularly servicing companies) that deny service members the protections that they deserve under the law
  • Large banks that make it too difficult to receive the protections of the Servicemembers Civil Relief Act (SCRA)
  • Any financial organization that doesn’t give our service members the benefit of the doubt

Uncle Bill 2Some businesses make a strategy out of exploiting our men and women in uniform, and their unique living situation. Fortunately, the CFPB has created an Office of Servicemember Affairs, led by Holly Petraeus. If you have experienced difficulties or unfair treatment from a financial organization, you can complain online to the CFPB, by clicking this link. They have a dedicated team that deals with service member complaints, and to-date have helped return $200 million to men and women in uniform.

We will deal with each of the biggest issues below.

Debt Collectors

Service members are uniquely at risk: credit defaults (failure to pay your bills) can result in having your security clearance revoked under the Uniform Code of Military Justice. And collection agencies know that.

Some collection agencies are particularly aggressive, and they will:

  • Contact your chain of command, trying to humiliate you into payment
  • Contact your spouse, making threats
  • Demanding payments from widows immediately, trying to get their hands on the death benefit

This happens far too often, and it is repulsive.

Remember that you have rights, and you do not have to tolerate abusive and illegal debt collection actions. Our recommendation:

  1. Make sure, particularly before a deployment, you have a power of attorney given to someone who can negotiate on your behalf with the debt collection agency. Typically this is a spouse or a parent.
  2. Immediately report any illegal contacts from the agency to the CFPB. Remember: they cannot contact your chain of command. They can only speak to you or someone you designated about your debt
  3. Restrict their ability to contact you, in writing. Below is a sample letter that you can use:

Dear [Debt collector name]:

I am responding to your contact about collecting a debt. You contacted me by [phone/mail], on [date] and identified the debt as [any information they gave you about the debt].

You can contact me about this debt, but only in the way I say below. Don’t contact me about this debt in other way, or at any other place or time. It is inconvenient to me to be contacted except as I authorize below.

You can only contact me at:

[Mailing address if you want to get mail]

[Phone number and convenient times if you want to be contacted by phone]

[If correct, include the following] My employer prohibits me from receiving communications like this at work.

Thank you for your cooperation,

[Your name]

Payday Loans

It is very easy to get stuck in a payday-lending trap. Although a payday loan may feel like an easy solution when you have an immediate need for money, it can become an expensive debt trap that becomes impossible to escape.

Fortunately, there are alternatives for service members. PenFed (a credit union), has a foundation. They have created a program: ARK (Asset Recovery Kit). This is basically a way to escape a payday loan: PenFed will lend you $500 for a $5 fee. No credit report is pulled, no interest is charged, and it is confidential and fast. However, in order to receive the money you need to sit with a consumer credit counselor. I believe this is a good requirement.

You can learn more about this program, and apply here.

Banks – and their Overdraft Fees

Payday lending companies typically charge $15 to $20 for every $100 that you borrow for 2 weeks.

Overdrafts on basic checking accounts can be even more expensive: they can be over $35 per incident. And some of the worst banks are the ones that target the military. When we recently reviewed the fees charged per branch, the absolute worst performer was Fort Hood National Bank, which targets the military. It makes $1.3 million per branch on banking fees – which is outrageous.

Given the mobile nature of a service member’s life, we recommend considering:

An internet-only bank, like Ally Bank has completely free ATM usage (including the reimbursement of other bank ATM charges anywhere in the US). In addition, there is no overdraft fee if money is transferred from your savings account to your checking account, and the overdraft fee is capped at $9 per day. You can compare that to other options on our checking account page.

There are certain financial organizations that target the military, and understand your unique needs. However, their overdraft fees are not always good deals, and their ATM networks are more limited.

cashRewards Credit Card from Navy Federal Credit Union: The Active Duty account is great if you can link a savings account or a line of credit. If you link a savings account, there is no fee for an overdraft transfer. And, if you need to borrow money, they offer a reasonable overdraft line of credit that is much cheaper than a payday loan or overdraft at a traditional bank. However, if you don’t have a line of credit or a savings account, you can be charged up to $60 per day in fees, similar to the large banks. In addition, you do receive $20 worth of ATM rebates per month (for active duty). If you go to the ATM 1 time per week, that should cover you.

Mortgage Companies 

Here is a common story: your house in underwater (you owe more money on your mortgage than your home is worth), and you receive a PCS (Permanent Change of Station). You feel stuck. When you call your mortgage company, they tell you that you don’t have any options.

They are wrong.

If you are in active duty (or just left), if you or your spouse have been injured in active duty, of if you have received a PCS, then you may be able to qualify for a military hardship on your mortgage.

Fannie Mae has created an entire resource guide here.

Freddie Mac has created a resource here.

I would recommend the following steps:

  1. Tell your mortgage company that you may qualify for military hardship, and you want to talk to a specialist. If you do not receive what you need, then
  2. Contact Fannie or Freddie (depending upon which one owns your mortgage). If your mortgage is not Fannie or Freddie, or you still don’t receive what you need, then
  3. Contact the CFPB Complaint Office.

Don’t wait to reach out. With mortgages, the earlier you reach out for help, the better.

In addition, you have certain protections from foreclosure. If you obtained your mortgage before you entered military service, than the lender is required to get a court order before they foreclose – even in states that do not require a court order. If the lender does receive a court order, and you can prove that you are unable to meet your financial obligations because of military service, the foreclosure must be stopped (or the mortgage adjusted).

Your SCRA Rights

When you join the military, you have certain protections under the SCRA (Servicemembers Civil Relief Act). Namely:

  • Any debt that you had before entering military service (including mortgages, student loans, credit cards and other loans) cannot charge an interest rate higher than 6% while you are in the military. That can be a massive reduction (especially on credit cards), and you should make sure you take advantage of it. Call your lender and tell them you are eligible for SCRA interest rate relief. (Some banks, like Chase, will reduce the interest rate further. Others, like Bank of America, charge the full legal max)
  • You cannot be evicted if your monthly rent is less than $3,047.45 per month.
  • You have protection from foreclosure (as detailed above)

There are some additional rights – which are summarized well here.

Common Decency

Sometimes banks just lack common sense. When my cousin was deployed, she ended up paying her credit card bill a week late. (She couldn’t pay earlier because she was on a ship in the Pacific, called at a moment’s notice). The credit card company charged her a late fee and increased her interest rate. When she explained that she was in the Navy, they didn’t budge.

Everyone is rushing to wave the red, white and blue on Veteran’s Day. But real patriotism is not taxing our service members with obscene charges. That ranges from the small (nickel and diming on late fees) to the outrageous (harassing a widow, illegally, within 24 hours of her husband’s death to collect on a payday loan).

To all service members: I thank you for your service. I encourage you to reach out to us ([email protected]) if we can be of any help. And I urge you to complain to the CFPB if you run into trouble. You make too many sacrifices on our behalf; banks and lenders should not have the ability to take advantage of you.

Uncle Sam image taken from Creative Commons.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Nick Clements
Nick Clements |

Nick Clements is a writer at MagnifyMoney. You can email Nick at [email protected]

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Earning Interest, Eliminating Fees

Should Banks Start Shutting Down Branches?

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As an early adopter of online-banking, I used to only set foot in a bank branch once a month when I needed to deposit rent. It wasn’t even my bank’s branch either. My landlord requested I directly deposit money into his checking account. He gave me his routing number and I would dutifully trudge three blocks to his community bank, handover my check and deposit slip and refuse a monthly pitch to open an account myself.

Last month, I’d had enough.

After an inciting incident of noticing I merely had a handful of checks left, I asked my landlord if we could transition to a simple wire transfer. Instead of taking 15 minutes of my time to walk to a community bank and deposit rent, I could simply click a few buttons on my computer and pay my rent.

He agreed and I, like many others, am back to being an exclusive online-bank user, with no need to visit a bank branch.

As Internet-only banks continue to spring up and online-banking becomes the new normal, traditional banks will be forced to answer a tough question: “Should bank branches be getting shut down?”

Brick-and-mortar branches are expensive

According to data from Federal Deposit Insurance Corp, the number of U.S. bank branches has dropped 5 percent since 2009.

American Banker noted some of these closures are due to mergers and acquisition deals between banks, which would naturally cause consolidation of branches that overlap.

Brick-and-mortar branches, especially underperforming ones, are costly to banks as they must pay for staff, property, and utilities expenses. Transitioning more customers to online-banking and cutting under-performing branches could help banks reduce costs.

Underperforming branches are qualified as banks doing no more than 3,000 transactions per month. Underperforming branches have risen from 21.9 percent in 2011 to 25 percent in 2014.

Internet-only banks provide less expensive products

It is no secret leaving money with traditional banks can incur asininely high fees for customers.

In fact, your neighborhood bank branch may be incurring one million dollars in hidden fees between overdraft charges, account maintenance fees and out-of-network ATM fees.

Internet-only banks, such as Ally, Axos Bank and Charles Schwab offer products with little-to-no fees.

These banks are able to afford these cost-effective products and give customers a better deal by forgoing the traditional brick-and-mortar branches.

You can get fee-free accounts (yes, including no ATM fees)

Internet-only banks actually do offer fee-free accounts, even no ATM fees. Axos Bank offers a fee-free checking account with no ATM fees (and reimburses fees charged at an ATM terminal), no overdraft fees and no monthly minimums or maintenance fees.

And lest we forget to mention, Internet-only banks also offer much higher interest rates on their savings accounts.

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What about grandma and grandpa (or non-smartphone users)?

Traditional branches from banks and credit unions aren’t likely to completely go away anytime soon. However, banks looking to protect their revenue by closing underperforming branches will need to education their customers on how to use online portals. Or long-time customers and non-smartphone users may leave their bank in favor of one offering an in-person experience.

From a financial perspective, banks will likely starting shutting down branches (or at least some) over the next few years. But it will be a long time before a bank branch is as antiquated as a CD player.

[Inspired by this original article on American Banker.]

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Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Erin Lowry
Erin Lowry |

Erin Lowry is a writer at MagnifyMoney. You can email Erin at [email protected]

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