Redact your Medicare card to reduce ID theft risk
Dear Liz: Is there an alternative to having my Social Security number as my Medicare number? This seems to fly in the face of all we have been taught as to keeping our financial identifiers secret.
Answer: More than half the states have banned the use of Social Security numbers on health insurance cards, but those laws don’t apply to the federal Medicare program. Unless Congress acts to change the federal law, you’re stuck with having your Social Security number as your Medicare identifier.
The Privacy Rights Clearinghouse recommends you protect yourself from identity theft by making a copy of your Medicare card and using a black marker to cross out the last four digits of your Social Security number, or cutting out the last digits with scissors. Then you could carry that version of your card, so that if your wallet is stolen the thief doesn’t have access to your full number. You would still need to bring your original card the first time you visit any new healthcare provider, but you wouldn’t have to carry it with you all the time.
New rules may help more underwater homeowners
Dear Liz: I have an adjustable-rate mortgage that is currently at 3.125%. I’d like to fix the rate, but no one will even discuss it with me because my house has been appraised at less than $100,000 and the balance of the mortgage is $144,319. I have never been late, and my credit scores are above 800. What can I do? I don’t want a mortgage modification. I just want a fixed rate.
Answer: If your loan was backed by Fannie Mae or Freddie Mac, and if it was originated before June 1, 2009, you may be in luck, thanks to recent improvements to the federal government’s Home Affordable Refinance Program, or HARP.
Federal officials eliminated certain fees and barriers that made lenders reluctant to refinance underwater mortgages. They also eliminated the limit on how far underwater you could be to get help. In the past, you could owe no more than 125% of a home’s value.
You’ll first need to find out whether you have a Fannie Mae or Freddie Mac loan. You can visit http://www.fanniemae.com/loanlookup or call (800) 7FANNIE ([800] 732-6643). You’ll find information for Freddie Mac at http://www.freddiemac.com/corporate or by calling (800) FREDDIE ([800] 373-3343). The toll-free numbers are open from 5 a.m. to 5 p.m. Pacific time.
Borrowers must be current on their mortgage payments with no late payments in the previous six months and no more than one late payment in the previous 12 months. Loans that have been refinanced under the old HARP guidelines aren’t eligible for another refinance.
If your lender isn’t offering HARP refinances, you can search for others that are. You may want to contact a counselor approved by the Department of Housing and Urban Development (referrals at http://www.hud.gov) to help you through the process.
Don’t make the mistake of entering “HARP” or “Home Affordable Refinance Program” into a search engine. Most of the links that will turn up will be to for-profit sites, not all of them reputable. For the real deal, visit http://www.makinghomeaffordable.gov or call (888) 995-HOPE ([888] 995-4673).
Not all loans help your scores
Dear Liz: Here’s a cautionary note you may want to share. I filed for bankruptcy almost three years ago. Many sites recommend taking a small personal loan or purchasing something small, like furniture, to pay for over time and improve your credit. So I bought a sofa from a local retailer with a no-interest loan deal. It is now almost completely paid off. When I checked my credit report recently, I noticed the installment loan wasn’t there. I called the retailer and found that they didn’t report to any credit bureaus. The lesson, of course, is to not presume that just because you can get a loan from somewhere, it will be reported on your score. I now have a sofa I didn’t really need and no benefit to my credit. And I feel stupid for not thinking to ask.
Answer: Plenty of lenders don’t report to credit bureaus. Even some credit unions, which are normally consumer-friendly, opt to report to only one credit bureau.
If you’re trying to rehabilitate battered credit scores, you want accounts to be reported to all three bureaus so that all three of your FICO credit scores (one from each bureau) can benefit. It doesn’t do your scores any good if a loan you’re paying on time isn’t reported to any bureau, and it does you only limited good if it’s reported to just one bureau because your other two scores won’t benefit.
You typically can find out simply by asking before you apply for a loan whether the creditor reports to all three bureaus.
The fastest way to improve your scores is to have both installment and revolving accounts. Revolving accounts include credit cards, but you don’t necessarily need to borrow money to improve your scores. Using a credit card and paying it in full each month also can help. If you don’t have a card, consider applying for a secured version, which gives you a credit limit equal to an amount you deposit with the issuing bank. But again, make sure the issuer reports the account to all three bureaus before you apply. You can find secured-card offers at LowCards.com, CardRatings.com, CreditCards.com and other sites.
How to get a house sold fast
Dear Liz: My elderly mother lives in another state and her health is deteriorating. We want her to come live with us, but her home has been on the market for more than a year and hasn’t sold, even after several price cuts. She’s depressed and we’re getting frantic. What can we do?
Answer: If her goal is to sell the house, she probably needs to cut the price even more. In most real estate markets today, what gets a home sold is a truly competitive price.
You also might consult an experienced real estate agent about what low-cost improvements could speed the sale. If the home is cluttered or stuffed with furniture, for example, removing one-third to one-half of the household contents can make the space seem dramatically larger. Your mom will be packing and discarding all this stuff anyway, and starting the process now can help sell the home. If she’s not able to manage this alone, consider taking a week or so off to help her or hiring a professional organizer to assist with the process.
Other relatively inexpensive fixes can include minor repairs, refreshing the landscaping, washing the windows and deep cleaning the house. Your mom shouldn’t embark on any major projects because she’s unlikely to recoup the expense. But the money she spends getting her home ready for sale can be deducted when she determines whether she has any taxable profit on the sale. (Typically $250,000 of home sale profit is tax-free. The limit is $500,000 for married couples.)
Another alternative is to simply move her in with you and rent out the home, but trying to manage a rental long distance can be a hassle. If that turns out to be your best option, consult the real estate agent for referrals to good property management firms.
Bad credit traps job seeker
Dear Liz: How do you recover from bankruptcy? My daughter lost a very good job and got upside down with her house, so she had to file for bankruptcy. She is working now in a very low-paying job but cannot find a good job in her field of finance. Everything goes well in the interviews, but then they check her records for bankruptcy. Once they learn that she was bankrupt, they will not hire her. How can she dig out of this predicament?
Answer: Federal law prohibits employers from using a bankruptcy filing as a reason not to hire (or to fire or decline to promote) someone. However, most states allow employers to check credit reports, and employers are allowed to use the negative marks they find there as a reason to not hire someone. Since most people who file for bankruptcy have plenty of late payments and charge-offs leading up to the filing, that gives employers the legal cover they need to refuse to hire someone with a checkered financial past.
Interestingly, there’s no research or other evidence that indicates bad credit leads to problems on the job, such as theft or even poor performance. Yet employers continue to use credit checks to screen out job applicants for a wide variety of jobs.
Only six states — California, Connecticut, Hawaii, Maryland, Oregon and Washington — restrict employers’ ability to check credit reports, and often there are exceptions for jobs in finance or those that involve access to large amounts of cash.
Unfortunately, that means your daughter’s troubled financial past may continue to haunt her for years to come unless she finds an employer willing to overlook it. Most negative marks stay on credit reports for seven years, while bankruptcies can stay on for up to 10 years.
