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Q&A: More credit score drama over a missed payment

May 20, 2024 By Liz Weston

Dear Liz: You responded to a woman who was concerned that a missed payment had hurt her credit score. My situation is also about a missed payment. In fall 2018, I received a dunning letter from a bill collector. I did a ton of research because I never received the bill that ruined my previously stellar credit rating (840). My rating sank by 200 points even after the retailer involved acknowledged that I never received the bills. Their office showed all the bills, although addressed correctly, were returned as undeliverable. The executive with whom I had lots of interaction wrote all the bureaus explaining the error was the retailer’s. The credit bureaus did nothing to restore my credit rating. It has been six years and I continue to pay in full on time as I had for the 45 years before 2018. My payment behavior has done little to improve my low score. Maybe 2025 will bring relief, as that will be seven years since the collection letter.

Answer: Your situation offers the opportunity to clarify a few things that confuse many consumers.

The first and most important: We are responsible for paying our credit card bills whether we receive those bills or not. Mail goes astray, emails wind up in junk folders, but if there’s a balance on our credit cards we’re supposed to pay at least the minimum when the due date rolls around. As mentioned in the previous column, setting up automatic payments can prevent missed payments. At a minimum, you should mark your calendar with your cards’ due dates and submit your payments, preferably electronically, in time to avoid late fees. Having online access to your credit accounts can help you track balances, and you can set up email or text alerts to remind you to pay.

Next, the executive you talked to either didn’t understand the credit reporting system or wasn’t entirely frank with you. The credit bureaus’ files reflect what creditors tell them. It’s a dynamic system, with information constantly being updated. If the retailer agreed that the late payments shouldn’t be reported, then it should have stopped reporting the erroneous information. Instead of corresponding with the bureaus, the executive should have been talking to the retailer’s finance arm.

If the executive provided you with a copy of the letter sent to the bureaus, however, you can use that to correct the record. Dispute the late payments with the bureaus and use the letter to back up your claim.

By now, your scores should have regained most of the ground lost to this unfortunate incident. If that’s not the case, something else is wrong with your credit reports. You should request free copies of your reports from AnnualCreditReport.com and scrutinize them closely. (If you’re asked for a credit card, you’re on the wrong site.)

Filed Under: Credit Cards, Credit Scoring, Q&A Tagged With: Credit Bureaus, Credit Cards, credit report, Credit Score, Credit Scores, credit scoring, late payment, Late Payments

This week’s money news

May 13, 2024 By Liz Weston

This week’s top story: Home insurance companies may use aerial images to drop policies. In other news: how participating in campus protests could affect your financial aid, the worsening prescription drug shortage and how to cope with it, and balancing homebuying and summer travel.

Home Insurance Companies May Use Aerial Images to Drop Policies
Insurance companies may check photos of your home before deciding whether to renew your policy.

How Participating in Campus Protests Could Affect Your Financial Aid
Involvement in college protests could cost you your financial aid and more.

The Worsening Prescription Drug Shortage and How to Cope With It
Causes for the shortage vary but include a tornado-damaged Pfizer plant in North Carolina.

Yes, You Can Balance Homebuying and Summer Travel
Embarking on a getaway during your homebuying journey is possible — if you have a plan and don’t completely unplug.

Filed Under: Liz's Blog Tagged With: balancing homebuying and summer travel, campus protests, financial aid, home insurance policies, prescription drug shortage 2024

Q&A: Need help with your IRA? Call a CPA, or maybe a PFS

May 13, 2024 By Liz Weston

Dear Liz: My husband and I have substantial pre-tax savings in our workplace retirement plans and IRAs. Based on where those balances would be in retirement, we would definitely be paying more in taxes than now, and face the potential of running out of money if forced to withdraw it all. You often refer people to the Garrett Planning Network for fiduciary financial planners. Is there a similar organization for tax planners who can provide a strategy for rolling over our pre-tax accounts in order to take part of the hit now, and reduce taxes later? The financial planners we’ve found through Garrett have some tax knowledge, but refer us to tax professionals for more in-depth tax analysis.

Answer: Many fee-only financial planners work with tax professionals such as certified public accountants — CPAs — to craft Roth conversion plans that can reduce future taxes. If you want an all-in-one pro, though, you could consider hiring a CPA who is a personal financial specialist, or PFS. The PFS credential is similar to the certified financial planner credential, but is granted only to CPAs. To find one in your area, you can use the American Institute of CPAs’ directory at https://www.aicpa-cima.com/directories. Click the plus sign next to “Find a credential/designation holder,” select “PFS” in the box titled “Credential/designation name” and then input your location.

Filed Under: Financial Advisors, Q&A, Taxes Tagged With: AICPA, CPA, CPA-PFS, financial advice, personal financial specialist, Roth conversion, tax advice, Taxes

Q&A: Safeguarding your personal data is hard. Here are a few tips.

May 13, 2024 By Liz Weston

Dear Liz: I was recently alerted that my Social Security number has been found on the dark web. My information was part of the AT&T breach that took place recently. I am no longer an AT&T customer and haven’t been for several years, but they have not made any contact with me. What do I do to keep myself safe and how do I get my information removed from the dark web? Why hasn’t AT&T reached out to me?

Answer: As a consumer, you don’t have much power. Companies often demand your personal data, such as Social Security numbers, before they’ll do business with you. Once your information is in their databases, you have no control over what happens to it. And if your information is leaked, there’s no way to remove it from the dark web.

You can’t even be sure how your information got there, given the sheer volume of database breaches in recent years. If you’re an adult with a Social Security number, chances are pretty good that number can be found on the black market sites where criminals buy and share information, says Eva Velasquez, chief executive of the Identity Theft Resource Center, a nonprofit that helps identity theft victims.

In other words, your data may have been compromised long before the latest incident, which AT&T says affected 73 million current and former customers. AT&T began notifying impacted customers via letters or email starting in April. Those customers should have received an offer for free credit monitoring.

There are a few things you can do to make yourself a bit less vulnerable to identity theft, such as putting freezes on your credit reports, not clicking on links in texts or emails if you didn’t initiate the transaction and using digital wallets or other secure payment methods.

Also, don’t be your own worst enemy. Beware of sharing personal information (birth dates, address, phone number, etc.) on social media. Consider limiting your audience to people you know and trust, Velasquez says.

The Identity Theft Resource Center also recommends using passkeys, a technology that replaces passwords, whenever you’re offered that option. If a passkey is not available, the center suggests using passphrases of 12 characters or more rather than shorter passwords. A passphrase is a sequence of words that can be personalized for easier memorization, typically with numbers added and a mix of capital and lowercase letters. The center gives an example of a passphrase for a 2015 University of Texas graduate: “H00kEmH0rns2015.” You’ll still need unique passphrases for every account and site. You also should turn on two-factor authentication or multi-factor authentication where available. This requires an extra step, such as getting a code on your phone or from an app, but this will make your accounts harder to compromise.

Filed Under: Identity Theft, Q&A, Scams Tagged With: credit freezes, dark web, Identity Theft, multi-factor authentication, passkey, passwords, Social Security number, two-factor authentication

This week’s money news

May 6, 2024 By Liz Weston

This week’s top story: 7 surprising facts about credit cards. In other news: Weekly mortgage rates rise again, look to last-minute scholarships when you can’t control FAFSA delays, and best cities for freelancers and self-employed workers 2024.

7 Surprising Facts About Credit Cards
Card issuers have a lot of leeway in terms of when and how they can make changes to your account. Some changes may be unwelcome, but others can work in your favor.

Weekly Mortgage Rates Rise Again, While Home Sales Increase, Too
Mortgage rates have climbed five weeks in a row and are now at their highest levels since the week before Thanksgiving.

No Financial Aid Package Yet? Look to Last-Minute Scholarships
You can’t control FAFSA delays, but you can control whether you research and apply for scholarship awards to lower your college costs.

Best Cities for Freelancers and Self-Employed Workers 2024
These 10 metro areas have a relatively large percentage of self-employed workers, relatively low state income tax rates and more.

Filed Under: Liz's Blog Tagged With: best cities for freelancers and self-employed workers 2024, Credit Cards, FAFSA delays 2024, scholarships, weekly mortgage rates May 2024

Q&A: Is my wife’s pension at risk?

May 6, 2024 By Liz Weston

Dear Liz: My wife worked in the private sector for 30 years and paid into Social Security before starting her current job in the public sector. She will get a small pension from this job when she decides to retire. It’s our understanding that the windfall elimination provision won’t apply to her since she contributed to Social Security for 30 years. Is that correct? Will she also be able to receive her small pension?

Answer: Yes and yes. The windfall elimination provision normally applies to people who receive pensions from jobs that didn’t pay into Social Security. This provision can reduce, but not eliminate, the benefits they get from Social Security. However, the provision doesn’t apply to people who have 30 or more years of “substantial earnings” from jobs that did pay into Social Security. The amount considered “substantial” varies by year; in 2024, it’s $31,275.

Filed Under: Q&A, Social Security Tagged With: government pension, Pension, Social Security, WEP, windfall elimination provision

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