First, let me state that the problem with the credit industry in America is politicians. Politicians in the name of campaign support have protected this industry and allowed a huge problem to occur. There is very little Federal regulation of credit card companies.
So now that Hillary is running for President, she is concerned about fixing this problem. She never seemed to be concerned while she was serving as a Senator.
Now some of her colleagues have some great legislation on the table that should be passed. This Fair Credit for Families Agenda is a joke. This is what concerns me about the Clintons. They are blatantly political and offer nothing but political sound bites that don’t solve anything.
Here is her latest solution for credit industry reform:
· Cap penalty interest rates at 30% - Well Senator Clinton, that is just about where most penalty rates are right now. Capping them at 30% does nothing for the American consumer and still protects the credit industry.
· Prevent card companies from unfairly increasing interest rates – In order to do this, politicians would be forced to write legislation that at the end of the day, they just will not write. The only way to solve that problem is to forbid a company to raise rates unless the card holder was late two times or more. Even then, there should be some restrictions. If you take away the universal default clause, they find other creative ways to raise rates.
· Credit card companies cannot raise your interest rate without your affirmative written consent – I really cannot make this stuff up.
“Hillary will require lenders to obtain written consent from a borrower before any rate increases or change in terms become effective.” So, if I don’t want a credit card company to raise my rates, I will just write them and tell them “don’t do that!” or just refuse to agree to it. What did she say?
We need a real leader to stand up and stop the abuse. I only write these blogs about her press releases so that you get the real information. These sound bites are nothing more than political banter. Please don’t elect four years of this sort of thing.
Please give us a real leader to vote for!
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
Thursday, January 31, 2008
Tuesday, January 29, 2008
It is a Good Thing that Senator Clinton has this Housing Mess Figured Out!
NEWS FLASH!!!!!! Senator Clinton revealed her plan yesterday to “bring our nation’s financial house in order.” This was from her press release.
“Simply put, in order to bring our nation's financial house in order, we need to begin with housing itself. That is why my economic stimulus plan calls for $30 billion in assistance to states and communities to help them fight foreclosures. I have also called for a 90-day moratorium on sub-prime foreclosures and a five-year freeze in rates on sub-prime adjustable mortgages.”
There are two things that frighten me about politicians. First, they could potentially know very little about the economy and the housing markets. During the political season, politicians tend to turn into economists. Second, politicians actually think that the American people are that stupid. If it were as easy as 1-2-3, the current administration would have already fixed it.
First, there is an estimated 1 trillion dollars of adjustable rate mortgages still to reset over the next few years. Throwing $ 30 billion in aid to the housing problem is like giving an antibiotic to someone who has a fatal disease. In addition, bailing out homeowners by providing assistance creates moral hazard. This is not a good precedence.
Second, by freezing sub-prime rates, you throw out the basis of contract law. President Bush already tried to offer this as a solution. However, he soon found out the disaster he would have created by doing so. This type of thing creates huge problems in our credit and investment markets. The lawsuits could potentially get completely out of control.
Third, please stop calling it a sub-prime problem. It goes way beyond sub-prime mortgages.
When evaluating the candidates, remember political sound bites offering “the” solutions is the method of getting elected. Don’t be fooled that these politicians actually have an answer. If there were a solution, the current administration would have already figured it out.
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
“Simply put, in order to bring our nation's financial house in order, we need to begin with housing itself. That is why my economic stimulus plan calls for $30 billion in assistance to states and communities to help them fight foreclosures. I have also called for a 90-day moratorium on sub-prime foreclosures and a five-year freeze in rates on sub-prime adjustable mortgages.”
There are two things that frighten me about politicians. First, they could potentially know very little about the economy and the housing markets. During the political season, politicians tend to turn into economists. Second, politicians actually think that the American people are that stupid. If it were as easy as 1-2-3, the current administration would have already fixed it.
First, there is an estimated 1 trillion dollars of adjustable rate mortgages still to reset over the next few years. Throwing $ 30 billion in aid to the housing problem is like giving an antibiotic to someone who has a fatal disease. In addition, bailing out homeowners by providing assistance creates moral hazard. This is not a good precedence.
Second, by freezing sub-prime rates, you throw out the basis of contract law. President Bush already tried to offer this as a solution. However, he soon found out the disaster he would have created by doing so. This type of thing creates huge problems in our credit and investment markets. The lawsuits could potentially get completely out of control.
Third, please stop calling it a sub-prime problem. It goes way beyond sub-prime mortgages.
When evaluating the candidates, remember political sound bites offering “the” solutions is the method of getting elected. Don’t be fooled that these politicians actually have an answer. If there were a solution, the current administration would have already figured it out.
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
Friday, January 25, 2008
8 Things You Need to Know About Investing in Tough Markets
1) Understand Diversification – Don’t confuse quantity of investments with diversification. Proper diversification in its simplest form comes down to how much you have invested in anything classified as a stock and anything classified as bonds, fixed investments, or cash.
2) Your financial advisor, most financial media, Wall Street, your Mutual Fund company, etc. will always tell you to just hold on for the long-term. Sometimes that makes sense. However, there are times when it doesn’t make sense. Your response should be that long-term is fine. What can you do for me today to reduce risk and be more balanced?
3) Your financial advisor is probably not managing your money. They have invested it and are watching it decline. Make sure you understand the difference between investing money and investing then managing money. The latter helps you avoid risk.
4) If you have 100% in 10 stock funds, you have 100% in stocks with no diversification. Remember there are markets where it doesn’t matter how your stock is classified. There are environments where ALL stocks go down at the same time.
5) The salespeople marketing “guaranteed not to lose” investment annuity programs come out of the woodwork. Remember that you don’t get anything for free. If these programs were really as advertised, we would all be using them. The best advice I can give is to stay away unless an average of 4 to 5% a year for the rest of your life makes sense.
6) If you are going to reduce your stock positions, do so gradually and do so when the market goes through periods of strength.
7) If this is a bear market, they last on average 406 days with an average loss of a negative -30%.
8) Bear markets don’t fall in a straight line. They fall over time with a combination of stock market rallies and declines.
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
2) Your financial advisor, most financial media, Wall Street, your Mutual Fund company, etc. will always tell you to just hold on for the long-term. Sometimes that makes sense. However, there are times when it doesn’t make sense. Your response should be that long-term is fine. What can you do for me today to reduce risk and be more balanced?
3) Your financial advisor is probably not managing your money. They have invested it and are watching it decline. Make sure you understand the difference between investing money and investing then managing money. The latter helps you avoid risk.
4) If you have 100% in 10 stock funds, you have 100% in stocks with no diversification. Remember there are markets where it doesn’t matter how your stock is classified. There are environments where ALL stocks go down at the same time.
5) The salespeople marketing “guaranteed not to lose” investment annuity programs come out of the woodwork. Remember that you don’t get anything for free. If these programs were really as advertised, we would all be using them. The best advice I can give is to stay away unless an average of 4 to 5% a year for the rest of your life makes sense.
6) If you are going to reduce your stock positions, do so gradually and do so when the market goes through periods of strength.
7) If this is a bear market, they last on average 406 days with an average loss of a negative -30%.
8) Bear markets don’t fall in a straight line. They fall over time with a combination of stock market rallies and declines.
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
Wednesday, January 23, 2008
What To Do If We Really Are In A Bear Market
The stock market has taken a dramatic plunge over the almost past 3 months. However, today it looks like it might have found a temporary resting spot. At one point today, the NASDAQ looked like it was in the biggest amount of trouble with the technology index going as low as 21% from its high in 2007. If the stock market would have closed at those levels, the tech sector would officially be in a bear market.
Fortunately, the markets put in a strong rebound and put investors’ nerves at rest, at least for the time being. Are we out of the woods? Well we have to look at how bear markets work. On the front page of the Prudent Money website I illustrated how the stock market tends to respond in bear market environments.
Between September 2000 and March 2001, investors LOST -26%. YIKES!!
Between March 2001 and May 2001, investors GAINED 17%. YEA!!
Between May 2001 and September 2001, investors LOST -26%. YIKES!!
Between September 2001 and March 2002, investors GAINED 21%. YEA!!
Between March 2002 and July 2002, investors LOST -31%. DOUBLE YIKES!!!
Between July 2002 and August 2002, investors GAINED 27%. YEA!!!!
Between August 2002 and October 2002, investors LOST -19%. YIKES but YEA it is over with.
It is exceptionally volatile. This is the problem with bear markets. The market will plunge in value. Then it will make huge gains. Investors will feel as if things have turned around. Then the market plunges again. It is hope to despair to hope and vice versa.
Do I feel like this is over? My stance has been all along that we could experience a bear market in stocks. I do think that we are in one. The problem causing the drop in stocks is far from solved. So, what steps should you take now?
1) Don’t Panic – You cannot make rationale decisions when your emotions are running wild.
2) IF you feel like we are in a bear market, then reduce your stock holdings as the market takes a break from the selling and increases in value. Also keep in mind that you might be wrong. If the market just turns back into a bull market, also know that there is a good chance that we will see THE bear market sometime in the next year or so. Either we see THE bear today, or THE bear tomorrow. Ultimately, I don’t think that we escape the bear.
3) If you are just on the fence, evaluate how much money you have made in the last 5 years being invested in a bull market. Determine how much of that you are willing to risk. Draw a line in the sand that you are not willing to cross.
4) If you are going to reduce your stock holdings, reduce them into strength. Look at the chart above and how the market does go through periods of big returns in the midst of bear markets. Make sure and use that to your advantage. If you are unsure as to the percentage in stocks, read this study to see how much risk you might be taking.
The bottom line is to prevent panic and emotion by having a game plan and knowing what you are going to do in the event that your game plan is wrong. Most importantly, don’t make any of those decisions without God’s peace.
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
Fortunately, the markets put in a strong rebound and put investors’ nerves at rest, at least for the time being. Are we out of the woods? Well we have to look at how bear markets work. On the front page of the Prudent Money website I illustrated how the stock market tends to respond in bear market environments.
Between September 2000 and March 2001, investors LOST -26%. YIKES!!
Between March 2001 and May 2001, investors GAINED 17%. YEA!!
Between May 2001 and September 2001, investors LOST -26%. YIKES!!
Between September 2001 and March 2002, investors GAINED 21%. YEA!!
Between March 2002 and July 2002, investors LOST -31%. DOUBLE YIKES!!!
Between July 2002 and August 2002, investors GAINED 27%. YEA!!!!
Between August 2002 and October 2002, investors LOST -19%. YIKES but YEA it is over with.
It is exceptionally volatile. This is the problem with bear markets. The market will plunge in value. Then it will make huge gains. Investors will feel as if things have turned around. Then the market plunges again. It is hope to despair to hope and vice versa.
Do I feel like this is over? My stance has been all along that we could experience a bear market in stocks. I do think that we are in one. The problem causing the drop in stocks is far from solved. So, what steps should you take now?
1) Don’t Panic – You cannot make rationale decisions when your emotions are running wild.
2) IF you feel like we are in a bear market, then reduce your stock holdings as the market takes a break from the selling and increases in value. Also keep in mind that you might be wrong. If the market just turns back into a bull market, also know that there is a good chance that we will see THE bear market sometime in the next year or so. Either we see THE bear today, or THE bear tomorrow. Ultimately, I don’t think that we escape the bear.
3) If you are just on the fence, evaluate how much money you have made in the last 5 years being invested in a bull market. Determine how much of that you are willing to risk. Draw a line in the sand that you are not willing to cross.
4) If you are going to reduce your stock holdings, reduce them into strength. Look at the chart above and how the market does go through periods of big returns in the midst of bear markets. Make sure and use that to your advantage. If you are unsure as to the percentage in stocks, read this study to see how much risk you might be taking.
The bottom line is to prevent panic and emotion by having a game plan and knowing what you are going to do in the event that your game plan is wrong. Most importantly, don’t make any of those decisions without God’s peace.
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
Tuesday, January 22, 2008
Turning Your 401(k) Plan Into An ATM Machine
I thought that I had seen just about everything when it comes to borrowing money. There are so many crazy programs on the market that end up putting the consumer in a trap. You can watch what is happening in the mortgage markets to get a good example.
Those loan programs were the worst of consumer traps.
Well a company had the bright idea of marketing a program to companies that allows their employees to have a debit card on their 401(k) plan. Now that you can no longer treat your home like an ATM machine, in steps your 401(k) plan.
Here is how it works – An employee gets approved for a loan line. They basically have that amount of money, approved to borrow, waiting to be borrowed for any reason. Interest isn’t charged until the employee takes money out of the account through the use of the debit card. They can take as much or as little as they want.
Then the company who set up the program bills them directly like a credit card. The employee pays a pretty stout interest rate on that money and a nice up-front fee.
There should be watch groups that prevent these types of products from being introduced into the market place. These 401(k) plans should be considered sacred. They are there for an individual’s future. From the standpoint of a loan, borrowing from a 401(k) plan should be in extreme emergency situation where there is just not any other choice.
Retirement saving in America is dangerously low. I am hoping that a program like this does not catch on. The last thing in the world consumers need is the temptation to just take money out as they wish from their 401(k) plan.
Incidentally, when you pay back interest on a loan from your 401(k) plan, you are paying it back with money that has already been taxed. Down the road when you take out that money that was used to pay the interest on your loan, you pay taxes on it a second time.
At least with a 401(k) loan and not this debit card program, you pay yourself back the interest and not out to some company.
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
Those loan programs were the worst of consumer traps.
Well a company had the bright idea of marketing a program to companies that allows their employees to have a debit card on their 401(k) plan. Now that you can no longer treat your home like an ATM machine, in steps your 401(k) plan.
Here is how it works – An employee gets approved for a loan line. They basically have that amount of money, approved to borrow, waiting to be borrowed for any reason. Interest isn’t charged until the employee takes money out of the account through the use of the debit card. They can take as much or as little as they want.
Then the company who set up the program bills them directly like a credit card. The employee pays a pretty stout interest rate on that money and a nice up-front fee.
There should be watch groups that prevent these types of products from being introduced into the market place. These 401(k) plans should be considered sacred. They are there for an individual’s future. From the standpoint of a loan, borrowing from a 401(k) plan should be in extreme emergency situation where there is just not any other choice.
Retirement saving in America is dangerously low. I am hoping that a program like this does not catch on. The last thing in the world consumers need is the temptation to just take money out as they wish from their 401(k) plan.
Incidentally, when you pay back interest on a loan from your 401(k) plan, you are paying it back with money that has already been taxed. Down the road when you take out that money that was used to pay the interest on your loan, you pay taxes on it a second time.
At least with a 401(k) loan and not this debit card program, you pay yourself back the interest and not out to some company.
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
Monday, January 21, 2008
Another Rough Week for the Bull
Are we in a bear market? A few weeks ago I posed that question. This past week confirmed at least in my mind that we are in a bear market. We are very close to the official 20% decline line that is used by many to classify a drop as a bear market. Of course, today the market is closed. However, the futures markets are trading in other countries. The trading is absolutely horrible. IF the Dow Jones were to open right now, it would be down 400 to 500 points. That would put us in official bear market territory.
So, if you are invested in stocks and you want to reduce your risk, how should you go about doing that?
Please know that I am not suggesting that anyone sell their investments. I cannot give advice in these pages. I just hope that you found agreement with me months ago when I was writing about the risk in the markets and made the appropriate moves at that point.
I think that we are pretty close to a “temporary” bottom. Remember, bear markets don’t fall in a straight line. They go through periods of declines. They rebound for a period of time, then the selling and the declines resume. This happens over a period of time until one day the market has found a real bottom.
So, if you are looking to sell some of your holdings and reduce the risk in your portfolio, one method would be to use bear market rallies as an opportunity to make sells. As the market rallies, you might slowly sell some of your equity positions.
Remember, we still have not heard anything from the Fed in regards to a rate cut. I feel strongly that we will see the Fed move aggressively. To get the most bang for the buck, they could do a surprise rate cut. That should motivate the markets to rally and temporarily halt the selling.
Don’t forget, the problems that are causing this slide in the stock market are not gone. Unfortunately, they will probably worsen before they start to get better. So, know your risk and make sure that you have a game plan. Bear markets can be very brutal.
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
So, if you are invested in stocks and you want to reduce your risk, how should you go about doing that?
Please know that I am not suggesting that anyone sell their investments. I cannot give advice in these pages. I just hope that you found agreement with me months ago when I was writing about the risk in the markets and made the appropriate moves at that point.
I think that we are pretty close to a “temporary” bottom. Remember, bear markets don’t fall in a straight line. They go through periods of declines. They rebound for a period of time, then the selling and the declines resume. This happens over a period of time until one day the market has found a real bottom.
So, if you are looking to sell some of your holdings and reduce the risk in your portfolio, one method would be to use bear market rallies as an opportunity to make sells. As the market rallies, you might slowly sell some of your equity positions.
Remember, we still have not heard anything from the Fed in regards to a rate cut. I feel strongly that we will see the Fed move aggressively. To get the most bang for the buck, they could do a surprise rate cut. That should motivate the markets to rally and temporarily halt the selling.
Don’t forget, the problems that are causing this slide in the stock market are not gone. Unfortunately, they will probably worsen before they start to get better. So, know your risk and make sure that you have a game plan. Bear markets can be very brutal.
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
Friday, January 18, 2008
Strange As It Sounds...
Strange as it sounds, I miss Alan Greenspan.
This certainly isn’t your Greenspan-run Federal Reserve Board. It is the Ben Bernanke era and a strange one it is for the markets. First, let’s be fair to Chairman Bernanke. He didn’t create the mess we are in right now. He just inherited it.
Greenspan is part owner and architect of this credit mess we are facing today in our country. Greenspan was the one a few years back that actually encouraged the use of adjustable rate mortgages. Keep in mind that it is adjustable rate mortgages that really put the sub-prime in sub-prime loans. I would argue that they are the main reason that most homes are going into foreclosure. When the adjustable rate changes and the homeowner cannot afford the payment, foreclosure is typically the undesirable ending.
Let me tell you something that I did like about Greenspan. He kept things a game. He spoke a language that some called “Greenspeak” or “Greenspanology.”
He spoke in code. Analysts would attempt to determine what he really said by interpreting his eloquent and sometimes vague language. He came across very confident.
Thinking back, that is what I liked about Alan Greenspan. Ben Bernanke is a totally different Fed Chairman. His words seem to send the markets into the tank. His speech to Congress today continued to strengthen this crisis of confidence that we have in the markets.
Now, I am the last person that wants the Federal Reserve Board to manipulate and play with markets. However, we need the Federal Reserve Board to act now. We need Chairman Bernanke to aggressively lower those interest rates. If not, we could have an even bigger mess on our hands as this continues.
So for those of you who are invested in the stock market and taking a bath in your 401(k) plans, this is what you look for. If the Fed acts fast and cuts rates, then there is a glimmer of hope that things might be OK for the economy. If the Fed continues to sit on their hands and just monitor the situation, then things could get very ugly for our markets.
Right now, capital preservation is the name of the game!
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
This certainly isn’t your Greenspan-run Federal Reserve Board. It is the Ben Bernanke era and a strange one it is for the markets. First, let’s be fair to Chairman Bernanke. He didn’t create the mess we are in right now. He just inherited it.
Greenspan is part owner and architect of this credit mess we are facing today in our country. Greenspan was the one a few years back that actually encouraged the use of adjustable rate mortgages. Keep in mind that it is adjustable rate mortgages that really put the sub-prime in sub-prime loans. I would argue that they are the main reason that most homes are going into foreclosure. When the adjustable rate changes and the homeowner cannot afford the payment, foreclosure is typically the undesirable ending.
Let me tell you something that I did like about Greenspan. He kept things a game. He spoke a language that some called “Greenspeak” or “Greenspanology.”
He spoke in code. Analysts would attempt to determine what he really said by interpreting his eloquent and sometimes vague language. He came across very confident.
Thinking back, that is what I liked about Alan Greenspan. Ben Bernanke is a totally different Fed Chairman. His words seem to send the markets into the tank. His speech to Congress today continued to strengthen this crisis of confidence that we have in the markets.
Now, I am the last person that wants the Federal Reserve Board to manipulate and play with markets. However, we need the Federal Reserve Board to act now. We need Chairman Bernanke to aggressively lower those interest rates. If not, we could have an even bigger mess on our hands as this continues.
So for those of you who are invested in the stock market and taking a bath in your 401(k) plans, this is what you look for. If the Fed acts fast and cuts rates, then there is a glimmer of hope that things might be OK for the economy. If the Fed continues to sit on their hands and just monitor the situation, then things could get very ugly for our markets.
Right now, capital preservation is the name of the game!
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
Wednesday, January 16, 2008
Falling for the Holy Grail
After last week’s show where a caller inquired about an investment program that would guarantee good returns with no risk, I had many emails come in asking about other types of similar programs.
- Human nature is to gravitate towards the easy buck. There is a real tendency to gravitate towards a program that shows a secret easy way to make money without risk.
- The irresponsible marketers prey on these human emotions.
- Are these programs illegal in any way? While some are a part of scams that go undetected for a while, most of these are software programs that promise just a few minutes a day will make you a millionaire. The problem is that the stars would have to align for them to work as advertised. Unfortunately, the consumer is out big bucks before they realize it.
Here is a rule of thumb with any “money making program”:
- There is no slam dunk easy solution to making money in the stock market that doesn’t require risk.
- Risk and reward is a timeless principle that doesn’t go away.
- There is no investment model or program that works 100% of the time.
- If a program is offering a way to make an enormous amount of money with apparently little or no risk, then there is a catch.
Michael Covell in his book, Trend Following, interviewed the traders who are considered the best in the business. These were his conclusions:
- Even the best have bad years
- No one has it all figured out
- There is no holy grail
Here is the bottom line – If I had the secret to making money in the stock market that would guarantee I would make millions, I would keep it a secret. If everyone knew, it would cease to work. Don’t forget the laws of irresponsible marketing!
PLEASE BE CAREFUL ABOUT THESE PROGRAMS
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
Tuesday, January 15, 2008
Bank of America Deserves Countrywide
The big news on Friday was that Bank of America was buying Countrywide. Quite frankly, I think that they deserve each other. Of course, Countrywide is a train wreck. Due to all of their irresponsibilities in writing loans to consumers through the years, they find themselves in quite a financial mess.
Countrywide could be the poster child for sub-prime loans. They were a big part of an industry that put together these horrible loan packages for consumers. Now, consumers are paying the price of foreclosure.
You cannot tell me that the leaders of mortgage companies like Countrywide couldn’t look ahead and say:
“If we write loans for more than the house is worth, take no down payments, don’t verify incomes, give loans to people who were recently bankrupt, and use teaser rates to suck people in, do you think that might be a problem one day? Well maybe it will be a problem of some sort. For now, look at all of the money we are making!”
Then you have Bank of America. The “people’s” bank that wrote the same types of irresponsible mortgages and provided savings programs (Keep the Change) for consumers that pay a whopping 0.25% in interest. You have a bank that creates programs that encourage the use of debit cards. In this, consumers paid over $18 billion in late fees last year because of mistakes with these cards.
Then, of course, Bank of America is one of the biggest players in the credit card game where consumers are being victimized by the fine print.
So, these two definitely deserve each other.
The best part of it is the package that Angelo Mozila stands to get from Bank of America. It is estimated that he might receive as much as $ 115,000,000. I have a lot of respect for how Mr. Mozila built this company from scratch. At the same time, it is like rewarding someone for a business practice that has created billions of dollars of losses and caused hundreds of thousands of people to lose their homes.
I realize that no one held a gun to the consumer’s head and forced them to sign up for a sub-prime loan. Just like a drug addict, everyone has responsibility for their decisions. However, that doesn’t make the drug dealer innocent.
If Mr. Mozila were to do the right thing, we would take a good portion of that
$ 115,000,000 and give it to a fund to help people who have lost their homes. After all, I am sure that he doesn’t need it.
What are your thoughts?
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
Countrywide could be the poster child for sub-prime loans. They were a big part of an industry that put together these horrible loan packages for consumers. Now, consumers are paying the price of foreclosure.
You cannot tell me that the leaders of mortgage companies like Countrywide couldn’t look ahead and say:
“If we write loans for more than the house is worth, take no down payments, don’t verify incomes, give loans to people who were recently bankrupt, and use teaser rates to suck people in, do you think that might be a problem one day? Well maybe it will be a problem of some sort. For now, look at all of the money we are making!”
Then you have Bank of America. The “people’s” bank that wrote the same types of irresponsible mortgages and provided savings programs (Keep the Change) for consumers that pay a whopping 0.25% in interest. You have a bank that creates programs that encourage the use of debit cards. In this, consumers paid over $18 billion in late fees last year because of mistakes with these cards.
Then, of course, Bank of America is one of the biggest players in the credit card game where consumers are being victimized by the fine print.
So, these two definitely deserve each other.
The best part of it is the package that Angelo Mozila stands to get from Bank of America. It is estimated that he might receive as much as $ 115,000,000. I have a lot of respect for how Mr. Mozila built this company from scratch. At the same time, it is like rewarding someone for a business practice that has created billions of dollars of losses and caused hundreds of thousands of people to lose their homes.
I realize that no one held a gun to the consumer’s head and forced them to sign up for a sub-prime loan. Just like a drug addict, everyone has responsibility for their decisions. However, that doesn’t make the drug dealer innocent.
If Mr. Mozila were to do the right thing, we would take a good portion of that
$ 115,000,000 and give it to a fund to help people who have lost their homes. After all, I am sure that he doesn’t need it.
What are your thoughts?
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
Friday, January 11, 2008
Successfully Selling Your Home in a Tough Environment
This is a tough real estate market and sellers are running into all types of difficulties. So, how do you sell a house in this market? It really comes down to your mindset. I find that many people are trying to sell their homes with the mindset that we are still in a booming real estate market. Unfortunately, that is far from the case.
So, let’s talk about some tips that you consider if you are contemplating selling your home.
1) Unless you have an unlimited amount of patience during the sales process, accept the possibility that you are going to have to sell your home for much less than you would like.
It is a buyers’ market. There are two types of buyers. First, you have the buyer who is looking for the good deal. They are watching the prices of homes and looking for panicky sellers. Second, you have the buyers who are waiting. They feel pretty certain that prices will be much lower; thus, they wait. To motivate interest in your home, the price has got to be competitive. Unfortunately, a competitive price comes out a discount. However, that is not so bad news. You can make up that price discount with the next tip.
2) You are not only a home seller, but you are also a home buyer.
So, you unfortunately took a lot less than you wanted when you sold your home. The key is to make up for it on the back-end. This is where you really have to do your homework and look for the good deal. Find areas of the city that interest you. Then look at the homes that have been on the market. Make notes of how long they have been on the market. If the house is vacant and it has been on the market for a long time, you might just find a motivated seller.
The key is to determine the amount you want to finance following the sale of your house and the purchase of another one. Obviously, you will have a lower down payment if you sell your house at a discount. Thus, you have to be a great buyer.
3) Resist putting a great deal of money into the house.
You might think that the carpet looks bad. You might not like the paint. Well, guess what? A prospective buyer might not care for the new paint or carpet that you choose to put in the house. You spend all of that money and the new buyer just paints and carpets over it.
Yes do some small things that create nice curb appeal and create value in the selling price. However, be smart about it and keep your costs at a minimum. Remember, you are trying to get everything possible out of this house. Keep those expenses down.
4) Cut your costs but don’t cut your realtor.
Realtors are worth any money that you pay in the home selling area and they earn every penny of it. Not only do you get on the listing service, you also get internet exposure. Buyers go to the net first now. Realtors know which sellers might be motivated. They can cut down on your legwork. Plus, the realtor can negotiate for you. You are always better off having someone handle those negotiations.
5) Consider renting until you find that perfect deal.
Maybe you are lucky enough to sell your home quickly. If you haven’t found something, I think that it makes sense to consider renting for a while. The buying process is crucial and you need plenty of time to go through the process.
Yes, the real estate markets are in a tough spot. However, that doesn’t mean you cannot successfully put a good deal together. Today’s real estate market requires you to look at the whole deal, including both the sale and the buy, and that you work hard to obtain the right overall deal that makes sense for you and your family.
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
So, let’s talk about some tips that you consider if you are contemplating selling your home.
1) Unless you have an unlimited amount of patience during the sales process, accept the possibility that you are going to have to sell your home for much less than you would like.
It is a buyers’ market. There are two types of buyers. First, you have the buyer who is looking for the good deal. They are watching the prices of homes and looking for panicky sellers. Second, you have the buyers who are waiting. They feel pretty certain that prices will be much lower; thus, they wait. To motivate interest in your home, the price has got to be competitive. Unfortunately, a competitive price comes out a discount. However, that is not so bad news. You can make up that price discount with the next tip.
2) You are not only a home seller, but you are also a home buyer.
So, you unfortunately took a lot less than you wanted when you sold your home. The key is to make up for it on the back-end. This is where you really have to do your homework and look for the good deal. Find areas of the city that interest you. Then look at the homes that have been on the market. Make notes of how long they have been on the market. If the house is vacant and it has been on the market for a long time, you might just find a motivated seller.
The key is to determine the amount you want to finance following the sale of your house and the purchase of another one. Obviously, you will have a lower down payment if you sell your house at a discount. Thus, you have to be a great buyer.
3) Resist putting a great deal of money into the house.
You might think that the carpet looks bad. You might not like the paint. Well, guess what? A prospective buyer might not care for the new paint or carpet that you choose to put in the house. You spend all of that money and the new buyer just paints and carpets over it.
Yes do some small things that create nice curb appeal and create value in the selling price. However, be smart about it and keep your costs at a minimum. Remember, you are trying to get everything possible out of this house. Keep those expenses down.
4) Cut your costs but don’t cut your realtor.
Realtors are worth any money that you pay in the home selling area and they earn every penny of it. Not only do you get on the listing service, you also get internet exposure. Buyers go to the net first now. Realtors know which sellers might be motivated. They can cut down on your legwork. Plus, the realtor can negotiate for you. You are always better off having someone handle those negotiations.
5) Consider renting until you find that perfect deal.
Maybe you are lucky enough to sell your home quickly. If you haven’t found something, I think that it makes sense to consider renting for a while. The buying process is crucial and you need plenty of time to go through the process.
Yes, the real estate markets are in a tough spot. However, that doesn’t mean you cannot successfully put a good deal together. Today’s real estate market requires you to look at the whole deal, including both the sale and the buy, and that you work hard to obtain the right overall deal that makes sense for you and your family.
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
Thursday, January 10, 2008
Identity Theft – The Guilty Victim
So, what are the steps to take if you are an identity theft victim? First of all, you have to take this seriously. Although you might consider yourself a victim of a crime, you are also considered a guilty victim until you prove that you had nothing to do with the theft. Remember, in an identity theft, someone is going to lose money. It wouldn’t be too difficult for an individual to stage an identity theft. In the eyes of a merchant, you could be the one directly benefiting from those fraudulent charges or withdrawals while claiming to be a victim of identity theft.
As the victim, you have three main objectives:
1) Prove that you are an identity theft victim
2) Get released from any liability
3) Make sure that all information regarding the theft is permanently removed from your credit file
You really have to focus on these three items. It is crucial that all three objectives are achieved. Most identity theft victims don’t achieve the first objective because they don’t go through all of the necessary steps. Most identity theft victims feel that they are protected by the law and are entitled certain protection. It is assumed that once the crime is reported they are covered.
So here is the order of the important steps for you to take.
1) Place an initial fraud alert on your credit file. This is easy to do and can be handled with a quick phone call. You are basically saying that fraud has been committed and you are in the process of gathering facts and filing a police report. In the meantime, you want to be alerted if your credit file is being accessed without your authorization. Remember that a fraud alert is temporary and not failsafe. You want either the extended alert or preferably (if available) the security freeze implemented as soon as possible.
2) If an account has been opened or the theft involves your credit card or bank, notify the appropriate company immediately to close accounts. Every company has a specific department that handles fraud. Make sure that you are contacting the right one.
3) File a report with your local police department. This is extremely important and gives evidence that you are serious about getting your name cleared from this situation. It is also required for almost every step that follows.
4) Create your Identity Theft Report. This is your “case” that proves your innocence. Remember the victim/guilty irony.
5) Turn your initial alert into a credit freeze with the three credit reporting agencies. This is the highest protection that you can have on your credit files.
6) Send the Identity Theft Report to the three credit reporting agencies and request that the information be blocked from your credit file.
7) Send the Identity Theft Report to the merchant that holds the fraudulent account as a follow up to your initial call. This will allow for them to confirm that you were indeed a victim. This should provide all of the information that is needed to conduct the identity theft claim. You can also request the application and any transaction records used in setting up the fraudulent account.
8) Get a closure letter from the merchant that releases you from liability. This is extremely important and something most people neglect to do. Remember the closure principle.
9) Make sure that all information about the fraudulent account is removed from your credit files at all three credit reporting agencies.
10) Keep a close eye on your credit files and make sure that nothing reappears concerning the identity theft on your account.
Keep a paper trail and, always send all correspondence certified mail return receipt requested.
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
As the victim, you have three main objectives:
1) Prove that you are an identity theft victim
2) Get released from any liability
3) Make sure that all information regarding the theft is permanently removed from your credit file
You really have to focus on these three items. It is crucial that all three objectives are achieved. Most identity theft victims don’t achieve the first objective because they don’t go through all of the necessary steps. Most identity theft victims feel that they are protected by the law and are entitled certain protection. It is assumed that once the crime is reported they are covered.
So here is the order of the important steps for you to take.
1) Place an initial fraud alert on your credit file. This is easy to do and can be handled with a quick phone call. You are basically saying that fraud has been committed and you are in the process of gathering facts and filing a police report. In the meantime, you want to be alerted if your credit file is being accessed without your authorization. Remember that a fraud alert is temporary and not failsafe. You want either the extended alert or preferably (if available) the security freeze implemented as soon as possible.
2) If an account has been opened or the theft involves your credit card or bank, notify the appropriate company immediately to close accounts. Every company has a specific department that handles fraud. Make sure that you are contacting the right one.
3) File a report with your local police department. This is extremely important and gives evidence that you are serious about getting your name cleared from this situation. It is also required for almost every step that follows.
4) Create your Identity Theft Report. This is your “case” that proves your innocence. Remember the victim/guilty irony.
5) Turn your initial alert into a credit freeze with the three credit reporting agencies. This is the highest protection that you can have on your credit files.
6) Send the Identity Theft Report to the three credit reporting agencies and request that the information be blocked from your credit file.
7) Send the Identity Theft Report to the merchant that holds the fraudulent account as a follow up to your initial call. This will allow for them to confirm that you were indeed a victim. This should provide all of the information that is needed to conduct the identity theft claim. You can also request the application and any transaction records used in setting up the fraudulent account.
8) Get a closure letter from the merchant that releases you from liability. This is extremely important and something most people neglect to do. Remember the closure principle.
9) Make sure that all information about the fraudulent account is removed from your credit files at all three credit reporting agencies.
10) Keep a close eye on your credit files and make sure that nothing reappears concerning the identity theft on your account.
Keep a paper trail and, always send all correspondence certified mail return receipt requested.
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
Wednesday, January 09, 2008
Are Fraud Alerts by Themselves a Good Identity Theft Prevention Tool?
One strategy for protecting your identity is issuing fraud alerts on your credit reports. Is this a good strategy? Well let’s first talk about how fraud alerts work. In 2003, the Fair Credit Reporting Act was updated with the signing of the Fair and Accurate Credit Transaction Act into law.
The FACT Act established three methods of protection for a consumer to immediately protect themselves from identity theft. The law reads that if you know or suspect that you are a victim of identity theft, then you can place a fraud alert on your credit file. A fraud alert is a red flag for a creditor when they check your credit file for information.
If someone is attempting to open up a credit account in your name, the fraud alert would tell the creditor that there is a high risk of identity theft. As a result, the creditor is instructed to call the consumer and verify identity before issuing credit. A consumer would have to reissue the fraud alert every 90 days.
If you can provide proof that you are a victim of identity theft, you can extend that fraud alert up to seven years.
So, is this an effective way to protect your identity? Reports would suggest that there are times that fraud alerts do not work. I have seen reports that place the percentage of failure between 10 and 25% of the time. It appears that creditors don’t always check and verify the identity of the person opening the account.
So what about the companies that issue fraud alerts on your behalf? Is this effective? Well, it has been documented that these fraud alerts don’t always work. So, that is a concern. If a fraud alert were to fail, you could be a victim of an identity theft for years and not even know it.
This is why credit monitoring makes the most sense. You still need to know that identity theft is taking place. There isn’t a failure rate with credit monitoring as long as the company you are using is accurately reporting to you changes on your credit report.
Fraud alerts by themselves are not the perfect identity theft tool. I wouldn’t want to use any strategy that had that high of a failure rate. If you are committed to preventing identity theft, just know that you will have to partner up with someone monthly to help you. Your money is best spent issuing fraud alerts on your own and having a subsequent company monitor your credit reports.
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
The FACT Act established three methods of protection for a consumer to immediately protect themselves from identity theft. The law reads that if you know or suspect that you are a victim of identity theft, then you can place a fraud alert on your credit file. A fraud alert is a red flag for a creditor when they check your credit file for information.
If someone is attempting to open up a credit account in your name, the fraud alert would tell the creditor that there is a high risk of identity theft. As a result, the creditor is instructed to call the consumer and verify identity before issuing credit. A consumer would have to reissue the fraud alert every 90 days.
If you can provide proof that you are a victim of identity theft, you can extend that fraud alert up to seven years.
So, is this an effective way to protect your identity? Reports would suggest that there are times that fraud alerts do not work. I have seen reports that place the percentage of failure between 10 and 25% of the time. It appears that creditors don’t always check and verify the identity of the person opening the account.
So what about the companies that issue fraud alerts on your behalf? Is this effective? Well, it has been documented that these fraud alerts don’t always work. So, that is a concern. If a fraud alert were to fail, you could be a victim of an identity theft for years and not even know it.
This is why credit monitoring makes the most sense. You still need to know that identity theft is taking place. There isn’t a failure rate with credit monitoring as long as the company you are using is accurately reporting to you changes on your credit report.
Fraud alerts by themselves are not the perfect identity theft tool. I wouldn’t want to use any strategy that had that high of a failure rate. If you are committed to preventing identity theft, just know that you will have to partner up with someone monthly to help you. Your money is best spent issuing fraud alerts on your own and having a subsequent company monitor your credit reports.
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
Tuesday, January 08, 2008
Five Reasons Why You Should Not Use a Debit Card
Are debit cards a good financial tool for your money? Below are five reasons why you might consider using a credit card versus a debit card for your everyday purchases.
1) Unlimited Liability – If someone steals money out of your bank account by the use of your debit card information, it can cause a host of problems. It can create overdraft fees, unlimited loss if you don’t catch it in time, and financial hardship while the theft is being investigated. With a credit card, fraud carries an out-of-pocket limit of $50 per occurrence. Many credit card companies even waive the $50 limit. In addition, an unauthorized charge on your credit card is easily disputed and should not cause potential hardship.
2) Debit cards are becoming larger identity theft targets – According to a recent report, 33% prefer to use debit cards for in-store transactions versus 19% who prefer credit cards. As a result, identity thieves are becoming smarter when it comes to creating ways to steal you money. Thieves will use skimmers to steal your debit card information and then create another card for their own use. This first started happening at gasoline stations. Now, there are cases where it is happening in restaurants.
3) Online Fraud – Buying items online has become a fast and convenient way to shop. However, it can be a big problem when the store on the other end is really a scam designed to steal your money. If that happens with a debit card, you are out that money. According to Reader’s Digest, under the Electronic Fund Transfer Act, your debit card company isn’t required to step in if you make a deal with an unscrupulous merchant. With a credit card, your maximum liability is $50.
4) Potential to make mistakes – Your mistakes with debit cards are a big profit center for banks. It is estimated that Americans pay 18 billion dollars each year in overdraft fees.
5) With a debit card, you do not build credit – A debit card transaction is just a transaction between you and a bank and has no affect on your credit score. A credit card transaction that is paid off on time positively affects your credit score.
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
1) Unlimited Liability – If someone steals money out of your bank account by the use of your debit card information, it can cause a host of problems. It can create overdraft fees, unlimited loss if you don’t catch it in time, and financial hardship while the theft is being investigated. With a credit card, fraud carries an out-of-pocket limit of $50 per occurrence. Many credit card companies even waive the $50 limit. In addition, an unauthorized charge on your credit card is easily disputed and should not cause potential hardship.
2) Debit cards are becoming larger identity theft targets – According to a recent report, 33% prefer to use debit cards for in-store transactions versus 19% who prefer credit cards. As a result, identity thieves are becoming smarter when it comes to creating ways to steal you money. Thieves will use skimmers to steal your debit card information and then create another card for their own use. This first started happening at gasoline stations. Now, there are cases where it is happening in restaurants.
3) Online Fraud – Buying items online has become a fast and convenient way to shop. However, it can be a big problem when the store on the other end is really a scam designed to steal your money. If that happens with a debit card, you are out that money. According to Reader’s Digest, under the Electronic Fund Transfer Act, your debit card company isn’t required to step in if you make a deal with an unscrupulous merchant. With a credit card, your maximum liability is $50.
4) Potential to make mistakes – Your mistakes with debit cards are a big profit center for banks. It is estimated that Americans pay 18 billion dollars each year in overdraft fees.
5) With a debit card, you do not build credit – A debit card transaction is just a transaction between you and a bank and has no affect on your credit score. A credit card transaction that is paid off on time positively affects your credit score.
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
Monday, January 07, 2008
Watch out for Free Offers – Most of the Time, They are a Scam
I really need to stop listening to Sirius. Sirius, as well as XM radio, will allow anyone to buy marketing time and say anything. I have found that most of the time these commercials that air on satellite radio fall into the “irresponsible marketing” category.
My favorite one is by “self titled stock market genius” Ross Jardine. Here are his claims:
"I've taught thousands to make money in the stock market and I want to teach you for free!"
~ Ross Jardine
• Fast and Easy (15 minutes a day)
• Consistent Income Every Month
• Profit in both Up and Down Markets
• Take Control of your Financial Future
So, he wants to send you his free investor’s stock market kit and make you rich. Well, let’s talk about this “free” offer. It will cost you a “processing and handling fee” of $ 9.95. He sends you a CD that probably costs roughly $ 1.50 to $ 2 to produce (that is probably on the high side). He pays another $ 0.75 or so for postage and pays for advertizing. I would suspect he is making a pretty good penny per free offer. Plus you have to sign up for his service (he will not tell you the cost on his site – you have to pay him $ 9.95 to find out the cost) to get the subscription cost.
That doesn’t sound free to me. Then in order to learn and discover the “holy grail,” you have to buy and subscribe and spend lots of money.
First of all, repeat after me. There is no holy grail in investing. There is no quick way to get rich. If there were, no one would tell anyone. Secondly, this is nothing more than a marketing scam to sell product.
Mr. Jardine, with all due respect, don’t talk about teaching people to invest for free when it is not true. If you want to sell a book for $ 9.95, then sell one.
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
My favorite one is by “self titled stock market genius” Ross Jardine. Here are his claims:
"I've taught thousands to make money in the stock market and I want to teach you for free!"
~ Ross Jardine
• Fast and Easy (15 minutes a day)
• Consistent Income Every Month
• Profit in both Up and Down Markets
• Take Control of your Financial Future
So, he wants to send you his free investor’s stock market kit and make you rich. Well, let’s talk about this “free” offer. It will cost you a “processing and handling fee” of $ 9.95. He sends you a CD that probably costs roughly $ 1.50 to $ 2 to produce (that is probably on the high side). He pays another $ 0.75 or so for postage and pays for advertizing. I would suspect he is making a pretty good penny per free offer. Plus you have to sign up for his service (he will not tell you the cost on his site – you have to pay him $ 9.95 to find out the cost) to get the subscription cost.
That doesn’t sound free to me. Then in order to learn and discover the “holy grail,” you have to buy and subscribe and spend lots of money.
First of all, repeat after me. There is no holy grail in investing. There is no quick way to get rich. If there were, no one would tell anyone. Secondly, this is nothing more than a marketing scam to sell product.
Mr. Jardine, with all due respect, don’t talk about teaching people to invest for free when it is not true. If you want to sell a book for $ 9.95, then sell one.
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
Friday, January 04, 2008
Mr. President, You Just Can’t Spin These Numbers
President Bush addressed the media Friday morning and had these comments regarding everything that is happening in the economy and the stock market.
Here are a few excerpts (note: not exact wording):
I understand that people are worried about losing their homes. That is why we set up programs to help “credit worthy” people.
Mr. President, although we Americans greatly appreciate the efforts behind your programs to fix what was allowed to occur under your watch, most of these worried homeowners have no credit and not credit worthy. Thus, this really isn’t a solution. However, it does make for a good sound bite.
Home prices are beginning to fall.
Mr. President, that actually started in July of 2005 when the real estate market topped. We will call that a little slip on the dates.
…..Job growth slowed a bit in December.
Mr. President, it appears that 18,000 jobs created was more than “slowing a bit.” If you removed all of the jobs that the Government created out of thin air, we would be in an employment contraction.
We have had 52 months of job growth.
Mr. President, congratulations on that record. However, that doesn’t pay the bills for those who are in trouble today.
And my favorite…
We are going to see what Washington can do to fix this problem.
Mr. President, the idea of you cutting taxes to fix the problem was as crazy as the band-aid that you put on this country in 2001 with your tax cut programs. We couldn’t afford it then and we cannot afford it today.
Someone please tell me that he really does understand and this is nothing more than the SPIN machine. Politicians must think that Americans are dumb. I know my intelligence has been insulted.
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
Here are a few excerpts (note: not exact wording):
I understand that people are worried about losing their homes. That is why we set up programs to help “credit worthy” people.
Mr. President, although we Americans greatly appreciate the efforts behind your programs to fix what was allowed to occur under your watch, most of these worried homeowners have no credit and not credit worthy. Thus, this really isn’t a solution. However, it does make for a good sound bite.
Home prices are beginning to fall.
Mr. President, that actually started in July of 2005 when the real estate market topped. We will call that a little slip on the dates.
…..Job growth slowed a bit in December.
Mr. President, it appears that 18,000 jobs created was more than “slowing a bit.” If you removed all of the jobs that the Government created out of thin air, we would be in an employment contraction.
We have had 52 months of job growth.
Mr. President, congratulations on that record. However, that doesn’t pay the bills for those who are in trouble today.
And my favorite…
We are going to see what Washington can do to fix this problem.
Mr. President, the idea of you cutting taxes to fix the problem was as crazy as the band-aid that you put on this country in 2001 with your tax cut programs. We couldn’t afford it then and we cannot afford it today.
Someone please tell me that he really does understand and this is nothing more than the SPIN machine. Politicians must think that Americans are dumb. I know my intelligence has been insulted.
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
The Importance Of Being Proactive When It Comes To Identity Theft
With identity theft stats getting worse, it is more important than ever to be proactive and partner up with a service that will help you protect your good name.
You can take companies in the identity theft business and break them down into two categories. There are the monitoring companies and the protection companies.
Let’s start with the monitoring companies. This is what you are looking for:
1) Monitors all three credit reporting agencies – Using a system that monitors one is better than nothing. However, it doesn’t allow for the best protection. Creditors don’t always report to all three. You want all three agencies monitored for complete safety.
2) Has alerts – Most companies will alert you when something changes on your credit report.
3) Gives you unlimited access to your credit reports and scores – I think that this is critical. It is important to be able to access your credit reports once a month to check over them and make sure everything remains accurate.
4) Identity theft insurance – Most companies have some form of insurance coverage in the event that you are a victim. This could cover lost wages, loss due to identity theft, etc. You want to look at total coverage, deductible, and amount that they cover for lost wages and for how long. This is the one component that can really affect the price.
Then there is the new breed of identity theft protection companies. Take the guy who gives out his social security number in commercials and dares someone to steal his ID. This company is doing nothing more than activating fraud alerts on your credit reports every 90 days. You are paying them to make this phone call for you. In my opinion, they are doing something you can do for yourself. It is not a good use of money.
A fraud alert prompts a creditor to call you first in order to alert you that someone is trying to take out credit in your name. The problem is that this doesn’t always work. Also, according to the law, it is intended to be used if a consumer THINKS they could be or they already are a victim of identity theft.
If you are living in the state of Texas, you could take one step further and place a credit freeze on your credit reports. There is a cost associated with freezing and “un-freezing” your credit. However, this is the most effective way to protect your credit reports.
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
You can take companies in the identity theft business and break them down into two categories. There are the monitoring companies and the protection companies.
Let’s start with the monitoring companies. This is what you are looking for:
1) Monitors all three credit reporting agencies – Using a system that monitors one is better than nothing. However, it doesn’t allow for the best protection. Creditors don’t always report to all three. You want all three agencies monitored for complete safety.
2) Has alerts – Most companies will alert you when something changes on your credit report.
3) Gives you unlimited access to your credit reports and scores – I think that this is critical. It is important to be able to access your credit reports once a month to check over them and make sure everything remains accurate.
4) Identity theft insurance – Most companies have some form of insurance coverage in the event that you are a victim. This could cover lost wages, loss due to identity theft, etc. You want to look at total coverage, deductible, and amount that they cover for lost wages and for how long. This is the one component that can really affect the price.
Then there is the new breed of identity theft protection companies. Take the guy who gives out his social security number in commercials and dares someone to steal his ID. This company is doing nothing more than activating fraud alerts on your credit reports every 90 days. You are paying them to make this phone call for you. In my opinion, they are doing something you can do for yourself. It is not a good use of money.
A fraud alert prompts a creditor to call you first in order to alert you that someone is trying to take out credit in your name. The problem is that this doesn’t always work. Also, according to the law, it is intended to be used if a consumer THINKS they could be or they already are a victim of identity theft.
If you are living in the state of Texas, you could take one step further and place a credit freeze on your credit reports. There is a cost associated with freezing and “un-freezing” your credit. However, this is the most effective way to protect your credit reports.
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
Thursday, January 03, 2008
The Fastest Growing Crime in America is Growing Faster
The Federal Trade Commission declared identity theft the fastest growing crime in America….and for good reason. It is a crime without violence or much risk of getting caught and is extremely lucrative.
The loss or theft of personal data such as credit card and Social Security numbers soared to unprecedented levels in 2007. The Identity Theft Resource Center’s report lists more than 79 million records reported compromised in the United States in 2007. In 2006, only 20 million records were reported. This is personal information such as credit cards or Social Security numbers that were either lost or stolen. This could have happened through hackers getting into company databases, as well as all other types of identity theft scams. It is an alarming number.
Another group looked at the same statistic on a world-wide basis. The number soared to 162 million. That same statistic in 2006 was merely 49 million.
This is a major problem that is just getting worse. Thieves are finding new ways to get your information. Companies are not working hard enough to secure and protect information. It is also a crime that, for the most part, goes undetected. If someone shoots another individual, there is a good chance it will make the newspaper. Identity theft claims don’t make it in the newspaper. It is a crime that can go on for a long time without even getting detected.
There is also a mindset that “it will never happen to me.” Thus, people are not proactive enough. I want to change that mindset and make sure that you don’t become a victim. The good news is that it is easy to protect yourself against identity theft. Just like anything else, it takes time and a little investment of money to do so.
Over the next week, we will be discussing why debit cards are so dangerous when it comes to identity theft. My report on debit cards might make you rethink using them at all.
I will also be reviewing the various identity theft solutions that are aggressively marketed and tell you which ones are a waste of money and which ones make the most sense. When I tell you the truth behind some of these marketing campaigns, you will start to see that most of them are an insult to intelligence.
I will be writing about why fraud alerts don’t always work, as well as the new laws in the state of Texas that will put an iron clad lock on your credit reports.
Most importantly, I will write about what to do in the event that you are an identity theft victim. I will cover your first steps to dealing with the debt collectors. The bottom line is that consumers have to stay on alert, stop being so trusting, and start using some common sense. Identity theft thieves are counting on consumers to stay complacent.
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
The loss or theft of personal data such as credit card and Social Security numbers soared to unprecedented levels in 2007. The Identity Theft Resource Center’s report lists more than 79 million records reported compromised in the United States in 2007. In 2006, only 20 million records were reported. This is personal information such as credit cards or Social Security numbers that were either lost or stolen. This could have happened through hackers getting into company databases, as well as all other types of identity theft scams. It is an alarming number.
Another group looked at the same statistic on a world-wide basis. The number soared to 162 million. That same statistic in 2006 was merely 49 million.
This is a major problem that is just getting worse. Thieves are finding new ways to get your information. Companies are not working hard enough to secure and protect information. It is also a crime that, for the most part, goes undetected. If someone shoots another individual, there is a good chance it will make the newspaper. Identity theft claims don’t make it in the newspaper. It is a crime that can go on for a long time without even getting detected.
There is also a mindset that “it will never happen to me.” Thus, people are not proactive enough. I want to change that mindset and make sure that you don’t become a victim. The good news is that it is easy to protect yourself against identity theft. Just like anything else, it takes time and a little investment of money to do so.
Over the next week, we will be discussing why debit cards are so dangerous when it comes to identity theft. My report on debit cards might make you rethink using them at all.
I will also be reviewing the various identity theft solutions that are aggressively marketed and tell you which ones are a waste of money and which ones make the most sense. When I tell you the truth behind some of these marketing campaigns, you will start to see that most of them are an insult to intelligence.
I will be writing about why fraud alerts don’t always work, as well as the new laws in the state of Texas that will put an iron clad lock on your credit reports.
Most importantly, I will write about what to do in the event that you are an identity theft victim. I will cover your first steps to dealing with the debt collectors. The bottom line is that consumers have to stay on alert, stop being so trusting, and start using some common sense. Identity theft thieves are counting on consumers to stay complacent.
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.
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