Credit

The state of Oregon is considering a bill I think is a fabulous idea. SB 1045 is titled "Limits use of credit history for employment purposes to certain circumstances," and it does just that: prevents employers from requesting credit checks to use as a screening tool for potential employees, unless the credit history provides a substantial relation to the employee's job (for instance, a bank teller or mortgage broker position).

As someone who's seen this issue from many angles: as an employer who checked credit; as an individual with bad credit looking for a job; and as an employer burned by unethical employees, I believe credit histories, instead of providing an employer with valuable tools, are loaded with pitfalls on both sides of the hiring desks.

More and more consumers are saying no to credit cards and shifting to debit cards, but are they permanently changing spending habits or finding a way to make do because lenders aren't lending? It's probably a little of both.

Whatever the reason, new credit card origination was down by 54.5% in November 2009 compared to figures from November 2007. In November 2007, 64 million new bankcards were issued year-to-date. In November 2009, that number was down to just 29.1 million new bankcards year-to-date, according to Equifax's January 2010 new account trends report.

You may never know when it happens, but lenders may begin guessing your income before they approve your credit application when the new Credit CARD Act takes effect on February 22.

The new law requires lenders to consider your ability to pay any new or additional debt before approving a credit card application. While they could do something as simple as ask you, they may want to verify what you tell them.

Since most people don't carry around a pay stub when they go shopping, if you decide to apply for a credit card during a shopping trip, the stores may look for a clue about your income when they ask for your credit score.

"Retail stores are quite upset about this change in the instant approval of their cards," Bill Hardekopf, CEO of LowCards.com, wrote to WalletPop by e-mail. "Consumers now need to show proof of income when they apply for a card, and not many of us carry this around when we are shopping in the mall."

Consumers overwhelmingly want limits and additional disclosures on bank overdraft fees, according to a survey released by the Consumer Federal of America (CFA). Yet Congress has done nothing to fix the problem since it held hearings late last year and banks continue to make billions on overdraft fees. The Center for Responsible Lending (CRL) estimates that consumers paid $23.7 billion for overdraft fees in 2008, which is an increase of 35% over just two years.

CRL reported that 50 million Americans overdrew their checking accounts at least once over a 12-month period with 27 million account holders paying five or more overdraft or insufficient funds fees per year.

The Federal Reserve is implementing new rules requiring banks to get customers' consent on overdrafts when they get a debit card, but the new rules do nothing to rein in the high fees or provide real-time disclosures. The rule does mandate an opt in at the time one opens an account, but does not require banks to discuss the opt out provision after a customer experiences an overdraft.

If you're fed up with overdraft fees, you're not alone. During a telephone press conference held earlier this afternoon, which I sat in on, Consumer Federation of America released the results of a national poll today showing that (surprise) just about everyone wants limits and additional disclosures on bank overdraft fees.

I'll get to that in a moment, but there was really a second message that the CFA and the Center for Responsible Lending, which had a representative at this conference, wants to get out: If you're truly fed up, call your Congressman or woman and ask them to get behind two bills circulating in Congress that intend to put much more severe restrictions on overdraft fees.

If you need to use credit but don't want to impact your credit score, you may want to apply for a charge card rather than a credit card.

If you've found yourself paying frequent overdraft fees when using debit cards, or finding your checking account tied up waiting for the bank to correct an error from your debit card usage, charge cards may also be the answer.

Let's flash back to the beginning of December. The Consumer Reports National Research Center polled more than 1,000 randomly-selected consumers to find out how much they planned to spend on gifts this holiday season. The answer: $699 on average, about $65 less than they planned to spend in the prior two years.

Now, however we have actual totals and they are -- you guessed it -- substantially higher. The average shopper spent $811 – or 16% more than they'd planned – on gifts alone. The half of the population surveyed that paid with credit cards reported spending another $85 more, on average, raising their total to $896. And nearly one-fifth couldn't resist bringing home a little (or not so little) something for themselves.

You might expect a plunging credit score to affect your ability to qualify for a car loan or how high the interest rate on your credit card will soar. But too often Americans don't realize a plunging credit score can cost them big bucks on insurance premiums.

One of the biggest mistakes insurers say people make is not realizing when their credit score is tanking.

"Credit scores factor heavily into your rate," says Ashley M. Hunter, a construction-risk insurance specialist who owns HM Risk Group in Austin, Texas. That's because in the eyes of your insurer, if you've missed a few payments to your credit card company or have written a lot of bad checks (that wound up in collection), chances are you'll do the same thing to them.

Rebuilding lousy credit is a hot topic with consumers these days, and one I've thought about a lot, having recently written a book about bad credit and having survived many, many years of financial turmoil. I currently have no credit cards, save one that my wife and I were able to get when my wife needed dental work last year. When I mentioned this to my bank manager once -- during a discussion about my almost-every-other-month overdraft fees -- he suggested I get a secured credit card.

Secured, as in, I put my own money into the credit card, say $300, and then I use it for a year, and eventually I'm be granted credit again. (Bankrate.com does a nice job of explaining the ins and outs of secured credit cards, in case you're interested in learning more.)

Getting the best interest rates on major purchases, whether that's a house or a car, can be much harder with today's stricter credit standards. Credit scores must be higher, and so does the amount you plan to put down on a house, even to get a mortgage.

In 2006, when I wrote my book, The Complete Idiot's Guide to Improving Your Credit Score, you could get a 0% down home loan with a credit score of 720 and still get the best interest rate. Today in order to get the lowest rates for a home loan, you'll need at least 10% down and a credit score of 760 or higher. For a 15-year equity line, you'll need a score of at least 740 and you'll only be able to get a loan for up to 80% of your home's value. In 2006, you could get a loan for as much as 100% of the home's value. Loans for as much as 125% of the home's value were also available, but you wouldn't get the best interest rate.

Affinity cards, credit cards that carry the logo of a charity you support, may make you feel good, but are you really helping out the charity? You are, but you could end up giving much more by choosing other options.

"Affinity cards tug on our heartstrings. We all have causes we like to support. But in most cases, an affinity card is not the wisest financial way to support the organization," Bill Hardekopf, CEO of LowCards.com, told me by e-mail interview.

The next time you're sorting out your mail, you'd better give everything a thorough scan before tossing out what appears to be junk mail. Some credit card issuers, like Bank of America, are sending cardholders their statements in plain white envelopes that appear to be nothing more than a solicitation -- or junk. And since the average American throws out their fair share of junk mail, many don't realize they could be tossing their credit score right into the trash.

While people used to always pay their mortgage first before other bills, priorities have definitely changed for some. Maintaining car payments appears to be the first priority, with credit cards second and mortgages last. That's the results of the third quarter trend data from TransUnion. The 60-day delinquency national average for auto loans was 0.81%. Credit cards national 90-day delinquency average was just a bit higher at 1.10%. Mortgages national 60-day delinquency rate was six times higher at 6.25%

F.J. Guarrera, VP of Sales Strategy/Thought Leadership for TransUnion concluded about the mortgage numbers: "Delinquency rates are rising and expected to peak at record levels. Until the housing market can consistently demonstrate several months of home value appreciation and the unemployment rate improves, mortgage delinquencies will likely continue to rise."

The people of North Dakota are the most reliable payers. Their delinquencies rates were just 0.35% on auto loans, 0.66% on credit cards and 1.74% on mortgages. So even the most reliable payers are putting autos first, credit cards second and mortgages last on the priority list.

The hardest hit state for delinquencies was Nevada. It's auto loan delinquency rate was 1.16%, it's credit card delinquency rate was 1.98% and its mortgage delinquency rate was 14.53%. Florida residents were next in line for the worst records with a mortgage delinquency rate of 13.34%, but their auto loan defaults were just 0.99% and their credit card delinquencies were just 1.47%

A new report shows that the amount of credit available to Americans is still contracting, but in light of some other recent data showing that we still haven't shaken our addiction to spending, this seemingly bad news might be a blessing in disguise.

Federal Reserve data shows that between October and November, the amount of debt held by Americans dropped by $17.5 billion. Analysts only expected that amount to drop by around $4 billion, according to economists cited in this MarketWatch article.