Today’s batch of reader questions reminds me how complicated our lives have become since the introduction of consumer credit. Some days I long for simpler times so long ago when cash was king and there was no such thing as a billion-dollar consumer credit industry attempting to control our lives.
Dear Mary: A couple of months ago, I left my wallet on the bus. I immediately called the bus company and was told the driver had turned it in. When I got it back, I found everything in its place, including my cash. I didn’t think any more of it. Now my credit card statement is two weeks late. Should I be concerned? — Brian
Dear Brian: Yes, you should be very concerned. With identity theft so prevalent, you should see this as an emergency. First, call your credit card company to learn why your statement is late. While you’re on the phone, report the incident. Request a new card, and report your current one as stolen. Verify that your mailing address has not changed.
Your next calls should be to the fraud departments of each of the three major credit bureaus: Experian (888-397-3742), Equifax (800-525-6285), and TransUnion (800 680-7289). Tell them to flag your file with a fraud alert. At that point, all creditors will have to get your permission before opening any new accounts in your name. Additionally, request copies of your credit report. Review these carefully to make sure there are no new accounts in your name that you did not authorize.
If you have not already set up online access to your bank and credit card accounts, I suggest you do that right away. Now you can monitor your account every day. Even though I’m fairly confident that nothing is amiss (the mail is often delayed), you are wise to stay on top of things, if for no other reason than to make sure your credit card payment will not be late.
Dear Mary: We’ve been putting money into a 529 plan for our daughter’s college education for the past several years. She recently told us she wants to attend beauty school, instead. Now that the surprise has worn off, we’re concerned about penalties when we withdraw the money. How much will we lose, and is there any way to avoid it? — Rebecca
Dear Rebecca: I’ve got great news for you! That money can be used at any accredited trade or vocational school — not only colleges and universities — to pay for tuition, room, board, fees, books and supplies. If you have more than the total cost of the vocational training and related costs, you can withdraw the balance. Federal law imposes a 10% penalty on earnings for nonqualified distributions. This means that you will get back 100% of your principal and 90% of your earnings.
Another option is to change the beneficiary to another child or qualifying family member to keep the account going and avoid (or at least delay) taking nonqualified withdrawals if your daughter’s education doesn’t require those funds. Your particular fund may have additional provisions, so be sure to check with the fund manager. You can learn more about 529 college savings plans at SavingForCollege.com.
Dear Mary: At a recent job interview, I completed the application, which included a form asking for permission to obtain my credit report. I was hesitant to sign because I’ve fallen behind on a number of payments since I was laid off six months ago. Can my bad credit score hamper my chances of getting the job? Is it even legal? — Doug
Dear Doug: Yes, it is legal in most states for prospective employers to request your credit report (not your credit score) as part of the interview process.
A credit report has become more than just a list of creditors. It has come to be considered a character reference. Some employers want to see how a potential employee manages his life. If you are sloppy with your personal affairs, can they expect the same kind of sloppiness on the job?
These days, a credit report shows lots of things other than late payments. If you’ve been evicted, had a judgment filed against you, a tax lien or you have a civil action pending — all of that can show up. Does a potential employer have a right to know all of that? I guess you’d have to think like an employer to answer that question.
Making sure you keep your credit report as squeaky clean as possible is beneficial for many reasons. You have a lawful right to obtain one free copy of each of three different credit reports, every 12 months to see exactly what’s on them.
You need to make sure that all the information in your credit files is correct. This information is available free at the only government-sanctioned, credit reporting, agency-operated website, Annualcreditreport.com, or by calling 1-877-322-8228. Dispute anything on your reports that is not correct. If you want to get a copy of your FICO credit score, you’ll have to pay a few bucks to get it at MyFico.com.
If there are negative, albeit true, entries, write up a simple explanation and have it available should a potential employer, landlord, or even insurance agent (yes, they look, too) make a similar request. Sometimes, a simple, upfront explanation is all that’s required to get past that issue.
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