Have you ever been in a restaurant when a mismatched couple openly feuded a few tables away from you? You weren’t directly affected by the sparring match, but chances are it was uncomfortable because you were trapped in the same eatery and forced to witness the whole sordid affair.

Well, the always strange bedfellows of Fair Isaac, the mastermind behind the FICO score the credit reporting agencies (who are themselves made up of an odd alliance of TransUnion, Equifax and Experian) are at it again. Worse, we, as credit consumers, are all trapped in the same restaurant with little hope of escaping their quarrel. Whether the fuedin’ twosome will merely frustrate us or make us very uncomfortable remains to be seem.

The pair have always had a co-dependant, can’t-live-with-them-can’t-live-without them relationship. The credit bureaus keep a detailed record of your credit history. But the problem is, when a potential lender wants to check a client’s credit, they don’t want to filter through pages of raw data to determine if the client was a good credit risk. So to help with this, Fair Isaac developed several algorithms to crunch this information and develop a numeric score to represent a person’s credit risk. The FICO score usually ranges from 300 to 850, the higher the number the better someone’s credit was.

While this arrangement is convenient for potential lenders, it wrangles the credit bureaus who have to pay Fair Isaac to use the bureaus’ own data and assign a number to it. The credit bureaus reasoned that it would be much easier (and a lot more profitable) if they developed their own scoring system, and weren’t forced to siphon off part of their profits to a third-party company.

Enter VantageScore, developed by the credit bureaus themselves. Like the FICO score, the new scoring system assigns a number value to your credit history. VantageScore’s points range from 501 to 990. Additionally, the score is assigned a grade designed to give creditors and consumers an easy way to know how good their credit is.

For example, a score between 990 and 901 represents an “A”, a score between 801 and 900 a “B”, a score between 701 and 800 a “C” and so on, down to a failing grade of an F.

The VantageScore system is currently in the test phase and is not currently in use. But once the system goes on-line, the bureaus are hoping lenders will stop using the FICO scores and switch to VantageScore, enabling them to keep their profits.

Though VantageScore was launched as a strike against Fair Isaac, it is easy to see how the duel between the two parties could catch a few consumers in the cross-fire. First consumers will have to learn a new scoring system. After 50 years of dominance, consumers understand a FICO score of 745 is a good score. But the same number with the new system isn’t so hot.

Further, while both scoring systems use similar scoring Cciteria , there are differences between the two methodologies, so a consumer may have a better score on one system that an other.

What’s more, the VantageScore system promises lenders that the new system will do a better of job of rooting out bad credit risks than the FICCO system. Exactly how it does this has yet to be seen, but some financial analysts worry the tighter net for people with bad credit will also unfairly trap a those with an average or above average credit history.

But whatever happens, one thing seems clear—the fued between the co-dependant pair won’t go away soon. Currently, FICO is used by 80 percent of the banks and 75 percent of the mortgage companies; the credit bureaus will no doubt be fighting hard to claim their share of the market. How uncomfortable the fight for become for consumers, the hapless bystanders, is unclear.

By David Plowman

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As we mentioned earlier, you have a right to receive a free credit history from each of the three major credit reporting agencies once a year by visiting www.annualcreditreport.com. If you think the report is inaccurate, under the Fair Credit Act, you have the right to dispute the charges.

To dispute the charges, you should write a letter to both the reporting agency and the company that provided the information to the credit agency. (It is especially important that you contact the credit agency’s source directly if you think you were the victim of identity theft.)

In your letter to the credit agency, mention each item you are disputing, and give a detailed explanation of why you are disputing the charge. Make sure to include copies of any supporting documents (such as police reports in the case of identity theft, or a notice of paid accounts if you believe a lender is erroneously stating you have not paid a bill.) Do not include your original documents; always make sure you send copies. Also include a copy of your credit report with the items you are disputing circled.

Send any correspondence to the credit agency via a return receipt or through a courier so you have confirmation that your letter has been received.

Once the credit agency receives your complaint, they must respond in a timely manner. They will usually refer the matter to their reporting source and ask them to investigate.

If their investigation finds there was an error, they must report the result back to the credit agency you filled your complaint with, and the other two reporting agencies. The credit agency must supply you with the written results of the investigation, and supply you with a copy of the corrected credit report. You may also ask that a corrected report be sent to anyone who has requested a copy of your report in the last six months. You can also ask that a corrected report be sent anyone who requested your report for employment purposes over the last two years.

Once the credit reporting agency has corrected your credit report, it cannot be changed back unless the agency receives written verification from the provider that the information is correct. The agency must inform you of any changes in writing, and provide you with the reporting agency’s name address and phone number.

If you do not resolve your dispute with the credit agency, you may ask that a statement of your dispute be included in the credit report, and that it is included in future reports. The credit agency may charge you a fee for doing this.

Your credit report may have a great impact on your ability to get reasonable rates on a loan, insurance or even a job. By checking your report and disputing any results that you believe to be inaccurate, you can help ensure that your report is correct.

By David Plowman

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Carrying a lot of credit card debt can take both a emotional and financial burden. It can create a sense of helplessness. It can be very easy to become frustrated that nothing you can do will remedy the problem. It can be easy to become depressed and to shy away from the problem.

But financial hurdles, just like other problems, are best faced head-on with a definite, slow-but-steady plan. Remember, your goal is not to be debt-free tomorrow, but to be less in debt than you were a month ago. With the right amount of discipline and planning, you can gain the upper hand with your debts.

The first step to becoming debt-free is probably the most emotionally taxing one, figuring out exactly how much you owe. This step can be as painful as it is necessary. Take a hard look at all of your bills. When listing your credit card debt, note the total balance due, the interest rate and the minimum payments. While it may be depressing to take this step, remember that you are doing this to drive yourself out of debt, not into despair. In order to develop a strategy to solve this problem, you need to shine a harsh light on your finances, and look at the cold, hard numbers.

Once you have your credit card bills gathered in one place, your next step should be to break up your collection of plastic. Keep only the two cards with the lowest interest rates, and commit yourself to using them only in cases of emergency. Your goal of getting out of debt will be nearly impossible if you pile new debt on top of old.

Next, if you have any credit card balances with low balances that can be paid off in one or two payments (as you continue to make the minimum payments on your other cards), consider paying them off first. This may provide a much needed, well-deserved motivational push if you are able to quickly eliminate one or two credit card balances.

When tackling credit cards with significantly higher balances, take another look at your debt tally sheet and attack the credit card with the highest interest rate. Continue paying the minimum balances on the other cards. One simple way to keep up on the minimum balances to sign up for an automatic bill payment service, so the minimum fee is deducted from your checking account automatically.

When deciding how much to pay on your highest interest credit card, the key is to stretch yourself as much as you can, without going past your breaking point. Definitely cut back on some perks or extras in your life (For example, you can save as much as $3 a day by switching your daily latte habit for a regular cup of joe at the local coffee shop), or see if there are simple, everyday ways tosave money. But at the same time, remember that your credit card debt is not your most important bill. Definitely prioritize, put your mortgage or rent payments and transportation costs and food above your debt.

Once you have paid down the card with the highest interest rate, repeat the process with the next highest rate and on down the line until you have successfully paid down your cards.

Once you have successfully paid down your credit card debt, consider extending the same strategy for a few months to developing a savings account. Instead of paying your creditors, you will be “paying yourself,” and developing a nest egg so you will be able to weather future financial storms.

By David Plowman

411Web provides finance ideas for its readers. Our postings, articles and e-mail responses are not meant as to serve as personal advice, nor are they endorsements of any investment or personal finance strategy. Any financial or investment plan must take into consideration an individual’s personal experience and circumstances. Individuals may want to contact their investment or tax advisor on these subjects.

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Q: What are student loan consolidation programs?

A: If you applied for multiple student loans when you when to college, you may have several different loans and may owe multiple creditors. Consolidation enables you to combine several student loans into one new loan. Rather than sending multiple checks to multiple lenders, you can send one check to one lender. You may also be able to reduce your interest rate, extend the life of your loan or lower your monthly payments when you consolidate.

Q: What types of student loans can be consolidated?

A: While you may have multiple student loans, it is important to remember there are two major types of student loans, government loans and private loans. Government loans can consolidated with other government loans, and private loans may be consolidated with other private loans. However, government loans and private loans cannot be consolidated together.

Q: What types of federal student loans can be consolidated?

A: Direct Loans, Stafford Loans, PLUS Loans, Perkins Loans, Guaranteed Student Loans, Federal Insured Student Loans, Supplemental Loans for Students, Auxiliary Loans to Assist Students, National Direct Student Loans, National Defense Student Loans, Health Education Assistance Loans, Health Professions Student Loans, Loans for Disadvantaged Students and Nursing Student Loans are all eligible for a Federal Consolidation Loan.

Q: Who sets the interest rate and other terms on Federal Consolidation Loans?

A: Most of the major terms are set by the federal government.

Q: If the federal government sets all of the major terms, does it matter where I get a federal consolidation loan? Aren’t all student loan consolidation programs created equal?

A: While the government sets the major terms of student loan consolidation programs, individual lenders are authorized to reduce a borrower’s interest rates in certain circumstances. For example, some lenders may reduce your interest rate if you consistently pay on-time, or if you pay electronically. Borrowers should shop around to find a student loan consolidation program that best befits them.

Q: Do I have to consolidate my student loan from the same lender that originated my student loans?

A: No, under federal law, you can consolidate your student loan from any approved lender, whether you are a previous borrow or not.

Q: I already consolidated my loan. Can I consolidate it again to get a lower interest rate?

A: No, you can only consolidate your student loans once. You can only re-consolidate if you have acquired additional student loans since consolidating your existing loans.

Q: What is the specific payback term of a consolidation loan?

A: The repayment term can range from 10 to 30 years, depending on the total amount owed, and what repayment options you chose.

Q: Can I pre-pay my federal consolidation loan?

A: Yes, in most cases you can make a payment early, and in most cases, there is no penalty for early repayment. Borrows should double check with their individual lender before making early payments.

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To many people, completing a home improvement means also means taking out a home equity loan.

While that may be a good option for some homeowners, others may not want to get one of these loans, either because they do not have a lot of equity in their home or because they do not want the hassle of applying for a new loan.

But that doesn’t mean a home improvement project has to be put on hold, there are several other ways of funding a renovation project.

• Cash. As with any other major purchase, paying with cash could save you a lot of money in interest and finance charges. While the option is not always viable, carefully weigh the pros and cons of financing your project versus waiting until you have saved enough money to pay with cash.
• Credit cards. If you don’t have a major project, you may be able to charge the expenses to a major credit card or an in-store charge card. Be cautious with this option however, because unless you can pay off the balance quickly, you may be charged a lot of interests. If possible, you may want to sign up for a low interest credit card and plan to pay the balance off before the interest rate spikes.
• Title I Property Improvement Loan Programs. These loans, available from most commercial lenders is insured through the Federal Housing Association (FHA) may be a favorable option for residents who do not have a lot of equity in their home. There are be some restrictions on the type of worker covered by the loan, and there strict loan limits. Check with your local bank for more information.
• IRA loans or borrowing from life insurance. While these options sound like they are equivalent to “borrowing money from yourself” there are some very serious tax penalties to think of. Basically, these options should only be considered if all other potions have been exhausted and the work needed on your house is severe and cannot be differed until a later date.

While a home equity loan might be an option for may people looking to fund a home improvement project, it is not the only option.

By David Plowman

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