Want to save money? Here are nine suggestions to help you save on your auto insurance policies.

1.Comparison shop.

Use consumer information provided by your state’s insurance department. These guides tell you what coverages you need and show you sample rates, usually from the biggest companies. Get quotes from at least three insurers.

2. Ask for higher deductibles.

When you file a claim, a deductible is the amount of money you pay before your insurance company pays for the rest of the damage. Higher deductibles mean lower premiums. For example, increasing your deductible from $200 to $500 on collision coverage could reduce your premium by as much as 30 percent – potentially saving you hundreds of dollars.

3. Drop collision and/or comprehensive coverages on older cars.

If you own a car that’s worth less than $2,000, you’ll probably pay more for the coverage than you would ever collect on a claim. Although insurance companies use their own criteria to determine fair market value for vehicles, you can find out how much your car is generally worth by using the Kelley Blue Book.

4. Buy a “low-profile” car.

Cars that are expensive to repair or that have a high theft rate generally have higher insurance costs.

5. Take advantage of low-mileage discounts.

Some insurance companies offer discounts to drivers who put fewer than a predetermined number of miles on their vehicles each year. And with the high price of gasoline, carpooling and taking public transportation around town can help you save more than just premium dollars.

6. Consider insurance cost when making a move.

Costs tend to be lowest in rural communities and highest in cities, where more traffic congestion occurs and the likelihood of theft increases.

7. Ask about discounts for air-bags and other safety features.

Your insurance agent should let you know about these discounts when you purchase your coverage. Most policies give discounts for airbags.

8. Ask about antilock brake discounts.

Some states, including Florida and New York, require insurers to give discounts for cars equipped with antilock brakes. Some insurance companies give the discount no matter where you live.

9. Ask about other discounts.

Some companies offer discounts for insuring more than one car, also insuring your home with them (known as a multiline discount), having no accidents in three years, taking driver training courses, and having antitheft devices. Plus, remember good-student discounts.

The 10 most expensive 2002 vehicles to insure are:

1.Mitsubishi Montero Sport

2.Chevrolet Corvette Convertible

3.Lexus GS 430

4.Cadillac Escalade

5.BMW 7 Series

6.*Honda Civic Coupe

7.Chevrolet Corvette Coupe

8.Mitsubishi Mirage Coupe

9.Toyota 4Runner

10.BMW 5 Series

*Drivers may be surprised to find their Honda Civic in the top 10, but Hondas such as the Civic and the Accord are repeatedly high on the theft list, since parts are so valuable on the street, thus pushing premiums up.

The 10 least expensive 2002 cars to insure

1.Buick LeSabre

2.Oldsmobile Silhouette

3.Honda Odyssey

4.Buick Park Avenue

5.Pontiac Montana

6.Mercury Grand Marquis

7.Buick Century

8.Chevrolet Venture

9.GMC Safari

10.Oldsmobile Bravada

Most states require a minimum amount of automobile insurance coverage.

But if you’re interested in protecting yourself from a lawsuit or hefty repair bills, then it makes sense to buy more than what’s required.

Liability insurance

Liability coverage limits (that’s for the damage you do to others) are usually presented as a series of three numbers. For example, your agent might say that your policy carries liability limits of 20/40/10. That stands for $20,000 in bodily injury coverage per person, $40,000 in bodily injury coverage per accident, and $10,000 in property-damage coverage per accident.

Liability coverage is the foundation of any auto insurance policy and is required in most states. If you are at fault in an accident, your liability insurance will pay for the bodily injury and property-damage expenses caused to others in the accident, including your legal bills.

The other party may decide to sue you to collect “pain and suffering” damages. Bodily-injury coverage pays for medical bills and lost wages. Property-damage coverage pays for the repair or replacement of things you wrecked other than your own car.

Forty-five states require the purchase auto liability insurance, New Hampshire, South Carolina, Tennessee, Virginia and Wisconsin don’t mandate liability coverage, so your insurance minimum will depend on where you live.

For example, in Texas, drivers have to purchase at least $20,000 worth of bodily injury coverage per person, $40,000 worth of bodily injury coverage per accident, and $15,000 worth of property damage coverage.

Remember, if you cause a serious accident, minimum insurance may not cover you adequately. That’s why it’s a good idea to buy more than what your state requires.

If you own a home and have nest-egg and a savings account you should consider more liability insurance because, in most states, drivers are allowed to sue other drivers who injure them in car accidents. If you’re sued and your liability insurance doesn’t pay for all of the damages, your personal finances are on the hook, and it’s likely you’ll become a target.

Collision and comprehensive coverages

If you cause an accident, collision coverage will pay to repair your vehicle. You usually can’t collect any more than the actual cash value of your car, which is not the same as the car’s replacement cost.

Collision coverage is normally the most expensive component of auto insurance. By choosing a higher deductible, say $500 or $1,000, you can keep your premium costs down. However, keep in mind that you must pay the amount of your deductible before the insurance company kicks in any money after an accident.

Replacement cost vs. actual cash value

Replacement cost is the amount it would take to replace your vehicle or repair damages with materials of similar kind and quality, without depreciating. Depreciation is the decrease in vehicle value because of age or wear and tear.

Actual cash value (ACV) is the value of your property when it is damaged or destroyed. Claims adjusters usually figure ACV by taking the replacement cost and subtracting depreciation.

Insurance companies often will “total” your car if the repair costs exceed a certain percentage of the car’s worth. The critical damage point varies from company to company, from 55 percent to 90 percent.

Comprehensive coverage will pay for damages to your car that weren’t caused by an auto accident: Damages from theft, fire, vandalism, natural disasters or hitting a deer all qualify. Comprehensive coverage also comes with a deductible and your insurer will only pay as much as the car was worth when it got wrecked.

Because insurance companies normally will not pay you more than your car’s book value, it’s helpful if you have a rough idea of this amount. Check the Kelley Blue Book or the National Automobile Dealers Association. If your car is worth less than what you’re paying for the coverage, you’re better off not having it.

Medical payments, PIP, and no-fault coverages

MedPay will pay for your (and your passengers’) medical expenses after an accident. These expenses can arise from accidents while you’re driving your car, someone else’s car (with their permission), and injuries you or your family members incur when you’re pedestrians. The coverage will pay regardless of who is at fault, but if someone else is liable, your insurer may seek to recoup the expenses from him or her.

Personal injury protection (PIP) and broader “no-fault” coverages are expanded forms of medical payments protection that may be required in your state. Some states have optional PIP or no-fault coverage. Expanded features include payments for lost wages and childcare.

If you have a good health insurance plan, there might be little need to buy more than the minimum required PIP or MedPay coverages, if at all. And, if you already have disability insurance, there’s little reason to purchase higher-than-minimum amounts of PIP.

Uninsured/Underinsured motorists coverages

Uninsured motorists (UM) coverage pays for your injuries if a hit-and-run driver or someone who doesn’t have auto insurance strikes you. You’ll probably want to have at least the minimal amount of UM/UIM, it is required in many states.

Underinsured motorists (UIM) coverage will pay out if the driver who hit you causes more damage than his or her liability coverage can cover. In some states, UM or UIM coverage will also pay for property damages.

Add-on features

Several supplemental auto coverages are available, either as separate premium items or included in augmented policies.

Rental reimbursement, a common add-on, covers vehicle rentals required because your car is damaged or stolen.

Coverage for towing and labor charges in case of a road breakdown is also common.

Gap coverage for your new car will pay the difference between the actual cash value you receive for the car and the amount left on your car loan if your vehicle is totaled in an accident.

Tips for lowering your premiums

You can find discounts for your policy if you know where to look. Be sure to ask about specific discounts when you apply for or renew your policy. Auto insurers offer numerous ways to reduce your premiums, but don’t expect them to be handed to you. Make a list of possible discounts before you visit your agent or contact your company. Each company has some offerings that are specific, but there are quite a few that are general in the insurance industry.

Insuring more than one car with an insurance company will get you a discount, as well as insuring your home with the same insurance company as your car. And these days, auto insurers offer discounts to nonsmokers.

But did you know that in some states you can get a discount just for buying a brand-new car? If your car has never been titled, you could get as much as a five percent discount on your policy.

You can also get discounts if you are over age 55 and have voluntarily taken a defensive-driving course and/or are not employed full-time.

If you own your car outright or if your finance company allows it, you can lower your premiums by 15 to 30 percent by raising your deductible on collision from $200 to $500.

You can reduce your premiums by as much as 40 percent by increasing your deductible to $1,000.

For those of you whose rates went up when you listed a teen on your policy, there is some heartening news.

If your licensed child is under 21 and goes to college more than 100 miles from home you can save a few pennies because it’s assumed they won’t be driving your car year-round.

You can also get “safe car” discounts of up to five percent in some cases for having air bags or factory-installed mechanical seat belts, antilock brakes, and antitheft devices such as alarms.

And finally, if your profession is farming or ranching and you use your car for work, you can get as much as five percent taken off your auto insurance bill.

Always make sure you ask your agent about discounts on anything that makes your car safer or makes you a better driver.

It’s the time of year for ghosts and goblins, chills and thrills, tricks and treats – which means it’s also time for spending some serious bucks on costumes and decorations.

Decorating for Halloween has become as common as decorating for the Christmas holiday. Some households keep it simple with a jack-o-lantern or two, but many homeowners go all out, decking the front lawn with special lighting, coffins, tombstones, life-size mannequins and other scary stuff.

Halloween is the second-most decorated holiday next to Christmas, and spending on decorations and costumes has risen steadily over the years, industry figures show. Americans will spend more than $580 million on Halloween home decorating alone in 2003, according to industry estimates.

This year, spending will be a little less – an average of $41.77 for each of the 56 percent of consumers who plan to buy for Halloween – compared with last year’s $44.20, according to a National Retail Federation survey conducted last month.

“Halloween continues to be important for retailers because it represents the beginning of a new season, not just one holiday,” says Tracy Mullin, president of the retail federation, which tracks consumer spending.

Such devotion is usually reserved for some type of religious rite, which for most people, Halloween isn’t.

But those who spend the time and money to super-size their Halloween say they do it because the holiday has a particular value that other special occasions don’t.

While Christmas is generally a family occasion, Halloween, more than any other holiday, is a time when the community interacts.

Childhood nostalgia pushes Halloween spending to $7 billion. It used to be the most scandalous thing adults did on Halloween was steal candy from their kids’ sacks. Now, they’re stealing the whole holiday.

Halloween ranks first in candy sales, beating out Easter and Valentine’s Day. Besides Christmas, it is the biggest reason people decorate their homes. And it is the third-largest party day behind New Year’s Eve and Super Bowl Sunday.

If Halloween were a gift-giving event, it probably would rank even higher, said Ellen Tolley, spokeswoman for the National Retail Federation, an industry trade group in Washington, D.C.

“People have always loved decorating for Halloween. But instead of just looking at it as just one day, consumers are looking at it as a season,” Tolley said.

“People can justify spending more because they have (their decorations) up for a whole month.”

Lynch said she remembers a time when the Halloween rush started one day before the big event. These days, the season starts in September with corn stalks, hay bales and scarecrows. Then the pumpkins show up. Soon enough, neighborhoods are full of fog machines and life-size skeletons.

Credit card companies have all kinds of tricks to gouge your wallet and drive up your bill. While arguably unfair, all these tricks are legal, leaving you no alternative but to stay as informed as possible to protect yourself.

The old bait and switch

So you’ve got this ingenious plan. You’re going to apply for a great credit card that gives you tons of frequent-flier miles, put all your shopping on it, and then head to the Bahamas in February. Stop – the miles you earn, if any, might get you no further than Hope, Ark.

When and if you get that card, study the terms carefully. If you don’t qualify for the great card, the credit card company can send you a completely different card with different terms. If it’s not what you want, don’t activate the card.

Call the company and cancel the account.

Musical address

Credit card companies sometimes change their payment P.O. Box. If you send your payment to the wrong one, it may meander around the postal system or your credit card’s headquarters for a while before finding its way to the payments department. That means you’re responsible for the late fee and your interest rate could be raised. It will be raised if you have one of those super-duper low rates – guaranteed.

To avoid falling for this trick use the envelope provided in your statement. If you use a different envelope or use online banking, check the mailing address on your statement each month or call the company to verify the address. Always pay early to avoid last-minute mix-ups.

Late fees in minutes

If you’re five minutes late it could cost you $29. You see, even though your due date may be the 15th of the month, upon further inspection of your statement, you might see it’s actually due by 1 p.m. So if Harvey the letter carrier took a few minutes of shut-eye at the cul-de-sac, it will cost you a late fee and a possible rate increase. Check your statement to see what time and date your payment is due and send it in early.

Over-the-limit fees

This fee is a no-brainer – don’t go over. But what you don’t know are the little tricks credit card companies use to push you over the limit.

The company may gave you a card with a much lower limit and after transferring as much of the balance as possible from the old card, hit you with an over-ther-limit-fee the first time you use the card.

Cash advance fees and rates

Don’t take cash out of your credit card. Read the fine print on your statement and you’ll see it’s a very bad idea. Your card might have a really low rate for purchases, but if you take out a cash advance, get ready for a shock. The rate for cash advances is much higher. And there is no grace period – you start paying interest right away.

Aside from paying a high rate on the cash you take out, you’re going to pay a fee, usually two to four percent of the amount advanced. And your payments will be applied to the lower-interest balance before they are applied to your cash advance.

Reverse the late payment, but up the rate

Credit card companies may forgive a late payment, but they could still punish you by raising your rate. Let’s say you fell for the ever-changing mailing address trick. You call and scream until they reverse the late-payment.

But next month, when your bill arrives, you notice you’re now being charged a much higher interest rate because you were late on a payment.

Increasing the rate based on other accounts

Your credit card company may use your late auto loan payment to justify a rate increase. They frequently check your credit report and look for any late payments to justify raising your rate.

Fixed rates aren’t fixed

A fixed rate means the credit card company has to give you 15 days notice before raising your rate. You can call and ask them to lower it, but they don’t have to do it.

Balance-transfer fees and disappearing low rates

If you’re not careful, you’ll get socked with unexpected fees and soaring rates when you transfer your balance. Before transferring a balance, ask if there is a fee. Also, ask how long the low rate lasts.

Those low rates on credit card offers are usually only good for six months. If you are late on one payment, the low rate is immediately replaced with a much higher rate. Another note of caution: When you transfer a balance from one card to another, wait to see the balance appear on the new card before closing the old one.

Shrinking grace periods

The grace period is the time between when you make a charge on your credit card and when that amount starts building interest. Many credit card companies are shrinking that time down to 20 days; meaning that by the time you get your bill, you may already be paying interest.

This trick isn’t limited to the credit card industry, either. Persistence pays off – but it’s exhausting.

The dreaded D-word: debt. All of us have it at some time or another, and we would all like to get rid of it. Although it is probably not possible to live 100 percent debt free, you can manage the debt you have.

Depending on your circumstances, you need to consider whether you should manage your debt yourself, seek professional help, or when – and whether – you need to consider bankruptcy.

Am I in trouble?

Steve Rhode, cofounder of Myvesta.org, says you can feel crunched whether you have debt of $3,000 or $300,000. “You’re in trouble if you feel you are, or if you’re afraid to open bills, can only afford minimum payments, or if you time checks until the last possible minute so you can pay your bills,” Rhode said.

Tips for Doing It Yourself

Besides a trip to the library, or checking out the Internet for tips and advice, you can consult certified credit counseling or debt management agencies. These non-profit firms provide expert advice on how to manage your debt. For people with extensive debt, these organizations will help you formulate a debt management plan.

One of the largest is the National Foundation for Credit Counseling (NFCC), a national nonprofit network of 1,450 centers across the U.S. Among the other leading agencies are Myvesta.org, American Consumer Credit Counseling and Consumers First.

Credit or financial counseling agencies should provide you with information free of charge. There should be no minimum amount of debt required. Most organizations will offer help with types of debt, including secured debts such as car loans and mortgages. Ask for an agency’s costs, credentials and qualifications before making a choice.

When to Consider Bankruptcy

In 1999, 1.3 million people filed for bankruptcy. Although bankruptcy might seem a tempting way to clean the slate once and for all, most financial experts agree it is, at best, a last resort.

When you file for bankruptcy, your debts go into “automatic stay” – that is, they are frozen. What happens next depends on the type of bankruptcy. There are two options: Chapter 7, called liquidation and Chapter 13, also known as “wage-earner” bankruptcy. In Chapter 7, your assets are sold to pay off creditors. With Chapter 13, you lose no property, and your trustee establishes a payment plan, usually lasting three to five years.

Sounds easy, right? But bankruptcy’s aftereffects are long and damaging. Filing remains on your credit report for up to 10 years even if you don’t go through with the entire process.

Bankruptcy remains tied to your record whenever you apply for a job with a salary above a certain amount, insurance or a loan above a certain amount, even after the 10-year period has passed.

Most importantly, bankruptcy does not change your financial management habits. If you do not change your attitude and habits, you may find yourself faced with financial crises again and again.

Alternatives to Bankruptcy

Bankruptcy is a complicated process involving you, your creditors, lawyers and courts. To avoid it, you might want to find ways to increase income or sell assets to pay off debt as part of an overall repayment plan.

If you’re thinking of using your retirement savings, such as an IRA or 401(k) to pay off debt, you must consider penalties. Will the income tax and penalties involved create new debt in place of the old?

Finally, consider enrolling in a debt repayment plan sponsored by a nonprofit counseling agency before turning to bankruptcy.

Part 2 of 2. This week we’ll look at how to remove negative incorrect information. Last week, we looked at the importance of knowing and understanding what’s in your credit report.

Before you can demand your legal rights, you must thoroughly know your legal rights. These are contained in the four sections of the Consumer Protection Act. The Fair Credit Reporting Act (FCRA) is primarily concerned with credit bureaus and credit reports. The intent of the FCRA is twofold:

1.To protect you against credit abuses.

2.To provide you with the legal tools to repair and improve your credit.

What can you do if your credit report contains false, misleading or incomplete information that now injures your credit?

The Fair Credit Reporting Act (FCRA) protects you against credit abuse that might result from an unfair summary of your credit history. The FCRA grants you certain rights as a credit consumer. These basic rights are the keys to eliminating negative marks in your credit report and to reestablishing good credit.

Challenge the accuracy of your report.

You have the right to dispute any information in your report that you feel is false, obsolete, incomplete, or incorrectly entered. By disputing an entry, you are challenging the accuracy of what is reported on your credit statement and you neither admit nor deny your liability for the debt.

The law clearly defines the length of time negative information can remain on your credit report; older information is considered obsolete and must be removed. For example, a bankruptcy or an unpaid IRS tax lien will remain on your report for 10 years. Generally, most other types of information are considered obsolete after 7 years.

The credit bureau must verify any information challenged. Credit bureaus are only considered reporting agencies; they need not prove the accuracy of the information – unless it’s challenged.

Once an individual challenges the information, the credit bureau must contact the creditor and request that the creditor verify the information exactly as it appears on the credit bureau report.

Unfortunately, any person or company – whether a legitimate creditor or not – can include negative information on your credit report without your consent or knowledge – and without the need to first prove it is true.

The credit bureau must provide proof of the entry within 30 days, unless there is some good reason for delay, such as an overload of inquiries to the bureau.

Any information that cannot be verified must promptly be deleted from the credit bureau files.

In this way, the burden of proof goes back to the original creditor. And, the information needed for a creditor to verify is rarely easily accessed. Old files will need to be found and checked for accuracy and completeness. The creditor must then respond to the credit bureau within the 30-day time limit to present proof of the adverse information, which is usually too difficult for most creditors to do within the required time. In essence, many negative remarks are deleted through creditor default!

If the original creditor verifies the information within the time limit, the negative marks must remain in your file.

Challenge the Negative/Non-Rated Remarks

Successful credit repair requires everything to be in writing. When disputing items, never waste time communicating with a credit bureau either by telephone or in person, mainly because your communication must state certain information.

Send a letter for each item you want to challenge. Send a protest letter only if you feel the negative or non-rated summary is incorrect due to problems with the creditor, is factually incorrect, or was due to circumstances beyond your control.

If you find the code “charge-off,” the creditor thinks your debt is uncollectible. Protest that this comment should be removed if the debt was satisfied; it should not be reported as a charge-off. If there were a series of “past dues”, perhaps those payments were delayed when you changed addresses.

You may also dispute owing the creditor the amount claimed as delinquent or charged-off. Were you billed for unsatisfactory goods or services when the creditor failed to resolve the problem to your satisfaction? Did you in turn delay your payment? There are many possible reasons you may have for disputing a negative credit mark.

When you write your letter of dispute to the credit bureau, carefully list each negative or non-rated notation you want to challenge and then draft one letter.

Using a separate letter for each dispute may cause the credit bureau to consider your requests as “frivolous and irrelevant”. They will then be able to legally ignore your request for an investigation.

Use only general reasons for your dispute. Avoid specific reasons, such as incorrect dollar amounts or dates. Your dispute should only state that you never owed that creditor $2,000. You are not obligated to mention what you do owe.

For a disputed date, simply claim that you never incurred that debt on that date. If you fully paid the debt, say so, but don’t say when it was satisfied. Do not give the credit bureau more negative information to add to your report.

Never send a form letter to the credit bureau. In essence, a handwritten letter starts the process more effectively. Include a copy of your credit report to ensure the bureau checks the right file.

Be sure to sign, date and include your address, date of birth and social security number in the letter. Copy your letter for your file. Send your letter certified mail, return receipt requested. This proves when the bureau received it.

Remember, a credit bureau cannot by itself, verify credit information. It must rely on the creditor to defend against your dispute. Only in this way can the negative mark be verified and allowed to remain on your credit report.

Wait 30 days for a reply.

If the credit bureau does not reply within 30 days, send a second letter demanding an immediate response to your initial request. The credit bureau should ultimately respond in one of three ways:

1.The credit entries are changed.

The notations will be changed/removed because either the credit bureau verified that the notation(s) were in error, or the creditor failed to verify the disputed credit entry. The credit bureau is now required to reply to you within 30 days that the disputed credit entry will be deleted.

2.The creditor verifies the disputed item, so it stays on your credit record.

The credit bureau’s reply to you will contain the creditor’s statement and/or documentation to verify the negative credit information.

This does not mean there is nothing further you can do to correct your credit report. You then have other options:

a.Try again later. Challenge the negative item in a year or two, but then raise a different dispute.

b.Talk to the creditor directly.

Most creditors are reasonable. Attempt to persuade your creditor that your claim is legitimate and the creditor can have the credit bureau correct your credit report. This commonly occurs.

3.You receive a preliminary response from the creditor.

The credit bureau may first respond with a preliminary letter that acknowledges receipt of your letter and advises you that the bureau is continuing its investigation.

If the credit bureau sends preliminary responses to request additional information such as canceled checks or evidence that a tax lien or judgment has been satisfied, you should respond quickly to the request.

If the credit bureau asks you to verify your identity, send them a current phone or utility bill with account information they are already likely to have in their computer.

Never send a copy of your driver’s license, social security card or identification that reveals your place of employment.

If you do not receive a final reply from the credit bureau within 30 days, then the negative credit information against you must be removed.

You will probably not get results on every challenge the first time, but you can try again later with a different dispute.

You will notice that the bureau has probably deleted some negative items only because one or more creditors failed to respond to the investigation within 30 days. If you still have negative marks, repeat this process.

Bad credit cannot be repaired in a day; it takes diligence.

Identity theft is the fastest growing crime in America. In 1999, 13 percent of Americans had been victimized by identity theft. Victims can expect to spend upwards of $1,000 and 200 hours of work to clear their good name and credit rating.

What is identity theft? When one person steals another’s personal information and uses it fraudulently. In 1998, identity theft became a federal crime. Forty-seven states have also passed anti-identity-theft laws. Identity theft is an easy crime to commit and difficult to investigate and prosecute.

Common techniques for collecting personal information include stealing wallets, handbags, and mail (especially pre-approved credit card offers). Dumpster diving (going through a business or individual’s trash) is another popular method where thieves are looking for discarded mail, personnel files and documents.

Unscrupulous employees of retail stores, gas stations, restaurants and so forth can sell or use personal information from credit cards, drivers licenses and so on. Other methods to gather personal information include theft from mailboxes and calling potential victims posing as a legitimate figure seeking information. The most important and frequently used information identity thieves can obtain is a social security number.

Make no mistake: An identity thief can ruin your life. Thieves, who may work individually or as part of large international crime rings, obtain identifying information about their victims in many ways.

They may be roommates, relatives, friends, estranged spouses or household workers with ready access to their victims’ personal papers. Sometimes they even switch the addresses of victims to their own post office boxes and wait for the credit applications and card renewals to come to them.

They also get essential information – including the quality of prospective victims’ credit – by illegally accessing the huge databases of the three credit reporting bureaus. All have thousands of computer terminals in places like car dealerships or real estate agencies. They can shop for victims at will.

Identity thieves can even photocopy your vital credit information legally at the local courthouse. If you’ve been divorced, the transcripts of your case, including the financial and credit account information you divulged as part of the proceedings, as well as your Social Security number, are part of the public record.

Finding victims through the Internet

The Internet provides another opportunity for identity thieves to glean personal information. Thieves can design very official-looking e-mail messages that imply they are from a major company and successfully obtain personal information from trusting individuals.

Once the crooks have some of your personal information, they can start applying for credit cards in your name, often giving an address that is different from yours. Identity thieves may buy a car or rent an apartment in your name. Some may even commit crimes in your name.

Many identity theft victims have been denied student loans, mortgages, credit accounts and even jobs. Some wrongly have had their telephone service disconnected and their driver’s licenses suspended or been harassed by collection agencies.

The sad part is, it is next to impossible to stop a determined identity thief. Who is going to apprehend him? Occasionally law enforcement agencies, including the Secret Service, bust up identity theft crime rings that involve many victims and millions of dollars. But they don’t chase down single crooks that commit “victimless” crimes.

While victims may not be liable for the credit bills an identity thief runs up, they still are compelled to spend time, effort and money to clear up the mess.

Looking out for yourself

If you become an identity fraud victim, you take three steps immediately:

1. Report the identity theft to local law enforcement authorities, including the police, postal inspectors and Secret Service.

2. Contact all banks and others where your name has been used fraudulently, sending a copy of a police report or other documentation to show that you are a fraud victim.

3. Call the fraud departments of the three major credit bureaus to get copies of your credit report and to have fraud flags and statements added to your report saying that all potential creditors should contact you to verify credit applications.

If the first three steps fail to resolve the problem, we would add a fourth: Call a lawyer. Credit issuers and reporting agencies are sometimes slow in responding to complaints from consumers. The threat of lawsuits can provide some incentive.

You ultimately cannot prevent identity theft from happening to yourself, but you can reduce the odds.

Part 1 of 2. This week we’ll look at the importance of knowing and understanding what’s in your credit report. Next week, we’ll look at how to remove negative incorrect information.

Many people find it hard to read credit reports so they don’t bother checking the information that the reports contain. While the goal of credit bureaus is to maintain fair and accurate records, mistakes can and do happen. By checking this information on a regular basis, you can head off possible problem areas or fix negative information.

Who uses your credit report? Well, financial institutions that need to make a decision on your credit/debt worthiness, of course. But also a potential employer, landlord or insurance agency may look at it to make a decision as to whether they want to do business with you. Fair? Tough! They’re going to use it anyway.

The biggest mistake you can make is to not know what’s on your credit reports. Yes, reports. You can’t just look at one and know what’s on the others. You have to get all three reports. Of course they format the reports in different ways so then you have to learn how to read them. But you must learn, as not to learn is akin to giving them permission to report inaccurate, negative information about you.

The Credit Score

By having your credit history compiled into a number, you and those checking on you can more easily understand how your credit history compares to others. Individual lenders and credit bureaus have their own formulas.

Usually, about 35 percent of your score is based on your bill paying habits. Thirty percent is based on how much you owe vs. how much credit you have available. Fifteen percent of you score is based on how long you have managed your credit. Ten percent is based on the mix of credit you have. Having a mix of types of credit is seen as good. Only 10 percent are based upon your pursuit of new credit.

See How Creditors Rate You

When you get a copy of your credit reports, you have most, if not all, of the information that creditors use when deciding to grant you credit.

The three traditional characteristics that creditors rate when judging your credit are capacity, character and collateral. When you get your credit reports, you can read them with these characteristics in mind.

Creditors want to know not only can you pay off a debt, but will you. To judge your character, creditors look at your credit history. Some people may have the income to afford the debt, but may not have the budgeting ability to always pay their bills. So a creditor will check your bill-paying record. He’ll also look at the stability of your work history and how long you’ve lived at your current address.

After determining if you can and will repay the debt, a creditor wants some further risk insurance in the form of collateral. He’ll want to know what assets you have that could cover the debt if you lost your income.

How To Read A Credit Report

Once you have your credit report, it is important that you know how to read the report and understand the special coding included. Although credit reports don’t look alike, they contain many of the same items. When reviewing, check the details. Make sure your name is spelled correctly and that your date of birth and social security number is correct. If these items are incorrect, this could cause some problems. Someone else’s credit history may be mistakenly included in your file!

Your creditors are listed on the report. The first thing to do is to find and circle each of the negative remarks or “dings” in your credit file. Information on these reports is usually coded like your bank statement. The law requires credit bureaus to explain anything on the report that you cannot understand. You will find a key to the coding symbols. Next, look for damaging remarks in the Historical Status section of your report.

Your credit report will also include an “Account Profile” column. This column contains a summary rating for each account. A summary may read “positive,” “negative” or “non-rated”:

1. “Positive means you pay on time.

2. “Negative” means serious credit problems, perhaps a defaulted debt.

3. “Nonrated” may signify a few late payments, which still gives you a weak credit report even when there is no strongly negative entry.

Each negative or non-rated entry has a code that reflects the nature of the problem. Your goal is to protest and eventually remove every negative or non-rated profile.

Once you have your reports and know how to understand them, you must be vigilant because new information is constantly being added. Is it accurate? The only way to know is to check your reports on a regular basis. Remember there maybe companies that you are doing business with that are looking for a black mark on your report so that they can raise their rates on your account. The only way you can win this game is to stay on top of it.

Editor’s Note: This is part 2 of a two part series on dealing with credit cards. Last week we looked at the pros and cons of having credit cards and how to compare the different card offers to pick the one right for you.

A 2001 study conducted by Nellie Mae, the nation’s leading student finance firm, revealed that the average undergraduate carries a credit card balance of $2,327. According to the study many students use their cards without anticipating how the bills will be paid off.

While its almost impossible to live debt-free, too many people let debt get out of hand. Ideally, experts say, your total monthly long-term debt payments, including both loans and credit cards, should not exceed 36 percent of your gross monthly income.

It’s far too easy to spend more than you can afford, especially when you pay with credit cards. Of course, avoiding debt at any cost is not smart either, if it means depleting your cash reserves for emergencies. The challenge is learning how to wisely manage the money you borrow.

The problem most students have is that they carry a lot more than one credit card, and often only carry small balances on many of them. The goal here should be to identify the easiest card to pay off – and pay it off.

For the next three to six months, put all your extra debt-busting cash toward paying down that single card. The resulting feeling from eliminating that single debt will give you a sense of accomplishment – and the momentum you need to perhaps pay down your second smallest card balance, and third and etc.

Understanding the ins and outs of your debts is critical. Which one carries the largest balance?, which has the highest APR?, etc. Then decide, using your budget, how quickly you would like to pay it all back. Set a feasible time goal, of say, 18 months, and stick to it at all costs.

Where to turn when the hole is too deep

The human reaction to extreme financial difficulties due to debt are unfortunate, but fairly consistent. Feelings of panic or desperation are often underlined by feelings of depression that come with the debt trap.

What’s worse is that there are always going to be people who are there to take advantage of your desperation to offer you a quick fix. What they always neglect to mention, however, is that this quick fix comes with a high price. Some companies literally profit off of other people’s misery, either by dressing up a bad deal to appear good, or by charging you for what amounts to nothing but fraud.

Guaranteed Low Interest Loans

If ever you encounter an offer for a loan at an extremely low rate, “no matter your credit history”, beware. This is not likely the offer of a legitimate company. There are numerous fraudulent scams currently being practiced where these loans are “guaranteed”, and all you need do is submit a “small application fee” (often $200 or more) to be approved. Avoid these offers altogether. No established financial firm would demand a fee up front simply to apply for a loan.

Payday or Title Loans

When times are tough, many people turn to what are termed “payday loans” in order to meet their obligations. The way this process works is the borrower shows the lender recent pay stubs, and the lender advances cash based on a guarantee of payment.

The key fact of these loans is that they are intended to be short-term. The real problem here is that the interest rates and fees are often more than 500 percent, depending on the loan and the time it takes to pay it off.

In many states, investigations of firms offering this type of loan have been launched, mainly because what this basically amounts to is legalized loan-sharking.

Title loans have typically been under even greater scrutiny than payday loans, mainly because they use loopholes in state laws to charge annual interest fees, which may be higher than 1000 percent! Collateral for title loans is always your car, hence the term “title loan.”

Avoid these loans at all costs.

Credit Repair Practitioners

You’ve probably seen ads for companies that claim they can fix your credit, qualify you for a loan or get you a credit card. Their pitches are tempting, especially if your credit is bad and you desperately want to buy a new car or house.

You should avoid these outfits, however. Many of their practices are illegal. Some have been caught stealing the credit files or Social Security numbers of people who are under 18, have died or live in out-of-the-way places like Guam or the U.S. Virgin Islands, and substituting these for the files of people with poor credit histories. Others have been identified as breaking into credit bureau computers and changing or erasing a bad credit file.

But even assuming that the credit repair company is legitimate, don’t listen to its come-ons. These companies can’t do anything for you that you can’t do yourself. What they will do, however, is charge you between $250 and $5,000 for their unnecessary services.

Credit counseling agencies are a necessary part of the debt industry. One of the things you should be careful of is the confusing nature of Credit Counseling agencies’ use of the term “non-profit” or “not-for-profit”.

What many people do not understand is that the term “not-for-profit” is simply just another type of business organization. Many assume that these agencies are not interested in profit, when this is simply not the case. In fact, many of the largest organizations in the credit counseling industry managed to grow from humble beginnings fueled by their profits.

The key to not-for-profit credit counselors is that your creditors primarily pay for their services. Typically, this means they organize a plan for you in which interest rates are lowered, but at which your debt level remains the same.

They basically extend the length of your debt payment plan to ensure smaller payments. This is exactly what your creditors want, as they lose very little over the long term. As a result, credit-counseling agencies typically are paid a 10-15 percent commission by your creditors. Obviously, this can mean upwards of several thousand dollars over the life of your debt plan.

The worst point about credit counselors is that despite what they may lead you to believe, they are actually working for your creditors. This means that they benefit by extending your debt payment plan because every time you make a payment, they pick up a commission.

What credit repair clinics claim to be able to do:

- Remove incorrect information from your credit file.

You can do that yourself under the Fair Credit Reporting Act.

- Remove correct, but negative, information from your credit file.

Negative items in your credit file can legally stay there for seven or ten years (depending on the type of information), as long as they are correct. No one can wave a wand and make them go away.

One tactic of credit repair services is to try and take advantage of the law requiring credit bureaus to verify information if the customer disputes it. Credit repair clinics do this by challenging every item in a credit file – negative, positive or neutral – with the hope of overwhelming the credit bureau into removing information without verifying it.

Credit bureaus are aware of this tactic and often dismiss these challenges on the ground that they are frivolous, a right credit bureaus have under the Fair Credit Reporting Act. You are better off getting your file and selectively challenging the outdated, incorrect and ambiguous items.

Even if the credit bureau removes information that a credit bureau had the right to include in your file, it’s no doubt only a temporary removal. Most correct information reappears after 30-60 days when the creditor that first reported the information to the credit bureaus re-reports it.

- Get outstanding debt balances and court judgments removed from your credit file.

Credit repair clinics often advise debtors to pay outstanding debts if the creditor agrees to remove the negative information from your credit file. This is certainly a negotiation tactic you want to consider, but you don’t need to pay a credit repair clinic for this advice.

- Get you a major credit card.

Credit repair clinics can give you a list of banks that offer secured credit cards. While this information is helpful in rebuilding credit, it’s not worth hundreds or thousands of dollars – you can find this information yourself for little or nothing.

Many states and the federal government regulate for-profit credit repair clinics, or even prohibit them from doing business. Some dubious credit repair clinics have tried to get around these regulations by setting themselves up as nonprofits, but still take your money and provide poor results.

Before using any organization that claims to be a nonprofit, carefully check the company’s fees, claims of what it can do and its reputation. Call the Better Business Bureau or ask for the names of satisfied customers.

Myth 1: I’m a loser and a failure because I’m in financial trouble.

Reality: You have to accept responsibility for your actions and remember that you did accept the credit with the promise of paying it back. But most families and our schools do a poor job of teaching financial responsibility.

How many classes did you take while growing up that taught you how much credit you should accept? Maybe the truth is that you made a mistake and got in over your head because you didn’t know better. If you can learn from this mistake, you are neither a loser nor a failure. Accept your setback, learn from it and move on.

Myth 2: My financial condition is so bad that my situation is hopeless.

Reality: Although your problem may not be solved in a way that you would envision, a resolution can always be found. Open your mind and be realistic about your options. Ultimately, you have to choose the solution you are most comfortable with.

Myth 3: The credit card companies wouldn’t send me applications in the mail if I couldn’t afford it.

Reality: Wrong. The credit card companies are simply making you an offer based on mailing lists or research they have performed. It is your responsibility to determine whether you can afford to accept their offer.

Myth 4: Everything is okay because I pay the minimum payment due each month.

Reality: By just paying the minimum payment on a debt, you extend your payments for many years. If possible, send more than the minimum payment. If that isn’t possible, you are probably living close to the financial edge.

What would happen if you were injured or sick or could not work? Simply being able to live from paycheck to paycheck is not a sign of financial well being.

Myth 5: If my debts get to be too much, I’ll just file for bankruptcy.

Reality: Bankruptcy is a very serious matter and should be a last resort, not an easy out. It is a legal case filed with the bankruptcy court that is a matter of public record, and it can be reported for the rest of your life if you apply for certain loans, life insurance or jobs.

Many people who have filed bankruptcy wish they had tried other alternatives before filing. Once you file, you will always be ”a person who filed bankruptcy,” and you can never take that back.

Myth 6: It’s okay if I take a cash advance to keep me from falling behind on my payments.

Reality: Some people take cash advances on their credit cards to pay their other creditors ”on time.”

It is better to accept a late payment than to borrow your way deeper into debt, just to pay for bills you can’t afford. What often happens is you put yourself so deep in debt that it is nearly impossible to improve your situation without significant negative marks being made on your credit report.

Myth 7: I can wrap up all of my credit card debt into a home equity loan and my interest will be tax deductible.

Reality: You have just placed your home at risk and could lose it if you fail to make your payments. Nobody ever plans not to be able to make her payments.

The reason the lender uses your home as collateral is so she can take it from you if you default on the loan. As for the tax deduction, who knows whether the interest will be deductible for the life of the loan?

Credit card interest used to be deductible but no longer is. Are you confident that home equity interest will always be deductible?

Myth 8: Credit is bad.

Reality: Wrong. Credit can be used for many good and worthwhile purposes, such as buying a home. Credit cards are very convenient when making purchases as long as you have the money to pay off the credit card bill. Credit is like many other things in life: When used incorrectly, it can hurt you.

Myth 9: If I don’t use credit, I’ll never be able to buy anything.

Reality: If you don’t use credit, you won’t have debt. Remember when people used to pay for purchases in cash? If you want something bad enough, save for it. It is significantly more rewarding to purchase something and own it outright than to create another liability.

Myth 10: If I cosign a loan, the lender will never come after me.

Reality: You cosigned for the loan, which means you promised to repay the debt if the borrower couldn’t. When the borrower is unable to pay back the loan, you are on the hook. Unless you are prepared to repay the loan when the borrower defaults, you should never cosign anyone’s loan.