Funny Money Friday: The Amazing Shrinking Groceries

Money doesn't have to be boring! Each week, CreditBloggers.com takes a look at the lighter side of the personal finance world in a series called Funny Money Friday.

If the rising cost of gas isn't enough to get your goat, here's another reason for your blood pressure to creep up: Grocery manufacturers have been quietly shrinking the size of their products and keeping the prices the same.

That's right, your weekly bag of groceries is getting lighter. To combat rising expenses and inflation, many manufacturers have started dropping a couple ounces from their packages without notice.

The Consumerist has been keeping a running tab of products hit by the "grocery shrink ray" including diapers, yogurt, cereal, chips, beer, cat food, garbage bags, juice, ice cream and more. Some products are shrinking by as much as 25%. You're left with paying the same price, but getting less.

For Funny Money Friday, we've thought of some other ways this "shrink gun" idea could be leveraged for solutions to America's problems:

• We won't have to pay $5 a gallon if a gallon shrinks down to only 3 liters. It's a minor .78 litters difference and would lower the cost to $3.70. Think of how happy the lower price could make you!
• What job losses? American companies have just been shrinking down to "fun size" for the past six months.
• Chop off the extra bedroom from your suburban home and that 30% drop in your equity won't seem so bad after all.

On the plus side, between the rising cost of gas forcing people to walk or bike more and shrinking food sizes we may just be winning the war on obesity!

Emily Davidson – Credit.com's financial expert and former TransUnion credit bureau insider. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com editor.

Just What We Need, 44 Million Federally-Funded Opportunities for Identity Thieves

If you're over 65, you're one of the 44 million people who are easy targets for ID thieves. Why? Because Uncle Sam emblazons your Social Security number -- in full -- right on your Medicare card. And it's not the kind of card that you're supposed to leave at home.

Don't Leave Home Without It?
Medicare tells you to "carry your card with you when you are away from home." It's written right on the back of the cards that some 44 million of us take with us wherever we go –- or our parents or grandparents do.

Yet the FTC says, "Protect your Social Security number. Don't carry your Social Security card in your wallet."

And the Social Security Administration is even more specific: "Show your card to your employer when you start a job so your records are correct. Provide your Social Security number to your financial institution(s) for tax reporting purposes. Keep your card and any other document that shows your Social Security number on it in a safe place. DO NOT routinely carry your card or other documents that display your number."

Two recent and excellent articles point out the absurdity of this situation: one in The New York Times, by Robert Pear, and the other is an AP story by Larry Margasak. As they show, the FTC and SSA worry about putting the identities of millions of Americans at risk -- while the Medicare people talk about not wanting to scare seniors with new cards and how expensive it'll be to come up with new cards for everyone.

Are They Nuts?!
Its hard enough to prevent identity theft without Uncle Sam making it easier on the crooks, by sending every senior citizen in the country out there with their Social Security numbers in their wallets! (My partner, Marc, just got his. Oy!)

It'd be great if we didn't have to get the whole federal government involved in rectifying this problem … but we do. The "Medicare Card Security Act of 2008 (S. 2908)" calls for the elimination of the use of Social Security numbers on new Medicare cards. It won't totally solve the problem, but at least it's a first step.

Consumers Union, which is calling on government to "be the solution, not the problem,"  has made it easy to contact your Senators in support of this bill. Click here.

What Should Seniors Do Now?
One of the bigwigs at Medicare say to leave the card home unless you know you'll need it. That sounds too extreme to me, given all the What Ifs out there. While I don't like the idea of Marc leaving his Medicare card home, I don't want us to have to deal with the consequences of his identity being stolen, either.

So I'm going to recommend he punt to prevent thieves from getting his Social Security number, by copying and cutting, as the Privacy Rights Clearinghouse recommends:

"You can make a photocopy of your Medicare card. Take a black marker and cross out the last 4 numbers of your Social Security number. Or take a scissors and remove the last 4 digits. Then cut it down to card size and carry that with you instead of the actual card that has your full SSN on it."

Until this gets straightened out in Washington, he'll still need to bring his original Medicare card with him whenever he goes to a doctor for the first time, and the hospital will no doubt want to see it if he's being admitted. But I prefer this punt to leaving the card home or going everywhere with the card that has the full Social Security number on it.

Do you agree? If so, tell everyone in your life who is 65 or older to start copying and cutting!

Nancy Castleman – Co-author of "Invest in Yourself: Six Secrets to a Rich Life" and founder of Good Advice Press. Nancy has spent the last 23 years teaching people how to get out of debt, save money, and live better on less. She writes on all these subjects for CreditBloggers.com.

Appraisal Hanky Panky

A cornerstone of the mortgage business is that everyone in the process, borrower, lender, and ultimate investor, can rely upon the sanctity of the appraisal process. Lenders require that appraisers be licensed, something that is required by law in every state. Many lenders place additional requirements on appraisers, perhaps that they be licensed for a minimum number of five years. 

The good lenders also have requirements that mortgage brokers must meet and they rely upon the mortgage broker to select a qualified appraiser in the area. In the overwhelming majority of cases, this works just fine because the underwriting process also includes an appraisal review. This is beginning to change.

Many large lenders are beginning to require that appraisals be ordered through appraisal management companies, AMCs, with whom they contract.  We have now had experience with a few of these and they are disasters. They do nothing more than insert another level of bureaucracy into the process. We have found that the "management" is nothing more than clerks passing paper back and forth between the ordering company and the appraisal.

Their internal "review" is a joke. It does not increase appraisal quality to have one more so-called expert review appraisals. Worse yet, they take a large fee for the process which ultimately adds to the cost paid by the consumer.

In one case, we needed to have field review of an appraisal we already had. We had to order it through an AMC who apparently could not find anyone in the county to do it for the fee they paid, $150 out of the $210 we had to pay.  Ultimately the order went to someone who is 133 miles away from the property who had to drive across three counties to get to the subject property. After paying for gas to drive 266 miles, how much is left for a day’s work? How much does someone that far away know about the local market?

In a more recent case, we waited three weeks for an appraisal, compared with a normal one week turnaround. I ended up paying over $500 in lock extension fees because the delay caused us to blow the lock.

The worse news is that the appraiser selection process at that company is, in my view, horribly tainted. To get on that AMC’s panel, you don’t have to meet some stringent quality or experience requirement. You just have to pay $10,000 to “buy” a zone, a territory consisting of a couple of ZIP Codes. Appraisals ordered with the AMC in their zone would be routed to them.

A lender ought to expect an AMC to recruit a panel of the most highly qualified appraisers in an area. What they are really getting is the appraiser who was willing, in effect, to “bribe” the AMC to send it orders. Are they the most qualified? I doubt it. To see this for yourself,  click here and then select your state and area.

Frankly, it looked to me that the "best" areas were taken while in what appear to be predominantly minority areas, no one had signed up. The implications of that are insidious.

The economics are rotten too. Appraisals cost between $300 and $400 these days and if you add $10,000 to an appraiser’s cost of doing business, the cost to the consumer has to increase.

It just stinks!

How Many Credit Scores Are There?

Scott wrote in earlier this week with a very good question:

I bought my credit score when I received my report from TransUnion. The interesting thing is that the score I received was a VantageScore. Is this the same as a FICO score?

I also received my PLUS score from Experian when I received their credit report. So I'm wondering if Experian is actually using the new FICO model? Or are then simply calling their FICO scores by a different name? I'm very confused as myFICO shows me yet another credit score...?

Hold on your hats, my answer is going to be a little messy and it may make you mad.

To start: no, a FICO score is not the same as a VantageScore or a PLUS score.

Each of the three national credit bureaus - Equifax, Experian and TransUnion - have a stable of credit scores that they sell to businesses and consumers. Each score is developed for a specific purpose. It might be tailored to an auto lender, a credit card marketer or a consumer.

Some of these scores are from FICO and some are developed in-house by the credit bureaus. FICO scores are more expensive, so they're not used as often in consumer products. A consumer FICO score is different than a FICO score used by a lender.

Here's a quick breakdown of some of the most common credit scores used:

Equifax
Equifax is the one credit bureau that uses FICO scores for most of their products. If you order a credit score from Equifax.com or AnnualCreditReport.com, it is going to be a FICO score. Equifax was a part of developing the VantageScore with the other two bureaus, but isn't currently selling it anywhere that I've seen.

Experian
If you order your credit score from Experian.com or one of their affiliates (FreeCreditReport.com, etc) you're going to get a PLUS score. This score is pretty similar to the FICO score. If you order from AnnualCreditReport.com, you're going to get a VantageScore. This score is pretty different from FICO. You should expect a 100 point difference between the two scores due to differences in the formula and range (501-990 vs. 300-850).

TransUnion
If you order a credit score from TransUnion.com or TrueCredit, you're going to get their TransRisk Score. There are a couple different versions of this score, some are closer to FICO than others. If you order through AnnualCreditReport.com, you'll get the VantageScore. TransUnion also has a small satellite site called TransUnionCS.com that sells FICO scores. 

FICO
myFICO.com obviously sells FICO scores for all three of the bureaus. These scores are more expensive to purchase than other options. Fair Isaac market a wide variety of FICO scores to business customers.

Feeling a little frustrated and confused? That's how most customers end up after discovering that the credit score they bought online wasn't a "real" credit score.

What's the solution? It's tricky because there isn't really a "real" credit score at all. Even if you pay the premium price for a consumer FICO score online, it isn't going to be exactly the same as the FICO score your lender would use.

My advice? Stay away from the VantageScore but don't worry about the other variations. The other scores are similar enough to the FICO score that it shouldn't confuse you. Just keep in mind that they're not all exactly the same.

You should splurge on FICO scores if you're preparing for a major purchase like a mortgage loan and are in the 600-720 range. Consumers in this range are most likely to have their rates impacted by small changes in their score.

Have you been confused by a credit score you ordered being different than a score used by your lender? Share your story in the comments section below.

Emily Davidson – Credit.com's financial expert and former TransUnion credit bureau insider. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com editor.

Bankruptcy Law A Disaster

The idea of the 2005 bankruptcy "reform" law was that it would stop abusive filings and as a result everyone would be better off, except the shameless few who were abusing the system. We were sold this bill of goods so effectively that many of us who are usually quite compassionate felt the reforms probably made sense. After all, shouldn't it be difficult to file for bankruptcy?

The resulting mess was legislation that bankruptcy judges are calling a colossal failure.

• "Unquestionably, this is the most poorly written piece of legislation that I or anyone else has ever seen," U.S. Bankruptcy Judge Keith M. Lundin of Tennessee (31 years of experience) is quoted as saying in an article on bankruptcy reform published by In These Times.

• "It's such a poorly thought out piece of legislation," says Henry E. Hildebrand, a U.S. bankruptcy trustee in Nashville, Tennessee in the same piece.

• U.S Bankrupcty Judge Frank R. Monroe published an opinion that essentially accused the credit industry and Congress of colluding "to make more money off the backs of consumers in this country."

Bankruptcy attorneys everywhere are expressing tremendous frustration in their ability to help consumers suffering from the perfect storm of bad mortgages, credit card card debt, stagnant wages or unemployment, and rising food and fuel prices.

For the credit industry, a word to the wise: Sometimes you don't get what you paid for. They wanted fewer bankruptcies  (more money) but filings are still rising, even with the new law. All predictions are they will reach the one million mark this year – a number not seen since the bankruptcy law was changed in 2005. As for making money as a result of these changes, apparently that's also a fantasy according to bankruptcy researchers. (I wonder if the credit industry has recouped the millions spent lobbying for it yet?)

Clearly the bankruptcy law is broken, and needs to be fixed. An overhaul is not likely at the moment, but there is an immediate issue that can and should be addressed: helping consumers save their homes by allowing loans to be modified in bankruptcy.

The Center For Responsible Lending says that by lifting the ban on court-supervised loan modifications for qualified homeowners in bankruptcy, Congress can help communities retain an estimated $89 million in tax revenues and save at least 600,000 homes from foreclosures.

HR 3609, the "Emergency Home Ownership and Mortgage Equity Protection Act"  would enable bankruptcy judges to allow these modifications in cases where it makes sense. Essentially, a bankruptcy judge would be able to order a lender to modify a loan if he or she determined the homeowner could afford keep his or her home. (Additional guidelines would have to be met.) This solution will cost taxpayers nothing, and in the end will likely save lenders a tremendous amount of money they would otherwise lose through foreclosures, short sales, and a continuing decline in home values. (What many people don't realize is that some loan servicers can't modify loans even if they want to help homeowners avoid foreclosure!)

Unfortunately that legislation has been "put on hold" but my sources say it's not a dead issue by any means. So let's do something about it.

While bankruptcy reform may not save every home, it's the single best commonsense way to help the greatest number of homeowners at one time, without costing taxpayers anything, Kathleen Day at the Center for Responsible Lending explained to me. I agree.

So speak up! Are you worried about keeping your home? Did you lose your home to foreclosure, or do you know someone who has or will? Is your neighborhood, county or state at risk of being hurt by foreclosures, and the corresponding loss in home values and tax revenues? Write to your Congressional Representative and Senators, the Presidential candidates, and even your local newspaper.

Gerri Detweiler – Personal finance author, radio host and credit expert. Gerri contributes budgeting, debt recovery and savings information online. She is also the co-author (with Mary Reed and attorney John Ventura) of the forthcoming Credit.com book, Stop Debt Collectors: How to Protect Your Rights and Resolve Your Debts.

Good News at the Gas Pump...In a Few Months

Come this fall, you'll be able to breathe a little easier when you use your Visa debit card at the gas pump. In October, excessive holds that freeze consumer's available funds for a day or two (or three) will become a thing of the past.

Currently, using your debit card to pump gas can be risky if you are living paycheck to paycheck as many people are. That's because when you use your debit card at the pump to pay for gas, a preauthorization request is made to your bank to make sure the card is valid and that there are sufficient funds in the account.  The problem is this preauthorization request also places a hold on an additional amount on your funds.  But that hold isn't lifted until the hold and the purchase amount are matched up by your bank, which can take about three days.

This means you may have bought $30 in gas, but also have a hold for $75 on funds. So the $45 difference is essentially "frozen" until your gas purchase clears the bank.

A new real-time authorization system that goes into effect this fall will cut that hold time to anywhere from about 15 minutes to 2 hours when a Visa debit card is used. MasterCard hasn't announced similar plans yet, but it's a good guess that they are working on something.

This is welcome news for consumers, but of course, we are presuming that gas stations will still welcome payment with plastic at the pump by then. In an effort to cut costs, some gas stations are banning credit cards, while others are offering discounts for those who pay with cash. And still others limit the amount you can spend at the pump if you use a credit card.

Funny Money Friday: Bridal Party Economy

Money doesn't have to be boring! Each week, CreditBloggers.com takes a look at the lighter side of the personal finance world in a series called Funny Money Friday.

Is the rough economy putting a damper on your plans for a lavish wedding? Here's a novel way to make some money...sell a spot in your bridal party to the highest bidder! A story earlier this week revealed that a hair stylist in Virginia Beach had posted an ebay listing offering a spot to be a bridesmaid in her 2009 wedding:

"As weird as it sounds, I just think somebody might be interested," she said. "Somebody who's never been in a wedding and always wanted to, or somebody who does weddings and wants to help out."

Gray said she hopes the auction brings in enough to cover the $18 she paid in eBay fees, the cost of the winner's dress and shoes - and then some."

There are currently four bridesmaid opportunities for sale on eBay, with prices ranging from $5 to $5,000.

What's next? A seat at the bris? A can't-miss pallbearer opportunity?

Emily Davidson – Credit.com's financial expert and former TransUnion credit bureau insider. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com editor.

Piling On

I'm sure that you remember watching a football game where the ball carrier was tackled, was down on the ground, the play had been whistled dead, and yet four more players jumped on the pile. That sure seems to be happening with Countrywide.

You will recall that another lender, Ameriquest, was accused on similar improprieties, alleging that they had taken advantage of consumers. Before it was all over, the Attorneys General of 49 states and the District of Columbia had joined in the suit! Talk about piling on!

In the end, in one of those "we didn't do anything wrong but whatever you say we did we promise not to do again" type settlements Ameriquest paid $300 million into a fund to reimburse wronged borrowers and paid another $50 million to the states to reimburse them for legal costs. Another result of the action was that Ameriquest then started the process of closing their operations, shuttering some 229 retail offices.  The company basically does not exist today.

We all know that if the Bank of America acquisition goes through, Countrywide will also cease to exist as a brand name.  Bank of America is acquiring the company at about $2 per share, down from a top of $45.  My calculations of the value of their loan servicing portfolio is many times the acquisition price, but a big question is the extent of the legal liabilities that BofA will also assume.

There are a number of suits that have been filed, including one by employees who lost money tied up in their retirement accounts, money that was invested in Countrywide stock. They sued the company and the executives who, they said, misled them too.

In the latest action, the States of Illinois and California have filed suits that will become suits against BofA.  Top Countrywide executives are variously named in the suits also.  You can count on this being a long, drawn out legal battle. The allegations in the suit are ones you have heard before, all practices they engaged in to sell unsuitable products to borrowers who didn't understand what they were getting into. 

From all the people I know in the industry who tell me what was going on at Countrywide and similar lenders, it is likely that the allegations are all true. But someone has to prove a lot of things before there is a settlement, and you can rest assured that the cost will be a lot more than $325 million. What ultimately happens is a matter of conjecture, but if you are an aggrieved Countrywide borrower, I would not hold my breath.

Tell the Fed to Protect Seniors and Stop Unauthorized Overdrafts

Seniors who are heavily dependent on Social Security pay nearly $1 billion a year in fees on unauthorized bank overdrafts. Overall, Americans who are 55 and older pay $4.5 billion in overdraft fees – $1.65 in fees for every $1 a lender advances them.

These are some of the key findings in “Shredded Security: Overdraft Practices Drain Fees from Older Americans,” the latest report from the Center for Responsible Lending (CRL) on the sorry state of the nation’s current overdraft system. It costs people of all ages some $17.5 billion a year, at an average fee of $34 for every overdraft, often with additional daily fees – even though they never agreed to this “protection.”

Isn’t 18% Enough for a Bank to Make?
There’s a case study in the new report about "Mary," who paid $448 in overdraft fees for $210 in credit from her bank. The bank repaid itself from her Social Security check, leaving her $20 to live on and putting her further in debt every month. Instead, if Mary had an 18% line of credit for overdrafts, she would have paid only about $1 in fees.

I don’t know about you, but 18% seems like plenty of interest to me – especially since the bank can re-pay itself from future deposits, which are guaranteed to come from Mary’s Social Security. What a rip-off!

Let’s Put an End to It
While the news here is not good, the timing is excellent: The Federal Reserve is considering changes to the overdraft rules. Unfortunately, the Fed doesn't go far enough, only calling for banks to let customers opt-out of pricey overdraft programs. Along with the CRL and over 80% of Americans, I believe banks should ask customers if they’d like to opt-in.

The vast majority of us want to be warned when an ATM withdrawal or a debit card purchase would put us in the red. That way, we can decide for ourselves what to do. The Fed should require it.

I also want to see the Fed put an end to the way banks maximize their overdraft fee income -- by subtracting the checks with the highest dollar amounts first, regardless of the order in which they were received, and by holding deposits longer than necessary. All of these practices put customers deeper into the red when they may not even know they have a problem.

If the bank has hit you, your parents, or your grandparents with unfair overdraft fees, the Center for Responsible Lending wants you to tell the Fed about it. I want you to speak up even if you haven’t been victimized by this unfair system.

Sealed with a Kiss
This is what I sent to the Fed:

Please protect our seniors and their Social Security checks from the excesses that leave too many of our elderly with hardly any money, thanks to their overdraft “protection.” I call on you to require lenders to:

1. Ask customers if they’d like to opt-in to the bank’s overdraft program.
2. Show how much the overdraft fees would be in terms of an annual percentage rate.
3. Warn people before they go into the red.
4. Stop “gaming the system” to increase overdraft fees by picking and choosing when checks and deposits clear. 

Feel free to copy and paste my message to the Fed here!

Nancy Castleman – Co-author of "Invest in Yourself: Six Secrets to a Rich Life" and founder of Good Advice Press. Nancy has spent the last 23 years teaching people how to get out of debt, save money, and live better on less. She writes on all these subjects for CreditBloggers.com. 

Is a Credit Inquiry the Same if You're Approved or Denied?

A reader wrote in this week with the following question about credit report inquiries:

I was wondering: when a person is applying for a credit card and a hard inquiry is done on your credit file, does your FICO score go down even if are approved or does it go down only if you are denied? Curious??!!

The credit inquiry impact on your credit score does not change if you are approved or denied. Basically, all an inquiry does is record the fact that your credit was pulled for the purpose of a credit application. There is no record with the inquiry of you being approved or denied for the credit card or loan.

Inquiries are used in credit scoring formulas to track how frequently you apply for new accounts. Too many applications for credit and you are considered to be a greater credit risk. Applications for credit add instability to your credit and credit scores hate instability.

Damaging hard inquiries only occur when you apply for a credit or loan account. You'll receive a soft inquiry when you check your credit yourself or when your credit is checked for a pre-approved offer. Soft inquiries don't hurt your credit score.

Ironically, your credit score will likely be more damaged if you're approved for the account than if you're denied. If you are approved, you'll have the damaging hard inquiry plus some damage in the credit age category resulting from having a newly opened account. Your credit score will improve as you use the new account responsibly.

You can learn more about inquiries in this expert article from FICO insider, John Ulzheimer.

Emily Davidson – Credit.com's financial expert and former TransUnion credit bureau insider. Emily writes about credit reports, credit cards, loans and personal finance as the CreditBloggers.com editor.