Author Brian Koerner Archive

As we start 2009, identity theft experts from around the globe are checking their crystal balls and compiling predictions of what you’re going to see in the field of identity theft in the new year. As I once again dust off my crystal ball and peer deep inside, here’s what I think is in store for you in 2009.

• More scams. That’s right, my crystal ball tells me that 2009 will be chock full of identity theft-related scams. Not surprising, considering the economic climate. When the economy goes belly-up, those people who walk the line on a good day will go to the dark side when the days get bad. They’ll do whatever it takes to get money, even if it means stealing your precious name.To make matters worse, today’s economic climate has turned people with good character desperate. And although they might not go to the dark side and become your neighborhood identity crook, when good people get desperate, they certainly are more prone to falling victims to these scams. Identity crooks thrive on the vulnerable, and the current economic situation is making many of us exactly that. In fact, scams related to real estate, jobs and credit (all affected by the current economic climate) will be on the rise. I’m even going to go out on a limb here — while overall identity theft crimes may or may not rise this year, I’d bet that we’re going to see an increase in new credit-related fraud due to the tight credit climate. When those who walk on the edge can’t get their own credit, they’ll get it using your precious name.

• Consumer education. Without a doubt, consumers appear to be more interested in educating themselves on identity theft-related issues. They want to understand the different types of identity theft and what they can do to protect themselves against them. They’re also looking more and more into available protection services and how to choose a service that meets their needs.

• Increased legislation. Every other week, it seems like there’s a big breach with thousands of consumer’s information being compromised. Without a doubt, “data breach central” has caused many states to take initiatives and create legislation in the interest of the consumer. With over 40 states passing or considering such legislation, more are sure to follow, and the federal government is getting involved in the game as well.

• Consumer-driven services. More and more consumers are inquiring about identity theft-related consumer services to help them prevent, detect and remedy an identity theft incident.

Picking a personal finance hero isn’t really that easy.  After all, who would you pick?  Would you pick those responsible for putting the bailout together?  How about someone who sounded the alarm whistles early on about the credit/financial crisis but was ignored?  Perhaps a TV finance personality like Jim Cramer from the “Mad Money” TV show on CNBC?

Better yet, how about that couple that you know who aren’t particularly complicated, but full of common-sense financial wisdom?  They worked and played hard, but they always lived well within their means.  They saved when it wasn’t the most fun they could be having with their money.  They were frugal.  They didn’t buy a BMW or a house with a huge mortgage.  They spent their money wisely and saved smart.  And even today, with the economic downturn, their hard work has paid off.  They remain financially sound.

See, those are the people who should be your personal finance hero.  They not only deserve such credit, but they can help you.  And though I know many of those people, I sit here thinking of someone with those qualities and a bit more influence, someone who not only has pulled herself up from the boot straps but who helps others do the same thing.  For 2008, the person who gets my vote is Suze Orman.  She’s been where the average American is, and through hard work and common sense, she made it.  And she shares her story with just about anyone who will listen. During the last few months, as folks were panic-stricken, Suze appeared on the Oprah show with her no-nonsense style and calmed everyone down.

Though Suze might be my personal finance hero, I urge you to look for your own.  You don’t need to go far.  Look around you.  Look at those people from whom you too can learn.  They have all the characteristics that someone like Suze has.  They work hard, are frugal, live well within their means — and they save.  They check their credit regularly, and they work hard to maintain their good credit standing. Those are the heroes, the everyday folks who make it — even during times like this.

As we start 2009, I, like other identity theft and credit experts, once again dust off my crystal ball to see what’s in store for us for the year to come.   Here’s what I see regarding credit in 2009:

• Scarce but available credit. That’s right, my crystal ball tells me that 2009 will be a tough year, but you don’t have to be an expert to figure that out.  Many of us either experienced, or know someone who’s had some experience related to, the tightening of credit in the last few months.  When the credit crisis was in full swing, I spoke to the owner of a car dealership who told me that he was probably going to have to lay off half of his staff.  Not only did sales drop because people didn’t want to make such a big purchase, but even those who wanted to couldn’t get a loan approved. In September, October and November, his sales were 40% of what they should have been.  The good news is that the credit crisis has started to lighten up, and it’s expected that things will get better in the second half of 2009.  Credit will still be tighter than what we’re used to seeing, but it will be available to those with excellent and good credit.  For those who have marginal credit, the situation will be more bleak, but they too will find a few options — just not nearly as many as they had prior to the credit crisis.

• Increased interest rates. Credit companies, particularly credit card companies, are hiking rates at any opportunity.  Though you might think that they wouldn’t want to make it more difficult for people to make their payments, it seems as though the losses that credit card companies are taking is driving them to hike rates wherever possible.  Expect more of this in 2009.  If you miss a payment, that great rate you had will be gone; if you go over the limit, same thing.  And if you haven’t had a rate hike in quite a while, well, expect it.  In 2009, chances are you’ll see your rate increase.

• Traditional lending practices return — it’s not a circus anymore. Remember those crazy real estate loans that your friends were getting — nothing down, interest-only payments, etc.?  Well, those days are gone, and I have to be honest, I’m happy about it.  The circus is over, and it’s time to return to a more traditional and reasonable approach.  For those who had some difficulty in making reasonable decisions when it came to selecting acceptable loan terms and ended up buying more house than they could afford — well, help is on the way.  Kind of.  Those types of terms won’t be offered in 2009 and perhaps never again.   Lenders took a little bit of the heat too, and you can expect that lenders will have a more conservative approach in 2009.

Certainly most of us would agree that the thought of bailing out the auto industry is a bit controversial, right?  After all, if they can’t stand on their own two feet, then why should we pay the price?  Quite frankly, I have mixed feelings on this one.  I wonder when enough is enough.  When will the government stop bailing out private business, and what is it that I’m just not getting?  On the surface, at least to me, it seems simple.  These companies are private businesses.  If they don’t have and can’t put together a sustainable business plan, then, hey, let ‘em sink.

Unfortunately, it isn’t so simple.  Imagine for a moment that the Big Three go under.  It could mean huge impacts on an economy already in trouble.   And it trickles down to auto dealers and other in auto-related businesses.  It means the loss of jobs in communities that are already hit hard and perhaps even trouble getting parts for that Dodge Dakota that you just bought a year ago.   So once again, it’s not so cut-and-dried.

So while it’s difficult to say exactly what the auto bailout might mean to us as consumers, we know that it does mean:

• Preservation of jobs. The significant loss of jobs resulting from any of the Big Three going under at this point would further hurt the economy.

• Support of current products. Those of us who own a vehicle from any one of these three manufacturers will likely need support for our product.  We need the dealerships, the parts suppliers, etc., to maintain our vehicles.

While these might not seem like significant reasons to bail out three very large companies, it’s the timing of it all that makes it so important.  A failure of these companies now would drive the already-harsh economic conditions into a much steeper decline.  Most of us would agree, I think, that further substantial hits to the economy need to be avoided if they can be.

There’s no doubt that 2008 presented a plethora of financial challenges to companies around the world in a way we haven’t seen in a very long time. The residual effects of those problems that could no longer be quietly and effectively dealt with in the corporate boardroom came crashing down into the living rooms of folks just like you and me. And sadly, many of us just weren’t prepared. It’s very difficult to find anyone unaffected by the economic downturn of 2008 — often affected in some very significant way. Whether it be loss of a job, increased healthcare expenses, foreclosure of their home or the slaughtering of the value of their home or retirement plans — most of us were hit and hit hard.

2008 was chock full of financial events that left almost all of us concerned about our financial future. Depending on the seat you hold, your view may be slightly different, but here are my top 5 financial events for 2008.

1. Retirement Accounts Slashed. I could talk about Bear Stearns, Lehman Brothers, the federal takeover of Fannie Mae and Freddie Mac or even the proposed auto bailout, but for people like you and me, the reality that hit us was that our retirement accounts were slashed in half or perhaps even worse. Wall Street closed out with the worst year since the Depression. No one can deny that 2008 was a dreadful year for the stock market and for consumer pocketbooks. Their retirement savings (401k) dwindled to an all-time low, with the DOW dropping 33.8 percent, the S & P 38.5 percent and Nasdaq 40.5 percent.
2. The Real Estate Crash. If you owned a home, chances are you were affected by this in one way or another. If you were lucky, you sat there watching the value of your home drop, but you continued to be able to make your payments and live in the place that you called home. For those not so lucky, they were upside-down on their mortgages, owing more money than their home was worth. They were making interest-only payments on an Adjustable Rate Mortgage (ARM) that they can no longer afford, and they either have lost their home or might be close to it. Real estate experts predict that it’s going to get worse before it gets better and that it will indeed take years for home values to recover.
3. Unemployment. If you haven’t lost your job, I’d bet that you know someone that has. 2008 was a terrible year not only to find a job but to keep the one that you’ve had for years.
4. Credit Crisis. Credit became scarce, with banks not even lending to other banks. Small businesses struggled to get the credit that they needed and normally were able to get without issue. Consumer credit lines were lowered, interest rates hiked, and unless your credit was perfect, lenders weren’t willing to lend.
5. Energy Crisis. I’ll admit that I am not a gas price watcher. Yet, it’s incredibly difficult to look at 2008 and not feel obliged to add the high cost of energy to the list of my top five financial events for 2008. While I don’t know exactly what you paid at the pump in your neck of the woods, I paid well over $4.00 per gallon. And it wasn’t just the cost of gasoline that skyrocketed — energy costs associated with home heating did too, leaving many in quite a tight spot that they won’t forget anytime soon.

Call me naïve, but, given the rise in credit card defaults, you might think that credit card companies would try to make it easier for their customers, particularly those who are in trouble, to pay off their credit card debt. These companies should be working with their customers to lower the interest rates and restructure the debt — if for no other reason than to avoid getting stuck with the bad debt when consumers are unable to pay.

However, that is not what’s happening. Credit card companies are instead raising the interest rates on their credit cards. Take Citigroup, for example, which plans to raise interest rates on their credit card products for some of their consumers in an effort to help lessen the blow of the $1.59 billion in losses that they’ve seen in the third quarter of 2008 alone. Their strategy isn’t to make it easier for their cardholders to pay off their debts in these tough economic times; instead, they plan on leveraging their credit card business to make up for losses elsewhere in the company due to the tight credit markets, delinquencies and defaults.

On average, Citigroup is raising its interest rates three percentage points, and most consumers don’t realize that, by law, credit card issuers can make these changes at any time, provided they give the customer advance notice. A spokeswoman for Citigroup, Jeanette Volpi, said that the customers affected are those who haven’t seen an increase in at least two years and that they can opt out if they’d like and continue using their card under the existing terms until it expires.

This new policy directly conflicts with the commitment that Citigroup executives made to Congress in 2007, when they were testifying in opposition to legislation that would have imposed greater regulations on the credit card industry. During a hearing on Capitol Hill, they pledged not to raise any cardholder’s rates until after his or her account expired. (The legislation didn’t pass.)

Even still, Citigroup is hardly the only company moving forward with this policy. Companies such as JP Morgan Chase, American Express and others are moving forward with very similar interest-rate policies in an effort to manage their losses and ward off the problems that they see coming from the looming financial crisis.

Have your credit card interest rates gone up this year?

Most of us realize that there’s a lot of valuable information that can be gleaned from the Internet. Whether you’re looking for the latest gossip on your favorite Hollywood star, following the election or researching a paper for school, the Internet can help you get the information that you need.

While most of us spend a lot of time pulling information from the Internet, sometimes we find ourselves posting it as well. We might be posting a question to a newsgroup seeking a technical answer or looking for that long-lost relative. What we must also realize is that in much the same way that we use the Internet to get information about our favorite topic, identity crooks are surfing the Internet looking for bits and pieces of personally identifiable information that they can use to steal our precious names.

Be careful what you post

All information is not created equal. As tempting as it may be to simply advise people not to post or provide any information online, it isn’t practical. There are legitimate reasons to post information online, and by not doing so, we reduce our online experience and limit the benefits of the Internet.

What we can do, though, is be careful about the type of information we provide. While it makes sense to post detailed information online about a technical problem so you can get help resolving it, it’s more difficult (but not impossible) to justify providing more personally identifiable information, such as name, address, date of birth, Social Security number, mother’s maiden name, etc.

We also need to remember that the more information we provide, the more significant it becomes. For example, if someone comes across your first name on the Internet, it means very little. Add your last name to it, however, and it means a bit more. Again, add a few more bits of information, such as your address and your date of birth, and you can quickly see where things start taking shape for an identity thief who’s on the prowl. So it’s not simply the type of information, it’s how it all can be used together.

Understand why you’re providing information

I doubt there are many people who’ve heard about protecting their personal information more than my friends and family have. Considering my background, it’s just my thing. I’m constantly telling them to protect it and to do so fiercely. Yet, even after hearing it day in and day out for the last five or so years, they’ll still sometimes provide information without really knowing why. Legitimate business or not, just because someone tells you they need your Social Security number doesn’t mean they really do. Don’t provide it without asking why. You’ll be surprised at how many of those people asking for it really don’t know why they need it and, in the end, won’t require you to provide it if you challenge it.

In the online world, even if some online forms request personal information, the information may not be required. Don’t assume that it is — see if you can proceed without providing it. If the information is required, take a minute to decide whether it makes sense for you to supply it. If something doesn’t seem right, don’t provide the information.

Is it worth the risk?

As you provide information online, measure not only whether it makes sense but also if it’s worth the risk. For example, if you’re getting your credit report online through a secure website from one of the three bureaus, you should expect to provide some personally identifiable information. In this case, the risk is relatively low, since you’re dealing with one of the three credit bureaus, making the transaction through their secure site, and getting a credit report in return, which is an important item and likely worth the small risk.

However, what if you’re providing personal information on a form as part of an online contest to win a free phone? Do you know who the recipient of that information really is? Is taking the chance of providing that information to an identity thief really worth the chance to win a free phone? It may sound far-fetched, but it’s not — people do it all the time. As part of surveys or contests, they provide very personal information without stopping, taking a deep breath, and asking if it’s worth the risk. They get caught up in the moment, as I vividly remember just a couple years ago when my wife received her free phone in the mail. As I asked all those questions that you would suspect that a person with my background might ask, we found out that what she really won was a new cell phone contract that she didn’t need.

How much information is too much?

There’s no quick and simple answer to this question. It depends on the type of information and why you’re providing it. I’ll go so far as to say, however, that providing any information that you don’t need to provide is too much. Protect your personal information fiercely, and always remember that your information might stay out there in cyberspace for a very long time. There will always be a crook out there browsing the Internet looking for those bits and bytes of information to steal someone’s precious name. Don’t let yourself become the next identity theft victim.

Even if you’ve lived under a rock for the last several weeks, chances are you know that the economy has taken a dive. Stocks have plunged, credit is tight, and economists are predicting some gloomy months ahead. Most people believe that either we’re already in a recession or we will be very soon.

Now that we have the bad news established, let’s focus on some positive things — like a few tips that you can use to improve your credit score. And just so I’m clear, the economy doesn’t have to tank for these tips to be of use to you. Your credit score is your credit score, and for the most part, how it’s calculated doesn’t changed based upon the rise, or fall, of the economy.

Your credit score is broken down with approximately 35% of your score being based upon your repayment history and 15% of your score based upon length of credit history. Another 30% of your score is based upon amounts owed (e.g., accounts with balances, amount owing on accounts, etc.), with another 10% based upon the types of credit used and the final 10% based upon any new credit you may have.

With that said, focus on the things that you can do to influence your credit score.

1. Pay your bills on time. Although it’s hard to do if you lose a job, paying on time is very important to keep your score in good shape.
2. Keep your credit card balances low. Don’t use those cards. It’s tempting, especially when money is tight. But keeping that debt-to-credit-limit ratio low will help keep your score in good shape. It will also prevent you from being burned if your creditor lowers the balances on your revolving accounts. For example, if you owe $1,000 with a $4,000 limit, you’re only at 25% of your available balance. However, if your creditor lowers the limit, as some are doing now, then it drives your ratio up and your credit score down. Keep paying down those balances.
3. Don’t open new accounts. Don’t be tempted to go get that new car because you think credit is going to be tight in a few months. If you don’t have to have it, don’t get it. Tighten your belt — in the long run, you’ll be glad you did.

Recessions, especially this one, can be scary. However, by planning ahead and cutting back, you can get through it. If things get sideways, call your creditors, and try to work something out with them. It might not save your credit score entirely, but it will help some and save you a lot of aggravation in the end.

We’ve all seen the news about all the foreclosures happening all over the country, and, worse, some of us have first-hand experience in our own neighborhood. Homes that were once occupied by our friends, neighbors, perhaps even family, now stand empty. The banks aren’t getting paid, and the properties aren’t getting taken care of. It not only affects those who once lived in these houses, but the neighborhood too, by driving down property values of those homes around foreclosed properties.

Certainly, given all these foreclosures, we’ve also heard about — or have first-hand experience with — the occasional squatters, perhaps a homeless person finding some solace in some nice temporary shelter, or even some kids getting a bit carried away and finding a new party house. But there’s a new kind of squatter in town. These squatters are likely to scare away not only looters and thieves looking for their next empty target but perhaps even those looking for that bargain home to buy.

Who might these squatters be? How about a pack of mountain lions that decided to park themselves in an empty home in Lake Elsinore, California? Perhaps they figured that no one else was using the home, so they would. Maybe their thinking was much more devious: They decided that it was about time that they do something about the ever-encroaching human population that keeps pushing them farther and farther away from their habitat. Whatever the reason, they’re there, and it looks like they’re staying a while. They’re not making payments or even getting nasty phone calls and letters from the creditors, but authorities hope that, once the litter grows up a bit, they might move on.

Don’t be so sure, though. In this economy, even a bunch of cats can figure out when they’re living the high-life — and free of charge to boot.

A mountain lion roams a foreclosed home in California.

It isn’t just Disney that receives high scores for creativity in Orlando, Florida. Identity crooks also seem to be getting so creative that some are asking what could they really achieve if they put their creative minds to do good work instead of thievery and crime.

The story that received so much attention involved a Wal-Mart store in Orlando, where a strange box with an antenna was found, resulting in the store being evacuated and the police bomb squad being called in. The box didn’t contain a bomb at all, but surveillance cameras and further investigation showed that it contained a spy-cam that was seemingly focused on customers making credit card transactions inside the store. It’s suspected that the spy-cam captured the credit card numbers of unsuspecting Wal-Mart customers and beamed those credit card numbers via the wireless video device to thieves waiting in a van in the store parking lot. Though it’s not yet known if any of these customer credit card numbers have yet been used by the crooks or other accomplices, it certainly is expected that these thieves set up this elaborate scheme to perpetrate credit card fraud and identity theft. Police and Wal-Mart authorities are attempting to alert customers of the potential for further unauthorized activity.

There’s no doubt that some of these crooks could use their creativity and skills in a much more productive way. And even if they aren’t interested in helping others, they could help themselves by turning their technical ability into a high-paying technical career that might include helping organizations secure their sensitive data, much in the same way that perhaps one of the most famous identity crooks, Kevin Mitnick, does today.