Security Freeze - Protect Against ID Theft

Identity Theft is one of the fastest growing crimes in America. Over $50 billion is stolen each year via Identity Theft, and you need to protect yourself. One of the best ways to protect yourself is to lock-down your credit reports with a PIN number.

By establishing a PIN number for your credit reports, you will keep prying eyes off of your information, which will help keep someone from being able to pretend that they are you, and then open accounts in your name. Of course, this only offers protection against potential future attacks.

Be sure to review your credit report to ensure that no accounts appear thereon, which are unfamiliar to you. If a review of your credit report reveals strange information, be sure to dispute it with the Credit Reporting Agency that is showing the faulty data.

Asking for a PIN number is a simple process. You may request via web, telephone, or mail. The downside is that Equifax is still in the stone ages, so they do not have an online way to ask for a PIN. You must either contact them via phone or mail. You may find information on all three of the CRAs below, if you want to establish PIN numbers for your credit reports:

TransUnion 1-888-909-8872 Fraud Victim Assistance Department, PO Box 6790, Fullerton, CA 92834

Experian 1-888-397-3742 PO Box 9554, Allen, TX 75013

Equifax 1-888-298-0045 PO Box 105788, Atlanta, GA 30348

If you have been a victim of Identity Theft, you can get a PIN for free, but you must make your request via mail only. Fees for PIN numbers vary by state. If you live in Indiana, your PIN is free. Other states allow charges ranging from $3 to $20 per bureau, so you may have to part with up to $60. However, this is chump change compared to the aggravation that any case of ID Theft may cause.

Another protection against Identity Theft is to join a program such as LifeLock or join the National Consumer Rights Alliance, which provides Identity Theft protection and up to $25,000 of insurance protection for potential victims of Identity Theft.

If you have been a victim of Identity Theft, be sure to file a police report, and obtain a copy for use in fighting unauthorized transactions and accounts. Undoing an Identity Theft can be a time-consuming and costly undertaking. Do everything you can to protect yourself upfront.

Flash: Congress Tries to Recapture Bonuses Through Taxes

In what may prove to be one of the most asinine attempts at penalizing people for doing their jobs, each house of Congress has passed (or is considering) new bills that penalize companies that have received Stimulus (Porkulus) money and the employees receiving bonuses under contract.

If you missed the news, the House version of the bill (HR 1586) would impose a 90% tax on companies paying bonuses, and the Senate version would impose an excise tax of 35% each on the company and the employee, if the employee's household compensation exceeds $250,000. One would expect that state taxes would be at least 10%, thus taking away the entire bonus and returning it to government coffers, under the House version.

What the American people are not being told is that most of these bonuses are required as part of compensation packages that were negotiated and signed long before any bailouts occurred. The companies are legally obligated to pay these bonuses, and in some cases, the bonus comprises the majority of an employee's compensation.

The original Stimulus Package contained a provision that would have kept bonuses from being paid by Stimulus Package recipient companies. However, the Obama Administration didn't think that it would be legal to do this, so they removed the limitation from the package, over the howls of Republican lawmakers.

Now, the Administration is pushing for this new tax. Here is my question, "If it would have been illegal to block the bonuses, where is the legality of passing an ex-post-facto tax on this money?"

People have decried executive compensation models for decades. However, the reality is that companies cannot attract top performing executives without these compensation packages. The talent will simply go to another company that offers a better incentive package. This means that the companies that are already failing and that are desperately looking for new leadership will not find many takers.

Regardless of what version of this bill finally passes, look for a number of class-action lawsuits to be filed on behalf of the affected employees. The government will probably spend more money defending itself against the lawsuit than it would raise in new taxes. Since the government already owns 80% of AIG, it seems that Congress should be able to call a special Shareholders' Meeting, elect new Directors, and then voluntarily refund whatever amount of assistance they deem appropriate.

This is just a case of buyer's remorse, and it penalizes the wrong people. Should executives get a bonus for running a company into the ground? Of course not. However, in the AIG example, over 400 people are receiving bonuses. I have to think that not all of these people are in senior management positions of executive-level responsibility. Many of these people are probably regular working stiffs, who depend on this bonus to round out their incomes each year.

I have worked in businesses where I received a bonus based on what I accomplished during the year. I would always work hard to ensure that I qualified for my bonus. If the guys at the top screwed up the company by not doing their jobs, why should I get shafted, when I did the job I was hired to perform, and earned the bonus for which I was eligible? What if this was you?

I invite and welcome your comments.

This is the Perfect Time to Fix Your Credit

We have all read the headlines about the current economic crisis. We have seen the “Stimulus” packages passed. We have all wondered aloud, “What is in it for us?”

Well, on an individual basis, you may have a lot of ways to take advantage of the current economic situation. Opportunities abound if you have a fist full of cash and/or excellent credit. The sad reality is that most of us have neither. While I could write about a number of ways to fill your hands and pockets with cash, this article is about fixing your credit.

You see, if you don’t fix your credit, your ability to put cash together to take advantage of opportunities will be limited. We live in a credit-based society, and many items are overpriced due to the availability of credit. Do you really think that homes and cars would cost so much money if people had to pay cash for them? Of course, they would not cost so much!

The burning question then is “how to fix your credit?” You have two choices: 1) Do it yourself, or 2) Hire a professional. Let’s think this through.

If you opt for the Do-It-Yourself route, you need to do a lot of research. Why? The decks are stacked against you. Every American wants perfect credit. If it was so easy to fix their credit themselves, they would have done it by now. Instead, the average American’s credit score has been dropping each year at a record pace. The average American’s credit score is now 678, when it was over 720 just three years ago.

You could research the credit laws, pore over case histories, and study the various Federal and State Acts and laws that have been enacted to protect your consumer rights. You could write brilliant letters espousing your innocence against the spurious allegations against you that say that you do not honor your commitments and pay your debts. You could keep meticulous records, building evidence for lawsuits that you would later file against your creditors, collection agencies, and credit bureaus.

The sad truth is that you could do all of these things yourself. The sadder truth is that you probably won’t. Most consumers make a brief effort to write a couple of letters and hope their credit reports will magically improve. Unfortunately, these feeble attempts rarely achieve the goals set by these same consumers, and they sadly give up, and face their fate. Even those who get proactive, take all the right steps, keep their documentation in order, and follow-through are in for a battle that could last two years or longer, and still not get the results they desire.

Your creditors, in concert with the credit reporting agencies and others, have spent a lot of money to back those very same Federal Acts and other legislation that supposedly protects your rights. Do you realize that these laws do little to protect you, but do a lot to protect those who disparage your reputation by saying you don’t pay your bills? It’s sad, but true.

In fact, the three major credit bureaus have spent millions of dollars in lobbying for laws that severely restrict the ability of third parties that would help you fix your credit. Nearly every state in the union has laws set-up to make it very difficult for a so-called “credit repair company” to exist and do business. Why would they fight so hard for this? The reason is simple, “The CRAs do not want you to engage professional help, because they know it works!”

Consumer Reporting Agencies exist for one reason only. They exist to protect the creditors and collection agencies who provide data to them and who rely on this data to make credit decisions. It makes sense that the CRAs would rather have inaccurate, negative data against you than to possibly miss something negative. Since your creditors use the data provided by the CRAs to turn down all but the most solid risks, it is in the best interest of the CRAs to ensure that ALL potentially negative information about you is reflected on YOUR credit report. If the CRA told your creditor that you had a very low risk of default, your creditor gave you a loan, and then you defaulted; it makes them look bad!

This is why when you try to get the CRA to remove any adverse information (regardless of merit) they do everything in their power to avoid removing the item. They stall. They force you to jump through hoops. They ask for more information. They simply tell you that the creditor has confirmed the information as accurate. They tell you that your dispute is frivolous.

They do all of these things, because they know that you will probably not follow-up. They count on the fact that you do not know your rights, and that puts you at their mercy.

This is why you need PROFESSIONAL help. A professional has seen all of these tactics. A professional knows the laws that protect consumers. A professional can cut through the stalls, and attack the CRAs and your creditors using the laws in YOUR favor.

Sure, you could do the work yourself. However, I don’t know a single cardiologist who would do her own angioplasty. A professional should be able to get results for you within three to six months, rather than the two years or longer it might take you to do it yourself. Considering the cost of bad credit in higher interest rates and lost opportunities, it is an investment with a very high return.

Where and how do you find a professional? This is the difficult question. You can hire an attorney to do this for you, but that could cost you thousands of dollars. You could find a company that charges a low monthly fee to do the work (and their motivation to work quickly will be?). You could find an organization that charges a fair amount of money, but actually gets the job done.

Whichever route you choose, choose wisely, because credit repair organizations earned the bad rap they received back in the 90s by not performing. Things are much better now, but you need to choose your solution wisely. Do your homework. Ask the right questions. Contact this author for suggestions.

Help is available, if you know where to look, and whom to ask. Fix your credit, and then we can talk about how to use that access to capital to start building your wealth.

How the Stimulus Package Hurts Real Estate

We all know that the economic stimulus package exists because real estate crashed. Now, I am working on another article that will detail and explain how we got here, but that is a story for another time. The Economic Stimulus (Porkulus) Package contains several key provisions that directly affect real estate.

Now, the National Association of Realtors feels that anything that reduces the prices of houses is a bad deal. Their argument has some justification, because when the price of a house reduces to a value less than the obligations (liens, mortgages) standing against it, then we have a recipe for foreclosure. However, that is not their real motivation. Lower housing prices mean lower commissions, as most commissions are based on a percentage of selling price.


Personally, I think that we should be looking at housing affordability. In other words, what combination of factors will allow MORE people to actually be able to OWN homes? We need a combination of low interest rates, favorable mortgage terms, and low housing prices.

The problem in all of this relates to how housing prices are set by the marketplace. The rental market has an impact on this, because most people who are looking to buy a first home currently rent a house or apartment, and they will be trading a rent payment for a mortgage payment. They will also be divesting themselves of some level of their personal savings for a down payment and/or closing costs.

A person who is accustomed to renting will take a look at the family budget, and determine what amount can be allocated toward a mortgage. Most people overlook all of the extra costs that go into owning a home, including taxes and insurance, maintenance, water, trash collection, etc., but we’ll ignore those costs for the moment.

If a family determines that they can afford $1,200 for a mortgage payment, they will volunteer this fact to their mortgage broker and Realtor®. In turn, a determination will be made as to how much house that family can afford. If interest rates are at 5.75% (a currently available fixed rate), then this relates to a principal amount of about $207,000. Assuming that the family has the proper down payment of 20%, this means that the family can afford a house valued at about $260,000.

Now, the Realtor’s job is to find a house for which the family is willing to spend $1,200 per month. So, the family will look at the marketplace of houses, and determine from the range of homes available, which is worthy of their $1,200 per month budget. As a result, all houses in the market that justify a monthly expenditure of $1,200 will be worth about $260,000. This is a simplistic depiction of how retail housing prices are set.

What can complicate this scenario and formula is when the government (or the Fed) steps in to try and affect the housing market. Here are some items in the budget, which are supposed to help the housing market. Analyze each, and try to determine what effect each will have on the cost of housing. Then, determine the effect each measure has on the affordability of housing:

1. An income tax credit for first-time home buyers of $8,000 2. A reduction in the mortgage interest deduction for families earning over $250,000 per year 3. $100 down payment mortgages on FHA loans to buy HUD repos

1) An income tax credit for first-time home buyers will increase the price of houses by making more money available for the purchase. In other words, no one likes to leave money on the table, and the sellers will grab whatever is there. The downside to the credit is that it is only applicable to purchases that occur by first-time home buyers in 2009, which eliminates a large part of the buyer pool. In addition, the credit won’t be received until 2010, so it is not available for down payment money.

2) Lowering the mortgage interest deduction will actually reduce housing prices, because the net cost of ownership in high-cost areas will increase, when those capable of making the higher payments have a higher net cost of ownership, due to this tax increase (Note: A reduction in tax deduction has the same effect as an increase in tax).

3) $100 down payment mortgages increase the prices of homes by increasing demand. The offset here is that this program only applies to homes that have lost value and been subject to short sale/HUD sale auctions. The lack of a down payment does not reduce the price of the homes, but this will help to provide a bottom for housing prices in some markets.

This gives us three proposals, all of which will increase the net cost of buying houses, and decrease the affordability of those same homes. If the government did not get involved, housing prices would continue to fall, thereby making homes more affordable for everyone. Oh well, at least the government tried to help out.

Special: 12 American Solutions for Jobs and Prosperity

SPECIAL NOTE: This post was to have appeared on February 19, but was lost due to a technical issue. It now appears in its entirety.

Dear Readers:

Recently, I received the following announcement from American Solutions, an organization led by former House Speaker Newt Gingrich. While I don't always agree with Newt, and I don't agree with everything mentioned in this plan (see my comments in red italics), this is a much better start than the pork-barrel bailout that the Democrats have forced upon the American taxpayer. The American Solutions article begins after the message from our sponsor.

Washington solutions of more money for more government, more power for politicians, more debt, and more bureaucrats will not lead to real growth in jobs and prosperity.

We need a clear and decisive alternative that creates jobs and rewards work, saving, and investment.

1. Payroll Tax Stimulus. With a temporary new tax credit to offset 50% of the payroll tax, every small business would have more money, and all Americans would take home more of what they earn. (This would add some fairness by eliminating the self-employment tax, which unfairly burdens small business owners. I would prefer to see a permanent elimination of the self-employment tax, coupled with an individual investment account provision.)
2. Real Middle-Income Tax Relief. Reduce the marginal tax rate of 25% down to 15%, in effect establishing a flat-rate tax of 15% for close to 9 out of 10 American workers. (This would actually help Obama keep one of his campaign promises.)
3. Reduce the Business Tax Rate. Match Ireland’s rate of 12.5% to keep more jobs in America. (This lowers the double-taxation burden on corporations and should spark an increase in equity investments. This would also serve to lower bond interest rates, thereby increasing bond prices. This could lead to a rare, simultaneous increase in equity and bond prices, providing overall economic growth. A serendipitous benefit to this would be a decrease in inflation, as businesses would not have to offset their tax burdens by charging higher prices.)
4. Homeowner’s Assistance. Provide tax credit incentives to responsible home buyers so they can keep their homes. (I don’t totally agree with this measure, as it will artificially inflate housing prices. However, with all the giveaways for irresponsible home buyers, something had to be done to make things equitable for the rest of us.)
5. Control Spending So We Can Move to a Balanced Budget. This begins with eliminating Congressional earmarks and wasteful pork-barrel spending. (A balanced budget is not always the best way to stimulate the economy, but we need to severely reduce wasteful Congressional spending, so this is a good idea on the whole. A line-item veto would usually help here, but with a Democrat-led Congress and a spendthrift President, it would be of no consequence now, as evidenced by the $1.2 Trillion spending package signed last week.)
6. No State Aid Without Protection From Fraud. Require state governments to adopt anti-fraud and anti-theft policies before giving them more money. (This is a good idea. The question here is “Who pays for (and conducts) the investigation and enforcement?” Is it possible to expand this to include accountability for money given to foreign governments?)
7. More American Energy Now. Explore for more American oil and gas and invest in affordable energy for the future, including clean coal, ethanol, nuclear power and renewable fuels. (Always a good idea. We need to get away from fossil fuels in order to clean the air and shore-up our economy. The problem is the big money interests (Energy, Auto Makers) who don’t want to pay for the change.)
8. Abolish Taxes on Capital Gains. Match China, Singapore and many other competitors. More investment in America means more jobs in America. (This is an obvious move to spur investment. By the time you pay taxes on your income, your interest, and your capital gains, it hardly seems worth all the effort. I would also like to see a repeal of the Alternative Minimum Tax (AMT) or at least an inflation-adjustment to the income trigger.)
9. Protect the Rights of American Workers. We must protect a worker’s right to decide by secret ballot whether to join a union, and the worker’s right to freely negotiate. Forced unionism will kill jobs in America at a time when we can’t afford to lose them. (Unions helped build this country in the last century. They gave us the 40-hour work week, workplace safety measures, and numerous other employee benefits. Unfortunately, unions have become more of a bane than a benefit, and they have outlived their usefulness in most industries. When unions get so greedy as to actually begin to destroy the business model of the companies that employ the union’s members, then we have a problem. We should also eliminate the unions of all government employees immediately.)
10. Replace Sarbanes-Oxley. This failed law is crippling entrepreneurial start-ups. Replace it with affordable rules that help create jobs, not destroy them. (Corporations spend hundreds of millions of dollars annually just to stay compliant with these worthless regulations. Accountants love it, but no one else is benefiting.)
11. Abolish the Death Tax. Americans should work for their families, not for Washington. (Absolutely! You work your whole life to build your estate. You pay taxes on your income, interest, investments, and even on your Social Security. After you die, the government wants to take up to 90% of everything you created during your lifetime, even though they already taxed you all along the way. Eliminate this unfair burden now!)
12. Invest in Energy and Transportation Infrastructure. This includes a new, expanded electric power grid and a 21st century air traffic control system that will reduce delays in air travel and save passengers, employees and airlines billions of dollars per year. (This is a no-brainer. In the 1970s, states and the federal government spent billions on the National Highway System and local roads and bridges. Now, these throughways have fallen into disrepair, and they are largely obsolete. I would also like to see a relaxing of the environmental impact reports and other useless requirements that delay these projects for up to ten years or more. By the time most projects are completed, they have cost over twice as much as the original budget, and they turn out to be too little, too late.)

If you would like to learn more visit www.americansolutions.com. You may endorse this program at their website, and you may also read more about this and other initiatives of the organization.

For those of you who were waiting for my regular article last Saturday, I apologize, but my significant other had different plans for me on Valentine’s Day. I will be posting periodic comments on the Economic Porkulus Bill, which Obama signed yesterday, as I have time to go through its various entitlements. I have no faith that this bill will do anything to stimulate the economy, but it should be a boon to campaign donations to the Democrat Party.

Until next time, enjoy life, and watch your wallet!