credit score en-US Wise Bread Reloaded: President Obama's Credit Card Declined at Pricey Restaurant (and How You Can Avoid the Same Fate) <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/wise-bread-reloaded-president-obamas-credit-card-declined-at-pricey-restaurant-and-how-you-can-avoid" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="credit card protection" title="credit card protection" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>This week the President revealed that even the leader of the free world is not immune to credit card identity fraud.</p> <p>&quot;I went to a restaurant up in New York when I was &mdash; during the U.N. General Assembly, and <a href="">my credit card was rejected</a>,&quot; the President said during an executive order signing ceremony at the Consumer Financial Protection Bureau. &quot;It turned out I guess I don't use it enough. They were &mdash; they thought there was some fraud going on. Fortunately, Michelle had hers.&quot;</p> <p>The President usually pays with cash and doesn't often carry a credit card, which is a good budgeting trick, even for someone who earns a $400,000 per year salary.</p> <p>The executive order instructs government agencies to beef up <a href="">identity fraud protections</a> on government issued credit cards. The protections will include the new &quot;Chip and PIN&quot; security technologies that most card issuers and big retailers will move to in the next few years.</p> <p>Of course, regular readers of Wise Bread are familiar with Chip and PIN &mdash; and a whole host of other ways to protect themselves from identity theft, along with lots of advice about maintaining good credit card hygiene. Here's a sampling in this weekend's Reloaded.</p> <h2>This Is How Chip and PIN Defends Against Identity Theft</h2> <p><img width="605" height="340" src="" alt="" /></p> <p>Emily Guy Birken explains the technology behind Chip and PIN, what it will protect you against &mdash; and what it won't while she ask <a href="">Will New Chip-and-PIN Credit Cards Stop Identity Theft?</a></p> <h2>Uh Oh &mdash; Where's My Card?</h2> <p><img width="605" height="340" src="" alt="" /></p> <p>If you've ever had that sinking feeling when you realize your credit card has been lost, you probably wish you knew the <a href="">10 Things You Should Do Immediately After Losing Your Wallet</a>. And if you don't know that feeling yet, keep Paul Michael's list handy!</p> <h2>Should You Hire an Identity Theft Protection Service?</h2> <p><img width="605" height="340" src="" alt="" /></p> <p>Peace of mind is valuable, but the service can be expensive. Wise Bread contributor GE Miller shows you <a href="">How to Do What Identity Theft Protection Companies Do&hellip; for FREE</a>.</p> <h2>What Do They Do With Stolen Plastic, Anyway?</h2> <p><img width="605" height="340" src="" alt="" /></p> <p>Big time credit card fraudsters buy and sell identities for all sorts of nefarious schemes, but as Carrie Kirby explains, the smaller operators &mdash; the ones who get nabbed &mdash; are the authors of these <a href="">8 Weirdest Cases of Credit Card Theft</a>.</p> <h2>New Ways to Pay With Plastic</h2> <p><img width="605" height="340" src="" alt="" /></p> <p>Plastic is pretty convenient (when used responsibly) and Mark Jackson shows how much more convenient it can be with these <a href="">6 Pieces of Credit Card Tech That Will Blow Your Mind</a>.</p> <a href="" class="sharethis-link" title="Wise Bread Reloaded: President Obama&#039;s Credit Card Declined at Pricey Restaurant (and How You Can Avoid the Same Fate)" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Lars Peterson</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Credit Cards credit credit declined credit score Sat, 18 Oct 2014 11:00:07 +0000 Lars Peterson 1238259 at 11 Reasons Your Credit Card Application Was Denied — And What You Can Do About It <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/11-reasons-your-credit-card-application-was-denied-and-what-you-can-do-about-it" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="credit declined" title="credit declined" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p><a href="">About 7% of Americans</a> have been rejected for a credit card in the past 12 months.</p> <p>This is about 17 million Americans, a number that went up by 3% from the previous period. The key to turning things around is to have a better understanding about why those credit card applications are being denied. Some of the reasons are not as intuitive as you may think.</p> <h2>1. You've Made Too Many Credit Applications</h2> <p>When you are just starting to build your credit history, it is often a good idea to get a credit card. Responsible management of a credit card helps to build up your credit score. However, like anything else, too much of a good thing can be harmful.</p> <p>Every time you apply for a card, a lender has to do a hard inquiry on your credit history and that lowers your score by a little bit. Inquiries remain on your credit history for two years. However, credit scores, such as FICO, only consider those <a href="">hard inquiries within the last 12 months</a>. This is why it is a good idea to wait 12 months before opening a new card.</p> <h2>2. Your Credit Utilization Is Too High</h2> <p><a href="">Most financial advisors recommend that your credit utilization should be about 30%</a>. That means that if you have a line of credit of $1,000, you are only using $300. If your credit utilization is above that threshold, lenders believe that you have a higher probability of not meeting your monthly payments, or, even worse, defaulting on all your liabilities. Maintaining a credit utilization rate above 50% for a long time is a surefire way to get your credit card application denied.</p> <p>To fix this, pay down those high credit card balances to 30% of your credit limit. Once you reach that goal, start working on getting them to 0%. Another alternative is to check if your lender will increase the limit of your credit card. (See also: <a href="">This One Ratio Is the Key to Your Credit Score</a>)</p> <h2>3. Your Income Is Too Low</h2> <p>On the other hand, even if you have a low credit utilization, your application may still be denied.</p> <p>For example, let's imagine that you have a card with a limit of $10,000 and a balance of $3,000. When you opened that credit card, you presented a W2 showing that you were making about $4,000 per month. A year later you apply for a new card but now you have a monthly income of $1,500. Now, your <a href="">debt-to-income ratio</a> (DTI) is too high, and an agent may decide to deny your application.</p> <p>To prevent this scenario, <a href="">calculate your DTI and keep it well below 43%</a>. The only two ways to improve your DTI are to either pay down debt or increase your income.</p> <h2>4. Your Account Age Is Too Young</h2> <p>Some people have a hard time resisting the temptation of using their credit cards and, in hopes of preventing further spending, close down their accounts. This is a bad idea because <a href="">closing accounts lowers their average age</a>.</p> <p>Therefore, aim to pay down your balances and leave those credit cards open. And never close your oldest credit card, even if you don't used it anymore. If you have no other card that you have been holding as long, <a href="">your credit score may take a hit</a>.</p> <h2>5. Your Public Records</h2> <p>Your credit report includes a lot of information about your credit history, including public records and collections. Credit card companies regard public record negatives on your credit report as big drawbacks. (See also: <a href="">How to Get a Credit Card When You Have Bad Credit</a>)</p> <p>Some examples of negative public records are:</p> <ul> <li>Chapter 7 and Chapter 13 bankruptcies;</li> <li>Unpaid tax liens;</li> <li>Civil judgments or court orders forcing you to pay monies to another party;</li> <li>Unpaid traffic violations and library fines.</li> </ul> <p>Most public records stay on your credit record for at least seven years, and some, such as Chapter 7 bankruptcies, stay for 10 years. If you have an unpaid tax lien, make sure to pay it within seven years or it will stick on your record for 10 years. If you think that there is a mistake on your list of public records, <a href="">file a credit recording complaint</a>.</p> <h2>6. You Have Had Some Charge-Offs</h2> <p>Besides a negative public record, a charge-off is the next worst possible thing to appear on your credit report. When a lender charges off your account, it is writing off the debt as a loss and has given up on getting you to pay.</p> <p>While a charge-off may sound like great news for you, it is far from that. Not only does a charge-off stay on your credit report for seven years, but it also becomes a roadblock to getting a mortgage or loan application approved. Your best option is to contact the creditor and work out a <a href="">lump-sum payment or installment plan in exchange of getting the charge-off removed</a>. Make sure to get the agreement in writing.</p> <h2>7. You're a Minor</h2> <p>If you are younger than 18 years old, you may not get a credit card on your own. The main reason is that minors cannot enter a legally binding agreement, which is what a credit card agreement is. This is why some very conservative financial institutions may even decline to issue a credit card to anybody younger than 21, including <a href="">emancipated minors</a>.</p> <p>The only way for a minor to get a credit card is to become the <a href="">authorized user of a credit card</a> held by a parent or legal guardian. If used responsibly, the authorized credit card enables the minor to start building his or her credit history. However, rules have to be clearly set, or this is a proposition that can end in disaster. (See also: <a href="">What You Need to Know Before Getting Your First Credit Card</a>)</p> <h2>8. You Have No Pay Stub or W2</h2> <p>Some credit card companies may take your word regarding your income, but most of them require proof of income. The only acceptable documents are pay stubs, W2s, or copies of federal tax returns.</p> <ul> <li>If you are asked to present proof of income and you are not able to produce one (e.g. recent company hire, no prior tax filings), then you may have to wait until you can get one.<br /> &nbsp;</li> <li>In the case of self-employed or freelancing individuals, you may have to wait until your next tax filing. Make sure to request 1099-MISC forms, whenever applicable, because they help a lot to show revenue.<br /> &nbsp;</li> <li>Seek the advice of a professional accountant to determine the best way to provide proof of income to lenders.</li> </ul> <h2>9. You Hop From Job to Job</h2> <p>Even if you are able to produce all of your W2s and pay stubs, a credit card agent may see your inability to hold down a job as a problem. The rationale is that you may not have the necessary steady stream of cash inflows to meet your monthly payments.</p> <p>Never lie about how long you have held a job on a credit card application because companies often call employers to verify information. To squash doubts about your commitment to your current position, you can bring a letter from your employer or a signed contract binding you for several months.</p> <h2>10. You Already Have Too Many Cards</h2> <p>This is a tricky reason. While there is no rule of thumb as to how many cards is too many, the number is the one that makes it difficult for you to responsibly handle your cards. (See also: <a href="">How Many Credit Cards Should You Carry?</a>)</p> <p>For some people, the ideal number may be two: a main card and a &quot;backup&quot; card. For others, it may be three: one for <a href="">air miles</a>, another for <a href="">cashback</a>, and another for main use. The key is to aim for a number that allows you to keep a credit utilization ratio below 30% and a debt-to-income ratio below 43%.</p> <h2>11. Your Application Is Incomplete</h2> <p>Yes, this can happen to the best of us. When receiving an <a href="">incomplete credit card application</a>, a company has two options. One is to issue a notice of adverse action and the other is to issue a notice of incompleteness, stating what is necessary to process the application.</p> <p>So, make sure to cross your t's and dot your i's before turning in that credit card application.</p> <p><em>Have you ever had a credit application denied? How did you fix it?</em></p> <a href="" class="sharethis-link" title="11 Reasons Your Credit Card Application Was Denied — And What You Can Do About It" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Damian Davila</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Credit Cards bad credit credit application credit score denied credit good credit Mon, 13 Oct 2014 13:00:06 +0000 Damian Davila 1231314 at This One Ratio Is the Key to a Good Credit Score <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/this-one-ratio-is-the-key-to-a-good-credit-score" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="credit score" title="credit score" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>A credit score is a bit like the Da Vinci Code; it's a serpentine web of myth and mystery that's hard to crack. But there is a Holy Grail of sorts here too. Of all the different factors that feed into your credit score, many experts believe that there is one factor that stands above the rest in keeping your score high. The fact that this one ratio is so important is a little counterintuitive, so simply understanding its importance can unlock the higher credit score you've been looking for. (See also: <a href="">How to Rebuild Your Credit in 8 Simple Steps</a>)</p> <p>So what is it? It's called the <em>credit utilization ratio</em>.</p> <h2>A Complicated Calculation</h2> <p>So what exactly is the credit utilization ratio? It's simply your total credit card balances divided by your total credit card limits. So, if you have, say, $15,000 of available credit on your credit card(s), and have an outstanding balance of $5,000, your credit utilization ratio is about 33%.</p> <p>Now, that isn't so complicated and mysterious, is it? But where things start getting a little weird is when you come to understand exactly how this ratio functions in terms of your credit score. As a financially literate person who handles debt with caution (you're reading Wise Bread, after all), you might assume that having no more available credit than is strictly necessary is a good thing. After all, why have more available credit to tempt you away from sticking to your budget and staying out of debt?</p> <p>Well, because it's important to maintaining your credit score, that's why.</p> <p>Credit utilization accounts for about 30% of your credit score. And while on a strictly practical basis having less credit available to you is probably a good idea, experts typically recommend that you never allow your credit utilization ratio to exceed 30%. What that means is that if you have only one credit card with a relatively low $5,000 limit, you should never allow the balance to exceed $1,500. Even if you're a person who conscientiously pays off that card each and every month, that can get tricky. Use your card to get a <a href="">great deal on a vacation</a> online and you could blow your credit utilization ratio.</p> <p>What it all means is that in order to have the best possible credit score, you need more available credit that you never use.</p> <h2>The Plot Thickens&hellip;</h2> <p>So let's dig a little deeper into how to get your credit utilization rate at an optimal level for your credit score.</p> <p>Now, I mentioned that experts typically recommend that it not exceed 30%. However,<a href=""> research conducted by Credit Karma</a> looked at 70,000 credit scores and their corresponding credit utilization rates and found that the lower your credit utilization rate, the higher your credit score &mdash; except if you have 0% utilization. In fact, those with the highest credit scores had a utilization rate of 1% to 10%.</p> <p>It is also important to note that in the FICO credit scoring model (the most common credit scoring model used in the U.S.), credit utilization is scored in two separate ways. First, the credit utilization for each of your credit cards is calculated separately. Then, the total of all your credit card balances is compared to your overall credit limit. What that means is that not only is more available credit important to achieving a higher credit score, but that available credit should be spread out over more than one credit card.</p> <p>Ideally, you should keep both your balance on each card and your overall balance across all cards as low as possible.</p> <h2>How to Beat the System</h2> <p>OK, so now that you've unlocked how the credit utilization ratio affects your credit score, it's time to look at exactly what you can do to keep your ratio at the most optimal level possible. Here are few key moves to make &mdash; without becoming a debt junkie.</p> <h3>Spend Less</h3> <p>One very simple way to improve your credit utilization ratio is to simply spend less on your credit cards. Work on converting to a cash budget and save up for big purchases in advance. It's as simple as that.</p> <h3>Expand Your Available Credit</h3> <p>When it comes to credit, less is definitely more, but it's better to use less than to have less available. So, if you're a person who regularly spends a lot on your credit card &mdash; whether for convenience or to <a href="">earn points</a> &mdash; it's best to make more credit available to keep your credit utilization ratio in the optimal zone.</p> <p>But no matter how much credit you use, just be sure to pay off your balance on time every month &mdash; the age of your debts and your payment history have a big impact your credit score, too. If you don't trust yourself, open a credit card, then cut it up. The credit's available, but you won't be using it.</p> <h3>Be Careful About Closing Credit Cards</h3> <p>Closing credit cards can be a good <a href="">debt reduction strategy</a>, but not if it pushes your credit utilization ratio up. If you want to reduce the amount of available credit you have, cut your spending and average monthly balance first.</p> <h3>Watch the Rest of Your Score, Too</h3> <p>Of course, credit utilization isn't the only factor in your credit score. Your payment history, age of credit, mix of credit, and credit inquiries all play a role. Improving your credit utilization ratio is a simple way to boost your credit score, but it isn't the only way. And, if you have bad credit as a result of past financial decisions, it shouldn't be the only way.</p> <h2>The Big Reveal</h2> <p>If you're feeling confused about why you would be rewarded for having more available credit, it's important to remember exactly who's in charge of the entire notion of a credit score: lenders.</p> <p>So, while having a good credit score can have a lot of financial benefits for you, the scoring itself isn't designed for your benefit; it's designed to help credit card companies and other lenders protect their interests. What that means for borrowers is that getting the best credit score isn't necessarily about making what appears to be the most logical financial choices; it's about playing the game. Just be sure you play it to win.</p> <p><em>What do you do to keep the best possible credit score? Please share in comments!</em></p> <a href="" class="sharethis-link" title="This One Ratio Is the Key to a Good Credit Score" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Tara Struyk</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Credit Cards credit cards credit history credit score credit utilization ratio Wed, 01 Oct 2014 13:00:07 +0000 Tara Struyk 1224394 at 13 Things You Don't Know About Your Credit Report — But Should <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/13-things-you-dont-know-about-your-credit-report-but-should" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="credit report" title="credit report" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Everybody knows that their credit report matters. But beyond that, most people don't know much else.</p> <p>Here are 13 things you don't know about your credit report &mdash; but should.</p> <h2>1. Scores and Reports Are Not the Same</h2> <p>While many people use the terms &quot;credit report&quot; and &quot;credit score&quot; interchangeably, those two terms mean two completely different things.</p> <ul> <li>A credit report details your credit history, including personal data, detailed account information, inquiries into your credit history, and accounts turned over to collections.<br /> &nbsp;</li> <li>A credit score is a number calculated by a financial institution to determine the your creditworthiness (or how likely you are to repay your debts).</li> </ul> <h2>2. There Are More Than 3 Credit Reporting Agencies</h2> <p>When talking about credit agencies or bureaus, you may think of Experian, TransUnion, and Equifax. However, there are many other <a href="">consumer reporting agencies</a> out there gathering data about you to help institutions make decisions about credit, insurance, or employment, and for other purposes.</p> <h2>3. You May Not Have One</h2> <p><a href="">It is possible not to have a credit history</a>. If you have neither credit cards nor any type of loans, then you won't have a credit history. (See also: <a href="">How to Build Your Credit History</a>)</p> <h2>4. Agency Scores Aren't The Same</h2> <p>When talking about credit scores or reports, make sure that you're comparing apples to apples.</p> <p>For example, let's imagine that you have a credit score of 660. Now try to evaluate that number with the following ranges:</p> <ul> <li>FICO: 300 &ndash; 850</li> <li>Equifax: 280 &ndash; 850</li> <li>Experian: 330 &ndash; 830</li> <li>PLUS Score: 330 &ndash; 830</li> <li>TransUnion's TransRisk: 300 &ndash; 850</li> <li>VantageScore: 501 &ndash; 990 (versions 1.0 &amp; 2.0), 300 &ndash; 850 (version 3.0)</li> </ul> <p>Not so black and white, is it? Even when talking about a specific credit score you have to double check which one your lender is referring to. For example, there are <a href="">53 different FICO credit scores</a>.</p> <p>The Consumer Financial Protection Bureau analyzed <a href="">200,000 files from all credit reporting agencies</a> and found that one out of every five Americans is likely to receive a score that is meaningfully different from the score used by a lender to make a credit decision.</p> <h2>5. You Are Entitled to Free Credit Reports</h2> <p>By <a href="">federal mandate</a>, you're entitled to a free annual credit report that includes all the information gathered by the three main credit bureaus. Every 12 months, you can request your free report by:</p> <ul> <li>Calling 1-877-322-8228;<br /> &nbsp;</li> <li>Mailing this <a href="">Annual Credit Report Request Form</a> and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281; or<br /> &nbsp;</li> <li>Requesting it online at <a href=""></a>.</li> </ul> <p>Getting your own credit report doesn't hurt any of your credit scores.</p> <h2>6. The Unemployed Get an Extra Report</h2> <p>On top of your free annual credit report, you can get <a href="">another free report when you are unemployed</a>.</p> <p>Why?</p> <h2>7. Credit Reports Can Factor in Hiring Decisions</h2> <p>One in 10 Americans has been <a href="">denied a job due to information on their credit report</a>.</p> <p>The reasoning is that some employers may perform background checks, which include credit report information. So, to be on the same page as potential employers and to be able to dispute any inconsistencies, you are granted a second free report.</p> <p>The <a href="">7 occupations that regularly check an applicant's credit history</a>:</p> <ol> <li>parking booth operator</li> <li>the military</li> <li>accounting</li> <li>mortgage loan originator</li> <li>Transportation Security Administration (TSA) officer</li> <li>law enforcement officer</li> <li>employment through temp agencies</li> </ol> <h2>8. You Can Get a Free Report After an Adverse Action</h2> <p>If you believe that a company has taken adverse action against you, such as dramatically increasing your home insurance or denying employment, then the relevant consumer reporting company is required to give you a free copy of your consumer report. Other times that you can get a free credit score report are in case of mortgage scoring and risk-based pricing.</p> <h2>9. Parking Tickets and Library Fines Appear on Your Report</h2> <p>Your credit report includes details of public record, which includes debts to any level of government. This is why ignoring that public library fine comes back with a vengeance by popping up on your credit report and staying there for the next three to seven years. The same applies to parking tickets. (See also: <a href="">10 Surprising Ways to Hurt Your Credit Score</a>)</p> <p>This is why it is important to always notify the U.S. Postal Service every time you move, so you never miss a bill from any city or state government.</p> <h2>10. Some Late Payments Are Not Reported</h2> <p>The industry standard for account delinquency starts 30 days after a due date.</p> <p>This means that any payment within 30 days of its respective due date won't be reported to any of the credit bureaus. While it is a bad idea to pay your bills late, if you already got hit with a late payment, then you can take advantage of your grace period before it affects your credit report.</p> <h2>11. Closing Accounts Hurts Your Credit Report</h2> <p>While it may sound like a good idea in theory, closing accounts negatively affects your credit history in two ways.</p> <p>First, it may lower your average account age, which is viewed negatively by credit reporting agencies. Generally, it is a <a href="">bad idea to close your oldest credit account</a> if you have no other account as old as that one. Second, closing accounts always decreases your <a href="">available credit</a>, which increases your credit utilization rate. The higher this rate, the more likely you are to fall behind on debt payments.</p> <h2>12. Time Heals All Credit Wounds</h2> <p>No matter what kind of credit <em>faux pas</em> you have committed, it will not haunt you forever. Foreclosures, bankruptcies, and other <a href="">negative financial information will generally disappear from your credit report after 7 years</a>.</p> <p>And finally...</p> <h2>13. Your Credit May Land You a Date</h2> <p>Turns out that some bachelors and bachelorettes enjoy deep conversations, long walks on the beach&hellip; and amazing credit histories. By submitting your credit score to <a href=""></a>, you may attract potential suitors and find the love of your life.</p> <p>There is one catch: The creators of the dating site are still looking for a third party to verify credit scores. This means that you have to trust what others tell you about their credit histories and scores. Good luck!</p> <p><em>Have you been surprised by what's in your credit report?</em></p> <a href="" class="sharethis-link" title="13 Things You Don&#039;t Know About Your Credit Report — But Should" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Damian Davila</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Personal Finance credit credit history credit report credit score Fri, 26 Sep 2014 13:00:04 +0000 Damian Davila 1220790 at How to Get a Credit Card When You Have Bad Credit <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-get-a-credit-card-when-you-have-bad-credit" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="credit card" title="credit card" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>A <a href="">bad credit score</a> can happen to anyone. Perhaps you bit off more that you could chew during the holiday season, or have been in between jobs for a long time and missed several monthly payments. Sometimes circumstances arise and you have to declare bankruptcy.</p> <p>When you have a terrible credit score, the last thing on your mind is getting a credit card. However, it can be a savvy way to start <a href="">rebuilding your credit</a>. Here is how to get a credit card when you have bad credit. (See also: <a href="">Best Secured Credit Cards</a>)</p> <h2>Become a Member of a Local Credit Union</h2> <p>Unlike banks, credit unions are not for-profit. The main goal of any credit union is to make financial services more accessible to its members. That's not a typo: Credit unions don't have clients as every member is a shareholder with voting rights. (See also: <a href="">Why Choose a Credit Union Instead of a Bank</a>)</p> <p>To become a member, a credit union often holds your first deposit of about $100 for one to three years. Once the hold period expires, your credit union keeps only $5 on hold and gives the rest back to you. In exchange for your deposit, the credit union doesn't charge you monthly fees, require you to have a minimum account balance, charge you ATM fees within its network, or limit your withdrawals per month. This amounts to plenty of savings in fees, which is money that you can use to pay down your other debts and meet your monthly payments.</p> <p>The best part is that credit unions offer better <a href="">credit card interest rates</a> than banks. According to the National Credit Union Administration, the average annual interest rate for <a href="">credit cards issued by credit unions is 11.56%</a>, while for those issued by banks is 12.87%. For example, the Aloha Pacific Federal Credit Union offers VISA credit cards starting at a 8.00% APR. Additionally, almost all credit unions charge no annual fees for their credit cards.</p> <p>Given the $100 initial deposit, several credit unions have very low requirements to issue a $400 to $500 credit card. The most important requirement is that you are able to provide proof of employment. This is a great way to access a credit card even with bad credit and work towards improving your credit score.</p> <h2>Get a Secured Credit Card</h2> <p>But, what if you are not eligible for any credit union? It is true that you have to qualify to become a member. For example, there are credit unions for university students, federal and state employees, or members of professional associations. Also, it is possible that there is just no credit unions available in your area.</p> <p>In that case, your best option is to get a <a href="">secured credit card</a>. Unlike regular credit cards, secured ones may not require a credit check. This is a great advantage for those with bad credit because it does away with a <a href="">hard inquiry</a> and the possibility of getting dinged with a credit denial.</p> <p>A secured credit card works just like a <a href="">prepaid gift card</a>. For example, if you deposit $400 in your account, then your credit limit is $400.</p> <p>Secured credit cards offer several advantages to those with bad credit:</p> <ul> <li>Provides a &quot;last resort&quot; solution to getting a credit card, which is essential to build back up your credit score.<br /> &nbsp;</li> <li>Through responsible management over time, allows you to build higher credit limits that may not require a deposit.<br /> &nbsp;</li> <li>Gathers evidence for the three credit bureaus (<a href="">Equifax</a>, <a href="">Experian</a>, and <a href="">TransUnion</a>) of good debt management, which boosts your credit score.<br /> &nbsp;</li> <li>Allows you to become eligible for &quot;regular&quot; credit cards from the same financial institution over time.</li> </ul> <p>When evaluating secured credit cards (See also: <a href="">The 5 Best Secured Credit Cards</a>), remember to:</p> <ul> <li>Avoid cards with application or setup fees.</li> <li>Select a card with a low annual fee and a simple cost structure.</li> <li>Choose cards that appear as regular credit cards, not secured ones, on your credit report.</li> <li>Understand the rules to qualify the lowest interest rate before applying.</li> <li>Look for cards with cash or gas rewards.</li> <li>Inquire about additional benefits, such as car rental insurance and no charge for foreign transactions.</li> </ul> <h2>The Bottom Line on Credit Cards</h2> <p>Notice that we have not included here finding a cosigner as a recommended way to get a credit card in case of bad credit. While it is an easy route to qualify for certain credit cards, it does not address the main problem: your poor credit score. Additionally, it is a decision that if things go sour, could kill a relationship with a family or friend. (See also: <a href="">7 Decisions That Seem OK Now, but Might Ruin Your Finances Later</a>)</p> <p>Remember that a credit score is necessary for applying to some jobs and setting rates for financial products, such as car and life insurance. This is why it is important to maintain a credit card even during periods of bad credit, so that you can rebuild your credit score.</p> <p><em>How did you get a credit card while having bad credit?</em></p> <a href="" class="sharethis-link" title="How to Get a Credit Card When You Have Bad Credit" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Damian Davila</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Credit Cards Debt Management bad credit credit credit score repair credit secured credit Wed, 30 Jul 2014 13:00:03 +0000 Damian Davila 1170316 at 10 Things You Think Affect Your Credit Score — But Don't <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/10-things-you-think-affect-your-credit-score-but-dont" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="couple finances" title="couple finances" class="imagecache imagecache-250w" width="250" height="145" /></a> </div> </div> </div> <p>There are a lot of misconceptions when it comes to personal credit. One reason for this is the way your credit score is determined is largely shrouded in secrecy. Because of this, there are many things that you may think affect your score that actually don't. Let's go through a few of these below! (See also: <a href="">How to Rebuild Your Credit in 8 Simple Steps</a>)</p> <h2>1. Your Age</h2> <p>Age is not a consideration when you take a look at the <a href="">credit score breakdown</a>. Many feel that you'll have a worse credit score when you're younger, but in reality, it's not your age that matters &mdash; it's how much you've used credit. Opening a low-limit credit card, using it, and paying the bill in full every month can help you establish your credit history at a young age.</p> <h2>2. Unemployment</h2> <p>As long as you continue to pay your credit card bills, unemployment will not affect your credit score at all. Late payments or missing a payment, however, will affect your score.</p> <h2>3. Breaking a Lease</h2> <p>Not paying your rent or breaking your lease will not affect your credit score, as long as your landlord does not take you to court and win a judgment against you. Renting and leasing property or <em>things</em> isn't something credit card reporting agencies track.</p> <h2>4. Not Carrying a Balance</h2> <p>This is one that I hear about the most from friends and family, but it's not true. In fact, having a low credit utilization ratio, or none at all, helps, as stated <a href="">here</a>.</p> <h2>5. Debit Cards</h2> <p>Overdraft your debit card accidentally? No problem (well, for your credit score). Since the bank has not extended any credit to you in giving you this card, you won't have any <a href="">negative consequences on your credit</a> from accidental overdrafting.</p> <h2>6. Not Spending on Your Cards for a Time</h2> <p>Just because you don't spend any money on your credit cards for a time, doesn't mean that your credit score will be hurt. It's only closing credit that may affect your score negatively &mdash; but not always. For example, closing your oldest credit card will affect the length of your credit history, thus negatively affecting your score.</p> <h2>7. Marrying Someone</h2> <p>While joint accounts may be affected, your personal credit score will not be affected by your spouse's bad credit. So, if you plan on marrying someone that has had some financial difficulties in the past, go for it! But know that filing for joint credit may result in a lower score than your personal score.</p> <h2>8. Not Paying Taxes</h2> <p>As long as the government does not put a lien on your property, not paying your taxes on time will not affect your credit score. I would probably recommend that you do pay these on time, though&hellip; it's sort of required.</p> <h2>9. Level of Interest Being Paid on Credit Card Accounts</h2> <p>The amount of interest that you are paying on remaining balances for your credit card accounts does not, in fact, affect your score. Your credit score does affect the initial size of your APR on most cards, though.</p> <h2>10. Your Location</h2> <p>Some may think that your credit score has something to do with your location (like people in big cities having better scores than rural customers). But your credit score is unaffected by matters that don't affect your spending habits.</p> <p><em>Are you surprised by any of these? Relieved that your credit might be better than you thought?</em></p> <a href="" class="sharethis-link" title="10 Things You Think Affect Your Credit Score — But Don&#039;t" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Mark Jackson</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Credit Cards borrowing credit credit cards credit score debt Fri, 18 Jul 2014 09:00:03 +0000 Mark Jackson 1161532 at Save $70,000 (or More!) With 4 Simple Credit Score Boosts <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/save-70000-or-more-with-4-simple-credit-score-boosts" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="piggy bank" title="piggy bank" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>Do you dream of having a home to call your very own one day? If you&#39;re like most people, the answer is a resounding, &quot;YES!&quot;</p> <p>If you do, you&#39;re likely to run into a pretty significant challenge: You probably don&#39;t have hundreds of thousands of dollars in your bank account to buy a home with cash. (See also: <a href="">The Process for Buying a House With Cash</a>)</p> <p>So what do you do?</p> <p>Again, if you&#39;re like most people, the next step to getting the house of your dreams is to get a mortgage loan.</p> <p>And once you start shopping for a mortgage, you&#39;ll find that not all loans are created equal. Lenders will charge you different interest rates based on their judgment of your financial responsibility and your ability to repay the loan.</p> <p>The more responsible they think you are, the better the interest rate you&#39;ll get. And the better the interest rate you get, the more money you&#39;ll save.</p> <p>So how do most lenders judge your sense of financial responsibility? They do it by looking at a three-digit number &mdash; your credit score.</p> <h2>How Your Credit Score Affects Interest</h2> <p>Check out this <a href="">mortgage loan savings calculator</a>, which shows how your credit score impacts the total amount of interest you pay on a loan. For the sake of simplicity, I&#39;m using the traditional 30-year fixed mortgage with a loan amount of $200,000. (See also: <a href="">Should You Choose a 15- or 30-Year Mortgage?</a>)</p> <p>With these numbers, let&#39;s say your credit score is in the worst range, between 620 and 639. Based on the calculator&#39;s results as of 12/24/13, you&#39;ll end up paying $223,150 in interest over the life of your loan.</p> <p>On the other hand, what if your credit score was in the best range, between 760 and 850? In this case, you&#39;d end up paying a total of $153,186 in interest.</p> <p>In other words, if you have the best possible credit, this is how much you&#39;ll end up saving over the life of your loan &mdash; more than $69,000.</p> <p>What could you do with an extra $69,000? Better yet, how much would it hurt to lose more than $69,000?</p> <p>So now that you&#39;ve seen how your credit score affects the amount of money you&#39;ll pay, you may be wondering, &quot;How do I get my credit into the best range?&quot; (See also: <a href="">Rebuild Your Credit in 8 Steps</a>)</p> <h2>How to Improve Your Credit Score</h2> <p>Here are four proven steps to raise your score.</p> <h3>1.Pay Your Credit Card Bills on Time</h3> <p>According to <a href="">myFICO</a>, your debt payment history makes up 35% of your credit score &mdash; the largest chunk. So the single best thing you can do to improve your credit is to have no late payments. (See also: <a href="">How to Avoid Late Fees</a>)</p> <h3>2. Get Out of Debt, and Stay Out</h3> <p>The amount of money you owe makes up 30% of your credit score &mdash; the next largest chunk. If you&#39;re using a high percentage of your available credit, lenders may think you&#39;re more likely to make late or missed payments. So by paying off your debts, you&#39;ll be using less of your available credit, and your score will improve.</p> <h3>3. Keep Your Cards, and Keep Them Active</h3> <p>Repeat Steps One and Two over and over again. Lenders like to see a long history of credit. It makes up 15% of your score &mdash; &nbsp;the third largest chunk. So the longer you hold a credit card, the better it&#39;ll be for your credit score. And if you ever get a new card, don&#39;t close your old one. That could hurt your score. (See also: <a href="">10 Surprising Ways to Hurt your Credit Score</a>)</p> <h3>4. Ask for More Credit</h3> <p>As a warning, you should only do this if you&#39;re completely out of credit card debt and you pay your balance in full. Otherwise, the extra credit may tempt you to spend more. This is related to Step Two. Again, since the amount you owe makes up 30% of your score, by increasing your available credit, you lower what&#39;s called your credit utilization rate. This helps improve your score. To get more credit, simply call your credit card company, and tell them you&#39;d like more credit because you&#39;re thinking about making a large purchase in the future. It&#39;s that simple. (See also: <a href="">Habits of Responsible Credit Card Users</a>)</p> <h2>Checking Your Score for Free</h2> <p>If you&#39;d like to monitor the progress on your score as you follow these steps, you can check your score by going to <a href="">Credit Karma</a> or<a href=";fot=9999&amp;foc=1"> Credit Sesame</a> and signing up for an account at no cost to you.</p> <p>Building good credit, like building wealth, doesn&#39;t happen overnight. But by following these steps over the long term, you&#39;ll be sure to save the most amount of money possible when you finally find your dream home.</p> <p><em>Have you taken any of these steps to improve your credit? How well did you do?</em></p> <a href="" class="sharethis-link" title="Save $70,000 (or More!) With 4 Simple Credit Score Boosts" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Darren Wu</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Personal Finance better credit credit report credit score good credit Wed, 22 Jan 2014 10:48:09 +0000 Darren Wu 1112797 at Ask the Readers $200 Giveaway: Would You Ding Your Credit to Get Out of Debt? <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/ask-the-readers-200-giveaway-would-you-ding-your-credit-to-get-out-of-debt" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="woman thinking" title="woman thinking" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p><em>Congratulations to <a href="">Mary Happymommy</a>, Petal Flowers, and Adrienne gordon for winning this week&#39;s contest!</em></p> <p>Many people are on a quest to have a good credit score while also trying to get out of debt. However, when it comes to debt settlement, consumers can take a hit to their credit score in order to pay off their debts at a substantial discount. This begs the question, which is more important: being debt free or having a good credit score?</p> <p><strong>Would you ding your credit to get out of debt?</strong> Why or why not? Is your credit score or being debt free more important to you? Why?</p> <p>This week, <a href="">National Debt Relief</a>, one of the country&rsquo;s largest and most reputable debt settlement companies, is sponsoring $200 in prizes for our Ask the Readers giveaway! Make sure to tell us if you would ding your credit to get out of debt and we&#39;ll enter you in a drawing to win a $150 or one of two $50 Amazon Gift Cards!</p> <h2>Win a $150 Amazon Gift Card or 1 of 2 $25 Amazon Gift Cards</h2> <p>We&#39;re doing three giveaways &mdash; here&#39;s how you can win!</p> <h3>Mandatory Comment Entry for a Chance to win a $150 Amazon Gift Card:</h3> <ul> <li>Post your answer in the comments below. One commenter will win a $150 Amazon Gift Card!</li> </ul> <h3>For extra entries to win one of two $25 Amazon gift cards:</h3> <ul> <li>You can tweet about our giveaway for an extra entry. Also, our Facebook fans can get an extra entry too! Use our Rafflecopter widget for your chance to win one of two $25 Amazon Gift Cards:</li> </ul> <p><a class="rafl" href="" id="rc-79857d61" rel="nofollow">a Rafflecopter giveaway</a> <script src="//"></script></p> <p><strong>If you&#39;re inspired to write a whole blog post OR you have a photo on flickr to share, please link to it in the comments or tweet it.</strong></p> <h4>Giveaway Rules:</h4> <ul> <li>Contest ends Monday, November 11th at 11:59 pm Pacific. Winners will be announced after November 11th on the original post. Winners will also be contacted via email.</li> <li>You can enter all three drawings &mdash; once by leaving a comment, once by liking our Facebook update, and once by tweeting.</li> <li>This promotion is in no way sponsored, endorsed or administered, or associated with Facebook.</li> <li>You must be 18 and US resident to enter. Void where prohibited.</li> </ul> <h2>This week, our Ask the Readers giveaway is sponsored by National Debt Relief!</h2> <p>Here is a message from our sponsor:</p> <blockquote> <p>National Debt Relief is a BBB accredited business that helps consumers resolve their debt problems without filing bankruptcy or debt consolidation loans. They are the #1 rated debt consolidation company on <a href="">TopTenReviews</a> - a leading independent consumer review site.</p> <p>NDR wants to know if it makes sense to temporarily ding your credit to resolve a financial crisis and get out of debt in 2-4 years compared to struggling to make the minimum payments for years and paying $1000s in interest charges.</p> </blockquote> <a href="" class="sharethis-link" title="Ask the Readers $200 Giveaway: Would You Ding Your Credit to Get Out of Debt?" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Ashley Jacobs</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Giveaways Ask the Readers credit credit score debt debt settlement Tue, 05 Nov 2013 10:36:03 +0000 Ashley Jacobs 1067939 at 12 Habits of Highly Responsible Credit Card Users <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/12-habits-of-highly-responsible-credit-card-users" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="online shopping" title="online shopping" class="imagecache imagecache-250w" width="250" height="168" /></a> </div> </div> </div> <p>Everyone should aspire to be a highly responsible credit card user. Besides obvious benefits such as staying out of debt, highly responsible credit card users will also be happier and less stressed out about their money because they&rsquo;re in more control. So, what are the key habits of highly responsible card users? (See also:&nbsp;<a href="">Keep Your Credit Card Safe While Shopping Online</a>)</p> <h2>1. Sign Up for Auto Pay</h2> <p>Every credit card offers an automatic payment system. Auto pay does just what you might think &mdash; it automatically pays your bill each month on the date it&rsquo;s due. If you miss a payment or make a late payment, you&rsquo;ll not only incur hefty fees, but you can also hurt your credit score (depending on how late your payment is). So, by enrolling in automatic payments, you prevent these issues. Most card companies offer you the option to sign up for auto pay on the card&rsquo;s website; if not, call the company and they will mail you a form to complete. Just make sure that you have enough money in your bank account to ensure you won&rsquo;t be overdrawn when the auto pay makes its withdrawal from your account.</p> <h2>2. Register for the Card&rsquo;s Website</h2> <p>If you&rsquo;re not banking online, you should be. When you sign up and register for the card&rsquo;s website, you&rsquo;ll have instant access to your card&rsquo;s balance. But you&rsquo;ll also be able to have faster access to the rewards program and customer service. When you&rsquo;re traveling internationally, you won&rsquo;t have to incur fees to call your bank &mdash; you can just log on. Finally, registering for the card&rsquo;s website enables you to access other features like text or email reminders.</p> <h2>3. Sign Up for Text or Email Reminders</h2> <p>No one actually wants to login to their credit card account every day or week (depending on your compulsiveness). Instead, you should sign up for text or email notification of key events such as payment due dates. Some cards will send you a reminder if you are getting close to a set spending limit. Personally, I get emails once a month with my statement balance.</p> <h2>4. Check Your Statement Once a Month</h2> <p>Just because you are enrolled in auto pay and get monthly reminders of your balance doesn&rsquo;t mean you can forego actually reading your statement. Every month, sit down and look through your statement to ensure there are no erroneous charges. Just this past summer I discovered two fraudulent charges for a rental car that I never rented (in a city I hadn&rsquo;t visited.) The charges were relatively small, so had I not looked at the statement, I might have completely overlooked them.</p> <h2>5. Pay Your Balance in Full</h2> <p>When you enroll in auto pay, select the option to pay your statement balance in full. All highly responsible credit card users pay their balances in full each month to avoid interest and fees. If you can&rsquo;t afford to pay your statement in full each month, pay as much as you can afford, and call your credit card company to negotiate a lower interest rate for your card.</p> <h2>6. Know Your Perks</h2> <p>I love telling people that if they lose an earring or spill red wine on white pants just after making a new purchase, they may be eligible for a replacement or refund from their credit card. Seriously. You have a lot more credit card perks than you likely know about. Check out my <a title="Ultimate Credit Card Perks Checklist" href="">credit card perks checklist</a>, and then call your card company to request a complete list of membership benefits.</p> <h2>7. Use Your Perks</h2> <p>Once you know your credit card perks, start using them. When you go on vacation, pay with the credit card that offers the best car rental insurance. When your new scarf is lost or stolen, report it to the credit card and get a refund. When the price on the phone you just purchased drops by $50, call your card company and request a purchase price adjustment. It&rsquo;s that easy.</p> <h2>8. Use a Rewards Card that Matches Your Spending Habits</h2> <p>You should be using a rewards card &mdash; one that matches your spending habits. For instance, if you&rsquo;re a new parent, use a <a href="">card that&rsquo;s good for new parents</a>. If you drive a lot, get a card that offers <a href="">5% back on gas</a>. Travel much? Choose a <a href="">travel rewards card</a>. You get the idea. Don&rsquo;t just settle for a card that gives you 1% cash back on everything. If you do this you&rsquo;re likely passing up on hundreds or thousands of dollars worth of rewards each year. Instead, spend 30 minutes reviewing a few recent months of spending, and get a card that gives the highest rewards for where you spend the most money.</p> <h2>9. Spend Rewards Wisely</h2> <p>Once you&rsquo;ve earned rewards, you need to spend them. Don&rsquo;t just opt for cash back. If you can trade your rewards points for items or travel, those may be better deals. For instance, I get a much better value when I use my points for hotel nights or airfare than I would by buying a gift certificate. I&rsquo;m currently planning on using what amounts to about $700 in cash back rewards for $2,400 worth of hotel nights. You don&rsquo;t have to spend a lot of time calculating the reward value, but a few minutes could lead to a huge boost in benefits. Most importantly, spend the rewards on items you actually need or want. Don&rsquo;t just opt for a Gap gift certificate because it&rsquo;s the first thing that pops up in the rewards redemption. If you can get an Amazon gift certificate that won&rsquo;t just sit in your drawer for years, get that instead.</p> <h2>10. Choose Your Payment Date</h2> <p>One of the best little-known habits of highly responsible card users is that they choose their credit card due date. I have my cards set up to all be due a few days after payday. This gives me time to ensure that the paycheck was properly deposited and cleared, but not so much time that the money in my bank account gets spent on other items. Plus, it&rsquo;s much easier to just check my account once a month and say, &ldquo;I know my credit card totals were $1,000 this month, and yes, I have that in my account today,&rdquo; rather than having to check my account multiple times each month.</p> <h2>11. Don&rsquo;t Cancel Your Card</h2> <p>Even if you&rsquo;re not using your credit card very frequently, you shouldn&rsquo;t cancel it. Canceling a credit card may actually lower your credit rating. Instead, keep the card in your dresser drawer, and use it once a year. (See next tip.) The primary exception would be that you can cancel your card if it has a fee (as paying the fee may cost more than a ding to your credit score would).</p> <h2>12. Use All Your Cards Once a Year</h2> <p>Credit card companies know that it costs a lot of money in administrative costs to retain a card user who isn&rsquo;t using their card. As such, some card companies have started cancelling cards that haven&rsquo;t been used frequently enough. If you have a card tucked away because you don&rsquo;t use it very often, I recommend either setting up one monthly expense on the card (like Netflix) or just taking the card out once a year for a random expense. That way you won&rsquo;t risk having the card canceled on you which will lower your credit score.</p> <p><em>What good habits have you developed as a responsible credit card user?</em></p> <a href="" class="sharethis-link" title="12 Habits of Highly Responsible Credit Card Users" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Elizabeth Lang</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Credit Cards credit score habits Wed, 26 Dec 2012 11:24:30 +0000 Elizabeth Lang 955536 at FICO vs. Fakes: Are You Getting the Wrong Credit Score? <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/fico-vs-fakes-are-you-getting-the-wrong-credit-score" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="looking at paperwork" title="looking at paperwork" class="imagecache imagecache-250w" width="250" height="199" /></a> </div> </div> </div> <p>If you&rsquo;ve applied for a loan recently and had your credit score pulled, chances are you are aware that you have more than one credit score. FICO issues a score, and each of the three major credit bureaus also offers its own credit score, too.</p> <p>Knowing your credit score is important for wise financial management . But you should understand which credit scores are &ldquo;real&rdquo; and which are &ldquo;fake.&rdquo; (See also: <a href="">10 Surprising Ways to Negatively&nbsp;Affect Your Credit Score</a>)</p> <h2>What <i>Is</i> a FICO Score?</h2> <p>This is the credit score most lenders use to determine your creditworthiness. The FICO score comes from the <b>F</b>air <b>I</b>saac <b>Co</b>mpany, which has developed an algorithm to determine your creditworthiness using information contained in your credit reports from the three major credit bureaus (Equifax, TransUnion, and Experian).</p> <p>Lenders and others buy access to the algorithm. Fair Isaac offers different credit scores that emphasize specific borrowing behaviors, such as varying weights for different actions like <a href="">buying a home</a> or <a href="">buying a car</a>.</p> <p>Your FICO scores from each of the three different credit bureaus are different, too. FICO&rsquo;s formula is applied to the information in each of your credit reports, and since your information may not be the same in all three, your scores can differ.</p> <p>Each bureau has a different name for its FICO, but they all come from Fair Isaac:</p> <ul> <li>Equifax = BEACON Score</li> <li>TransUnion = EMPIRCA</li> </ul> <p>What about Experian, the other of the big three credit bureaus? If you attempt to buy a FICO score from Experian, you&rsquo;ll be out of luck. Experian offers its own, non-FICO credit score for purchase.</p> <p>Fair Isaac has a fairly tight grip on the credit scoring industry, but that doesn&rsquo;t mean that no one else has developed their own credit score algorithms. The catch? These scores might not be what lenders &mdash; particularly mortgage lenders &mdash; use to determine your creditworthiness.</p> <h2>FAKO Scores and Your Credit</h2> <p>Other credit scores have acquired the designation FAKO (from &ldquo;fake-o&rdquo;). For the most part, these are not FICO scores. Instead, they are scores from companies that have developed their own scoring models. These scoring models look similar to FICO scores, and even have a similar scale. Some examples include:</p> <ul> <li><b>VantageScore</b>: This is a scoring model developed by the three major credit bureaus together. It includes information from all three reports. You can get your VantageScore from each of the three credit bureaus. It was designed to compete with FICO, but so far, few lenders actually use it.<br /> &nbsp;</li> <li><b>PLUS</b>: Experian developed its own credit scoring model, based on information in the Experian report. However, this is a consumer credit score and not used by lenders. It&rsquo;s purely educational.<br /> &nbsp;</li> <li><b>TransRisk</b>: The credit bureau TransUnion developed the TransRisk score based on information from that bureau.<br /> &nbsp;</li> <li><b>Experian credit score</b>: This is a score based on the information in your Experian credit report and based on Experian&rsquo;s proprietary model.</li> </ul> <p>It&rsquo;s true that these scores can provide you with a general idea of your creditworthiness, but since they are not widely used, they might not actually tell you how lenders see you.</p> <p>Alternative scores can help you keep tabs on your credit situation and alert you to potential problems, but they can&rsquo;t replace your FICO score.</p> <h2>Where to Get Your Credit Scores</h2> <p>You can buy your FICO score directly from the source at <a rel="nofollow" target="_blank" href=""></a>, but you can also purchase your FICO score from two of the three major credit bureaus.</p> <p><a href="" target="_blank">TransUnion</a> and <a rel="nofollow" target="_blank" href="">Equifax each sell a version of the FICO score</a> based on their own information. Each of the three major bureaus also sells a score based on their own models, and you can purchase your VantageScore from each of the bureaus.</p> <p>While it might be worth it to purchase your FICO score, though, it usually isn&rsquo;t worth the cost to purchase a FAKO score. You can usually find these alternative scores for free at web sites like <a rel="nofollow" target="_blank" href="">Quizzle</a>, <a rel="nofollow" target="_blank" href="">CreditKarma</a>, and <a rel="nofollow" target="_blank" href="">CreditSesame</a>. Keep tabs on your situation with free scores, but if you are serious about fixing your credit before applying for a major loan, check your FICO score.</p> <p>It&rsquo;s also important to watch out for those &ldquo;free credit score&rdquo; web sites. First of all, most of them offer FAKO scores, rather than FICO scores. Secondly, you normally have to sign up for a credit monitoring service in order to get your &ldquo;free&rdquo; score. You are much better off going through official channels to get your credit score.</p> <h2>What About a Free FICO Score?</h2> <p>While it&rsquo;s fairly easy to find FAKO scores for free, getting your free FICO score is a little more difficult. (Remember, your FICO&nbsp;score isn't the same thing as your free annual credit report.) For the most part, you will need to pay $19.95 at myFICO in order to see your score. That&rsquo;s $19.95 for one score based on one bureau, so you will have to pay another $19.95 for another score. (Experian charges $15.95 for its non-FICO score.)</p> <p>It is possible to get a free credit score if you have been denied credit or if you don&rsquo;t receive the best possible terms. However, lenders only have to provide you with the credit scoring method used and an explanation of why you were denied credit.</p> <p>A recent law requires lenders to either provide you with the credit score used (so, if it&rsquo;s FICO, you get the FICO score) OR provide you a Risk-Based Pricing Notice. This means that lenders can get around providing you with a free copy of your credit score by analyzing why you didn&rsquo;t get the best rate or why you were turned down.</p> <p>If you want to stay on top of your credit score at all times, you can sign up for <a href="">Score Watch at MyFICO</a>. They'll send you alerts when there are changes to your credit score and provide you with tools to understand the factors affecting your score. The 1-month trial costs $4.94; each month after that costs $14.95.</p> <h2>Bottom Line</h2> <p>Your credit score is a numerical representation of your creditworthiness. Banks and other lenders use it to make judgments about whether to <a href="">approve your loan</a>, and what terms you receive. The most common score used is the FICO score; if you are going to pay for a score, make sure it&rsquo;s that one.</p> <a href="" class="sharethis-link" title="FICO vs. Fakes: Are You Getting the Wrong Credit Score?" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Miranda Marquit</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Credit Cards credit score FAKO fico Thu, 20 Dec 2012 11:24:30 +0000 Miranda Marquit 955323 at How to Rebuild Your Credit in 8 Simple Steps <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-rebuild-your-credit-in-8-simple-steps" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="Young couple talking to credit card company" title="" class="imagecache imagecache-250w" width="250" height="166" /></a> </div> </div> </div> <p>When you have bad credit, many doors are closed to you. A poor or bad credit score is one that falls at or below 619 on the <a href="">FICO score</a>. You might not qualify for loans, or you might have to settle for less-than-desirable terms that cost you thousands of dollars during the loan&rsquo;s terms. In some cases, poor credit can result in higher insurance premiums, and some employers check credit reports before deciding to hire you.</p> <p>Many lenders are also wary of those with an &ldquo;average&rdquo; credit rating of between 620 and 679. You might qualify for a loan, but you won&rsquo;t get the best terms; instead, you are likely to pay a higher interest rate, costing you hundreds &ndash; or thousands &ndash; of dollars over the life of the loan. Until you achieve a good score of 680 to 739, you will likely pay the price. And if you want the best terms on some loans (particularly mortgages), you need an excellent credit score of 740.</p> <p>Most of us could use a little improvement in our scores. If you have average credit, you might want to bump it into the &ldquo;good&rdquo; range. Someone with good credit might want a credit score upgrade to an &ldquo;excellent&rdquo; rating. And, if your credit rating is poor, it&rsquo;s especially important that you work to improve your situation.</p> <p>Rebuilding your credit, whether you have been through a bankruptcy or divorce, or whether you have made mistakes with your finances, doesn&rsquo;t have to be complicated. As long as you have patience and create a plan, you can rebuild your credit and eventually obtain an excellent credit rating.</p> <h2>1. Check Your Credit Report</h2> <p>Know where you are at financially. Check your credit report to see exactly where you need to improve. Do you have a lot of missed or late payments? Is your debt utilization too high? These clues can help you figure out what items to tackle first. You are entitled to a free report from each of the credit bureaus one a year (so, three total). You can visit <a href=""></a> (the official site run by the three credit bureaus) for your free reports. You can also order reports directly from each of the three bureaus:</p> <ul> <li><a href="">Equifax</a></li> <li><a href="">Experian</a></li> <li><a href="">TransUnion</a></li> </ul> <p>Check your credit report for errors and fraudulent accounts as well. Errors can bring your credit score down. If something is inaccurate, dispute it, and fix the problem. The FTC offers great information on disputing inaccurate information, as well as a <a href="">helpful sample dispute letter you can use as a template</a>. This can be one of the easiest ways to give your credit score a little bump higher. Don&rsquo;t forget to bring fraudulent accounts to the attention of the credit bureau and have them removed. If you are concerned about fraudulent accounts and identity theft, can place a freeze on your credit to avoid further identity theft problems. Each bureau has its own procedures, and you can learn more about how to place a credit freeze on your report by visiting the bureaus&rsquo; web sites. Understand that a freeze needs to be placed with each bureau individually.</p> <h2>2. Arrange to Catch Up on Your Payments</h2> <p>Payment history accounts for the largest factor affecting your credit score. If you are behind on your payments, you won&rsquo;t be able to improve your credit situation. Try to bring all of your accounts up to date. If you can&rsquo;t afford to bring everything up to date at once, you can contact your creditors and work out a payment plan. Be up-front when you contact your creditors, explaining your situation and letting them know that you want to pay your obligation. Let your creditors know how much you can pay, and how long you expect to pay it. In many cases, it&rsquo;s possible to work out an arrangement that all parties can live with.</p> <p>You can also seek the services of a legitimate credit counseling agency to help you create a plan. The <a href="">FTC has some good information on managing your debt and contacting creditors, and finding legitimate credit counselors</a>.</p> <h2>3. Pay Your Bills on Time Moving Forward</h2> <p>Going forward, pay your bills on time. This includes non-credit bills. Your missed utility payments and late rent payments can be reported to the credit bureaus. Because payment history is so important, establishing a reliable pattern is vital to rebuilding your credit. At the very least, you want to avoid reports that you are missing payments, or paying habitually late. Consider setting up automatic withdrawals in order to avoid missing payments in the future.</p> <h2>4. Try to Avoid Closing Credit Card Accounts</h2> <p>When possible, avoid closing <a href="">credit card</a> accounts. The longer your credit history, the better your score. However, if you are very far behind in your payments, you may not have a choice. A payment plan may require you to cancel your credit card. If possible, though, keep your older accounts so that you have a substantial credit history on your side. (See also: <a href="">How to Avoid Getting Your Credit Card Cancelled</a>)</p> <h2>5. Pay Down Debt</h2> <p>The second most important factor in your credit score is your credit utilization. Your credit utilization is a measure of how much debt you have. It is expressed as a portion of the available credit you are using. If you have a total credit availability of $10,000, and you are using $7,500 of it, your credit utilization is 75%.</p> <p>If you are using a great deal of your available credit, it can count against you. Create a plan to pay down your debt a little faster. Honestly evaluate your expenses, and cut back. Use the money you save to reduce your debt. Try to get your credit utilization down to 30% or less. If you can reduce your debt, the credit utilization portion of your score will improve, and help your credit overall.</p> <h2>6. Use a Secured Credit Card</h2> <p>One of the best ways to quickly build a payment history is to use a credit card. A secured credit card can help with this step if your poor credit precludes you from qualifying for a &ldquo;regular&rdquo; credit card. A secured card requires that you keep money in a linked savings account as collateral. Because the money is already there, it is easier to get approval for a secured card &mdash; especially when you have poor credit. In either case, your payments are reported to the bureaus every month, so it makes a big difference in showing that you pay regularly &mdash; and on time. (See: <a href="">Wise Bread's review of the 5 best secured credit cards</a>.)</p> <p>An unsecured credit card carries more positive weight, but you might not qualify for an unsecured card right now. If this is the case, begin using a secured credit card. Double-check to ensure that the card is truly a credit card. Prepaid debit cards look similar, but they are not the same thing, and your payment history isn&rsquo;t reported to the credit bureaus. Ask the secured card issuer if your payments will be reported, and only use a card that will report to bureaus.</p> <p>After a few months, ask if your secured card can be &ldquo;upgraded&rdquo; to an unsecured card. If you stay within your balance, and make your payments on time, it should be possible to transform your secured card into an unsecured card. This will also give your credit score a bit of a boost.</p> <p>Remember, though, that any credit card isn&rsquo;t an excuse to spend more money. Whether you get a secured card or use an unsecured card, getting a card just to &ldquo;free up&rdquo; more money that you don&rsquo;t actually have to spend out of control won&rsquo;t help you in the long run. You have to keep a tight rein on your spending. If you can&rsquo;t change your habits so that you are in control of your spending, don&rsquo;t get a credit card, secured or unsecured.</p> <h2>7. Obtain an Installment Loan</h2> <p>Now that you have a secured credit card and are on your way to improving your payment history, you can try to obtain other loans. Part of your credit score is based on the types of account you have. There are two main types of account: rotating and installment. A rotating credit account is like a credit card or a home equity line of credit, where you have an available limit and you free up more funds as you pay down the loan. An installment loan has a set term and a set payment. Auto loans and mortgages are installment loans.</p> <p>It&rsquo;s important to be careful with this step, though. If you apply for too many loans, it can damage your score. Instead, you need to plan your credit applications carefully. Start with a small installment loan. You might be able to get a small, low-balance installment loan from your bank. It might also be possible (if you are looking for a car) to get an inexpensive car from a dealer that specializes in customers with poor credit. Your small loan will probably have a relatively high interest rate, so plan to borrow a small amount, and keep the loan term short.</p> <p>Your installment loan will show diversity in your account types and help your credit score. As you apply, though, keep it targeted. If you shop around, do so over the course of a few days, and your inquiries will be clustered together and considered one inquiry.</p> <h2>8. Practice Good Financial Habits</h2> <p>It can take 60 to 90 days or longer for you to start seeing improvement in your credit score. In some cases, depending on how bad the situation is, it can take two or three years to see solid improvement to your credit history. As a result, it&rsquo;s important to change your financial habits so that you reduce the chances of poor credit in the future.</p> <p>Develop the good financial habits of living within your means, setting aside money in your emergency fund, and saving for the future. That way, you&rsquo;ll be less inclined to skip payments, and you&rsquo;ll have something to fall back on if you run into financial trouble. Keep with the good habits you formed while rebuilding your credit, and it will be easier to maintain your new, better credit history.</p> <h2>Rebuilding Your Credit Is Worth Your Patience</h2> <p>Follow the steps listed above, and you will be well on your way to a credit score of more than 700. Don&rsquo;t forget to show patience, though. Credit improvement doesn&rsquo;t happen overnight. Depending on how bad your credit is, it can take years to achieve excellent credit. But, if you keep at it, you will be rewarded with better rates, and thousands of dollars in interest savings.</p> <a href="" class="sharethis-link" title="How to Rebuild Your Credit in 8 Simple Steps" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Miranda Marquit</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Credit Cards Debt Management building credit credit credit score Wed, 03 Oct 2012 10:36:42 +0000 Miranda Marquit 954833 at Surprising Things That Can Kill Your Credit <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/surprising-things-that-can-kill-your-credit" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="Surprised eyes" title="Surprised eyes" class="imagecache imagecache-250w" width="250" height="118" /></a> </div> </div> </div> <p>When it comes to credit scores, we're all very familiar with the damage a late payment can do to your credit &quot;worthiness.&quot; We also know that having too much debt is bad as is having no credit references at all.</p> <p>But surely that can't be all that affects your credit score, right?</p> <p>The truth is, there are several things that can tank your credit, some of which just might surprise you. (See also: <a href="">6 Credit Card&nbsp;Services You&nbsp;Don't (Usually) Need</a>)</p> <h2>Sneaky Inquiries</h2> <p>When you apply for a new credit card, you expect an inquiry to show up on your report. This is known as a &quot;hard&quot; inquiry, and too many of these within a 12 month period will lower your score.</p> <p>But filling out that Visa application isn't the only way to generate a hard inquiry. If you use a debit card when you rent a car for example, many rental agencies will check your credit before approving the transaction, and since few of us read all the fine print, you may not realize it's happened until it's too late.</p> <p>Likewise, opening a new checking account will also typically generate a hard inquiry (even though you're not applying for credit) as will applying for new phone service and &mdash; surprise! &mdash; requesting an increase on an existing account. Unfortunately, many consumers assume that credit card companies simply look at their own payment history to determine approval for increases, but the fact is that your existing creditors are monitoring your credit score on a regular basis.</p> <p>Now, only the hard inquiries generated by a request for an increase will ding your score &mdash; those periodic &quot;checkups&quot; are considered soft inquiries and don't cause a penalty. But that doesn't mean that they can't still hurt your credit, bringing us to the next item on this list...</p> <h2>Changing Your Ratio</h2> <p>When a creditor approves an application for credit, they will continue to monitor your score to ensure that your credit worthiness doesn't change. And again, these soft inquiries don't count against you. But should the creditor decide that you no longer meet their requirements, they can lower your credit limit or worse, close your account. By the time you realize it, the damage has already been done.</p> <p>Your credit score depends greatly on the ratio between how much credit you've used and how much you have available. So, if you have an account with a $2,000 balance for example, and you've charged $400, then you've used 20% of your available credit, and anything up to 30% is considered to be responsible credit management.</p> <p>But let's say that the credit card company decides that you no longer meet their standards and as a result, they lower your limit to $250 (yes, they can do that &mdash; I speak from experience). Now, instead of having a credit ratio of 20%, you're suddenly maxed out as far as your credit report is concerned, and your score will drop considerably as a result.</p> <p>If they decide to close the account instead (yes, they can do that too), you not only suffer the ding for a high credit utilization ratio, but you also lose the benefit of that available credit once you've paid the balance off. Remember, your utilization ratio is based upon your total credit available, so when an account is closed, it reduces the amount of credit you have access to. And the less available credit you have, the higher your utilization ratio will be.</p> <p>This is also the reason that financial experts discourage balance transfers. Debt-conscious consumers will often transfer their credit card balances to a new card with a lower rate, thinking that they're making a smart move, but this can actually have an adverse effect on your credit.</p> <p>Not only do you suffer the ding for a hard inquiry to secure that new, lower-rate account, but you'll also skew your utilization ratio if &mdash; like many consumers do &mdash; you close those higher-rate accounts after the <a href="">balance transfer</a> is complete.</p> <p>Let's say for example, that you have two cards, each with a $1,500 limit and a $200 balance. That gives you a utilization ratio of about 13% ($400 used / $3,000 total available). Then let's say that you get a new, lower-rate credit card with an additional $1,000 limit, and you shift your $400 outstanding balance to that new card. You now have a credit utilization ratio of just 10% ($400 used / $4,000 total available), but the minute you close those two older accounts with the higher interest rates, your ratio goes down the tubes.</p> <p>Instead of having $4,000 in available credit, you now only have $1,000. Your ratio goes from an impressive 10% to a whopping 40%, and that's bad, bad, bad.</p> <h2>Applying for the Wrong Type of Credit</h2> <p>Many consumers think that any kind of credit is good, and for those trying to rebuild their credit scores, getting approval on in-house financing plans might seem like a step in the right direction.</p> <p>Unfortunately, that's not the case.</p> <p>These &quot;local&quot; finance plans &mdash; like those you see advertised by furniture stores and car dealerships &mdash; are considered to be &quot;second class&quot; credit...that is, credit for those who can't get it anywhere else, and this makes you look like a high risk to potential creditors.</p> <p>In addition, because these in-house programs don't issue you a revolving limit, your available credit is typically the amount of your purchase. So, when you finance $1,000, it appears as a maxed-out account on your credit report and affects that all-important utilization ratio we were talking about before.</p> <h2>Skipping Out</h2> <p>When it comes to late payments, it's not just your credit cards that you have to worry about. Those old library fines, parking tickets, and unpaid balances on your book club can also hurt you if the company decides to use a collection agency to resolve the account.</p> <p>And once the collection hits your credit report, you and your score are stuck with it for seven years.</p> <h2>Swearing Off Credit</h2> <p>After having a few bouts of <a href="">credit card debt</a> in my early twenties, I swore I would only pay cash for my stuff and never use a credit card again. But knowing the importance of having credit, I kept a few accounts open and just locked the cards away. I thought I was being smart... I thought wrong.</p> <p>When you don't use your credit &mdash; as in, <em>ever</em> &mdash; there's no payment history for potential creditors to evaluate and after an extended period of time, your creditors may close your account because of inactivity, both of which can make it harder for you to secure credit when you need it.</p> <p>In addition, if you do ever decide to use one of those cards, you may find that your purchase is declined because it's outside of your &quot;usual&quot; spending habits. Of course, this can be resolved, but not without some embarrassment as you step out of the checkout line to call your credit card company.</p> <h2>The Moral of This Story?</h2> <p>Managing and protecting your credit score is most certainly a pain, but it's a necessary one. Use your credit, but use it wisely, and always ask about credit checks before securing new services...even (and especially) when those services seemingly would have nothing to do with your credit.</p> <p>But most importantly, monitor your score. The only way to know what's being reported is to check it yourself and then dispute any information that's incorrect.</p> <a href="" class="sharethis-link" title="Surprising Things That Can Kill Your Credit" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Kate Luther</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Consumer Affairs Credit Cards Debt Management credit score managing your credit protect your credit Thu, 02 Feb 2012 11:36:28 +0000 Kate Luther 885178 at Ask the Readers: Do You Know Your Credit Score? <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/ask-the-readers-do-you-know-your-credit-score" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="Do You Know Your Credit Score?" title="Do You Know Your Credit Score?" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p><em>Editor's Note: Congratulations to </em><a href=""><em>Sarah</em></a><em>, </em><a href=""><em>Elizabeth S.</em></a><em>, and </em><a href=""><em>Jen</em></a><em> for winning this week's contest!</em></p> <p>Whether you realize it or not, your credit score plays a huge part of your life. From getting approved to rent an apartment to getting a loan, a good credit score can make your life much easier. However, many people have no clue what their credit score is.</p> <!--StartFragment--><!--StartFragment--><!--EndFragment--><!--EndFragment--><p><b>Do you know your credit score?</b><span style="font-weight: normal;"> When was the last time you checked your score? How frequently do you check your score?</span></p> <!--StartFragment--><!--StartFragment--><!--EndFragment--><!--EndFragment--><p>Tell us whether or not you know your credit score and we'll enter you in a drawing to win a $20 Amazon Gift Card!</p> <h2>Win 1 of 3 $20 Amazon Gift Cards</h2> <p>We're doing three giveaways &mdash; one for random comments, one for random Facebook &quot;Likes&quot;, and another one for random tweets.</p> <h3>Mandatory Entry:&nbsp;</h3> <ul> <li>Post your answer in the comments below&nbsp;</li> </ul> <h3>For extra entries (1 per action):</h3> <ul> <li>Go to our <a href="">Facebook page</a>, &quot;Like&quot; us, and leave a comment telling us you did, or</li> <li><a href="">Tweet</a> your answer. You have to be a follower of our <a href="">@wisebread account</a>. Include both &quot;@wisebread&quot; and &quot;#WBAsk&quot; in your tweet so we'll see it and count it. Leave a link to your tweet (click the timestamp for the individual URL) in a separate comment.</li> </ul> <p><strong>If you're inspired to write a whole blog post OR you have a photo on flickr to share, please link to it in the comments or tweet it.</strong></p> <h4>Giveaway Rules:</h4> <ul> <li>Contest ends Monday, October 10th at 11:59 pm Pacific. Winners will be announced after October 10th on the original post. Winners will also be contacted via email.</li> <li>You can enter all three drawings &mdash; once by leaving a comment, once by liking our Facebook update, and once by tweeting.</li> <li>This promotion is in no way sponsored, endorsed or administered, or associated with Facebook.</li> <li>You must be 18 and US resident to enter. Void where prohibited.</li> </ul> <p>Note: Due to recent changes in Facebook's promotions guidelines, we have restructured the entry format of our giveaways.</p> <p><strong>Good Luck!</strong></p> <a href="" class="sharethis-link" title="Ask the Readers: Do You Know Your Credit Score?" rel="nofollow">ShareThis</a><div class="field field-type-text field-field-blog-teaser"> <div class="field-items"> <div class="field-item odd"> Tell us whether or not you know your credit score and we&#039;ll enter you in a drawing to win a $20 Amazon Gift Card! </div> </div> </div> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Ashley Jacobs</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Giveaways Ask the Readers credit score Tue, 04 Oct 2011 10:36:24 +0000 Ashley Jacobs 724763 at Building a Credit History <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/building-a-credit-history" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="Credit Cards" title="Credit Cards" class="imagecache imagecache-250w" width="250" height="178" /></a> </div> </div> </div> <p>Books on personal finance used to have a chapter on building a credit history, because it used to be harder to do. Young people used to find themselves in a classic chicken-and-egg situation, unable to borrow money without a credit history, but unable to build a credit history without borrowing.</p> <p>Things changed about twenty years ago, when the credit card industry started giving anyone who could scrawl their name a credit card. That's become a little less true since the financial crisis, but only a little.</p> <p>So, it's pretty easy nowadays to build a credit history. Even so, it's worth giving the topic some careful attention, because building a <em>good</em> credit history can save you a lot of money over the course of your life. (See also: <a href="">How Debt Fools People</a>)</p> <h2>How to Build Your Credit History</h2> <p>The procedure is easy. There are three steps:</p> <ol> <li>Borrow money</li> <li>Make payments on time</li> <li>Make the last payment a little early</li> </ol> <p>As I say, that first step used to be tricky, back when lenders insisted that their borrowers be credit worthy. Nowadays, it's not so tough.</p> <p>Don't just skip to the last step, though. You might imagine that you could just borrow some money, then pay it back, and you'd be done. But that's not the sort of credit history that borrowers want. What they really care about (and they care about it more deeply than you might imagine) is that you can <em>make payments on time</em>.</p> <p>They care for two reasons.</p> <p>First, because a proven ability to make the payments turns out to be a very good indicator of your ability to eventually pay the money back, even if you run into problems. (That is, they're not interested in your ability to borrow money, stash it in a bank account for a month, and then pay it back.) They care about your demonstrated ability to be <em>organized enough</em> to <a href="">get the payments made</a>. They care about your demonstrated <em>willingness</em> to make the <a href="">little sacrifices</a> needed to make the payments even when there's some glitch in your income or an unexpected expense.</p> <p>Second, that's how they make money. A borrower who pays the money right back is of no particular interest to a lender, because he or she pays much less interest.</p> <p>Making the last payment a little early is no longer as important as it used to be, but it can't hurt. (It was important back in the days when the records were kept on paper &mdash; when an actual person had to look down a row of entries in a ledger to see if your payments had been made on time. Lazy people would just check that you made all the payments, and then check that the loan was paid in full by the due date.)</p> <h2>Building Your Credit Score</h2> <p>Be aware that your credit history is only one piece of minimizing your borrowing costs; you also want a great credit score.</p> <p>Happily, if your credit history shows you can make monthly payments on time, you're most of the way there.</p> <p>The other important factors for your credit score are:</p> <h3>A Longstanding Credit History</h3> <p>If all your debts are new, it hurts your credit score. Solution: <em>Keep your oldest credit card active.</em></p> <h3>Plenty of Available Credit</h3> <p>If your cards are maxed out, it hurts your credit score. Solution: <em>Don't approach the limits on your cards. </em></p> <h3>Few Credit Checks</h3> <p>If your credit history is checked by multiple potential lenders, there's no way for the lenders to tell if you're just shopping around, trying to get the best deal on a loan (fine), or desperately trying to arrange more credit because you're overextended (not fine). Solution: <em>When shopping for additional credit, apply to a small number of lenders, and apply to them all at once.</em></p> <p>A good credit history and a good credit score can save you a huge amount of money on a mortgage and a modest amount of money on a car loan. But remember &mdash; you're just &quot;saving&quot; money compared to what it would cost to borrow if you had a crappy credit history. In actual fact, <em>borrowing costs you money</em>, no matter how good your credit history is. The real way to save money is not to borrow in the first place. That's not to say that credit can't be a <a href="">reasonable choice</a> at certain times &mdash; it's just never the cheapest choice.</p> <a href="" class="sharethis-link" title="Building a Credit History" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Philip Brewer</a> and published on <a href="">Wise Bread</a>. Read more <a href="">Debt Management articles from Wise Bread</a>.</div></div> Credit Cards Debt Management credit history credit score fico Tue, 24 May 2011 10:00:16 +0000 Philip Brewer 549641 at 25,000 Reasons to Pamper Your Credit <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/25000-reasons-to-pamper-your-credit" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="improve credit score" title="improve credit score" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p>Would you take good care of your credit score if you knew someday it could save you $25,000? What if you wouldn't see the savings immediately, if you had to wait a year or two? How about if you had to wait 10 years &mdash; could you keep your credit score healthy if you knew it would pay off big time?</p> <h2>A Tale of Good Credit</h2> <p>I'm sure you've heard many cautionary tales of families that ruined their credit and couldn't get a loan when they needed it most. How would you like to hear something a little different? Rather than keeping you up at night worrying about all the bad things that can happen financially when you have bad credit, what if I could tell you a story that might get you excited about the opportunities that come from good credit?</p> <h2>Too Good to Be True</h2> <p>Just a few months ago, we were a family whose credit score didn't really make much difference in our daily lives. It had been 10 years since we'd bought a house and eight years since we borrowed money for a car. We hadn't really needed our credit score for its primary purpose &mdash; to help us get a loan.</p> <p>Then suddenly, in two short weeks, our credit score went from relative obscurity to one of the most important numbers in our life. For a variety of reasons, we were looking to buy a house but we couldn't afford all the criteria we were looking for in a new home.</p> <p>That all changed one Friday afternoon when our realtor called me with some good news and some bad news. We had made an unbelievably low offer on a short sale, for $25,000 less than their already discounted asking price. Good news was that the bank had accepted our offer, but the bad news was we had to close on the new house <em>by the following Friday.</em></p> <h2>Credit Score to the Rescue</h2> <p>If you've ever applied for a home loan, you know that you can't just go out and borrow hundreds of thousands of dollars in one week's time. The only thing that stood between us and an amazing deal on a house was the bank underwriting process.</p> <p>Thanks to some skillful maneuvering by our realtor to buy us a little more time and the fast-tracking of our loan by our bank, we ended up closing on the house five hours before the deadline. None of that would have been possible if it weren't for a good credit history and excellent credit score.</p> <h2>Pampering Your Credit</h2> <p>Your credit is one of those things that you can ignore for a long time but when the moment comes, you'll wish you hadn't. It's kind of like ignoring a major health condition: You can get by for a while and feel just fine but eventually it will come back to bite you big time.</p> <p>If we had ignored our credit for the last 10 years, there's no way we would have gotten the deal we just did. Not only that &mdash; your <a href="">credit score impacts your interest rate</a>, which can end up saving or costing you thousands of dollars over the life of a <a href="">home mortgage</a>.</p> <p>So, how do you pamper your credit?</p> <ul> <li>Make your payments on time.</li> <li>Keep your balances low.</li> <li>Don't close old accounts.</li> <li>Keep your credit utilization low (used credit vs. available credit).</li> </ul> <p>Taking care of your credit basically means showing future potential lenders that you don't borrow more than you can afford and that you regularly pay back what you owe. Stick to those principles and you might have a chance to save a lot of money in the future. It could be less than $25K, or maybe more. The thing is, you'll never know unless you <a href="">pamper your credit score</a>!</p> <a href="" class="sharethis-link" title="25,000 Reasons to Pamper Your Credit" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Ben Edwards</a> and published on <a href="">Wise Bread</a>. Read more <a href="">Real Estate and Housing articles from Wise Bread</a>.</div></div> Real Estate and Housing credit score home mortgage Wed, 06 Oct 2010 12:00:15 +0000 Ben Edwards 254705 at