credit score http://www.wisebread.com/taxonomy/term/8451/all en-US Save $70,000 (or More!) With 4 Simple Credit Score Boosts http://www.wisebread.com/save-70000-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="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/piggy-bank-164113230.jpg" 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="http://www.wisebread.com/the-process-for-purchasing-a-house-with-cash?ref=seealso">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="http://www.myfico.com/myfico/creditcentral/loanrates.aspx">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="http://www.wisebread.com/choosing-the-right-mortgage-loan-15-or-30-years?ref=seealso">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="http://www.wisebread.com/how-to-rebuild-your-credit-in-8-simple-steps?ref=seealso">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="http://myfico.7eer.net/c/27771/87522/2185">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="http://www.wisebread.com/how-to-get-rid-of-and-avoid-late-fees?ref=seealso">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="http://www.wisebread.com/10-surprising-ways-to-negatively-affect-your-credit-score?ref=seealso">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="http://www.wisebread.com/12-habits-of-highly-responsible-credit-card-users?ref=seealso">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="http://www.jdoqocy.com/click-2822544-10809829?sid=1112797">Credit Karma</a> or<a href="http://track.linkoffers.net/a.aspx?foid=3616879&amp;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="http://www.wisebread.com/save-70000-or-more-with-4-simple-credit-score-boosts" 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="http://www.wisebread.com/darren-wu">Darren Wu</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/taxonomy/term/"> 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 http://www.wisebread.com Ask the Readers $200 Giveaway: Would You Ding Your Credit to Get Out of Debt? http://www.wisebread.com/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="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/thinking-5267721-small.jpg" alt="woman thinking" title="woman thinking" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p><em>Congratulations to <a href="http://www.wisebread.com/ask-the-readers-200-giveaway-would-you-ding-your-credit-to-get-out-of-debt#comment-715719">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="http://www.nationaldebtrelief.com/">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="http://www.rafflecopter.com/rafl/display/79857d61/" id="rc-79857d61" rel="nofollow">a Rafflecopter giveaway</a> <script src="//d12vno17mo87cx.cloudfront.net/embed/rafl/cptr.js"></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="http://debt-consolidation-services-review.toptenreviews.com">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="http://www.wisebread.com/ask-the-readers-200-giveaway-would-you-ding-your-credit-to-get-out-of-debt" 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="http://www.wisebread.com/ashley-jacobs">Ashley Jacobs</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/taxonomy/term/"> 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 http://www.wisebread.com 12 Habits of Highly Responsible Credit Card Users http://www.wisebread.com/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="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/couple-online-shopping-iStock_000007441474Small.jpg" 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="http://www.wisebread.com/keep-your-credit-card-safe-while-shopping-online">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 href="http://www.wisebread.com/ultimate-credit-card-perks-checklist-benefits-you-don-t-know-about" title="Ultimate Credit Card Perks Checklist">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="http://www.wisebread.com/5-best-credit-cards-for-new-parents">card that&rsquo;s good for new parents</a>. If you drive a lot, get a card that offers <a href="http://www.wisebread.com/5-best-gas-rewards-credit-cards">5% back on gas</a>. Travel much? Choose a <a href="http://www.wisebread.com/top-5-travel-reward-credit-cards">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 American Express 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="http://www.wisebread.com/12-habits-of-highly-responsible-credit-card-users" 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="http://www.wisebread.com/elizabeth-lang">Elizabeth Lang</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/taxonomy/term/"> articles from Wise Bread</a>.</div></div> Credit Cards credit score habits Wed, 26 Dec 2012 11:24:30 +0000 Elizabeth Lang 955536 at http://www.wisebread.com FICO vs. Fakes: Are You Getting the Wrong Credit Score? http://www.wisebread.com/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="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/woman-looking-at-paperwork-iStock_000017685048Small.jpg" 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="http://www.wisebread.com/10-surprising-ways-to-negatively-affect-your-credit-score">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="http://www.wisebread.com/quiz-am-i-really-ready-to-buy-a-home">buying a home</a> or <a href="http://www.wisebread.com/guide-to-buying-a-used-car-without-going-crazy">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="http://myfico.com/">myFICO.com</a>, but you can also purchase your FICO score from two of the three major credit bureaus.</p> <p><a href="http://www.wisebread.com/redir/9553233" target="_blank">TransUnion</a> and <a rel="nofollow" target="_blank" href="http://www.wisebread.com/redir/9553232">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="http://quizzle.com/">Quizzle</a>, <a rel="nofollow" target="_blank" href="https://www.creditkarma.com/partner?id=Wisebread">CreditKarma</a>, and <a rel="nofollow" target="_blank" href="http://www.wisebread.com/redir/9553231">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>It is possible to sign up for a <a rel="nofollow" target="_blank" href="http://www.myfico.com/">free trial at MyFICO</a> in order to see your credit score for free. However, you have to remember to cancel before the end of the 10-day trial period in order to avoid being charged $14.95 per month (a three-month minimum applies).</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="http://www.wisebread.com/the-different-types-of-loans-a-primer">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="http://www.wisebread.com/fico-vs-fakes-are-you-getting-the-wrong-credit-score" 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="http://www.wisebread.com/miranda-marquit">Miranda Marquit</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/taxonomy/term/"> 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 http://www.wisebread.com How to Rebuild Your Credit in 8 Simple Steps http://www.wisebread.com/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="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/young_couple_rebuilding_credit_iStock_000017548382Small.jpg" 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="http://www.wisebread.com/debt/credit-scores">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="https://www.annualcreditreport.com/">AnnualCreditReport.com</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="http://www.equifax.com/home/en_us">Equifax</a></li> <li><a href="http://www.experian.com/">Experian</a></li> <li><a href="http://www.transunion.com/">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="http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre13.shtm">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="http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre19.shtm">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="http://www.wisebread.com/topic/personal-finance/credit-cards?ref=inarticle">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="http://www.wisebread.com/how-to-avoid-getting-your-credit-card-canceled">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="http://www.wisebread.com/the-5-best-secured-credit-cards?ref=inarticle">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="http://www.wisebread.com/how-to-rebuild-your-credit-in-8-simple-steps" 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="http://www.wisebread.com/miranda-marquit">Miranda Marquit</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/taxonomy/term/"> 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 http://www.wisebread.com Surprising Things That Can Kill Your Credit http://www.wisebread.com/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="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/surprised_eyes.jpg" 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="http://www.wisebread.com/6-credit-card-services-you-don-t-usually-need">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="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">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="http://www.wisebread.com/how-much-does-your-credit-card-debt-cost-you">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="http://www.wisebread.com/surprising-things-that-can-kill-your-credit" 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="http://www.wisebread.com/kate-luther">Kate Luther</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/taxonomy/term/"> 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 http://www.wisebread.com Ask the Readers: Do You Know Your Credit Score? http://www.wisebread.com/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="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/bigstock_Woman_In_Her_Kitchen_Using_Her_1899647-1.jpg" 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="http://www.wisebread.com/ask-the-readers-do-you-know-your-credit-score#comment-510752"><em>Sarah</em></a><em>, </em><a href="http://www.wisebread.com/ask-the-readers-do-you-know-your-credit-score#comment-510733"><em>Elizabeth S.</em></a><em>, and </em><a href="http://www.wisebread.com/ask-the-readers-do-you-know-your-credit-score#comment-510625"><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="http://www.facebook.com/pages/Wise-Bread/26830741467?ref=ts">Facebook page</a>, &quot;Like&quot; us, and leave a comment telling us you did, or</li> <li><a href="http://www.twitter.com/">Tweet</a> your answer. You have to be a follower of our <a href="http://twitter.com/wisebread">@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="http://www.wisebread.com/ask-the-readers-do-you-know-your-credit-score" 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="http://www.wisebread.com/ashley-jacobs">Ashley Jacobs</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/taxonomy/term/"> 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 http://www.wisebread.com Building a Credit History http://www.wisebread.com/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="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/credit-cards-large.jpg" 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="http://www.wisebread.com/how-debt-fools-people">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="http://www.wisebread.com/manage-your-fixed-expenses">get the payments made</a>. They care about your demonstrated <em>willingness</em> to make the <a href="http://www.wisebread.com/emergency-belt-tightening">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="http://www.wisebread.com/good-debt-bad-debt">reasonable choice</a> at certain times &mdash; it's just never the cheapest choice.</p> <a href="http://www.wisebread.com/building-a-credit-history" 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="http://www.wisebread.com/philip-brewer">Philip Brewer</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/topic/personal-finance/debt-management">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 http://www.wisebread.com 25,000 Reasons to Pamper Your Credit http://www.wisebread.com/25000-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="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/2720239113_fc3a4f09bc.jpg" 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="http://moneysmartlife.com/credit-score-interest-rates/">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="http://moneysmartlife.com/home-mortgage-rates/">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="http://www.wisebread.com/how-to-improve-your-credit-score">pamper your credit score</a>!</p> <a href="http://www.wisebread.com/25000-reasons-to-pamper-your-credit" 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="http://www.wisebread.com/ben-edwards">Ben Edwards</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/topic/personal-finance/real-estate-and-housing">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 http://www.wisebread.com How a Solid Credit Score Saves You Money http://www.wisebread.com/how-a-solid-credit-score-saves-you-money <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-a-solid-credit-score-saves-you-money" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/iStock_000009122819XSmall_0.jpg" alt="credit history" title="credit history" class="imagecache imagecache-250w" width="250" height="166" /></a> </div> </div> </div> <p>There was a time when I had no real interest in my FICO score. I always thought it was just another number and wasn't sure just how relevant it was to my day to day living. But I was wrong.</p> <p>My FICO credit score has a direct bearing on what kind of interest I can expect to pay on a loan, a mortgage or any other similar product. In fact it also helps lenders decide whether they should even consider me for a loan in the first place. I've also learned how much of an influence your <a href="http://www.wisebread.com/debt/credit-scores">credit score</a> actually has on your chances for landing a job or getting into a new apartment. Many employers and landlords review your credit history carefully before deciding to enter into a working relationship with you.</p> <h3>The Importance of Keeping an Eye on Your Credit</h3> <p>A FICO score is comprised of a few elements, each one is formulated as a percentage of the overall score: these include your payment history, amounts owed, length of credit history, new credit and types of credit used.&nbsp; From what I've studied, my ability to make payments on time or to pay off my debt promptly accounts for a massive 35% of my overall score. That&rsquo;s over a third of my score that can be attributed to my own actions.</p> <p>Here's where it's important to keep watch over your credit rating, whether you do it on your own by ordering your credit reports via <a href="https://www.annualcreditreport.com/cra/index.jsp">AnnualCreditReport.com</a>, or through the use of a paid <a href="http://thesmarterwallet.com/2009/credit-monitoring-services-check-your-credit-report/">credit monitoring service</a>. If upon review, you discover that your credit may have taken a hit, you should remedy the situation by first finding out whether you've been on time with your bill payments. Start by working on those things you can control and do what you can to resolve any delinquencies in your financial records. You should realize that avoiding late or missed payments has a significant impact on your credit rating, and ultimately, on your overall financial health. Again, this has a whopping effect on your total FICO score.</p> <h3>The Costs of Poor Credit</h3> <p>There have been times in the past when my FICO score wasn&rsquo;t quite as good as it is now. And I now realize that I probably paid more for things back then than I might have done if I had taken better care of my credit.</p> <p>While your credit score can affect lots of things in life, it has the biggest effect on the costs you incur as a borrower. For example if I'm looking to <a href="http://www.thedigeratilife.com/blog/get-approved-prime-credit-card/">get approved for a prime credit card</a> and I had a low FICO score, I wouldn't qualify to receive the more attractive terms on this card, and will likely be denied the card altogether. This is the unfortunate consequence of having poor credit, and there are strong reasons why this is the case: the lower your score, the bigger a credit risk you are deemed to be, and therefore, the higher the <a href="http://www.thedigeratilife.com/blog/personal-loan-interest-rates-lending-club/">personal loan interest rates</a> that you are charged.</p> <p>So when it comes to big things like a mortgage or a car loan, you can pay a lot more over time if your credit score is at the low end of the scale. I am now someone who remains vigilant about my credit; when I pay my mortgage each month, I revel in the knowledge that I'm saving hundreds of dollars per month, thanks to excellent loan terms that I've been able to secure successfully.</p> <h3>Get Educated About Credit</h3> <p>While FICO information is readily available out there, not everyone understands it too well. But it's something you should be willing to learn about and to give a bit more priority to. After all, it's not something they readily teach us in school, so a lot of folks have to read up on this on their own, or have a lender teach them the ropes. The irony here is that this kind of information is hardly exciting, but the savings it brings can actually pay you a lot of dividends over time, which <em>should</em> be pretty exciting. This is actually one aspect of finance that can make a huge difference on your financial bottom line, if you remain on top of things.</p> <p>If you find yourself resisting this little bit of financial education, then think of it this way: If you can only invest some time now educating yourself about your own FICO score, finding out what it is and figuring out what you can do to improve it, you can look forward to getting the best deals you can make as a consumer. You can look forward to saving a tremendous amount of money over time.</p> <a href="http://www.wisebread.com/how-a-solid-credit-score-saves-you-money" class="sharethis-link" title="How a Solid Credit Score Saves You Money" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="http://www.wisebread.com/silicon-valley-blogger">Silicon Valley Blogger</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/topic/personal-finance/debt-management">Debt Management articles from Wise Bread</a>.</div></div> Credit Cards Debt Management credit credit score debt fico Wed, 02 Jun 2010 12:00:05 +0000 Silicon Valley Blogger 110653 at http://www.wisebread.com How to Avoid Getting Your Credit Card Canceled http://www.wisebread.com/how-to-avoid-getting-your-credit-card-canceled <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-avoid-getting-your-credit-card-canceled" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/6847230925_5934663426_z.jpg" alt="canceled credit cards" title="canceled credit cards" class="imagecache imagecache-250w" width="250" height="166" /></a> </div> </div> </div> <p>Some people like to have their credit card available for emergencies &mdash; either at home or while traveling abroad. Be careful: that card might not be available to you, just when you need it the most. This article explores the various reasons why your credit card could be canceled on you, along with some tips to help avoid having your own credit card canceled &mdash; possibly without notice.</p> <p><strong>I speak from experience: while traveling in Australia, I found out &mdash; the hard way, in the throes of an emergency &mdash; that my credit card had been canceled without notice, months prior.</strong></p> <p>I&rsquo;m still here to tell the story though, so my emergency was not life-threatening. But I can&rsquo;t possibly express the various shades of red I saw when I found out what had happened, and spent countless hours and days on overseas phone calls trying &mdash; unsuccessfully &mdash; to reinstate the card and rectify the situation.</p> <h2>True Horror Stories</h2> <p>A woman is vacationing in <st1:place>Europe</st1:place> when she discovers that her <a href="http://www.wisebread.com/credit-card-rewards-programs" title="Credit Card Rewards Programs">reward miles credit card</a> is on the fritz. She is stranded and spends hundreds of dollars in cell phone calls to the credit card company and the banks, trying to get out of this bind. There is no retribution granted from the credit card company who had canceled her card outright. To make matters worse, she loses out on the free companion ticket she had just earned with her rewards.</p> <p>How about the person who finds that the gas pump won&rsquo;t take their card? Nothing is amiss: they are in their home town, use their card regularly and responsibly, and maintain an excellent credit score too. But their credit card is also canceled, without notice. The reason cited? &ldquo;Something&rdquo; on their credit report was amiss. However with a spotless credit record, the real suspected reason is that their account wasn&rsquo;t profitable enough for the credit card company to keep them on board.</p> <h2>What Gives? Reasons Credit Card Companies Will Cancel Cards</h2> <p>With the ability to change the terms and conditions at any time, credit card companies can cut loose card holders who aren&rsquo;t making them money, especially the ones who pose additional risk or are a financial drain to the company. And when times get tough financially, credit card companies tighten their belts along with everybody else. Here are some specific reasons why the credit card company could cancel your credit card.</p> <h3>Non-Use</h3> <p>This is the most prevalent of reasons why your card will be canceled, and also the most avoidable. <strong>Charge something to the card every few months (even something very small), pay it off right away, and you can largely avoid this pitfall.</strong></p> <p>Don&rsquo;t settle for a phone call to the credit card company. I had a special note put in my file that I was abroad and would only use the card rarely, in an emergency. The customer service rep I spoke to said that would not be a problem. Two months later, the card was canceled. My suspicion was that my card got canceled by an automated system and not a human being, so the preemptive phone calls and special notes in the file were worthless.</p> <h3>Your Credit Score Dropped</h3> <p>If your credit score has taken a hit, your credit card account could be flagged. (See also: <a href="http://www.wisebread.com/how-to-rebuild-your-credit-in-8-simple-steps" title="How to Rebuild Your Credit in 8 Simple Steps">How to Rebuild Your Credit in 8 Simple Steps</a>)</p> <h3>Your Debt Increased</h3> <p>If you just took on a large amount of debt such that your credit utilization ratio is teetering, the credit card company can make sure you don&rsquo;t get in over your head &mdash; by canceling your card and eliminating the chance. (Ironically, this further increases your credit utilization ratio.)</p> <h3>Your Credit Increased</h3> <p>If you just applied for a line of credit or other credit vehicle that increases the overall credit available to you beyond a threshold that the credit company is comfortable with (regardless of whether you actually use that credit), they&rsquo;ll take themselves out of your equation.</p> <h3>Market Conditions</h3> <p>Anything from house values dropping, to unemployment rising can affect your ability to hang on to that credit card.</p> <h3>Anything Else</h3> <p>Credit card companies like to keep their game faces on, and won&rsquo;t always reveal the true reason why they are canceling your credit card. That&rsquo;s probably how our friend above had their card canceled due to &ldquo;something&rdquo; on the credit report, despite their spotless credit record. Ultimately, it boils down to their bottom line. Hey &mdash; that&rsquo;s business. <strong>Let's face it: owning a credit card is a privilege, not a right. </strong></p> <h2>Your Rights</h2> <p>Credit card companies are required to give you 45 days notice for making significant material changes to the terms &mdash; such as a change in interest rates.</p> <p>However,<strong> canceling cards isn&rsquo;t actually considered a significant material change</strong>, and cancellation without notice is still allowed.</p> <h2>How It Affects Your Credit Score</h2> <p>More than an inconvenience, the cancellation of your credit card can negatively impact your <a href="http://www.wisebread.com/5-things-you-need-to-know-about-credit-scores" title="5 Things You Need to Know About Credit Scores">credit score</a> in a few ways.</p> <h3>Increase in Credit Utilization Ratio</h3> <p>If your credit card is canceled and you are carrying debt elsewhere, then that debt becomes a larger percentage of the overall credit available to you, thus increasing your credit utilization ratio. This <a href="http://www.wisebread.com/10-surprising-ways-to-negatively-affect-your-credit-score" title="10 Surprising Ways to Negatively Affect Your Credit Score">decreases your credit score</a>.</p> <h3>Decrease in Credit Longevity</h3> <p>Longevity of your credit vehicles is important; 15% of your credit score<span style=""> </span>is attributed to longevity. If you have a credit card that is 10 years old and others that are only a few years old, the cancelation of your 10 year old card will have a more detrimental effect on your credit score than the cancelation of one of the newer ones.</p> <h2>How to Prevent Cancelation</h2> <p>Once your credit card is canceled, talking your way into having it re-activated requires a minor miracle. So knowing what we&rsquo;re up against, here are a few preventative measures you can take to increase the chances that you aren&rsquo;t stranded at the gas pump (or in a distant land), idle plastic in hand.</p> <h3>Use it or Lose it</h3> <p>Avoid cancelation due to inactivity by using the card every couple of months. The size of the purchase is irrelevant, and you can pay it off immediately too.</p> <h3>Pay Attention to Ratios</h3> <p>Maintaining a credit utilization ratio below 25% will keep your credit score high.</p> <h3>Focus on Longevity</h3> <p>If you have multiple credit cards, pay special attention to the ones you have had for a long time. Losing them will be the most detrimental to your credit score.</p> <p><em>Please note that you can do everything right and still end up a victim of credit card cancelation. But hopefully these preventative measures will keep you out of the spotlight and off the top of their cancelation list.</em></p> <h2>What to Do if Your Credit Card Is Canceled</h2> <p>If the deed has already been done and you&rsquo;re looking for retribution, here are a few things you can do.</p> <h3>Check Your Credit Report</h3> <p>Order a copy of your credit report from one of the big three credit bureaus (<a href="http://www.equifax.com/home/en_us">Equifax</a>, <a href="http://www.transunion.com/">TransUnion</a>, and <a href="http://www.experian.com/">Experian</a>). You are entitled to <a href="https://www.annualcreditreport.com/cra/index.jsp">one free report</a> from <em>each</em> of the bureaus every year. You can also use a free service like <a href="http://www.wisebread.com/get-free-credit-score-monitoring-with-credit-karma" title="Get Free Credit Score Monitoring With Credit Karma">Credit Karma</a>. Make sure there aren&rsquo;t any incorrect postings in there that have affected your credit score through no fault of your own.</p> <h3>Call Them</h3> <p>Nothing is lost (save for some time and possibly a chunk of your patience) by trying to call the credit card company. Who knows &mdash; they might take a look at your account and decide you&rsquo;re worth keeping after all. <a href="http://www.wisebread.com/lower-your-credit-card-interest-rate-and-reduce-your-phone-bill-immediately-and-easily" title="Lower Your Credit Card Interest Immediately">You never know what you can get unless you ask</a>. <i>(A word of advice: be polite and friendly, and ask for the manager if you aren&rsquo;t getting anywhere)</i>.</p> <p>I&rsquo;ve typically used one <a href="http://www.wisebread.com/top-seven-reasons-why-i-use-my-credit-card-for-everything" title="Why I Use My Credit Card for Everything">credit card for all my expenses</a>, keeping a second card in reserve for emergencies or when my regular card isn&rsquo;t accepted. (When <a href="http://www.theprofessionalhobo.com">living abroad</a>, credit cards aren&rsquo;t infallible to dodgy local systems or tricky time zone glitches.)</p> <p>But just because I&rsquo;ve fallen victim to having a card canceled without notice (leaving me in the lurch no less), I&rsquo;m not going to eschew the conveniences and benefits of credit cards that I&rsquo;ve become accustomed to. To do so would be to shoot my own foot based on principle and anger, and I&rsquo;m not into self-mutilation. Instead, I&rsquo;ll make sure to use my backup card regularly and continue to pay the balance off each month. I&rsquo;ll pay closer attention to the <a href="http://www.wisebread.com/credit-card-fees-hidden-and-otherwise">rules and fees</a>, and be sure to stay on the same game page as the credit card companies from now on.</p> <p>For more articles about credit cards, please see our <a href="http://www.wisebread.com/credit-card-guide">Ultimate Credit Card Guide</a>.</p> <p><em>Have any of you experienced a canceled card without notice? Were you able to get it reinstated?</em></p> <a href="http://www.wisebread.com/how-to-avoid-getting-your-credit-card-canceled" class="sharethis-link" title="How to Avoid Getting Your Credit Card Canceled" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="http://www.wisebread.com/nora-dunn">Nora Dunn</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/taxonomy/term/"> articles from Wise Bread</a>.</div></div> Credit Cards credit card cancellation credit rating credit score Mon, 01 Feb 2010 17:00:01 +0000 Nora Dunn 4976 at http://www.wisebread.com How to Prepare for a Home Purchase in 2010 http://www.wisebread.com/how-to-prepare-for-a-home-purchase-in-2010 <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-prepare-for-a-home-purchase-in-2010" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/stockxpertcom_id22164291_jpg_7ef51b18081bb31d587372195b7e71ef.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="177" /></a> </div> </div> </div> <p>With all the talk and controversy in the last year about the housing market and mortgage industry, it&rsquo;s a wonder people are not petrified of buying a home in the new year. While things seem to be leveling off a bit, there have been some major changes made and getting low-interest financing is going to be tougher than ever before. Anyone looking to buy a home this year needs to do their homework and be really prepared before even considering a home-buying venture. Here are a few tips to make your home purchase a success from start to finish.</p> <h3>Be clear on your credit</h3> <p>Mortgage requirements are much stricter and lenders want to see proof of your credit worthiness. A credit score of 720 used to be the magic number to enable low-interest loans, but most lenders expect 740 or higher now in order to offer the best rates and fees to borrowers. Request a copy of your report and score as soon as possible. If your score doesn&rsquo;t live up to those standards, get to work immediately at <a href="http://www.wisebread.com/debt/credit-scores">improving your credit score</a> before approaching any mortgage lender.</p> <h3>Understand the numbers</h3> <p>Many people do not consider how much house they can afford. Instead, they base everything on loan interest rate and amenities. Savvy consumers will focus on the true amount owning a home will cost them. Experts recommend following the guidelines of the Federal Housing Association, who suggest that house payments (including taxes, principal, interest, insurance, and any homeowner dues) should not exceed 31% of gross monthly income. They also recommend that a consumer&rsquo;s total debt payment should not exceed 43% of gross monthly income. Do the math. Be sure you will not go drowning in debt with a home purchase.</p> <h3>Save for a down payment</h3> <p>If you are ready to buy, you should have enough cash to cover at least 10% of the down payment as per most lenders requirements. If you haven&rsquo;t saved enough, look into a FHA-insured mortgage where you need 3.5% of the down payment amount. If you have no down payment money, you can investigate VA loans from the Department of Veteran Affairs.</p> <h3>Grab a loan early</h3> <p>There are plans for the Federal Reserve to quit buying mortgage-backed securities by the end of March so experts believe rates will go up when the support is gone.</p> <h3>Inquire about loan options</h3> <p>While fixed-rate mortgages are typically the safest way to get a loan, ask about the other options. For instance, an adjustable-rate loan may be ideal if you only plan to stay in the home for 5 years. Check out not only the interest rates but also the available discount points and other loan scenarios.</p> <p>Again, know that the housing and mortgage industries have changed a lot in a short period of time and what used to be &lsquo;good enough&rsquo; is what started this fiasco in the first place. If you are serious about home ownership, get started on the research, the math, and the savings, and the credit improvement as soon as you have an inkling you are ready to buy. The more prepared you are, the better deal you will get, and the lesser the financial burden in the long run.</p> <p><em>Are you in the market? What problems have you encountered?</em></p> <a href="http://www.wisebread.com/how-to-prepare-for-a-home-purchase-in-2010" class="sharethis-link" title="How to Prepare for a Home Purchase in 2010" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="http://www.wisebread.com/tisha-tolar">Tisha Tolar</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/taxonomy/term/"> articles from Wise Bread</a>.</div></div> Real Estate and Housing credit score financing home buying loans mortgages real estate Sat, 16 Jan 2010 16:00:09 +0000 Tisha Tolar 4567 at http://www.wisebread.com How to Botch Up, Then Peddle Back to Good Credit http://www.wisebread.com/how-to-botch-up-then-peddle-back-to-good-credit <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-botch-up-then-peddle-back-to-good-credit" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/iStock_000003775560XSmall.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="175" /></a> </div> </div> </div> <p>As a young adult, I thought I had a firm grasp on being financially responsible. At the tender age of 18, I moved out of my parent's house to live on my own. I couldn't wait to become an adult with adult responsibilities. I had the basic understanding that I had to pay my bills on time, and I made sure that I was always employed. But I never really understood my&nbsp;<a href="http://www.wisebread.com/debt/credit-scores" title="Wise Bread's Guide to Credit Scores">credit score</a>, or how the credit agencies calculated that elusive number, or even why it was important to build a good score. This misunderstanding led me to make some irresponsible decisions that took many years to correct. To be quite honest, those mistakes of yesteryear are only now beginning to fall off my credit report.</p> <p>One of the most glaring things missing today from high school or college education is educating young adults on how to build good credit and <em>why</em> it is important. Had I been able to take a class on using and successfully managing credit, I might not have made so many mistakes.</p> <p>So, I've decided to outline my steps showing how I completely wrecked my credit, then how I worked twice as hard to get it back. Hopefully this will be an insightful lesson on what not to do!</p> <h2>How to Botch Up a Credit Score</h2> <p>I can truly say that I was under the influence when I made many of my poor credit decisions. Of course, that influence was young love. The chemical dopamine does funny things to your brain! Here is just a short list of ridiculous things I did that negatively affected my credit.</p> <h3>I decided to quit my job and start a hot dog vending cart without a savings account to fall back on.</h3> <p>Bad idea! As exhilarating as it was the first few weeks to be corporate-job free, I soon realized that I couldn't survive on hot dog sales alone.</p> <h3>I put all of my new found start-up business expenses on my credit card.</h3> <p>I quickly came to the conclusion that it takes many years to actually profit from a small business. Whoops!</p> <h3>While living off my credit cards unemployed, I didn't pay my car payment.</h3> <p>Guess what happened? You got it! One morning I noticed my car wasn't in its parking spot. Within seconds I knew what had happened: The repo man had slipped in quietly and took it back. Hoofing it for a few weeks is permanently etched in my brain!</p> <h3>I made a late payment to a very strict landlord.</h3> <p>Had I hired a tenant right's lawyer, I might have won the case. (I did actually <em>save</em> all of my rent payments until the court date.) However, against my better judgment, I went it alone and got evicted. This one really hurt, and the judgment took 7 years to fall off my credit report. Ouch!</p> <h3>Let a student loan go into default.</h3> <p>This is one that is easy to get back on track, thankfully. However, during the time my loan was in default, the feds kept my tax refund.</p> <h2>Peddling Back to Good Credit</h2> <p>I am now at a point where I can look back and chuckle a little at the disastrous foibles I made with my credit and finances. But how did I get my credit back on track? After a few years of making horrendous mistakes, I realized that a good credit score was important for future decisions. First off, many employers view how responsible you are based on your credit score. The higher the score, the more responsible you appear to them. Secondly, there comes a time when you may want to purchase a new car because you can now afford the payments. A good score means a much better finance rate. And finally, most people can't pay cash for a house. A high score will allow you to become eligible for a low interest rate home loan. Here is how I've been able to turn my finances and credit around.</p> <h3>I made a plan to get my credit card debt under control.</h3> <p>I worked on paying off the smaller balances, to keep me motivated, and then hacked away at the larger ones. I've paid off a total of $8,500. I'm not completely debt free yet, but this is a good start.</p> <h3>I draw up a monthly budget that is reasonable, and stick to it</h3> <p>I revise my budget every couple of months to see if there are places I can cut back and save.</p> <h3>When I receive a windfall, or money I wasn't counting on, I use it to pay down debt.</h3> <p>Even small amounts I receive as gifts count in my book.</p> <h3>I save money towards building an emergency fund, even if it is as little as $20 a month.</h3> <p>This comes in handy if the need arises to replace a tire or pay a parking or speeding ticket.</p> <h3>Reduce eating out.</h3> <p>Eat at home more, cook for friends, and take your own lunch to work. I have been able to cut back the most on this category alone.</p> <h3>Minimize shopping.</h3> <p>I don't purchase an item the first time I see it. I wait a day or so, then decide if I really need it. Out of sight, out of mind usually works.</p> <h3>Cut back on the frivolous things.</h3> <p>I cut back on Starbucks, movies, vacations, traveling, cable, and reduced my cell phone plan.</p> <p>Had someone sat me down years ago and explained why it is so important to be financially responsible, I'm quite sure I would have made some different decisions. However I can genuinely appreciate the saying, &quot;Hind sight is 20/20,&quot; much more today than I could have 15 years ago. But I guess that's the point.</p> <a href="http://www.wisebread.com/how-to-botch-up-then-peddle-back-to-good-credit" class="sharethis-link" title="How to Botch Up, Then Peddle Back to Good Credit" rel="nofollow">ShareThis</a><div class="field field-type-text field-field-guestpost-blurb"> <div class="field-label">Guest Post Blurb:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <p>This is a guest post by <a href="http://www.littlehouseinthevalley.com/">Little House</a>. Here are links to more articles by Little House:</p> <ul> <li><a href="http://www.littlehouseinthevalley.com/?p=401" rel="nofollow">Small Houses Rock<br /> </a></li> <li><a href="http://www.littlehouseinthevalley.com/?p=541" rel="nofollow">Hypermiling the House</a></li> <li><a href="http://www.littlehouseinthevalley.com/?p=296" rel="nofollow">Little House Plans I Adore</a></li> </ul> </div> </div> </div> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="http://www.wisebread.com/little-house">Little House</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/taxonomy/term/"> articles from Wise Bread</a>.</div></div> Personal Finance Debt Management credit score Wed, 23 Dec 2009 14:00:04 +0000 Little House 4201 at http://www.wisebread.com Can Your Spending Patterns Affect Your Credit? http://www.wisebread.com/can-your-spending-patterns-affect-your-credit <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/can-your-spending-patterns-affect-your-credit" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/stockxpertcom_id18999571_jpg_0e6a88de0f1fcaa30e2cfbf30b1b0380.jpg" alt="shopping with credit card" title="shopping with credit card" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>I am one who prefers to use <a href="http://www.wisebread.com/credit-card-guide" title="Ultimate Credit Card Guide">credit cards</a> over cash for the convenience and ease of use of dealing with the plastic. Since I always pay my monthly bills in full, using credit cards has never been an issue for me. In fact, I'm always on the lookout for good <a href="http://www.wisebread.com/credit-card-rewards-programs">credit card rewards programs</a> and I readily take advantage of those <a href="http://www.thedigeratilife.com/blog/0-interest-credit-cards-12-months-balance-transfer/">0% interest credit cards</a> that allow me to take out free loans for a limited period of time. No worries since I always pay off my balances in full before the intro periods are up.</p> <p>But regardless of how fiscally cautious and responsible you are as a credit card holder, you may still be curious to know just how much credit card companies know about you through your card use. The truth is, our card spending patterns provide information that is monitored by issuers; and this data has been used to affect our credit ratings.</p> <p><a href="http://www.creditcards.com/credit-card-news/credit-card-purchase-privacy-1282.php">This article</a> from CreditCards.com is quite telling: credit card companies are interested in where we shop, how much we earn (which they may try to verify based on activity in our accounts), where we live, how much we normally spend per year and even what nationality we are. So it's not just how you pay your bills that goes on record, but also how and where you use your money. These companies keep their eye on how you shop, and use this data to determine your financial health. Certainly, they are mining a lot of our personal information for a variety of purposes. Here are a few of those reasons.</p> <h3>To know which products to market to you</h3> <p>I've been receiving a lot more telemarketing calls from my credit issuers lately and it's no doubt linked to what they know about me as a customer. This is nothing new though, as many retailers use the information they get about you to pitch more products your way. If you use sales and store catalogs, then you know what I mean!</p> <h3>To monitor your account for possible fraud</h3> <p>I've been contacted more than once for possible suspicious activity in my credit card accounts. This kind of free monitoring is something I appreciate from the credit card companies. At least they're putting their information gathering to good use this way.</p> <h3>To manage risk</h3> <p>Here's where a lot of consumers may feel a bit uncomfortable about the extent of tracking that their credit card companies are doing. The truth is, these companies watch your <a href="http://www.thedigeratilife.com/blog/index.php/2009/07/28/credit-scoring-fico-score-vs-vantage-score/">FICO score</a> and credit report like a hawk to gauge your credit-worthiness. Even financial accounts you have at different institutions may be subject to scrutiny by credit companies and agencies such that any financial transactions you make may influence your credit rating. You may be paying your card bills on time but if you're late on your mortgage payment, watch out! That just may be grounds for your card rates to go up or for your credit limit to get cut. It's therefore important to <a href="http://thesmarterwallet.com/2009/check-credit-score-credit-reporting-agencies/">check your credit score</a> on a regular basis to keep abreast of what it is that is visible to lenders and credit watchers. You'll want to ensure that these reports are accurate.</p> <h3>To monitor information that may be used for law enforcement.</h3> <p>If need be, financial data may be used for legal situations and cases. Our financial records may be utilized and entered as potential evidence in disputes, reviews or investigations of any sort.</p> <p>That said, I'm not at all surprised that our financial behaviors are easily monitored by those we go into business with. When you enter into a relationship with a financial institution such as a credit card company, bank or mortgage lender, you should assume that your data is being tracked to form your profile as a debtor or consumer. It's the tradeoff we make to become borrowers or customers of companies that offer us the privilege of being part of a financial system that helps us thrive and prosper in the material sense.</p> <h3>Can You Avoid Being Monitored?</h3> <p>While it may be concerning that banks and credit card companies are aware of just how and where you spend your bucks, the good thing is that there have been steps taken by the government to pursue reform and <a href="http://www.askmrcreditcard.com/creditcardblog/a-different-view-on-credit-card-regulation/">regulate the card industry</a> further. The Credit CARD Act has been put together to address the &quot;abuses&quot; that have been rampant in the industry for some time now. By early next year, the full effect of this legislation will be in place and may hopefully make a dent on some of the undesirable practices that card companies have been imposing upon their customers, including unpredictable rate increases, unfair changes in credit limits, and unfavorable adjustments to terms and conditions.</p> <p>While the government is pushing for change in this area, there are things that consumers can do to protect themselves from this kind of scrutiny, if they so choose. It's always our prerogative to limit the use of credit cards when participating in financial transactions. <strong>It's simple: if you use cash, there won't be any data to track.</strong> As it stands, this could be one more reason for <a href="http://www.wisebread.com/top-6-reasons-why-using-cash-only-rocks">why using cash-only rocks</a>.</p> <p>So are you at all surprised by how much your spending behavior can affect how your lenders and card companies are viewing you? The bottom line is that there are both good and bad implications for having &quot;big brother&quot; watch how you shop. Well nothing's for free. In this case, we give away some of our privacy for the convenience of using the plastic.</p> <p>&nbsp;</p> <a href="http://www.wisebread.com/can-your-spending-patterns-affect-your-credit" class="sharethis-link" title="Can Your Spending Patterns Affect Your Credit?" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="http://www.wisebread.com/silicon-valley-blogger">Silicon Valley Blogger</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/taxonomy/term/"> articles from Wise Bread</a>.</div></div> Consumer Affairs Credit Cards credit cards credit monitoring credit score shopping Tue, 01 Dec 2009 17:07:07 +0000 Silicon Valley Blogger 3902 at http://www.wisebread.com Credit Scores Across the Country: Which Third are You In? http://www.wisebread.com/credit-scores-across-the-country-which-third-are-you-in <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/credit-scores-across-the-country-which-third-are-you-in" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://www.wisebread.com/files/fruganomics/imagecache/250w/blog-images/creditkarmagif.gif" alt="" title="" class="imagecache imagecache-250w" width="250" height="269" /></a> </div> </div> </div> <p><a href="http://www.wisebread.com/redir/creditkarma">Credit Karma.com</a> recently released a report that concluded about a third of consumer's credit scores have increased (that's good) during a period of October 2008 until January 2009. Suprisingly, one third also took a dive, while the other third remained relatively unchanged. Where do you stand in this U.S. Statistic? And how can you increase your score for free?&nbsp;</p> <p style="margin-bottom: 0in;">Here are the details from the report, obtained from <a href="http://www.wisebread.com/redir/creditkarma">Credit Karma.com</a> (a pro-consumer credit score tracking and management service that has delivered more than 850,000 free credit scores and counts more than 250,000 registered users.) It just announced the launch of it's U.S. Credit Score Climate Report with trend data for January 2009. Here are some of the more interesting points of the report:&nbsp;&nbsp; </p> <ul> <li>&quot;During the October 2008 to January 2009 time period, 37% of consumer credit scores have gone up, 31% have gone down, and 32% remained the same.&nbsp; Of the scores that increased, the average credit score rose 13 points during the time period.&nbsp; Of the scores that decreased, the average credit score dropped 15 points.&nbsp; Here are some additional points revealed in the Report:</li> </ul> <p>&nbsp;</p> <ul> <li>Average credit score with no change is 693 whereas 673 and 662 are the respective credit score averages for those with an increase and decrease. This would suggest that people with higher credit scores maintain more stable credit scores while those with marginal credit scores tend to be in flux. </li> </ul> <p>&nbsp;</p> <ul> <li>Age is one key factor. Younger consumers, age 18-24, saw the biggest increase in their credit scores. This is caused by a few factors. First, younger people have a shorter credit history and therefore lower scores (Average score: 670). As a result, we see a higher percent of younger consumer&rsquo;s credit scores on the increase. Secondly, older consumers, age 65+, tend to have a longer and more stable credit history (Average score: 736)</li> </ul> <p>&nbsp;</p> <ul> <li> Location is another key factor. As states experience economic changes such as massive layoffs, foreclosure, bankruptcy or impacts of the economic stimulus initiatives, credit scores may be impacted. Currently, we don&rsquo;t see major differences between the states highlighted in this report.&rdquo;</li> </ul> <p>&nbsp;</p> <p>&nbsp;</p> <p>Want to know more about Credit Karma and how it works? We interview Ken Lin, CEO of <a href="http://www.wisebread.com/redir/creditkarma">CreditKarma.com</a> tonight on our <a href="http://www.blogtalkradio.com/stations/Elevenmomsradio/WiseBread/2009/02/26/What-is-Your-Credit-Karma">live Blog Talk Radio show</a>! Tune in at 8pm CST to hear how you can get your credit score for free, what actions might help to increase your score, and what you should be doing now to get a handle on future credit opportunities.</p> <p>&nbsp;</p> <p><i>Report data courtesy of <a href="http://www.wisebread.com/redir/creditkarma">CreditKarma.com</a></i></p> <a href="http://www.wisebread.com/credit-scores-across-the-country-which-third-are-you-in" class="sharethis-link" title="Credit Scores Across the Country: Which Third are You In?" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="http://www.wisebread.com/linsey-knerl">Linsey Knerl</a> and published on <a href="http://www.wisebread.com/">Wise Bread</a>. Read more <a href="http://www.wisebread.com/taxonomy/term/"> articles from Wise Bread</a>.</div></div> Personal Finance Consumer Affairs Credit Cards consumer credit credit score creditkarma.com fico Wed, 25 Feb 2009 21:07:59 +0000 Linsey Knerl 2872 at http://www.wisebread.com