Thanks in large part to technological innovations, the ability to access information, communicate, and enjoy multimedia has never been easier. But the advantages of the computer age can sometimes be outweighed by the downfalls of technology as well — particularly in the area of privacy. The meteoric rise in Internet traffic over the last ten years, for instance, has opened up a whole new galaxy of opportunities for identity thieves to steal other people’s private information. The influx in computer use — which has directly led to a vast increase in the number of reported identity theft cases in the United States — has put the issue on the front burner nationally.
Make no mistake about it; the perils of identity theft are high— from the headaches that come from fighting to restore your good name to tremendous financial woes. And unless you're prepared, you could become a victim of identity theft at any time. But, arguably, the biggest risk of identity theft is the detrimental effects that losing your identity will have on your credit history and credit score. As well as the costs from attempting to get your name back, you will lose a great deal of points on your credit score if you ever fall victim. Strictly from a credit standpoint, recovering from identify theft poses a difficult challenge. Think 12-year-old Little Leaguer stepping up to the plate to face Roger Clemens. For some people, it takes years to restore their credit in the aftermath of identity fraud.
Preventing identity theft could be the most important reason why you should frequently monitor your credit. Using a credit monitoring service, like the one provided by Privacy Matters, you can detect fraudulent activity in your name faster. As a member of a credit monitoring program, you will receive instant notifications of any change in your credit report. This will allow you to easily discover if someone is attempting to use your name to commit identity fraud. In fact, monitoring your credit is one of the best ways to protect your identity.
For more on the subject—from in-depth detail on how identity theft will negatively affect your credit score to new ideas on how to prevent identity fraud from ever happening to you — be sure to visit Neil O’Farrell’s blog. Mr. O’Farrell, your Identity Theft expert, consistently provides readers with excellent identity fraud analysis and insight. He also discusses the latest identity theft trends in his daily posts. And for even more ways to prevent identity theft, click here.
Think it doesn’t happen frequently? Well, think again! Today, an Oregon woman was arrested for allegedly stealing the identity of a woman in Rhode Island. It can happen to any person, in any location, at any time. Don’t be the next victim.
Other news from the world of credit reports and scores:
Heather Haddon of the Herald News in New Jersey says that “solid credit is the key to owning a home.” Personally, I couldn’t agree more. In her column, Ms. Haddon gives a personal account of a Patterson, NJ police officer, Ivan Hicks, who went through a painful ordeal shopping for a house. This is an interesting read and will resonate with anyone who has been in a similar situation.
Himanshu Joshi offers several tips for “recovering from bad credit” in a column that appeared in the American Chronicle on Sunday.
Paul Wenske of the Kansas-City Star has more information on the controversial report recently released by the Federal Trade Commission. The report, which I discussed in further detail in my previous post, found that “blacks and Hispanics consistently end up with lower scores and therefore pay higher insurance rates.” Soon after its release, several civil rights groups, who think that some insurance companies discriminate against low-income and minority consumers, publicly condemned the report. In this column, Mr. Wenske offers his opinion on the matter.
Monday, July 30, 2007
Wednesday, July 25, 2007
Credit History: A Pillar of Financial Success
Having excellent credit history has never been as important as it is today. In this generation more so than others, your credit score has effects, negative or positive, on several different important factors in your life — from determining whether you’re eligible to apply for your dream apartment to receiving decent rates on various types of insurance. Due to the continuous changes in the credit-driven society that we live in today, it’s impossible for me to overemphasize the importance of establishing a solid credit history and knowing your credit score at all times.
Now to test if you were reading the first paragraph carefully, at the very least skimming it, here is a credit-related trivia question for you (in less generic terms). Not to mention, this analogy also serves as a SAT prep question for your child — which reminds me, are you thinking about (or starting to save for) college yet? Can you say t-u-i-t-i-o-n?
Credit history is to financial security as:
a.) Middle relief pitcher is to baseball team
b.) Utility infielder is to baseball team
c.) All-Star starting pitcher is to baseball team
d.) Backup catcher is to baseball team
And the correct answer is … drum roll please… C (for credit; go figure).
Owning a good credit score is as vital to achieving financial security as Johan Santana — the 2006 American League Cy Young Award winner — is to the success of the Minnesota Twins in the 2007 season. And lucky for you, unlike general managers who have to trade (and spend exorbitant amounts of money) for a pitcher of Santana’s caliber, you can easily find information on how to establish, improve, and maintain an All-Star credit score by clicking here.
In news from the world of credit today, consumer and civil rights groups publicly condemned a congressionally-mandated report on insurance credit scoring that was recently released by the Federal Trade Commission.
Recent studies — from the Missouri and Texas Departments of Insurance — have discovered that certain types of insurance scoring “discriminate against low income and minority consumers because of the racial and economic disparities inherent in scoring.” The Missouri study even alleges that “a consumer’s race was the single most predictive factor determining a consumer’s insurance credit score.”
To hear what people are saying about the biggest controversy in credit today — the Michael Vick scandal of credit reports and scores — click here.
College Students (or those who wish that they were still in college, but in reality only pay for their children to attend): In her column today, Eileen Ambrose, a financial columnist for the Baltimore Sun, discusses why “it pays to shop for student loans.”
Per Ms. Ambrose:
“Americans love to shop. After all, we made The Price Is Right the longest-running TV game show.
But when it comes to shopping for student loans — a complex product with hundreds of lenders to choose from — we would rather have someone else do the legwork. Now, we've learned, that can be a problem.
Colleges for years have compiled lists of recommended lenders to help families navigate a maze of options. An investigation by the New York attorney general's office, though, uncovered chummy financial relationships between some financial-aid officers and lenders promoted on schools' lists. Suddenly, doubts popped up over whether such lists were compiled with students' best interests in mind.
The moral of this story: You have to do some of the work yourself if you want to make sure you're getting a good deal.”
She is right about a lot of things in the above few paragraphs, but two things stick out in particular. And yes, we all do love The Price is Right.
1.) Americans love to shop. This could be more of an understatement than saying “Howard Schultz, the king of Starbucks, had a strong business model in mind before he created a coffee empire.”
2.) Yet for some people, shopping for the right college loan is worse than going to the dentist. With more lenders to choose from than there are pizza shops in the greater New York City area, it's hard to know where to look.
But as the bold sentence in Ambrose's paragraph above proves beautifully, you NEED to conduct a thorough search into finding the right lender. If you like saving money (five words that don’t often appear in a sentence that discusses the cost of college) and honestly, who doesn’t, you need to do the work yourself. For the best tips on what steps to take, I recommend reading the entire article.
If you were looking for more SAT prep or a riveting trivia question at the end of the post, I'm sorry to disappoint you. I guess you’ll have to check back frequently. And to have all of the latest information on credit reports and scores sent directly to you, subscribe to our reader — the perfect RSS feed for your iGoogle homepage.
Now to test if you were reading the first paragraph carefully, at the very least skimming it, here is a credit-related trivia question for you (in less generic terms). Not to mention, this analogy also serves as a SAT prep question for your child — which reminds me, are you thinking about (or starting to save for) college yet? Can you say t-u-i-t-i-o-n?
Credit history is to financial security as:
a.) Middle relief pitcher is to baseball team
b.) Utility infielder is to baseball team
c.) All-Star starting pitcher is to baseball team
d.) Backup catcher is to baseball team
And the correct answer is … drum roll please… C (for credit; go figure).
Owning a good credit score is as vital to achieving financial security as Johan Santana — the 2006 American League Cy Young Award winner — is to the success of the Minnesota Twins in the 2007 season. And lucky for you, unlike general managers who have to trade (and spend exorbitant amounts of money) for a pitcher of Santana’s caliber, you can easily find information on how to establish, improve, and maintain an All-Star credit score by clicking here.
In news from the world of credit today, consumer and civil rights groups publicly condemned a congressionally-mandated report on insurance credit scoring that was recently released by the Federal Trade Commission.
Recent studies — from the Missouri and Texas Departments of Insurance — have discovered that certain types of insurance scoring “discriminate against low income and minority consumers because of the racial and economic disparities inherent in scoring.” The Missouri study even alleges that “a consumer’s race was the single most predictive factor determining a consumer’s insurance credit score.”
To hear what people are saying about the biggest controversy in credit today — the Michael Vick scandal of credit reports and scores — click here.
College Students (or those who wish that they were still in college, but in reality only pay for their children to attend): In her column today, Eileen Ambrose, a financial columnist for the Baltimore Sun, discusses why “it pays to shop for student loans.”
Per Ms. Ambrose:
“Americans love to shop. After all, we made The Price Is Right the longest-running TV game show.
But when it comes to shopping for student loans — a complex product with hundreds of lenders to choose from — we would rather have someone else do the legwork. Now, we've learned, that can be a problem.
Colleges for years have compiled lists of recommended lenders to help families navigate a maze of options. An investigation by the New York attorney general's office, though, uncovered chummy financial relationships between some financial-aid officers and lenders promoted on schools' lists. Suddenly, doubts popped up over whether such lists were compiled with students' best interests in mind.
The moral of this story: You have to do some of the work yourself if you want to make sure you're getting a good deal.”
She is right about a lot of things in the above few paragraphs, but two things stick out in particular. And yes, we all do love The Price is Right.
1.) Americans love to shop. This could be more of an understatement than saying “Howard Schultz, the king of Starbucks, had a strong business model in mind before he created a coffee empire.”
2.) Yet for some people, shopping for the right college loan is worse than going to the dentist. With more lenders to choose from than there are pizza shops in the greater New York City area, it's hard to know where to look.
But as the bold sentence in Ambrose's paragraph above proves beautifully, you NEED to conduct a thorough search into finding the right lender. If you like saving money (five words that don’t often appear in a sentence that discusses the cost of college) and honestly, who doesn’t, you need to do the work yourself. For the best tips on what steps to take, I recommend reading the entire article.
If you were looking for more SAT prep or a riveting trivia question at the end of the post, I'm sorry to disappoint you. I guess you’ll have to check back frequently. And to have all of the latest information on credit reports and scores sent directly to you, subscribe to our reader — the perfect RSS feed for your iGoogle homepage.
Monday, July 23, 2007
Beware! Co-Signing Could Tarnish Your Credit History
Suze Orman (www.suzeorman.com)
Will my credit score go down if I marry someone with a bad score?
Kimberly Lankford, the credit guru herself, answers this question in today’s “Ask Kim” section on Kiplinger.com.
Per Ms. Lankford.
“Not necessarily. There are no joint credit reports or scores, so getting married in itself won't lower your score. But becoming a co-signer on an account with a bad history will tarnish your record. Lenders will look at both credit histories if you apply for a loan together. And the bad one could carry more weight. See if you can qualify for the loan with only one income, or wait to apply until your spouse's score improves.”
In case you zoned out during the last paragraph (perhaps due to a hatred of Italic font): DON’T CO-SIGN AN ACCOUNT WITH SOMEONE WHO HAS POOR CREDIT HISTORY! It doesn’t matter who it is — your friend, significant other, or spouse — think it over before co-signing with anyone, loved ones included. In the wrong situation, co-signing an account could dramatically tarnish your credit record.
WARNING: Refusing to co-sign an important account with your spouse (due to her/his bad credit history) could be detrimental to you marriage. Side effects include: being forced to sleep on the couch, constant fighting, nagging, and in some rare cases, divorce.
But look at it this way; if and when you do become single because of a refusal to co-sign a loan with your (at this point, former) spouse, you will still have a strong relationship in your life — with lenders, because of your excellent credit score. This will greatly improve your chances of finding a hot date — as unlike the majority of trendy ways to attract singles out there, having good credit is always in season. In the world of single life, this could prove to be invaluable to you.
Personally, I think that co-signing a loan is never a good idea. Suze Orman, the best-selling author and Emmy award-winning TV host, agrees.
In other news, there was a great article — focusing on the recent credit survey conducted by the Opinion Research Corporation in association with the Consumer Federation of America and Washington Mutual — that appeared in the Washington Post this weekend. In my previous post on this blog, I discussed the survey in great detail. But Nancy Trejos, a veteran staff writer at the newspaper, puts me to shame in her column.
Per Ms. Trejos.
“The percentage of those who know the purpose of credit scores — to show their risk of not repaying a loan — rose only from 27 percent to 29 percent since 2005. The percentages of respondents who incorrectly believe that income, age and education influence their scores increased. In addition, many said they believe that their state of residence and ethnicity affect their scores. They do not. Their debt-to-income ratios, payment history and credit lines do. Perhaps most disturbing to those who commissioned the survey, only 24 percent know that the minimum score typically needed to qualify for a low-cost mortgage is 700.”
And Kimberly Palmer, a columnist for U.S. News and World Report, is reporting “credit scores are growing in importance.” Palmer’s article, which also discusses the recent survey, is a must-read for all you credit junkies out there.
Why do journalists from the nation’s most acclaimed newspapers and talking heads in the mainstream media constantly discuss credit history, reports, and scores? The answer is simple: establishing and maintaining a strong credit history is crucial to every person who desires financial security.
In the credit-driven world that we live in today, you need to know your credit score at all times. For access to a FREE Triple Credit Report right now, click here.
Saturday, July 21, 2007
Most Americans Don’t Understand Their Credit Score
(Associated Press)
Unless you have a contract like A-Rod, you need to know your credit score.
Searching the Internet this morning, I came across an interesting article about the ineffectiveness of credit score commercials. According to Becky Yerak, a columnist for The Chicago Tribune, the plethora of credit score advertisements on television appear to be having little impact on consumers.
No, the reason has nothing to do with the quality of the commercials — as annoying as they may seem sometimes. Rather, as staggering statistics from a recent poll prove, a large percentage of the adult population in the United States lacks a basic knowledge of how credit scores work. Since there is a general lack of knowledge on the subject and the majority of commercials lack the flair of a Bud Light or Geico spot, people have tended to turn away.
In May, the Opinion Research Corporation surveyed 1,000 U.S. adults about their knowledge of credit reports and scores. Personally, I was surprised that only 47 percent of the people who participated in the survey considered their credit to be good or excellent. Even more stunning to me, only 27 percent, meaning just 270 of the 1,000 people surveyed, knew the meaning of the term “credit score.”
In order to establish strong credit, it’s imperative to understand how credit reports and scores work. Not only should you understand how credit works, you should know what your credit score is at all times. Without a general knowledge of credit, it becomes exceedingly more difficult to have a good credit score. And unless your name is Alex Rodriguez, who earns more in a day than most people do in an entire year, you need to have a good credit score to ensure financial success.
For the 730 people from the survey, or anyone else out there who doesn’t know what a credit score is, here is a cheat sheet for you.
A credit score is “a numerical expression based on a statistical analysis of a person's credit files, to represent the creditworthiness of that person, which is the likelihood that the person will pay his or her debts. A credit score is primarily based on credit report information, typically sourced from credit bureaus / credit reference agencies.”
Now you know. The next step you should take is to find out what your current credit score is. The video below will give you more information on how to acess a FREE Triple Credit Report.
With Joe Coffey, the former head of the NYPD Organized Crime Task Force, who is widely known for his role as one of the lead detectives in the infamous Son of Sam investigation, as the host, you will be on the edge of your seat for the duration of the above clip. This video definitely doesn't fall into the category of annoying credit score commercials. Hey, it's Joe Coffey! What I want to know is who is going to play the former investigator in The Bronx is Burning, the new series on ESPN revisiting the New York Yankees run to the World Series title during the 1977 season, the Summer of Sam?
Friday, July 20, 2007
Thinking of Buying a Home?
In a column that appeared in The Ithaca Journal yesterday, Sandra Block discusses the importance of having a strong credit score before borrowing money for a mortgage. Block, who is a financial columnist for USA Today, provides anyone who is currently in the market for a new home with a must-read column.
Per Ms. Block:
Sales of existing homes fell to a four-year low last month, and the supply of homes for sale was up, which is happy news for house hunters. But unless you're sitting on a mountain of cash, you'll need a mortgage, and that's no longer a sure thing. In response to a sharp rise in foreclosures, mortgage lenders have tightened their standards, leading to an increase in rejected applications.
In addition, interest rates have been rising recently, so even if you qualify for a mortgage, you'll probably pay more for it. That means it's more important than ever to make sure your credit score is in good shape. A credit score is a mathematical model that analyzes information in your credit report. Lenders use credit scores to gauge the likelihood that you'll repay your debts. A good credit score can save you thousands of dollars in interest over the life of your loan.
For the best ways to improve your credit score, click here. Also, stroll through several of the previous posts below for more excellent credit-related tips.
Per Ms. Block:
Sales of existing homes fell to a four-year low last month, and the supply of homes for sale was up, which is happy news for house hunters. But unless you're sitting on a mountain of cash, you'll need a mortgage, and that's no longer a sure thing. In response to a sharp rise in foreclosures, mortgage lenders have tightened their standards, leading to an increase in rejected applications.
In addition, interest rates have been rising recently, so even if you qualify for a mortgage, you'll probably pay more for it. That means it's more important than ever to make sure your credit score is in good shape. A credit score is a mathematical model that analyzes information in your credit report. Lenders use credit scores to gauge the likelihood that you'll repay your debts. A good credit score can save you thousands of dollars in interest over the life of your loan.
For the best ways to improve your credit score, click here. Also, stroll through several of the previous posts below for more excellent credit-related tips.
Thursday, July 19, 2007
FICO is Ready to Adopt a New Credit Scoring Formula
The Fair Isaac Corporation, best known for establishing the commonly accepted and used FICO credit score, is scheduled to debut a brand-new credit scoring formula in September. The change is expected to affect over 60 million consumers with established credit.
Carolina Newswire guest columnist, Pat Earnhardt, discussed the changes in extensive detail in her article on Tuesday. Earnhardt, a Mortgage Consultant and Senior Mortgage Banker for The Mortgage Rewards Team of Alera Financial, is more than an expert when it comes to the subject.
Here are the changes.
Change # 1: An end to credit boosts for authorized users on accounts:
Per Ms. Earnhardt,
“An end to credit boosts for authorized users on accounts — Fair Isaac estimates that about 30% of the 165 million consumers with enough information on their credit reports to have a credit score calculated have someone on their account as an authorized user. Authorized users on credit cards are not responsible for paying the balances but are approved to make purchases with the cards. Often, authorized users are family members of the actual cardholder, such as a college student on his/her parents' card or spouses who may have little or no credit of their own. With the old scoring model, coat tailing by authorized users could improve their credit score considerably if the primary cardholder kept balances low and paid the required monthly payments on time over a long period.”
For all of you college students out there who are listed as an authorized user on a parent’s credit card, you will have to find a new way to establish and improve your credit. This change in the new formula certainly would have been a blow to my credit score a few years ago.
Change # 2: Adding more population segments:
Per Ms. Earnhardt,
“Another major change is the addition of two more population segments. The theory at play with this segment change is that more population segments will make the scoring system more accurate overall, since the risk of putting someone in the wrong pool will be lower. In the past, FICO grouped consumers into 10 groups or consumer pools called population segments. These groups fell in pools — such as high-risk borrowers or borrowers with thin credit profiles, etc. Each group uses a slightly different version of the credit scoring formula.
Under the new system, the population will be divided into 12 segments: eight for people with good credit and four for people with bad credit. This increase in groups could result in a slight change of a consumer’s credit score either up or down. But even a slight movement of your score could have an impact on your interest rate or ability to be approved for a loan.”
Make no mistake about it; these changes could be extremely detrimental to your credit score. However, according to Ms. Earnhardt, there are two quick and easy steps that you can take in order to improve and protect your credit score under the new system.
1. Married couples: If you have an account(s) with your significant other as an authorized user, convert this to a Joint Credit Account.
2. Younger consumers: Apply for a secure credit card in your own name. Applying for a secured credit card is often the first step towards an illustrious career in the sport that is credit.
I would recommend forwarding Earnhardt’s article to any of your friends who will be affected by FICO’s new credit scoring formula. The public needs to be aware of the new formula and soon — September is just around the corner.
And for even more tips on how to improve your credit score and prepare for the new change in the FICO formula, click here.
By the way, for those of you who are wondering, Pat has no affiliation with the legendary Earnhardt racing family. Sorry to disappoint! But when it comes to mortgages, she is a strong contender in the chase for the CREDIT cup.
Also, I came across a related article on a new tactic that will help lenders mitigate authorized user abuse. TransUnion, one of the three major credit bureaus, recently "developed a customized approach that enables lenders to identify customers who may have added authorized user accounts to artificially inflate their credit report and standing." I strongly advise reading the article.
Carolina Newswire guest columnist, Pat Earnhardt, discussed the changes in extensive detail in her article on Tuesday. Earnhardt, a Mortgage Consultant and Senior Mortgage Banker for The Mortgage Rewards Team of Alera Financial, is more than an expert when it comes to the subject.
Here are the changes.
Change # 1: An end to credit boosts for authorized users on accounts:
Per Ms. Earnhardt,
“An end to credit boosts for authorized users on accounts — Fair Isaac estimates that about 30% of the 165 million consumers with enough information on their credit reports to have a credit score calculated have someone on their account as an authorized user. Authorized users on credit cards are not responsible for paying the balances but are approved to make purchases with the cards. Often, authorized users are family members of the actual cardholder, such as a college student on his/her parents' card or spouses who may have little or no credit of their own. With the old scoring model, coat tailing by authorized users could improve their credit score considerably if the primary cardholder kept balances low and paid the required monthly payments on time over a long period.”
For all of you college students out there who are listed as an authorized user on a parent’s credit card, you will have to find a new way to establish and improve your credit. This change in the new formula certainly would have been a blow to my credit score a few years ago.
Change # 2: Adding more population segments:
Per Ms. Earnhardt,
“Another major change is the addition of two more population segments. The theory at play with this segment change is that more population segments will make the scoring system more accurate overall, since the risk of putting someone in the wrong pool will be lower. In the past, FICO grouped consumers into 10 groups or consumer pools called population segments. These groups fell in pools — such as high-risk borrowers or borrowers with thin credit profiles, etc. Each group uses a slightly different version of the credit scoring formula.
Under the new system, the population will be divided into 12 segments: eight for people with good credit and four for people with bad credit. This increase in groups could result in a slight change of a consumer’s credit score either up or down. But even a slight movement of your score could have an impact on your interest rate or ability to be approved for a loan.”
Make no mistake about it; these changes could be extremely detrimental to your credit score. However, according to Ms. Earnhardt, there are two quick and easy steps that you can take in order to improve and protect your credit score under the new system.
1. Married couples: If you have an account(s) with your significant other as an authorized user, convert this to a Joint Credit Account.
2. Younger consumers: Apply for a secure credit card in your own name. Applying for a secured credit card is often the first step towards an illustrious career in the sport that is credit.
I would recommend forwarding Earnhardt’s article to any of your friends who will be affected by FICO’s new credit scoring formula. The public needs to be aware of the new formula and soon — September is just around the corner.
And for even more tips on how to improve your credit score and prepare for the new change in the FICO formula, click here.
By the way, for those of you who are wondering, Pat has no affiliation with the legendary Earnhardt racing family. Sorry to disappoint! But when it comes to mortgages, she is a strong contender in the chase for the CREDIT cup.
Also, I came across a related article on a new tactic that will help lenders mitigate authorized user abuse. TransUnion, one of the three major credit bureaus, recently "developed a customized approach that enables lenders to identify customers who may have added authorized user accounts to artificially inflate their credit report and standing." I strongly advise reading the article.
Wednesday, July 18, 2007
Can You Rent a Credit Score?
I came across a surprising blog post this afternoon. According to Bob Brooks, who is the host of the radio show "Prudent Money" in Dallas, Texas, people who are looking to improve their credit score can borrow credit history from someone with good credit.
An Internet company, not named in Brooks’ post, can increase your credit score by making you an authorized person on someone else’s credit card -- usually an individual with excellent credit history. When you become an authorized user on a credit card belonging to a person with a high credit score, that person’s credit history will eventually be transferred to your credit file.
Why would someone ever allow this company to add authorized users to their credit card?
When I first started reading the post, this question quickly popped into my head. I began to think about all of the negative reasons why a person should never do this. But as I read further, I confirmed my initial suspicions. Money -- the one thing that consistently motivates people – is the driving factor for this operation. According to Brooks, “There is big dollars in it for people who are willing to allow this company to use their credits cards by adding authorized users.” The company, run by Adam Wheeler, reportedly offers an exorbitant amount of money to people with strong credit scores in order to allow an authorized user on to their credit cards.
I need to do more research on this subject, but I remain very skeptical about this rent-a-credit technique. To be honest, the operation seems extremely shady to me. The Federal Trade Commission is currently investigating this, but as of right now, there hasn’t been any legal action taken against the company.
Essentially, the company helps people lie to credit lenders, which is very unethical in my eyes. And apparently, the Nevada Mortgage Lending Division agrees.
Per Mr. Brooks:
"However, the Nevada Mortgage Lending Division states that anyone associated with this scheme “will be subject to administrative action and potential criminal penalties.
Adam Wheeler who runs this unethical scheme states his business is “legal” but he conceded that “some people might say it’s unethical.” He also said he does not “condone fraud against mortgage institutions.” If clients are going to lie to lenders, he says, “that is not good."
I predict that this practice will have a short life span. Most likely, new legislation and legal repercussions for doing this will halt the operation quickly.
And for anyone ever considering renting a credit score, I would highly recommend against it. If lenders ever find out about you doing this, this will be used against you in all future credit, loan, or mortgage applications.
As it is in every facet of life, there is no get-rich-quick scheme or shortcut when it comes to having good credit. From your credit score to golf game, there is only one way to improve -- through hard work. I sound like a grandfather when I say that, but from my personal experience, that statement has always proven to be true. In this instance, improving your credit score, hard work translates into being smart with your credit. The best way to improve a credit score is to consistently pay back all of your credit card, loan, or mortgage bills on time.
For a full list of ways to improve your credit score without having to rent another person’s credit history, click here.
An Internet company, not named in Brooks’ post, can increase your credit score by making you an authorized person on someone else’s credit card -- usually an individual with excellent credit history. When you become an authorized user on a credit card belonging to a person with a high credit score, that person’s credit history will eventually be transferred to your credit file.
Why would someone ever allow this company to add authorized users to their credit card?
When I first started reading the post, this question quickly popped into my head. I began to think about all of the negative reasons why a person should never do this. But as I read further, I confirmed my initial suspicions. Money -- the one thing that consistently motivates people – is the driving factor for this operation. According to Brooks, “There is big dollars in it for people who are willing to allow this company to use their credits cards by adding authorized users.” The company, run by Adam Wheeler, reportedly offers an exorbitant amount of money to people with strong credit scores in order to allow an authorized user on to their credit cards.
I need to do more research on this subject, but I remain very skeptical about this rent-a-credit technique. To be honest, the operation seems extremely shady to me. The Federal Trade Commission is currently investigating this, but as of right now, there hasn’t been any legal action taken against the company.
Essentially, the company helps people lie to credit lenders, which is very unethical in my eyes. And apparently, the Nevada Mortgage Lending Division agrees.
Per Mr. Brooks:
"However, the Nevada Mortgage Lending Division states that anyone associated with this scheme “will be subject to administrative action and potential criminal penalties.
Adam Wheeler who runs this unethical scheme states his business is “legal” but he conceded that “some people might say it’s unethical.” He also said he does not “condone fraud against mortgage institutions.” If clients are going to lie to lenders, he says, “that is not good."
I predict that this practice will have a short life span. Most likely, new legislation and legal repercussions for doing this will halt the operation quickly.
And for anyone ever considering renting a credit score, I would highly recommend against it. If lenders ever find out about you doing this, this will be used against you in all future credit, loan, or mortgage applications.
As it is in every facet of life, there is no get-rich-quick scheme or shortcut when it comes to having good credit. From your credit score to golf game, there is only one way to improve -- through hard work. I sound like a grandfather when I say that, but from my personal experience, that statement has always proven to be true. In this instance, improving your credit score, hard work translates into being smart with your credit. The best way to improve a credit score is to consistently pay back all of your credit card, loan, or mortgage bills on time.
For a full list of ways to improve your credit score without having to rent another person’s credit history, click here.
Tuesday, July 17, 2007
Factors That Lower Your Credit Score
There have been numerous posts on this blog about the various methods people use to improve their credit score. But equally important, every person with established credit should be aware of the four largest factors that dramatically lower people’s credit score.
To avoid falling into the dreaded financial black hole -- a low credit score -- try to avoid the following factors, several of which consistently drive credits scores down.
Try not to:
File for bankruptcy:. It certainly isn’t rocket science -- filing for bankruptcy will destroy your credit score. In fact, declaring bankruptcy can knock as much as 200 points off your credit score.
Frequently apply for a credit card, loan, or mortgage: If you have an established credit rating, your FICO credit score will drop anywhere between 15 and 20 points each time that you apply for a new credit card, loan, or mortgage. That being said, limit your amount of credit cards to a number that you actually need. It may be tempting not to resist an offer for a credit card from your favorite store at the mall -- from Banana Republic to Neiman Marcus -- but try to avoid doing so. In the long run, saving 15% on a transaction with your Gap card will never cover the costs that you will incur as a result of a lower credit score. My best advice: Try to consistently zone out cashier(s) when they begin to chime in with additional offers before you make a purchase. As someone who used to frequently sign up for credit cards at Major League Baseball games solely to receive a free towel or T-shirt, trust me on this.
Max out credit cards: If you max out a credit card, it could cost you anywhere from 20 to 120 points on your credit score. To prevent ever maxing out a card, never carry a balance of more than 25% of the credit card’s total limit.
Miss monthly payments: If you miss a monthly payment, even only one time, you can lose up to 35 points on your credit score. I say this frequently in my posts, but regularly paying back bills on time is one of the best ways to improve a credit score.
For more factors that lower credit scores, click here.
To avoid falling into the dreaded financial black hole -- a low credit score -- try to avoid the following factors, several of which consistently drive credits scores down.
Try not to:
File for bankruptcy:. It certainly isn’t rocket science -- filing for bankruptcy will destroy your credit score. In fact, declaring bankruptcy can knock as much as 200 points off your credit score.
Frequently apply for a credit card, loan, or mortgage: If you have an established credit rating, your FICO credit score will drop anywhere between 15 and 20 points each time that you apply for a new credit card, loan, or mortgage. That being said, limit your amount of credit cards to a number that you actually need. It may be tempting not to resist an offer for a credit card from your favorite store at the mall -- from Banana Republic to Neiman Marcus -- but try to avoid doing so. In the long run, saving 15% on a transaction with your Gap card will never cover the costs that you will incur as a result of a lower credit score. My best advice: Try to consistently zone out cashier(s) when they begin to chime in with additional offers before you make a purchase. As someone who used to frequently sign up for credit cards at Major League Baseball games solely to receive a free towel or T-shirt, trust me on this.
Max out credit cards: If you max out a credit card, it could cost you anywhere from 20 to 120 points on your credit score. To prevent ever maxing out a card, never carry a balance of more than 25% of the credit card’s total limit.
Miss monthly payments: If you miss a monthly payment, even only one time, you can lose up to 35 points on your credit score. I say this frequently in my posts, but regularly paying back bills on time is one of the best ways to improve a credit score.
For more factors that lower credit scores, click here.
Is Credit Usage to Blame For High Auto and Home Premiums?
If you own this car, feel free to skip this post.
This morning, I came across an interesting article from the Money section of CNN.com. Sarah Max, a frequent contributor to Money Magazine, discusses how your credit usage could be to blame for high auto and home premiums.
Per Ms. Max.
“In most states they (insurance companies) are allowed to use your credit information to formulate premiums - and in June the U.S. Supreme Court decided that your carrier doesn't need to tell you if your credit has caused you to pay more.
In concurrent cases against Geico and Safeco, the Justices unanimously agreed that the companies were not wrong in charging certain poor-credit customers more without notifying them.
The impact of the decision: "You are not going to know if your credit score is costing you," says Harvey Rosenfield, founder of the Foundation for Taxpayer and Consumer Rights.
How insurance premiums are determined is a recipe long kept secret from consumers. Some 90 percent of home and auto carriers use a score based on credit data as part of that recipe, according to risk-assessment firm Fair Isaac, known for its FICO credit score.”
The article then dives into further detail about the process insurance companies go through to determine rates. More importantly, however, Ms. Max discusses the importance of having a strong credit history.
According to Ms. Max, one of the best ways to put your credit score in the brightest possible light is to frequently check your credit report for accuracy . Regardless of who determines the credit score, the original data comes from reports established by the three major credit bureaus. To check your credit report now, click here.
In terms of insurance credit scores, insurance companies put a large emphasis on prompt bill payment. As well as a way to improve credit, paying back bills on time is the best way to avoid high auto and home premiums.
The article is definitely worth checking out for anyone with established credit or if you're in the process of reaching that point.
On a different note, Experian Consumer Direct recently conducted a study that determined the average credit scores of citizens in all fifty states. With an average score of 721, the citizens of Minnesota lead the nation when it comes to credit. Texas might be home to this year's NBA Champions -- the San Antonio Spurs -- but the Longhorn State currently resides at the bottom of the credit score standings -- owning the nation's lowest score, 666. For all you Texans out there or citizens of any state who want to improve their chances of catching Minnesota next year, click here for more ways to strengthen your credit.
Monday, July 16, 2007
What is “Universal Default,” and How is it Related to Your Credit Score?
Universal default is defined as the process where a lender changes a loan agreement from the current terms to the default terms. Lenders have the power to do this when they’re informed about a customer defaulting with another lender. Currently a controversial topic in the credit industry, universal default is a practice that every person with established credit should be familiar with.
Universal default is becoming more prevalent ever year. Most people aren’t aware of it, but most card issuers follow their account holders closely every month — every single card that the customer has. If one of your credit card companies sees that you’re late on a payment with a different credit card company, they have the ability to raise your interest rate. Not surprisingly, this tends to shock a lot of people, from first-time credit card holders to veterans in the world of credit.
But will continuous account reviews affect your credit score?
Luckily, numerous account reviews, with the intention of discovering information on other accounts or not, will never affect your credit score. When potential lenders pull up your credit report, they will only see the inquiries made on applications for a new credit card, loan, or mortgage. If it looks like you’re taking on too many obligations, these types of applications can greatly affect your credit score.
In order to avoid universal default and ensure the best rates, consistently pay your credit bills on time each month. Consumers who are responsible when it comes to paying back loans tend to the ones with the best credit scores. For more suggestions on how to improve your credit and join that elite group, click here.
Universal default is becoming more prevalent ever year. Most people aren’t aware of it, but most card issuers follow their account holders closely every month — every single card that the customer has. If one of your credit card companies sees that you’re late on a payment with a different credit card company, they have the ability to raise your interest rate. Not surprisingly, this tends to shock a lot of people, from first-time credit card holders to veterans in the world of credit.
But will continuous account reviews affect your credit score?
Luckily, numerous account reviews, with the intention of discovering information on other accounts or not, will never affect your credit score. When potential lenders pull up your credit report, they will only see the inquiries made on applications for a new credit card, loan, or mortgage. If it looks like you’re taking on too many obligations, these types of applications can greatly affect your credit score.
In order to avoid universal default and ensure the best rates, consistently pay your credit bills on time each month. Consumers who are responsible when it comes to paying back loans tend to the ones with the best credit scores. For more suggestions on how to improve your credit and join that elite group, click here.
Friday, July 13, 2007
Credit History and Private Loans
Will private loans affect your credit history in any way?
The correct answer to the above question, one of the most commonly asked regarding credit history and loans today, frequently eludes people. Unfortunately for us all, private loans, either from a family member or a friend, won’t show up in a credit report for any of the three major credit bureaus.
If you’re fortunate enough to have a relative who is nice enough to offer you some money, consider yourself lucky. However, even with a legitimate payment schedule set up, the loan will never show up in your credit history.
The reason is simple. Credit bureaus only report loan information when they have a contractual relationship with the lender. And for the most part, lenders will only partner with a credit bureau if they’re doing enough business to make the cost of the partnership worthwhile. Unless your beloved Aunt Eileen and Uncle Jimmy conduct business with Experian on a regular basis, there is simply nothing you can do.
But in all honesty, don’t let this post discourage you from accepting money from a private lender. Obviously, if a friend is willing to lend you money during a time of need, take them up on the offer. On a side note though, be careful when borrowing money from friends. Friendship and money doesn’t often mix well. I’ve seen more than my fair share of relationships end because of financial deals gone awry; try to avoid this from happening to you at all costs.
And the good news is, even though private loans will never show up in your credit history, there are still a number of other ways to improve credit.
First and foremost, by simply making credit payments in full on the day that you get your bill, you can dramatically improve your credit score. And if you have the means to do so, try to pay more than the minimum amount required on your credit card bill or loans each month. In doing so, you will save a great deal on interest in the future. A popular myth about credit is that you need to carry a balance from month-to-month in order to build a history. In reality, credit bureaus can’t differentiate between people who carry a balance and those who don’t. So to prevent high interest charges, make monthly payments in full.
For more ways to improve your credit, click here.
The correct answer to the above question, one of the most commonly asked regarding credit history and loans today, frequently eludes people. Unfortunately for us all, private loans, either from a family member or a friend, won’t show up in a credit report for any of the three major credit bureaus.
If you’re fortunate enough to have a relative who is nice enough to offer you some money, consider yourself lucky. However, even with a legitimate payment schedule set up, the loan will never show up in your credit history.
The reason is simple. Credit bureaus only report loan information when they have a contractual relationship with the lender. And for the most part, lenders will only partner with a credit bureau if they’re doing enough business to make the cost of the partnership worthwhile. Unless your beloved Aunt Eileen and Uncle Jimmy conduct business with Experian on a regular basis, there is simply nothing you can do.
But in all honesty, don’t let this post discourage you from accepting money from a private lender. Obviously, if a friend is willing to lend you money during a time of need, take them up on the offer. On a side note though, be careful when borrowing money from friends. Friendship and money doesn’t often mix well. I’ve seen more than my fair share of relationships end because of financial deals gone awry; try to avoid this from happening to you at all costs.
And the good news is, even though private loans will never show up in your credit history, there are still a number of other ways to improve credit.
First and foremost, by simply making credit payments in full on the day that you get your bill, you can dramatically improve your credit score. And if you have the means to do so, try to pay more than the minimum amount required on your credit card bill or loans each month. In doing so, you will save a great deal on interest in the future. A popular myth about credit is that you need to carry a balance from month-to-month in order to build a history. In reality, credit bureaus can’t differentiate between people who carry a balance and those who don’t. So to prevent high interest charges, make monthly payments in full.
For more ways to improve your credit, click here.
Thursday, July 12, 2007
Student Loan Debt and Your Credit Score
During college, the so-called “time of your life,” the benefits that come with being away from home for the first time seem to outweigh everything. Freedom, one of my personal favorite things about the college experience, is something that most college students couldn’t put a price on. But with the combination of exorbitant (and always increasing) tuition prices these days and high student loan rates, that statement isn't entirely true. In fact, it’s safe to say that most college students who have to pay back student loans share a common hatred for one four-letter word – DEBT.
When college students begin to establish credit after they graduate, their debt from student loans leads to a very popular, but important question. “Will lenders view my debt from student loans in the same negative light as credit-card debt?” In all honesty, there is no definitive answer. Rather, the answer is more of a yes and no. In terms of calculation of scores, student loan debt is viewed more favorably than other types of debt. However, with regards to terms of debt-to-income ratios, student loan debt is looked at equally.
The FICO score, one of the most common credit scores that lenders use, splits up loans into two different categories. The first category, installment loans, includes loans with fixed monthly rates -- car loans, mortgagees, and student loans. The other category, revolving loans, sums up all of the loans where you control the monthly payment based upon the frequency of use. For example, any credit card transaction is a revolving loan.
One thing is for certain, though. A high amount of debt in student loans won’t affect your credit score to the same extent of frequently maxing out your credit card. Still, delaying or missing payments on student loans can severely hurt your credit score. On the other end of the spectrum, though, making student loan payments in a timely fashion is a great way to improve credit. That being said, it’s important for all college students who have to pay back student loans to check their credit score. If you do consistently pay back your loans every month, you need to make sure that the student loan information is being reported, thus improving your credit.
As education becomes more of a necessity to be successful every year, the amount of student loans will continue to increase. And every college student needs to know what steps to take to prevent being followed by bad credit for years.
When college students begin to establish credit after they graduate, their debt from student loans leads to a very popular, but important question. “Will lenders view my debt from student loans in the same negative light as credit-card debt?” In all honesty, there is no definitive answer. Rather, the answer is more of a yes and no. In terms of calculation of scores, student loan debt is viewed more favorably than other types of debt. However, with regards to terms of debt-to-income ratios, student loan debt is looked at equally.
The FICO score, one of the most common credit scores that lenders use, splits up loans into two different categories. The first category, installment loans, includes loans with fixed monthly rates -- car loans, mortgagees, and student loans. The other category, revolving loans, sums up all of the loans where you control the monthly payment based upon the frequency of use. For example, any credit card transaction is a revolving loan.
One thing is for certain, though. A high amount of debt in student loans won’t affect your credit score to the same extent of frequently maxing out your credit card. Still, delaying or missing payments on student loans can severely hurt your credit score. On the other end of the spectrum, though, making student loan payments in a timely fashion is a great way to improve credit. That being said, it’s important for all college students who have to pay back student loans to check their credit score. If you do consistently pay back your loans every month, you need to make sure that the student loan information is being reported, thus improving your credit.
As education becomes more of a necessity to be successful every year, the amount of student loans will continue to increase. And every college student needs to know what steps to take to prevent being followed by bad credit for years.
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