What are the two most common pieces of mail that fill up college students’ campus mailboxes across the country?
Or a better question for readers of this blog: What does that have to do with my credit scores?
Well, the first answer — for the luckier, well-loved college students out there, at least — shouldn’t be a surprise — letters from Mom (hopefully jam-packed with endearing words and, more importantly, a fat check).
But college students also receive a plethora of other incoming envelopes: credit card applications. And for most students, a pre-approved credit card proves to be a very tempting offer. However, college students need to be very conservative when it comes to applying for credit cards without a steady income. Recovering from a poor credit past — stemming from a careless approach to credit in college or not — is a difficult challenge. You don’t want to put yourself in a credit hole as a student.
Michelle Felter, a columnist for the Standard Democrat, dives into this topic in great detail in a recent column. As well as the negative aspects of applying for a credit card during college, though, Ms. Felter thinks that there are some positives to students’ establishing a credit history during college. In the article, she states, “Sometimes, however, credit is a good thing to have, especially for students about to graduate and buy items such as vehicles and houses.” But according to Terry Williams, who is the community bank president at Southern Missouri State Bank, students need to be extremely careful throughout the entire process.
More from Ms. Felter:
Taylor Allen, who will begin college at the University of Missouri-Columbia this month, said she has received about two credit card applications a week since early this spring.
Despite the temptations of pre-approved cards, she will not get one before college.
“I had a banking class and the teacher said ‘hold off on the credit card as long as you can,’ and I’ve always remembered that,” Allen said.
She’ll use her debit card. “It’s about the same thing, but you can’t overspend,” Allen said.
Anna Ferrell, marketing director at Focus Bank, said that seems to be a trend. “If the money is not there, you can’t spend it,” she said. “It actually will help you to establish good spending habits and stay within your budget.”
She continues:
Williams compared the significance of a credit score to that of the SAT or ACT score of getting into college. “Your credit score is going to be looked at for the rest of your life,” he said.
There are some tips to follow if you do obtain a card. Justin Taylor, a financial advisor at Edward Jones in Sikeston, said to just open one line of credit, as multiple cards can make someone a credit risk.
Also take a look at the annual percentage rate. “The lower the better,” Wooden said.
Adams suggested using credit cards like a bank account, or just for necessary items. And if one will be making Internet purchases, he advised a card with a limit below $500. “You can have ID theft with those purchases,” he said.
I particularly like Mr. Williams’s analogy (in bold) above — where he compares the importance of establishing a high credit score to achieving exemplary results on standardized college admission tests.
Unfortunately, though, unlike an SAT score, which does little for students — other than something to brag about (if high) — following graduation, a credit score will measure your credit-worthiness for the rest of your entire life, which is why it’s so important to be careful when applying for pre-approved credit cards during college.
To check your credit report instantly, click here.
And if you're scoring at home, there's now less than a year (364 days to be exact) to vote in our credit poll. Don't waste another second, vote now!
Showing posts with label credit report. Show all posts
Showing posts with label credit report. Show all posts
Friday, August 10, 2007
Great Article From FoxNews
There was an outstanding credit-related article that appeared on the FoxNews website this morning. The article, titled Cardholders Caught In Credit Trap Report, is definitely worth reading. I will analyze the article in further detail in a future post.
Thursday, August 09, 2007
Credit Scores and Car Insurance
In a previous post, I discussed how credit scores dramatically affect — negatively or positively — people’s car insurance bills. Although it’s a common misconception, car insurance companies do not use credit scores to predict payment behavior. However, insurance companies do use credit scores to estimate the number of claims that potential customers will make in the future. In an article from today’s issue of the Florida Sun-Sentinel, Dan Thanh Dang, a popular columnist who focuses on consumer interests, analyzes this topic in extensive detail.
Using the first-hand account of John Rogers — a 43-year-old salesman from Baltimore with a past clouded by financial struggles — Ms. Dang thoroughly discusses the tremendous dangers, insurance-related or not, of having a poor credit score.
Does a credit bearing have any impact on how people drive? This question, one of the most frequently asked regarding the impact of credit scores on insurance rates, doesn’t really have a definitive answer.
In the article, Mr. Rogers wonders the same thing: “I'm not the worst-credit person in the world and I'm not the best. But I don't see how it has any bearing on how I drive, though."
A credit score certainly won’t directly influence the way people drive, but in essence — at least in the eyes of insurance companies — it can.
In response to this question, Ms. Dang says, “Well, it doesn't — not technically, anyway. It does, however, play a role in how much you pay for your auto insurance. Insurance companies don't use your credit score to predict payment behavior. Some use the scores as a factor when estimating the number of, or total cost of, claims that customers are likely to make.”
Unfortunately for some, including Mr. Rogers, this can be quite a wake-up call for people who have low credit scores.
Per Ms. Dang:
Rogers found that out the hard way. When he recently opened his Erie Insurance renewal statement, Rogers was gobsmacked to find that his auto insurance premium had jumped by 12 percent.
Instead of the $7,400 he was paying for three cars (a 1999 Nissan Sentra, a 2000 Chevy Cavalier and a 2005 Chevy Trailblazer) and four drivers (himself, his 42-year-old wife, 20-year-old daughter and 18-year-old son), Rogers would now have to pay $900 more. "No one has had any accidents in the last five years," Rogers said. "The only claim we filed was from two years ago when someone kicked the side of my son's car door in while he was downtown. That was filed under an uninsured motorists claim. But that's it."
If you’re in a similar situation as Mr. Rogers — with a flawless driving record and exorbitant insurance rates — you need to find out why. More than likely, your high rates are due to a low credit score.
Do you know where your credit history stands right now? If not, then you need to check your credit report immediately because you need to know where your credit stands at all times. Click here to do so instantly. But also make sure to carefully look for any errors in the report, which can have detrimental effects on your credit score — thus costing you dearly, possibly thousands of dollars annually, through higher credit card, insurance, and mortgage rates.
For tips on how to improve a poor credit score, scroll down to view several of the previous posts on this blog. And for even more credit insight, click here.
Using the first-hand account of John Rogers — a 43-year-old salesman from Baltimore with a past clouded by financial struggles — Ms. Dang thoroughly discusses the tremendous dangers, insurance-related or not, of having a poor credit score.
Does a credit bearing have any impact on how people drive? This question, one of the most frequently asked regarding the impact of credit scores on insurance rates, doesn’t really have a definitive answer.
In the article, Mr. Rogers wonders the same thing: “I'm not the worst-credit person in the world and I'm not the best. But I don't see how it has any bearing on how I drive, though."
A credit score certainly won’t directly influence the way people drive, but in essence — at least in the eyes of insurance companies — it can.
In response to this question, Ms. Dang says, “Well, it doesn't — not technically, anyway. It does, however, play a role in how much you pay for your auto insurance. Insurance companies don't use your credit score to predict payment behavior. Some use the scores as a factor when estimating the number of, or total cost of, claims that customers are likely to make.”
Unfortunately for some, including Mr. Rogers, this can be quite a wake-up call for people who have low credit scores.
Per Ms. Dang:
Rogers found that out the hard way. When he recently opened his Erie Insurance renewal statement, Rogers was gobsmacked to find that his auto insurance premium had jumped by 12 percent.
Instead of the $7,400 he was paying for three cars (a 1999 Nissan Sentra, a 2000 Chevy Cavalier and a 2005 Chevy Trailblazer) and four drivers (himself, his 42-year-old wife, 20-year-old daughter and 18-year-old son), Rogers would now have to pay $900 more. "No one has had any accidents in the last five years," Rogers said. "The only claim we filed was from two years ago when someone kicked the side of my son's car door in while he was downtown. That was filed under an uninsured motorists claim. But that's it."
If you’re in a similar situation as Mr. Rogers — with a flawless driving record and exorbitant insurance rates — you need to find out why. More than likely, your high rates are due to a low credit score.
Do you know where your credit history stands right now? If not, then you need to check your credit report immediately because you need to know where your credit stands at all times. Click here to do so instantly. But also make sure to carefully look for any errors in the report, which can have detrimental effects on your credit score — thus costing you dearly, possibly thousands of dollars annually, through higher credit card, insurance, and mortgage rates.
For tips on how to improve a poor credit score, scroll down to view several of the previous posts on this blog. And for even more credit insight, click here.
Wednesday, August 08, 2007
Can Closing a Credit Card Account Hurt Your Credit Score?
According to financial guru Stephen Snyder, “closing credit card accounts is a fast track to lowering your FICO credit score.” And as usual when it comes to credit, Mr. Snyder is exactly right.
He even offers a personal experience of how a bad encounter with a customer service employee at American Express led him to cancel a card — a decision he profoundly regrets.
Snyder recalls, “I was in a rare fit of anger. Last summer I got so mad at American Express, I closed a personal credit card account that I had just opened with them. The lady I spoke with at Amex was a complete idiot...and clearly working in the wrong department. I thought I was talking to a person in customer service...she obviously worked for the sales prevention unit. It felt empowering when I told her to, ‘close the account,’ and promptly hung up the phone. Then I realized what I had just done...”
As he frequently discusses in his columns and on television appearances — in media outlets such as CBS, CNN, Newsweek, Smart Money, The Wall Street Journal, and The Washington Post, among others — canceling a credit card is a serial credit score killer.
Why is closing a credit card bad for your credit score?
I’ll let the expert explain it to you.
Per Mr. Snyder.
“Here's why...one of the categories that makes up your FICO credit scores is called "time in file."
In English, "time in file" translates to:
- How old the oldest account on your credit report is, and
- The average age of all the accounts on your credit report
The longer you have the same accounts the better it will be for your FICO credit scores. (And it is in your favor if those accounts are in good standing.)
I've had the opportunity to study a few credit reports where the consumer obtained FICO credit scores of over 800.
These folks are like the white buffalo. They're very rare and rank in the top 5.85% nationally. This means their credit scores are higher than 94.15% of the rest of the people in the country.
One thing the "800 Club" members all have in common are several old accounts appearing on their credit reports. When I say "old," I mean really old...decades in some cases.
One example is from a guy from Georgia who had a Sears credit card on his credit file that was opened in 1954. It actually said that on his credit report...opened in 1954. (That means that his credit report is 52 years old.) His lowest FICO score was 809.
Bottom line: an old credit history is good for your credit scores. And you can't achieve an old history if you close your accounts.”
I would highly recommend reading the entire article and several of Mr. Snyder’s other columns for more reasons on why you should think twice before canceling a credit card.
He even offers a personal experience of how a bad encounter with a customer service employee at American Express led him to cancel a card — a decision he profoundly regrets.
Snyder recalls, “I was in a rare fit of anger. Last summer I got so mad at American Express, I closed a personal credit card account that I had just opened with them. The lady I spoke with at Amex was a complete idiot...and clearly working in the wrong department. I thought I was talking to a person in customer service...she obviously worked for the sales prevention unit. It felt empowering when I told her to, ‘close the account,’ and promptly hung up the phone. Then I realized what I had just done...”
As he frequently discusses in his columns and on television appearances — in media outlets such as CBS, CNN, Newsweek, Smart Money, The Wall Street Journal, and The Washington Post, among others — canceling a credit card is a serial credit score killer.
Why is closing a credit card bad for your credit score?
I’ll let the expert explain it to you.
Per Mr. Snyder.
“Here's why...one of the categories that makes up your FICO credit scores is called "time in file."
In English, "time in file" translates to:
- How old the oldest account on your credit report is, and
- The average age of all the accounts on your credit report
The longer you have the same accounts the better it will be for your FICO credit scores. (And it is in your favor if those accounts are in good standing.)
I've had the opportunity to study a few credit reports where the consumer obtained FICO credit scores of over 800.
These folks are like the white buffalo. They're very rare and rank in the top 5.85% nationally. This means their credit scores are higher than 94.15% of the rest of the people in the country.
One thing the "800 Club" members all have in common are several old accounts appearing on their credit reports. When I say "old," I mean really old...decades in some cases.
One example is from a guy from Georgia who had a Sears credit card on his credit file that was opened in 1954. It actually said that on his credit report...opened in 1954. (That means that his credit report is 52 years old.) His lowest FICO score was 809.
Bottom line: an old credit history is good for your credit scores. And you can't achieve an old history if you close your accounts.”
I would highly recommend reading the entire article and several of Mr. Snyder’s other columns for more reasons on why you should think twice before canceling a credit card.
Monday, August 06, 2007
A Big Day in the World of Credit Scores
Capital One does more than provide television viewers with funny commercials.
On Saturday, Capital One Financial, one of the leading credit card companies in the United States (What’s in your wallet?), announced that they will start reporting cardholder’s credit limits to all three national credit bureaus — TransUnion, Equifax, and Experian. The move, which has been praised by several pundits in the world of credit, could potentially raise the FICO credit scores of over 50 million consumers across the country.
In recent months, Capital One has come under intense criticism from consumer and lending industry groups for withholding its customers’ credit limits in regular reports released to each bureau — a method which has lowered consumers’ credit scores for years. This is one of the many reasons that led to a change in the system.
Why is this headline news?
According to Washington Post financial columnist Kenneth Harney, “Higher FICO scores, in turn, will allow Capital One cardholders to qualify for lower mortgage interest rates when they buy or refinance homes. An increase from 659 to 700 would have cut an applicant's mortgage rate quote last week from 7.68 percent to 6.59 percent on a 30-year fixed-rate mortgage of $300,000, according to Fair Isaac, the developer of the widely used scoring system.”
He continues, “Although most consumers are unaware of it, their credit scores can be artificially depressed if creditors do not report their credit limits. That's because Fair Isaac assigns a heavy weight -- 30 percent of a person's score -- to what is known as "utilization" of available credit. Utilization basically boils down to this: If you've got a card with a $5,000 credit limit and you're carrying a $4,750 balance, you've got a 95 percent utilization rate. FICO's scoring system -- which runs from 300 to about 850 -- subtracts points for high ratios. The rationale is that people who are maxing out their cards are perceived as riskier and more likely to fall behind on payments.”
This is great news for all consumers with an established credit history everywhere. However, even with a boost to your FICO credit score resulting from the end of Captial One’s long-standing practice, you still need to take the appropriate steps to continuously improve and maintain a strong credit history. One of the best ways to do this — signing up for a credit monitoring service — is as easy as sinking a three-foot putt. Credit monitoring services, like he one provided by Privacy Matters, provide instant alerts to any changes in your credit report — some of which even offer constant access to all three leading credit bureaus. Not only will instant credit alerts allow you to easily detect and quickly respond to identity theft, you will also have the opportunity to fight any discrepancies in your credit report — which could potentially lower your credit score —immediately.
I must say, the Washington Post is consistently one of the best sources to go to for credit-related news. I would recommend checking out the financial section on the Post’s website on a regular basis.
Other news from the world of credit report and credit scores:
“Bad Credit, good business,” The Kalamazoo Gazette
From the article:
“Subprime credit: People with subprime credit have low credit scores because of their spotty credit histories or because they lack credit histories. Lenders consider loans to them high-risk.
The costs: Subprime borrowers can expect to pay high interest rates. Most banks don't deal with subprime borrowers, which limits these borrowers' choices. And the companies that do extend loans to people with poor credit will charge a high rate to compensate for the risk.
How it works: In auto financing, subprime customers get chances to improve their credit scores by paying off loans. The auto dealer finances the deal or works with a loan company to finance the deals and then reports positive payment records to credit agencies.”
Again, in this article, another reliable source stresses the importance of owning a high credit score. Check out the full article for more information.
In another interesting column that filled up the pages of the Money sections of your newspaper this weekend, journalist Humberto Cruz discusses the recent credit study — which produced staggering statistics about the general lack of knowledge among Americans when it comes to their credit score — conducted by the Consumer Federation of American in association with Washington Mutual.
For more information on how to improve your credit score, click here.
And in case you missed it — possibly because you were stressing out about a poor credit score — San Francisco Giants slugger Barry Bonds belted his 755th career home run on Saturday to tie Hank Aaron for first place on the career home run list. In the opinion of this blog, the blast, an opposite-field shot to left field in the second inning of the Giants’ extra-inning loss to the San Diego Padres, although a major story, pales in comparison to Capital One’s record-breaking practice change. The same could be said about Alex Rodriguez’s 500th home run, which was hit just hours before Bonds’ historic long ball. Rodriguez, who became the youngest player in Major League Baseball history to reach the 500 home run plateau, may not have to worry about his credit score as baseball’s $250 million man (this number will grow considerably this off-season), but the rest of us need to monitor our credit score at all times. So if you’re not in the 500 home run club, click here to get your FREE Triple Credit Report.
Controversy or not, the Credit Report and Scores blog would like to congratulate both players for their monumental achievements, landmarks in the history of the game. For the record — and you probably didn’t hear it first — Rodriguez will end his career as baseball’s home run king in the opinion of the writers of this blog.
We would also like to give a shout out to Tom Glavine for picking up the 300th win of his career in the New York Mets 8-3 victory over the Chicago Cubs last night.
On a side note, please check out our new video.Credit Report and Scores Joins YouTube
We are pleased to announce that the Credit Report and Scores blog team is now officially a member of the YouTube community. Please let us know what you think of our first video (above) -- either by leaving us a comment on the blog or underneath the video on the YouTube website. And don't forget to check out our YouTube profile and add us as a friend. We hope to post more videos in the very near future. To contact the team at any time, send us an email at creditreportandscores@gmail.com.
Thursday, August 02, 2007
Critics Question the Practice of Using Credit Scores to Set Auto Premiums
In today’s issue of The Boston Globe, columnist Michelle Singletary, a regular contributor to the Washington Post, chimes in on the current controversy making headlines in the insurance industry. In the aftermath of a high-profile report recently released by the Federal Trade Commission — which many critics feel sides with the insurance industry — numerous consumer groups have loudly voiced their concerns with the way insurance companies use credit scores to determine whether — and how frequently — someone will file a claim. The consumer groups think that this process unfairly hurts African-Americans and Hispanics.
After extensive research using industry data and public comment, the FTC report concluded that “credit scores accurately predict the number of claims consumers file and the cost of these claims.” However, several prominent consumer interest groups — including the Center for Economic Justice, the Consumer Federation of America, and the National Fair Housing Alliance — strongly disagree.
From Ms. Singletary’s article:
"The FTC's approach to collecting data for the analysis is like the federal government trying to do a study on the health impacts of tobacco use with data selected by tobacco companies for the study," said Allen Fishbein of the Consumer Federation of America.
Commissioner Jon Leibowitz, who voted to release the report, said that although the analysis appears to find insurance scoring does predict the risk of insurance claims, "the differences in credit-based insurance scores across racial and ethnic groups are a disturbing reminder that our society is still not race blind, and that vestiges of our history of discrimination remain ever-present."
The insurance industry, however, was pleased with the FTC report.
"We believe scores reduce subsidization of bad risks by good ones, meaning most consumers pay less for insurance," said David Snyder, vice president and assistant general counsel for the American Insurance Association.”
For the time being, insurance companies will continue to monitor your credit score as a way to predict your future liability. Unless you take the appropriate measures to establish and maintain a high credit score, you will be forced to pay higher insurance rates, period! This is one of the many reasons why having a strong credit history is so important. A high credit score, which will help you lower your insurance rates dramatically, will save you thousands of dollars in the long run.
Where does your credit score stand right now? Click here to find out. You should definitely know where your credit stands before you apply for a credit card, loan, or mortgage, but in all honesty, you need to know what your credit score is at all times. By frequently monitoring your credit, you can help fix a poor credit score and keep an eye on potential threats of identity theft at the same time.
Elsewhere in the world of credit: Arabia.com is reporting that a poor credit score could hurt your chances of landing a job. In fact, many employers are “now looking at an applicant’s credit report for hiring purposes.”
I will explore this topic in more detail in a future post.
On another note, you may have noticed a few changes to the blog over the past few days. Feel free to utilize several of the new content features on the right-hand side of the site — including a brand-new feature that provides you with all of the latest information on “credit scores” from Google News.
And please be sure to vote in our credit poll. After you vote, see if your assessment of your current credit standing is correct by viewing a FREE Triple Credit Report, courtesy of Privacy Matters.
To contact the blog, send an email to creditreportandscores@gmail.com.
After extensive research using industry data and public comment, the FTC report concluded that “credit scores accurately predict the number of claims consumers file and the cost of these claims.” However, several prominent consumer interest groups — including the Center for Economic Justice, the Consumer Federation of America, and the National Fair Housing Alliance — strongly disagree.
From Ms. Singletary’s article:
"The FTC's approach to collecting data for the analysis is like the federal government trying to do a study on the health impacts of tobacco use with data selected by tobacco companies for the study," said Allen Fishbein of the Consumer Federation of America.
Commissioner Jon Leibowitz, who voted to release the report, said that although the analysis appears to find insurance scoring does predict the risk of insurance claims, "the differences in credit-based insurance scores across racial and ethnic groups are a disturbing reminder that our society is still not race blind, and that vestiges of our history of discrimination remain ever-present."
The insurance industry, however, was pleased with the FTC report.
"We believe scores reduce subsidization of bad risks by good ones, meaning most consumers pay less for insurance," said David Snyder, vice president and assistant general counsel for the American Insurance Association.”
For the time being, insurance companies will continue to monitor your credit score as a way to predict your future liability. Unless you take the appropriate measures to establish and maintain a high credit score, you will be forced to pay higher insurance rates, period! This is one of the many reasons why having a strong credit history is so important. A high credit score, which will help you lower your insurance rates dramatically, will save you thousands of dollars in the long run.
Where does your credit score stand right now? Click here to find out. You should definitely know where your credit stands before you apply for a credit card, loan, or mortgage, but in all honesty, you need to know what your credit score is at all times. By frequently monitoring your credit, you can help fix a poor credit score and keep an eye on potential threats of identity theft at the same time.
Elsewhere in the world of credit: Arabia.com is reporting that a poor credit score could hurt your chances of landing a job. In fact, many employers are “now looking at an applicant’s credit report for hiring purposes.”
I will explore this topic in more detail in a future post.
On another note, you may have noticed a few changes to the blog over the past few days. Feel free to utilize several of the new content features on the right-hand side of the site — including a brand-new feature that provides you with all of the latest information on “credit scores” from Google News.
And please be sure to vote in our credit poll. After you vote, see if your assessment of your current credit standing is correct by viewing a FREE Triple Credit Report, courtesy of Privacy Matters.
To contact the blog, send an email to creditreportandscores@gmail.com.
Wednesday, August 01, 2007
How Credit Monitoring Can Add Money to Your Bank Account
As well as providing one of the best ways to detect identity theft, monitoring your credit will help you improve your credit score. Credit monitoring services instantly alert you of any changes to your credit report and take the necessary steps to address any negative changes to the report. To do this, most services provide an evaluation of your credit report and challenge or dispute any changes that negatively affect your credit score.
If you utilize the right credit monitoring service effectively, you can improve your credit score dramatically. In the long run, this will lead to improved (i.e., lower) rates on credit cards, car and home insurance, loans, and mortgages — saving you thousands of dollars in the process. As I frequently stress on this blog, maintaining a high credit score is crucial to reaching financial success. Monitoring your credit on a regular basis will make the amount of money in your bank account rise faster than an earned run average of a relief pitcher for the Tampa Bay Devil Rays.
For an excellent credit monitoring service that offers a Free Triple Credit Report and top-notch identity theft protection, click here.
What do credit monitoring services do exactly?
Brian Koerner, a finance expert from About.com, provides an excellent description of what credit monitoring services actually look for in a recent article. In great detail, Mr. Koerner provides consumers with insights on how services actually help prevent identity theft among other credit-related topics discussed in the article.
Per Mr. Koerner:
“Although you can purchase varying levels of service, generally, these services will monitor the following:
• Inquiries to your credit file. The service will monitor who is inquiring on your credit file. This information can be useful in detecting unauthorized activities.
• New account activity. The identity theft victims that suffer the most financial damage are those that a thief opens new accounts in their name. The service will monitor any new accounts that are opened in your name and report this activity to you.
• Address changes. Identity thieves have been known to change the address of a victim to their own, particularly when applying for credit. The monitoring will alert you to this activity so that if you didn't really move, you will know that a thief may be in your midst.
• Collection accounts. Unfortunately, many victims realize that their identity has been stolen when they can't get credit. If there is any activity on your credit report related to collection accounts, the monitoring service will notify you so that you can investigate it further.
• Changes to account information. The service will monitor any changes to account, which would include things like, if the account is refinanced, status, etc.
• Credit limit increases. Often one of the first things an identity thief will do is raise the credit limit on the victims accounts. The credit monitoring services will monitor this activity and notify you--you can then take action.
• Changes to public records. The service will monitor any changes to public records that would include, judgments, bankruptcies, etc.
• Changes to existing accounts. The service will monitor any negative changes to existing accounts such as delinquencies, etc.
• Closed accounts. Any accounts that have been recently closed will be flagged by the monitoring service and reported to you.”
News From the World of Credit Reports and Credit Scores:
In a column that appeared in the Dallas Morning News on Monday, financial columnist Pamela Yip discuses the latest developments in today’s insurance industry controversy — regarding a recent report released by the Federal Trade Commission that angered several civil rights organizations.
According to the FTC study, it would be impossible for the organization to come up with an alternative scoring model that would continue to predict risk effectively and decrease the differences in scoring among certain ethnic groups at the same time. Jerry Johns, who was interviewed by Ms. Yip for the column, agrees. Mr. Johns — president of Southwestern Insurance Information Systems, an industry organization located in Austin, Texas — says, “Race and ethic backgrounds have nothing to do with credit histories.”
However, as I discussed in my previous two posts, consumer groups have strongly condemned the FTC study. In a joint statement, the groups said, “The relationship between insurance credit scores and race is so strong that even though the FTC used data handpicked by the industry, it found that credit scoring discriminates against low income and minority consumers, and that insurance scoring was a proxy for race."
What is your take on the situation? Leave a comment below.
For our British readers: In a column yesterday, Alan Tomlinson, a publisher for 24dash.com, talks about how Equifax — one of the three major credit bureaus — is warning that consumers “need to be careful that they aren’t still paying for their summer holiday well into the winter — hitting their credit rating.”
Do you have a credit-related question or a suggestion for the blog? Feel free to send us an email at creditreportandscores@gmail.com.
If you utilize the right credit monitoring service effectively, you can improve your credit score dramatically. In the long run, this will lead to improved (i.e., lower) rates on credit cards, car and home insurance, loans, and mortgages — saving you thousands of dollars in the process. As I frequently stress on this blog, maintaining a high credit score is crucial to reaching financial success. Monitoring your credit on a regular basis will make the amount of money in your bank account rise faster than an earned run average of a relief pitcher for the Tampa Bay Devil Rays.
For an excellent credit monitoring service that offers a Free Triple Credit Report and top-notch identity theft protection, click here.
What do credit monitoring services do exactly?
Brian Koerner, a finance expert from About.com, provides an excellent description of what credit monitoring services actually look for in a recent article. In great detail, Mr. Koerner provides consumers with insights on how services actually help prevent identity theft among other credit-related topics discussed in the article.
Per Mr. Koerner:
“Although you can purchase varying levels of service, generally, these services will monitor the following:
• Inquiries to your credit file. The service will monitor who is inquiring on your credit file. This information can be useful in detecting unauthorized activities.
• New account activity. The identity theft victims that suffer the most financial damage are those that a thief opens new accounts in their name. The service will monitor any new accounts that are opened in your name and report this activity to you.
• Address changes. Identity thieves have been known to change the address of a victim to their own, particularly when applying for credit. The monitoring will alert you to this activity so that if you didn't really move, you will know that a thief may be in your midst.
• Collection accounts. Unfortunately, many victims realize that their identity has been stolen when they can't get credit. If there is any activity on your credit report related to collection accounts, the monitoring service will notify you so that you can investigate it further.
• Changes to account information. The service will monitor any changes to account, which would include things like, if the account is refinanced, status, etc.
• Credit limit increases. Often one of the first things an identity thief will do is raise the credit limit on the victims accounts. The credit monitoring services will monitor this activity and notify you--you can then take action.
• Changes to public records. The service will monitor any changes to public records that would include, judgments, bankruptcies, etc.
• Changes to existing accounts. The service will monitor any negative changes to existing accounts such as delinquencies, etc.
• Closed accounts. Any accounts that have been recently closed will be flagged by the monitoring service and reported to you.”
News From the World of Credit Reports and Credit Scores:
In a column that appeared in the Dallas Morning News on Monday, financial columnist Pamela Yip discuses the latest developments in today’s insurance industry controversy — regarding a recent report released by the Federal Trade Commission that angered several civil rights organizations.
According to the FTC study, it would be impossible for the organization to come up with an alternative scoring model that would continue to predict risk effectively and decrease the differences in scoring among certain ethnic groups at the same time. Jerry Johns, who was interviewed by Ms. Yip for the column, agrees. Mr. Johns — president of Southwestern Insurance Information Systems, an industry organization located in Austin, Texas — says, “Race and ethic backgrounds have nothing to do with credit histories.”
However, as I discussed in my previous two posts, consumer groups have strongly condemned the FTC study. In a joint statement, the groups said, “The relationship between insurance credit scores and race is so strong that even though the FTC used data handpicked by the industry, it found that credit scoring discriminates against low income and minority consumers, and that insurance scoring was a proxy for race."
What is your take on the situation? Leave a comment below.
For our British readers: In a column yesterday, Alan Tomlinson, a publisher for 24dash.com, talks about how Equifax — one of the three major credit bureaus — is warning that consumers “need to be careful that they aren’t still paying for their summer holiday well into the winter — hitting their credit rating.”
Do you have a credit-related question or a suggestion for the blog? Feel free to send us an email at creditreportandscores@gmail.com.
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.
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.
Tuesday, July 17, 2007
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.
Thursday, May 03, 2007
Do you risk your credit score if you cancel a credit card?
If you ever looked at your credit report (of course you did, we hope!) - you probably were shoked at the number of accounts listed. So you think if closing any of these old accounts you never use would be a good idea and will boost your credit score? Think again!
Here is a good explanation why you shouldn't do this. Keep them open!
Here is a good explanation why you shouldn't do this. Keep them open!
Thursday, March 22, 2007
Why Your Credit Score Is Important
A recent article in the Durham Homes Magazine points out the importance of a good credit score when applying for a mortgage. A score between 550 and 750 is usually required to obtain a loan. The score is calculated by considering your past payments punctuality, amount of current debt, credit history, and types of credit used. An important note is that recent searches on your credit history account for 10% of your score, so do not let a lot of companies do credit searches on your history!
Here are some ways to increase your score:
- Always pay your bills ASAP (at least 4 days before they are due)
- Keep your credit card balances below 50%
- Use one credit card often (but pay it off on time)
- Avoid having too many open lines of credit
- Do not cancel old credit cards (Unless you have other cards)
- Do not ask to reduce your credit (It lowers your ratio and it will hurt our score)
Your credit history is really important and it takes a long time to fix, so look after it!
Here are some ways to increase your score:
- Always pay your bills ASAP (at least 4 days before they are due)
- Keep your credit card balances below 50%
- Use one credit card often (but pay it off on time)
- Avoid having too many open lines of credit
- Do not cancel old credit cards (Unless you have other cards)
- Do not ask to reduce your credit (It lowers your ratio and it will hurt our score)
Your credit history is really important and it takes a long time to fix, so look after it!
Saturday, October 15, 2005
Keeping An Eye on Your Credit Report
Credit reports should be monitored as often as possible. I keep hearing stories about identity theft, and anyone of us can be a victim at any point in time. Privacy Matters provides credit reports from the three major US credit bureaus. Keep an eye on your credit file; it's not that easy to resolve discrepancies on it. In fact, it's easier for companies to drop something negative into your account regardless of whether it's accurate or not while it could takes months for you to resolve it.
Good luck!
Good luck!
Friday, October 14, 2005
Do you Check Your Credit Files?
You balance your checkbook and check your portfolio, but how frequently do you check your credit files?
Credit files are windows into your private life. Lenders look at your credit history to assess your creditworthiness. It’s to your advantage to know what your credit report says before you apply for credit in order to correct any inaccurate data. It can take up to six months for credit reporting agencies to make a change in your credit report, so give yourself at least that long before you start shopping for a mortgage, car or any other large purchase.
For an outstanding credit monitoring service that provides excellent identity theft protection and a FREE Triple Credit Report, click here.
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