Credit

Thinking of Co-Signing a Loan?

Think about this: three out of four co-signers end up paying the debt themselves.

http://www.stretcher.com/stories/16/16sep26e.cfm?STT0928

Co-signing isn’t just a recommendation or a personal reference. It’s a financial obligation.

Even the most conscientious person can lose their job or get sick, and then you’re stuck with either paying their debt or taking the hit on your own credit report.

Advertisements

Uh-Oh, Check Your Credit Report Real Soon

https://www.yahoo.com/finance/news/wells-fargo-customers-recall-their-shock-upon-discovering-fraudulent-accounts-124902698.html

You may have heard the latest Big Bank scandal. Under pressure to get customers to open all kinds of accounts, Wells-Fargo employees have been opening accounts that people don’t know about. Some of the victims had only the briefest interaction with the bank, and ended up with credit cards and other accounts they didn’t know about. Some of those accounts incurred fees, and others will have damaged a person’s credit score.

It might be a good idea to go down to your nearest branch and ask one of the desk people to search their records for any accounts in your name.

If you haven’t done it lately, a free check on your credit report could show you any nefarious activity:  https://www.annualcreditreport.com/requestReport/landingPage.action

Another free source is http://www.creditkarma.com.

Don’t fall for the name in freecreditreport.com, it’s only free with a paid membership.

 

Your Credit Score, Find it, Fix it

Having a good credit score can save you money. It makes you eligible for lower interest rates when you need to borrow money. It can make your insurance rates lower. Some employers now use credit scores as part of deciding whom to hire. The FICO credit score scale runs from 300 to 850. Above 700 is good, above 750 is excellent.

Www.creditkarma.com is a good free resource. They show you most of what a credit report would show you, right there online. Some credit cards will show you your FICO score on their websites.

Everyone is entitled to one free credit report from each of the three bureaus every year. You can get them at http://www.annualcredit report.com or (877) 322-8228. (Do NOT confuse this with the freecreditreport.com site with the catchy ads. Their report is only “free” with a paid membership.)

The three credit bureaus can be contacted at:

Different bureaus may have different errors. If you’re getting ready to apply for something big like a mortgage, you’ll want to check all three. If you’re not, then checking different ones a few months apart will monitor your credit more closely than one yearly request of all three at once.

Finding and correcting errors on your credit report is an important first step to improving your credit score. In the identifying information section, look for wrong spellings of your name and for names that aren’t even yours. Look for an address you never had, wrong birthday and wrong social security number. This part is very important, to prevent suffering for someone else’s bad credit. If you have a common name, or are a Jr. or a Sr., this is vital.

In the credit accounts section, look for anything you will want to dispute with the credit reporting companies. These include:

  • Accounts that aren’t yours
  • Negative entries (except bankruptcy) that are more than seven years old
  • Negative entries your spouse received before your marriage. (Positive ones can just as well be left there.)
  • Entries that show as past due even after it was wiped out in bankruptcy
  • Negative entries that aren’t true. It’s your account, but you never paid late.
  • Watch for repeats: sometimes the original creditor reports an account and then a collection agency reports the same account.

In the credit inquiries section you’ll see a record of anyone who asked about your credit, such as if you applied for a credit card. Having too many of these will look bad. If you find any that you didn’t authorize or that are more than two years old, you can dispute them. Your own inquiries about your own credit don’t count against you.

In the public records section you can dispute any paid tax liens or judgments that are over seven years old. You can dispute bankruptcies more than ten years old that don’t have a specific code such as chapter 7, chapter 13, etc.

Send the list of disputes to the credit bureau. They then have to check with the reporting entity to verify it. If the creditor doesn’t respond, or admits it’s inaccurate, the bureau will remove the entry from your record.

If the creditors don’t update their records, they may send in the same wrong information again the next time they report to the credit bureau. For this reason, it’s smart to do this kind of cleanup just before applying for something important. That way any stubborn errors won’t have come back yet during your application process. Then follow up at least every year to make sure the errors stay gone.

What if you have a negative item which is true, but there are reasons for it such as illness or divorce? You are allowed to send a one-page letter to the credit bureau with a request that it be made part of your file. An effective letter will explain briefly and calmly what happened. Most importantly, it will show why such a thing is unlikely to happen again in the future.

 

What if you have no credit history or have bad credit? One option is to get a pre-paid credit card. You pay the company up front and your limit on the card is the amount you paid them. This allows you to have a credit card on your credit record, without getting in over your head spending too much with it. They do charge fees for this, so do the math to see if it’s going to be worth it to you. Having a bank account and a phone or other utilities in your name is also a good start to building or rebuilding credit.

 

Marie Brack is the author of Frugal Living for the 21st Century: Adventures in Using Your Money Wisely. It’s available on Amazon.com in both Kindle and paperback versions.

https://www.amazon.com/s/ref=nb_sb_noss_2?url=search-alias%3Daps&field-keywords=marie+brack

 

Credit – Times Have Changed

If you’re near my age, you remember when it was “good” to have some credit, and to use it. Now, they want you to have a lot of credit, and use as little as possible. When I say ‘use,’ I mean carry a balance from month to month and owe interest, not pay with a card and pay the card in full each month.

“They” are most impressed if you have a very large amount of AVAILABLE credit. Large credit lines, with small or zero balances.

I agree with them. I think the most effective use I can make of my credit is to keep it active by using the card, and keep it clean by paying it off either in the same month or within a month or two. The main benefit to me of a credit card is to be able to pay for something like a car repair that costs too much to pay out of pocket. Then I have a month or two or three to pay off that expense gradually.

 

Read more about getting and maintaining good credit in my book: https://www.amazon.com/s/ref=nb_sb_noss_2?url=search-alias%3Daps&field-keywords=marie+brack

The Value of a Well-aged Credit Card

When it comes to your credit, a card you’ve had for a long time has great value, even if you don’t use it. The longer you’ve had various lines of credit in your credit report, the better you look. Even though it seems tidier to cancel accounts you no longer use, leaving them alone is actually better for your credit score.

(If you have a spending disorder and just can’t manage credit well, it may be that your credit score already sucks, so canceling everything you can, to remove temptation, may be the wisest choice.)

I wish I had known this a decade ago when I “cleaned up” my credit report by removing old department store accounts I don’t use anymore. My oldest card would have been forty years old this year if I’d left it alone. My oldest card is 9 years old, and averaged with the others comes out to 6 years. By credit score standards, that’s merely “fair.”

So if you can, age those cards like fine wine!

 

 

Marie Brack is the author of Frugal Living for the 21st Century: Adventures in Using Your Money Wisely. It’s available on Amazon.com in both Kindle and paperback versions.

https://www.amazon.com/s/ref=nb_sb_noss_2?url=search-alias%3Daps&field-keywords=marie+brack

Hard and Soft – Not Tacos, Credit Inquiries

There’s widespread misunderstanding of the effect on your credit score when someone checks your credit. You checking your own credit should never have an impact. When a business or other creditor checks your credit, it MIGHT have a negative impact. The difference lies in whether the inquiry is “hard” or “soft.” This is a reason not to apply every time a store offers you 10% off if you apply for their credit card. That’s a hard inquiry, and too many of them can drag your score down. It makes you look like you’re out on a credit-getting spree, preparing to charge up a storm and risk being unable to make the payments.

When you arrange a cell phone contract, ask the vendor if they are going to check your credit, and if so, whether the inquiry will be hard or soft. They can do soft, but they don’t always.

If you rent a car using a debit card, the company may very well check your credit, and without mentioning it to you. Given a choice, it’s better for your credit to use a credit card instead of a debit card when renting a car.

 

 

Marie Brack is the author of Frugal Living for the 21st Century: Adventures in Using Your Money Wisely. It’s available on Amazon.com in both Kindle and paperback versions.

https://www.amazon.com/s/ref=nb_sb_noss_2?url=search-alias%3Daps&field-keywords=marie+brack