yup, plus all transactions are faster with no counting change etc., i don't have to goto the ATM all the time for cash and it's one transfer at the end of the month
Posted on 11/27/2011 7:20:54 PM PST by Graybeard58
Credit scores inspire anxiety in many consumers. We can't easily see them, and we don't always know what's lurking behind them. Perhaps that's why there seem to be so many myths and misperceptions about exactly what's in a credit score.
In a recent national survey by Visa Inc. that asked U.S. consumers what factors negatively affect a credit score, plenty of answers were flat-out wrong.
About 25 percent mistakenly thought where they live could hurt their credit score. Others said — erroneously — that their job, their ethnicity or even their age could affect a credit score.
The findings are "dismaying," said Jason Alderman, Visa's global financial education director. But, he added, they aren't altogether surprising.
"People are uncomfortable talking about money, so they perpetuate misinformation by not discussing it with friends, family or at work," Alderman said. "These (erroneous) ideas pop up ... but people don't talk about them, so the myths become solidified."
A credit score is that magical, somewhat mysterious, number that determines so much of your financial life — from what you'll pay on a car loan or mortgage to, in some cases, whether you'll get hired. Typically ranging from a low 300 to a perfect 850, the higher your score the better terms you'll get from lenders and creditors.
Gerri Detweiler, a personal finance expert for Credit.com in San Francisco, says people carry a lot of misinformation about credit scores.
One of the common myths is that getting credit counseling or taking a debt management class is as bad as filing for a Chapter 13 bankruptcy.
"Credit counseling used to be reported in a way that had a negative impact, but it's not true anymore," Detweiler said. Taking a debt management class has never affected your credit, she added.
Another myth: A short sale is better for your credit score than a foreclosure.
"That's not necessarily true. They're both very negative and, depending on how the lender reports them, can have a significant impact on credit scores."
But even the negative factors on a credit score eventually get dropped from your credit history. Things like Chapter 11 bankruptcies, foreclosures, late payments and other hits generally fall off after seven years. Also, the older a negative citation is, the less impact it'll have on your credit score. As credit score site MyFico.com notes, a 5-year-old debt collection will hurt far less than one that's 5 months old.
Credit scores are based on credit reports, the financial history on you as compiled by the nation's three credit reporting bureaus: Equifax, Experian and Trans Union. By law, every consumer is entitled to a free, annual credit report from each of the three bureaus. To request your copies, call (877) 322-8228 or go to AnnualCreditReport.com.
It's a good way to spot any errors that need correcting and to get a snapshot of how you look to lenders, whether it's for a car, a mortgage or a credit card.
According to Visa's survey, 42 percent of Americans don't regularly take a look at their credit score.
"If you don't know where you are on the map, you can't get to where you need to be," Alderman said.
Why does a credit score matter so much? Money. On a loan, a higher score can save you thousands of dollars. For instance, on a 30-year, fixed-rate mortgage for a $250,000 house, a buyer with a credit score below 640 will pay about $258,700 in interest, according to MyFico.com. The buyer with a credit score of 760 or higher will pay only $170,800 in interest over the life of the loan. That's a difference of almost $250 a month.
It's a given that the malingering economy makes it difficult to stay credit-healthy. "If you're struggling, it becomes a harder road to a better credit score. But that doesn't mean you should give up," said Alderman.
If you're having a hard time paying bills, call your creditors to let them know. Ask about getting the minimum monthly payment reduced or stretching out the payments.
The only “free” way to get a Fair-Isaac score that I know of would be to apply for a refi or major purchase. Assuming, that is, you either actually want to do so or don’t plan to make some other major purchase because the application itself is something of a ding. They’ll tell you your score, or always have told me at least. Required to do so if you’re denied, in NC at least.
Funny thing is, I’ve been hit pretty hard by this not-a-depression since 2008, income off by two thirds compared to 2007 and prior, sold assets, cut credit lines, you name it. Rearranged my life to be able to live within reduced means. My FICO is higher than ever. Doesn’t make good sense, but there it is. So long as I have sufficient income I suppose it’s a good thing, if I ever have an emergency, but I don’t plan to run up any more debt going forward, just getting rid of what I’ve got. Just a mortgage with slightly over 10 years to go.
Ladies and gentlemen, the Democrat base.
Been trying to have them stop sending me those blank checks for months now. You wouldn't believe the BS you have to go through. Finally recieved a questionaire asking what "products" I wanted to receive correspondence for. Told them I was ONLY interested in getting my monthly statement. Will have to wait a bit to see if that finally does it.
Actually there is if you look at it from the creditor POV. A credit score does not reflect how likely you are to pay your debts, though it does reflect that indirectly. What it really does is it tells the credit companies how much money they can make off you. The more likely you are to close an account, the fewer fees they can charge you.
Household income and housing costs tend to be tied to one another, even as distorted as this became during the height of the housing bubble. States or even regions of states with inexpensive housing tend to have much lower household incomes on average, so it’s not any easier to do it there than anywhere else. The only way around it would be to live cheaply earning a high income in a high income area and buy cheaply in a lower income area. Possible, if one’s income isn’t tied to physically being in a specific place.
But that’s not what a credit score is suppose to be. It’s allegedly used as an indication of how timely you pay your bills When you go for a mortgage your interest rate is based on your payment reliability.
I check my credit history regularly since I was a victim of Identity theft 10 years back...luckily I caught it in time and prevented any significant issues. Still I do the periodic check just to make sure...
you do spend more with a credit card, so we are trying to limit ourselves to only one card and to use it sparingly...
The credit score to strive for is a credit score of zero, not one in the high 700’s.
You need a high credit score to get loans. A credit score of zero means you don’t have any loans...and that you won’t need any loans thus you won’t need a credit score.
Don’t fall into the credit trap. If you are in the credit trap, get out of it.
Do a little exercise with your own finances.
Take all your monthly payments and add up what part of those payments go to only making the interest part of those payment. How much interest do you pay each month?
What would your lifestyle be if you had that extra interest money to live on?
If you have credit card debt at, say, 10% on the unpaid balance and you have some savings, take your savings and pay down the card or pay it off completely.
You have just made an investment in yourself instead of being an investment for the credit card company.
Work your debt/interest payments problem and get yourself debt free. Then laugh every time someone posts a thread that says, “Credit scores spawn anxiety.”
The way to win that game is not to play it. No credit cards. Get rid of them. Never ever use them.
btt
Spending yesterday's money is best. Spending today's money is okay. Never spend tomorrow's money.
It’s even worse than that. If you don’t carry a balance on your credit lines, your score will also be lower. The best way to raise your score is to never pay off a loan early, never pay down your credit cards, and keep at least a few lines open with a balance at all times (don’t just have one card, have three or four, but don’t go overboard; too many will also drop your score). As noted elsewhere, the score is really about how good of a client you’ll be to the companies i.e. how much money will they make off of you, not how good you are at staying out of debt or how responsible you are. All they want to see is that you can pay their maintenance fees.
By not going into DEBT in the first place and living within your means or cheaper. Something too many people don’t understand, especially politicians who believe it is their duty to ENSLAVE America’s children with DEBT.
I can't laugh at other people's misfortune and a lot of people are trapped into high credit balances. Through their own making most of the time perhaps. Some are in the trap because of circumstances forced on them by medical expenses or some other thing, beyond their control.
Personally, I don't even know what my credit score is, nor do I care as to how it affects my ability to borrow money but there are other things that score affects, including but not limited to, insurance and as the article points out, even the ability to get a job.
I'm neither looking for a job nor to borrow. I asked my insurance agent how my credit score was and he said it was excellent. I haven't paid a dime of interest in, possibly 20-30 years and yes, I have credit cards, one that I use a lot. They are handy tools when not abused.
yup, plus all transactions are faster with no counting change etc., i don't have to goto the ATM all the time for cash and it's one transfer at the end of the month
You make a good point that we should not laugh at people that find themselves in tough times. That certainly was not my intent but you are correct to raise the point.
For those in very tough financial straights that have lost everything and a mountain of debt, they have actually gotten ahead of the game.
They are starting at zero instead of in a debt hole.
The trick for them to get way ahead is to never get into debt again. Some people that get into trouble set a goal of being able to get a credit card again. They get no sympathy from me if that is their goal.
OK, rent a car then. Or book an airline ticket.
Tell me how you accomplish that.
The purpose of FICO scores is to measure risk. The risk a lender takes in lending money on credit.
Closing a credit card can lower the score because it means you are not using credit or using less credit. Using credit in several different forms and paying as agreed increases your score.
You’ve proven you can pay as agreed using credit.
If you never use credit, which can be extremely wise financially, causes you to be a blank when measuring risk to extend credit. It is just not known from this whether you will pay as agreed if given credit.
Before you say it, I believe having a personal relationship with a lender who knows your character is a far better system. That’s the way it used to be. But that would greatly limit the time and amount and varieties of credit available today.
Again, it would be better if you never borrowed a dime; however, if you do wish to use credit, the FICO score gives the lender a measure of your risk quickly, and that’s become a valuable thing for those lending and borrowing today.
BTW: Paying your cards off each month will lower your score, but most people don’t know that the balance reported for scoring is before the bill and pay date. So to get the credit score for it, you need to pay it off and keep it down for at least one reporting period, say before you go for a major purchase.
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