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The Credit Scores You Don’t Get to See [Credit Report]

Posted on June 24, 2009
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You have a right to see your credit score once a year, but that’s not the only credit knowledge lenders and sellers base their decisions on. MSN Money runs down eight “secret scores” that the credit world keeps on you.

Photo by TrinityCreditServices.

These non-FICO scores don’t factor into that seemingly all-important trio of credit bureau numbers, but they do affect how credit issuers and contracts will be negotiated. Besides looking at credit histories to determine if a borrower is likely to be late or go bankrupt, credit histories allow companies to fine-tune their marketing to you, even if you’ve been strong-willed in the past:

Attrition-risk score: Attrition risk refers to the likelihood a user will stop using a card, and attrition-risk scores are typically used in combination with other scores to determine what to do next if you look ready to bolt. If your account generates a lot of revenue and is deemed at low risk for default or bankruptcy, for example, the issuer might aggressively try to keep your business by jacking up your credit limit, lowering your rate and pelting you with convenience checks. If your account isn’t that profitable or is deemed risky, on the other hand, the issuer might just let you go.

Hit the link to see seven other “secret” scores the junk mailers and lenders of the world are looking at.





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Reduce Your Debt with a DIY Balance Transfer [Credit Cards]

Posted on March 18, 2009
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You’re looking to cut down on your debt and reducing the APR on your credit card would be a great step in that direction. What if you can’t find a good balance transfer promo?

Photo by Serge Melki.

Over at the financial blog FiveCentNickel they’ve got a rather novel and sneaky way of creating your own no-fee balance transfer. It relies on two things: first that even if you can’t find a credit card with a good low or no-interest balance transfer that you can find a card with low or no-interest on purchases and second you’ll need the help of the US Mint. How do you achieve this feat of money magic?

Once you have your card, simply drop by the US Mint and buy cash with your credit card. That’s right, you can buy $1 coins straight from the Mint, and you can pay with a credit card. They come in boxes of 250 coins, with a limit of two boxes per order, and shipping is free. Thus, you can buy up to $500 per order.

Once your coins arrive, simply deposit them at the bank and use the proceeds to pay down your high interest debt. Bip, bop, bam. You’ve just turn that “0% on purchases” promo into a 0% balance transfer. And best of all, there are no fees.

It’s legal, it achieves the goal of the US Mint to get dollar coins into circulation, and unless your credit card company has a policy against using credit to buy currency, you’re golden.





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FICO Credit Score Calculations Change Today [Credit Report]

Posted on February 5, 2009
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In the current economic downturn, the last thing you want to see is your credit score go to hell. Today, a new system for determining your credit score has rolled out, and here are the highlights.

Photo by TheTruthAbout….

The new FICO system—called FICO 08 (apparently it was meant to debut last year)—has tweaked many factors, hoping to distinguish between consumers who've made an isolated mistake and those with habitual credit troubles. Our friends over at Consumerist have covered the highlights:

  • Debts less than $100 that go to collections will matter less.
  • They will look at the total picture more. A single repossession, for instance, won’t matter as much if everything else looks good.

Head over to Consumerist for a closer look at four other ways the scoring has changed, then let’s hear how you feel about those changes in the comments.






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Avoid these Five Common Credit Card Company Tricks [Money]

Posted on January 26, 2009
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Even if you’ve tried reading the fine print from your credit card company, it’s rarely obvious what it all means. Weblog Get Rich Slowly takes pity on us, breaking down five common tricks to watch for.

The post breaks down five promises, explaining the trap set up by each promise, then detailing you can avoid it. For example:

Promise #3: “0% APR on balance transfers for 12 months!”

The Trap: Two-fold. First off, it’s almost impossible these days to transfer a credit card balance without paying 3% of the balance upfront. Transfer $5000 and you’ll pay $150 before we even start talking about paying down the balance.

Second, almost all card companies take your payments and apply them first to balances with the lowest interest rate. Say you transfer $1000 to a card at 0%. The card’s interest rate on new purchases is 13.99%. This month you buy $500 worth of stuff with the card, then pay $500 when the bill comes. Do you still have a $1000 balance at 0%? No, you have a $500 balance at 0% and a $500 balance at $13.99%! Why? Because your $500 payment went toward the balance sitting at 0%, not toward the balance sitting at the 13.99%.

Your Plan: A couple of options. The easy thing to do would be to swear off credit for a bit — transfer the balance then don’t use the card until it is paid off. (You’d stilll get hit with the 3% fee, but it might be worth it if you had a high interest rate on your old card.)

If you have decent credit and a little more self control, you could get a new credit card that offers a 0% rate on purchases for 12 months, then use it while you pay off your old card’s balance. By doing so, you focus on paying off your high-interest debt while floating new purchases at 0%. If you follow my logic, this is very similar to transferring your balance at 0% but without the fee. Either way, recognize that the 0% rate doesn’t last forever and the bill eventually comes due.

Be sure to head to the post to school yourself on the other common tricks to be wary of. If you’ve ever been suckered into a similarly less-than-ideal credit situation, share your experience in the comments. Photo by Andres Rueda.






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