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This Week’s Top Credit Questions

Justine — Wed, 28 Jul 2010 01:25:39 +0000

No other topics are the bane of consumers’ financial lives more often than the terrible triad of debt, credit cards, and credit scores.

Sometimes interconnected and conspiring to spoil your financial health, and just as bad on their own, these issues come up at the Credit Advice Center so often because many consumers are fuzzy on the basics of how debt, credit cards, and credit scores affect them. So before any of the threesome rear its ugly side, read what’s been buzzing around our community-powered Q&A and arm yourself with credit-savvy skills.

And please, feel free to stop by the Credit Advice Center yourself to post your own credit question or shoot the breeze with other Credit Karma members with some smart answers of your own!

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Can you suggest steps to take to pay off credit cards totaling $14,000?
Your Answers:

You can opt for debt settlement to deal with your debt. I would suggest doing it yourself instead of going to a debt settlement company to avoid fees and the potential hassle of involving another party in your personal finances…
If you have a job and a decent credit score join a credit union. Some CU’s offer personal loans to pay off your credit card debt…
You might look to look into LendingClub.com or Prosper.com (which is listed here), assuming you don’t have that many other options for less expensive financing…
Check out more answers here!

I have a 707 Credit Score yet denied for everything! I’m somewhat a beginner and have a “thin file” but nothing bad or negative in my report. I dont want a First Premier Bank card with a 300 limit. Anyone know of something for me?
Your Answers:

707 is not considered a high credit score anymore to not get questioned and risk getting turned down for loans. 707 is still a good score, but it’s not a “decision proof” score….
How old are you? If your young and don’t have a lot of credit go to a credit union, they will be able to approve you for a low limit card…
Hi, I was in your same situation about two years ago when I just turned 18…. So in these days it’s going to be extremely difficult to get a card right when you jump into the game of Credit. I’m with you in avoiding getting a low credit limit and not having to pay a big fee to start up, so stay away from the secured cards if you can…
Read more here!

How do I tell a potential new employer NO about looking at my credit report?
Your Answers:

Luckily, you must give permission for them to check your credit report, so a simple “no” should work. However, they also have the same right to tell you “no” about the job offer….
My husband has terrible credit, but still got a job after allowing the employer to see his credit report. I think mattzzg1 is right. They just want to make sure you’re not drowning in debt so bad that you’re likely to steal from them.
Check out more answers here!

I have 2 checking accounts; will opening a 3rd affect my credit score?
Your Answers:

No checking accounts don’t affect credit. The only exception is if you get some sort of line of credit or overdraft protection. Those could…
You can have as many checking accounts as you’d like — the accounts themselves have nothing to do with your credit report, but as hardeight mentioned, features that are tied to those checking accounts requiring “credit approval” can have an affect on your score such as an inquiry, positive (if good), or negative (if something goes wrong)…
Check out the full answers here!

Monday Jumpstart to Personal Finance & Credit Report News

Justine — Mon, 26 Jul 2010 19:35:25 +0000

A new bill introduced in Congress last week aims to protect homeowners from a nasty credit score hit when applying to modify a mortgage, reports the Chicago Tribune. A mortgage modification typically lowers a homeowner’s credit score because the homeowner’s credit history reflects that they are no longer paying the mortgage according to the original terms. Homeowners applying for a permanent or temporary modification, some with great credit, are typically hit with a 100 point drop.

Credit score damage that substantial can prevent a consumer from getting loans, credit card, or even cost them a job. This bill, making its way to the Congressional floor, hopes to cut unfortunate homeowners a break on their credit so they are no longer penalized.

For more credit score and credit report news, plus awesome tips to keep up with your personal finance, check out our favorite picks from around the web!

Personal Finance News

5 Things That Are Killing Your Budget, brought to you by Moolanomy. Are impulse purchases or too strict a budget sabotaging your budget?
MarketWatch shares Five money tips for couples in tough times.
In case of disaster, Bargaineering suggests these steps to Building Your Financial Bug Out Bag.
A Simple Question To Jump-Start Your Finances, from Get Rich Slowly, will help reset your financial outlook.
A must-read for life-long personal finance knowledge, from CNN Money — Not Enough Cash? Get Your Priorities Straight.

Credit Report & Credit Scores News

3 Ways Your Credit Score Impacts Retirement Readiness, reports Yahoo! News.
Online statements might be a convenient alternative, but Own The Dollar sheds some light on how Online credit card statements can lead to bad credit scores.
Memorize this NOT-to-do-list from the Sun’s Financial Diary: Five Surefire Ways To Torpedo Your Credit Rating.
Moolanomy Personal Finance asks, Are You Aware of the Most Common Credit Threats?
Understand Your Rights Under The Fair Credit Reporting Act, writes Own The Dollar. Freedom of speech? How about freedom to a credit report?

Bad Timing: More Employers Do Credit Checks As More Consumer Credit Scores Fall

Justine — Fri, 23 Jul 2010 01:19:51 +0000

It’s a pretty vicious cycle—without a steady paycheck, unemployed Americans’ shaky financial situations can often plummet credit scores, especially since unemployment often pushes consumers to rely heavily on credit, or miss bills here and there, or even declare bankruptcy or foreclosure.

At the same time, employers are increasingly doing credit checks to screen job applicants. So if unemployment is worsening your credit, it may very well be the things that costs you a job.

According to a survey reported by CNN Money, 60% of employers currently use credit checks for at least some of their job openings, a big jump from the 35% of employers reported in 2003.

This is bad timing considering consumer credit scores have been reportedly sinking to new lows. 25.5% of consumers—nearly 43.4 million people—have a credit score of 599 or below. That means 1 in 4 consumers are considered poor credit borrowers and don’t have the credit to qualify for most loans and credit cards due to stricter lending standards. According to the Bureau of Labor Statistics, the unemployment rate hovers at 9.5%, equal to 14.6 million Americans. Now, given the grim financial situations many of these unemployed Americans are facing (with nearly half of them unemployed long-term for 27 weeks or more, reports the Bureau), how many of the 14.6 million unemployed also fall into the bracket of the 43.4 million who are struggling with poor credit?

That isn’t to say that unemployment immediately leads to poor credit. But without consistent income coming in, keeping up with mortgage payments, credit card bills, and more become financial hardships that heavily impact credit scores. When it comes to perfect on-time payments to maintaining a 750 credit score, or skipping this month’s car loan payments to put food on the table, unemployed Americans are facing a rock, a hard place, and strict job-hiring practices too.

“You get in a Catch-22: You can’t pay your bills because you don’t have a job, and now you can’t get a job because you can’t pay your bills,” quotes CNN Money. While a handful of states have passed laws restricting employer’s use of credit checks in hiring decisions, many businesses claim that a credit check is pertinent to weeding through job candidates to asses “financial responsibility and financial stability”. Consumer advocates argue that job seekers are being unfairly judged on the surface of their credit standing as “a proxy for character reference”.

What do you think? Are these credit checks an acceptable aspect of the job hunt? Share your thoughts with us!

This Week’s Top Credit Questions

Justine — Wed, 21 Jul 2010 00:22:29 +0000

What do on-time payments, bad scores, and recent immigrants all have in common?

All three of these interesting topics made it to our top Credit Advice Center questions! Check out this week’s standout credit questions and read what’s been buzzing around our community-powered Q&A. Feel free to stop by the Credit Advice Center yourself to post your own credit question or shoot the breeze with other Credit Karma members with smart answers of your own. You might just make it to our Q&A hall of fame next week…

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Question: Why, when I have 100% on-time payments, does my credit score keep going lower each month?
Your Responses:

Someone please respond to this question, I’m having the same issue!
Are you applying for new credit and getting inquiries? Did you pay off an old loan a while ago?…
Maybe your credit card utilization percent is increasing?…
I wouldn’t recommend going wild with a card unless you know that as much as you put on it you are able to pay off immediately, which is what you should do…
Check out more answers here!

Question: How can a new immigrant better build their credit score?
Your Responses:

Get a secured credit card. Those usually don’t have a credit requirement. A secured credit card will report your payment history to the bureaus and start your credit history…
I do appreciate your advice. Now, does it make a difference that I apply for a secured credit card with my bank or can I apply with some other financial institution?…
Any institution is fine. Just make sure that they report to the three credit bureaus and make sure they don’t perform a credit check…
Thank you so much for your prompt reply. It is sweet & to-the-point. That’s exactly what I need now. I wonder if I can throw in another question…
Read the rest of this conversation here!

Question: Why do we have a bad credit score when we always pay more and not late in the last 3 years?
Your Responses:

The most likely reason: When you say that you have a “B” score on “payments on time” in the last 3 years, I’m taking this to mean that you DO have a late payment sometime before that…
What I have found out is that even if you pay your bills on time, if the amount of debt you have out ways what you normally bring in or its over half of what you bring in, to creditors it looks like you are stretched thin and there is really very little “asset” left after you pay everything…
Finish up these answers here.

Monday Jumpstart to Personal Finance & Credit Report News

Justine — Mon, 19 Jul 2010 19:23:11 +0000

Consumers are just waiting for the ax to fall on the next bank cutting out free checking accounts. We anticipated that free checking would be long-gone once industry reforms forced banks to recoup revenue, lost from overdraft fees, by tacking charges onto already-free checking accounts. The New York Time’s “Bucks” blog keeps a great list of which banks are ending free checking and details their newly modified policies. Check out the Free Checking Account Watch List to see if your own bank’s free checking is on the chopping block.

Get your fill of more personal finance and credit advice with the following round-up, focusing on how to save more money and secrets to building better credit.

Personal Finance News

Automate your savings account! Moolanomy’s post will convince you of all the benefits of this smart financial decision.
Read Foreigner’s Finances personal story, Why I spent $2,000 on an airplane ticket. It’s a great way to remind yourself of what REALLY matters when it comes to you and your money.
Ask Liz Weston blog makes a good argument for Why you should pay for luxuries in cash.
8 Ways To Maximize Gas Mileage, brought to you by SmartMoney. Beat the summer prices on gas and save money.
These 7 Simple Money Tips Can Make All Your Dreams Come True, writes MoneyNing.

Credit Report & Credit Scores News

SmartMoney tells the story of the Credit Score Haves And Have-Nots.
Raise your credit score! Find out how at CNN Money.
The Washington Post reports that Credit matters more when seeking best car deals.
U.S. News & World Report features an informative blog post entitled, 9 Surprising Facts About Your Credit Score. #1 There are three major credit bureaus, not just one. Read on…
Bill to Give Credit Scores to Renters, reports The Wall Street Journal.

Skeletons in Credit Karma’s Closet @ Credit Advice Center

Justine — Wed, 14 Jul 2010 01:10:00 +0000

Some of you are curious about what kind of skeletons Credit Karma has been hiding. Hidden fees perhaps? Strings attached somewhere? Shady security? Maybe some faulty scoring? The answers Credit Karma community members posted in response to questions surrounding the mystery of Credit Karma are… that there is no mystery. Credit Karma really and truly is a pro-consumer, 100% free site that provides credit scores and credit tools and resources. What, were you expecting anything different?

Check out the conversations that have been buzzing at the Credit Advice Center lately…

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Question: My Credit Karma score hasn’t moved in 3 months. With the deletion of several negative accounts and late payments, my TransUnion FICO score has increased by 50 points. Why is this?
Your Answers:

…This natural difference between credit score models may account for the point difference between your Credit Karma and TransUnion FICO score….
Sometimes closing old accounts can lower your score. Be careful.
Check out the rest of these answers.

Question: Does checking my credit score on Credit Karma count against me as an inquiry each time I update?
Your Answers:

… This is a very common question and creates confusion for a lot of people…
…Since these credit scores are not used in the application for credit, there is NO negative impact on the users credit score from checking their credit score on Credit Karma…
According to the credit karma FAQ, the answer is no.
Check out the rest of these answers.

Question: Does Credit Karma use cookies to store my data and how does that affect my privacy?
Your Answers:

According to the privacy policy, credit karma doe use cookies. As for that affecting your privacy it depends on how they use the cookies as 99% of sites on the web use cookies.
Check out the rest of these answers.

Question: Which credit bureau and credit score does Credit Karma use for its data?
Your Answers:

Credit Karma uses TransUnion for its credit data and credit scores. The credit score model is one developed by TransUnion. This score is the same score used by several other sites for credit monitoring.
The government does mandate credit reports as you suggest. As for the score, they are a tool of convenience and different lenders use them differently. It is unrealistic to build one score that works for everyone.
It’s interesting that all 3 reporting agencies have such a difference in their range of scores…
It is a statistical fact that no one credit bureau is better than any other. There are some correlations with better coverage in different geographies based on old reporting habits. Today, those biases are virtually gone due to the ease of transferring data…
Check out the rest of these answers.

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Post your own question now or offer some answers at the Credit Advice Center!

Monday Jumpstart to Personal Finance & Credit Report News

Justine — Mon, 12 Jul 2010 18:06:03 +0000

Since the recession hit, Americans’ credit scores have been steadily sinking, reports MSNBC. An increase of 2.4 million people have shifted to the lowest end of credit scores in the past two years. Credit scores of 25.5% of consumers, nearly 43.4 million people, have a poor credit score of 599 or below. With this type of credit score, qualifying for a credit card, mortgage, or car loan is less likely, and furthermore, financial offers would include sky-high interest rates.

On the brighter side, consumers with an excellent credit score of 800 or above has increased to 17.9% from the historical average of 13%.

A credit score, a numerical assessment representing a consumers’ credit risk, is crucial to your financial life. Work on a healthy credit score with tips and good financial know-how from this roundup of the week’s best articles and posts on personal finance and credit.

Personal Finance News

10 ways to count your chickens before they hatch, writes My Two Dollars. Have any idea what it means? Read on and get interesting financial advice.
Want to cut down on your utility bills? SmartMoney suggests 13 Simple Ways to Lower Your Electric Bill.
A Good Budget Can Save You From Insolvency, reports the Sun’s Financial Diary. Find out how.
If you’re looking for a good recommendation for a personal finance management site, look up Wisebread’s list of 5 Free Wesabe Alternatives.
Do you eat out too often? Cashmoneylife describes the perils of being an expensive foodie.

Credit Report & Credit Scores News

Can you repair credit without plastic? The answer might surprise you at Ask Liz Weston.
Consumer Commentary writes on How To Build Credit, with crucial steps like Paying Bills on Time.
Business Insider gives more great steps on How To Maintain A Winning Credit Score.
Bankrate.com answers the question, Should I Dispute High Balance on Credit Reports?
‘Adverse actions’ by lenders to let you see free credit score, writes Rapid City Journal. Read more on the new free credit score provision on the upcoming financial reform legislation.

What’s the Deal with Debt and Your Credit Score?

Justine — Fri, 09 Jul 2010 23:10:28 +0000

It’s a love-hate relationship. When debt crops up on your credit report, good debt management can contribute to a great credit score… or mishandled debt can also damage your credit score.

If you are a credit-savvy consumer, you know that total debt is one of the key financial components that go into calculating your credit score. While debt isn’t necessary to a good credit score, having credit is necessary, and borrowing any kind of credit–whether its a credit card or a mortgage–can potentially accumulate debt. Ultimately, it is how you deal with your debt that lenders consider as a reflection of your creditworthiness.

Here are a few tidbits on the love-hate relationship of your debt and your credit score.

More debt isn’t always a bad thing. Not kidding. Good credit habits include minimizing revolving debt, such as credit card bills that you should pay off each month, while balancing installment debt, such as student loans or mortgages that keep you in debt for years. Also, having a mix of credit, from mortgages to loans to credit cards, is important in a credit score and demonstrates responsible credit management. Surprisingly, Credit Karma data shows that those with $5,001-$49,999 in debt averaged a credit score of 640, while those with more than $150,000 in debt averaged a higher credit score of 701.
All kinds of debt can affect your credit score. Did you know your medical bills, utility bills, and even your cell phone bills can damage your credit score? Any bill or loan you default payments on can be sent to a debt collection agency and will become unpaid debt that stays on your credit report that reflects in your credit score. If you find out from your credit report (or ceaseless phone calls from a debt collector) that you have unsettled debt, contact the collection agency and negotiate payments on your debt to settle as quickly as possible. After the debt is settled, check your credit report to make sure the debt is listed as “Paid in full” or “Settled”.
Prioritize your debt. Healthy credit habits include dealing with debt as promptly as possible by prioritizing your debts. Installment debts stick with you for awhile, so adding money to your minimum monthly payments will save you in interest in the long run and pay off your debt sooner. For your revolving debt, first pay off the cards with the highest balances or highest interest rates (or both). These cards are costing you the most by piling highest interest on top of your principal debt, so get rid of them as soon as possible. Pay off first whatever debt is costing you the most money, and use the freed-up, extra money to tackle the next card.

Love it or hate it, debts are inevitable in your financial life, especially if you plan to take out a loan, buy a home, or use a credit card. But heed these insights and maintain good credit habits so that one day you and your healthy credit score can live happily ever after.

Should You Go All Cash Or All Plastic? The Perks And Precautions

Justine — Thu, 08 Jul 2010 01:14:22 +0000

Going Cashless

Once upon a time, cash was ubiquitous amongst common folk and “charging it” was reserved for the rich, fancy-pants type. Now, most Americans are paying less by paper and coin and more often in credit card, debit card, online transaction, and even up-and-coming mobile phone payments.

MintLife Blog writes that the future of money is the age of the cashless, as the rise of debit cards in the mid-1900s signaled the decline of paper checks and cash. Today, the fall of cash is speeding up thanks to increased credit card use and the introduction of mobile transactions via Smartphone, reports Daily Finance. Down the road, paying by cell phone may force credit cards to go the way of cash.

It’s unlikely that you’ll make a definitive lifestyle change to go all plastic, but it’s interesting to see the perks and precautions if you did decide to go all-cash instead. If you decide to go with either extreme and ditch cash or plastic, be sure to comment and let us know how it’s going.

Going All-Cash

Perk: Imagine life without debt. If you go all cash, you can’t get in over your head with debt if you aren’t swiping more on credit than you have actual money in the bank. Plus, budgeting strategies like the cash envelope system is a simple way to keep track of expenses and restrict spending.
Precaution: If you don’t use credit, you won’t build credit. A great credit score and comprehensive credit report is crucial for a healthy financial life because it gives access to loans, credit, and is looked at by employers, landlords, etc. Without credit, you’re limited in your financial options.
Perk: You avoid pesky fees and sneaky banking practices. You won’t be subject to the ups and downs of the credit card industry and won’t have to worry about interest rate hikes or surprise charges if you steer clear of using plastic altogether.
Precaution: You’ll give up some convenience. Carrying hundreds of dollars on you for every shopping trip or big ticket purchase is not only inconvenient, but can also put you at greater risk of theft. Plus, you’ll have to make constant trips back and forth to the bank.
Perk: How would you like less stress? Cash-only means you will potentially have no debt fears looming over you, no credit card bills to be anxious about, and you’ll learn to manage money so that you are in control of it, rather than the other way around.
Precaution: With no credit or debit card, you can’t benefit from any cash back or rewards program. If you look forward to getting cash rebates, airline miles, or rewards points for every time you spend, it may not be worth it to you to go without plastic cold turkey.

Answers To Your Credit Score & Credit Card Questions

Justine — Wed, 07 Jul 2010 00:47:04 +0000

If you are looking for all questions and topics that are credit-related, you’ve stumbled into the right place! The Credit Advice Center at Credit Karma is keeping busy with hundreds of questions asked by consumers and answered by consumers too.

Below is a glimpse of conversations popping up right now. And feel free to stop by the Credit Advice Center yourself and submit a question of your own, or browse through posted questions and suggest an answer! It’s the new way to empower yourself through consumer-generated knowledge.

Question: To boost my credit score, should I pay off a student loan over time or right away?
Your Answers:

Paying them off at once will be more beneficial to your credit score than paying them over time, especially if you have other accounts (like a credit card). The effect of reducing your debt is greater than the effect of making on-time payments on an open account…

Question: What does “charge off” mean exactly?
Your Answers:

Many people mistakenly think when a debt has been charged-off that it’s been cancelled by the creditor. This is not true. You are still responsible for paying off the debt. However, you will not be able to use your credit card to make purchases…

Question: How often to use a paid off credit card to keep line of credit open?
Your Answers:

The short answer is to use each of your cards once a month (and pay them off) to maximize your credit score….
Thank you so much for your suggestions…once a month is a lot to demand from these companies… I have heard every 6 months would suffice…..
So far, with the two companies I have credit with, one has a “one-year” clause of closing the account for inactivity and the other has a “six-month” clause. So I think you’re on the money (so to speak – six months is the minimum that I’ve heard of or encountered but some banks go longer (e.g., Chase) before penalizing in some way…
The new credit law that just went into affect BANS inactivity fees…