The other day I was talking to a friend in the loan/credit department of the credit union that so graciously pays my salary and the topic of conversation turned to a member who had applied for our best fixed-rate credit card. He had a strong enough credit score and made plenty of money but he was denied. Why? Lack of overall credit history. And here I thought all you needed was a good score to get a credit card. So I added that to my running list of credit score myths, which includes the following five…

1. There is only one credit score out there

Wrongamundo.There are three major credit bureaus, Experian, Equifax, and TransUnion, each with multiple scoring models, including FICO and others. Also, all three bureaus may not receive exactly the same data in you credit report-the number of accounts you have open, the current balance of those accounts, whether or not you’ve defaulted on any of the terms and conditions of those accounts, and so on. So in all actuality there are lots of different scores out there, although all of them will be highly correlated.

2. Checking your score will make it lower

Negative, ghost-rider. You can check your credit score all you want; it won’t do a darn thing to it. And you know those pre-approval notices you get for credit cards and auto loans every now and again? Those won’t affect your score either, despite the fact that the lender is obviously pinging your score to se if you qualify. If that type of action did affect scores we’d have a whole lot of angry callers at the credit union.

3. Your income can change your score

Bzzzz, sorry, but thanks for playing. You could go from making 10 bucks an hour to a bazillion dollars a year (a number so high it doesn’t even exist) and it won’t affect your score. Of course, having a bunch of money will likely make it easier to qualify for certain loans and pay them on time, hence allowing you to build credit you might not have otherwise received, but on a very basic level your income does nothing to your credit score.

4. Shopping for a loan will hurt your score

If this were a math problem, you’d get partial credit. It’s not a good idea to shop around for several different types of loans at a time because that says to the credit bureaus, “Mr. Smith (that’s you) is frantically looking for money wherever he can get it, something must be wrong!” But let’s say you are looking for a home loan and you apply at four different banks within a 14-day period. That would only be considered a single inquiry on your credit report and your score will not be affected. Beware of applying for too many credit cards at one time, however, as those do not fit into the 14-day rule and will all be counted as separate inquiries.

5. Closing some accounts will improve your score

For the love of no and all that is wrongy (I’m totally reaching on that one), please don’t go closing out accounts because you think it will help your score. It might end up doing just the opposite for two main reasons:

One, your total credit limit vs. your total debt. For example, if you have three credit cards with $5,000 limits each and you carry a total balance of $4,000 on two of them, you’re using approximately 27% of your total credit. Close the card with no balance and you’re down to a limit of $10,000 with the same $4,000 outstanding, meaning you’re now using 40% of your available credit. That may lower your score.

The other possible problem would occur if that card you closed was the oldest form of credit you had, because then your credit history would appear shorter and that too could negatively affect your score.

So hopefully this list has cleared up a few of the misconceptions you may have had about credit scores. I too used to think several of them true just because someone, somewhere, had been given the wrong information and was passing it along. Glad I’m now able to pass on the right information to you instead.

As I said in my introductory post, the trick to getting the most from your bank or credit union is to take advantage of the financial system. But sometimes it feels like it’s the financial system that’s taking advantage of us; mainly in the way of ever-increasing fees.

You’ve got your fees for overdraft protection, fees for using an ATM that doesn’t have your bank’s name on it, fees for going under your minimum balance or over your allotted number of withdrawals each month… the list is seemingly endless. And especially in this time of financial woe, when people are defaulting on loans left and right, you can be sure most banks are looking to squeeze whatever they can out of you.

So here are a few simple ways to avoid paying fees:

1. First off, you need to grab a “fee disclosure” from your bank or CU, which they should have at any branch. This will list out absolutely every fee they can stick you with. Once you know what to watch out for you will be much better equipped to sidestep those fees. This will also help you pick the right checking, savings, or credit card account based on your spending and savings habits; no need to get hit with low balance fees or to choose an account that doesn’t give you enough withdrawals each month.
2. Join up with a financial institution that has ATMs near your house or office and don’t be afraid to take your money elsewhere if you move. If you don’t use your own bank’s ATMs, fees are typically around $2 at the ATM and then your bank will stick you with another charge of around $2. That’s $4 to take your own money out! Obviously the major banks have a good amount of machines in bigger cities, but ATMs are one place you might not have seen the little credit unions coming—most CUs are part of a network of ATMs that will not charge you a fee. The CU CO-OP Network, for example, gives you access to over 25,000 ATMs in the US, including other credit union’s ATMs and those you’ll find at all 7-Eleven and Costco stores. Either way, if you do have to use a machine that charges you a fee, take out a little more cash than you might need at that moment, because paying $4 for $100 rather than for $40 will at least keep you from having to go back to that ATM as much in the future. Getting cash back at the supermarket is always an option too.
3. Avoid overdrafting your account or, worse, getting slammed by a non-sufficient funds fee (NSF). This one just takes paying attention on your part (or not spending money you don’t have, but no one needs to tell you that). A great new feature of most banks’ online banking system is that you can sign up for account alerts, which will be delivered to you via e-mail or even text message. You can set the alerts up to warn you when you balance gets to a certain minimum level, saving yourself a lot of hassle and a lot of money in fees.
4. Get to know the people at your branch. Seriously. Because if you do get hit with a big fee, like an overdraft fee or a late payment on a credit card, often if you talk to a real, live person (and you don’t have a history of account abuse) you’ll be able to get your fee waived or at least reduced. In this age of doing everything online there is still something to be said for the personal touch.

Trust me, this fee trend in banking isn’t going anywhere and it’s not even exclusive to the financial industry. It’s happening among a lot of service-based organizations that have hit hard times. Just look at the airline industry. Now you have to pay a fee to have a decent snack!

We get asked this question quite often. Technically, it can change any point your credit report changes. Any of the following can trigger a credit score change:

1. Missing a Payment
2. Applying for a New Loan or Credit Card
3. Changing Your Available Credit
4. Defaulting on a Loan or Charging Off
5. Bankruptcy
6. The List Goes On……

But some people have asked why their score has not changed in months. Well, my score hasn’t changed since we launched the service in Feb, 2008 until just this week. As background:

* I have a mortgage
* I don’t carry any balance on my credit cards
* I’ve had a good payment history for over 15 years
* I don’t apply for credit often

A few days ago, I decided to apply for one of the Gas credit cards I wrote about. I then updated my credit score the next day. My score dropped 6 points from the inquiry. I’m sure it will change again when the credit card provider reports my credit line and utilization to the bureaus. I suspect it will jump back up since I won’t carry a balance and it will increase my total available credit.

I’m writing this to let users know that your score shouldn’t be constantly changing if you are stable with your finances and credit. I’ve had the same score for over 3 months so don’t be concerned if your score isn’t jumping around. Part of the service is built to instill a sense of comfort and familiarity with your score.

I presented at Finovate on April 29th. After the presentation, we had lots of great feedback about Credit Karma. Aside from the truly free credit score, attendees really liked how we made our offers transparent.

In case you haven’t seen one of our offers, we share several metrics based on how members view the various offers (for better or worse).

User Voting - The percent of users who voted that this is a good offer.

Exclusivity -Based on how many members are eligible for the offer. Higher exclusivity means fewer people are eligible.

Take Rate - Ranked against all offers, this measures the relative percentile of members who apply for an offer.

The common thread of all the metrics is that we hope the Credit Karma community will help others decide the good / bad offers. We don’t want to suggest what you should like, we want users like you to suggest what is interesting and what is not.

We are big fans of transparency. More sites are moving in this direction and we want to be supporters of the movement. We plan on adding more features along these lines. For now please continue to vote and add comments so we can all share our experiences and knowledge.

Let us know if you like the concept.