Are you as credit savvy as you think you are? Did you know that the average consumer credit card debt in July was $6818, or that your credit report could shape the approval and account terms when you apply for a credit card, home loan, and auto loan? If you’ve been keeping up with our blog, you probably know many of the ins-and-outs of the credit world, but take this quiz to see if you have the financial know-how to keep up with your credit health.

1. Income is a key component of your credit score? True or False
2. What state had the highest average credit score in July?
   A. California
   B. Colorado
   C. Illionois
   D. New Jersey
3. What is the amount of credit card debt you currently have divided by your total credit available?
   A. Credit Card Utilization
   B. Credit Card Default
   C. Credit Limit
   D. Credit Charge-Off
4. What are the first two changes of the Credit Card Bill of Rights? Choose two:
   A. 30 day advance notice for arbitrary interest rate increase
   B. Issuers must deliver billing statements at least 21 days before due date
   C. Co-signer necessary for credit card applicants under 21
   D. Double-cycle billing no longer permitted
5. What credit card is best to help consumers start building or rebuilding credit?
   A. Unsecured Credit Card
   B. Student Credit Card
   C. Rewards Credit Card
   D. Secured Credit Card
6. What credit card do you rarely, if ever, want to close?
   A. Any unused credit card
   B. Most used credit card
   C. Oldest credit card
   D. Most recently opened credit card
7. Credit scores can impact your credit limit? True or False
8. Once a creditor charges off an account, the consumer is no longer responsible for payment of the debt. True or False
9. When does the $8000 First-time Homebuyer Tax Credit expire?
   A. November 1, 2009
   B. December 1, 2009
   C. December 31, 2009
   D. January 1, 2010
10. A co-signer on a loan or credit card account can expect to:
    A. Pay-off the account if the primary accountholder cannot
    B. Have the credit line added to their personal credit history and report
    C. Have their credit score affected if the primary accountholder defaults
    D. All of the above

Answers

1. False. Your credit score is determined by several factors including the length of your credit history, on-time payment history, credit utilization, total accounts, and number credit inquiries. Consider using the Credit Report Card to see a summary of your key credit factors as well as how you compare to other Credit Karma members.
2. D. New Jersey. New Jersey’s average statewide credit score for July was 694. Credit Karma’s national average consumer credit score in July was 674.
3. Credit Card Utilization. Credit card utilization basically tells you how much of your available credit you are actually using. Try to keep your total credit card utilization to 30% or less. The credit card utilization ratio of your total debt to available credit determines roughly 30% of your credit score.
4. A & B. One provision of the Credit Card Bill of Rights will be an additional 30 days advance notice for arbitrary rate increases, credit limit change, or any other ‘significant’ change to your credit card’s terms. The other provision to go into effect is that credit card issuers must deliver billing statements at least 21 days before the due date (previously 14 days). These changes go into effect August 20, 2009.
5. D. A Secured Card. A secured card is designed to help consumers build a credit history by providing them the opportunity to demonstrate responsible credit usage and regular on-time payments. A secured card requires a security deposit from the cardholder that functions as cash collateral which sets the credit limit and helps keep consumers from defaulting on their payments.
6. C. The oldest credit card. Age of credit history is a key component of your credit score, so closing your oldest card will likely shorten your credit history and could cause a significant drop in your credit score.
7. True. Credit card companies use a consumer’s credit score as a prediction of how much risk they will be as a cardholder, and determine a cardholder’s credit limit based on this assessment.
8. False. When a credit card company charges-off your debt, meaning they declared it a loss for the company, the consumer is still responsible for paying off the debt. The credit card account will be closed so the cardholder will not be able to charge to it and interest will no longer accrue on that debt, but you will still receive bills until and the creditor will attempt to collect until the entire debt is paid off.
9. B. December 1, 2009. While the deadline is a few months away, consumers are advised to begin shopping for their home now because complications like getting approval for a loan, negotiating a mortgage rate, navigating inspections, managing paperwork with escrow, and the closing process of the Tax Credit could take months to complete and first-time homebuyers definitely do not want to miss out on this opportunity.
10. D. All of the above. As a co-signer, you contractually agree to pay off the account if the cardholder does not and you are obligated to the account until it is paid off in full. Any delinquent actions reported on the account will affect your credit score as if you defaulted on the payments yourself.

Scoring:

If you missed 0-2 questions , you are a credit know-it-all and chances are you have a good credit score. But don’t sit back and think that you and your credit score are safe. Make sure you put your credit know-how to good use by being diligent about keeping your credit health in check.

If you missed 3-4 questions, you are on your way to knowing more about credit. You might know the basics of how credit works, but empower yourself to learn more specifics about your credit report, the Credit Card Bill of Rights, and more details about how to manage your credit score in the process.

If you missed more than 5 questions, you may be a New Kid on the block when it comes to credit. The ins-and outs of credit scores and credit reports may be a bit fuzzy for you. The first step towards getting a good credit score is to understand how credit works, so keep learning and build a more solid foundation of what credit is, how to use it responsibly, and how to maintain healthy credit.

Question:

Why is it that any simulated action I take cannot raise my score over 769 maximum? I pay all of my cards off entirely every month. My Mortgage accounts are amortizing and paid with auto withdrawals. Why can’t my score be raised?

Answer:

The answer actually differs for each consumer based on their personal credit history. In the future, we hope to release a product that will detail the top 3 or four actions you can take to actively manage your credit score over the coming 3 and 6 months along with the simulated change in score. But in interim, I hope this helps.

Two significant factors that compose your credit score are payment history and length of credit history. These two factors can only be changed with on time payment and time. No matter how good you are about your available credit or the types of credit used, this part of your score simply needs time to improve.

Derogatory factors such as delinquencies (30,60,90 days late payments) and collections will hurt your credit for a long time. It can take up to 7 years before those factors stop affecting your score.

Lastly, just remember that credit scores are logarithmic which is just a fancy way of saying the higher your credit score the harder it gets to improve your credit score. That is the final reason that bigger credit score jumps become more difficult.

Question:

I have excellent credit, but I just had an unused Discover card closed by the company because of non-use (19 months). I also had a credit card application declined because I have enough credit already available. Does this hurt my credit score?

Answer:

Closing an old account could affect your credit score in two ways.

• Length of credit history is an important component of your credit score. If your Discover card was your longest held credit card account it probably did have a negative impact on your credit score.
• Also, if you carry a monthly balance on your credit cards, the closure of any credit card account could lower your total available limit. This in turn would increase your credit card utilization, and yes — this could again lower your credit score.

As for the credit card application, in the short term an inquiry for credit will almost certainly decrease your credit score. The amount an inquiry will affect your credit score varies for each person based on other details in their credit file, but to give you a point of reference, my score dropped by 6 points for about 2 months when I last applied for a credit card. My credit score is now 793.

Question:

I have been reading all the entries, and just wonder how long it takes for a credit score to come up. I now have paid off all 11 collection accounts, paid bills on time this entire year, do not have any debt except for 5,000 left on car loan and student loans, all on time, do not have any inaccuracies, applied for Crowne Jewelers credit card-was approved, used the card, and have paid on time for 3 months, and my score is STILL at 545 after a year. What do I do?

Answer:

There is no quick fix in this situation since your past collections and delinquencies will stay on your credit file and impact your score for a few years. There are two things you should do.

1. Continue to pay on time. The negative factors will go away with time but any new one will stay with you for another 5-7 years. This is why I often say good credit takes years to build and a few bad decisions to destroy.
2. Demonstrate your ability to use credit wisely moving forward. This means doing exactly what you have started to do with the Crowne Jewelers credit card — use the credit wisely and pay on time. Your goal should be to open more trade lines. I see that 3-6 credit cards are generally a good number of credit cards. I suggest looking for cards with no annual fees and low rates. The key is to be responsible. Just because you have a few cards does not mean you should use them. Demonstrated ability to keep and use credit responsibly is the goal.

Question:

I have 3-4 old (6-7 years) closed loans on my report. None show past due. Will removing these from my bureau help or hurt my score?

Answer:

By loan, I assume you don’t mean credit card account. Generally speaking, you can not remove a loan from you credit report even if it is closed unless it is inaccurate. So in this case, you don’t have to do anything. Removing anything that is closed won’t really have an affect. Just don’t close old accounts until you read The Do’s and Don’ts of Closing Old Accounts.

With all the great discussion going on at forums.offtopic.com, I thought I would take a minute to consolidate some popular questions and answer them in a centralized location. The quick disclaimer is that these answer are based on my 10+ years in credit and finance but they are still my personal thoughts.

Q. I don’t understand why mine is 730 and not like 800 or something, I have one 30 day late payment… one… in December 2002. How long does that *** last for? And why does it make such a big impact?

A. Credit is composed of many elements. Payment history and length of credit are two key components. From your comment and score, it sounds like those two items are strong and not bringing down your score. The other key elements are your outstanding debt, inquiries, and type of credit. So perhaps you have high general debt or are maxed out on the credit that you do have.

Credit scores are comprised of almost 200 data attributes. It’s very difficult to pin-point one exact reason for a cause. We hope to start by show the top 14 reasons in the our next major release.

Q. How long has this been around? Has anyone actually received updates when your score changes?

A. Credit Karma launched in March 2008.

Technically, your score can change anytime your credit file changes. Some bureaus update their files once per week, others daily. We recommend that you check once per month since most lenders report once per month.

Q. Is 657 good for a single 23 year old with only 2 years of credit history (a credit card and a vehicle payment that just started in November?)

A. Good is relative. Since a large portion of credit is based on your payment history and length of credit, you are probably on the right track. We want Credit Karma to be a single source resource so you can monitor that score over time.

Q. I’ve never heard of this site, it is really reliable?

A. Good question. You should always be wary of sites that take your personal information. As someone mentioned we are BBB certified. In addition, we are also TRUSTe and VeriSign secured. Finally, our press page has mentions of us from sources like USA Today, The Wall Street Journal, and American Banker.

Q. What is the proper credit card usage to boost score?

A. Credit scores are comprised of dozens of attributes, so it’s difficult to give an exact number. A rule of thumb I suggest is 30% utilization or lower. For example, if you have $10,000 of available credit on your credit cards, try to keep your balance at $3,000 or lower.

On a side note, utilization is only counted on the amount the carry. If you pay your balance off in full each month, your utilization is zero.

Q. 758, But i don’t work, am still in graduate school, and have tons of student loan debt…wtf…how does work?

A. Your income is not a factor in credit scores which means a job does not drive the score. If you are in graduate school, I would think you have at least 4-6 years of credit history and that you probably haven’t defaulted or been late on other payments.

Q. 541. How bad is that? Any hope?

A. The score means your are on the lower end of the range. It will be tough to get credit and nearly impossible to get a mortgage unless you improve it.

There is always hope. Good scores take years to build but can be destroyed in days. The simple way is to pay bills on time and to apply and use credit responsibly. You can use Credit Karma to track your progress over time.

Q. By the way do you need to give them a working e-mail address? I dont need any more spam than I already get.

A. You do need a working email as part of our user verification system. With that said, we don’t send spam. If you don’t want any messages from us, we won’t send you anything!

Q. You might want to look into a credit repair service. Sometimes they can get **** legally taken off your report.

A. Be very wary of credit repair agencies. Many will just take your money. The ones that are legitimate are doing things that you, as a consumer, can do yourself.