Keep An Eye On Your Credit Score

By Joseph Ducat

A few years ago, I wanted to buy a car and so I approached a loan company to come up with the money. This big, well-known, respectable institution turned me down flat. In my disappointment, I learned that their background check on me had turned up a couple of missed payments on my credit card, and that was enough for them to deny me the loan. You can imagine how concerned I became that I had a bad credit history. That concern drove me to find out what my actual credit score was. It took a little online investigation for me to get my score, and to my surprise and relief, it was a much better score than I had expected.

Even if no one has turned you down for a loan, you may want to know what your credit score is. You'll be glad to know it's something you can find out in a matter of mouse clicks. Simply typing "credit score" in a web search will bring up a wealth of links to credit score report providers.

But first, one must understand exactly what a "credit score" is. There are actually several different versions of a person's score, the best-known probably being the FICO score, in use since 1989. Additionally, three different scores are available from the three major credit reporting agencies competing with FICO. These are the Experian, TransUnion, and EquiFax scores. These scores are not considered as credible as the FICO score, but they are available at a lower cost.

I do suggest that, if you are looking for your credit score, you seek out the FICO statistic, as it remains the most respectable and widely-used. If you try a simple Internet search for "fico," you will find the sites myfico.com and fico.com among the top search results. These sites will provide you with a FICO score report for around $15 or even lower.

To get the report, you must sign up for an account at one of the sites. You provide your personal information, including full name, address, and Social Security number. You will also need to provide a valid email address. Once you sign up, you will enjoy a free 30-day trial period, during which you can avail of your score.

Your account will also allow you to monitor your score and get alerts should it experience any changes. With such information in your hands, I expect you will soon start seeing it change for the better. Before you know it, you'll will be able to get better interest rates on loans and better deals on credit cards.

If you want to learn more about your Credit Rating and get more information on how your FICO Score can affect your finances, please visit http://www.getbettercredit.info/

Types of credit card payment protection insurance plans

There are many types of credit card payment protection insurance plans available for different consumer needs.

Credit Card Disability Insurance – In credit card disability insurance, the credit card insurance company will pay the minimum monthly payment requirement of your credit card bills for you on the basis of your disability and will continue to do so within the reasonable period that you remain disabled. Each credit card disability insurance company has their criteria on what passes as a disability for them to take on your credit card bills. It is best to check these credit card insurance companies’ list of disabilities.

Credit Unemployment Insurance – Credit unemployment insurance offers to pay the minimum monthly credit payment of credit bills in events of being involuntarily laid off from work or fired from work for a certain period of time or until the customer becomes employed again.

Credit Life Insurance – In a credit life insurance, the credit insurance company pays for the debts in case the debtor dies.

Lower Your Credit Card Interest Rate

You've received credit card applications in the mail promising low interest rates. Now, instead of an annoyance, you can use them to get a lower rate on your current credit card.

We hit MacArthur Center in Norfolk, to find people willing to put our game plan to lower your rates to the test. We asked people to call the customer service number on the back of their credit cards.

Once they have a person on the phone, they make a simple four sentence statement. "Hi, my name is (your name). I am a good customer, but I have received several offers in the mail from other credit card companies with lower annual percentage rates. I want a lower rate on my credit card. Can you help?"

The people we spoke with saw a drop between 5% and .6%. It didn't work for everyone, but you can always try again and ask for a supervisor if you don't get anywhere with the first person you talk to. Keep in mind it may take a month or two before your credit card statement reflect the change in interest rate.

Figuring credit scores not an exact science

By PAUL WENSKE

Maybe you had a class you tried to ace but were denied by a picky teacher who always found ways to shave points. It’s kind of the same with credit scores.

Truth is, you can’t ace your credit score, no matter how hard you try.

Now, in the big picture it probably doesn’t matter too much. A high credit score shows you can handle credit well and guarantees you favored treatment on loans and insurance rates.

But it still rankles folks with solid credit histories who call up the paper wondering why their scores aren’t even higher.

I had the same question recently when I refinanced a home equity loan to get a lower interest rate. The bank gave me the better rate in part because my FICO credit score from TransUnion was 796.

That’s high, but still short of 850 — the highest you can get. Official FICO scores range from 300 to 850. A good score typically is above 760. A bad score is below 600.

What I learned may not be startling but it is revealing. As scores get higher, credit bureaus get more picky and, seemingly, more arbitrary. Scores and reasons for them vary between bureaus. Ambiguous language can make you look worse than you are. And some dings are just wrong:

•One of the most revealing things is that nobody can ever get the top score.

That’s according to Barry Paperno, consumer operations manager for Fair Isaac Corp., the data analysis firm that invented FICO scores, used now by most creditors to assess consumer risk.

Paperno said when FICO created the scores, it gave itself wiggle room. That way, when new versions are created, lenders don’t have to reprogram their computers. “There really is not an 850 score,” he said. So the best you can ever do is somewhere between 820 and 840, he said.

•Credit bureaus often cite one to four major negatives. They can seem pretty picky at higher ranges.

TransUnion, for example, said the amount I owed “on revolving accounts is too high.” Bureaus don’t like high credit-card balances relative to credit limits. The worry is you might max out beyond your limit.

But I had only one credit card with any balance. And it was only $758, with a credit limit of $7,000. A TransUnion official assured me not to worry, that it cost me only a few points. Still, you need a credit card to qualify for a credit history. Yet, with higher scores, a balance is apparently an excuse to ding you.

•If you get all three bureau scores, you will find your FICO score jumps around.

For example, Experian gave me a score of 802. Equifax scored me at 784. Why the variance? It has to do with statistics. The FICO score assesses risks based on a statistical sampling of consumers.

But each bureau bases its scores on an analysis of a separate and distinct sampling of a million consumers. So you end up with three samplings, each with a different mix of risk factors. In essence, Paperno said, each bureau compares you against different people. You may compare better in one bureau than in another.

Some variances are simply at odds. Experian also nailed me for a too-high “proportion of balances to credit limits,” even though I had only one card with a balance. Yet, Equifax praised me for having “a low proportion of balances to credit limits” on my cards. But gave me a lower score.

•But if scoring seems ambiguous, bureau-speak is so imprecise it makes things seem worse.

Bureaus use terms such as “relatively high” for stuff without saying relative to what. They like the plural form, as in you have too many high-balance “revolving accounts” when you have only one. Equifax dinged me for “multiple accounts” with missing payments. But it only listed one late payment — back in 2001.

Paperno said bureaus are trying to be more precise. For years only lenders saw credit scores. Consumers only recently have had access to them. He said the wording made sense to lenders, who were measuring relative risk. For example, even one missed payment might be judged “too many” to get a top score.

But Paperno said language that worked in the past may confuse consumers now. “In some ways we have a lot of catching up to do,” he said. Can’t argue with that.

I probably shouldn’t complain. I still got a lower-rate loan. But the scoring process remains as mysterious to me as the theory of relativity. Right after I refinanced my loan, TransUnion dropped my score 30 points to 766, apparently viewing my refinance as a new loan with added risk, rather than as a replacement loan with a better rate.

Statistics are like that. They don’t measure the context of what humans do. That won’t hurt me much. But to a guy starting out with a 766 score, a 30-point drop is a costly credit dent.

Figuring FICO

Your FICO score is based on five key credit factors:

•Payment history is worth about 35 percent. Do you pay your bills on time?

•Outstanding debt is worth about 30 percent. Do you owe too much?

•Length of credit history is worth about 15 percent. How established is your credit?

•New accounts and inquiries you initiate are worth about 10 percent. Are you taking on more debt?

•Mix of credit is worth about 10 percent. Do you maintain a healthy mix?

For more information, go to www.myfico.com.