Jeff Rickard

Back to school. Seems like summer just started and it’s time, once again, to make the trip to the store for all those school supplies. Can buying school supplies actually hurt your credit? Do the kinds of items we purchase really have any affect on our credit score? Read on….

Credit card companies are feeling their own pain with the credit crunch. According to American Express and several other companies they are seeing more and more consumers falling behind on their credit card payments. They are also seeing higher balances than before with people being driven to use their credit cards for paying some monthly bills. Their way of combating this though could hurt the average consumer.

One of the actions they are taking is lowering credit limits. And most of the time it is without your knowledge. Credit card companies are supposed to notify cardholders 15 days in advance of making changes, but often this is noted on your monthly statement in very small print that can be easily overlooked. Their feeling is that lowering limits is a way that they can control cardholder risk by not giving them as much available credit.

The problem with this is that lowering your limit could make your balance to high credit ratio off kilter. This is something the credit card companies don’t explain. Let’s say for example that right now you have a limit of $10000 on a card and a $5000 balance. Your credit card company decides it’s in your best interest for you to not have so much available credit because you might use it so they lower your limit to $6000. Now it looks like you are almost maxed out on your credit card, which can have an extremely negative impact on your FICO score.

Credit card companies that we know are initiating this practice are Washington Mutual, HSBC and Wells Fargo. According to the consulting firm Institutional Risk Analytics that helps monitor credit card activity there will be many other companies following in their footsteps.

Does what you buy determine your credit limit and interest rate? It can now. Along the same lines some credit card companies are actually paying attention to what you are buying with your credit card and either lowering your limits or raising your interest rates based on these purchases. Let’s say you are going through marriage counseling and you are paying the counselor with your credit card – your credit card company takes note of this and decides you might be at risk for a challenging divorce, so they decide to raise your interest rate to reduce their risk if you default or they lower your credit limit so there is not as much temptation available to you. Or let’s say you stop on your way home every Friday to have a drink with co-workers before you go home, they will track your history of those charges and may decide you could indulge a bit too much – you might become irresponsible and default on your credit card so they exercise their right to change their terms of service.

So what you can do about this? Keep your balances low. This way if your credit card limits do get lowered it won’t have the impact it would if you had high balances to begin with. If you do get a notification that they are lowering your limit, call them. See if you can reason with them not to. Limits are often lowered randomly so it does not hurt to call them and see if they will leave your limit alone. Try not to pay your monthly bills such as utilities, etc with credit cards. This makes the credit card companies very nervous as to them it makes you look desperate and they could, in turn, take some measures that could hurt your credit score.

I know all this sounds like “big brother” is watching…and in today’s financial climate they are. Watch what you spend, watch where you spend and you will be fine. It’s never to late to learn!

Mindy Leisure, mindy@advcredit.com, and Jim Kaiser, jim@advcredit.com
Advantage Credit Inc. of Colorado www.advcredit.com

When it comes to your credit score, don’t be caught by surprise!

April showers may bring May flowers but those storms may not be over yet.  The key is to protect you from the possible damage that may come from an unexpected storm.  Protecting your credit is somewhat the same.

Up until now lenders have always considered a 680 credit score as “A” paper.  If you had a score above 720 you were practically gold.  This is all about to change.  Fannie Mae and Freddie Mac have recently announced some major changes.

Imagine having to pay 2.75% in points and you’ve never had a late payment on anything!  As of June 1st on loans with LTV’s about 70% Fannie Mae will penalize borrowers by 50 basis points for a score below 720.  And Freddie Mac will penalize borrowers 30 basis points for a score below 740.  This is on top of the loan level pricing they have both implemented for borrowers with scores below 680.

What does this mean?  It means borrowers could pay hundreds of dollars more each month or thousands more at closing.  For example – on a $250000 loan, if a borrower has a score below 620 they would pay a 2.75% delivery fee at a cost of $6875.  More then ever it is important for borrowers to get their scores as high as possible. Continue Reading »

When it comes to your credit score, luck, unfortunately, has nothing to do with it.  Now, more than ever, it is important to work on attaining and maintaining a good credit score.

What is a good score?  For mortgage purposes this would be a minimum of 680, especially if you have less the 5% down.  That’s up 60 points from the 620 that was acceptable only 6 months ago.  Anything below that could now cost you hundreds of dollars each month. 

We all probably have a pretty good idea of how to maintain an acceptable credit score.  However there are a few things borrowers do on a monthly basis that may not help and could actually hurt your credit score.  These actions may seem like good ideas but in reality are not healthy for your credit score.  Continue Reading »

February is well known for sweethearts and Valentines.  It is that time of year that someone may steal your heart.  Just make sure they don’t steal your credit at the same time!

Identity theft is the fastest growing crime in America.  In 2008 someone in one of every three households will become a victim.   Every day identity thieves are coming up with more clever ways to access your credit and bank accounts.  And once a victim of identity theft it takes the average person up to two years to clear everything up. While no one is immune to the possibility of identity theft there are things you can do to protect yourself. Continue Reading »

2008 - What’s your New Year’s resolution?  To get healthy?  What about your credit health?  Those credit cards came in very handy for all those last minute purchases.  You’d forgotten all about Aunt Irene until she called December 23rd to see how you liked the fruitcake she sent – didn’t you? So you had to get her a last minute gift!  But now come the bills…

Your credit score is your lifeline to getting the best rates on mortgages, auto loans and even credit cards.  And there are some changes coming up this year that will make that score even more important if you are planning on purchasing or refinancing your home.  The most significant of these is beginning on March 1st when Fannie Mae and Freddie Mac are adding, “credit score-based fees” to their loan level pricing models.  This also includes a quarter-percent “delivery fee” effective on all loans.  The fees will run as follows: Continue Reading »

This holiday season; don’t just worry about expanding your waistline but also expanding your credit waistline!  There are several traps it is easy to fall into during this spending season.  But there are some tips you can follow that will help you avoid these pitfalls and keep your credit rating in good shape all year long! Continue Reading »

     Yes it does!  I had a past client tell me yesterday that “that’s the American way”.  I do not know if that is the true but I will tell you that this year I have personally pulled over fifty 400 FICO score credit reports.  The scale runs from 300-850.  300 sucks, 850 is awesome.  To give you a point of reference, when we were the preferred lender to Oakwood Homes we would pull credit on 600-700 people per year and in 2001 if we saw one 400 score that was amazing.

     What’s happened??????????    Who cares!!!!!!!!!!!!!!!!! 

     What we do care about is getting your score repaired.  You must improve your credit score if you are going to get a mortgage today.  All the bad credit score programs are gone.  What is the first step? Continue Reading »

Beginning in September we are going to see some fairly significant changes in credit scoring with the release of the FICO 08 scoring model. While Fair Isaac regularly “tweaks” its models to coincide with consumer behavior and economic activity, two of the changes we will see with the new scoring model are the most dramatic changes since the 1980’s. Approximately 60-75 million consumers will be affected by these changes. Continue Reading »