Your Credit Questions and Answers

Some extimates say 60% of Americans are living Paycheck to Paycheck.  It doesn't matter if they have $20,000 a year or $20,000 a month to live on. The reason many people are living paycheck to paycheck is they cannot stand to have a dollar in their pocket that is unspent. As an example in the grocery store she (my ex wife) had to have the most expensive cute little bottle of olive oil.  Was it better?  Well if it was more expensive it must be better.  As long as there was $3.89 in her bank account she had to spend down to the last ten cents.  When going shopping she knew, to the penny, how much was in her account so she could spend it all. It is Monday and she gets paid on Friday. With $38 in her account she orders takeout Pizza for $32 and gives a $5 tip.  On Tuesday she discovers she is out of gas and needs to borrow another $20 for gas to get to work just like last month. It is the continuous little decisions that keep paycheck to paycheckers without ca...

 Fees and Interest and Merchant Charges. Late Payment Fee, Over Limit Fee, Annual Fee, Cash Advance Fee, Very High Interest. The banks will offer you credit when you have proven that you can make payments.  Basically that is what your credit rating tells them. When you get a new credit card or loan it signals to the banks you are probably credit worthy.   Credit Card Companies lose money on their reward programs.  However they make 80% of their revenue from fees and interest that the majority of their customers are willing to pay.   The Average American has over $6,000 in credit card debt.  The average interest rate is between 20 and 24%.  This means the Average American pays over $100 per month in interest. Many people spend over $1200 per year on credit card interest. This is why the banks are so happy to offer you a credit card. Merchant Charges When you use a credit card the merchant will have to pay between 1.5% and 4%.  This means ...

 I was first introduced to airline miles by a friend who had just gotten a United Airline Chase Credit Card .   I signed up and started getting airline miles for all of my business purchases.  Just for signing up I received 50,000 miles.  I believe I had to spend $3,000 in the first three months to get the 50,000 points.  This was a great bonus, two free flights anywhere in the US for spending $3,000 which I would have spent anyway.   The annual fee for this card is $95 which is waived for the first year. It took 25,000 airline miles to get one round trip ticket anywhere in the US.  Short flights would only cost 20,000 airline miles. I used just this Chase United card for a couple of years and earned a couple hundred thousand Airline Miles on the purchases my business made.   More Chase Points Cards I applied for and got more Chase credit cards for points.  I got the first Chase Freedom card with no annual fee.  This ca...

Home loans have a different impact on your credit score than credit cards. Since most home loans last for 30 years after a few years they are an excellent credit reference. That is if you make your payments on time. The monthly grind of making the Home Mortgage Payment isn't much different after a few years than paying rent.  The rent increases over the years while your Mortgage payment will stay the same except for tax and insurance increases.  For many households the increase in house prices creates the largest family asset. The Home Loan is often the longest loan to show up on your credit report.  It also shows lenders you can make payments over an extended period of time.   The size of your Home Mortgage payment when compared to your claimed income when you Apply for a loan may also have a significant impact.  

 No Many people think that it will help your credit if you carry a Balance on your Credit Card.  This is simply not true.   The only things that change if you carry a balance on your card is you will pay a high rate of interest and you will pay interest.   You do not need to pay interest on your cards to keep them active and for them to have a positive effect on your credit score.   Use each of your cards a few times a year and pay them off in full at the end of the month and they will stay open and eventually have a positive effect on your credit score.  

 What is a Secured Credit Card? A secured credit card is a type of credit card that requires a cash deposit to be made when you open the account.  The deposit acts as collateral for the account, and the amount of the deposit is usually equal to the card's credit limit.   Secured credit cards are reported to the three major credit bureaus, so responsible making payments on time will help improve credit scores over time. Using a Secured Credit Card For most people a Secured Credit Card is used to start their credit journey or to start rebuilding their credit after a significant Credit problem. You must pay your Secured Credit Card bill on time.  Even though you made a $500 or $1,000 deposit to get your Card you must pay your regular bill on time.   Remember you will be rated by the Secured Credit Card Issuer on whether or not you make your payments within the allowed payment time. Normally you will have Twenty One to Thirty days to pay your bill from the...

I avoid using my debit card because I'm frugal. Instead, I rely on multiple credit cards that offer a 1% to 5% rebate on purchases. In contrast, using a debit card doesn't provide any rebate or financial benefit. Free Float Another reason I prefer credit cards is the free float they offer. When I use a credit card, the money for my purchase doesn't leave my checking account until 10 to 40 days later. With a debit card, the cash is deducted from my checking account within a day or two. Merchants typically pay a fee of 1% to 4% for credit card transactions, and most have already factored this cost into their prices. Some merchants, however, offer different pricing for cash versus credit card payments. Gas stations are a common example of this practice. Being frugal, I always opt to pay with cash if it saves me money compared to using a card. Cash Back (Credit Card Points) During a recent road trip through the western United States, I encountered several gas stations offering ...

The most common reasons for a credit score drop is a missed payment, a new line of credit, a credit card removed, or an increased use of your credit.    A missed payment will have a significant and lasting effect on your credit score.  I had an 810 credit score and I missed a payment on my Lowes card.  I did not realize I had a bill with them.  The bill was under $50. I realized I had not made the payment when it showed up as a negative on my Credit Karma credit score.  It dropped my well aged with over 800 credit score by over 90 points.  Check this article on how I was able to get the Lowes negative removed.???** A new line of credit like a new credit card will lower your credit score.  Depending on how much credit history you have, a new line of credit will lower your score by ten to thirty points.  Increasing your debt with a major purchase on your credit card or a new car loan, will also lower your credit score.  A friend of mine ...

I hate to pay fees. Little fees, big fees, they all irritate me. In the old days of checking accounts where local companies all accepted checks, banks used to charge $15 to $25 on bounced checks. In my area of Montana they made enough in Bad Check fees to pay all of their full time tellers.  A friend who was a banker told me this. Fees are a huge revenue source for banks. I try to avoid most bank fees. My checking account is does not have a monthly fee. My savings account does not have a yearly fee.   I do have an annual fee on my lines of credit, HELOCs, but I have not been able to talk my banker out of those fees. Debit Cards Fees will grow quickly if you don't pay attention. Debit card fees can vary depending on the bank or financial institution you use, as well as the type of account and the transaction type. Here are some common fees associated with debit card usage: ATM withdrawal fees : When you use an ATM that is not owned by your bank or financial institutio...

The reason not to cancel a credit card is because the average age of your credit is important.  If you do not have a loan like a house payment that you have paid for several years your oldest credit history account is probably a credit card.   If the average age of all of your credit cards is less than six or seven years your score will not be able to build an over 800 Credit Score . I have acquired a lot of credit cards through the years.  Many of them after I get the bonus I will quit using.  It usually takes a year or three for the company to delete that credit card account.  Long Term Credit Cards  However I have four cards that I have had for over ten years.  I make sure I use them some so they do not get cancelled.  A few times a year is enough to keep the cards active. How to Keep Credit Active If you do not have a home loan it is a good idea to keep a good credit score to have at least two old credit cards active.  You do not nee...

Begin a Debt Disaster Now! You start by getting a credit card. You get excited and see something you would like to buy. You don't have the money for it today. Let's say it's a new set of ski boots that cost $600 or a new video game console that cost $600. You promise yourself that you will pay it off in the next 3 months. You tell yourself, “I will just pay an extra $200 for the next three months and it will be paid off.” You get your credit card bill and you don't quite have the extra $200. This is how it starts. Your personal Credit Card Disaster is just starting. Next you get an offer for a screaming deal on a ski trip, Friends have an Air BNB rented and you can join the trip cheaply. You put it on your credit card. Listen to a Dave Ramsey podcast or radio broadcast sometime. The people calling in on his podcast or radio program have $20,000 to $380,000 in debt.  Usually a large portion of this debt will be credit cards.  They started with just $600 in unpaid c...

 How people steal your identity.   Your Name, Social Security Number, and Address are all that an identity thief needs to steal your identity.  If they have one of your passwords, phone number, or email that is just a bonus for them . One in One Hundred   If you know 100 people it is likely one of them will get their identity stolen this year.  It can take you years to get the problems you will have fixed if your Identity is stolen. There are a lot of black websites that will store your name, address, and Social Security number.  They might have your phone number and email address also.  Identity Thieves will continuously contact you any way they can to try to get you to sign into their fake website.  Often they will pretend to be your bank like Wells Fargo or Chase or Amazon to get your password.   Once they have access to any account they will try to steal from you.  Sometimes they will open up new accounts or other...

I have four different Free ways to be notified of a new account being opened in my name on my Social Security number.  This is the critical notification that your Identity is being stolen if you did not just open a new credit line. My Discover card, Credit Karma, Chase Bank, and Credit Sesame accounts all notify me if there has been a new account opened in my name with my Social Security number.   New Credit Account I recently opened a new Home Depot* credit card.  You know those Black Friday tool sales sucked me in again.  I do it almost every year.   Anyway right on time the next day and the day after I opened a new account I was notified by Credit Karma, Discover, Chase Bank, and Credit Sessame. Why This is Important Any time your credit is checked you need to be notified.  If you did not apply for new credit it is likely to mean someone is attempting to STEAL Your Identity.   The first step in Identity Theft is for the thief to apply...

  I am about to have my last birthday of my 7th decade.  I know, a strange way to say I am turning 69. I was 33 years old with a problem. I had no idea how credit worked. I had a couple of credit cards which I usually paid on time.  At 28 I had purchased my first house with owner financing.  The woman I bought my first house from did not check my credit as I made a significant down payment.   At 33 years old I was applying to purchase my second house and I was going to rent out my first house. We applied for a home loan from a bank, however my wife at the time had missed a payment on her credit card and I had missed a payment on my credit card. The Bank required an explanation as to why we had missed payments.  I thought it was silly as neither of our missed payments were for more than $25.  My income at the time was significantly more than needed to easily make the payments and other than a small loan on the first house we were debt free.   ...

  Debit card fees will vary depending on the bank or financial institution you use. Here are some common debit card fees : ATM withdrawal fees : When you use an ATM that is not owned by your bank or financial institution, you may be charged a fee by both the ATM owner and your bank. This fee typically ranges from $2 to $5 per transaction. Foreign transaction fees: If you use your debit card to make purchases or withdraw money in a foreign country, you may be charged a fee by your bank or financial institution. This fee is typically a percentage of the transaction amount, ranging from 1% to 3%. Replacement card fees: If you lose your debit card or it gets stolen, you may be charged a fee to replace it. This fee can range from $5 to $25 depending on your bank or financial institution. Overdraft fees: If you spend more money than you have in your account, you may be charged an overdraft fee. This fee can be as high as $35 per transaction.  Ouch. Balance Check Fee:  Some A...

To earn an 800 Plus credit score you must have at least Three Different Credit Sources , No Missed Payments in the last 7 years, Less than a 10% Credit Utilization , and an Average Credit History of at least 6 years.       An 800 Plus credit score is considered excellent and what most people would like to accomplish.   A perfect FICO or Vantage 300 Credit Score is an 850. The worst is a 300.  800 Plus Credit Score Requirements The requirements for an 800+ score are rarely stated but here's what I have found: You must have at least three sources of credit, up to five will have a positive affect. An example  might be  two credit cards, two car loans and a mortgage or two credit cards and a personal line of credit. You cannot have any thirty day late or MIssed Payments in your credit history in the last 7 years. I have been able to get some missed payments removed. Check out How I removed a Missed Payment. You cannot have any Collections ...

Always Be Nice to Customer Service Customer Service Agents are able to help you if you're nice to them and hurt you if you're not. I was never taught how to deal with Customer Service.  However my Mother always taught me to be a Gentleman. Customer Service on the Phone I am always extremely nice and courteous to customer service. They have a very tough job because so many people yell at them and treat them horribly.  So many customers, especially of banks or credit cards, make a mistake but won't accept responsibility for their mistake. The customers want to blame the bank for the missed payment.  My dog ate my statement so I didn’t pay my bill. My rule of thumb is always be extremely nice to customer service. They're just doing their job and it is a tough one. They can certainly help if you are nice to them. Customer Service Tracks You Many Customer Service agents are able to make notes on your account. If you are particularly mean during an interaction they will ...

Three Steps to Identity Theft If someone attempts to steal my identity they will do at least these three things. They will: Get my Social Security Number Change my mailing address to their address Apply for a new credit card or loan with my name Closely Track New Credit Applications If the Thief has gotten my social security number and applied for new credit this will show up on my credit history. By closely tracking the credit applications made with my SS number I will know right away if my Identity is being stolen. Credit Karma Monitoring is Free With Credit Karma monitoring, any time new credit is applied for Credit Karma emails me with a notification. I check my credit and my email regularly. My Stolen Credit Card Monitoring If the thief has stolen my credit card number and used it I will get an email from my credit card company that my card was used. I have my credit cards set up so any charge creates an email to me. You can setup a separate email account just for credit card pu...

Recently I tried to use one of my Chase cards with a low credit limit to purchase an expensive item. My credit limit for the card was $4,000 and I tried to charge $8500. Chase declined the purchase.   Credit Card Customer Support  I called Chase Customer Support but the three digit number on the back of my card has rubbed off. I cannot read it. When I talked to Customer Service, I could not give them the three digit number on the back of my card.  Chase must have thought the card number had been stolen and temporarily closed all of my Chase Credit Cards. Support On Hold I called in over that weekend and was told I needed to talk to Loss Prevention.  Three times I was transferred to Loss Prevention and they never picked up the phone.  After twenty minutes or more I just gave up each time. Chase stopped usage on all four of my Chase cards for four days until my account got straightened out. I have a total of $35,000 credit available on the four different Cha...

Credit Karma is a free credit monitoring service that provides users with access to their Vantage 300 credit scores and credit reports.  In my opinion Credit Karma is awesome. Here's how Credit Karma works To sign up you will create an account and provide personal information, including your name, address, email, phone number, and the last four digits of your Social Security number. Credit reporting Credit Karma uses two of the three major credit bureaus, Equifax and TransUnion, to obtain users' credit reports. After you sign up they will update the credit reports every week.  If you check it more often CK will eventually update daily. Credit scoring Credit Karma uses the Vantage Score 3.0 credit score model, which is a credit scoring model developed by the three major credit bureaus. The score ranges from 300 to 850.  It is not the same as your FICO score but it will usually be close. Credit monitoring Credit Karma monitors your credit reports for changes, such as new ac...