Have you ever wondered what kind of impact a foreclosure, short sale, or bankruptcy would have on your credit score? Well, wonder no more…

According to a recent report from VantageScore Solutions, which is a credit scoring company created by the “big three” (Equifax, Experian, and TransUnion), here’s what you can expect:

• Short sale = 120-130 points
• Foreclosure = 140-150 points
• Bankruptcy = 355-365 points

Apparently loan modifications, where late payments and penalties are rolled into the mortgage balance, can actually have a small beneficial impact on your credit score.

Note that your VantageScore isn’t the same as your FICO credit score. VantageScores range from 501 (subprime) to 950 (superprime), whereas FICO scores range from 300-850.

Despite these differences, the numbers above can give you an idea of the relative impact of the different scenarios. Moreover, your VantageScore is being used by an increased number of lenders, particularly large mortgage lenders.

If you’re curious about your “real” FICO credit score, you can take a free peek at it by signing up for a free trial with MyFICO.

Source: Baltimore Sun via Clark Howard

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This is a guest post from Adam Jusko, founder of IndexCreditCards.com, a credit card information site where you can compare credit card offers. Please consider following Adam on Twitter for quick credit tips and opinions.

As the founder of a website about credit cards, I’m sometimes asked by financial reporters what advice I’d give to people trying to get out of debt. This used to stump me a bit, because the only true answer is “spend less than you earn and pay down your debt.” But of course, it’s not that easy.

Just as weight loss requires a certain psychological change that goes beyond “burn more calories than you eat,” so too does debt reduction. In fact, when climbing out of debt, you can adapt many of the same strategies used for successful weight loss. Let’s look at a few to see how you can put yourself on a financial diet that will lead to debt loss:

• Take it slow to build new habits – If you’ve ever heard the term “yo-yo dieting,” you know that it’s common for people to lose weight quickly, then put all that weight back on again once the “diet” is over. Why? Because it was a short-term fix, not a permanent change in behavior. The same is true of debt. You can put yourself on a complete financial sacrifice program to pay down your debt quickly, but once the debt is paid, you’ll feel deprived and you won’t have new habits to sustain you over the long haul. So, take it slow. Create a debt reduction program that requires real change in financial behavior but not a program that is such a shock to the system that you’ll never be able to maintain it.
• Make it public (at least somewhat) – A common goal-setting tactic for weight loss (and other goals as well) is to tell someone about the goal you’ve set. Doing so achieves a few worthy objectives: (1) friends & family understand changes in your behavior, (2) they encourage you toward your goal, and (3) you feel more committed because you want the praise that comes with success (or want to avoid admitting failure, depending on what motivates you). It may not be fun to tell of your debt, but people that care about you want to help you reach your goals. So tell ‘em.
• Cut down on sweets – Weight loss isn’t without sacrifice, and neither is debt reduction. If you want to lose weight, you have to lay off the cupcakes (or at least cut down on them). If you want to get out of debt, you have to lay off the new purse or new cell phone or new whatever-it-is-that-you-LOVE-to-spend-money-on (or at least cut down on them). Obvious, but still worth mentioning.
• Exercise – Obviously it’s good for losing weight, but getting out of debt? Yep. You’re more likely to be overweight if you’re in debt, and vice versa. Why? We could talk about endorphins and depression and all sorts of possible reasons, but in the end it doesn’t matter. Exercise is good for everything. Don’t believe me? Here’s at least one study that backs up the positive effects of dieting, which include increasing wealth.
• Use small rewards – Whether it’s losing weight or getting out of debt, it’s hard to wait until you reach your ultimate goal to celebrate. So, don’t wait. Set small goals along the way and reward yourself for staying on the right path. Just don’t make your reward a big money splurge that defeats earlier efforts. One suggestion: coffee with a friend who supports your efforts and will give you the pat on the back you need.

Like weight loss, debt reduction ain’t easy. It takes sacrifice, there’s no way around it. But using small strategies to support your larger goal will help you through the slog and to the other side — where you know a happier life is waiting for you.

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As time goes by and taxpayers see less and less personal benefit from the bank bailouts, tensions are on the rise. People are starting to ask more and more questions. People are starting to question what caused all the problems we are facing today. People are wondering if there is another way, a better way.

I am one of those people.

What caused the current credit crisis?

Did banks overextend credit and employ substandard lending practices? Did individuals get carried away and accept more credit than they should have accepted? Maybe we just plain lost our way and let our abundance get the better of us across the board.

Regardless of cause, many feel the financial sector is hanging them out to dry. While taxpayers bailout failing financial institutions with their paychecks, banks have been raking them over the coals in preparation for the CARD Act of 2009. So much so that our elected officials are stepping in to bump of the date of its passing.

Has the credit crisis changed the rules we have to play by? Has it changed the rules we have to live by?

Who is responsible?

Are we as individuals personally responsible for our behavior today? Many contend that, over the last few decades, our principles have deteriorated. Is this same general lack of personal responsibility spilling over into business, resulting in corruption… Or has it always been this way?

What about the banks? Banks have received a tremendous amount of bailout money, but have done little to help restart the economy. Instead, they’ve been holding the money and posting huge quarterly profits. As more and more homes go into foreclosure, their profits increase.

Is some of this bailout money filtering back down to the taxpayers? Not really. As banks profited, loans dropped. Have they refunded the bailout money with all of these profits? Not entirely. Some banks have refunded in full, some have refunded in part, and others have not refunded at all. Here is a great resource to help you track which banks have refunded and which have not.

Personally, I’m amazed at what’s happening. The public has been called upon to fund the unprecedented bailouts of private industry and maintain high levels of consumption to sustain the economy, all while being asked to live with ever-increasing credit card rates, fees, and an inability to refinance troubled mortgages.

As far as I’m concerned, the banking industry must be absolutely brilliant to have pulled this off. I am truly in awe as I watch all of this unfold before my eyes. Banks have definitely not been making friendly with the American public, and people have just been taking it. Perhaps the American public is finally be ready for a change!

Can we live without credit cards?

Given all the unfriendly changes in the credit card world, what about living without credit cards altogether? Can we possibly do it?

People are resilient. I think you’d be surprised by what you could do if you absolutely had to. If things spiral downward, and we find ourselves facing a devalued dollar and ever-increasing unemployment, how would we react?

My best guess is that most of us would react just like folks did back in the 1930s. We’d band together and do what needs to be done to get by. And perhaps most importantly, we’d start living within our means. So why put some pressure on ourselves and take those steps regardless?

I think this pressure is good for us.

There are many examples in nature where pressure provides us with a precious bounty. Coal left under pressure gives us diamonds. When certain fruits are exposed to pressure they yield precious oils. And history shows us how pressure and fear of failure are some of the best motivators in the financial matters of both businesses and individuals.

And since we (as individuals) aren’t going to a bailout… Let’s focus on bailing ourselves out!

Real world ways to curb the use of credit

• Are you borrowing for wants or needs? Did you need that 2,500 square foot house, or could you have made due with 1,500 and a much lower mortgage payment? Did you need that brand new Chevy Silverado, or should you have gone with a 3 year old truck in solid shape? Did you need that Jet Ski? How about that new 50″ plasma HDTV? If you truly need to borrow money, then borrow it… I’m just asking you to reevaluate your needs against your wants.
• Reduce your available credit. How much credit do you have at your disposal? And how much do we really need? Get a free credit report from AnnualCreditReport.com. Next, go through your report(s) and figure out your total credit limits. I’m betting you’ll be surprised by the high amounts. If you cannot stop using credit, or just plain don’t want to, try cutting back to just one or two cards. Do you really need more than that?
• Change the way you think. If I asked how you would buy a car, most would answer, “Get a loan.” If I asked how you would buy a house, most would answer, “Get a mortgage.” What about TVs? What about furniture? What about college? Loans. Loans. Loans. Why do we automatically think we have to borrow money to buy things? Is this a trained response? We need to reduce our standard of living so we can get out of debt and save for future purchases… Then pay cash. Change the way you think. Start today.
• Reduce your standard of living. Live below your means. Spend less than you earn. You may be sick of hearing these phrases, but they work. Maybe it’s time we start living them. Doing so will eventually allow us to save pay down debt and save.
• Pay down debt. Once you’ve brought your standard of living back into check, follow through on that spirit of discipline by paying off your existing debt. Doing so will empower you. Don’t believe me? Try it out for yourself.
• Save Money. Now that you’re spending less than you’re earning and paying off debt, you’ll be able to save more money for future purchases. Pretty soon, paying cash for your next car will be a reality. Remember, by saving money, you reduce your risk. The more money you have saved, the better buffer you have against emergencies… Which means you’ll no longer need a credit card for an emergency!
• Use your debit card. If you are used to using your credit card for everyday purchases, start using your debit card instead. I promise that you’ll hardly notice a difference, but you’ll become more deliberate in your spending. Many will argue the superiority of credit over debit for reasons like purchase coverage and rewards. In my experience, however, these things hardly make a difference in everyday life. In light of the pros and cons of each, I would choose debit every time.
• Pay cash. Now that you’ve saved up some money, start using. Paying in cash has been linked to reduced spending rates. In fact, it’s argued that handing over cash actually elicits brain function that mimics pain. Paying with cash will also give you better deals when you go to purchase goods and services. For example, medical bills paid with cash can often be reduced because it eliminates the practitioner’s need to file an insurance claim or pay credit processing fees. Also… When you spend cash, you can only spend what you have!

In closing…

Remember… If you don’t agree with industry and/or business practices, your best course of action is often to simply stop using their products. The same is true for the financial industry. Reevaluate your priorities, change the way you think, pay down debt, save your money, and start using cash and/or debit for more of your purchases. You have a voice, don’t be afraid to use it!

No one makes changes for us… We must make them for ourselves, and go from there.

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A reader named Hannah recently wrote in to ask about current 0% balance transfer offers. It seems that she took advantage of a 12 month offer last November, and is now looking for another to extend her 0% promo period with a new offer.

Unfortunately, credit card issuers have gotten increasingly stingy with their offers over the past year or so. Most of those twelve month offers have become six month offers, and pretty much all of them now come with fees attached.

While these offers have gotten considerably less attractive, they’re still a great deal when viewed in the context of prevailing credit card interest rates. So… What’s the best deal currently available?

Twelve month offers making a comeback?

A week or so ago, I got an e-mail announcing that the 0% promo period on the Discover American Flag has been increased from six to twelve months. While that sounds like great news, it’s important to note that they’ve also increased the balance transfer fee from 3% to 5%. Thus, it’s not quite as nice as it sounds. Nonetheless, depending on your situation, this could still be a worthwhile option.

Six month balance transfers abound (sorta)

It wasn’t too long ago that I had a list of over 40 great 0% balance transfer offers. That list has now dwindled to fewer than ten and, as noted above, the terms have deteriorated. Pretty much all of them are six month offers, and pretty much all of them have a 3% transfer fee.

Once again, this isn’t great, but it’s arguably better than paying 20% or more on your credit card debt. In case you’re interested, here are four such offers:

• Discover More Card
• Discover Miles Card
• Discover Monogram Card
• Citi Platinum Select Card (+ 0% on purchases!)

If you know of any particularly attractive 0% balance transfer offers, please share the details in the comments.

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This is just a quick note to let you know that there’s a new discount code out there for myFICO. Unfortunately, it’s only good through September 30th, so you have to hurry. Here’s the scoop…

Simply enter promotional code ‘FinancialHelp25‘ to get 25% off your purchase. Thus, if you’re interested in something like FICO Standard, which gives you access to your TransUnion or Equifax FICO credit score, you can get it for $11.96 (vs. $15.95).

Also note that myFICO ScoreWatch still offers a 30 day free trial, complete with free access to your Equifax FICO credit score. Just be sure to cancel when you’re done if you don’t want to pay for the service. Of course, if you do want the service, then be sure to use the promo code.

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A reader that I’ll call Mary recently wrote in with the following question about dealing with a collection agency:

We were in a horrible car accident last year and our car insurance just now paid the car towing company. This company turned our bill over to collection agency which listed this on our credit report. Now… Who does what? The towing company tells collection agency to delete record on our credit report? Or do we need to do something?

We actually experienced something similar when a local medical clinic sent to collections a bill that we had already paid. Based on our experience, I would suggest starting by reading up on the Fair Debt Collection Practices Act (FDCPA).

Once you’ve done that, I would then request validation of the debt from the collection agency. A quick Google search turns up numerous sample letters that you can adapt for you own purposes. As part of your request, it wouldn’t hurt to note that you have proof of payment.

Be sure to send this letter via certified mail within 30 days of the collection agency’s initial contact. The collection agency will then have 30 days to respond. If they can’t validate the debt, they’re not allowed to:

(1) attempt to collect it,
(2) contact you about it, or
(3) report it to the credit bureaus

If they don’t respond, send a followup noting (politely!) their failure to comply with the FDCPA. Further state that they will be in violation of the act if they attempt to collect and/or report you to the credit bureaus (or fail to remove the listing if they’ve already reported you).

In our case, this is as far as it went. We sent the request for validation and didn’t hear anything. I then sent a followup noting their failure to validate the debt, and further stating that we consider the matter to be resolved. We haven’t heard anything since.

In Mary’s case, it would also be worth following up with both the insurance company and the towing company and asking for their help. It’s important to be polite but firm, and to not give up until you get a resolution. Take good notes of every conversation, and provide documentation wherever possible/necessary.

What did I miss?

Have any of you successfully navigated this sort of situation, or otherwise dealt with a collection agency? If so, do you have anything to add?

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If you’ve followed this site for any length of time, you’re likely aware that I’m not a huge fan of debit cards. While I recognize that they can be quite convenient at times, debit cards simply have too many disadvantages for me to use one instead of a credit card.

In the past, my biggest concern has been fraud. While debit card issuers typically offer fraud protection on par with credit cards, fraudulent activity typically results in an investigation before the questionable charges are eventually reversed. I’m not sure about you, but I don’t want a portion of my bank balance tied up with things get sorted out.

Fees, fees, and more fees

Well, after reading this article, I now have one more reason to dislike debit cards: overdraft fees. I know what you’re thinking — any responsible debit card user won’t overdraw their accounts, but…

We’re all human, and it might happen. In fact, it did happen to Peter Means, who’s been using a debit card to reign in his spending, but wound up getting hit with seven different $34 overdraft fees in a single day.

“[Means] was stunned when his bank charged him seven $34 fees to cover seven purchases when there was not enough cash in his account, notifying him only afterward. He paid $4.14 for a coffee at Starbucks — and a $34 fee. He got the $6.50 student discount at the movie theater — but no discount on the $34 fee. He paid $6.76 at Lowe’s for screws — and yet another $34 fee. All told, he owed $238 in extra charges for just a day’s worth of activity.”

To make matters worse, he had actually deposited sufficient funds a few days earlier, but it took too long for these transactions to clear.

Doing us a favor?

The problem here is that banks allow customers to overdraw their accounts without warning. Sure, they call it “overdraft protection,” as if they’re doing you a favor but they don’t actually ask if you want it. And why would they? Banks are expected to collect tens of billions of dollars this year on overdraft fees alone.

Compare that to the situation with credit cards. Under the terms of the CARD Act of 2009, cardholders will have to opt in for approval of over-limit charges. In other words, you can protect yourself from inadvertent credit card fees.

The solution?

Rep. Carolyn Maloney (D-NY) has actually introduced legislation to level the playing field between credit cards and debit cards by requiring consumer consent before banks can permit (and charge for) overdrafts. The legislation would also regulate overdraft fees and prohibit banks from maximizing overdraft fees by manipulating the order in which transactions are posted.

Of course, such restrictions will come at a cost. If banks lose overdrafts as a major profit center, some industry experts are predicting that they’ll start charging monthly service fees on formerly “free” checking accounts. That way we can all share the joy.

Source: NY Times

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This is a guest post from Andy Jolls, a former FICO executive and founder of VideoCreditScore. If you like what you see here, please consider checking out his videos and/or subscribing to his RSS feed.

A few years ago, a friend of mine was engaged in 0% credit card hopping. She had accumulated $20,000+ in credit card debt after graduate school and was constantly opening up a new card to avoid interest charges. The logic: people see these 0% credit card offers and think “Wow, I can use those to make a dent in my debt.”

This line of thinking should, however, lead to two questions:

1. If credit card issuers are making these offers so often, how can they be making money?
2. Are there any negative impacts of card hopping, such as damage to your credit score?

The 0% reality

The truth is that most people weren’t careful enough to really take advantage of the “free loan” offered by 0% credit cards. The reality is that most folks transfer their balances and then see their card balances stay about the same, or even grow.

This is probably because people keep putting off their payments knowing they can hop to the next 0% offer. While I could dig for data to support this view, I’ll just stick with some basic logic…

Credit cards essentially offer 30 day “free” loans, and yet they generate billions in interest payments to card issuers every year. It thus stands to reason that a six month 0% offer could easily lead to a profitable business — and it often does.

Effects on your credit score

On the credit score side, the impact of card hopping is probably unknown to many “hoppers.” Credit card hopping creates several different issues. First, by opening so many credit cards, you are impacting the inquiries piece of the credit factors pie. Lots of inquiries means lots of risk and thus a lower credit score.

Second, if you are opening these cards, doing a transfer, and then closing the cards, you are never building aggregate available credit. You could have had 20 credit cards in your life, yet only have $1000 worth of available credit at any given time. People with great credit scores often have total credit limits in excess of $20,000 meaning that you’re usually using just a small fraction of their available credit. Since credit utilization accounts for 30% of your credit score, this can have a big impact.

Finally, the credit history portion of your score will be damaged, as it favors people who have had a few credit cards for years and years as opposed to consumers with lots of cards that have only been open for six months. This is why older people often have better credit.

Ask for a better rate

Another possibility is to use a 0% balance transfer offer as leverage against your current card issuers. Go ahead and contact your creditors and tell them that you have an offer to switch to a 0% card and that you want your interest rate lowered. You may be able to negotiate that 24% rate down significantly.

The 0% landscape

So… If these 0% credit card offers are so profitable, why have they begun to dry up? Well, the current economic climate has transformed consumers who struggle to pay off their debts into defaulters, cutting into profit margings. Thus, credit card issuers have tightened up and 0% cards have gotten harder to find — for now.

Eventually, however, the economy will recover. When it does, zero percent offers will once again become commonplace. As tempting as these offers might be, you should resist them unless you have a firm repayment plan in place. While getting out of debt is an admirable goal, you won’t make any progress without a plan.

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I recently learned that Citi is removing the automatic travel insurance from their cards, effective September 1, 2009. If you’re anything like me, then I know exactly what you’re thinking…

“Travel insurance? What travel insurance?”

To be completely honest, I was vaguely aware of this coverage, but my card usage is primarily governed by one thing — credit card rewards — so I’ve never paid much attention.

Whether you know it or not, if you’ve booked travel on any “common carrier” using your Citi card, you’ve been automatically covered by this insurance. Here’s a description of the coverage, straight from Citi:

“When you use [select Citi cards] to buy plane, train, ship or bus tickets, you, your spouse and eligible dependent children are each automatically covered for up to $1,000,000 of Automatic Travel Accident Insurance, at no additional cost to you.”

Now that you know about it, will you miss it?

While I realize that this isn’t necessarily an either/or proposition, I’d prefer to see perks like this get dropped rather than having card issuers reduce their reward programs, institute new fees, etc.

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A couple of months ago, I wrote about the new Citi Forward card. In case you don’t recall, it’s a relatively new reward credit card that offers ThankYou points instead of cash back rewards.

While I much prefer cash rewards, the reward structure on the Citi Forward card is pretty attractive… You get five points for ever dollar spent on books, movies, music, and restaurants. Believe it or not, this includes all purchases at Amazon.com, which qualifies as a “bookstore.”

Given that you can exchange points for $100 store gift cards on a point per penny basis, this works out to a 5% discount on all Amazon purchases. Pretty nice, especially considering the amount of shopping that we do at Amazon.

Anyway, the point of all this is that we’ve been look for a replacement for the Chase Freedom card, whose rewards were recently restructured, and we’ve settled on the Citi Forward card.

What about our American Express Blue Cash card?

As I’ve noted elsewhere, the rewards associated with the AmEx Blue Cash card have likewise been restructured. When I last wrote about the Citi Forward card, I noted that we’d thus be replacing our Blue Cash card, as well.

While that post generated a good bit of interest, I never got around to writing a followup. Today, I’m doing just that… My current line of thinking is that we’ll be switching to the Charles Schwab reward card. This is a Visa-branded card that offers 2% cash back with no reward cap and no annual fee. The only requirement is that you have to open a Schwab One brokerage account in order to get the rewards.

Given that we’ve already passed the $6500 spending threshold to earn the full 5% cash back on gas and groceries with our AmEx card, we probably won’t pull the trigger on this change until later in the year. And who knows, by then the reward credit card landscape may have changed.

I’ll be sure to update again when we make a move.

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This is a guest post from Manshu of OneMint. If you like what you see here, please consider subscribing to his RSS feed.

Have you ever noticed that some retailers don’t accept certain credit cards? For example, while Visa and MasterCard are widely accepted, American Express card are often turned away. The reason for this is simple…

When you use your credit card to make a payment, the retailer doesn’t get to keep 100% of the transaction amount. Rather, they pay a “merchant discount fee,” which can vary based on the type of card involved.

For example, whenever you use your Visa card, the retailer loses as much as 3% of the transaction amount in fees. In fact, these sorts of fees apply to credit cards, debit cards, and even prepaid cards. While the calculation of these fees* can be quite complex, a simple example will shed some light on how it works.

Consider a scenario in which you go to the grocery store and use your Visa card to buy groceries costing $100. From that $100, the retailer might get $98 or so. Of the remaining $2, about $1.75 would go to the bank issuing the credit card (the so-called “interchange fee“), about $0.20 would go to Visa, and the remainder would go to the retailer’s merchant account provider, who initially processed the transaction.

Interestingly, these fees get collected on a per-transaction basis. Thus, even if you never pay a penny in interest or fees to your credit card issuer, they’re still making money when you swipe your card. Among other things, these fees help to pay for cash back and/or other rewards programs.

Not surprisingly, retailers are sensitive to these sorts of fees, and often choose whether or not to accept certain types of cards accordingly. Indeed, as I noted above, American Express is less widely accepted than Visa and MasterCard, and one of the main reasons for this is that they charge higher fees to merchants.

*Note: Here’s a link to a description of the fees charged on a Visa transaction.

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This is a guest post from Jim Wang of Bargaineering. If you like what you see here, please consider subscribing to his RSS feed.

Credit scores are becoming increasingly important each and every day. While some people check them compulsively, almost as frequently as they check their investment portfolio, others check them infrequently, like the oil in their car. Regardless of where you stand, that three digit credit score plays a big role in your life, so it’s important to make sure that you have a good one.

So what’s a good credit score?

Good is relative. If you’re not planning on getting a loan, you probably shouldn’t be too worried about your score. As long as you have an average credit score or above, you’re in good shape. In such cases, good enough is good enough.

But let’s say that you want to buy a house, and you’re looking for a 30 year, fixed rate mortgage. What do the rates look like relative to credit scores?

Here’s what MyFICO says:

 
In that case, anything above 760 is “good,” though anything about 700 r†ange are pretty darn good. The point that I’m trying to make is that the definition of good depends on your needs. If you don’t need to borrow, then a 620 is as good as a 850. After all, you can’t walk into the grocery store with your 850 and expect to get anything with that alone, right?

So, the next time you’re fretting about how good your score is, think about what you’re trying to achieve first. Once you have context, it’s worth spending time finding out if your score is good, or at least good enough.

There are several ways you can see your FICO credit score for free, but all of them require that you sign up for a trial membership for some sort of paid service (e.g., FreeCreditReport.com requires a seven day free trial of their credit monitoring service). If you don’t want the hassle, you can always try a site like Credit Karma.

Credit Karma is absolutely free, but it’s not a true FICO score. Rather, it’s an approximation based on your TransUnion credit report. If you’re planning on getting a loan, you’ll want your real FICO score. If you’re just curious or want to see how it changes, the TransUnion-based score is good enough.

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In case you haven’t heard, the Senate just passed the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 by a 90-5 vote. The House passed their own version of this bill, known as the Credit Cardholders’ Bill of Rights, back in April by a 357-70 margin. It’s now up to the House and Senate to settle their differences and then send it on to the White House for the President’s signature.

What follows is a rundown of some of the key provisions that are included in this legislation. Wherever possible, I’ve tried to indicate how the House and Senate versions differ.

• Rate increases: Both the House and Senate versions ban interest rate increases on existing balances unless the account is more than 30 (House) or 60 (Senate) days delinquent. Also, according to the House version, promotional rates must last a minimum of six months.
• Payments: All payments above the minimum are required to be applied to the portion of your balance with the highest interest rate.
• Punitive rates: According to the Senate version, if you pay late and your rate gets increased, you have the right to go back down to the original rate if you pay on time for six consecutive months.
• Universal default: Both the House and Senate versions ban universal default, wherein card issuers can raise your rates if you have a late payment to a different creditor. Note that several issuers have already stopped this practice.
• Notification: Card issuers have to send your bills at least 21 days before the due date. They also have to give you 45 days notice before increasing your rates, fees, or finance charges. Under the House version, card issuers are required to give you 30 days notice before they close your account.
• Over limit fees: Card issuers can only charge over limit fees if you opt in for approval of over-the-limit charges. If not, your charge won’t go through, but you also won’t get hit with a fee.
• Age restrictions: The House version limits issuers from extending credit to those under the age of 18 and also limits college students to a single card with the credit limit being governed by the students income. The Senate version goes further, requiring those under the age of 21 to have a cosigner or otherwise provide proof of income.
• Fees: Issuers cannot charge fees to pay by mail, phone, and electronic transfer or online, except for expedited service.
• Gift cards: According to the Senate bill, gift cards can’t expire in less than five years. The House bill doesn’t mention gift cards.

Note that many of these regulations overlap with new rules put in place by the Federal Reserve. However, the Fed’s rules won’t kick in until July 2010. Depending on how quickly the House and Senate versions get reconciled, it’s possible that the President could sign this into law before Memorial Day.

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After a good run, the time has come to once again change our reward credit card strategy. First, AmEx reduced the rewards on their Blue Cash card, and then the same thing happened to the Chase Freedom card.

Over the past year or two, we’ve been using our AmEx Blue Cash card for nearly everything, with the Chase Freedom card serving as a backup at places that don’t accept AmEx. While we’re leaning toward replacing our AmEx (more on this in a forthcoming post), we’ve decided to drop our Chase Freedom card cold turkey.

Goodbye Chase, hello Citi

In its place, we’ll be using the new Citi Forward card. As you might have read in my recent review, this card offers ThankYou points instead of cash rewards. Not great, but the reward structure is pretty sweet…

You get five points for every dollar spent on books, movies, music, and at restaurants. And guess what? All purchases at Amazon.com qualify as “bookstore” purchases. Given that you can trade your points in for $100 store gifts cards on a point per penny basis, this equates to a 5% discount on all Amazon purchases, not to mention restaurants, etc.

Don’t forget the bonus

Oh, and don’t forget about all those bonus points that you’ll get when you sign up — 6k once as long as you make $50 in purchases during the first three months, and another 5k for signing up for paperless statements. This is enough for a $100 store gift card right off the bat, and you’ll still have 1k points to spare.

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As a followup to yesterday’s post about FreeCreditReport.com, I wanted to open up a discussion about whether or not you care about your credit score.

On the one hand, I’ve written extensively about why you should care about your credit score… Like it or not, your credit score does matter, even if you don’t intend to borrow money. In fact, insurance companies, utilities, apartment complexes, and even prospective employers regularly check credit scores when evaluating potential customers/employees.

On the other hand, debt reduction guru Dave Ramsey has disparaged credit scores as being nothing more than “debt scores,” and has gone on record encouraging his followers to “stop worshiping at the altar of the FICO score.” Dave’s point here is that you need to focus on getting rid of your debt rather than worrying about what effect doing so will have on your credit score. I agree, but…

I still care about my credit score. I’m a realist. Like it or not, credit scores play a central role in many aspects of our financial lives, and it doesn’t cost me anything to have a good one. I don’t lie awake at night worrying about it, and I most certainly don’t base major financial decisions on the impact it will have on my credit score, but I do care about it.

The simple truth here is that living a responsible financial life typically results in a high credit score. My wife and I use credit cards as a convenience, but we always pay our balance in full, and have never carried consumer debt. We save and invest aggressively, and we have a 15 year fixed rate mortgage that will be paid off well in advance of its due date. We also have credit scores just shy of 800.

My point here isn’t to brag, but rather to point out that you can have your cake and eat it, too. While it might feel good to thump your chest and claim that you’re looking forward to getting out of debt and having a credit score of zero, it’s not an either/or proposition. In fact, the two are intrinsically linked. As you work to get yourself out of debt, your credit score will likely rise — and that’s a good thing.

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“F-R-E-E that spells FREE, credit report dot com, bay-bee!”

Unless you’ve been living under a rock, you’ve probably heard that jingle a bazillion times. FreeCreditReport.com — sounds great, right? Just sign up and get a free credit report as well as a free credit score. But is it really free? Or is it some sort of scam? They’ve gotten some bad press in recent years, so I decided to investigate.

While I dig deeper below, here’s the executive summary:

In my humble opinion, FreeCreditReport.com isn’t a scam. They tell you up front exactly what you’re getting into, and they honor their end of the bargain. You’re signing up for a free trial of their credit monitoring service, which comes with free access to your Experian credit report and credit score. If you don’t cancel before the trial expires, they’ll charge you. But if you do call them and cancel, you won’t be charged anything.

What does FreeCreditReport.com provide?

One of the first things you’ll notice when you arrive at FreeCreditReport.com is the big, yellow button promising you free access to your credit report and your credit score (pictured below). As just about everyone knows, the free credit report itself isn’t that big of a deal. After all, you can get free access to all three of your credit reports by visiting annualcreditreport.com.

But what about your credit score? Free credit scores are a bit harder to come by, though there are a number of promos out there floating around — e.g., the FreeCreditReport.com offer talked about here, as well as the free trial of myFICO ScoreWatch that I wrote about awhile back.

FreeCreditReport.com — What’s the catch?

As always, it’s important to read the fine print. If you look over to the left side of the FreeCreditReport.com homepage, you’ll see a box labeled “Important Information.” Here’s the scoop:

“When you order your free report here, you will begin your free trial membership in Triple Advantage Credit Monitoring. If you don’t cancel your membership within the 7-day trial period**, you will be billed $14.95 for each month that you continue your membership.”

They go on to specify that they are not affiliated with the federally mandated free credit report program (linked above). The footnote indicates that you actually have nine days during which you can cancel your trial membership since it can take up to 48 hours for the credit monitoring to begin.

Signing up for the free trial

I’m as curious as the next guy when it comes to things like this, so I decided to sign up and give it a whirl. The signup process is actually very easy. Simply visit FreeCreditReport.com, click the yellow signup button, and go through their two step signup process.

Step 1 (below) just asks for your name and address.

Step 2 (below) asks you to create a username and password, provide your personally identifying information (social security number, date of birth, and credit card information. Your card is not charged unless you decide to keep the service beyond the trial period.

After that, they ask two quick security questions derived from information on my credit report, and then you’re in. While they offer to upsell you at various points along the way, you can simply click “No Thanks” and keep going.

Accessing your free credit report and credit score

Once you’ve gained access, you free to view your Experian credit report and credit score. You can either view your report online or download a printable version. They also provide a link to a “Credit Report Guide,” which explains the types of information contained in each section of your credit report, and they have a link for disputing errors from directly within the site.

So… What did I learn from all of this? Well, for starters, there aren’t really any errors on my credit report. Beyond that, I learned that I have a credit score of 796, which puts me in the 99.5th percentile.

They also give you a breakdown of factors that helped and hurt your credit score. Here’s what they had to say about me…

Factors that increased my credit score:

• You have paid your bills on time and currently do not have any overdue accounts or derogatory information, such as a collection, charge-off, or bankruptcy, on your report.
• You have a good cushion of available credit between your current balance and your credit limits on all open trades. This has a positive affect on your credit score. This cushion shows lenders that you are unlikely to overextend yourself financially.
• The total balance on all your credit cards is relatively low compared to your total available credit limit. This has a positive impact on your credit score.
• Your average credit limit for your major credit cards, such as Discover, American Express, VISA, or MasterCard, is high. This tells lenders that you have enough financial experience, and they will be more likely to see you as a good credit risk.

Factors that decreased my credit score:

• Credit scores are calculated based on various factors in your credit report. Currently, your credit report does not show any significant negative or derogatory information.

How to cancel FreeCreditReport.com

Straight from their FAQs, here’s how to cancel:

If for any reason you are not satisfied, you can cancel anytime to discontinue your membership to Triple Advantage Credit Monitoring and stop the monthly billing. However, you will not be eligible for a prorated refund of any portion of your current month’s paid membership fee. To cancel, please contact Customer Care at 1-888-829-6560.

When I was done poking around, I called them up to cancel. After a brief period on hold, the phone rep pulled up my account, verified my identity, and then tried to convince me to stay for the remainder of my trial period. I simply told him that I had signed up to get the free credit report and credit score, and that I hadn’t seen anything after logging in that convinced me to stick around. He then canceled my account. The entire process took less than three minutes (yes, I timed it).

Just to be on the safe side, I called back and asked to cancel my account. The rep that I got this time around pulled it up just as before, and then said that my account was already showing that it had been canceled a few minutes earlier.

Is FreeCreditReport.com a scam?

So… In answer to the original question… FreeCreditReport.com is not (in my opinion) a scam. Yes, some people may erroneously arrive there looking for the federally mandated free credit reports mentioned above, but they clearly state what they’re all about and they honor the terms of the free trial period.

Closing thoughts

When she heard that I scored a 796, my wife decided she had to check hers. We’ve always run neck-and-neck since our credit histories are so similar, though she has often had me by a couple of points in the past (primarily due to a slightly longer credit history, I think).

Well… When she checked, she found out that her score was also 796. Exactly the same as mine. Consider me disappointed… I had hoped I would finally pass her by. For the record, she also found that the cancellation process was a snap — just be firm and clear about your desire to cancel.

So what are you waiting for? Go check your score and let us know if you can beat us. Just don’t forget to cancel if you don’t want their recurring service.

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Citi has rolled out an interesting new Visa-branded card called the Citi Forward card. If you’re in the market for a new credit card, this one appears to offers a nice combination features, including a generous signup bonus, 0% APR for an introductory period, up to five reward points per dollar spent, and there’s no annual fee.

Signup bonus

New Citi Forward cardholders get a 6k ThankYou point signup bonus as long as they make $250 in purchases within the first three months. Opting for a paperless statement within the first three months gets you another 5k bonus ThankYou points. Taken together, these bonus points can be traded in for a $100 store gift card right off the bat, and you’ll still have 1k points to spare.

Promotional rates

Another nice feature of the Citi Forward card is that it offers a six month introductory period with 0% on purchases and balance transfers. The only real downside here is that there’s a 3% balance transfer fee.

Credit card rewards

In addition to the signup bonus, the Citi Forward card offers five reward points for every dollar spent on books, movies, music, and at restaurants. For all other purchases you get the standard one point per dollar.

An interesting twist on this reward structure is that purchases from Amazon.com using the Citi Forward card apparently qualify for the higher reward tier*. This is huge for us, because we buy tons of stuff from Amazon. Note that this isn’t limited to book purchases — Amazon is technically a bookstore, and all purchases qualify.

All in all, this card looks to be a nice complement to reward credit cards that offer 5% rewards on gas and groceries. This is especially true if you shop at Amazon and/or dine out frequently.

*Note: The Citi mtvU card offers a similar reward benefit.

Bonuses for good behavior

In addition to the above, Citi will give you 100 bonus points every month that you: (1) stay under your credit limit, and (2) pay on time. They’ll also reduce your APR by 0.25% whenever you make a purchase and pay your bill on time for three consecutive months. You can do this up to eight times, for a total reduction of 2%.

The APR reduction is a non-issue for us, as we never carry a balance. The extra 100 points every month is, on the other hand, a nice touch. Not a huge deal, but I certainly wouldn’t turn them down.

Closing thoughts

I have yet to apply for this card, but will almost certainly be doing so. After all, it’s hard to turn down a 5% discount on restaurants and purchases from Amazon. Given our spending patterns, this card would be a great fit alongside our primary reward credit card (AmEx Blue Cash), which pays 5% cash back on gas and groceries.

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A couple of years ago, I was in the market for a business credit card, so I applied for an American Express card that was offering a $250 signup bonus (sadly, that offer has long since expired). While this card was perfectly serviceable, I occasionally run into places that wouldn’t accept AmEx, and I also wasn’t crazy about the $125 annual. I ultimately cancelled it.

After that, I applied for a Discover Business card. I was once again enticed by a generous signup bonus, but I ultimately ran into similar problems regarding card acceptance. There are a few key places around town that won’t accept anything but Visa or MasterCard. Thus, I’m once again in the market for a business credit card.

Features of the ideal business credit card

My needs are simple. I want a cheap, widely accepted card — thus, I’m looking for a Visa or MasterCard. I also don’t carry a balance, so the APR is a non-issue. I’m more interested the annual fee (or lack thereof). Rewards are great, but my business expenses aren’t actually that high, so they’re not a huge deal.

The best business credit card — for me

As of right now, the most attractive business credit card out there for my needs appears to be the new AT&T Universal Business Rewards credit card from Citi. Most importantly, this is a Visa card and there’s no annual fee. The rewards also match up fairly well with my relatively meager spending.

For example, I’ll get 5 ThankYou points for every dollar spend on AT&T products/services (currently DSL and phone; also considering an iPhone) as well as 3 ThankYou points per dollar spent at gas stations, office supply stores, and on professional services (like legal and accounting). All other purchases qualify for one point per dollar spent. While points aren’t quite as good as cash, I can trade them in for gift cards at stores that we frequent.

Oh, and for those that are looking for a bit of interest-free financing, there’s a six month introductory period with 0% APR on purchases.

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Your credit report is incredibly important. Not only do potential lenders check it when you’re trying to secure credit, but landlords, cell phone companies, utility companies, insurance companies, etc. have also been known to check your credit prior to doing business with you.

Given the above, it’s in your best interest to check your credit reports regularly and clear up any errors or out of date information. In addition to protecting your credit score, checking your credit report is also a good way of detecting against identity theft before things get out of control.

Fortunately, if you find errors on your report, it’s relatively easy to correct them. For example, I had a medical bill that was erroneously sent to collections. My insurance company had paid it years ago, so I was surprised to see it there. While this error had a huge negative impact on my credit score, I was ultimately able to get it fixed.

How to get your free credit reports

You can get a free copy of your credit report from each of the three credit bureaus once per year. To order your reports online, visit annualcreditreport.com. Note that this site is the only place where you can get your reports completely free. Sites such as FreeCreditReport.com and MyFICO.com have strings attached, as you have to enroll in free trial and then cancel before you get charged.

According to the Federal Trade Commission, there are additional circumstances in which you can get free access to your credit reports:

“Under federal law, you’re also entitled to a free report if a company takes adverse action against you, such as denying your application for credit, insurance, or employment, based on information in your report. You must ask for your report within 60 days of receiving notice of the action. The notice will give you the name, address, and phone number of the consumer reporting company.

You’re also entitled to one free report a year if you’re unemployed and plan to look for a job within 60 days; if you’re on welfare; or if your report is inaccurate because of fraud, including identity theft.”

Finally, it’s worth noting that each of the three bureaus will provide you with a free credit report if you place a fraud alert on your file.

How to dispute errors on your credit report

Now that you’ve reviewed your credit report and found some errors, you need to decide how you want to dispute it. For starters, all three credit bureaus offer online dispute resolution. This is a great place to start, though you can’t necessarily fix all of your problems online.

Contact numbers and online dispute sites:

• Equifax: (800) 685-1111 (Online Dispute Resolution)
• Experian: (888) 397-3742 (Online Dispute Resolution)
• TransUnion: (800) 888-4213 (Online Dispute Resolution)

Fixing errors on your credit report by mail:

As convenient as online dispute resolution might be, sometimes you’ll need to send your dispute through the mail. If you’re unsure, call the credit bureaus (numbers above) to verify what you need to do for your specific case.

When we were disputing an error on my credit report, I called Equifax to get some more information on what to send with the claim. Some items you may need to include (depending on your error):

• Copy of driver’s license or state ID card
• Copy of Social Security card
• The full name of the creditor or collection agency
• The account number in question
• A concise description of why you’re disputing it
• Any paperwork you have that supports your case

It definitely pays to call ahead and get specific guidance for your for how to handle your dispute if you’re going to mail anything to them.

Sample credit report dispute letter

In case you’re unsure what to include in your dispute letter, the FTC has a sample dispute letter to help you out.

Date
Your Name
Your Address
Your City, State, Zip Code

Complaint Department
Name of Company
Address
City, State, Zip Code

Dear Sir or Madam:

I am writing to dispute the following information in my file. The items I dispute also are circled on the attached copy of the report I received.

This item (identify item(s) disputed by name of source, such as creditors or tax court, and identify type of item, such as credit account, judgment, etc.) is (inaccurate or incomplete) because (describe what is inaccurate or incomplete and why). I am requesting that the item be deleted (or request another specific change) to correct the information.

Enclosed are copies of (use this sentence if applicable and describe any enclosed documentation, such as payment records and court documents) supporting my position. Please investigate this (these) matter(s) and (delete or correct) the disputed item(s) as soon as possible.

Sincerely,
Your name

Enclosures: (List what you are enclosing)

And remember… Always send copies of your documentation. Keep your originals!

Credit bureau mailing addresses

What follows is a list of addresses for the major credit reporting agencies.

Equifax Information Services, LLC
P.O. Box 740256
Atlanta,GA 30374

Experian
P.O. Box 2104
Allen, TX 75013-0949

TransUnion Corp.
P.O. Box 2000
Springfield, PA 19022-2000

You should receive a letter in approximately 4-6 weeks regarding the status of the dispute. Mark the date you sent your dispute on your calendar, and keep detailed records in case there are any further problems.

Dealing with accurate negative information

If there are legitimate negative items on your credit report, there’s not much that you can do. In most cases, negative information will be removed from your credit report seven years after the date it was last reported. As you slowly rebuild your credit history, you should see your more and more positive information on your credit report, the negatives will gradually drop off, and your score should rise accordingly.

Closing thoughts

Fixing your credit report takes a bit of time, but it’s worth it. I’m certainly glad to have the medical collection taken off of my credit report. Of course, it pays to have proper documentation as you go through the process. In my case, I had proof of payment, so it was just a matter of filing my request and waiting.

Have you been through this? Do you have any tips to add?

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It’s no secret that we’re in the midst of a credit crunch. Banks aren’t lending, foreclosures are on the rise, card issuers are reducing credit limits, and the juiciest credit card offers have all but disappeared. Gone are the days when everyone (and their uncle!) was offering lengthy 0% balance transfers with no transfer fee.

Getting Creative

So what’s a savvy debt reducer to do? Get creative. Building on an idea that I first wrote about over at Credit Addict, you can create your own fee-free balance transfer with any card that offers 0% APR on purchases. There are still a number of such cards available, many with promo periods of up to 12 months.

Once you have your card, simply drop by the US Mint and buy cash with your credit card. That’s right, you can buy $1 coins straight from the Mint, and you can pay with a credit card. They come in boxes of 250 coins, with a limit of two boxes per order, and shipping is free. Thus, you can buy up to $500 per order.

Once your coins arrive, simply deposit them at the bank and use the proceeds to pay down your high interest debt. Bip, bop, bam. You’ve just turn that “0% on purchases” promo into a 0% balance transfer. And best of all, there are no fees.

Miscellaneous Notes

While there’s no explicit limit on the number of orders that an individual can place, it’s possible that the Mint will wise up and limit your transactions if you try to do too much. Also note that shipping initially shows up as $4.95, but it’s deducted on a subsequent page. Oh, and since this is technically a purchase, you should also earn rewards on these transactions. Here again, if you do too much too fast, your credit card company might wise up and limit your transactions.

Finally, I should note that I do realize that the ethics of this trick are somewhat questionable. The goal of the Mint is to get these coins out into circulation, and depositing them at your bank technically does that. Nonetheless, that’s not really in the spirit of what the Mint is trying to accomplish, and you’ll be generating unnecessary credit card processing fees. If you’re not comfortable with this, then don’t do it. But if you are, you can save a good bit of money.

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Late last week, I mentioned MyFICO Scorewatch in the context of Experian’s decision to stop offering consumer FICO scores. This time around, I thought I’d mention it in it’s own right, as it’s a great way to get a free peek at your credit score thanks to their 30 day free trial.

In case you’re not familiar with MyFICO, they’re the consumer division of Fair Isaac, which is the company that invented the FICO credit score. Their ScoreWatch product is essentially a credit monitoring service that gives you two free Equifax Score Power reports per year. These reports include a complete Equifax credit report plus your Equifax-based FICO score. They also alert you whenever your credit report changes, and provide you with an updated FICO score at the same time.

While this sort of service may or may not appeal to everyone, there’s one killer feature that pretty much anyone should love — a 30 day free trial which, at the very least, provides you with access to a free FICO credit score. If you sign up and decide to keep the service, it costs $8.95, or $89.95 per year. But if you cancel within 30 days, there’s no cost to you whatsoever.

So what are you waiting for? Go check your score and let us know where you stand. Mine is 795. Can you beat that?

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In spite of the ongoing credit crisis, Discover has launched a new credit card. It’s called the Escape Card by Discover, and it offers some fairly generous travel rewards as well as a 25,000 mile bonus, whih is the equivalent of a $250 signup bonus. The reward program offers two miles for every dollar spent. The miles never expire, and there’s no cap on how many you can earn.

Given that these miles are worth $0.01/each (more below), this is the equivalent of a 2% cash back reward. As far as redeeming your miles goes, you can use them on any airline for any flight. Simply purchase your ticket(s) with the card and then redeem your miles at a rate of $100 for 10,000 miles.

If you’d prefer non-travel rewards, you can redeem your miles for gift cards from over 90 Discover partners. Gift card redemptions start at 1,000 miles. Alternatively, you can convert your miles into statement credits, though the exchange rate here is only $25 for 5,000 miles.

As for the 25,000 mile bonus, you’ll receive 1,000 bonus miles per month for the first 25 months as long as you use the card at least once per month. This card also comes with 0% APR on purchases for six months.

The only real downside to this card is that there is a $60 annual fee. However, the bonus miles more than cover this amount for the first two years. All in all, the generous rewards make this card awfully tempting.

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I originally wrote this up over at Credit Addict, but it’s important enough that I wanted to share it here, as well. Apparently Fair Isaac, the company that created the FICO score, will not be allowed to provide consumers with credit scores based on Experian’s data beyond February 14th, 2009.

In the past, you’ve been able to access your FICO credit scores based on data from all three credit bureaus (for a fee, of course) via Fair Isaac’s MyFICO.com website. While Experian has pulled out of their agreement with Fair Isaac, they will continue selling their own proprietary score directly to lenders.

This is bad news for consumers, as it means that lenders will now have access to information that their customers can’t see. Sure, you can still check your Experian credit report, but you won’t be able to see the number that really matters.

If you’d like to see your Experian score before it’s too late, your’ going to have to purchase it soon. One option would be MyFICO Credit Complete, which gives you all three FICO scores, but costs close to $50. Alternatively, if you’re okay with just receiving one of your scores, you can signup for the free ScoreWatch trial , which gives you free access to your Equifax-based FICO credit score. Note that this is a 30 day free trial, so be sure to cancel before it ends if you don’t want to be charged.

See also: Experian Credit Scores to Go Dark

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Here’s an interesting little tidbit from Consumer Reports Money Advisor… Almost all credit unions require you to put up your other accounts as collateral when applying for one of their credit cards. Thus, if you default on the card, they can take your savings and apply it toward what you owe them. In contrast, very few banks require this sort of collateral when opening a credit card account.

Hopefully this won’t directly impact you, but it’s certainly worth knowing about.

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Unfortunately, this Discover offer has expired… The good news is that Amex Preferred Gold Rewards is offering a $100 signup bonus.

Simply apply for the card and spend a total of $500 within the first three months to qualify for the bonus. Apply now and get a decision in 60 seconds!

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This is just a quick heads up to let you know that both Citi and Amex are revising their cardmember terms and increasing their credit card interest rates and fees. I wrote about this in more detail over at Credit Addict, but here’s the executive summary…

Citi Changes

• Purchase APR is going up to a minimum of 16.99%
• Cash advance APR is going up to a minimum of 21.99%
• Default APR is easier to trigger, and increasing to a minimum of 23.99%
• Fees for foreign transactions are increasing (new 3% transaction fee)
• You can opt out of the changes, but they’ll ultimately close your account

Amex Changes

• Cash advance APR is increasing to Prime + 17.99%
• Late payment APR is increasing to Prime + 14.99%
• Default APR is increasing to Prime + 23.99%
• Foreign transaction fee is increasing to 2.7%

And here are the direct links to the articles, where I’ve transcribed the full text of the letters that I received:

» Citibank Change in Cardholder Terms, Rate Increase, and Opt-Out Notice
» American Express Change in Cardmember Terms, Rate Increases

Forewarned is forearmed. You should also be on the lookout for credit limit reductions, as you don’t want to trigger any over-limit penalties.

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Unfortunately, this Discover offer has expired… The good news is that Amex Preferred Gold Rewards is offering a $100 signup bonus.

Simply apply for the card and spend a total of $500 within the first three months to qualify for the bonus. Apply now and get a decision in 60 seconds!

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» Discover Signup Bonus Expiring Soon
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» AmEx Credit Card Signup Bonus Disappearing Soon
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» Best Business Credit Cards: What’s Hot, What’s Not
» Discover Business $100 Bonus – Expiring Soon
» Applying for a Business Credit Card

Kenneth Lin, the CEO of Credit Karma recently e-mailed me about their site, which offers free credit score tracking. Credit Karma has actually been around for awhile, but I had never bothered signing up until Kenneth contacted me. I figured that it’s free, so what’s the harm in trying?

Checking it out

Setting up an account was dead easy, but you should be aware that they’ll ask for some fairly sensitive information, including your SSN. This should come as no surprise, as they need this info to access your credit records, but I just wanted to forewarn you. The good news is that they never ask for a credit card number, so there’s nothing to cancel. Ever.

Once I had confirmed my e-mail address, I was in. The actual “product” that Credit Karma deliver is pretty simple. It’s a three digit number designed to reflect your credit score (see below).

As I understand it, this isn’t a “real” FICO score, but it is based on real information from your TransUnion credit report. They also recently changed their algorithm to make their scores more comparable to FICO scores. For the sake of comparison, I recently checked my FICO credit score via Equifax and learned that it’s 798.

Advantages of Credit Karma

Two real strengths of Credit Karma are that they offer a plethora of statistics that let you know where you stand in a relative sense (see below), and they allow you to track your score over time such that you can see trends, and perhaps spot anomalies that might be signal negative information on your credit report. Oh, and one more thing… They’re free.

Disadvantages of Credit Karma

There’s not much to say here. The biggest downside of this service is that, as I mentioned above, they’re not providing you with a “real” FICO score, but rather a reasonable facsimile of one, but… As I also noted above, this is still a very useful tool for tracking trends and figuring out where you stand relative to others.

The other point is that the site is fairly ad-intensive. That’s understandable, however, as they’re offering this service for free, and they need to make a buck somehow. The good news here is that the ads don’t reduce the usability of the site. Indeed, it’s still very easy to find everything that you need.

Alternatives

If you’d rather get your real credit score, and you don’t mind having to call back to cancel before you get charged, then you should check out TrueCredit or MyFICO. Both offer 30 day free trials that give you access to your credit reports and your credit score. See also my earlier article on how to get your credit report for free.

But, if you don’t want any headaches, Credit Karma is definitely worth a look.

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With the holidays just around the corner, I thought I’d put together a list of credit cards that are offering 0% APR on purchases. Like 0% balance transfer offers, these sorts of promos can be a great deal for savvy consumers.

Assuming that you buy only what you can afford, you can pay off your purchases with a 0% credit card, stash the money in a high yield savings account, and then collect interest for the better part of a year. Just keep making your minimum payments, and be sure to pay off your balance before the 0% promo period ends.

With that said, here’s a list of six great options… Note that all of these cards offer 0% APR on purchases and some also offer 0% balance transfers.

• Discover More Card – 6 months
• Citi Platinum Select – 6 months
• Discover Monogram Card – 6 months
• Discover Student Card – 6 months
• Discover Escape Card – 6 months
• Citi Forward – 6 months

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» Reduce Debt With a DIY Balance Transfer
» Citi Forward Credit Card: Signup Bonus, Rewards, and More
» Discover Escape Travel Rewards Credit Card
» Save 5% on Gas Purchases With the Discover More Card

This is just a quick note to say that Discover has brought back the $50 signup bonus on the Discover More card. Simply apply for the card, get approved, and make $500 in purchases (within the first three months) to get your bonus.

If you’re not familiar with the Discover More card, it’s widely considered to be one of the best reward credit cards available, paying up to 5% cash back on purchases. In addition to the $50 signup bonus, other attractive features of this card include a six month 0% balance transfer, 0% APR on purchases for six months, and no annual fee.

Also note that they’re running a promo where you can get a $20 gift card for every $200 spent at participating malls. ‘Tis the season to profit from credit cards.

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» Discover Business $100 Bonus – Expiring Soon
» Chase Freedom Rewards – $50 Signup Bonus
» AmEx Credit Card Signup Bonus Disappearing Soon

About a month ago, I published an article over at Credit Addict about protecting yourself against reduced credit limits. Since that time, readers have left a smattering of comments lamenting that their credit limit has been reduced. We’ve been totally unaffected by this, so I’m curious as to how widespread this problem is. Interestingly, all of the commenters reporting a reduced credit limit have been dealing with American Express.

Have your credit limits been reduced?

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Update: Chase has asked that the $50 bonus offer be removed. If you’re looking for a hot deal, be sure to check out these other credit card offers.

As noted over on Credit Addict… Rumor has it that the $50 signup bonus on the Chase Freedom Rewards card might be going away as soon as Friday. If you’re looking for a solid reward card as well as a bit of free cash, be sure to check it out.

For background, the rewards on this card follow a flexible 3%/1% structure that pays 3% cash back in the three “everyday” categories where you spend the most each month (see list below) with other purchases earning 1% cash back. Sounds good, but it’s actually more generous than that…

If you save up $200 in rewards before requesting your cash back check, they’ll give you $250. That’s a 25% bonus, which effectively turns the rewards into 3.75% on your top three categories and 1.25% on everything else.

Since this deal’s gone, check out these credit card offers.

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The AmEx Costco True Earnings reward credit card is currently offering a $25 signup bonus. Simply apply for the card and make a purchase (any amount) and you’ll get a $25 statement credit. It really couldn’t be any easier.

Here are some other attractive features of the card:

• 3% cash back for gasoline and restaurants
• 2% cash back for travel
• 1% cash back everywhere else, including Costco
• No limit on cashback

The 2% cash back on travel expenses and 3% cash back at restaurants are particularly attractive. While the 3% gas discount isn’t as generous as the 5% cash back offered by Blue Cash from AmEx, there are no tiers so you receive the full rewards from the very start.

Via: Credit Addict

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Over the weekend I received an e-mail from a reader asking about the effects of closing an old credit card on your credit score. The short answer is that the length of your credit history is an key factor in determining your credit score, so closing old accounts can hurt your credit score.

Anyway, all of this got me to thinking about the ages of our credit card accounts and, more specifically, how long we’ve had our oldest card. As it turns out, our oldest (current) credit card accounts are our Amex Blue Cash (my current top pick as the best cash back reward credit card) and our Chase Freedom cards.

We actually opened both of these accounts back in 1997. The former began its life as an Amex Optima card, whereas the latter was some sort of Chase rewards card. While the Amex card didn’t have any sort of rewards associated with it, they did offer extended warranty protection. I eventually enrolled in the Amex points-based Membership Rewards program, but we never used the card very heavily — just for major transactions where we wanted the additional warranty protection. Most of our charging was done on the Chase card.

Last fall, I finally made the decision to convert our Amex account to a Blue Cash rewards card, and we haven’t looked back since. The Chase account has been through several iterations, most recently having been converted to the Chase Freedom rewards card.

With that as a backdrop, I thought it would be fun to run a poll about the age of your oldest current credit card account. Those Amex and Chase cards of ours has been kicking around for eleven long years — since just after my wife and I got married, and shortly before our oldest son was born.

If you’re not sure how old your accounts are, just whip out your cards. Many of them have a “Member Since” date printed on them. And if, like our Blue Cash card, they don’t have this info printed on them, you can usually login and check it out online.

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I’ve talked at length in the past about how your credit score is determined and why it’s important. Aside from paying your bills on time, one of the biggest things you can do to protect your credit score is to keep a close eye on your credit report.

While you’re entitled to one free credit report per year from each of the three major credit reporting bureaus (see #1, below), sometimes that just doesn’t cut it. Take, for example, our run-in last year with a wayward collection agency.

When we first discovered the problem, we burned through our free credit reports trying to figure out what was going on. We then needed to monitor the situation until it was resolved, so we ended up using a free trial of TrueCredit (see #3, below) to keep an eye on things.

Given the above, I thought I’d put together a list of options for getting your credit report for free. Start at the top and work your way down.

1. Get it free, the old-fashioned way. As noted above, you can go to annualcreditreport.com and get one free credit report from each of the three major bureaus.
2. Place a fraud alert on your credit report. Whenever you file a fraud alert, all three credit bureaus will automatically send you a free hardcopy of your credit report.
3. Get it from TrueCredit. A 30 day free trial of TrueCredit provides you with access to reports from all three credit bureaus plus your credit score. Just don’t forget to cancel – here’s how.
4. Get it from MyFICO. You can sign up for a free 30 day trial of ScoreWatch from MyFICO.com, which comes with access to your Equifax credit report and FICO credit score. Here again, don’t forget to cancel.
5. Get it from FreeCreditReport.com, bay-bee! Last but not least, you can sign up for a free trial of TripleAdvantage, which access to your Experian credit report. FreeCreditReport.com has gotten a bad rap in the past, so just know this… You’re signing up for a seven day free trial. If you want a truly free credit report, be sure to cancel before it ends.

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The other day, a reader wrote in with the following question:

I’m in the market for a reward credit card. Which one do you recommend?

That’s a great question, especially since many credit card issuers have been scaling back on their rewards programs over the past year or two. I’ve always been of the opinion that, when it comes to reward cards, cash is king. Sure, you can get cards that offer points, miles, etc., but there are always strings attached. You have to convert the points into gift cards, free flights are subject to availability, and so on. With that in mind…

My favorite cash back credit card is the Blue Cash from American Express, which offers up to 5% cash back on your purchases with no annual fee. For the first $6,500 in annual expenditures (based on your cardmember anniversary date), you’ll receive 1% on “everyday” purchases (gas, groceries, and drugstore purchases) and 0.5% on everything else.

But… After you hit the magical $6,500 mark, the rewards kick up to 5% on “everyday” purchases and 1.5% on everything else. So you’ll save $0.20 on every gallon of $4 gas, 5% off your entire grocery bill, and even 5% on drugs when you’re sick. And the 1.5% on all other purchases is half again as much as what most other reward cards offer. And there’s no limit on the amount of rewards that you can earn.

Real world performance

Those numbers are all well and good, but what does that translate into in terms of real-world earnings? Well… I just logged into our account and pulled out some numbers. First of all, as you can see from the graph below, we’re fairly typical when it comes to Blue Cash cardholders…

Looking across our total spending, 14% of our purchases came from the “bonus” gas/grocery/drugstore category with 86% coming from all other purchases. Overall, we’ve earned an average of 1.9% cash back this year (our anniversary date is in December, so we’re about eight months in). These rewards will accrue throughout the year before being posted as a credit on our cardmember anniversary date.

The downside

The only real downside to this card is that not everyone accepts American Express. This isn’t a widespread problem, but it happens often enough that we carry a Visa rewards card as a backup. It’s not quite as good as the Blue Cash card, but a solid stand-in when needed.

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In case you haven’t noticed, it’s getting harder and harder to find 0% balance transfer credit cards that don’t charge a transfer fee. In fact, as far as I’m aware, there aren’t any fee-free, 12+ month 0% balance transfer offers left out there. There are, however, still some excellent offers available if you’re willing to pay a small fee. Here are three of my favorites:

Discover More Card 0% on balance transfers and purchases plus rewards!	Citi Platinum Select 0% on purchases and balance transfers for plus online discounts!	Discover Miles Card 0% on balance transfers and purchases plus 12k miles!

If you’d prefer a no-fee offer, you’ll have to settle for a low (non-zero) interest rate. Here are three cards that are currently offering a no fee, six month 1.99% balance transfer:

• IberiaBank Visa Classic Card
• IberiaBank Visa Gold Cash Back Rewards Card
• IberiaBank Visa Platinum Rewards Card

Finally, here are some other balance transfer offers that might be of interest to you:

• Discover More Card (0% for 6 months on purchases and transfers)
• Discover Monogram Card (0% for 6 months on purchases and transfers)
• Discover Miles Card (0% for 6 months on purchases and transfers)
• Discover Motiva Card (3.99% on purchases/transfers for 6/12 months)

If you still haven’t found what you’re looking for, be sure to check out my master list of 0% credit card offers.

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Identity theft is on the rise. According to the FTC, an estimated 8.3 million consumers fall victim to identity theft in the United States each and every year. While simple steps such as placing a fraud alert on your credit record can go along way to protect you against financial identity theft, you have an even stronger tool at your disposal… The credit freeze.

What’s a credit freeze?

A credit freeze (a.k.a., a “security freeze”) allows an individual to lock their data at the major credit bureaus, meaning that it’s virtually impossible for an identity thief to do anything in your name that requires a credit report. The credit freeze concept has its roots in a 2003 California state law which caused many other states (40 at last count) to pass credit freeze laws of their own. As of late 2007, however, all three major credit bureaus began voluntarily credit freezes regardless of your state of residency.

Once you place a credit freeze, you’ll receive a personal identification number or password that can be used to temporarily lift or completely remove the freeze. While a credit freeze prevents the credit bureaus from releasing your information without your authorization, enitites with which you have an account (or collection agencies acting on their behalf) are exempt from these limitations.

The downside of freezing your credit

While credit freezes are for more effective than fraud alerts, which are actually ignored by some creditors, they’re not without their drawbacks. For example, while a credit freeze will stop new account applications in their tracks, it won’t do anything about existing accounts that have been compromised. Thus, if your credit cards are lost or stolen, you’re out of luck.

In addition, because a credit freeze completely prevents access to your credit report, having one in place can delay or prevent the approval of all kinds of applications. Given that your credit report is used for far more than just extending credit, this can be quite an inconvenience. If you go down this road, be forewarned that you might need a few days of lead time to unlock your credit report.

Another inconvenience is that a credit freeze will prevent automatic updates to your name or address. Thus, if either of these things change while you have a credit freeze in place, you’ll need to manually update this information with the credit bureaus.

The final downside is cost. For states without a credit freeze law, the default fees are $10 to place, temporarily lift, or completely remove a credit freeze. While many states mandate lower fees, it’s not necessarily cheap to do this, particularly if you envision needing to unlock your credit report frequently. This is especially true given that you have to lock/unlock your report at the different credit bureaus individually.

The good news is that, if you’re a victim of identity theft (and can prove it), then you can freeze and unfreeze your credit for free.

How can I freeze my credit?

So… You’ve read through this and you’ve decided that you want to freeze your credit. How do you go about doing it? Since the details vary from one bureau to the next, I figured it would be easiest to just link to the pertinent pages at each:

• Equifax
• Experian
• TransUnion

Photo Credit: weirdvis

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This is just a quick note to let you know that Discover and Fandango (an online movie ticket site) have teamed up to offer buy-on-get-one-free movie tickets through September 30th, 2008. Check it out if you like going to the movies.

I also wanted to remind everyone that Discover Business is currently offering a $100 signup bonus (expired). I first mentioned this deal about two months ago, and it’s still alive and kicking. Simply apply for the card and spend $1,000 within the first three months to qualify for the bonus. Other attractive features of this card include:

» 0% APY on purchases for 12 months
» Up to 5% cash back on select purchases
» No annual fee

Keep in mind that anyone can apply for a business credit card. If you are an individual, simply select “Sole Proprietor” as your legal entity and use your personal name as you business name.

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As a followup to my previous post about the best cash back credit cards for buying gas, I wanted to highlight a comment by a reader named Dave. As Dave pointed out, the Discover More card offers 5% cash back on a different set of “bonus” categories every three months. Well…

For the period of July 1 – Sept 30, 2008 the 5% categories are gas and hotels.

And after that, the 5% rewards will switch over to grocery stores, restaurants and movies. Unfortunately, the 5% rewards are capped at $400 in eligible purchases per reward period. All other purchases will receive up to 1% unlimited cash back. Given this, I’m still partial to the Blue Cash Rewards Card from AmEx, but the Discover More card isn’t a bad alternative. Click here to apply now.

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» Current 0% Balance Transfer Offers

With gas prices skyrocketing, I thought it would be worth putting together a roundup of the best credit cards when it comes to cash back rewards on gas purchases. Unfortunately, the American Express has announced that, effective immediately, they are reducing the reward on gas purchases made with the AmEx Simply Cash Business Card from 5% to 3%. That’s the bad news. The good news is that there are still some pretty sweet deals out there.

What follows is an overview of one of the best options for a “mainstream” gas reward credit card. While there are a number of brand-specific offers available, I much prefer to be able to choose amongst gas stations based on price as opposed to being tied down to a single brand. Here goes…

» True Earnings Card from Costco and AmEx

This is technically a business card, but anyone can apply for a business credit card. The beauty of this card is that it gives you a 3% discount on the already cheap gas prices at Costco (as well as elsewhere). You also get 3% back at restaurants and 1% on all other purchases. If you’re already a Costco member, the True Earnings card is definitely worth checking out. This card has no annual fee. Unfortunately, our nearest Costco is close to an hour away, so this one doesn’t work for us.

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Unfortunately, this Discover offer has expired… The good news is that Amex Preferred Gold Rewards is offering a $100 signup bonus.

Simply apply for the card and spend a total of $500 within the first three months to qualify for the bonus. Apply now and get a decision in 60 seconds!

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According to a recent AP article, the federal government will soon be cracking down on credit card issuers who engage in “unfair and deceptive” practices. More specifically, the proposed rules would prohibit:

1. Placing unfair time constraints on payments.

2. Unfairly allocating payments among balances with different interest rates.

3. Unfairly raising annual percentage rates on outstanding balances.

4. Levying high fees for exceeding the credit limit because of a hold placed on the account.

5. Unfairly computing balances.

6. Unfairly adding security deposits and fees for issuing credit or making credit available.

7. Making deceptive offers of credit.

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Check it out… $1300 worth of credit cards offers!

It’s been awhile since I’ve put together a list of credit card signup bonuses, so I thought I’d spend a little time compiling the best offers out there. What follows is a list of fifteen credit card bonus offers worth $100-$200 apiece. While some of these cards have an annual fee, all but one are free for at least the first year.

Now, without further ado, here are the offers listed in order of the bonus amount…

» Citi PremierPass Elite Level

Signup bonus: 20k points
Redeem for: $200 in store gift cards
When: After $600 in purchases w/in first 3 months
Annual fee: $75

» Citi Forward Card

Signup bonus: 6k points (+ 5k for going paperless)
Redeem for: $100 store gift card
When: After $50 in purchases w/in first 3 months
Annual fee: None

» AmEx Starwood Preferred Guest Credit Card

Signup bonus: 10,000 points
Redeem for: $100 store gift card or use for travel rewards
When: After first purchase
Annual fee: None for first year, $45 thereafter

» AmEx Preferred Rewards Gold Card

Bonus: 10,000 points
Redeem for: $100 store gift card
When: After $500 in purchases within first three months
Annual fee: None for first year; $125 thereafter

*Note: Several offers (worth a total of $800) have been cancelled and removed.

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When I was a kid, my parents went to the bank to get traveller’s checks before every major vacation. And yet… Now that we’re in the final stages of planning for our Disney cruise, it struck me that my wife and I never get traveller’s checks before we travel. And I suspect that we’re not alone. As a wise man once told me, travellers checks are so 1987…

I’m guessing that the big difference is the prevalence of credit and/or debit cards now vs. then. Since we put pretty much everything on our reward credit cards, there’s little need to carry much in the way of cash or traveller’s checks. And yet… While the situation will be much the same on our cruise in that we’ll be able to charge pretty much everything to our cabin and/or pay with a credit card, I still find myself thinking about picking up some traveller’s check before we depart.

What about you? Do you use traveller’s checks? Why or why not?

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The question of whether or not to pay your taxes with a credit card has been around for a few years now. According to conventional wisdom, the answer is “no” — the fees associated with doing this are simply too high. But what if your reward credit card is generous enough to more than offset those fees?

Edit: While there used to be a great 5% cash back promo floating around, it has since expired… When this deal was still available, you could couple it with payment through OfficialPayments.com, which charges a 2.49% processing fee, and you can earn a quick 2.51% by paying your tax bill with a credit card.

I would’ve been all over this deal myself this year if we hadn’t intentionally under-withheld to the point that our tax bill will be far larger than what we could reasonably put on a credit card.

Update to add: And no, your credit card rewards aren’t taxable.

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Here’s a cautionary tale for those of you that prefer debit cards over credit cards… Earlier this week, someone at Dreamhost accidentally typed the wrong year into their billing software. The end result was a wave of inadvertent overbilling to the tune of more than $7.5 million.

Not only did this error annoy the vast majority of their customers, but it actually caused serious financial hardship for some. Indeed, although they’re refunding everybody’s money, those that had debit cards on file lost the money straight out of their bank accounts, and many ended up with overdrafts (read through the comments here). At least one customer even reported have their mortgage payment bounce because of this error. Not good. But for those that had credit cards on file, it was no big deal. Dreamhost restored the funds and life goes on.

So… It looks like my list of reasons that credit cards rock and debit cards suck just got longer.

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Awhile back, I noted that we had received a mysterious collections call, and later learned that we had been inadvertently sent to collections by our local Urgent Care facility. Unfortunately, I had used up my free annual credit reports when I first got the call, so when we later learned what was going on, I wanted to check to see if anything had subsequently shown up on our reports.

Our state actually requires the credit bureaus to give us two credit reports per agency per year, but the additional reports would’ve had to come via snail mail (much like requesting a credit report for a minor). Since I didn’t feel like waiting around, I decided to find another way to access our credit reports for free.

My search led me to TransUnion’s TrueCredit service, which is a credit monitoring and credit protection service. While their service typically costs $14.95/month, they have an introductory offer that gives you 30 days for free. The beauty of this offer is that it gives you unlimited access to all three of your credit reports. The downside is that it auto-renews, and you have to call in to cancel.

In the end, I decided to sign up with TrueCredit so I could keep track of my credit record while the collections saga was unfolding. I actually ended up sticking with them for the free month plus a paid month, as I wanted to be sure that nothing ended up creeping onto my report before I was confident that this matter was settled.

Earlier this week I checked my calendar and saw that the end of the second month was fast approaching, so I dropped by the TrueCredit website to get their contact info and cancel.

In case any of you find yourself in a similar situation, I thought I’d jot down some notes about the cancellation process:

(1) Call TrueCredit at 1-800-493-2392

(They’re only open Mon-Thurs, 8AM-Midnight; Fri/Sat, 8AM-8PM Eastern time.)

(2) Press ‘1′ for English, then ‘2′ for cancelling service

(3) Wait while you’re being transferred (I was disconnected once at this point)

(4) Tell them that you want to cancel and wade through their pleas to keep you as a customer

That’s it.

While they do their best to upsell you, TrueCredit can actually be quite useful under certain circumstances. In my case, it was well worth $14.95 to have unlimited access to my credit reports for two months while sorting things out with the collection agency. That being said, I can’t imagine paying $14.95/month on an ongoing basis for this sort of thing.

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Last week I wrote about four credit cards with signup bonuses, including the Amex Preferred Rewards Gold Card, Amex Preferred Rewards Green Card, Discover More Card, and Chase Freedom Cash Rewards Visa.

Well, Discover has apparently decided to suspend their $50 signup bonus at the end of this month. So… If you’re looking for a Discover card and are interested in snagging a nice little signup bonus, be sure to apply soon.

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Okay, this just makes me laugh… According to a blurb in the most recent issue of Bottom Line/Personal, many jails accept credit cards for posting bail. But wait, it gets better:

“Cardholders can go home quickly – and may get reward points on their credit cards.”

So if you’re looking for another way to make use of your reward credit card, look no further than you local jail.

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