Going against the grain of many of so called “financial gurus” I don’t think credit is evil and that you should shred your credit cards and wait to pay cash for your house. I don’t believe that using only cash and debit cards are always a viable alternative in today’s world.
In daily activities there are numerous advantages and reasons to use credit cards instead of debit cards that are discussed in a previous blog post. If going without credit cards is something that you think may be good to do please read a prior post. Just click the link: http://www.stanleykstilwell.com/give-yourself-credit/ and read the numerous advantages of credit cards. I would also suggest reading the article if you do not have a good understanding of the credit industry. It will give you requisite knowledge on how credit works
In my workshops and in my private consulting I recommend my clients use credit strategically. The most strategic use of credit is to purchase real estate but the focus of this post is to help with general knowledge about credit scores and how to use credit cards.
If you are going to use credit cards strategically it is important to determine what you want from your credit card. Do you want the lowest rate? If you are carrying a balance from month to month your first objective should be to get the card paid, so the lowest rate card is for you. If you pay off your charges each month and you are looking to receive the tremendous benefits such as cash back or travel bonuses you need to compare both the benefits and annul fees of various cards to find the right fit for you.
To insure that you get the best rate or most benefits you must shop online and compare. The first step is to know your score. You need to view yourself as potential creditors view you. If you have a high score numerous great options will be available. If yourscore is lower but you are current on your payments to your creditors options will usually have fewer benefits and a higher rate.
EITHER WAY YOU NEED TO KNOW YOUR CREDIT SCORE!
Your score can have an effect on your ability to borrow as you no doubt know, but did you know that it can affect your insurance rates and even your employment? You credit score is so much more than a credit score. It is a picture of what the lending, insuring and corporate world sees when the look at you instead of your gentle demeanor and pretty smile.
If that is not enough incentive to get you to check and continue to monitor your credit score perhaps the possibility of identity theft is. Your score can drop like a rock if you are a victim of identity theft.
It is best to monitor your credit report and watch activity to make certain that no new accounts were opened or inquiries made that you did not know about or initiate. This vigilance will insure that no one has stolen your identity. This is important because according to Javelin Strategy and Research Identity theft happens every two seconds in America and over 13.1 million Americans were identity fraud victims in 2013.
Don’t let this happen to you. I would recommend that you get a complete credit report with all you history and make certain that it is correct. We will cover how to dispute credit reporting errors in a future post and it will be covered in depth in our soon to be released “Credit Mastery” course.
So you are wondering “how do I get my credit score and report?”
Great question! The first and easiest way is to see if your bank or any of your current credit cards offer it for free. This is becoming more common and is an easy, but not totally accurate way to get a picture of your score and history. I say not totally accurate because the report is usually only from one agency. There are three agencies that are used to compile the complete credit profile that determines how you are perceived by your creditors. Since the FICO score is used by more than 75% of the time by financial institutions our discussion will focus on that. FICO is an acronym for Fair Isaac Credit Organization.
To obtain your FICO Score and credit report there are a number of online resources in addition to your bank or current credit card companies. There are a few things to watch out for as you navigate the internet to find the best way to get your credit information. You want to know your FICO scores and your credit information from all three of the major credit reporting agencies. TransUnion, Experian and Equifax each have their own scores and because prospective creditors will look at all three, your lowest score can drag you down considerably. The agencies do not share information so something that is only reported to one agency can make a significant impact on your score with that agency and explains how scores can vary significantly from agency to agency. .
TransUnion, Experian and Equifax each have their own website and offer your scores and credit report for fees of about $20 a month. Each agency offers various promotions that change continually but in general you will get a promotional offer of either a free trial and then monthly dues or a low-cost report for $1 to 19.95. I would like to emphasize that the “FREE” offers are giving you a small bit of the apple but not the whole apple. In other words you are not likely to get all three agency reports and scores for free or even the promotional price. The idea behind their promotion is that you will opt for one of their most expensive services or you will forget to cancel the trial membership. I would recommend that you at a minimum, be prepared to spend at least $20 to get what you will need to have an accurate picture of how the banks and card issuers see you.
Here are a few links that are currently offering such services. I post these knowing that these sites make frequent promotional offers and their services and pricing could change by the time you read this.
www.experian.com
www.transunion.com
www.equifax.com
MyFICo.com offers all three of the major agencies scores and reports for about the same $19.95 a month but requires a minimum three month commitment. This I would recommend if you are restoring your credit to monitor for changes.
myfico.com
Any of the above will provide you the information you need if you cannot get the report for free from your bank or credit card company. As mentioned they usually offer a trial membership that you need to cancel if you do not want to get billed each month, so be careful if you choose the trial membership to save money make sure you cancel before you start to get billed.
There are numerous others you will find online that offer free credit reports, scores and all varieties of protection form identity theft. Buyer beware. You usually get what you pay for if that.
Since each situation is different it is imposable for me to recommend the best solution that will work across the board. I would recommend you use a FICO based scoring system and not use creditkarma.com. They have numerous security breaches and consumer complaints.
Once you search online for credit repair be prepared for online re-targeting. You will have pop-ups up the wazo every time you go online. Stick with reputable companies because you don’t want to expose yourself to any more risk than possible to save a few bucks. And pay with a credit, not a debit card.
All consumers are entitled to a free credit report each year but it does not have to include your score or other significant information credit issuers will see when they evaluate you. You can get some information from these reports but not enough to be of great value.
There is another player in the credit reporting space to mention. The VantageScore model is being used by some companies. Scores using this model go as high as 990. Some unscrupulous credit repair companies make outrageous claims of 200 point improvements in three months and back it up by using the FICO score as the before score and the VantageScore as the after score.
This brings me to another warning. Do not use credit repair companies until you do significant due diligence on the company and individuals involved. In general for most, but not all people, credit repair can be done yourself and fees saved if you are willing to spend a few hours a month. A thorough guide to credit restoration will be a significant part of our Credit Master course to be offered this spring.
There is one last way to possibly get a free report. If you have been turned down for credit at a bank, retail store, car dealership or any other establishment you are legally entitled to the information the creditor used when they denied you credit. This is usually a credit report but can be an employment verification. So if you know your employment was accurate you can ask for a copy of the documents they used when they denied you credit.
To summarize it is advisable to get your credit score to know what you look like to those you will seek credit from and a monitor your credit report for activity that you did not initiate. The time and money invested will be of great benefit to you.