Don’t Risk Your Credit Score In Retirement – WBRC FOX6 News – Birmingham, AL

Cancelling infrequently used credit cards may seem like a good strategy, but your credit score may be adversely affected. Adam Carroll, Founder and Chief Education Officer of National Financial Educators, explains: “When you have a long-standing trade line, which is what a credit card is considered on your credit report, and you cancel that card for whatever reason, your score will actually go down as a result because one of the main impacts on your credit score is the length of credit history.” A shorter credit history translates to higher risk in the eyes of lenders.

Sean McQuay, Credit and Banking Expert at NerdWallet, agrees but includes another reason to keep older cards, noting that closing a card account results in “decreasing your overall credit line, which basically signals that a bank trusts you less.”

In addition to decreasing your overall credit line, closing an infrequently used account raises your credit utilization your total credit in use compared to your cumulative credit line. High credit utilization suggests a greater chance of falling behind on payments and/or defaulting on debts.

To avoid these pitfalls, make periodic small purchases on all your open credit cards to keep them active and pay the balances in full at the end of each billing period. By keeping credit spending low, you can still address debts while getting the full benefits of your credit account.

It’s okay to concentrate most of your credit spending in one account to maximize rewards. Just use alternate accounts often enough to keep them from being closed for lack of activity.

Source: Don’t Risk Your Credit Score In Retirement – WBRC FOX6 News – Birmingham, AL

Credit Score Myths: What Hurts You & What Doesn’t – Consumer Reports

Checking Your Credit Report Frequently

Myth
Ellman says a common misconception is that each time consumers check their credit reports, their credit scores go lower.

“If I had a nickel for how many times I heard that, I could retire today,” he says. “It’s an urban legend.”

You’re entitled to look at your credit reports as often as you like. Consumer Reports maintains that you should do it several times a year, if only to ensure that the information is accurate.

And you don’t have to pay a credit-monitoring service to do that for you. Instead, because you are entitled to three free inquiries a year—one from each of the credit reporting agencies—go to annualcreditreport.com and stagger your inquiries. Every four months, ask for one of the reports—say, Equifax in April, Experian in August, and TransUnion in December.

It’s also a good idea to check all three of your credit reports simultaneously before shopping for a major loan like a mortgage. Do it even if you’ve used up your free reports and have to pay a bit to get new ones.

That way, you can correct errors before applying for the loan. A 2013 report by the Federal Trade Commission found that about 5 percent of credit reports had errors that could result in less favorable loan terms.

If you find mistakes on any of the reports, you’ll need to ask for corrections from each of the credit-reporting agencies showing the error.

This post from Consumer Reports summarizes nicely what has recently changed for the benefit of consumers on credit reporting. I’ve posted on this as the changes were about to be implemented. This CR blog summarizes nicely the highlights of the changes.

Source: Credit Score Myths: What Hurts You & What Doesn’t – Consumer Reports

Financially Speaking™ James Spray, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 | April 13, 2019

Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only. You may use this information in whole and not in part providing you give full attribution to James Spray.

Experian ‘Boost’ Adds a New Way to Strengthen Your Credit

The idea is to help thin-file customers — those who have less experience with credit — by incorporating signs of responsible financial behavior that traditionally aren’t seen by credit reporting bureaus. Boost also may help people who are rebuilding their credit after financial setbacks. Experian estimates the product could affect up to 100 million consumers’ scores.

Consumers who want to use Boost must allow the product to scan their bank account transactions to identify utility and cell phone payments. Information about payments will appear in their Experian credit report and be used when certain credit scores are calculated from that data.

Boost will count only positive payment history, Experian says, so missed utility or cell phone payments will not hurt your score. That’s different from how credit scores usually work, where late or missed payments are recorded in your credit report and can reduce your score.

Consumers can register on Experian’s website to get early access to Boost, and the product will roll out more widely in early 2019, the bureau said in a news release…” http://bit.ly/2V1nq9P

Image Credit

Financially Speaking™ James Spray RMLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 | December 20, 2018

Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct for your situation. This information is not legal advice and is for guidance only. You may reproduce this information in whole and not in part, providing you give full attribution to James Spray.

Capital One, Discover tighten credit for some consumers

haveyouheard-292x300Capital One’s CEO remarked that these actions are business intuition. Is this a sign of the genesis of an economic downturn? Perhaps the financial canary is already in the proverbial coal mine, so to speak.

While a lender’s action might be understandable from a business standpoint, it’s a big problem for affected cardholders. Not only do they have access to less credit, but that reduced access — especially if an account is closed — reduces the consumer’s credit score.

If you have a Discover or Capital One card you haven’t used in a year or more, it would be wise to immediately make a small purchase and pay off the balance. That way you could argue the account is not inactive.

Source: Capital One, Discover tighten credit for some consumers

Financially Speaking™ James Spray RMLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 | November 5, 2018

Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct for your situation. This information is not legal advice and is for guidance only. You may reproduce this information in whole and not in part, providing you give full attribution to James Spray.

UltraFICO®An Initial Discussion

While this new alternative “credit” algorithm is not set to roll out until sometime in 2019, included below are my initial thoughts based on the BIAA press release and the below referenced articles from the Wall Street Journal, Consumer Affairs and USA Today.

Experian, FICO and Finicity Launch New Ultra FICO Credit Score

With Ultra FICO® Score, a consumer grants permission to contribute information from banking statements, including the length of time accounts have been open, frequency of activity, and evidence of saving, which can be electronically read by Finicity and combined with consumer credit information from Experian to provide an enhanced view of positive financial behavior.

Experian, FICO and Finicity estimate this new score has the potential to improve credit access for the majority of Americans and is particularly relevant for those who fall in the grey area in terms of credit scores (scores in the upper 500s to lower 600s) or fall just below a lender’s score cut-off. Consumers who are relatively new to credit with limited history or those with previous financial distress that are getting back on their feet stand to benefit the most.

This new system will roll out next year. Initially, the most likely use will be for beginner credit cards. The UltraFICO® is an add-on feature some lenders will offer to enhance a prospective borrowers credit profile and score.

The prospect must provide access for a one-time snapshot of their banking/bill paying account. The data analyzed will be regular payments of rent and utilities. The expected average balance in the account should be $400 or more. There should be no overdrafts or NSF checks in recent months. It’s expected there will be more income than outgo to the account. Discussed is that the checking/bill paying account must be established for some undefined time.

The above referenced WSJ article captures the essence of what the new credit score enhancing tool is expected to be. It will not, in the immediate future, be used by mortgage lenders. I expect that it may be used by some auto dealers.

UltraFICO® score takes into account how much money you have in the bank

According to the Journal report, the new UltraFICO® would be a tool for consumers whose credit scores are not that great. If they have a few hundred dollars in the bank and have had the bank account for a number of [undisclosed] years without overdrawing they might see their credit standing rise.

But in practice, the new formula is likely to be of greater benefit to consumers who already have high credit scores because they are the consumers most likely to have accumulated some cash in the bank. Consumers with low credit scores are often in that situation because they lack the extra cash to meet an unexpected expense.

Based on practicality and experience, I believe this Consumer Affairs writer is off-base in his analysis of who this will help the most. Someone with >760 FICO® Scores has no need for a bump of a few points whereas someone with a 620 score most definitely has the need. We’ll soon figure out just how many months one must have $400 or more in their account to gain the bump.

New FICO system could lift credit scores by including checking and savings history

Finally, from the above referenced article from USA Today: “...it remains to be seen how fast lenders will adopt this supplemental scoring system. For instance, FICO’s latest credit score – FICO 9 – was released four years ago, but the previous version of the score – FICO 8 – remains the most widely one used.”

Consider the fact that neither FICO 8 or 9 are used in the mortgage lending industry. UltraFICO® may be used by certain credit card issuers as well as some vehicle lenders. We’ll know more next year.

Video Update 1/16/19

Image attribution

Financially Speaking™ James Spray RMLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 | October 29, 2018 | October 30, 2018

Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only. You may use this information in whole and not in part providing you give full attribution to James Spray.

Compliance Chrestomathy: CFPB goes Global

“Welcome to “GFIN” – yet another acronym to be added to the great pantheon of acronyms!

It stands for Global Financial Innovation Network. The name contains some modernistic sounding buzz words, such as “global,” innovation,” and “network.” It consists of eleven financial regulators,[i] hence the overly abused word “financial.” I am not sure how to contract GFIN into a monosyllabic word, let alone a polysyllabically pronounceable word, like “Go-Fin” or “Gaf-In” or “Goof-In” or “Gay-Fin” or “Gee-Fin” or “Gy-Fin” – so let’s just say “G,” “F,” “I,” “N,” and hope for the best!

The CFPB has said the new network will seek to provide a more efficient way for innovative firms to interact with regulators by helping them navigate between countries…”

Source: Compliance Chrestomathy: CFPB goes Global

Free Credit Freeze & Free Credit Thaw – Children, Too

I have frozen my credit. Have you?

Updated credit report law allows consumers to freeze and thaw their credit reports. It is now free for consumers to freeze their credit and they can lift that freeze for free, too.

Beginning today, September 21, 2018, the Federal Trade Commission (FTC) has enabled a new credit file protection layer — one the consumer controls.

Credit fraud experts say the new option is better than an alert, plus it covers the entire family.

It makes it harder for identity thieves to open new credit accounts under a consumer’s name.

This new act offers a bonus for parents concerned about their under-age 16 children who might be easily become victims of ID Theft. Children are also eligible to have their credit files frozen.

If a consumer asks for a freeze online or by phone, the credit reporting agency (CRA) must put the freeze in place no later than the next business day. You can place the freeze on-line immediately.

When the consumer needs to lift the freeze – for example, to finance a new phone, vehicle or, get a mortgage – the freeze must be lifted within an hour.

You must notify each of the three CRAs separately to freeze your credit on each of the three CRAs. Below are links to each of the three CRAs. Remember, you must notify each CRA to implement a freeze.

Image credit: AARP Blog

Financially Speaking™ James Spray RMLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 | September 21, 2018

Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct for your situation. This information is not legal advice and is for guidance only. You may reproduce this information in whole and not in part, providing you give full attribution to James Spray.