Pragmatic Finance

I read an interesting article on MSN Money today about some weird stuff that hurts your credit. It talks about several things that can hurt your credit that I imagine most people don’t know about. There were a few points that I thought were worth repeating.

Some credit cards don’t report their limits. They mention the problems of Capital One here that I have discussed in the past. To summarize, when your real limit isn’t reported it can make it look like your using a lot more of your available credit than you really are. No preset spending limit cards such as those from American Express also have this problem.

Their advice about fighting it is pretty pointless as Capital One won’t change their methods unless they are forced to. Interestingly, they did mention one guy who is suing them. Hopefully others will too.

The best way to get around this is to charge up close to your limit through purchases that you already planned on doing or cashing some of those purchase checks. You can then pay it off before you get charged interest and get your high balance to report. You can also change cards to ones that do report.

The other interesting thing is that FICO scores you a little differently depending on what group you are classified in. They gave an example of a lady whose score decreased significantly because when her new card aged enough she was put into a higher credit group. The debt she had made her score drop since she was no longer one of the best of a bad group but instead near the bottom of the good group. If that’s a little confusing the article described it better. I have to say, though, that doesn’t sound very effective if the scoring system does work that way.

They also warn about the tendency for unpaid traffic tickets and library fines to be put on your credit report. Hmm, I wonder if there is a statue of limitations on these as I think I still an unpaid library late fee from high school…

These days your credit history is becoming an inseparable part of our financial lives. Want a loan for a car or house? That lender is going to check your credit before he decides to loan to you and how much interest to charge. And of course if you’re going to apply for a credit card they are going to check it to help them make their decision. Even car insurance companies are starting to use it to help determine the rates they will give you.

In addition to looking over your history, potential lenders will also look at your FICO score, which is a measure of your credit worthiness. The higher the score the more willing they are to give you loans with lower rates. The score ranges from 300 to 850 with most in the 600 to 800 range. A score over 720 is usually needed for the best rates. If you’re curious about your current score you could pay to get an official one. Everyone is entitled to a free report from each credit bureau once a year. I would recommend pulling it for free and using a FICO score estimator.

If you wanna beat a game you gotta know the rules first. Unfortunately the exact equation is a secret but there are some vague guidelines about how the score is calculated. There are five main categories looked at and each has several factors inside it. Read the rest of this entry »

Well, I figured it was about time to check my credit report. Everyone is able to get a copy of their credit report once every 12 months free from each credit agency at AnnualCreditReport. I decided to stagger mine so that I could check one out every 4 months, so I will pull one in January, May, and then September. You don’t get a FICO or credit score but it does give you a chance to make sure nothing is wrong with it.

Anyway, I pulled mine this weekend and everything seemed to be good except one minor detail. One of my accounts had a minus sign or dash in front of the account number. I dunno if thats just the way American Express reports or if its a mistake. Other than that everything about that account is fine so its not causing any harm. I’m tempted to pull another report just to see if the other agencies have that dash as well. I guess since its not harming anything so I shouldn’t be worried. At any rate, if anyone knows if this is standard for amex leave a comment. I will probably call them this week.