A friend of mine, Josh, recently applied to job, had a positive interview, but ran into a problem with the paperwork. They wanted to run a credit check on him.

In college, Josh was a little irresponsible and racked up a fair amount of debt. Now he wants to repay it, but was worried that this employer would  disapprove of his past activity. The credit check was likely the deciding factor as he didn’t get the job and had to look elsewhere.

At least 16 states are now considering banning most employer credit checks, an act that will help give jobs to people who are trying to get out of debt. Josh was penalized for something that happened 5 years ago, and he has since changed his ways. Making the assumption that he is irresponsible and not letting him get a job adds insult to injury.

Unreasonable Conclusions

Another friend, Sally, had gone through a lengthy interview process, been offered a contract, and was ready to sign when she saw a strange non-compete clause. She didn’t understand why her administrative assistant job would require that, so she had her father, a lawyer, take it in to work and have a coworker who specialized in contract law take a look. He came back with a few concerns, which Sally relayed to her soon-to-be employer.

She received a call saying that the employment offer was being rescinded. My friend was confused why getting legal advice about the contract was a problem, but they explained that getting legal advice was fine, but going to her father for help was not and that it was a sign that she is too irresponsible to handle work without help from others. Whether that was the real reason or if the company had more of an issue with her not signing the clause we can’t be sure, but the employer’s assumption cost Sally a job.

They took a HUGE leap to come to the conclusion that she was unfit to work for them. Suddenly this 4.0 student with just about every award in the book isn’t responsible? It’s ridiculous that she would be penalized because of her father’s profession. Clearly this isn’t an employer anyone should actually want to work for, so it is probably best that she found out early on that this company is crazy.

Are employing making big leaps with these assumptions against my friends? Is it fair to discriminate against those who have had credit problems in the past and are now trying to make up for it?

Property Tax Deferral For Young Families A Good Idea? @ Canadian Finance Blog

Life Insurance Breakpoints @ Evolution Of Wealth

About 5 months into my first credit card experience, I decided that it was time for a credit line increase. No, I wasn’t racking up debt and no, I didn’t have any large expenses that made the credit increase necessary. I wanted an increase because when you have $1,000 each month, it’s easy to have over a $2,000 balance right before the bill is due. With a credit limit of $5,000, that equals a 40% utilization rate, something I’d definitely prefer to stay below. Add in the fact that Bank of America mysteriously skipped a bill cycle and that rate jumps to around 60%.

Sure, it’s not always that high and only if my accounts are checked on those days would it be marked that high, but I’d like to avoid the worry altogether and assure myself that my credit rating is as good as can be. It’s not imperative now, but it’s always good to keep a good credit score.

We know that hard inquiries negatively affect your credit score, so I decided that while I wanted to increase my credit line, I wouldn’t do it if it meant a hard inquiry.

Also, I have great news. Bank of America has one redeeming quality: it makes increasing your credit line very easy.

After logging into my account, I clicked on the “Request a credit line increase” button, filled out the form, and requested another $2,500 in credit.

The next day, I received a call to verify my job, income, and reason for requesting an increase (I have heard that saying that you’ll be making some large purchases works well).

I was approved immediately with only a soft inquiry and suddenly my utilization rate dropped. That same 40% utilization rate suddenly turned into less than 27% on the worst days, something I can definitely accept.

It’s only a small part of my credit score, but every bit helps and good habits now will help when we need it.

Yesterday marked the implementation of the Credit Card Act, which was designed to protect consumers in several ways from taking on too much debt and being charged exorbitant fees.

We’ve seen several changes happen over the past few months, including higher interest rates on credit cards and fewer 0% interest cards. Also, there have been reports that more cards will come with annual fees.

So what does all of this mean to you? What effect will this have on regular consumers? Let’s investigate several types of consumers and see which changes will affect them most:

The Student

In a Sallie Mae study, research revealed that the average undergraduate student carried $3,173 in credit card debt in 2008, with projects that the amount of credit card debt would increase in 2009.

As a response, the Credit Card Act makes it harder for students who are likely to be irresponsible with their credit line to obtain credit cards. The new law requires a co-signer for anyone under the age of 21, unless they can prove they have a job and can make payments without a co-signer.

Also, offering free gifts as a way of attracting college students to sign up for credit cards is banned within 1,000 feet of campus. Hilarious, but it actually works as I’ve seen lines form next to tables at football games where the reward is a free extremely expensive t-shirt.

Digging Out of Debt

For those who have debt and committed to getting out, there is lots of good news. In the old system, credit card issuers applied payments to the debt with the lowest interest rate, thereby increasing the total amount of interest paid over the longest possible period of time.

In the new system, the principle payment is applied to the debt with the highest interest rate. For those with balances of different interest rates, it means it will be possible to pay off the balance a little faster and with fewer interest charges.

More good news for those getting back on track is that credit card companies can only apply interest rate changes on new balances. The old system allowed them to hike up interest rates on your old balances as well, but now as long as you are not 60 days delinquent on your account, this can’t be done. So as long as you stay current, your old balances won’t be charged more.

Head In The Clouds

For those who are near their credit limits and who keep charging expenses on their card, there is good news and bad news. The bad news is that you have been paying $39 or more for each transaction that is over the limit. The good news is that credit card companies will have to get your permission to continue doing this.

If you think that $40 sweater is worth $79 (plus interest on the $39), then go ahead and opt in. But if you don’t, being cut off and having your card denied could be very embarrassing. For this group, I don’t see this as a solution, just a way of limiting just how much trouble someone can get into.

Credit card fraud can easily be avoided with a bit of common sense and by being knowledgeable about the potential dangers in general. Unfortunately statistics have shown and continue to show us that fraud is on the up.

Consumers have to face the realities of becoming a victim of fraud because we can’t live without the plastic fantastic anymore. Every time we pull our credit card from the wallet we expose ourselves to potential attacks. The good news is that not all is bad. You can protect yourself with the following steps.

Being a victim of credit card fraud is not fun. Short of having a nervous breakdown because of the fear of losing all of your hard-earned money you need to keep a cool head to be able to stop the perpetrators sooner than later.

The following 10 step action plan will allow you to protect yourself against the commonly seen fraud attacks.

1. Protect your personal details

Your personal details are like a fingerprint. Keep them save at all times. Avoid sharing passwords, PINs  or birthdays with other people. One common problem are social networking website where people freely share their birthdays with strangers.

You should also avoid using birthday dates as your PIN access details because those are the first to be guessed by thieves.

2. Take advantage of protection schemes

Verified by Visa and MasterCard SecureCode are schemes offered to consumers by these card merchants. Both schemes are free to use and can be joined once you get a Visa or MasterCard credit card.

3. Shred all your old statements

Never ever throw your old payment information into the rubbish bin without having shredded the info first. Anything personal containing dates, financial information, your address, your name, etc should be disposed of securely by shredding first.

Financial thieves lurk around household bins and are not shy of raiding your rubbish bin in search of private data that can be used to steal your identity or your money. Oh, and if you’re buying your first shredder – consider purchasing one with your credit card if you have a card that offers extended warranties or purchase protection!

4. Turn your PC or Mac into a fort

Always keep your anti virus software up-to-date. Consider using a firewall at all times and never browse the Internet unless you have these two lines of defense in place.

You also need malware software to help keep you safe from any attack while surfing the Internet.

5. Become wary of telemarketing scams

Don’t be tempted to hand out any information to people over the phone unless you call them first. Your bank will not ask for passwords or login details by phone out of the blue. 

6. Email security against phishing

One of the most popular forms of fraud is to steal your personal details via phishing. By using a phishing filter you can counteract any threat. In addition to this, it helps to be alert whenever you receive email. Never click on a link within an email program – always copy/paste and open a new browser window.

If the email is from your bank or PayPal asking you to verify your information before they shut down your account, don’t bite. These are common traps to make people click on the links after which their information is re-routed to another website (a phishing website) where your information (password, logins) will be stolen.

7. Shops can cheat too!

If you use your credit card in shops make sure you cover the keypad with your hand while you type your PIN. If you are in a foreign country identify that the actual terminal is issued by an official merchant by checking the terminal issuer number at the back.

There have been several recent cases of fake terminals used overseas to empty travellers bank accounts. By the time they got home, the money was gone.

8. Be alert

Check your monthly credit card statements and screen them for any suspicious transactions. If in doubt, contact your bank right away and double-check the transaction in doubt.

Thieves often start by stealing small amounts of money from your card. Once they realise you haven’t caught them they will strike.

9. Consider identity theft cover

Because of the rising cases of phishing, identity theft and fraud insurance companies have started to offer identity theft cover options.

If you want to eliminate every possible risk then taking out cover like this could be something you should look into.

10. If you lost your wallet…

You must contact your bank immediately. You can find emergency contact numbers on the back of your monthly credit card statement or online. Even better, keep a record handy on the fridge and in your wallet.

Cancel your card immediately. Unless the bank can proof neglect on your behalf your money is usually safe.

Contact your local bank for more information about credit card fraud protection.

This article was written by Jeremy Cabral who is part of the team at CreditCardFinder.com.au, an Australian credit card comparison service. Read their Credit Card Fraud, Traps and Scams guide for more credit card safety and security tips.

This is the eighth and final part of my Credit Series, where I explain the most important aspects of credit, credit reports, and credit scores. Each installment focuses on one factor influencing credit, tools to monitor and improve credit, or an explanation of a specific credit concept.

Of course you’ve seen those catchy commercials on TV for a site that says will give you what you want for free, but unlike that site, these 4 tools will help you get free reports (and scores) without using your credit card. Use these tools to find abnormal activity, such as accounts or credit cards you didn’t open. And remember, asking for your own credit information won’t negatively affect your credit score, so I encourage you to take advantage of these free tools.

Annual Credit Report

Believe it or not, by law, you are entitled to a free credit report from each of the three bureaus (Equifax, Experian, and Transunion) every year, and AnnualCreditReport provides just that. I suggest ordering a different report from this site every 4 months so you can keep track more frequently. These are the actual reports from the 3 credit bureaus, and since it’s absolutely free, why not take advantage of what is legally yours?

Quizzle

While I’ve heard of it, it wasn’t until Evan from Evolution of Wealth suggested it that I went to Quizzle to see what all the commotion was about. It turns out that it’s a great tool that gives you a detailed, easy to read credit report courtesy of Experian as well as a credit score based on their new credit score model that tracks closely with leading industry sources. My score from here is comparable to what I found when I got my score when ordering a free trial at myFICO.com (I cancelled before the free trial ended, but it was a real hassle).

Credit.com

Credit.com gives you a credit report card as well as your estimated credit score ranges for several reporting companies. They grade you on all five factors used to determine your credit score: payment history, debt usage, credit age, account mix, and inquiries. It also provides a data snapshot providing Transunion data of the number of open and closed accounts as well as total balances, minimum payments, and total credit limits. The best part of Credit.com’s tool, however, is the credit score details section, where it breaks down each portion of your credit score and provides explanations and suggestions about how to improve your credit and earn the maximum number of points for each category.

CreditKarma

CreditKarma does not provide a credit report, but does calculate your score as well as grade you based on payment history, credit age, account mix, and inquiries. It is a helpful tool that also compares you to other Credit Karma users, but the credit score I found through them was considerably lower compared to the my FICO score and Quizzle. While all the features I have listed are free, some of these sites also offer additional features at a cost. If you are not interested in purchasing additional features, simply keep your credit card in your pocket. These tools can be very helpful and will enable you to keep track of your credit information and find inaccurate information. Right now, Quizzle is my favorite. Which do you like best?

Also, I’d like to wish my father (great photography work, whoever took that picture) a Happy Birthday, he’s taught me just about everything I know about money and we’ve had some pretty interesting discussions over the past few months, even if he hasn’t realized why I bring up finance. Unfortunately, he found my blog (again), he has a habit of doing that. Enjoy.

This is the seventh part of my Credit Series, where I explain the most important aspects of credit, credit reports, and credit scores. Each installment focuses on one factor influencing credit, tools to monitor and improve credit, or an explanation of a specific credit concept.

We’ve talked a lot about how credit scores are calculated as well as ways to improve your score, so today I wanted to take a look at how your score actually affects you.

Your credit score has a large impact on the amount of interest you pay on a loan. Using FICO’s Loan Saving Calculator, I am going to illustrate the amount of money you can save by having a high credit score.

Assuming a $30,000 36-month new auto loan, we look at the interest rate, the monthly payment, and the total amount of interest paid based on credit scores. I think you will be surprised at just how much bad credit can cost you and the difference it could make in your life.

As you can see from the chart, those with the highest credit scores have an interest rate of just over 5.8%, giving them a monthly payment of $910. However, as the credit score decreases, the interest rate, along with the monthly payment increases. In the 660-689 tier, the monthly payments increase by $50 a month and the total amount of interest increases by almost $2,000 over the three year term of the loan. If you have an extremely low credit score, in the 500-589 range, this could mean almost $200 a month more in payments as well as over 3 times as much interest paid. Nobody would want to pay an extra $2,000 per year in extra interest charges due to poor credit. Imagine paying almost $40,000 for a $30,000 car. That’s what someone with a poor credit score would be dealing with.

The differences in cost are even more drastic when looking at mortgages. For a $300,000 30-Year fixed loan, the monthly payments for someone with a 630 credit score are $300 higher than for someone with a 760 credit score, which would add over $100,000 to the cost of the loan.

Clearly credit scores can have a huge effect on the amount houses and cars actually cost us, and by keeping our credit score high, we can save thousands of dollars a year.

This is the sixth part of my Credit Series, where I explain the most important aspects of credit, credit reports, and credit scores. Each installment focuses on one factor influencing credit, tools to monitor and improve credit, or an explanation of a specific credit concept.

The final 10% of your credit score is based by the number of inquiries you have on your credit report. Some types of inquiries can lower your credit score if they have occured in the past year.

Inquiries are a result of applying for credit and are placed on your credit report each time a business requests a copy of your report.

However, not all inquiries on your report affect your credit score. Only inquiries that are made because you are applying for credit affect your score. These voluntary inquiries are called “hard” inquiries and will lower your score slightly.

“Soft” inquiries, ones that are made by creditors who send “pre-approved” credit card offers, ones made by you through an online service, and by potential employers, are not counted against you. When you request your own credit report, all inquiries appear. However, when lenders and creditors look at your creit report, only the hard inquiries are shown.

Since inquiries only affect your score for the first 12 months they are on your report, the damage to your report is usually temporary.

What If I Need a Car Loan or Mortgage?

If you are in this situation, you may not want to simply take the first offer you get. But shopping around will result in more inquiries, right? Wrong. If you do your “shopping around” within a 14 day period, all of those inquiries will only count against your score once. So you don’t have to worry about the 3rd or 4th request for credit as long as it all happens within a 2 week span. For the latest version of the FICO score, this period is 45 days.

This category is worth relatively little, and by being smart with your inquiries, you can earn the maximum number of points for this category. But don’t be afraid to ask for credit when you need it: after 12 months, these inquiries are no longer counted against you.

This is the fifth part of my Credit Series, where I explain the most important aspects of credit, credit reports, and credit scores. Each installment focuses on one factor influencing credit, tools to monitor and improve credit, or an explanation of a specific credit concept.

Account Mix counts for 10% of your credit score and measures the diversity of accounts on your report. There are several types of accounts that can be included on your credit report:

• Revolving accounts include credit cards and home equity lines of credit.
• Installment accounts (accounts that have a fixed payment for a fixed amount of time) include auto loans, mortgage loans, and student loans.
• Open accounts are less common but include cellular service accounts and other home utility accounts.

To score high in account mix, consumers need a record of experience with several different types of accounts. I am young and have only credit cards and student loans, so I am likely to score low in this category.

There are ways to ensure scoring the maximum points available for this category:

• If you have a mortgage, you are much more likely to earn more points in this category. Mortgages are very good for your account (studies show that people who have mortgages are more responsible and stable than those who don’t).
• Having too many credit cards can hurt you in this category. While the optimal number of credit cards is another FICO secret, try to have as many as you need but not more.
• Although paying in cash for a car may be cheaper than financing a car, having a car loan as part of your credit mix can help your score. Still, I don’t advocate paying finance charges just to boost your score. The advantages of improving your credit score slightly (again, the scoring models are secret so it is difficult to predict exact changes) are outweighed by the interest costs of financing, in my opinion.
• People who have finance company accounts on their credit reports can have lower scores. Finance companies can hurt your score because they are considered to be higher risk lenders who targer higher risk companies.

Although account mix is a relatively small portion of your credit score, by avoiding having too many credit cards and understanding which types of accounts will help and hurt you, you should be more aware of which types of credit are beneficial and which are not.

This is the fourth part of my Credit Series, where I explain the most important aspects of credit, credit reports, and credit scores. Each installment focuses on one factor influencing credit, tools to monitor and improve credit, or an explanation of a specific credit concept.

This category accounts for 15% of your score. Research shows that credit risk decreases as age increases. The goal is to have your credit age be as high as possible. Over time, this will increase, although there are ways to increase the age of your credit due to the way it is calculated.

Credit age is measured in two ways. The first is the date you opened your oldest account. This may be different than your “credit report established date.” Personally, my credit report’s age is 8 years older than I am. This is because I was added as an authorized user on my parents credit card that they opened in 1979.

The second measurement is the average age of all accounts on your report. The longer credit cards are open, the bigger the credit age, which helps your credit score.

There is no easy way to increase your credit age other than to get started when you are young and be patient. Everyone starts at the same place, but over time, credit age will increase. Adding new accounts to the credit report will hurt the average age of your accounts, but eventually you will earn points in this category. Be selective when you are shopping for credit: don’t open up multiple retail store credit cards just to save 20% one time. The negative impact on your credit score will have much larger effects.

Another way to increase the age of your accounts is to be added as an authorized user of a family member who has an old account. However, make sure that they are in good standing. A old, delinquent account on your credit report will hurt your score much more than having a higher credit age will.

Yesterday we took a look at debt usage and our reason for keeping accounts open was to have high lines of credit and low utilization. Today the reason to keep your credit accounts open is to make sure our credit age remains high. However, if you decide to close a credit account, it would be more beneficial to your credit age to close the account you opened most recently opened. While this will hurt your score because your utilization will go up, your credit age will increase, partially ofsetting the effect.

The important lesson from today is to be patient, keep the oldest accounts open, and make smart decisions when deciding to open credit accounts.

This is the third part of my Credit Series, where I explain the most important aspects of credit, credit reports, and credit scores. Each installment focuses on one factor influencing credit, tools to monitor and improve credit, or an explanation of a specific credit concept.

Debt usage accounts for 30% of your credit score measures your ability to use your credit responsibly and avoid high balances. The main way debt usage is measured is through utilization. This is calculated as the percentage of total credit limits that you are currently using. For example, if I had a credit limit of $10,000 and had balances of $2,000, my credit utilization would be 20%. In general, the lower the utilization the better. Some people think that as long as you keep your utilization below 50%, your score will not suffer, but really a lower utilization indicates responsibility. In general, the lower the utilization score, the higher the credit score.

Some people recommend closing credit credit cards if your are not using them. However, closing an account will cause your utilization rate to increase. Using the previous example, if I closed a credit card with a $5,000 limit, my utilization would just to 40%. Keeping old accounts open will have a positive effect on your utilization. Some people choose to cut up the card to prevent it from being stole, but will leave the account open so the credit limit can help your score.

There are several ways to keep a low utilization rate. Here are a few strategies:

• Increase your credit limits. By asking your credit card company to raise the limits, you will have more available credit and the amount you spend will remain unchanged while the amount you have available will increase. Call up and ask for an increase. This is beneficial if they only do a soft pull on your credit, but a hard pull might have consequences that outweigh the advantages.

• Pay off your balance halfway through the month. By doing this, you are constantly keeping your rate low. Instead of ranging from 0 to $1,000 on your credit each month, you will range from 0 to $500, so at any given point, you will, on average, have half as high of a balance on your account.

• Some people suggest opening a new account to gain extra borrowing power. However, I strongly advise against this because, while your utilization rate will decrease, opening new accounts could have negative impacts on your credit score.

Debt usage is an important part of your credit score, but hopefully you now have a better understanding of what it is and how you can positively affect it.