Consumers Urged to Learn Credit Scores and How to Improve Them

By | August 1, 2007

  • August 1, 2007 at 10:05 am
    DWT says:
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    Like credit scoring or not, this article is the first to come close to explaining some of the major factors impacting a score

    > Late Payments
    > Outstanding Debt to Line of Credit
    > New Lines of Credit

    I agree that this is something that the public ought to know!

  • August 2, 2007 at 12:30 pm
    Claim Hawk says:
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    For decades we have paid cash for most of our purchases.

    This responsible managing of our finances has, fairly recently, given us a “immature” credit history that makes us a higher “risk” to somehow…maybe…be more likely to make a loss claim in the future, or at least that is what the insurance agent seemed to be trying to explain in regards as to why our auto rates were now higher than before.

    It all sounded prrreetty scammy to the wife…and me. The AllColony agent looked uncomfortable during the whole ackward moment.

    Funny thing too, even though we don’t have a credit card, which I guess is now not in our best interest (financially), the agent always takes our cash payment.

    Hmmm…

  • August 1, 2007 at 1:18 am
    Nebraskan says:
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    I agree DWT. This is stuff they should be teaching in middle school Jr. High! When young kids are getting out into the work force.

  • August 1, 2007 at 1:24 am
    HawaiiDuke888 says:
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    What is their not to understand about paying back you debts? What is their not to understand when reading you billing statement that their is a due date. What is their not to understand about not spending more than you make? Credit is not for people who do not understand these things.

  • August 1, 2007 at 1:40 am
    KLS says:
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    HawaiiDuke,

    Intelligence is not handed out equally, obviously. Some people don’t understand their credit reports or their credit scores. Many people don’t really understand how debt and financing work. Sad but true… some schools don’t even offer a home economics course any more, let alone require students to take it.

    I can easily see how studies show that so many people don’t ‘get it’.

    Some people grow up with parents who live in fine homes and drive luxury cars but own none of it because everything is financed to the hilt. They may not understand that their upbringing isn’t the ‘norm’.

    My son has several friends who come from families just like that. He has asked us before why we don’t have an Escalade or live in a certain neighborhood and my husband and I have explained to him that while our jobs are on par with his friends’ parents, we don’t like the insecure feeling that comes with financing so many things.

    Thanks to “No Child Left Behind” we can expect a whole new generation of under-educated people entering adulthood and the workforce soon.

    If you’re frustrated with others’ lack of understanding now, I hate to tell you there’s great potential for it to get much worse.

  • August 1, 2007 at 1:41 am
    Nobody Important says:
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    Unfortunately so much of what we do any more is affected by our credit history. Not just the dreaded credit scoring for insurance, these scores affect your ability to get a job, get a house, get credit cards, get an apartment and probably any other number of things I don’t know about. Most people don’t pay attention to this score and the reality is that it’s affecting so much that they do. Education is seriously needed at all levels.

  • August 1, 2007 at 2:58 am
    Pimp says:
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    They are about the only ones who dont use credit scoring these days. Im trying to change that though.

  • August 1, 2007 at 3:16 am
    Not important says:
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    While credit may be a factor in making many educated decisions I have found in my business (where I deal with credit reports everyday) it is often incorrect or at best misleading. A person who shys away from credit cards, only has a few, and rarely uses them. A person who does not have a car loan and a boat loan, and a motorcycle loan. A guy who does not pay debts with merchants (often Dr’s offices) where he has a legit dispute as to the charge. That person will often score lower than the guy who sends back every card offer he gets. He is the one who gets the max credit on every card, then over uses it. He finances everything until his monthly vig is 70 to 80% of his income. Then he makes his payments on time until he looses his job for one month. That guy will have a good score up to the point that he goes bankrupt. And we wonder why foreclosure rates are so high!!!!!!!!!!

  • August 1, 2007 at 3:29 am
    Pat says:
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    It’s not enough to know that you pay off your debts and on time. For example, assume you have two credit cards each with a $5000 limit and a $4000 balance. One is at 18%APR and the other at 10%APR. Many people trying to improve their FICO would pay off the 18% card in full (paying minimums on the other card) and then close it so they have less available credit. The problem is that by closing the second card, the ratio of debt to available credit jumps and as a result worsens your score. Better to keep the second card and not use it. Not fair, but that’s how it works.

  • August 1, 2007 at 3:31 am
    Nebraskan says:
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    What YOU said is common sense, but I think there is a lot mentioned in the article that usually comes to play AFTER a person has gotten themselves into credit card trouble…for example, the article mentions how you shouldn’t get rid of old credit cards just to get a new one with a lower interest rate or a prettier picture on the card…the BASICS which you speak of yes, we all know, but the sometimes hidden agenda of credit scoring companies isn’t always known until after the fact.

    And for the love of god, get over yourself. you sit and post like you are somebody important. you post on IJ for crying outloud. wowie!

  • August 1, 2007 at 4:18 am
    Felix says:
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    What was said below is true, but credit card companies are just as bad as insurance comapanies. Minorities with the same credit score as whites get higher % rate loans than their white counter-part. Isn’t a 700 score the same no matter what the color of your skin???

  • August 1, 2007 at 4:19 am
    HawaiiDuke888 says:
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    KLS,
    I could not agree you more about “no child left behind.” It so evil that we force teachers to teach at a higher level. The unions and the teachers that they represent are much more important than our kids. How dare President Bush raise the standards for our teachers to teach. The heck with the kids, what we need if more money for the unions so we can buy more politicians.

  • August 1, 2007 at 5:11 am
    KLS says:
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    The problem, Hawaii, is that while teachers may be utilizing more challenging cirriculum, the children who aren’t rising to the occasion are being passed through to the next grade regardless.

    Sorry to inform you that your interpretation of my point was off-base.

    My problem with “No Child Left Behind” is that it isn’t being used to it’s intended purpose.

    Some kids simply aren’t as smart as others. The same with adults. While the concept behind credit and debt-to-income ratios may be simple to you, it is NOT simple to everyone. Plus, a lot of them can’t help it. People are typically born with a certain level of intelligence. Being slow isn’t necessarily a choice.

    Understand what I’m saying better now?

  • August 1, 2007 at 5:46 am
    HawaiiDuke888 says:
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    KLM, I do understand what you are saying. We just accept the bigotry of low expectations, as peole of certain races are not capable of acheiving at the level of other races. We should never challenge ourselves to do better for these kids as they are hopeless. It’s just takes too much to improve these kids lives, so let’s neglect them. Go unions go, screw the kids, unions and their agenda is far more important.

  • August 1, 2007 at 6:06 am
    Nobody Important says:
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    I’m certainly not being cynical to say that teachers have been doing that for a long time. I remember when my kids were in school it was bad for the teachers paycheck if they allowed the low achievers to drag down the class average. Grade inflation is not a fallacy.

  • August 2, 2007 at 7:52 am
    DWT says:
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    Yes, it is common sense to repay your debts. That’s easy…

    1) But what about accepting some of the credit card deals that are out there. A local store offers a 10% discount on your first purchase. You go out and buy say $1,000 worth of clothes and save $100. You then pay off the $900 on the card and cancel the card. Does this impact your credit score?

    2) How about when you have 10 credit cards, each with $10,000 limit. You only use three and these are maxed out ($30,000 debt). You decide to cancel the 7 cards that you don’t use to eliminate the tempation to add more debt. Is that good or bad?

    Answers…

    1) You better beleive that can adversely impact your credit. Almost any time you establish a new line of credit you score goes down. And while you might think cancelling teh card would instantly remove that line of credit from your score… it doesn’t.

    2) While long term this might be a good move, short term it is a bad move. You’ve gone from a 30% debt to limit ration to a 100% debt to limit ratio.

    Bottom line is that from what I have learned about credit scoring, there are no quick fixes and that you need to seriously consider the cause and effects of adding or removing lines of credit. I honestly think the key is to get credit early, keep it current and then don’t open new lines of credit except for homes or cars.

  • August 2, 2007 at 9:24 am
    KLS says:
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    HawaiiDuke, I really don’t get where you’re coming from.

    First, why the hateful sarcasm?

    Second, where did I mention race?

    Third, where did I say we should neglect the slower kids? They shouldn’t be neglected, but they shouldn’t be passed to the next grade before they’re ready either.

    I also never brought up unions or having a low expectancy of others.

    You’re the one who expressed frustration with the fact that not all people understand the concept of debt and credit. I only pointed out that what is simple to some people is not simple to others. The solution to that is patience and tolerance… taking time to explain it to them. Perhaps explaining to them on several occasions and using different types of examples.

    Do you currently live in Hawaii or are you from there and living somewhere else? If you do live there, I hope you’ll take some time today, as I’m sure you have on other occasions, to get out and enjoy the beauty of your state.

    This is just my observation, but you seem very stressed. Maybe a walk on the beach would be relaxing for you? I sincerely mean that. I know it would be relaxing for me.

    Namaste.
    ~KLS

  • August 2, 2007 at 1:28 am
    Compman says:
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    Hey Felix, where on a credit card app does it ask for your race? I have never seen that on there. Do you really think the CC companies look at names to determine their rates? Let’s see, Bill, yeah, he get 11.9%, then there is Raul, he gets 14.9 becuase he sounds italian, how about Serge, well, he must be Russian, so his rate will be 20%. Then theres Shaniqway, must be from Oakland, ok, that rate will be 25%. Don’t forget about Lars, a a good Scandinavian, he should be pegged at 7.9%. See how stupid you sound?

  • August 2, 2007 at 1:48 am
    NEF says:
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    Common sense? Common sense is knowing the difference between “there” and “their”, idiot.

  • August 2, 2007 at 3:37 am
    Icee says:
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    Actuall, common sense has nothing to do with spelling or grammer, especially with American English

  • August 3, 2007 at 12:34 pm
    Icee says:
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    Actually, it’s not spelling I have a problem with; it’s that darn typing my fingers don’t like.

  • August 3, 2007 at 6:11 am
    NEF says:
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    …this coming from a person who also can’t spell.

  • August 4, 2007 at 10:25 am
    felix says:
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    compman, it is well known that minorities get charged higher rates for mortgage loans that whites, and that goes for insurance rates also. Why does that occur other that racism, in the credit and insurance industyr.

  • August 6, 2007 at 10:16 am
    Compman says:
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    Felix, I have been selling insurance for 20 years, I have never seen an application that asked for race. I even sell policies to people I have never seen in person. Please explain how race determines the premiums. I know location has a lot to do with rates, could it be that many non-whites do not live in the best neigborhoods, so the location is what is causing the rate difference? That would be my guess. We really don’t need any more race baiters out there Felix, we already have Jesse Jackson and Al Sharpton and La Raza.

  • August 6, 2007 at 1:35 am
    clm mgr says:
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    My kid just graduated from college, but from the time she was an upper classman in high school, she was receiving invitations from credit card companies to apply for and receive credit cards. To my knowledge she has never taken, and no school has ever offered, a course for kids like her to learn about and understand how to write a resume, how to use a check book, how to invest money for the future, and most importantly how to use credit. She’s hardly what you would call stupid, but combine the enticements one sees in credit card commercials (“What’s in your wallet?”) with offers to children of credit limits far in excess of their current earning capacity and you have a dangerous mixture that will surely lead to personal disaster. I firmly believe that along with readin’, writin’ and ‘rithmatic, an education in personal responsibility, incorporating the use of credit, should be mandatory at a very early grade level in our schools.

  • August 6, 2007 at 2:06 am
    Compman says:
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    Hey Clm Mgr, what about parental responsibility? Why are you concerned that someone else should be teaching your daughter the basics of financial survival? What is wrong with you taking the task upon yourself? That is what my dad did with me. He explained many factions of finances to me that I actually thought it was facinating. Also, by the 10th grade, even my school had taught us how to balance a checkbook.

  • August 6, 2007 at 2:12 am
    clm mgr says:
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    Compman: You were lucky. Your dad actually knew a thing or two about finance. I, on the other hand, did not have such an astute dad, and the problems I had with financial matters in my own youth (which still haunt me today) would lead you to believe that I was incapable of passing on anything more than abject failure to my own kids. I believe in parental responsibility, but my own ignorance in this area would have led my kid to repeat my own mistakes…better to have her learn it from folks who know such things and can pass their knowledge along.

  • August 6, 2007 at 2:20 am
    Compman says:
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    I think you underestimate yourself. If you were able to raise a child and put her through college, you must have been doing something right.

  • August 6, 2007 at 3:56 am
    lastbat says:
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    Where are people sending their children for an education these days? I’m not that old and I was taught all this stuff before the end of my sophmore year in high school. Oh, and I went to a moderately performing public school.

    As for the basics of finance, any parent that balances their checkbook every month can teach their children everything they need to know. I learned 90% of what I needed to know to succeed on my own by talking to my mother while she paid bills and balanced the check book. My parents have no retirement, no savings and no investments, but they still managed to teach me everything I needed to get those things for myself. Don’t sell yourself short just because you came from a background that didn’t support the education you wish to pass on.

  • August 7, 2007 at 4:13 am
    Nebraskan says:
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    I don’t think anyone is talking about teaching a course on checkbook balancing. basic arithmatic should cover most of that. i think the course some of us are speaking of are the ins and outs of APR’s, preparing for home buying, investments, things like that. i’m sure you have all attended a “class” on 401k’s if your company offers a 401K, i’ve even taken a course on home buying offered by my company and my company also offers a course on financial independence. But i think these are courses that should be taught in high school. BEFORE one enters the work force.

    so yes, i understand, there does NOT need to be a course on checkbook balancing, but there are some things that I think young kids should be taught along with pancake recipes in their Home ECONOMICS class.

  • August 12, 2007 at 2:20 am
    felix says:
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    http://newstandardnews.net/content/index.cfm/items/2696

    Copman, could you please explain the news article above. As when I last posted it no one would respond. Thanks in advance



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