5 ways to build your credit score and save money

Why should a good credit score matter to you?  Because it can have an effect on many financial decisions that will save you money.Most lenders, landlords and even cell phone service providers will check your credit before accepting your application. A good credit score can help you qualify for a better mortgage, help you rent a home, secure low insurance rates or even get you a job.Consequently, it is vital that you understand your credit score, also known as your FICO score.A credit score is a number calculated from your credit report. It is one factor that helps lenders appraise how well you’ve managed your financial responsibilities.  The higher the score, the less you are seen as a financial risk to creditors, potential employers and landlords.There are three major credit bureaus where you can get your credit score. There is a small charge for this, but it is well worth the cost to know where you stand. They are www.equifax.com, www.experian.com, or www.transunion.com.A credit report contains detailed information about your credit history and is the main piece of information that FICO uses to determine your credit score. By law, you can get a free credit report once a year at www.annualcreditreport.com or by calling 1-877-322-8228.A consumer tip: Initially ask for the credit report from only one of the three credit reporting agencies. Then four months later ask for a report from the second agency.  Wait another four months and ask the third agency for a credit report. This way you can get a free report every four months.Here are five ways to build your credit score:This may seem obvious, but even being slightly late, several times in a year could cause a creditor to report your delinquencies. So make it a priority to pay your bills on time.This one seems counterintuitive because you would think getting rid of old paid off loans makes you look more responsible. The truth is when creditors see that Continue Reading

Consumer credit scores to exclude some debts, liens starting July 1

Here's potentially good news for consumers: The nation's three largest credit-reporting agencies will soon exclude tax liens and some civil debts from their reports.The change by Equifax, Experian and TransUnion will take effect July 1, as part of a plan to ensure that consumer identifications in the data are accurate and current, the Consumer Data Industry Association, a trade association for the companies, said Monday.In a revision that could improve consumers' credit scores, the credit agencies will exclude the tax liens and civil debts if reports on those obligations don't include a consumers' names and addresses, as well as Social Security numbers and or dates of birth, the CDIA said. Many liens and most judgments don't include all of that data, in part because Social Security numbers are often redacted for security reasons.Additionally, the records won't be included without courthouse visits to obtain newly filed and updated public records at least every 90 days."Equifax, Experian and TransUnion continually seek ways to ensure the data they maintain on their consumer credit files is accurate and current, to best serve consumers and the needs of their business and government customers," CDIA Interim President and CEO Eric Ellman said in a statement. He added the change was part of the National Consumer Assistance Plan the credit reporting firms announced last year.However, the changes also likely result from new oversight of the credit-reporting agencies by the Consumer Financial Protection Bureau, as well as enforcement settlements by more than 30 state attorneys general, said Chi Chi Wu, a staff attorney for the National Consumer Law Center. Those actions focused on credit-reporting errors that harm consumers."It's a good thing. Anytime consumers are not being harmed by incorrect data is a positive," said Wu.Although the changes could help consumers appear more credit-worthy, the updated policies potentially Continue Reading

Money Pros: How to boost your credit score so you can refinance your mortgage at today’s low rates

The Money Pros are standing by to take your questions. Q. I went to a lender to refinance my mortgage and was turned down. They said my credit score was about 30 points too low. What can I do to fix my credit score so I can refinance while rates are low? A. There are many reasons why your credit score might be lower than it should be. A big reason is delinquent accounts. If you have any late payments, collection accounts, tax liens, or judgments, it can reduce your credit score by hundreds of points. Also, having new or young credit can decrease the average age of your accounts. Since being in the credit game a long time increases your score, it is best to have very old credit. If you have a relative or friend with old credit you can be added to their account as an authorized user. You will not be responsible for the debt owed, but within six months the account will show up on your credit as an old account and can boost the score. Although this type of credit is not considered primary when applying for a loan, it will increase your FICO score. Revolving credit, if not used carefully, can also ruin your credit score. Types of revolving credit include credit cards, overdraft on checking accounts and lines of credit. You must review what your balance to limit ratios are. If the aggregate balances are over 7% of your total limits, your score will begin to drop. The closer the balance inches up to the limit, the more the score drops. For example, if you have five credit cards, each having a $1,000 limit, you would have total limits of $5,000. If you had an aggregate balance of $4,500, your score could plummet, because your balance-to-limit ratio would be 90%. One way of increasing your score is making sure your balance-to-limit ratio on revolving credit is no more than 7%. Of course, if you have been late ten times in the last ten months, nothing is going to help you. It usually takes a month or two for the bureaus to update the new Continue Reading

It’s never too late – or too early – to fix your credit score

I’m sure if you were asked to raise your hand if the recession took a toll on your credit, many of you would. The circumstances that came out of that period — short sales, credit card delinquencies, higher medical bills due to the loss of insurance that comes with long-term unemployment — were not good for FICO scores. Unfortunately, they're not over. In its October report, RealtyTrac, an online marketplace for foreclosure properties, reported more than 610,000 foreclosure filings this year in the third quarter. But it's never too late — or too early — to start working on rebuilding a tarnished credit score. One tool you'll want in your arsenal is a secured credit card, which looks and acts like a credit card. But t requires you to put cash into an account with the card-issuing bank — hence the “secure” part — as collateral. That cash then becomes your line of credit. You may be limited to only the amount you've deposited, or you may be given additional credit by the bank, particularly if you've used the card with good behavior for a while. Beyond that, it works much like the standard credit card: You swipe, then pay off your balance every month. If you don't, you'll be charged interest. And someone looking at your card from the other side of the counter can't tell the difference between this and any other credit card. Secured cards can be helpful credit rebuilding tools for two reasons. First, because of the collateral, you can get them at a time when you're not likely to be approved for nonsecured cards. And as long as you maintain an on-time payment history, they can help you start to build a recent credit history that's fairly pristine. That’ll be very useful when you get further back on your feet and want to buy a car or get a mortgage or even another credit card. But, like most financial products, some secured cards are better than others. Here's what you need to know to get the most out of them: Find Continue Reading

Banks give customers access to free credit scores

It might be the most important piece of financial information about you — and it’s finally easier for you to actually get a look at it.Big banks and credit card companies are increasingly offering customers free access to their FICO score. This score, named after the software and analytics company that developed it, is used by lenders to determine how risky you are when they are deciding whether to issue a new credit card, mortgage or auto loan.Banks have been able to make scores available to customers for four years, a result of a FICO initiative, but they have been slow to do so. Discover Financial was the first major credit card issuer to give its customers access to their FICO scores in 2013. But banks like JPMorgan Chase and Citigroup among others have adopted the program in the past year.“This is a piece of information that grades you and judges your ability to borrow, and because it is so crucial, you should be entitled to have it,” said Chi Chi Wu, an attorney at the National Consumer Law Center.It’s the latest move by the banks to give credit information to consumers since Congress required that the three credit bureaus offer credit reports to individuals once a year. Credit reports contain much of the information that goes into determining your score, but not the actual number.A borrower’s FICO score is used in 90 percent of lending decisions, but until recently a person had to pay for it — if it was available at all. Worse, borrowers looking for their credit score sometimes would be provided what’s known as an “educational score” which guesses a person’s FICO score but is not the score used to determine a person’s ability to borrow. MORE:  Q&A: FICO credit score changes could help you Need to knowKnowing your credit score can help you negotiate for better rates and shop for better loan deals. Also, if you know your score is weak, you can work to improve it and possibly Continue Reading

9 ways to salvage an ailing credit score

Without even contacting a credit bureau, Jeana Reed has a pretty good sense of what her credit score is. "It's probably the worst they've ever seen," says Reed, a 51-year-old Texan. Like many Americans, Reed's current credit headaches can be traced to a hospital stay. After her husband blew out his knee playing softball, complications from the injury kept him out of work longer than expected, which forced the couple to use credit cards to pay off medical bills. A job loss and a subprime mortgage refinancing later, the Reeds find themselves among the scores of Americans struggling to rebuild a soiled credit history. "I just want to get back on track," Reed says. "I'm not a deadbeat person."Poor credit has always been a drag on household finances, as unpaid bills and late payments can lower a consumer's FICO score--the 300-to-850-point gauge lenders use to evaluate the risk that a borrower will default. Lower FICO scores can trigger higher interest rates on everything from credit cards to car loans. But recently, they've become more important to the real estate market. Just a few years ago, Fannie Mae and Freddie Mac used FICO scores primarily in deciding whether to approve a loan application. "That all changed as the market started to deteriorate and [Fannie and Freddie] were looking to fine-tune their mortgage pricing from a risk-based perspective," says Rick Allen, director of strategic initiatives for Mortgage Marvel, an online mortgage shopping website. Today, the mortgage finance giants use credit scores to determine mortgage costs too, jacking up fees on consumers with lower credit scores to compensate for their higher risk of default.Read more from U.S. News & World Report here.For would-be home buyers, this change has had powerful ramifications. With home prices declining and 30-year, fixed mortgage rates hitting near-record lows of less than 5 percent, the real estate market is offering plenty of incentives to jump in. But only borrowers who meet today's Continue Reading

Your questions answered on tax breaks, credit scores

TAX BREAKS Q. I am a one-family homeowner and no longer have a mortgage, so I haven't been itemizing my tax return. Is there still a way to deduct my property taxes? Can I deduct city water taxes? Are homeowners or flood insurance deductible? A. Assuming you are the occupant of the home and it is not rental property, the answer is a big no. New York City "water taxes" are actually not taxes, they are metered charges determined by usage. Insurance also is not deductible. Some of these costs would be deductible, however, if you were renting out the property. -Alan Straus, certified publicaccountant, Manhattan GIVE 'EM CREDIT Q. How can I find out my credit score without having it lowered because I checked? What is considered a good score? What's the best way to raise it? A. You can check your score for free and without lowering it through freecreditreport.com. You can verify your score annually through one of the credit reporting agencies: Experian, Equifax and TransUnion. I recommend checking each one on a staggered basis. That means review one now and in four months check with another agency (each allows a free report once a year). This way, you can see if any corrections have been made or additional information is reported by just one agency. Usually a score of more than 700 is good, but the average score ranges from 650 to 675. To raise your score, always pay your credit card bills on time and in full. Never pay just the minimum due; this suggests you don't have the money to pay your obligations. It takes time to damage your credit - and it takes time to improve it, as well. -Ginger Broderick, certified public accountant, Manhattan Got a money question? Write to and we'll ask the New York State Society of Certified Public Accountants to help get an answer. Join the Conversation: Continue Reading

Super-charging your credit score

For Natasha Horne, trying to buy a house all came down to a three-digit number.A 33-year-old home health care worker who lives with her husband and two kids in a rental in the Parkchester section of the Bronx, Horne was hampered by a low credit score of 612. But with the help of Marilyn Bell, a counselor at Neighborhood Housing Services, which has offices in all five boroughs, Horne went to work. She called her creditors; some were willing to negotiate a settlement. The big push, starting last May, wiped $4,000 off her debt load.Bell contacted the credit reporting agencies about Horne's efforts. Within three months, her credit score rose to 679. Now, she's eligible for a mortgage at better rates than those offered to people with very poor credit."I've started to look at houses," Horne said. "This made a big difference."The credit number checked by most lenders, known as FICO, was developed by Fair Isaac Corp. Grades range from 300 to 850, with scores topping 750 regarded as excellent. The median U.S. score is 723. A better score usually means better rates and faster credit approval.If Horne applied for a $300,000 mortgage in May, she'd have only gotten an adjustable-rate loan, starting at 7.75%, with monthly payments of $2,149. But her improved credit score would qualify for a 30-year fixed loan at 5.5%, with monthly payments of $1,703.Raising your credit score can make a huge difference in your financial life. In the wake of the subprime meltdown, banks are demanding stronger credit backgrounds. "You'll need to have better credit — and prove it," said Manhattan certified financial planner Charles Failla. The three credit firms — Equifax, Experian and TransUnion — use a combination of five factors to determine a credit score. The most important is your payment history, followed by the amounts you owe relative to your credit limit, and the length of your credit history."They are basically trying to figure out your probability of default," Manhattan Continue Reading

Consumers must wait on new credit-scoring system

A new credit scoring formula that changes the way lenders evaluate risk is on hold. Fair Isaac Corp., developer of the FICO credit score, announced last summer it was changing its scoring model to remove a popular score-improvement loophole. The system was supposed to go into effect last fall. But controversy over the revisions as well as a lawsuit between Fair Isaac and one of the three big credit reporting agencies delayed implementation. Equifax now says it has "no plans to offer FICO '08" until it settles the lawsuit with Fair Isaac over an unrelated issue. Experian and TransUnion, meanwhile, estimate it will be summer before they adopt the new scoring system.Craig Watts, a spokesman for Fair Isaac, said the update "needs to be installed at each of the credit reporting agencies and they control that scheduling." The delay is a potential boon to consumers who have benefited from a longstanding but potentially abusive practice called piggybacking. Piggybacking gives someone with little or tarnished credit the chance to boost his score simply by association to someone with a long, positive payment history. The person with good credit simply adds the second person as an authorized user on an existing account. Authorized users get credit for the bill payment history on an account, even though they have legal liability to pay. Piggybacking has historically benefited teens and nonworking adults. Parents may add teens as authorized users to help them build credit, for instance. Working spouses may add the name of a stay-at-home spouse. But then questionable companies found ways to exploit it. They enticed consumers with good credit to give a stranger with poor credit authorized-user status on an account. The consumer never gave the stranger access to the account. Just by adding him on paper, they could earn about $150 and the credit-impaired consumer could significantly boost his score. FICO '08 will be the first scoring model to ignore Continue Reading

Agency KOs piggyback rides for improved credit score

Just when you think you've found a loophole, someone closes it. That's the case for Richard Aarons - no relation - a Jersey City man who thought he could improve his credit score by adding a credit account with a long, positive payment history. "How do I go about doing this?" he asked. The technique is called piggybacking. You get a trusted friend or relative to make you an authorized user on an existing account that he has used responsibly for a long time. Once your name is on the account, the card issuer reports the bill paying history to the credit bureaus in your name, too. As a result, someone with little or no credit, or someone trying to improve blemished credit, instantly gets the benefit of another card user's years of responsible credit use. Even better, because you're just an authorized user, you aren't liable for any balances on the card. At least that's how it worked until recently. Last month, Fair Isaac Corp. - the company that developed the FICO credit scoring system - announced that it is taking piggyback accounts out of its scoring system. The adjustment removes authorized user accounts from consideration by the scoring model. The company reports that it took the action in response to abuse of authorized user credit card accounts. In other words, con artists found a way to exploit a system that legitimately helped many consumers. Parents, for example, often add teenagers as authorized users to existing credit card accounts. They monitor how the teens use credit and the teens gain the parents' seasoned credit histories. But no more. Companies like Fair Issac cracked down in response to a new kind of commercial credit repair service. Several Web sites began offering services to boost a FICO score by adding a consumer as an authorized user to a complete stranger's credit account in good standing. The consumer never actually gains access to the credit account. It's just a way to intentionally misrepresent the consumer's credit Continue Reading