Disputing Credit Report Information, What Happens to my FICO Scores During The Dispute?
I recently received this question from a consumer regarding a rumor they heard about how disputing credit information impacts their FICO credit scores…
“I’ve read on the Internet that when someone disputes information on their credit reports their credit scores will improve because the disputed item no longer counts in their scores. Is that true”
As you’ve probably figured out by now, there’s a enormous amount of information about credit scores floating around on the Internet. Some of it is accurate, a lot of it is not. This consumer’s question is actually a good one because there is variable treatment of credit information when it’s being disputed. But, it’s not as simple as saying, “no, it doesn’t count in your score while it’s in dispute.” Here’s the truth on the matter…
First off, the credit reporting agencies aren’t stupid. Second, FICO isn’t stupid. They know that ignoring a piece of negative credit information simply because the consumer doesn’t agree with it isn’t a good idea. If that were actually true then consumers would challenge everything they don’t agree with and then go out an apply for a loan while the items are being investigated. Sorry, it doesn’t work that way.
There are two different types of consumer disputes, the initial dispute and the persistent dispute. The initial dispute is the first time a consumer challenges the accuracy of a credit item. Normally the credit bureaus will post narrative text that states the consumer disputes the account and that they are in the process of investigating its accuracy. If the investigation comes back verifying that the credit data is, in fact, correct then that initial dispute text is supposed to be removed. If the consumer still challenges the accuracy of the data the bureaus will often post persistent text with the account stating the consumer disagrees with it. And, of course, the consumer can always add a longer 100 word statement to the credit report explaining their side of the story.
The initial dispute can change how the credit scoring model treats the account, but it’s certainly not fully ignored. Anything negative or debt related is temporarily bypassed while the initial dispute is conducted. This can sometimes cause the score to increase, although you wouldn’t know that, and it might seem like an opportunity for the consumer to pull a fast one on their lender by trying to time an application to coincide with the dispute. But, lenders aren’t stupid either.
When a lender pulls your credit report they can see that you’re disputing something. And since they’re privy to this “while in dispute” strategy many of them have built in policies that will kick out an application submitted by a consumer who has an active dispute in process. Fannie Mae, the mortgage giant, is one of them. Point being, it doesn’t really matter how good your score may be…the fact that you’re disputing potentially negative information isn’t a secret and lenders will want your dispute to be finalized before they move ahead.
Look, nobody blames anyone for trying to get a better FICO score. We all want great scores, right? But, I have a much better “score improvement” idea…earn great scores by paying your bills on time and staying out of credit card debt and you won’t have to try and beat the system. You’ll pay lower interest rates, lower insurance premiums, and be treated much better by your lenders. And, good scores tend to persist because once you’ve gotten a taste of low interest rates you’ll never want to go back to sub-prime land again.
OG Article here – http://www.smartcredit.com/blog/2011/01/05/disputing-credit-report-information-what-happens-to-my-fico-scores-during-the-dispute/
Credit Reporting Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. Follow him on Twitter here.
Interesting article I found on NY Times about how collection accounts can ruin credit scores. I see this very often. In many instances, consumers have health insurance and a co-pay was billed and the client was not notified appropriately. The end results was a drop in credit scores, hours wasted on the phone and money spent to just make it go away. It is an unfortunate fact of the credit reporting industry. Read on…
Paying your medical bills is becoming more complicated, particularly as more patients become responsible for a greater share of their medical costs. And often, hospitals and other providers are turning over bills more quickly to collection agencies.
The problem, as my article on Saturday outlines, is that medical bills can be riddled with errors. Or, it may just take you many months and phone calls to figure out how much you’re really obligated to pay, or why your insurer is dragging its feet. But if you take too long to untangle the mess, it could end up hurting your credit score. If a medical provider hires a collection agency to collect the money on its behalf, credit experts said there’s nothing stopping them from reporting the delinquency to the big credit reporting bureaus. Debt collection experts said that it was ultimately up to the medical provider to determine when the debt got reported.
A consumer has 30 days to dispute the debt (from the time the debt collector initially reaches out to them) with the collector. And if the consumer disputes the cost, the collector is supposed to “cease collection of the debt” until the collector can verify the debt with, say, a copy of a judgment. “That would seem to include notice to the credit bureaus,” said Robert J. Hobbs, deputy director at the National Consumer Law Center and author of “Fair Debt Collection” (National Consumer Law Center, 1987). But “it’s a gray area of whether that is actually a collection effort.”
The Consumer Data Industry Association, a trade group for the big credit bureaus, said that consumers could also request to have the debt deleted from their credit report if the debt was invalid. But as we’ve reported before, disputing errors is not always an easy process.
“You’ve got this mishmash of consumer protection laws that might provide some protection, but aren’t specifically designed to protect consumers against medical billing problems,” said Gerri Detweiler, a credit expert with Credit.com. “We’ve given collection agencies a lot of power to harm consumers’ credit reports due to medical problems, without proper checks and balances.”
The article also discusses legislation that would erase medical debt from credit reports within 45 days of being settled or paid. Supporters of the bill said it would help people whose credit scores were unfairly damaged, while critics argued that it would undermine the value of credit reports because it does not distinguish between people who were truly delinquent and those who were the victims of billing errors or other mistakes.
Has your credit score been damaged by medical bills? What do you think of the legislation? Please share your experience in the comment section below.
By TARA SIEGEL BERNARD
OG Article here http://bucks.blogs.nytimes.com/2012/05/04/on-keeping-medical-bills-from-hurting-your-credit-score/?ref=your-money
This is part 4 in a series of videos on basics of credit, which is Credit 101. What are the credit bureaus? Who are the credit bureaus? This is something that should be taught in high school. A brief explanation of credit. Interview between Adam Villaneda and Cesar Marrufo. Elite Financial, LLC credit repair in Yucaipa, California. Learn how to fix your bad credit report and position yourself to purchase a home.
Think you have three credit scores? You may have 50 or more
You probably know you have a credit score, and that score dictates much of your financial future. You might know you have three credit scores, thanks to aggressive advertising from companies that sell access to them.
However, those hardly scratch the surface of the collection of credit scores lenders might use to judge you. There are, most likely, dozens of scores that might control your ability to get a mortgage, buy a car or obtain insurance.
Banks often use their own scores, tweaked versions of the FICO score that began the credit score craze. Auto lenders also have their own scores. So do car insurers. And old scores, based on old formulas, are still in use by many lenders. U.S. consumers may have 50 different credit scores — or more — that could impact their ability to borrow money, and that number is rising, experts say.
“The idea of there being a one true credit score, well that’s just not accurate,” said Michael Schreiber, editor in chief at Credit.Com, a consumer advice website.
John Ulzheimer, a credit score expert who formerly worked for FICO score inventor Fair Isaac Corp., produced a detailed infographic for CreditSesame.com in September which detailed 49 different scores based on the FICO. He has found another five or six since them. And that number doesn’t include competitors like Vantage Score, invented by the credit bureaus in an attempt to cut out Fair Isaac, or other proprietary kinds of credit scores.
Getting your actual credit score is a like game of roulette at this point,” said Ulzheimer, now president of consumer education at SmartCredit.com. “Getting the wrong number can be overwhelming to a consumer. The lender is using one score but you don’t know which score.”
There are also exotic credit-based scores, such as a “revenue score,” which predicts how much interest revenue a credit card holder will generate; a bankruptcy score indicating the likelihood someone will file for legal relief of debts; and a collection score that helps debt collectors prioritize their efforts.
Credit scores were once held completely in secret by the credit industry, but are more available to the public today. Credit monitoring services include them with monthly subscriptions. Fair Isaac, the inventor of the credit score, sells FICO scores at MyFico.com. Wells Fargo gives them away to consumers who walk in and ask about new accounts. Credit.com gives away a free score to site visitors. But with more scores being invented all the time, it’s hard to say what consumers are looking at when they receive a credit score.
“It does irk people when they find out there’s a very different number they get from one scoring model to another,” said Gerri Detweiler, scoring expert at Credit.com. “People wonder, ‘What good is it to check my score if the score banks see is different?’”
If any credit score provider implies consumers are getting a comprehensive view of their creditworthiness by ordering three credit scores — based on their three credit reports at Equifax, Trans Union, and Experian — that’s misleading, Detweiler said. It’s also misleading for any firm to suggest their score is the one used by most lenders.
Ulzheimer think so, too.
“If you go to MyFico and you get a score, that is the same brand of score that lenders are using predominantly,” said Ulzheimer. “Going past that is an embellishment. … MyFico does sell you a FICO score, but it may not be the same FICO score that lenders use.”
In fact, many banks have their own scores, which sprinkle their own criteria into the complex algorithm. Car loan issuers, for example, often choose to weigh previous car loan payment history higher than other lenders, Detweiler said.
The proliferation of scores is partly the result of continuous updates to scoring formulas that are expensive for financial institutions to adopt, Ulzheimer said.
“Scores are really nothing more than generations of software,” he said. “Think of how many generations of Microsoft software are out there, for example. Every year, there’s something new that’s a little better but kind of does the same thing. Scoring systems are like that.”
For example: Last week, the group behind the Vantage scoring system announced VantageScore 3.0. It has some consumer-friendly features, such as ignoring collections accounts that have been paid off (such accounts generally lower a consumer’s FICO score), and providing exceptions for consumers who don’t pay bills because of natural disasters like Hurricane Sandy. But firms may continue to use VantageScore 2.0 for a long time.
“A large bank that didn’t want to update its systems could force providers to keep old scoring systems going for years,” Ulzheimer said.
Given the proliferation of scores, should consumers even bother trying to see one of their credit scores? Absolutely, says Detweiler. She says any score will offer a helpful reference point.
“Don’t focus so much on the number as much as what direction you are moving,” she says. “The number will give you some information about what areas of your financial life you need to work on. But if there is a drop, you will know something significant has happened.”
The number itself doesn’t matter as much as how a consumer compares to the general population, she said. Armed with this information, consumers should be able to ensure they are getting a fair interest rate when borrowing money for a home or a car or applying for a credit card. Consumers who rank near the top of a scoring scale should get a bank’s best rate.
Because she thinks consumers should track their score over time, Detweiler says it’s important to stick with the same score than trying to compare a free score doled out by a bank with another score purchased from a website.
Ulzheimer said it’s fruitless and frustrating for consumers to obsessively follow their credit scores as they pop up and down, given that lenders see different scores anyway. He recommends “managing” to your credit report instead of your credit score, since the report is at the heart of all score formulas.
“What’s constant across all scores is that doing the right thing will lead to a better score across the board,” he said. “If you pay your bills on time, your scores will go up. So worry about that. Managing to three credit reports is easier than trying to manage all those credit scores. …Consumers have to let go of that, because the number of scores will continue to get larger, not smaller.”
That’s not to suggest variations among credit scores aren’t important. In September, the Consumer Financial Protection Bureau published a study of credit scores revealing that variations among different scoring models could impact as consumer’s borrowing costs about 20 percent of the time.
The study recommended that firms that sell credit scores “should make consumers aware that the scores consumers purchase could vary, sometimes substantially, from the scores used by creditors.”
The best way to avoid paying too much for credit because of a credit score variation is to shop around. Never take the auto dealer’s word for it that they’ve gotten you the best deal on your car loan. The variations matter less with mortgages, where banks usually get three credit scores and throw out the lowest and higher score.
Detweiler said for personal sanity, consumers should avoid treating credit scores the way they treated SAT scores in high school, or grade point averages in college.
“Don’t get too hung up on a number,” she said. “You know the serenity prayer? There are some things you have control over, and some you don’t. Take care of the things you can control, like paying your bills, and the score will take care of itself.”
Follow Bob Sullivan on Facebook or Twitter
OG Article here http://redtape.nbcnews.com/_news/2013/03/19/17361604-think-you-have-three-credit-scores-you-may-have-50-or-more
Here is something you need to know about opting out of those credit card offers ; aka Junkmail
Beware, there’s no asset ownership at the end of these loans
1. Student Loans
The topic of whether or not to borrow a lot of money to go to college, thus incurring installment debt, is a lightening rod, to say the least.
I don’t think you can say that an education and a degree aren’t assets. But, I do think you have to consider the “I didn’t go to college and I’m still successful” argument, which is possibly why so many people think student loans don’t yield any sort of asset. In the strictest definition of an installment loan, an education isn’t tangible and it doesn’t secure any sort of loan obligation. I mean, a lender can’t repossess your knowledge for non-payment. Semantics, I know.
2. Auto Leases
Now we’re talking. Borrowing money to buy a car is one of the worst investments you can make because of the quickly depreciating value of the asset. But, at the very least you’ll own the car after 36, 48 or 60 months of payments. With a lease you’re essentially renting a car for some fixed period of time.
Even when you’re done making lease payments you don’t own a thing. In fact, in many cases you’ll owe still more at the end of the lease because of mileage that exceeds the maximum contractual allotment. If you like a new car every few years then leasing is a good option but you’ll be making car payments perpetually. If you want to drive something supercool every once in a while then call HERTZ instead. You can give it back at the end of the weekend.
You own nothing after satisfying your rental agreement, which is technically an installment agreement. The tenant gets a place to live (the “extension of credit”) and makes an equal payment to the landlord (the “creditor”) for a fixed number of months per contract (the “loan term”).
Don’t get me wrong; there are tens of millions of homeowners who would rather be home-renters right now because they’re upside down on the home loans. That’s a familiar position to be in with auto loans, but not mortgages. Tax deduction notwithstanding, renting ain’t a bad deal right now.
4. Title Loans
You know what these are, right? You take your car title (yes, you have to have clear title in hand) to this vulture of a lender who then gladly let’s you borrow about 50% of your car’s appraised value and expects you to smile about it while he hopes you default. You make payments of some amount over some period of time and you get your title back. I fully agree that a car’s title is a tangible asset, but you’ve already earned it by paying off another loan. Buying it back again…not so much.
5. P2P Lending
Yes, and no. P2P loans (peer-to-peer) occur when you borrow money from another person or group of people who act as the “lender” in the transaction and cobble together the funds to lend. There are several sites that facilitate P2P loans but since I’m not a fan of them I’ll let you find them on your own.
Peer-to-peer loans are, in fact, installment loans and some of them are attached to an asset. Some P2P loans are taken out to pay for orthodontic work, business equipment and yes, even plastic surgery. Still, just as many are taken out to pay for vacations and other non-tangible items. Regardless, defaulting on a P2P loan won’t result in the consumers/lenders showing up at your door. I think that’s a contributing reason for their high default rate … it’s hard to think about Joe the Consumer Lender like you think about Wells Fargo or Citibank.
What about plastic?
So, here is a sixth…What about credit card debt? Yea, this is one also- Have you ever heard of a credit card issuer repossessing clothing, vacations, dinner out, or anything else charged on a credit card?
by John Ulzheimer onwww.mint.com/blog/how-to/no-asset-ownership-loans-042011/
Do you know what type of information is on your credit report?
With all the credit reporting and scoring advice circulating the internet, sometimes it’s refreshing — and helpful — to just get down to the very basics. Namely: what exactly is in your credit report, and what isn’t?
Credit reports are generally broken down into five to seven areas, depending on what credit report you’re looking at and whether it’s a “consumer” version or a “users” version. Here’s are the sections and what you’re likely to find in each:
Personal Identification Data
This is where you’re going to find your name, any variations of your name, current and former addresses, date of birth, social security number, and perhaps your current or previous employer.
This is a list of who pulled your credit reports and on what date. The “consumer” version of the credit report is going to have all of your inquiries. The “user” version is only going to have hard inquires.
There is a separate section on a credit report for 3rd party collections. This is not the internal collection department at your bank or credit card issuer. This is when your creditors have either sold or consigned your delinquent debts to an outside company for collection efforts.
The trade section is going to make up the bulk of your credit report. This is where all of your accounts with lenders are going to show up. Some times they’re called “trade lines” as well.
On some old credit report formats the Public Records’ section also houses 3rd party collections despite the fact that a collection is hardly a public record. In the newer consumer versions they are called out as their own unique item leaving the public record section to only house liens, judgments and bankruptcies.
You might not know this but you have the right to add a short statement to your credit reports. In most states this is limited to no more than 100 words so you’ll need to bust out your best Twitter or text messaging skills to fit an explanation of why you stopped paying on your credit cards.
So now that we know what you WILL see on your credit reports, let’s address what you probably won’t see on your credit reports.
Under most circumstances you won’t see…
These were reported at one time but only when they went delinquent. Do you remember when gyms would sign people up for 3-5 year contracts and if you decided you were buff enough and cancelled they’d try and hit you up for the full amount?
You won’t normally see your gas, power, cable, or telephone service account on your credit reports while they’re in good standing. There are some exceptions. I’ve seen NICOR accounts on credit reports reporting month after month just like any other loan. NICOR is a gas provider in Illinois. Most of the time if you see these types of accounts on a credit report it’s because they’ve been sent to collections and the collector is reporting it.
You’ll rarely, if ever, see your rental payments on your credit report because most landlords don’t have accounts with the credit reporting agencies and they are unable to report. Even if you are living in an apartment complex with hundreds or thousands of units it’s unlikely you’ll ever see the payments on your credit reports. Of course if you default on your lease they’ll turn it over to a collection agency and you’ll see that on your credit reports lickety split.
Almost all insurance companies will allow you to pay your insurance premium in installments. I’m quite certain most people would consider that a form of extending credit, and I’d agree with them. However, insurance companies do not report the installment payments to the credit reporting agencies. If you don’t pay them they’ll just cancel your coverage. And of course driving without insurance is illegal. Talk about the ultimate leverage over their borrowers!
by JohnUlzheimer for Mint.com
How Can I Stop The Credit Card Offers?
Everyday millions of consumers get home from work to find a small stack of credit card offers in their mailbox. These offers, many of them from the same credit card issuers who sent you an offer last month, purport to offer you new credit cards. These are called “pre-approved offers of credit” and account for hundreds of millions of dollars in revenue not for the credit card issuers…but for the credit reporting agencies.
The credit reporting agencies, in addition to selling credit reports and credit scores, sell lists of consumer names and addresses to credit card issuers so they can send you those offers. The list of consumers has been “screened” by the credit reporting agencies and meets certain minimum credit score requirements. For example, a bank can buy a list of consumers who have FICO scores greater than 650, thus eliminating very risky prospective customers.
Thankfully there is a way to have your name removed from those screened lists. And, even better news, it’s free to do so. By going to this site you can have your name removed for 5 years or even permanently. But don’t worry, you can always opt back in if your mailbox starts having separation anxiety.
Opting out is easy, but giving out the amount of information you’ll be asked to give is going to be hard. You’ve got to provide your name, address, Social Security Number, Date of Birth and your phone number. They need this information to ensure the correct credit file has been “blocked” for screening purposes.
Some people don’t like the opting out idea because they can get a proxy of their credit scores by the offers they’re receiving. For example, if you’re getting Platinum style offers then you’ve got great credit scores. If you’re getting “classic” card offers with limits of “up to” $1,000 then your scores aren’t that great.
Just because you’ve opted out it doesn’t mean you’re going to stop getting offers. First off, your name is probably already on several pre-screened lists and you can’t get your name off of them after the list has been delivered to the lender. And, opting out just gets your name removed from screened lists sold by the credit bureaus. It doesn’t remove your name from other lists that are sold by other companies.
Finally, the website I sent you to is the legitimate unified “opt out” site sponsored by the national credit reporting agencies pursuant to Federal law. There are companies who, for a fee, will opt you out. Don’t get tempted into thinking you have to pay for this.
When Does The 7 Year Period of Negative Credit Reporting Actually Begin?
If you have made credit management mistakes in the past then I have some great news for you. Negative credit information cannot remain on a consumer’s credit report indefinitely. Thankfully, the Fair Credit Reporting Act (FCRA) requires the credit reporting agencies to remove negative information from a consumer’s credit report after a certain period of time. The date which an account must be removed from a credit report is often referred to as the “FCRA compliance date of first delinquency” or the “purge from date.”
Depending upon the item, the credit reporting statute of limitations can differ. However, a majority of the negative items on a consumer’s credit report must be removed after about 7 years. But, 7 years from when?
There is a great deal of confusion regarding specifically when an account can be expected to age off a consumer’s credit report. If you were to perform an internet search for the question “When will a collection account be removed from my credit report?” you would likely find dozens of different answers. However, the true answer to the previous question is “it depends.”
For credit items which have a purge date after 7 years, i.e. collection accounts, charge-offs, repossessions, etc., the item will be removed 7.5 years from the date of first delinquency or 7 years from the date of default. The date of first delinquency (DFD) is defined as the date that the original account went delinquent (past due) for the first time leading to the default. The default date can also be expressed as the date the original account became 180 days past due.
So, as an example, if you defaulted on a credit card account in June 2013 then it can remain on your credit report for either 7 years from that date (deleted no later than June of 2020) or 7.5 years from the date the credit card account went delinquent leading to the default. Either way, the default cannot be reported more than 7 years.
Here is a cheat sheet which you can use as a reference when you want to know specifically how long a negative account can legally remain on your credit reports.
Collection Accounts – Accounts reported by a collection agency are purged from your credit reports 7 years from the date of default on the original account. The FCRA does not allow collection agencies to “re-age” collection accounts when they are purchased from the original creditor in an attempt to keep a negative account on a credit report longer. If a collection agency tries to re-age an account by manipulating the FCRA compliance date that is illegal.
Charge-Offs – Accounts with a charge-off status should be purged from your credit reports 7 years from the date the charge-off occurred.
Judgments – The purge date for a judgment is 7 years from the date it was filed. If the judgment is re-filed and thus has a new filing date, it will remain for 7 years from that new date.
Repossessions – You can expect a repossession to be removed from your credit reports 7 years from the date your auto loan went into default (or 7.5 years from the date of first delinquency on your auto loan that lead to the default).
Chapter 13 Bankruptcy – A chapter 13 bankruptcy should be removed from the credit report 7 years after the date discharged, not the date filed. Note, it can take several years for a chapter 13 bankruptcy to be discharged after the original filing date. Therefore, a chapter 13 bankruptcy cannot remain on a credit report for longer than 10 years from the date of filing. All bankruptcies are capped at 10 years for credit reporting.
Paid Tax Liens – The purge date for paid tax liens is 7 years from the date the lien was released. Unpaid tax liens have no purge from date and can remain indefinitely if the credit bureaus so choose.
Chapter 7, 11, and Bankruptcies Which Have Not Been Discharged or Dismissed – Bankruptcies which fall into 1 of these 4 categories are purged from credit reports 10 years after the filing date.
The Insider – October 22nd, 2013
By John Ulzheimer
Carrying the plastic means you’re susceptible to a host of temptations and mistakes that can bring regrets later. Savvy cardholders know to resist them.
Credit cards can be a great asset or a great liability, depending on how a cardholder uses them. While you probably won’t go to hell for committing any of these sins, the financial situation you will find yourself in afterward can certainly cause some pain to your pocketbook and damage your credit score. Read on to find out the seven deadly credit mistakes you should avoid at all costs.
1. Gluttony: Bumping up against your credit limit
Just because your issuer awarded you a $6,000 credit limit doesn’t mean you should max the card out. For starters, those who aren’t able to pay off their balances in full increase the likelihood of winding up in debt, since they’ll be subject to the interest on their purchases. Secondly, bumping up against your credit limit is likely to have a negative overall impact on your credit score.
“The closer you get to your credit limit, the riskier your credit profile is going to look,” says Chris Mettler, the founder of CompareCards.com, since it leads to a high credit-to-debt utilization ratio. Mettler says it’s best to use credit in moderation, using only 15% or less of your total credit at any given time. And yes, you should also pay off all those balances in full by the end of the month whenever possible.
2. Pride: Not checking your credit report
You might assume your credit score is in fine standing based upon a presumably stellar payment history, but the truth of the matter is that credit reports can easily contain errors. And the more egregious ones, like inaccurate delinquencies or improper credit limit information, can cost you more than a few points on your accompanying credit score.
Consumers therefore should check their credit report at least once a year — especially since you’re entitled to one free copy each year, thanks to the Fair Credit Reporting Act — or right before you apply for a big loan, to minimize the chances that you’ll encounter any surprises.
3. Lust: Applying for too much credit
Lucrative sign-up bonuses can certainly be attractive, but that doesn’t mean you should apply for every credit card that’s touting one. Too many credit card inquiries — generated by lenders that are looking to see if you deserve a new line of credit — in a short time frame can also negatively affect your credit score. Instead, apply for credit as you need it, and add a new card to your payment arsenal about once a year until you’ve got three or four you can consistently pay off on time at your disposal.
4. Greed: Taking out a cash advance
It may seem like a great idea to use your credit card to get a cash advance at a casino so you have some cash to gamble with, but in addition to the lousy odds you’ll have trying to make the money grow, the paper comes with a price.
“You’re going to be charged a significant amount of interest,” Mettler says, estimating that most transactions will carry an interest rate around 23% or higher. As such, it’s best to use a credit card only in instances where the plastic itself can be used to make the purchase and you can pay back the funds by the subsequent bill’s due date.
5. Envy: Applying for a card that’s out of your league
Your globe-trotting friend may continually flash a credit card that grants access to swanky airport lounges, earns free airfare and avoids foreign transaction fees, but don’t let jealousy lead you to sign up for one of your own. Typically, cards of that caliber contain high annual fees that are worth paying only if you travel enough to justify the rewards.
Instead, ask yourself a few questions to figure out what type of credit card is more suitable to your lifestyle. (You’ll also want to check that your credit score qualifies you for the account so you don’t rack up any of the unnecessary inquiries we were talking about.) There may be a great rewards card with no annual fee that will look much better with your name on it.
6. Wrath: Closing all your credit card accounts
Those who have gotten burned by their plastic may be inclined to cut up all the credit cards in their wallet and close all the accompanying accounts, but it’s best to curb your anger. Closing accounts can negatively influence your credit-to-debt ratio, especially if the one card you’re leaving open — or transferring a balance to — is bumping up against its credit limit.
It’s better to keep the account open but not use it, since that will keep your credit-to-debt ratio positively intact and not jeopardize the average age of your credit report.
7. Sloth: Not checking your monthly credit card statements
It can be easy to set up automatic bill pay on your account and then forget all about your credit card, especially in instances where you use it infrequently. However, it’s a bad idea to skip checking your monthly credit card statements.
“You can be paying for things you’ve signed up for and forgotten about,” Mettler says, in addition to any fraudulent charges that may appear, courtesy of errors or, even worse, identity theft.
By Jeanine Skowronski, MainStreet http://money.msn.com/credit-cards/the-7-deadly-credit-card-sins-mainstreet.