Frugal Dad » FICO

MyFICO Promotional Code

Jason (Frugal Dad) — Mon, 14 Dec 2009 10:00:10 +0000

Over the weekend I completed one of my year-end financial checkup tasks. I visited MyFICO.com and pulled a current copy of my credit report. This exercise was even easier this year considering the MyFICO promotional code that gives 30% off of their products between now and the end of March (just provide the promotion code “myFICOis9“ when ordering your FICO score report).

I was pleasantly surprised at the bump in my credit score since the last time I checked it. Since paying off all our credit cards, our FICO score has increased about 40 points. It wasn’t bad to start with, but was in the “average” range, and has now moved to “very good.”

Getting our updated credit score was nice, but the real reason I request a credit report at the end of the year (and again in the summer) is to check for any suspicious account activity – new accounts that I didn’t open, balances or personal information that I don’t recognize, etc.

If it has been a while since you last pulled you credit bureau report, I suggest taking advantage of this opportunity offered by MyFICO.com.

How to Save 30% On MyFICO.com Products

1. Visit MyFICO.com

2. Choose “FICO® Standard” in the right sidebar

3. Click the “Buy Now” button

4. Select the credit bureau(s) you’d like to receive a report from

5. Log in or create an account

6. On the “Customer Agreement” page, enter the promotional code “myFICOis9″

7. Verify your discounted order and finalize the purchase.

Simply click the button above to take advantage of this promotional offer from MyFICO.com.

What Is A Good Credit Score Good For?

Jason (Frugal Dad) — Wed, 01 Apr 2009 10:00:53 +0000

Few things strike up a debate faster than asking what good is a credit score these days? There are those who totally spurn the idea of some 3rd party determining their credit worthiness. There are others who worship the mighty FICO, well aware of its ability to save them money on future loans, insurance, and even affect their job hunt. I fall somewhere in the middle. Still can’t help but wonder, what good is a good credit score?

I would not suggest someone go out of their way to wreck their FICO score, but I also wouldn’t recommend people be too concerned with their credit scores, either. For far too long we have been beholden to this score, and taken on unnecessary debt in the name of improving our standing. If you manage money wisely, make smart decisions when it comes to debt – including the type of debt you take on, and how well you repay it – you should have no trouble securing a high FICO score. And here are a few benefits…

Higher FICO, Lower Mortgage Payment

According to the research at Information Research Services (infomars.com), as MyFICO.com, the difference in a 620 credit score and a 760 credit score means a $197 lower mortgage payment (on a 30-year, fixed rate mortgage of $200,000). This is based on rates as of March 27, 2009, and may fluctuate some, but you get the idea. Having an upper-tier FICO score can lead to significant savings in interest on real estate purchases.

Not only will optimal rates be available only to those with higher credit scores, but it could mean the difference in qualifying for a mortgage loan, or having to pay additional points to secure a decent interest rate. The mortgage industry is probably the biggest supplier of FICO worries because most of us cannot afford to pay cash for a house, so financing is our only option.

Drive Cheaper

Besides saving money on car insurance, those who opt to finance a new car purchase on shorter terms (36 months) with a FICO score greater than 719 save about $119 a month over those with credit scores below a 590. Personally, I don’t plan to ever finance a car again, but if I did I would obviously want to qualify for the lowest rates possible. Bad enough car payments are as high as they are these days, but toss on another $100 due to high interest charges and it becomes downright ridiculous.

Higher Scores Lead Better Employment?

This is an area where there just isn’t much hard evidence to support FICO’s (and much of the financial press) claim that low credit scores can affect employment. I’m sure employers in certain industries would be interested to know your FICO score as one piece of determining your overall employment potential, but using FICO as a screening tool has so many limitations.

Credit scores don’t tell employers a thing about the level of education someone has achieved, their savings and other assets, their work ethic, their trustworthiness, etc. For instance, I used to work with someone who had trouble finding a job in her degree field (accounting) because she had gone through a nasty divorce and her ex-husband destroyed both their credit through running up unpaid credit cards, gambling, and a host of other financial problems.

It was only when she discovered this was going on behind her back that she ultimately asked for divorce, but the damage to her credit was done, as a couple of the accounts were in both their names (her husband forged her signature as a co-applicant). Even though what he did was a crime, it was a nightmare to get accounts removed from her report, and things continued to “pop up” for months.

Potential employers looking for someone to handle their company’s money may incorrectly toss her resume based on a low credit score, when in fact she was probably more qualified than many other candidates in terms of education, work history, etc.

I’m sure you could dig up an employer or two to own up to using FICO scores for screening purposes, but most won’t. I’m also sure you’d be hard pressed to find anyone in the banking industry that believes is not true. Again, we’ve been oversold on FICO and its importance in our society.

Don’t get me wrong, I think there is a place for credit scoring in helping insurers and potential lenders determine the risk of a potential customer. However, I don’t think it is fair to label people with low (or non-existent) scores as bad, as if they deserve to walk around with some type of “Scarlet Letter” reading FICO=607 on their forehead. Credit scores are but a small piece of the overall picture of someone’s creditworthiness, and to allow it to be the lone determining factor is just plain lazy on the part of lenders.

As consumers, the onus is on us to manage our credit wisely, check our credit reports periodically, and don’t go out of our way to damage, or enhance, our FICO score. If you find yourself in my friend’s situation, dealing with a low FICO, there are plenty of ways to improve your credit score on your own. Do not let desperation lead you to one of these “credit repair” places who charge fees for things that you can do yourself. The number one thing that improves your credit score is time. Yes, it heals credit wounds, too.

Get your updated FICO score today at MyFICO.com

Card Issuers Cut Limits, Lowering FICO Scores

Jason (Frugal Dad) — Thu, 03 Apr 2008 11:00:36 +0000

In response to the inevitable credit crunch many credit card issuers are lowering credit limits without advanced warning to cardholders. In their defense, many borrowers have shown a propensity for maxing out credit limits with little promise of repayment. As a way of hedging against potential write-offs credit card companies have decided to minimize their exposure by reducing credit limits, and therefore the amounts available to charge.

How Does a Lender Lowering My Credit Limit Affect My FICO Score?

If you are like me and are not currently using your credit cards a credit line reduction may seem harmless. However, it does have an impact on your FICO score, not because the limit reduction is viewed as an adverse action, but because it raises your credit utilization ratio. The amount of your outstanding balances accounts for approximately 30% of your FICO score. The amount you owe as a percentage of your total credit limit is referred to as credit utilization. Run this figure above 30% and your FICO score will likely take a dive.

An example. Let’s assume John Q. Citizen has two credit cards and owes $4,000 on one with a $5,000 limit, and owes $1,000 on another with a $5,000 limit. On the first card, John’s high balance-to-limit ratio of 80% is bringing down his FICO score.

The second card is well under the recommended 30% credit utilization ratio, at only 20%. However, the second credit card company has decided John Q. may be a risk because he just completely a car loan application, or he is shopping for insurance and has had a couple inquiries on his credit report, or because the lender doesn’t like guys named “John.” For whatever reason they choose, the credit card company decides to chop Mr. Citizen’s credit limit in half – down to $2,500. Without charging a dime, and arguably through no fault of his own, John is now suddenly running a 40% credit utilization ratio on his second credit card, lowering his FICO score even more.

My Credit Limit Has Been Decreased. What Are My Options?

Call to Get Your Limit Reinstated. Call the customer service number listed on the back of your credit card. Explain your situation to the customer service representative and complete the identity verification process. Automatic credit limit reductions are typically performed as the result of a computer audit. Once a human being reviews the account and considers all the factors they may be able to restore your credit limit. If not, ask to speak to someone in the credit department, or a customer service supervisor. These individuals usually have a higher lending authority and may be able to override the customer service representative’s decision (which is likely still driven by a computer model).
Transfer your balance to another card. If you have an open line on another credit card with a higher limit, and can transfer the balance without being assessed a fee, it might be worth the effort to move the balance over to the new card. Consider this 24 month promotional balance transfer offer from Discover® More Card (or this offer from Discover More Card with no balance transfer fee).This will improve your credit utilization ratio in the eyes of FICO. Be selective – surfing balances too many times could be yet another trigger for the infamous “universal default” or an automated credit limit reduction on your remaining credit card accounts.
Do Nothing. This actually happened to me a while back on a credit card I only owed a few hundred dollars. I called the credit card company and they refused to reinstate my limit. I spoke with a supervisor who also refused, as did a representative in the credit department. None of the three could explain to me why the limit was reduced in the first place. My FICO score had not changed, my charging patterns had not changed (accept for the fact my charging was greatly reduced), and I wasn’t shopping for new credit. Regardless, they refused to budge so I paid off the account in short order. Against my desires to tell them to take a flying leap I decided to keep the account open as closing the account would reduce my total credit line and could potentially send my FICO score lower.

Perfect Credit Score Not Estimator Of True Wealth

Jason (Frugal Dad) — Fri, 04 Jan 2008 18:23:19 +0000

It looks like Fair Isaac is reacting to this recent lending debacle by improving on its formula for creating the almighty FICO score. Habitual late-payers will see their credit score more heavily penalized, while those of us with the occasional 1-30 day late payment will be spared a few points to the negative. Of course all this reprogramming isn’t being done for your benefit; it is for the benefit of lenders whose bottom lines were eaten alive by sub-prime customers.

Changes to FICO Calculation

What do the changes mean for you? Unless you plan to run out and acquire new debt, probably not much. The changes do emphasize the need to implement your debt snowball plan and start paying things off quickly. Those with higher credit limit utilization (balance to credit limit ratio) will be hit harder in the FICO 08 scoring model, so it pays to drive those high balances down lower.

No more piggyback rides allowed. This may be one of the only positives out of the new FICO changes. Previously, people listed as “authorized users” still got benefits of having a good credit line, even though they were not financially responsible for the account.

Many of those late-night credit repair crooks used this technique to improve scores. They would pay a person with good credit to add someone with lousy credit as an authorized user (of course, Lousy never got a card or the number). By virtue of being paired up with Mr. Credit Pimp and his perfect credit score, Lousy saw her credit score increase. Under the new model only an account’s applicant or co-applicant will have their credit score impacted by account activity.

Perfect Credit Score Does Not Guarantee Financial Stability

FICO has really dumbed down the financial industry. I guess in some ways FICO has helped to prevent discriminatory lending practices (after all, it’s just a number, not a sex, race, or age). However, the negatives far outweigh the positives in my opinion.

Banks used to consider how long someone was on the job, or whether or not they paid their landlord on time, when considering lending money. An employer would use interviews and a firm-handshake-test to determine if someone was trustworthy. I remember when I worked in a new credit department of a large financial firm the only things that mattered on an application where FICO and income.

These days we look down on people with poor credit scores and exalt those with a perfect credit score in the 800′s. Can you imagine the personals in only a few years? Male 6’3″/220lbs/760 FICO seeking Female in the 720-760 range.

Wanna see how you measure up? Check out MyFICO.com to check your current credit score.