I received a question from one of my readers to this blog and I thought it was relevant enough for all of my readers to see and learn from.

Dear Mark,

I have four major credit card accounts in my name. I use one of them for my work expenses, one for household expenses, a Cabela’s card which I like for the points, and another one that I don’t use much.  It has a zero balance. Does this hurt my FICO scores by having a zero activity  and zero balance? Will it hurt my credit score more if I close the account?

Sherry M. Austin, TX

Hello Sherry,

Thanks for writing in. I have a short answer for you to your question….if your main goal is to keep your current high scores, you should leave the account open, but you must start USING the card! Keep the activity small so that you don’t boost up your credit utilization.

You don’t want the bank to cancel the card because you are not using it. Remember, the banks are in business to make money, if they have given you a product and they aren’t making any money, then they may make a decision to close it. As you know this will hurt your scores because your available credit ratios will change.

Regardless of who closes the account, your credit score may fall due to a change in a key credit scoring ratio. “Closing an account causes you to lose the available credit limit associated with it. Your utilization rate, also called your balance-to-limit ratio, will increase as a result of closing the account. That may cause a temporary decline in your credit scores.

To get an idea of how your utilization ratio could be impacted by closing an account, let’s say each of your four cards has a credit limit of $1,000, for a combined total of $4,000 in available credit. Let’s also say that across those four accounts, you’ve got a total debt burden of $2,000. Then your unused card gets closed, taking your available credit down to just $3,000. Now, instead of using 50 percent of your credit lines, you’re suddenly using about 66 percent of your total available credit. That higher proportion makes you appear to be a riskier borrower, since you’re that much closer to maxing out your available credit.

Your credit score should reflect that change, although the actual scoring damage will vary from borrower to borrower. The FICO score assesses all the information on your credit report.  So the score impact from any one action, such as closing an account, will depend on what other information is present on the credit report.

Stay tuned,

Your Credit Repair Expert

Mark

Now that we have had a chance to digest all of the details of the Credit CARD act, here is a great article at yahoo finance that summarizes how all of the different credit cards are going to be handled in the future.

Click Here For The Full Story

Well, I guess it was only a matter of time before this kind of product entered the marketplace.

As many of my readers to this blog have been hearing me preach for awhile, you must have great credit scores to survive in the current credit world we live in. This article that came out today highlights a company charging a whopping 79.9% interest rate on a credit card for people with bad credit and the company says the response has been “phenomenal”!

Click Here for the full story

Mark

Today I want to cover the new rules that are about to go into effect in February 2010 with regards to credit cards.

Many readers of the improve credit score system Crushing The Credit Bureaus will remember that having 1-3 major bank credit cards is part of the secret recipe to having FICO credit scores over 720.

On May 22, 2009 , President Barack Obama signed the Credit Card Accountability, Responsibility and Disclosure, or Credit CARD, Act of 2009 into law. The legislation will improve consumer disclosures and end some egregious practices in the credit card industry but stops short of capping interest rates and fees.

Here’s an overview of the major changes the law will enact.

Credit is defined in Webster’s Dictionary as “the favorable reputation derived from the confidence of others; honor, good opinion founded on the belief of a man’s veracity, integrity, abilities and virtue.”  In short, credit is based on trust. A lender “trusts” that a borrower will honor the debt, and pay it back in accordance with their prior agreement. In essence, a creditor is someone who is willing to place his/her faith in you. The word “creditor” is derived from the Latin word “credere,” which means to put faith or trust in.

Although credit in today’s world is still based on trust, it has been depersonalized by credit cards. An agreement between two individuals, concluded by the traditional shaking of hands, is almost something of the past. Still, the debtor’s responsibilities for repayment and the expectations of the lender are basically the same.

Credit has assumed a greatly expanded role in the lives of most Americans, and buying on credit can be both a blessing and a curse for many individuals. Unfortunately, for many people, living beyond their means is accepted as a way of life. Many people tend not only to spend next month’s earnings before they earn it, but even next year’s!

Most people just aren’t willing to wait until they have the cash to buy the necessities of life. When a person buys on credit, the added cost of having what they want, and having it now, is called interest charges. This is even more apparent when purchasing a home, car, appliances, and other high-ticket items.

Initially, the convenience of having what we desire seems to outweigh the inconvenience of the principal debt, plus the interest, at the time of a purchase. But, when a person finally realizes that they have dangerously extended him/herself, it’s often too late to place good judgment over credit convenience. It’s easy to know when a person has over extended themselves. Everything looks good and feels great as he/she merrily purchases gifts, clothing, meals, and miscellaneous high-ticket items. But when he/she also starts using credit cards to pay the rent and groceries or, worse yet, pay off other credit cards, then the writing is on the wall.

If you are one of those people, don’t feel alone! There are millions of people who are in credit trouble because they have abused their credit. As you shall see, a bad credit rating isn’t always the borrower’s fault! However, when it knowingly is, there is no-one else to blame. Not the banks, the retail stores, service stations, or the credit card companies. The ultimate responsibility lies with the person who signed the bottom line.

Incredibly, most Americans feel totally helpless when they finally discover or admit they are in financial trouble, or that something is wrong with their credit rating. Most Americans seem to have only the vaguest idea about the mechanics and procedures required in obtaining, maintaining & and re-establishing a good credit standing or how to repair credit report

Until Next Time,

Mark

Hello Credit Score Enthusiasts!

I came across some interesting information about how your credit scores are going to now be used to market to you online. As many of my loyal readers know, not only are credit cards, mortgages, and car loans approved based upon your FICO Scores, the rates you pay for insurance and utilities will be based upon whether you have bad credit or good credit.

Well, Google has now reportedly been testing the ability to lay consumer FICO scores on top of its Google Content Network to identify people with good credit. The strategy will enable the search engine to help advertisers target a specific type of consumer through display and text ads.

The project is one of two initiatives that Google recently explored to help advertisers reach “credit-worthy consumers” online. For both projects, Google partnered with Compete and the research firm’s 2 million U.S. consumers who opt into these types of projects.

With Google’s insight to online consumers, their  Content Network can reach 70% of credit card applicants with a high FICO score, 87% of mortgage applicants with a high FICO score, and 90% of the people who visit small business sites who have a high FICO score. That’s pretty impressive!

Other advertisers such as luxury retailers, upscale hotels, and high-end specialty shoppes could use this data to reach “high credit-worthy consumers.” This group typically has a FICO credit score of 720 or above and is known in the industry as “Super Prime”.

Consumers with high FICO scores demonstrate some unique attributes that show they shop carefully for the best cards. For example, shoppers begin using search earlier in their application process, they use the term “best credit cards” at three times the rate of lower FICO shoppers, and they are more likely to use branded terms.

Hello All,

Once again there is more news about banks failing and having to be taken over by the U.S. Government. However, if you listen to all of the talking heads on the news programs, the recession is officially over and the good ‘ole days are here again…Yeah right!

Who are they kidding? Foreclosures are still up, unemployment is up, banks and credit card issuers are jacking around with interest rates and creative fees, and with the new health care bill about to be rammed down our throats, we are in for a major financial shakedown!

For those of you with bad credit the near future is going to be rough! I found an interesting article today that I think you should all read:

Click Here for the full article.

Your Credit Insider,

Mark

Hello Again,

It seems as though you can’t turn on any news program lately without them mentioning the new credit card legislation that is about to go into effect.  For those of you who are attempting credit report repair and are struggling with your current credit card company, here are a few tips:

#1 – Call and complain! Let’s face it, you don’t have to take this nonsense lying down. Most of the credit card companies are trying to usher in these new fees and penalties before the crackdown from the Feds takes place early next year.

#2 – Shop around – There are plenty of both secured and unsecured credit card companies that are opening up to new business.

Remember, you must take control of your finances and that means staying informed on what the greedy bankers are trying to get away with!

Your credit insider,

Mark

Well imagine that…credit card companies are now realizing that getting some money is better than getting no money at all.

Our research is uncovering that most of the larger credit issuing banks are willing to settle for 35%-50% of balances owed.

Our newest credit expert friend, Kristy Welsh has a very informative article over at her website CreditInfocenter.com.

Check it out by Clicking Here

Take Care,

Mark

Happy Friday To Everyone,

We have been studying and testing various credit card issuers over the past 90 days. I believe that we have found the top tier credit card companies for those with bad credit and I will start to post a review of each company, the pro’s and con’s of each one…

Stay Tuned!

Your Credit Insider,

Mark