At last there is some good news coming from the Fed. The Federal Reserve is expected to finalize rules—as early as next week—that would prohibit banks from jacking up interest rates on existing credit card balances, except under limited circumstances.

   If the rule goes through, credit card issuing banks can no longer use the universal default clause and raise your interest rate. Just think – no more late payments that lead to interest rate penalties. If the proposed rules are finalized, issuers will have to give customers more time to pay their bills and eliminate other practices seen as unfair or deceptive. Issuers will also have to make big changes to the way they disclose your account terms.

   The fine print that’s often easy to miss—such as changes to your APR or late payment—will have to be highlighted in boxes in your statements. And if a bank does change your interest rate, you will be able to opt out of the changes and pay off your balances under the old rate.

   The banking industry has argued that the proposed rules will restrict their ability to manage risk and will ultimately force issuers to be stingier with credit and cut back on promotional offers. Consumers will likely see higher rates on new credit cards and potentially more cards with annual fees, as well as fewer perks, according to experts. All the more reason to improve your bad credit because the banks will only be extending high credit limits to those with the best credit scores!.

   One thing to watch out for in the final rules: the scope of the exceptions. Currently, the proposed rules say that issuers can’t raise your rate unless you’re more than 30 days late. (The other exceptions: when you have a variable-rate card or a promotional rate that’s set to expire.) The banking industry argues that those exceptions should be broadened to include other trigger events, such as being late twice in a year.

   The Fed is going to act in a way that will fundamentally rewrite a consumer’s relationship with his or her card company and dramatically increase the protections afforded consumers and how their card product works.

Score one for the consumer!

All I can say is “It’s About Time!

How To Raise Your FICO Credit Scores Fast!

As many of my students and coaching clients know, one of the quickest and cheapest (as in no cost at all) ways to increase your FICO Credit Scores is to change the ratio of credit used vs credit available. This is sometimes called a “Utilization Ratio” and it this part of the scoring algorithm factors heavily on your overall credit scores.

Now, what I am about to teach you can be abused by folks who don’t have self-discipline…I must tell you that when you get an increase on your cards – DO NOT go on a shopping spree!

You are trying to obtain the highest possible FICO scores you can, and increasing your credit card limits is one of the fastest ways I know how to accomplish this. I recommend you do this twice per year – six months apart for the best results. 

For this to work, you must not be late on any payments in the last six months and you must not have gone over your credit limit in the same six month period.

 

I will let one of my newest friends, Lane McGhee explain it to you in his own words:

There you have it. One simple phone call and Lane has added $26,000 to his credit card limits.

I would venture to say that he had an immediate bump in his FICO credit scores as well.

Now, Lane is an extremely prudent and savvy real estate investor. I know that he will put his newfound increases to a profitable use over and over again.

Folks, that is how the credit game works…find a system or process and as the old saying goes; “Lather, Rinse, and Repeat”…

 

Stay tuned and a BIG THANKS goes out to Lane McGhee for his credit testimonial…Thanks Lane!

 

Mark

www.CrushingTheCreditBureaus.com

Credit Scoring And The FICO Credit Scoring Model

Learn what your FICO credit score is and how to improve it.

You may not even know that you have a credit score, but you do — and it’s used by credit card companies, home equity lenders, auto loan lenders, and finance companies when you apply for credit or a loan. Produced with a computer model created, most often, by Fair, Isaac & Co. (or “FICO”), a credit score is intended to be a snapshot, or summary, of your credit history. A low score can mean you don’t get a credit card or loan, or that if you do, you will pay a higher interest rate. Also, some lenders use your credit score and other information to set the “price” for your loan.

Factors That Affect Your Credit Score

Although we don’t know exactly how a credit score is determined, FICO considers the following factors (the approximate weight it assigns to each factor is in parentheses):

Payment history (35%). Your score is negatively affected if you have paid bills late, had an account sent to collection, or declared bankruptcy. The more recent the problem, the lower your score — a 30-day late payment today hurts more than a bankruptcy five years ago.

Outstanding debt (30%). If the amount you owe is close to your credit limit, that is likely to have a negative effect on your score. A low balance on two cards is better than a high balance on one.

Length of your credit history (15%). The longer your accounts have been open, the better.

Recent inquiries on your report (10%). If you have recently applied for many new accounts, that may negatively affect your score. Promotional inquiries don’t count.

Types of credit in use (10%). Loans from finance companies generally lower your credit score. FICO says this is most important when there isn’t a lot of other information upon which to base a score.

Although this is a good guide as to what credit scoring companies deem important, keep in mind that some companies may consider different factors.

What the Numbers Mean

In the FICO Credit Scoring Algorithm, scores range from 300 to 900, with the average around 680. According to the model, as your score increases, your risk of default decreases. Industry experience shows a direct correlation between low scores and high default rates.

This means that you may have a hard time convincing a creditor to make you an affordable loan (or any loan at all) if your score is far below average. But just as your credit history can vary from credit bureau to credit bureau, so can your credit scores. It is possible to have a fairly high score with one credit bureau (Equifax, Experian, or TransUnion) and a somewhat low credit score with another, just as you might have a clean credit history with one bureau and a muddied record with another.

Wide-ranging credit scores are rare, however, although some lenders admit to seeing borrowers with scores that vary by 100 points or more. To combat this, a lender usually uses the middle score — but that can be of little comfort if you have scores of 550, 570, and 700, and the interest rate for a borrower with a score of 570 is two points higher than the rate for a borrower who scores 700. Narrow ranges are more typical. For example, a person with good credit might have scores something like 685, 702, and 710.

How to Get Your Credit Score

You may now obtain your credit score from credit bureaus that develop or distribute credit scores by paying a fee (the Federal Trade Commission sets the fee). The bureau must provide your score, the range of possible scores under the scoring model used, four key factors that affected the score, the date on which the score was created, and the name of the entity that provided the score (such as Fair, Isaac). Be aware, however, the score and the scoring model that you receive may be different than those your lender uses. Fair, Isaac, in partnership with Equifax (one of the “big three” credit bureaus), makes credit scores available online to consumers for a fee of $14.95. To get your credit score, visit www.myfico.com or www.equifax.com or www.transunion.com.

I recommend to all of my students, clients, and family members that you purchase your credit reports and scores from www.MyFico.Com/12

The reason is that this part of their website is the only place where you will get your 12 Negative Reason Codes. The codes are vitally important for you to understand why exactly your credit score is the way it is. Don’t forget to put in the “/12″ at the end of the web address.

How to Improve Your Credit Score

If you want to improve your credit score, Fair, Isaac offers these tips:

• pay your bills on time
• make up missed payments and keep all your payments current
• maintain low balances on credit cards and other “revolving debt”
• pay off debt rather than transferring it to a new account
• don’t close unused credit card accounts just to raise your credit score
• don’t get new credit cards that you don’t need just to increase the credit available to you, and
• see more tips in “Understanding Your Credit Score” on the Fair, Isaac website, www.myfico.com.

Finally, don’t give up hope just because you have a low score. In one chapter alone of my Crushing The Credit Bureaus manual I cover 31 battle tested dispute techniques that will boost your credit scores and clean up any negative information in your credit report.

To get started learning how to clean up your bad credit NOW, simply visit www.CrushingTheCreditBureaus.com to get your own copy of the book and begin raising your credit scores today.

Here’s to your credit success

Mark