True Credit Review – How I Use the Credit Score & Credit Report Monitoring Service

What is True Credit?

True Credit is a credit monitoring service that allows you to check your reports and scores from all three credit bureaus each month.

Do you really need to monitor your credit reports?

Well, depending on who you ask this service is either a valuable lifeline or a total and complete waste of money.

Let me be frank: If you are able to walk into any bank or auto dealership in America and have them roll out the red carpet for you, then you do not need this service! You can simply check your free credit reports once a year, look for inaccurate information, and give yourself a well deserved pat on the back for expertly managing your credit.

However, if you are like the rest of us, and your credit score needs a little work, then yes, this service should be invaluable to you.

Personally, I monitor my credit each month through a service called True Credit. Using this service has allowed me to raise my credit score over one hundred points (yes you read that correctly) and it has prevented me from accidentally lowering my score by applying for things I might not get approved for. Forewarned was forearmed in my case.

The Lowdown:

For $15 a month True Credit bought me access to all three of my credit reports and scores in an easy to read format. The sad fact is, not all of my creditors were reporting to all three bureaus, and I was shocked to find that my score varied wildly from place to place.

How True Credit Helped Me:

1. As soon as I signed up I was able to look at my reports from all three credit bureaus. It turns out, I had incorrect information on all three credit reports. I was able to immediately challenge an incorrect past address, and several old collection accounts that had already been paid off but were still reporting as open accounts. That is what raised my score.

   Now, it is important to note that you do not have to pay for a credit monitoring service to challenge items on your credit report – that is free. However, having everything in one place, printable, and easy to compare side- by- side made the process much easier for me. In my opinion that alone was well worth the $15 because it saved me time and stress.

2. I had a former friend who stole my personal information and used it to open an account in my name. I had previously resolved that issue, but keeping tabs on my report each month lets me be very, very sure that they do not do it again. Once your personal information has been stolen, you can never really be sure that the thief won’t use it again, or give it to someone else.

   Using True Credit gives me enormous peace of mind. No more identity theft here – I’m going to know it as soon as it happens and be able to take action on it. They also give me the ability to freeze and un-freeze my credit report with the click of a button. If I ever do notice suspicious activity, I can stop it right then and there.




3. Knowing my credit scores has save me from making several bad decisions. Once I knew what my score was I stopped applying for credit card offers that I probably could not get approved for, like platinum cash back rewards cards. Before, when I did not know my credit score, I always figured,

   “What the heck? Maybe I will get approved and that is a good offer!”

   Now, let me tell you that was the wrong way to go about it. Applying for any new loan can lower your credit score so while I was happily applying (and getting rejected) for several cards a year, my score was plummeting.

4. True Credit allowed me to time the purchase of our last car. I was able to wait until my score had gone up some (and because I monitored them, I knew exactly what all three of my scores were). Because of that, we were able to finance at a better interest rate than we would have gotten several months earlier, and we came out on top of the deal.




5. I noticed an interesting psychological effect – Once I started paying to monitor my credit, I started taking my score more seriously. I felt more in charge, and more comfortable with the credit side of my finances. It would be interesting to know if any of you have had that same effect come from monitoring your credit? Did you notice any change in the way you handled things while you were monitoring vs. when you were not?

Now, again, paying for a service like this may not be your cup of tea. I can only tell you that I have found it to be an essential part of rebuilding my score. If you are facing some similar challenges, then it will probably benefit you to take a look at it.

Free Trial: True Credit is offering a 30 day free trial that will let you try out the service and see your TransUnion credit report and score for no charge. Click here to get the free trial.

I also found an excellent walkthrough on YouTube. It’s about eight minutes, so if you’re at work, you may want to wait until you get home to watch it. It gives you screenshots, guides you through the process of looking at your reports, and even covers some additional features that I didn’t mention here.

How about you? Have you ever used a credit monitoring service?
Do you think it’s worth the money?

Leave us a comment below and give us your opinion!

Photo from Dreamstime.com

Writer Auditions – Author Connie Brooks – Offer Your Feedback

How My Local Banker Saved My Credit Score

I talked the other day about online banking vs. local banking and how I think using a combination of virtual and brick & mortar banking is the best strategy.  A close call on my credit score this week reminded me of the value a local relationship brings.

Credit Card Crisis
I opened a business credit card that I haven’t been using because it doesn’t offer me cash back for my purchases.  When the statement came for the credit card I filed the envelope away in my to-do pile knowing I hadn’t used it yet so I didn’t owe any money. Or so I thought.

When I finally got around to opening the statement I had few nasty surprises. First off, the card carried a $25 annual fee I wasn’t aware of.  Secondly, the fee had shown up on the previous month’s statement and was now long overdue.

Banker to the Rescue
As soon as I realized what had happened I called up the lady that had setup my business account and credit card. I explained the situation to her and stressed that my main concern was damaging the business credit with missed payments and unpaid balances.

She assured me she would take care of the whole thing.  Sure enough, later that day she called back to let me know her branch had paid the fee for me and worked with the credit division to make sure nothing negative would be turned in to the credit reporting agencies.

Banking Benefits
Thank goodness for my local banking relationship.  I was able to talk to a person instead of submitting a ticket online and awaiting a response to my problem.  Not only that, I was able to get immediate help from her.  No navigating phone menus and sitting on hold for 15 minutes. 

Maybe most importantly, there was no follow up necessary on my part after the initial call.  I didn’t have to waste my time babysitting the problem, coordinating between the different bank divisions and customer service reps.  My banker was able to take care of an important credit issue for me right away and all it took was one quick & easy phone call.

What to Do if You’re Declined for Credit

Being declined for credit is no fun. It can be demoralizing, whether you are being turned down for a credit card, a car loan, or a mortgage. Here is what to do if you have been turned down for credit:

Find Out Why You Were Turned Down

When you are denied credit, the creditor has to explain why you were turned down. You will receive an adverse action letter soon after you are turned down. This letter will tell you why you were turned down, and include information on the credit reporting agency that provided information about your credit history.

You are entitled to a free credit report from the agency that provided the information, as well as free access to the credit score that was used in determining your credit worthiness. Write to the credit reporting agency and ask for a copy of your report and score.

The adverse action letter should tell you why you were turned down – whether it was an income issue, or a credit issue. If it was a credit issue, you should go through your credit history to see what could be holding you back.

Work to Remedy the Situation

If your problem is an income issue, you will need to find a way to make more money if you want to be approved the next time you apply for credit. In some cases, the issue is that you already have a high amount of debt relative to your income. You might still have a good credit score, but the creditor might be uncomfortable straining your income with another debt payment. Paying down some of your debt can help in this instance.

When your problem is credit, though, you need to boost your credit score. Check over your free credit report. If you think that you should have good credit, look for mistakes on your credit report, as well as evidence of fraudulent accounts that indicate that someone has stolen your identity. You can clear up these problems and see improvement in your credit score.

Sometimes, though, your credit history is legitimately problematic. In those cases, you will need to take steps to improve your habits. The best things you can do are to make your payments on time and to reduce your debt load. After a few months, you should see some improvement in your credit score, and you can try to apply for credit again.

You can also get a form of credit that is easier to obtain, such as a secured credit card or a loan with a co-signer. These types of loans can help you rebuild your credit – as long as you are careful to make your payments on time and in full.

Should You Apply for Credit Again Right After Being Turned Down?

Some consumers turn around and apply for more credit right after being turned down. You have to be careful in these circumstances. Several inquiries in a short period of time can be a red flag that you are desperate for credit. It does take a few days for a credit inquiry to show up, so you might find success if you are quick about applying another time.

Really, though, you are probably better off trying to address the problem, rather than hurrying off to try to qualify for a loan again.

If you are applying for a larger loan, especially if you plan to apply for a mortgage, you will be better served by planning ahead and looking at your credit before you turn in the application. That way, you can catch problems ahead of time and fix them before you are turned down.

Have you ever been declined for credit? Leave a comment and tell us how you worked around it!

This article was originally published January 15th, 2013.

How to Improve Your Credit and Buy a House

If you want to buy a house with bad credit, the drop in housing prices over the last few years may be a little frustrating. Real estate is still on sale but it may be tough to get approved for a home loan with bad credit. It doesn’t mean that you absolutely won’t be able to buy a house, but it does mean that you will face some challenges and need to work on improving your credit.

Bankruptcies and Foreclosures

If you have a low credit score, with no bankruptcy or foreclosure, you might be able to purchase a home now. You will have to pay a higher interest rate, and you might not get the best loan terms, but you probably won’t have to wait – as long as you have a large down payment and a credit score above 500. (If you have a small down payment, you might not be able to get a bad-credit mortgage with a score below 580.)

Waiting periods apply if you have had a bankruptcy or foreclosure. Most lenders won’t offer you better rates until a bankruptcy is four years behind you and it has been at least two since a foreclosure. In order to qualify for a FHA loan, you have to be at least two years away from a foreclosure, and you can get a loan with as little as a 3.5% down payment.

Improving Your Credit to Buy a Home

So what should you do if you don’t have any recent bankruptcies or foreclosures and would like to buy a home but have bad credit? Your first move should be to try and improve your credit score. Here are three ways to begin improving your credit score:

1. Make your payments on time and in full.
2. Pay down your debt, reducing your debt-to-income ratio.
3. Avoid applying for very much new credit.

One way to build a history of making regular payments is with a credit card, but you may not qualify for one if you have bad credit. One option is to open a secured credit card, where lenders are willing to give you a credit card if you provide collateral in case you don’t make your payments.

As long as you use it responsibly, making regular purchases and paying down the balance each month, this can be a fast way to help your credit score.

Other Ways to Improve Your Qualifications

Other things that can help you improve your qualifications for a home loan include:

1. Earning a regular wage.

Self-employment offers a different challenge. If you are self-employed, you should be able to show tax documentation of regular earnings. However, self-employment income isn’t going to be viewed by lenders as favorably as a salary. Show that you have been steadily employed for at least a year or two.

2. Saving up for a down payment.

If you have poor credit, you can improve your chances with a down payment of at least 10%. If your credit score is lower, approaching 600 or below, you might need 20% down. If you have a credit score of less than 500, there is a good chance that you will need a 35% down payment to qualify.

3. Having a letter of explanation.

If you have a compelling explanation for your low credit score, a letter of explanation might be required. You can explain extenuating circumstances (such as job loss or medical catastrophe) that led to your poor credit. You can also describe what you are doing to improve your financial situation.

When you have bad credit, it is still possible to buy a house. However, you will need to work hard to improve your credit score at least a little, and you may have a couple other hoops to jump through.

Are you trying to buy a house with bad credit? Tell us about your journey in the comments!

This article was originally published April 30th, 2011.

4 Reasons to Keep Tabs on Your Credit Report

You probably understand how important your credit report is. You know that it’s a record of your credit activities, and that it’s used to establish your credit score, and that others look to your credit report for information about how fiscally responsible you are likely to be.

However, even if you understand the importance of your credit report, you might not be keeping tabs on it as often as you should. Here are some good reasons to check your credit report on a regular basis:

1. Catch identity theft.

One of the first indications that your identity has been stolen might appear in your credit report. If someone is using your name and Social Security number to open new accounts, you might not know, since the statements could be going to a different address.

If you check your credit report regularly, you can see when new accounts – accounts that you know you didn’t open – appear. You’ll catch identity theft sooner, and be able to address the problem.

2. Fix mistakes.

Studies indicate that a somewhat substantial number of credit reports contain errors that can impact consumer credit scores. Certain errors on your credit report can result in you not getting a loan, or not getting the interest rate that you want.

Check your credit report regularly to figure out whether or not something is inaccurate. Fix mistakes as soon as possible so that you don’t end up being held accountable for problems you didn’t cause.

3. Prepare for a major loan.

There are some very large loans that require good credit – at least if you want the best possible terms. Before you apply for a large loan, especially if that large loan is a mortgage, you should check your credit history. You want to make sure that everything is in order, and you need to identify problem spots and fix them before they hinder your efforts.

Checking your credit, and then making sure that you have as good credit as possible, you can ensure that you are getting the best deal for your loan. Good credit can mean savings as large as thousands of dollars over the life of the loan when you get the best possible interest rate.

4. Track your financial progress.

Checking your credit report can also help you track your financial progress over time. If you have fair credit, you can check your credit report regularly as a way to keep you motivated to make positive changes in your financial life. Watch as your payment history improves, and as sketchy loans from your past drop off. This can offer you a bit of encouragement to keep making positive changes with your finances.

Remember to check your credit report regularly. You are entitled to a free report from each of the major credit bureaus once a year via annualcreditreport.com. If you aren’t too worried about your report, you can stagger when you get your free reports so that you get one report every four months from a different bureau. However, if you want to check more often, you might need to be prepared to pay a little more.

Are you keeping tabs on your credit report? Why or why not? What are some other reasons one might want to track their credit report? Leave a comment!

3 Things You Can Learn from Your Credit Report

Reviewing your credit report every few months is an easy way to combat identity theft. Identity theft is a profitable form of crime because once you have someone’s personal information you can open up credit lines in their name and use those lines to buy items that you never intend to pay for. (Just make sure you use the government mandated AnnualCreditReport.com to view your report; other sites will charge you after the free trial period.)

But protecting your identity isn’t the only benefit to looking at your credit report. You can learn a lot from reviewing your report regularly.

3 Things You Can Learn from Your Credit Report

Here are three major items you can glean during your review of your credit report.

What Credit Accounts are Open in Your Name

This is one of the most important things to look for on your credit report. Each bureau’s credit report will list out all of the credit accounts that are open in your name. You need to make sure that you recognize every single account listed.

If you recognize all of the accounts you can move on. However, if you see an account (or multiple accounts) that you do not recognize and did not open your identity may have been stolen. If an identity thief has opened up a credit account (credit card, loan, and so on) in your name and using your Social Security Number then the creditor believes you made the charges. If you do not pay the amounts shown it will show on your credit report and severely damage your credit score.

Any unknown accounts should be immediately investigated. If you learn you have had your identity stolen you have a lot of work ahead of you: filing a police report, disputing the charges and accounts, and potentially freezing your credit.

What, If Any, Late Payments or Delinquencies are Listed on Your Credit Accounts

Even if you recognize all of the credit accounts listed on your report you need to dig a little deeper. Look at each reported credit account to see if there are any erroneous late or missed payments showing. If you haven’t missed a payment or paid late, but one shows up on your report, your credit score will be negatively impacted.

If you don’t find any late or missed payments, you can move on. However, if you do you need to dispute the late payment mark in writing with the creditor. They are required by law to research the error and if it truly is an error have it removed from your credit report at all three credit bureaus.

Which Companies are Looking at Your Credit

Another important area to review is to see which companies are looking at your credit report. There are two ways a company can look at your report: a soft pull and a hard pull.

A soft pull is used to send you pre-approved marketing messages like the credit card offers you get in the mail. These pulls are not used to determine a specific loan request and thus do not damage your credit score. Expect to see many inquiries listed here from various banks and credit card companies.

A hard pull is the opposite. Hard pulls do negatively pull down your credit score by a few points. These credit inquiries are done as part of a specific decision by a company as to whether or not to loan you money. If you apply for a car loan, the credit inquiry done on your report is a hard pull because the lender is trying to determine if they should let you borrow the money or not.

The important thing to learn here is if you have hard inquiries from companies you do not recognize, in that case, someone might have your identity information. Those hard inquiries would be where the identity thief is trying to convince a lender to give them a line of credit in your name. Again, if you find evidence of this you need to act quickly to shut it down or risk damage to your credit score (which can negatively affect your ability to get a mortgage, a car loan, and more).

What are some other things you can learn from your credit report? Leave a comment and let us know!

3 Surprising Corporate Credit Card Lessons

I resisted opening a corporate credit card for years in fear of what it would mean for my credit score. I also preferred to charge things on my personal credit card and earn cash back on the spending.

However this Spring I paid for two conferences and the only guaranteed way to get reimbursed was to put them on a corporate card.  So under the threat of non-payment from our accounting Gestapo I filled in my social security number and opened an American Express corporate card.

Today I’ll share a few things I’ve learned since I received the card in the mail and started charging expenses on it.  As I mentioned my card is from American Express so the details on your corporate card might vary but the concepts are the same. 

One thing to note, my card is an individual payment card where I’m responsible for paying all the bills and submitting receipts for reimbursement.  If your bill is paid directly by your company then these probably don’t apply to you.

1) Corporate Card Payment Dates Might Be Flexible

Depending on when you charge something on your card and how long it takes your accounting department to approve and reimburse your expenses, you could get stuck paying out of pocket.

In my case, my statement closed a few days after I charged a conference to my card and it takes about 3 weeks to get reimbursed for the expense. I’m signed up for credit card alerts so when I got an email saying, “The payment date for your Corporate Card account is approaching” just after submitting my receipts, I called customer service to see what options I had for handling the discrepancy.

Good News About Late Payments
It turns out the card has a “pay by” date suggested by the credit card company but the date is 2 weeks before payment is actually due.  In reality, payments are are due 30 days from the close of the previous statement.  On top of that they give you a 10 day grace period because they know corporate clients have to wait on approval processes that are sometimes out of their control.

Late Payment Penalties
Once your grace period has expired they charge a $39 late fee to the card.  If 2 more weeks pass and you haven’t made payment then there’s another fee which is an interest charge on your existing balance.

The customer service lady stressed that if I’m going to be late with a payment to call them so they can note the account.  She didn’t come out and say it but I got the impression that if you’re going to pay late and let them know ahead of time they can waive the fee.  Obviously if you’re late every month they won’t keep dropping the fee but they can for isolated incidents.

So the takeaways are:

• Submit your expenses right away.
• Always call the number on the back of your card to find out when payments are actually due and to notify them if you’re going to be late.

2) Credit Score Impact Could Be Less Than You Might Fear

My primary concern when I called in about late payments on the corporate card was that I didn’t want to impact my credit score.

The customer service rep explained to me that the business backing the corporate credit card is taking most of the risk. I still had to enter my Social Security number when I applied for the card so they did check my credit. She described the application process as having the same impact on my credit history as if I were applying for a $25 credit at a jewelry store.

So the impact of opening the card is pretty low but it can drag down your credit score if you don’t make payments.  The good news is American Express doesn’t report late payments to the credit agencies for corporate cards as quickly as they do for consumer cards.

Although they won’t report you to Experian or Equifax for 30–60 days late, if your card payment is 6 months past due American Express will send it over to the credit bureaus as a late payment. Of course you’ll probably get someone from corporate accounting calling you sooner than 6 months to see why you haven’t paid.

Takeaway:

• Sign up for alerts on your corporate card so you don’t miss payments and risk eventually having it reported to the credit bureaus.

3) You Might Be Able to Earn Credit Card Rewards

One of the benefits of traveling for business is that you can rack up frequent flyer miles or whatever kind of credit card rewards you prefer.

If you’re using your corporate card earning rewards can be more difficult, but it might still be possible.  It depends on the kind of card you’re using and your employers agreement with the credit card company but with American Express you can earn Membership Rewards for purchases on your corporate card (1 point for each dollar spent).

There is a catch, you have to pay an annual fee to be able to earn rewards on your corporate card.  I know for consumer cards many companies will waive the annual fee for the first year so I asked the rep if that was the case for this fee as well.  After she told me no, I called in again to talk with someone else to see if I could get a different answer but they seemed pretty inflexible on waiving the fee.

After you pay the fee your corporate card is linked to your personal card and the personal becomes your primary for rewards. So any rewards you earn from purchases made for work on the card will be available for your consumer credit card.

The upside of this is that if you leave the company you won’t lose the rewards you’ve earned. Obviously, the downside is the annual fee. For my corporate AmEx Green Card the fee is $75, – you’d have to put a lot of expenses on your card each year to make that worthwhile. Other credit card companies may handle this differently so call the customer service number on the back of your corporate card and ask about your options for earning rewards.

Takeaway:

• If you spend a lot on your corporate card it might be worthwhile to set it up so you can earn rewards.

Get Expenses Approved

One last word of warning, make sure big purchases are approved before putting them on your card. It seems pretty obvious but I know of several cases where people charged hundreds of dollars for courses or conferences without pre-approval and ended up eating the cost. You don’t want to have to go home and explain to your spouse or your budget how you suddenly owe an extra $600 at the end of the month.

For those of you with corporate cards, what else should I have mentioned?

How to Compare Cash Back Credit Cards

Choosing a cash back credit card can be a little more involved than simply going with the lowest interest rate. 

Of course if you carry a balance on your credit card, don’t bother with cash back cards. You should instead try to lower your interest rates and pay off your debt, as I covered yesterday in my review of David Bach’s new book. 

He outlines a process you can use for getting those lower rates but when all you’re comparing is the interest rates it does make it simpler to choose a card. For example he writes in one of his case studies about going with a 0% interest offer that has the lowest balance transfer fees.

However, if you don’t carry a balance and you’re not concerned with low interest cards then choosing the right card is a little more involved.  As I mentioned yesterday, I’ve thankfully never had to deal with carrying a balance so I look at criteria other than just the APR.  I recently did some comparisons of several cash back cards and thought I’d go over those as an example.

I’m not necessarily going over them in order of importance – I’ll list what criteria I look at and you can choose which are the most important to you.

• Earning Rewards
• Redeeming Rewards
• Card Fees
• Interest Rates
• Reward Limits
• Promotions
• Payment Policies 
• Card Programs
• Customer Service
• Other Features

Earning Rewards

The key here is to choose a card that best suits your spending patterns.  For example, I look at things like your amount of annual spending and specific types of things you buy when comparing the Blue Cash vs Discover cards.  Look at the types of spending behavior that various cash back cards reward and narrow it down to the one or two that best match how you spend money.

This is easier to do if you already use a credit card and are looking for a replacement because you can look at the previous year’s data online.  If you’ve never used a credit card before then you’ll have to look back through your check register and old bank statements to see your spending patterns.

Redeeming Rewards

The least amount of hassle to get your money back the fastest is what I look for in this category – I like to use my cash back earnings to help offset my expenses.  However, if you’re more interested in using your cash rebates to get deals on purchases of new stuff then your criteria will be a little different.

Going back to the Blue Cash vs More comparison again, one card lets you get your money back sooner but the other can earn you additional discounts on purchases in addition to your cash back.  So how you plan on using your rewards makes a difference in which card you might want.

Card Fees & Interest Rates

Obviously paying no fee is better than having the cost of an annual fee.  When you’re looking at travel rewards cards there are cases where the benefits of the card can outweigh the fee but cash back cards are usually a different story.  I can’t think of a cash back card with an annual fee that’s worth paying, if you know of one be sure to speak up in the comments.

I already touched on this at the beginning of the post so I won’t spend a lot of your time on it but if you’re carrying a balance then I don’t think a cash back card is right for you.  You should research low interest cards and focus on paying down your debt, no cash rebate will make up for your interest payments.

There are a few cards like the Citi Platinum Select that feature lower interest rates plus a form of cash back but in general you should just stick with a card that gets you the lowest interest rate possible.

Reward Limits

Since you’re chasing the highest cash back rates available, you want to make sure that as much of your spending earns at the top rebate rate as possible.  The trouble with reward caps is that they can get in the way of this, often times without you realizing it.  You’re usually not notified once you’ve hit an earnings limit, the cash back structure typically just reverts back to the minimum payout for the remainder of the period the cap applies to.

For example, when I looked at Discover vs Chase Freedom they both let you earn 5% cash back but also had some earnings caps on that higher rate to take into account.  The limits on earnings don’t mean they’re not good cash rewards cards, you just have to compare their bonus rebate caps and the timeframes they cover and see how they fit into how you spend.

Card Promotions

If you’re opening card after card simply to earn the account opening bonus then you’re probably going to negatively impact your credit score – I wouldn’t recommend that.  However, if you’re comparing cards and have two that are similar in most criteria and one pays a significantly higher bonus than the other, I don’t think it’s a bad thing to let the bonus help you decide.  For example, as I shared in my look at the American Express Gold card, I got a free plane ticket when I signed up for the card a few years back.

One thing to be aware of is that the really good credit card promotions are usually reserved for new customers.  So if you do have two similar cards to choose between that are both are offering bonuses – if you’ve previously used one of the cards you might not qualify and that might help make your decision a little easier.

Payment Policies

These are things like the number of days you have to pay off your card, late fees that are charged, how interest is calculated on a balance, and how late or missed payments impact any rewards you might have earned.

Even if you typically pay off your balance each month it’s smart to read up on these because there might be a month where you get busy or something happens and you forget to pay or are late.  It’s good to know what it will cost you in the event something like that happens.

Customer Service

I don’t know what your experience has been but I’ve never had bad customer service when dealing with a credit card company.  Unlike every other company I deal with that has you navigating phone menus and waiting on hold for minutes, the credit card companies always seem to have you talking to a person in under a minute.

One night before leaving on a trip I called American Express at 2:30 in the morning to ask about rental car insurance on my card and the lady was probably the most polite and helpful phone rep I’d talked to in a year.

Of course courtesy and response time aren’t as important as whether the company is willing to work with you. Going back to my discussion of payment policies and late payments, it’s something that happened to me before.  I’d had my Blue Cash card for years and always paid in full and on time but one month I was a few days late.  When I called in to see what I could do about the late fee and interest charges I’d incurred they were willing to work with me since I was a long time customer with a good track record. 

If you have a history of good customer service with a particular company then that’s something to consider.  You can’t always rely on past experience – for example if you’re thinking about getting a card from Capital One but have always had a Discover card it’s tough to compare since you’ve never had any dealings with Capital One.  The best approach in a situation like that is to ask a few people you know who have used the company.

Card Programs

One thing I looked at when comparing Blue Cash vs Chase Freedom is that both cards were eligible for a program specific to that card.  All the “Blue” AmEx cards were part of the “Blue Savings” program that gives you discounts on your purchases with certain partner merchants.  The Freedom card, along with a few others from Chase, can participate in the Chase Blueprint program. 

What Chase Blueprint does for you is let you arrange your payments to help you pay off your balance and lower what you pay in interest.  So Blue Savings is a way to save more on top of your cash back and Blueprint helps you pay off your debt.  They’re different types of programs, which one is more attractive obviously depends on your personal situation but the main point is to investigate what they offer when comparing cards.

Other Features

Some cards have unique feature that make them stand out a little and those can be tough to compare.  If only one company or card offers a feature, how do you figure that into your comparison?  The best way I know how is to try and determine what that feature could be worth in dollars and cents.

For example, with my Blue Cash card I get one free credit score a year through Experian.  The value of that is pretty easy to evaluate since I know what a credit score costs on average.  They also offer periodic discounts & deals, like a recent 35% off TurboTax software – again easy to figure out the dollar value.

Choosing a Card

Obviously choosing a cash back card isn’t the most important financial decision you’ll make in your life.  Since they say most people spend more time planning their vacations then they do their retirement, I’m not too worried that anyone will over analyze this decision.  I’ve gone over a number of points to consider when comparing cards; don’t feel like you have to study each one of these.  Use the ones you want and ignore the rest, good luck choosing the right card!

How to Lower Your Credit Card Interest Rates

Lowering the interest rate on your credit card is one of the top concerns for people who are stumbling under the weight of credit card debt.  So it’s no surprise that David Bach’s chapter seven in his new book “Debt Free for Life”, has the title of “How to Lower the Interest Rate on Your Credit Card”.

I’ve never personally dealt with carrying around debt on my credit card but said I’d be willing to check out his advice when Bach’s team asked me to review that part of his book.  The previous chapters talked about organizing and prioritizing your debt  – at this point in the book, the emphasis is on reducing the amount of interest you’re paying on your card or cards.

Finding the Best Interest Rates

The approach he suggests is one of negotiation, and in any negotiation it always helps to enter into it with as much information as possible.  The main idea is that you’re likely paying more interest than you could be so you should compare yourself against people around the country to see how much room there is to negotiate.

The book gives you a worksheet to track the balance and rates on each card and the progress of your negotiations.  Bach suggests finding out right away what rate new customers are paying on the same card that you have.   Then he breaks down the different interest rate categories based on your FICO score :

1. Super-Prime
2. Prime
3. Sub-Prime
4. Punitive
5. Promotional

His chart shows you which category you’d fall under and what interest rate you should expect to pay – based on your credit score.  Obviously if there’s a big gap that can be a talking point when you call up the credit card company.

Your Credit Score

If you don’t know your credit score, Bach recommends trying out a program from Equifax called DebtWise.  In an earlier chapter he explains how he came across the tool and worked with Equifax to add features that basically took the system he’s been teaching for paying off credit card debt and automates all the steps. 

Anyone who buys his “Debt Free for Life” book gets a DebtWise free trial for one month – I’ve never used the service but I agree that free is good.  Similar to other free credit score options available, if you remain a customer after the trial the service has a monthly fee.

Negotiating Your Debt

Once you know your credit score, what interest rate your score should qualify you for, and the interest rate being given to new customers you have enough information to begin negotiating.  Bach gives you several strategies for overcoming common obstacles when negotiating your interest rates.

There’s not a lot that Bach writes about that you couldn’t eventually figure out on your own but his tips can definitely save you time – and when you’re paying high interest rates time is money.   Bach’s big advantage is that he’s worked with thousands of people to get out of debt in his career so he’s seen what tends to work and what doesn’t.

In my opinion, the best feature of the book are all the examples he gives of former clients and what did, or didn’t work for them. Since I tend to learn better through examples and stories, I think these are the most useful parts of his book. I remember reading about Bach’s Latte Factor concept in his book “Smart Couples Finish Rich” right after my wife and I were married.  Some of the tales he shared of his former clients still stick with me to this day – so pay attention to those sections and learn from the experiences of others so you don’t make the same mistakes yourself.

One of his stories in this book explains how a client went through all his steps and was able to lower their interest rate.  However, it wasn’t as low as they’d like so she ended up signing up for a balance transfer card that gave her 0% interest on her balance for 6 months while she worked on paying it off.  I think this is a good example of how there’s no one right way to accomplish your finance goals – and sometimes you have to try several different things to find the best one for you.

Forbearance & Debt Management Plans

If negotiation doesn’t get your rate lowered and you’re really struggling because you lost your job, were injured, or are just earning less – then you can talk to your credit card company about restructuring your debt.  These are cases where companies are willing to work with you because your ability to pay back the money you owe has been dealt a major blow. 

Since this sometimes involves drastically lowering your interest rates and minimum payments, the credit card company does their homework to make sure you really have suffered a hardship and aren’t just trying to get out of money you agreed to pay.

The book explains how Forbearance and Debt Management Plans work and things you should be aware of before deciding to take that approach (such as frozen credit and damage to your credit score).  He also discusses alternatives to these strategies, such as credit counseling, and devotes a chapter later in the book to the topic.

Improving Your Credit

When it comes to your credit score, the saying “the rich get richer” seems to apply to the whole system.  People who have high debt to income ratios and a long history of good credit can borrow money at the lowest interest rates.  Of course, these are the people who probably have the least need to borrow money – in contrast to consumers with bad credit and high debt levels who are more likely to run into desparate times and need access to credit.

Once you’re in debt it can be tough to improve your credit score in order to borrow at lower rates. Next week I’ll cover another chapter in Bach’s book that explains how your credit score works and different ways you can raise it.

What are the Best Credit Cards for You?

The best credit card for you really depends on how you use your card – that’s how I started my email to a lady named Brigid who recently joined my email newsletter and was asking what the best credit card was for her to use.

I actually met Brigid a few months ago at a local event and she remembered me talking about Money Smart Life, so when she started her search for a new credit card she reached out to me.  She was looking for a list of the top three credit cards and wanted to know what my favorite ones were.

Of course, my reply was that how you plan on using your credit card makes a big difference in which one is the best for you.  Here are some of the questions I sent back to her to help narrow it down:

1) Do you carry a balance or pay off your card in full each month?
2) How often do you travel each year?
3) Approximately what dollar value do you charge on your card each year?
4) Do you use your card to buy gas and/or groceries?
5) What card(s) do you currently use?
6) Do you have a good credit score?

Of course this doesn’t cover all the bases but it was a quick starting point to get a feel for her situation. Brigid runs her own business so she’s a pretty busy lady and I haven’t heard back from her yet.  I started writing up more detail on the reasoning behind each question and my answer grew long enough I decided to post it for everyone. 

1) Credit Card Balances

If you’re going to carry a balance then it’s best not to use a credit card at all because the interest you’ll pay will be steep.  If you already have some credit card debt you’re paying interest on, one option is to consolidate the balance into a lower interest loan.

You might be able to get lower rates with a peer lending service like Lending Club or you could also look into a balance transfer credit card if you’re going to pay it off within the 0% interest window.  Citibank usually has some of the best balance transfer terms out there, for example cards like the Citi Dividend Platinum Select or the Citi Platinum Select. 

2) Travel Rewards Cards

If you don’t travel much then a card that earns you rewards for travelling or points that you can use for flights and hotels won’t do you a lot of good.  I know I used to have frequent flier points that I didn’t use or that expired over time.

If you’re not a frequent traveller but you’re saving up for a big trip some day just keep in mind that airline miles or hotel points may not have the same bang for their buck when you’re ready to use them in a few years.  For example, the Southwest Rewards card, is changing their airline rewards program so that points never expire.  But you still have to fly or use one of their rewards partners once every two years to keep your rewards active.

Since rewards programs change over time so it might be best to use something like cash back rewards and save the cash.  Cash rewards don’t usually have as good a redemption policy as travel rewards or gift cards but if it’s for years down the road, at least you know the value of your cash won’t change.  Another option is to use a card that isn’t tied to a single airline, such as the Blue Sky card from American Express.

If you do travel quite a bit, a good follow up question would be how do you spend most of your money when on the road?  This can help you determine if you’d benefit most from airline rewards, rental car rewards, or hotel rewards.  One thing to keep in mind is that some of the best travel rewards cards are offering big bonuses these days so be sure to compare those as well.

3) Credit Card Reward Caps & Tiers

If you don’t buy that much with your card each year then the one you chose won’t make that much difference.  On the other hand, if you put many of your purchases on your card like we do, then you’ll want to look closely at the amount you charge. 

Some cards, like our Amex Blue Cash, pay out much higher rewards once you’ve crossed an annual spending tier.  Before you reach the tier you earn a lower percentage cash back on your purchases, then once you cross it the amount of the cash rebate goes up considerably.  So compare what you’ve spent in the past on your credit card against any rewards tiers of a card you’re considering.

Other cards have limits on how many rewards you can earn in a month or a year’s time.  For example, the Discover card is great because it pays out 5% cash back on different categories throughout the year.  But it does put a cap on the dollar amount that earns the 5% cash rebate, after you reach the cap you go back to earning 1% cashback on purchases.  Discover publishes the 5% cash rewards schedule every year so compare what you typically spend in a category against the caps.

4) Grocery & Gas Credit Cards

Th reason I asked about groceries and gas purchases is that some of the best cash back cards like Chase Freedom and the True Earnings card have higher cash rebates for those categories of purchases.  For example, one of the spending categories in the Fall for the Freedom card is grocery stores – during which time they pay 5% cash back on groceries.

The Costco True Earnings card gets 3% cash back on the first $3,000 of gas purchases a year, whether you make them at Costco or any gas station, which makes it one of the best gas credit cards out there. So the kinds of things you typically use your credit card for can make a difference in which might be the best card for you. 

For example, I mentioned that we use Blue Cash from American Express that gives higher cash rebates for both gas and supermarket.  We buy a lot of groceries for our family and a considerable amount of gas for my daily commute so it’s a great card for us.  Below’s a snapshot of our rewards part way through last year:

So one tip is to look back at what types of things make up the biggest percentage of your spending and see which, if any, cards offer programs suited to those categories.

5) Comparing Credit Cards

You’ll want to compare credit card benefits if you already have a card, because applying for a credit card and opening new credit lines can have an impact on your credit score.  You want to make sure that the benefits of the new card are worth the implications of adding a new credit line to your credit report.  You also have to think about how many credit cards you already have in your name.  If you have a history of applying for lots of credit cards your credit score could suffer.

So when you compare a new card to your current card be sure you look for one with lower or no credit card fees and better rewards programs & terms than what you already have.  If you sometimes carry a balance then finding a card with a lower interest rate is also important.  Make sure you think about all the factors of the card, not just which one has the biggest new customer bonus or lowest introductory APR.

6) Credit Score Importance

If you have a good credit score then you shouldn’t have a problem being approved for a credit card.  On the other hand, if you have bad credit or no credit history that will have a big impact on which credit cards you qualify for.

If you’re trying to establish credit or re-build your credit you can get a secured credit card or a secured loan to build up a history of regular payments.  If you’ve had issues with payments in the past and have bad credit then it may be best to hold off on getting a new credit card and focus on improving your credit.

Why Check Your Credit Score?
If you’re not sure what your credit score is, you should check it out before applying for a credit card.  When you apply for a card, your application shows up on your credit report.  The credit reporting agencies like Experian, Equifax, and TransUnion will see the credit inquiry and know that you’re looking to increase your access to credit.  If you have a mediocre or bad credit score and apply for a card that requires excellent credit, not only will you be denied for the card, you’ll also have a credit pull showing up and potentially damaging your credit rating further.

Discounted & Free Credit Scores
You can pay to see your FICO score at myFICO, there’s usually some type of myFICO promotion running where you can get a discount.  There are also several ways you can get a free credit score, be aware that all require you to provide your Social Security number.  The site Credit Karma doesn’t provide your FICO score but rather an alternate score calculated by TransUnion at no charge to you.  Another site called Credit Sesame gives you your credit score from Experian when you use their free service.

Credit Score Benefits
The higher your credit score, the better your credit card options will be.  There are some cards that are designed for people with good credit – for example don’t bother applying for Chase Sapphire or the Marriott Rewards card unless you have pretty good credit.  Cards with lots of perks, services, or bonuses like the Platinum Card from American Express or Chase Freedom – $100 Cash Back card also require a really good credit score. 

Best Credit Card Criteria

As I already mentioned, the questions I asked don’t cover every aspect of rating credit cards but they’re definitely a good start.  Depending on your situation there are certainly other things to consider. For example if you’re a business owner like Brigid then there’s the category of business credit cards that are also an option.  Or if you’re in school you can consider, or may be limited to, student credit cards.

Something else I didn’t ask Brigid was about any credit card fees she currently pays.  I did cover fees some but they probably warrant their own section, what kind of charges and fees does a card have and are they worth it to you?

Hopefully this overview helps Brigid and can also help you find the best credit card for your needs.  Good luck credit card hunting!

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