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Debt Help

The Debt & Personal Finance Blog and Magazine

Monday, December 08, 2008

Chase Cancels My WaMu Credit Card

Chase canceled my WaMu credit card!I hadn't used my WaMu credit card since the first quarter of 2006. Back then, it was a Providian credit card. But then Washington Mutual (WaMu) bought Providian, and, just recently, Chase bought WaMu.

Now, the reason I wasn't using this card is because a) it didn't have a competitive interest rate for purchases and b) the rewards program attached to it wasn't anything special. I had plenty of cards to choose from, so why would I choose one with a high APR and a very ordinary rewards program? I used this card to take advantage of an attractive 0% balance transfer deal, then, when the interest-free period expired, I paid the card down to zero. I kept the account open because the $11,000 worth of credit available to me with this account was helping to keep my credit score high.

Another reason I liked having this account was because I had free access to my Bankcard FICO credit score (provided by TransUnion.) No other card in my wallet (and I have plenty) offered this unique benefit.

Last month, I received a letter in the mail informing me that Chase was closing my WaMu credit card account because I hadn't used it in more than 12 months. The letter was short and to the point:


Chase closes my WaMu credit card account
I wasn't happy about this. First of all, my FICO® credit score would likely drop due to the decreased amount of credit available to me. Second, I liked having free access to my credit score. Who wouldn't?

So my first reaction was to try and use the card to see if Chase had deactivated it yet. I tried to buy a song from Amazon ($0.99) but the charge didn't go through.

Next, I called the customer service number on the back of my card. Despite the late hour, I was able to talk to a customer service representative (CSR) right away. I asked the CSR to reactivate my card. I told him that I wanted to do some Christmas shopping with it immediately (which wasn't a lie. I would have spent some money on the card to keep it open.) The CSR said he couldn't do it (listen to the MP3 audio here.) He explained that WaMu had closed 1.3 million inactive accounts. The CSR anticipated that I would complain about the negative effect this action would have on my credit score, so, before I could say anything, he went on to say that this action, "will not appear as a negative mark on your credit bureau report." I complained a bit, then he explained that because the account was closed due to inactivity, and because my account had a zero balance, I had nothing to worry about.

I did not see any point asking for a supervisor, but I did call back a few hours later (their CSR's are available 24/7) to see if I would get a consistent response to my reactivation request. The second CSR gave the same canned response to my appeal for reactivation, but also added that I could apply for a new WaMu credit card account if I wanted to (MP3 audio here.) This suggestion made sense to me even though I wasn't happy about it. The "don't worry about it" nonsense that CSR #1 gave me was insulting, because we both knew that my score will be affected. I'm just going to hope that the ding to my score is a mild one.

My credit score is 804 right now and I want it to either stay there or rise. So, should take my time and find a really great credit card and apply for it?

Having thought about it for a few seconds, I've decided to apply for another WaMu (Chase) card, because I want my credit score to stay high and I want free access to my score. According to the WaMu website, all WaMu cards still provide free access to the accountholder's FICO.

I found that I can still login to my WaMu account online, so I visited WaMu to see if they had any credit card offers ready and waiting for me. I found no offers in there.

I will try to find a good WaMu card and apply for it. I'll post again after my application is processed.

So I may end up with another WaMu credit card account after all this, which would be a silly waste of time and resources (paper, plastic, phone calls, etc.)

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Thursday, November 20, 2008

FICO® Credit Score Holds Steady At 804

There are plenty of things I could complain about in my life. My credit score isn't one of them. My FICO® credit score has held steady at 804/805 since May of this year:

My FICO credit score - November 2008 - 804

I was hanging out in a CNBC forum the other day and came across an interesting thread. The user has a FICO credit score of 788, but is still worried about a comment in his credit report that reads, "amount owed on revolving accounts is too high." I know this comment well. I posted about this back in the summer of 2006 when my credit score hit 719. Yeah, it looks bad, but, in my opinion, that's just the FICO system's way of telling you that if you want to have a score of 800+, pay your revolving accounts down to zero. It's nothing to panic about. This note disappeared from my report when I paid all my personal credit card balances down to zero.

The fact that I still had a balance on one of my business credit cards at the time did not matter, since healthy business credit card debt is reported to business credit rating systems like Dun & Bradstreet's Paydex or Experian's Intelliscore service.

Now, if I ever get into trouble with one of my business credit cards and default (God forbid), the issuing bank(s) will almost certainly report the negative item(s) to all consumer credit monitoring agencies (TransUnion, Equifax and Experian.) They have the right to do this since I signed a personal guarantee when I opened my business credit card accounts, which is standard practice.

Even with my current score of 804, I'm seeing the following notes in my report as reasons why my score isn't higher than 804:

  • "The time since your most recent account opening is very recent

  • The length of time your revolving/charge accounts have been established is too short"

The top one I can understand since I only recently stopped chasing 0% credit card offers. But I find the second note quite funny since I have accounts so old that I'd even forgotten they existed.


Avoiding Interest Charges on My Main Business Credit Card

There is a certain balance on my business credit card that I have been targeting. This target balance allows me to have enough cash to save to for retirement (Roth IRA, of course!), pay my bills and child support, and have a little left over for savings (I wouldn't have a balance at all if the credit crisis never happened, but that's life.) Now, with this particular target balance, finance charges are applied every month. However, I've managed to avoid having to pay any interest by using the rewards points I earn each month to "purchase" a statement credit of $50.

My target balance is $4,000. Since this business card has an APR of 9.99%, the daily periodic rate for purchases is:

  • 9.99/365 = 0.02737%

  • 0.02737% is the same as 0.0002737

So with my preferred target balance, I am charged $4,000 x 0.0002737 = $1.0948 interest per day. This makes the interest I owe each month in the $34 range, which gives me some breathing room since I can't predict the exact amount that I'll purchase on this card every month. As long as the finance charges are $50 or less, I'm good.

How do I manage to stay close to my target balance? Easy! I login to my account at least every other day and check my balance. When my balance is looking too high, I schedule and online payment. Quick and easy. Whenever I make a major purchase, i.e. over $500, I make an online payment immediately, so that I don't mess up my average daily balance.

So, if you've been paying attention, your next question is likely, "so how much do you have to spend each month to get a $50 statement credit?" Easy. A $50 statement credit requires 5,000 rewards points. I get 1 rebate point for each dollar I spend on the card. So I have to spend $5,000 per month. In other words, it's a 1% cash back rewards program.

During the good times, when I'm able to pay my balance to zero every month, my points accumulate and roll over, which gives me plenty to play with during the bad times (I had about 28,500 points stored up when the credit crunch took a serious turn for the worse a couple of months ago. Converted all those points to statement credits.) However, my points do expire if I don't use them within two years, which is quite reasonable in my opinion.

So, with this technique, it would seem as though I could have a 0% business credit card forever, just as long as I keep spending and avoid having an average daily balance above the $4,000 threshold (this card has no annual fee.) But the reality is a "fixed" rate of 9.99% can disappear without much notice. That's because credit card issuing banks invariably reserve the right to modify the terms of each credit card account whenever they wish, as long as they give you warning of an impending rate increase and the option to opt out of it. Citi and American Express have plans to raise APR's for millions of their credit card customers.

This technique requires that I do a lot of spending on this card each month, which has worked out fine since I've been buying a lot of advertising lately. Even as business improves and I'm able to pay down my balance a bit, I have another statement credit tier to work with: I can get a statement credit of $20 in exchange for 2,500 rewards points. As you can see, this tier isn't as equitable as the top tier I described above, but I can still work with it. Maintaining an average daily balance of $2,500 would produce an interest charge of about $21.21, so I'd need to keep my average daily balance at around $2,200 (interest would be $18.67) and spend at least $2,500 per month.

Of course, I'd much rather end this game and return to the good old days of paying my balance in full each and every month. Yes, I'm taking full advantage of my card's rewards program -- and I enjoyed 0% on new purchases and a transferred balance for a year -- which is great. But by having a revolving balance, I'm playing right into the hands of my bank. Bottom line: this scheme could easily blow up in my face if my business has a really bad month.

Some credit cards offer up to 5% cashback on everyday purchases like gas, travel, home improvement, dining out, etc. The Discover More card is the perfect example. For some reason, I wasn't able to get a Discover More card, despite having a good credit score when I applied. When I submitted my application for this card, my FICO score was in the upper 700 range, yet my application was rejected. I checked my credit reports after that rejection, and found nothing wrong. Go figure. If you can get this card, do it. If you already have one, cool. The rewards are peerless in generosity, it comes with 0% intro APR on purchases and balance transfers and the "goto" APR isn't that bad (as low as 10.99%, variable) when compared to competing consumer cards in the American market.

But I'm not complaining. I like my flagship business card. It's a business purpose card, which enables me to have credit card debt and a high personal credit score simultaneously. Plus, the process that my issuing bank has setup for claiming statement credits is efficient and stress free. I just login to my account and within a few clicks of my mouse I've traded my points for a statement credit. Lovely. My other business cards either have APR's that are too high for my taste and credit standing (so I keep them for building credit and emergencies only) or, as is the case with my newest business card, the credit limit is way too low.

Discover has some relatively new business credit cards on the market now, and the rewards are quite generous, though not as generous as the Discover More consumer credit card I noted above. I'd love to apply for this card, but I'm gun shy as a result of my previous rejection.

So, why I am not recommending my favorite business credit card here? Good question. The answer is simple: it's not available anymore. A victim of the current credit crisis. In fact, I just visited the issuing bank's website to see what other business credit cards they have on offer, and found none. The market for business credit card receivables dried up last month (a receivable is any debt owed to a company/corporation that is not paid in full yet.)

Before the onset of autumn this year, my bank could take my $4,000 business credit card balance, bundle it with other credit card receivables and sell the debt to Wall Street. But investors don't want to buy that kind of debt right now because credit card defaults are rising, even with accounts held by prime borrowers.

Want to know when global credit markets will improve? Stay tuned to the TED spread (the TED spread is the difference between the yield on the 3-month Treasury Bill and the 3-month LIBOR yield; it's a reliable indicator of banks' willingness to lend.) Once it falls below 1.00 percentage point, banks will start (probably with baby steps at first) lending like they did before this decade's housing boom.

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Friday, July 18, 2008

FICO® Credit Score Rebounds to 804 After Hard Pull

Here's an updated chart of my FICO® credit score, provided by the folks at TransUnion:


Updated Chart of My FICO Credit Score - July 2008: 804


Here's a real life example of how applying for credit can affect your credit score. A dip of 8 points; a minor downgrade that lasted 2 months.

Earlier this year, I decided to open a new business credit card account, not because I needed the credit, and not because I needed to do a balance transfer to avoid paying interest. I opened up the new account because the credit crunch that began last summer and still persists today started to make me a bit nervous last winter. My business has suffered as a result of the economic slowdown, and no one knows for certain when a) the economy will return to substantial growth and b) when confidence will return to the banking system. So the new account is just a little insurance in case my situation gets really bad.

My understanding was that the ding associated with a hard pull on a credit report would last for about 6 months, so there's a chance that the reason my score rebounded so fast was due to some other unrelated improvement to my credit profile. Perhaps the rule is that a hard pull inquiry into my personal credit history for a business credit card application causes heartburn for only 1 or 2 months, whereas if it was for a personal card the ding would last longer. Just conjecture on my part: there's no way for me to know for sure.

Though applying for credit did cause my personal credit score to drop for a spell, the new account may bolster the credit rating of my business, because it's a new line that I most likely won't tap (debt to credit ratio is a big deal to lenders and, therefore, credit rating agencies.) I think I made the right decision, even though I read recently that having too many unused lines can have the opposite effect. My nascent business credit card account will lower the average age of my business credit lines, which can in turn hurt my business's credit rating. Hopefully, my other credit lines are old enough to provide enough weight to balance out the new account.

The credit line on my new card is generous -- much more than I was expecting -- but the interest rate associated with making new purchases is higher than I'm used to. Of course, it's a trade off, because if I need to use this card at some point, the debt I would incur would be unsecured, and that's something I really like. None of my personal or business assets are at risk, though if I hit rock bottom and defaulted for some reason, the bank would most certainly ruin both my business and personal credit ratings, in short order.

During my recent research into credit scores, I learned that:

  • There are many different types of soft pull inquiries.

  • Some banks perform credit-score-damaging hard pulls on credit reports when a customer applies for a checking and savings account. A commenter at CreditBloggers.com complained that his bank performed a hard pull every time his CD rolled over. Yikes!

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Saturday, February 23, 2008

No News Is Good News: Fico® Score Holds At 803

My FICO® credit score was updated recently:


Updated Chart of My FICO Credit Score - February 23, 2008: 803 - sideways


For the fourth month in a row, my score has moved sideways, which is just fine with me since I'm happy with my score. I'm expecting a small increase soon, since I recently paid off my student loan debt. I doubt I'll get more than a 5 point bump, but that's OK. I paid off my education loans because of the 8% interest I was being charged and not for any credit score benefit that may result.

For those of you who are paying down student loans, I've recorded one of the sweetest things you will ever hear over the phone. Click here to listen to the MP3.

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Friday, January 25, 2008

Can You Really Buy a Great FICO Score?

With every great industry comes subindustries; the housing industry is no different. From the traditional mortgage lending industry emerged the subprime mortgage industry. However, now that subprime lending is mainstream, companies who offer quick FICO fixes for individuals who have further damaged their credit through subprime borrowing abuses or other poor credit usage are now coming to the foreferont.

Yes, you can buy a good FICO score these days.

However, you might not be able to do it for long. These kinds of companies use legal loopholes to cosmetically establish good credit scores, and neither the Fair Isaac Corporation nor mortgage lending industry leaders are happy about it. These quick credit fixes are achieved by essentially attaching individuals with poor credit to the loans and credit accounts of others with good credit - and it's legal! This, opposers argue, will inevitably lead to more woes in mortgage lending scrutiny and foreclosures because people who really should not be approved for loans will be.

Furthermore, many think it to be unethical, as it is a false positive of sorts concerning one's creditworthiness. Fair Isaac is already changing it's formula to exclude some of these slick maneuvers from counting toward FICO score calculation. Industry whistleblowers are calling for further regulation. It seems like this 'insta-credit' subindustry might be of the "fly by night" sort with this level of opposition.

But what do I know - upon seeing the first episode or so, I predicted that the Power Rangers would flop, and I was absolutely sure that "Friends" wouldn't last.

Go figure...

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Tuesday, January 22, 2008

FICO Credit Score At 803: Still Moving Sideways

My FICO® credit score has been updated. Here's the latest snapshot:


Updated Chart of My FICO Credit Score - January 25, 2008: 803 - sideways


Still moving sideways, and I'm OK with that. This journey began back in 2004 when my FICO score was 628, so 803 is fine with me.

I am not expecting any movement for my score until March; that's when my car loan payoff should be firmly entrenched in all my credit reports. At my next FICO update, we'll see what paying off a car note can do for one's FICO score, in real world terms. And since I'm preparing right now to payoff my student loan, I'll be able to report -- by April -- on what annihilating student loan debt can do for one's score. Stay tuned!

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Friday, December 21, 2007

Fair Isaac's Revamped Credit Scoring System: FICO 08

So, I may not have to write a letter to Fair Isaac complaining about the FICO credit scoring system after all. Fair Isaac is in the process of rolling out a new version of FICO called FICO 08.

Here are two clips from a WSJ article:

"...Higher-risk borrowers may find it tougher to get credit, while those with less-risky profiles -- though they may have gotten approved for credit accounts in the past -- will start to get better deals from lenders.

Two people with the same FICO score currently could see their scores diverge under the new system. One possible reason: FICO 08 gives more points to consumers who maintain a variety of credit types, such as credit cards, a mortgage and auto loan, because it shows they can manage payments on different kinds of loans. On the other hand, the new scoring system penalizes to a greater degree borrowers who use a high percentage of their available credit.

FICO 08 also will draw greater distinctions among different borrowers who are at least 90 days late in making a loan payment, known as a serious delinquency. Traditionally, many credit-scoring models grouped subprime consumers into one general category. But Fair Isaac says its new model will give a higher score to a borrower in arrears if they also have a number of other credit accounts in good standing. Conversely, a person's score could drop if he or she has multiple delinquent accounts.

'Overall, more consumers will see their FICO scores go up slightly than will see their scores drop,' says Tom Quinn, vice president of global scoring solutions for Fair Isaac..."

"...FICO 08 also aims to curtail the growing business of allowing people to polish their credit by "piggybacking" on someone else's good credit history. In recent years, credit-repair Web sites have sprung up that arrange for subprime consumers to boost their scores by becoming authorized users on accounts held by strangers with better credit. When scoring a consumer, FICO 08 won't take into consideration credit-card accounts for which that person is an authorized user. But the move also will hurt legitimate users: People who give a credit card to a child or a spouse as an authorized user to help boost their credit score..."


FICO_08: examples of how the new scoring models could affect consumers.  From WSJ Online

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Saturday, December 01, 2007

Credit Score Peaks At 826, Then Dives to 803

So here's the latest snapshot of my charted, FICO® credit score, provided by TransUnion® :

Updated Chart of My FICO Credit Score - December 1, 2007: 803

I don't have enough room to fit as much time as I would like, but you can see that my score peaked at 826, then dropped 14 points, then went sideways for several months, and is now at 803.

I like the FICO scoring system. In my humble opinion, the system works. It's not perfect (see my gripe below) but if a guy like me -- someone who has had serious problems with debt in the past -- can go from having a truly terrible score to 826, that's proof enough that the system is reasonably fair. I went from 697 to 826 in one year, and I think that's pretty cool.

Ok, now here's what I don't like about the system: you have to continue playing the game if you want your credit score to remain high.

What's the game? You borrow lots of money via credit cards and pay it all back over time -- with no late payments, of course. You let the banks make money off you, and, in exchange, you get to borrow a lot more money, and you get much better interest rates. That's the game. Play the game right, and you can live in a nice house, consume lots of junk, drive a nice car, etc. Play the game wrong and life can get really hard, really fast.

So, yes, I borrowed a lot, and paid it all back. But now I have to continue to use at least one of my credit cards on a regular basis if I want my credit score to remain in the 800+ zone. If I don't use my cards at all, my score will decline steadily over time, and that's not fair. In essence, I am being penalized for not using credit cards, even though I am still a very responsible consumer. I still have debt that is being reported to the credit bureaus, but student-loan and car-loan debt doesn't carry as much weight as credit card debt in the eyes of Fair Isaac.

Here's what Fair Isaac has to say about it:

You have no recent revolving balance information being reported

The score evaluates the types of credit currently in use, or that you have used in the past, and will consider the mix of retail cards, bankcards, and installment loans appearing on your credit bureau report. In general, moderate and responsible use of revolving credit accounts will boost the score slightly. Research shows that consumers with very moderate usage of revolving credit accounts (charging low balances and repaying them on time) have slightly better repayment risk than those who do not use revolving credit at all.
So, Fair Isaac expects me to swallow that? That I have to maintain a small balance on my credit card in order to be considered an exemplary credit consumer? I mean, how much is "very moderate usage" anyway? $5? $25? $200? Yuck! That leaves a nasty taste in my mouth. Come on, Fair Isaac, you can do better than that! Seems to me that it's just an excuse to give the banks a shot of making some interest income off me. Seems to me that this is a classic case of conflict of interest, since banks pay Fair Isaac for their services. Yes, Fair Isaac makes money from many different sources, but here is a quote from the Fair Isaac website:

"Fair Isaac clients include...99 of the top 100 US banks and half of the top 50 banks in the world..."
Hmmm...

So, what are my plans? To be fair, I'm going to see if my score drops below 800. If it does, I'll write to Fair Isaac and complain. You never know. My arguments may be cogent enough to convince the firm that tweaking the FICO scoring algorithm is the right thing to do. Or maybe not, but I won't feel right if I don't try.

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Tuesday, March 06, 2007

FICO® Credit Score Hits 791

A nice jump for my FICO® credit score this month: up 31 to 791. How did I do it? I made a payment of $2,000 (exactly) on my Citi® credit card some weeks ago. This is cool: I'm just 9 points away from my goal of being in 800+ territory by 2008.

Just as soon as I'm done writing this blog entry, I'm going login to my Citi account and make another large payment -- $3,916.74 to be exact -- a payment that will eliminate my personal credit card debt completely! That's a significant milestone for me since I've had personal credit card debt for as long as I can remember.

A $2,000 payment caused my FICO score to leap from 760 to 791. So what will a $3,916.74 payment do for my FICO score? My guess is that my score will jump to at least 805. If you care to make a guess, please feel free to do so in the comments section below.

Will I be able to refrain from using credit for my personal needs? Yes, I'm quite confident that I will. I have some major purchases to make:

  • A new car stereo. It's not a self-indulgent upgrade! My radio went dead a month ago and I haven't been able to fix it. I may be able to spend less than $100 by simply replacing the head unit, but if I have to spend more, I will. I love to drive, and I can't stand driving without a good mix of NPR news and my favorite driving tunes.

  • A washer and dryer. An investment really, since I'm just making the owner of my local laundry center rich by washing my clothes there. Plus, I'll save time by washing my things at home.

  • Some car repairs. I've been hearing a strange and worrisome noise in my car's front end. It's been bothering me for many weeks, and it's time I got it fixed. Suspension work is often expensive, but I'm hoping the repairs won't cost more than $1,000.

But I've been saving up for the above list of expenses, so my personal credit cards won't see any action any time soon. Yup: my personal credit cards are going to experience some serious neglect from now on.

As for the status of my two business credit cards: I'll be paying the balance on my Citi business credit card down to zero later tonight, and I'm also going to make a large payment on my Bank of America business card, a payment large enough to reduce the balance by at least half.

I'm excited about all this debt reduction going on in my life, especially because it means that I'll be shelling out less money each month.

That's it for now.

I usually close with an updated chart of my FICO credit score. Don't worry: the tradition continues. I recently created a new spreadsheet with my FICO data, and from that spreadsheet I created a new chart which I hope is clearer and easier to read. So here it is: my FICO credit score from June, 2005 to the present:

Updated Chart of my FICO® Credit Score - March 6, 2007: 791

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Tuesday, January 30, 2007

FICO Credit Score Back Up to 760: Big Yawn...

Some good news and some bad news this month. First, the bad news.

The mother of my child moved out into her own condo, so, even though I am enjoying the extra space, stress relief and the freedom, I have agreed to pay $300 per month in child support.

$300 per month is too high, in my opinion, considering the circumstances. First of all, the mother of my child has a full time job with excellent benefits. She doesn't have to make car payments on her car (as I do), because she owns it, thanks to me. When her car broke down a couple of years ago, I gave her my very reliable and well-maintained car, and I bought another used car for me. Her insurance payments are very cheap as well -- less than $500 per year.

Now, don't get me wrong: I'm not trying to make a big deal out of my car donation, because it's really not that big a deal to me. I'm just laying down the facts here, and I think it's important to note the source of her assets.

Another reason why I feel that $300 per month is too much: our child -- I'll refer to her as TK from now on -- is in preschool, and I am paying for her tuition, which is $135 per week, or $540 per month.

Furthermore, it's not like TK is with her mother all the time. I pick up TK from school, and she spends all day with me every Friday (her preschool is 4 days per week), and she stays with me every other weekend.

Now, considering all these factors, I thought that $200 per month plus TK's tuition payments was fair. We debated the issue for about half an hour -- without any shouting, which was a welcome surprise -- and, in the end, I acquiesced and agreed to $300 per month. The way I see it, the bottom line is that we are in a critical transition period right now, and I really don't want to do anything to exacerbate the tensions that inevitably manifest themselves when a home is newly broken; my daughter can be surprisingly mature at times, but she's also very sensitive. My baby girl means a lot to me, so as long the money I'm providing is being used for food, clothes, weekend outings and trips to the hairdresser, I'm OK with it (I don't think I'm being a miser, but if you think I'm just being a cheap bastid', then feel free to post your comments below. I'm open to all rational arguments!)

So I'll be paying TK's mother by check tomorrow, and from February on I'll be making payments via a prepaid debit card, so that I can track all spending online. I'm not just being paranoid. When TK's mom was living with me, she would order stuff from QVC and the Home Shopping Network sometimes. Did I have problem with the spending? No, not at all. What did bother me, however, was the way she would spend money on items, then totally trash them or even throw them away a few weeks later. That kind of nonsense just boils my blood. That kind of spending is, in my opinion, a sign of a serious psychological problem -- possibly depression -- but that's a subject for a another blog.

I was hoping to fatten my savings account this year, as I'm getting too old to have such a puny balance in my savings account. But I guess I'll just have to work harder, and chase the dollar with even more zeal in order to maintain myself and my obligations.

One way I'm saving money is by using space heaters instead of the electric heating system that's installed in my place. My apartment's built-in heating system is a real hog at 8 kilowatts. When I got my first electric bill back a few years ago, it was a staggering $600 (December used to be a cold month in the Northeast U.S.) so I was highly motivated to find another heating solution (I was also motivated by my breathing problems, which are almost always exacerbated by built-in heating systems, no matter how well they are cleaned.) I turn my space heaters on when I need them, or when the nights are really cold, and this works very well for me. My heating bill now averages about $157 during the winter months, much less during the warm months, which is pretty darn good considering that I work from home (my computers actually produce enough heat to keep my home office toasty most of the time; of course, my office gets a bit too sticky during August, and I sometimes have to (grudgingly) power up my portable air conditioner.) I usually turn all my space heaters on full blast when my daughter is staying with me, as she has a habit of stripping down and running around the house with just her panties on.

I have to laugh at myself sometimes when I'm home alone. I'm so keen about saving money that my office is often the only warm room in the house during the cold months. This makes for some very eye-opening trips to the bathroom: who needs coffee when you've got freezing cold floors and toilet seats.

It's funny: when I was in high school, I never imagined that I would grow up to become the kind of person who thinks about money every day, but that's who I am now. I don't think an hour goes by without me thinking about ways that I can boost my income by another $10,000 per month, or ways that I can reduce my daily living expenses. Oh well.


OK, and now for the good news.

One of my businesses did surprisingly well during the holidays, so for February and March (it takes a while for my earnings to filter through to my bank account), I'll have some extra cash to play with.

As noted above, I don't think I'll be able to play catch-up with my savings situation, because my pending windfall has already been earmarked. I'm going to

  • Maintain a decent quality of life.

  • Take care of my familial responsibilities.

  • Pay down my personal and business debt.

  • Send my father $1,000 (he recently had surgery and needs some cash. I can empathize: I had a tonsillectomy back in April of last year.)

  • Maybe, just maybe, take a small, working vacation (my last real vacation was in 1999.)

Putting money into savings now doesn't make sense to me. My savings account is at a great bank, but the yield is not very competitive, as is the case with most brick-and-mortar banks. Putting money into saving while paying an average of 8% on my debts isn't the smart way to go, in my opinion. Overall, I would still be "leaking money" via interest payments if I opted to go with such a plan.

But I am very tired of my personal credit card debt. I'm bored with it. I'm sick of it!

My FICO® credit score, provided by TransUnion, jumped back up from 753 to 760 last month, and it stayed at 760 this month (boring!) My credit score hasn't experienced a serious jump since September, 2006. I'm itching for the kind of fix that only a 10+ point jump to my FICO score can provide.

Yep, my credit score is good enough that I could easily qualify for yet another 12-15 month 0% balance transfer offer, which would allow me to avoid paying interest on my personal credit card debt for another year or so. But, the bottom line: transferring my debt via a 0% APR deal is just moving my debt around, and I'm tired of it. The banks and credit card companies have made some good money off my debt, but it's time to turn off the music and kick everybody out: the party is over. I now have the power to eliminate all of my personal credit card debt and some of my business credit card debt, and that's exactly what I'm going to do.

Here's what my current debt situation looks like:

My Debt: January, 2007


Paying off my personal credit card debt should give my FICO credit score a huge boost, and should get me to my goal of an 800+ credit score sooner than I had originally planned (If bringing a personal credit card balance of $5,800 down to zero doesn't boost my FICO score above 800, then I will certainly lose faith in the system.)

At first, I was thinking of paying off my car loan. It would feel great to own my vehicle and get my title back into my fireproof safe where it belongs. It would also be great to get rid of the almost $390 per month I pay on my car loan; that's money that could ease the stress of my nascent $300-per-month child support payments. But the APR associated with my car loan is 6.25%, which is pretty good considering that the national Prime Rate is 8.25% right now. I'm paying higher than 6.25% on some of my other debts, so paying off my car loan is out, for now.

I then considered paying off my student loan debt. When I consolidated my student loan several years ago, I got an APR of 8.25%. Lots of people are consolidated at half the APR I'm paying these days, which makes me feel like I'm getting ripped off. But my student loan payments aren't stressful, and my credit card debt is more of a priority for me.

So, by March of this year, I will have completely wiped out my personal credit card debt, wiped out the debt on Business Credit Card #1, and made some major progress (i.e. cut the balance in half) with the debt on Business Credit Card #2. Business is kinda' slow right now, but if my new marketing push is successful, I plan on making some large payments toward my student loan and my car loan, so as to eliminate at least some of the interest I'll pay on those loans.

That's it for now. Remember: comments are always welcome.

Here's an updated image of my charted credit score:

Updated Chart of my FICO Credit Score - January 30, 2007: Back to 760

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Friday, November 24, 2006

An Unexpected Dip for My Credit Score: FICO Score Now at 753

Two weeks ago, I logged into my Citibank consumer credit card account -- the only consumer credit card account I have with a balance right now -- to find that the good folks at Citi had recently given me a credit line increase, and a substantial one at that. My credit limit was around $13,000; now it's close to $22,000. 22K is the highest credit limit I've ever been granted. Not even my strongest business credit card has a credit limit that high.

Of course, I was very pleased about the credit increase, because it means that the balance on this particular card is now a smaller fraction of the account's credit limit, and that looks good to my current and potential creditors.

Funny thing is, my FICO® credit score (provided by Transunion), which had been hovering at 760 for the past two months, has dropped to 753. Now, I realize that the best way to get my FICO score to rise is to pay down my consumer credit card debt: the bigger the payment, the bigger the bump to my score. But since the balance on my Citi consumer credit card is now close to a third of my total credit line, my thinking was this would cause at least a small increase for my score.


Unexpected Decline for My Credit Score: Must Be Identity Theft!


Since I was expecting a small rise for my FICO score this month, as soon as I noticed the lower score, my immediate reaction was to order a free credit report from each of the 3 credit bureaus. I had to rule out the possibility that someone had gained my sensitive info and used it to open one or more accounts in my name. Under federal law, you are entitled to one free copy of your credit report (also known as a "credit file disclosure") every year from the 3 majors -- Transunion, Experian and Equifax. I had never exercised my right to a free report, so it seemed like the perfect time to take advantage of the new law.

I stopped by the www.Annualcreditreport.com website to order my free reports (Congress mandated that the 3 bureaus create the Annualcreditreport.com website. It's the site you need to use to get your free annual credit report from the 3 majors, or you can call 877-322-8228. If you contact any of the credit bureaus directly, you'll probably be asked to pay a fee.) After bypassing all the extra stuff the credit bureaus tried to sell me, I was able to get a free copy of my report from each agency quite quickly. I reviewed all the data carefully, and found nothing out of order.

Was I being paranoid for assuming that someone had stolen my identity? I don't think so! And here's why: Last month, I performed a virus scan on all my computers and the virus scanner found a keylogger installed on my primary workstation. A keylogger! I was floored by the discovery. With all the precautions I take -- virus scanner, firewall, etc. -- someone was still able to get a keylogger program installed on my computer. Unbelievable. I am not going to do the idiots who create these programs any favors by posting the name of the trojan here, but I will share this: the trojan almost succeeded at collecting many of my usernames and passwords -- and the corresponding website URL's! Had the trojan succeeded, it would have sent my many credentials to the criminals who probably know exactly how to exploit them for maximum gain, or maximum damage.

So remember to run a virus scan regularly, and remember to keep your virus definition files up to date!

A Downgraded Credit Score: It Feels Like I Failed A College Midterm.

So, why did my FICO score regress? I haven't opened any new accounts, or performed any balance transfers lately. For all my personal spending, it's been all cash (or debit card) for some time now. My understanding was that as your accounts age and you pay down your balances, you score goes up. Maybe the scoring algorithm was recently modified in some way. Maybe it was a simple correction. Whatever the reason, the decline in my score has certainly rubbed me wrong, and I plan on making a $900+ payment to my Citibank consumer credit card next week, which I'm hoping will boost my FICO score above 770. Wish me luck!


Always Negotiate -- Even Your Rent!

I do have some good news to report. I recently renewed the lease for my apartment and was able to get a favorable deal. The folks who manage my apartment complex wanted to raise my rent by $250 per month. I realize that a rent increase is quite normal for a place like mine, but $250 was simply not reasonable. I met with the property manager and negotiated (I brought my baby girl along to the negotiating table; gotta' use all the tools God gave me!) In the end, the property manager agreed to raise my rent by $20, which I calculated to be considerably lower than the rate on inflation, so I was OK with it. It's like Frederick Douglass said, "Power cedes nothing without a demand."

Here's an updated image of my charted credit score:

Updated Chart of my FICO Credit Score - November 24, 2006: Retreats to 753

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Thursday, November 02, 2006

FICO Credit Score Stalls Out @ 760: What A Buzzkill!

Nothing exciting to report this time.

My FICO® credit score recently updated, and, as I expected, my FICO score didn't budge and is still at 760. Though I was expecting no change, I had gotten hooked on watching my score rise each month, so the fact that my score has leveled off is...well...a buzzkill!

Why no rise this time around? Well, it's quite simple: I didn't make a sizeable payment on my Citibank credit card last month (my Citibank card is the only consumer credit card I have with a balance right now. I have a balance on two business credit card accounts, but payments to those account don't affect my FICO score.) I've had to shift my priorities a bit as I prepare to live alone again, which will happen in about two months.

What does a 760 FICO score mean? For what I've learned, it means that I'm a 2% credit risk in the eyes of Fair Isaac (750 -799 range.) 800 or higher translates to a 1% risk of default, while a score between 700 and 749 translates to a 5% risk of default.

Here's what's really frustrating about having a 760 score: I recently learned that my car insurance company -- State Farm -- bestows their customers with the coveted "top tier" rank once an insured driver's FICO score rises above the 770 mark. So I'm a mere 10 points away from getting the best possible deal on car insurance! Bah! Jut doesn't seem fair. You can bet the shirt on your back that my insurance agent will be getting an urgent call from me just as soon as my score crosses the 770 threshold. Yep.

I need a new buzz, a new fix. In order to get the 11 point jump I desire, I think I'll need to make a payment of at least $500 on my Citibank credit card. I have no idea how I'm going to squeeze it out of my budget right now, but I'm sure I'll think of something.

That's it for now. I'll report again on my FICO-related adventures next month. Stay tuned!

As is the tradition at this particular debt blog, here's an updated image of my charted credit score:

Updated Chart of my FICO Credit Score - November 1, 2006: Stalled at 760!

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Sunday, October 01, 2006

FICO Credit Score Hits 760: Now 40 Points Away From My 2008 Goal

Exciting news: my FICO® credit score recently updated, and is now 760, a new record. I was expecting a bump of around 10 points this month, but I got 15, so I'm quite pleased. My goal is to get to 800 by the fall of 2008, but at my current pace I may be able to pull it off by the end of 2007, or even earlier.

But I also have some bad news to report today. My financial situation is about to take a turn for the worse. My baby girl started preschool recently, and the fees are steep: $134 per week, and that's for a four-day week! The fact that I'm not paying for baby sitting anymore offsets the pain, but it still hurts. Furthermore, my home situation has deteriorated to the point where I will probably be returning to the bachelor life by early next year, and that means no help with the rent and other household bills.

It's a good thing we never married; situation would have been much costlier, in both time and resources, and few things boil my blood more than wasting my time and my resources!

Will I be able to maintain my present standard of living? I think so. I won't be able to put as much as I would into my saving account every month, but I can live with that for a while. I may have to cut back on my credit card payments a bit: instead of paying 3 times the minimum due I may have to cut back to double the minimum, but that's nothing to panic about.

I'm actually quite relieved that my home situation is changing now, because I've made great progress with my debt over the past 2-3 years. Returning to the bachelor life 2 years ago would have been much harder to deal with, no doubt.

I'll cut back on eating out, which means that the owner of my local Chinese restaurant will lose some serious business for a while, but they are always busy (great food and service) so I'm sure the establishment will still be there when I'm ready to return.

Fresh fruit in the morning? Sure, I can still afford it, but I'll have to skip the ripe, precut cantaloupe for a spell (10 times better than coffee as a morning powerbooster, for me anyway.) My local supermarket charges a real premium for paring and slicing the best fruit, so I really should have broken this habit some time ago, especially now that the baby is in preschool and I really should be doing the paring myself. Yup, looks like its back to canned pears for a while.

Living alone will have its advantages. I'll be able to devote a lot more time to work, and the extra productivity will certainly result in more income. Power consumption will be cut in half (I think), so that means a reduced electric bill (it's all electric -- no gas -- where I live.) Of course, there's the reduces stress (<--I won't bore you with those details!) Will I get lonely? I highly doubt it. I'll still be hanging out with my daughter on a regular basis, and I look forward to socializing again -- this will help to add some much needed flavor to my routine. I am very American in that I like to immerse myself in my work, and I am also fortunate in that I very much enjoy what I do, so loneliness and boredom shouldn't be an issue. To put it simply: I accept that change is a normal part of life, and I feel very fortunate that the life modifications I am about to experience probably won't be as traumatic as I've seen in other households (my own parents went through a messy divorce years ago.) I count my blessing each and every day, a habit I recommend to all. As is the tradition with this particular debt blog, I will close with the charted progress of my FICO credit score. I hope to report only good news in next month's blog entry. Thanks for reading.
Updated Chart of my FICO Credit Score - October 1, 2006: 760

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Saturday, August 26, 2006

My FICO Credit Score Gets An 18 Point Boost: Now @ 745

Looks like all the cash I used to get my debt into a zone that I'm comfortable with is paying off. My FICO® credit score has just been bumped up by 18 points and is now @ 745. Am I pleased? Yes, quite pleased. 745 is basically an A- rating. From my research, I've determined that any score over 720 will get you the best possible interest rate on most loan products.

What does a FICO score of 745 mean to me? It means that when I am ready to buy a house or condo, the mortgage companies are less likely to ask for employment or income verification. This is very key for me because I'm self-employed. I'm actually hoping that I won't need to rely on a loan when I'm ready to buy; with a little luck and a lot of hard work, I may be able to pull it off. But if I don't have enough tucked away by the time I'm ready to take the plunge, I may have no other choice but to get a mortgage.

From this point forward, any increase in my FICO score probably won't make much difference in the interest rate I get on loans, etc. But I'm still shooting for an 800+ score by the time Bush & Co. leave office, just so I won't have to worry about those temporary dips that can cause problem if your score isn't high enough. In other words, if my FICO score was 800, and it dipped to 785 temporarily as a result of a new credit account being opened, then the temporary dip would be nothing to sweat about. On the other hand, a temporary dip from 725 to 710 may cause some interest rate-related issues.

About a month ago, I had a brief conversation with a mortgage broker at a car dealership. He told me that 720 is the threshold with most lenders, and any score above 720 is just good for breathing room. So, in theory, someone with a score of 731 should get the same rate on a mortgage loan as someone with a score of 799 -- all other things being equal, of course.

You know what's kinda' embarrassing? I know a guy who is in his early 20's and has a FICO credit score at or around 800. In my early 20's I was a very poor, spendthrift college student with lots of debt-related problems. But I don't feel too bad about my past. I really didn't understand money back then, but I do now, and even though it can take up to 7 years to fix major mistakes, those mistakes aren't a death sentence. With knowledge and perseverance, I believe that anyone can go from having a credit rating of F-, to A+.

Some advice for those who are working on repairing or building credit.

There was a time not too long ago when people in-the-know would advise credit consumers to cancel old credit card accounts once the balance on each account was paid in full. The reasoning was sound, as it was thought that banks considered you an increased credit risk if you had a lot of credit available to you. After all, a long, drunken weekend in Las Vegas, for example, is all it would take to raze a solid financial house to the ground.

These days, the advice from credit experts is to keep those old accounts open, because the FICO scoring system favors older credit accounts, especially those with a zero balance.

Also, if you really want the banks and credit reporting agencies to notice your excellent debt repayment track record, use your credit card(s) to make a few minor purchases each month, then pay the balance in full when the statement arrives. If you can't pay the balance in full, then pay at least 3 times to minimum amount due. Timely payments on your student or car loan will help your credit score by demonstrating that you are willing and able to pay your bills on time, but regular and responsible credit card activity is, in my opinion, the best thing for improving a credit score over time. Bottom line: the banks pay close attention to how well you handle retail purchases. Once you've achieved your desired credit score, you can pay all your cards in full to avoid interest charges, but remember to keep the account(s) open once you've done so.

And if you want to get 3 or 4 credit cards, do it, just don't get them all at once! Having more than once card can be advantageous, because having a modest balance on 3 credit cards is better -- from a FICO point of view -- than having 1 credit card that is nearly maxed out. Just be sure to space out the applications. In my opinion, the time between credit card applications should be at least 7-9 months. Remember: a great way to save on interest charges is to take advantage of the best available 0% APR balance transfer offers out there.

That's all for now. Below I've posted an updated image of my charted FICO credit score:


Updated Chart of my FICO Credit Score - August 26, 2006: 745

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Monday, July 31, 2006

FICO Credit Score Gets A 6 Point Raise: Now @ 727

Folks, in my opinion, the system works. Pay all your bills on time, spend your money wisely, shred all documents that contain any sensitive information, and your credit score will rise. Being responsible in matters of money lets the banks know that you "get it," and they respond by offering you the best deals on loans, credit cards, etc. It's really that simple.

Just checked my FICO® credit score to find a new record high: 727. I managed to squeeze out a $700+ payment on one of my Citibank consumer credit cards earlier this month, bringing the balance on that particular card down to zero. So now I am down to one consumer card with a balance, and I plan on transferring that balance to another account in the near future, as there are still plenty of top-notch 0% balance transfer offers out there.


Instinctual Budgeting

I'm going to coin a new phrase, people, right here, right now: "Instinctual Budgeting." That's what I rely on, and it works quite well for me. Some of my friends use complex budgeting systems in order to stay on track with their finances. I respect their discipline, but it's not for me: I simply don't have the time for that. Even if I were to use a sophisticated software program that made budgeting both very easy and very efficient, it would still take up too much of my precious time!

Basically, I know exactly how much my life costs on a daily basis. Rent, phone, cable, cell, Internet, food, energy, etc. Very easy to calculate, since my bills don't vary that much. I also know how much I make on a typical day. Every month, I deposit between $1,500 and $2,000 into my savings account. If for some reason I am not able to deposit at least $1,500 in a particular month, then I cut back on the number of meals I eat outside my apartment, and make up for the lost ground by depositing more than $2,000 the following month.

That's it, really. Sometimes, when I'm at Wal-Mart picking up something I need like deodorant or plastic cups, I get the urge to do a little impulse spending, like pickup a cool gadget or an extra, high velocity fan (it's been very hot this week!) When I get the urge, a little alarm bell goes off in my head, and the urge is almost always defeated after the frugal side of my brain asks the spendthrift side, "Do you really need that item?"

Yep, it's all about sticking to what you need, and spending on what you want on rare occasions.

Here's some advice for anyone who's having trouble controlling their spending: every time you want to buy something, ask yourself if the item or service you are about to spend your hard-earned money on has real value to you. I've saved myself from countless impulse purchases by asking that question whenever I get the itch.

Of course, I'm a guy, so it's relatively easy for me to be thrifty. I shave my own head every two weeks (my hair grows fast.) I have a one pair or sandals--which I wear way too often, one pair of athletic shoes and one pair of black dress shoes. I go clothes shopping every 3-5 years, though I do pickup a new underwear, undershirts and socks every 6-9 months or so. I spend more on my baby girl than I do on myself, and that's the way it should be, IMO.

My plan is to get to a point where I can comfortably deposit between $3,500 and $5,000 into my savings account each and every month. The only obstacles preventing me from doing that right now are my credit card debts and my student loans debts. If all goes well, I should be able to deposit at least $3,500 per month by this time next year. Wish me luck!

Here's the latest screen shot image of my charted FICO credit score:


Updated Chart of my FICO Credit Score - August, 2006: 727


That's it for now. Hopefully my FICO score will experience another increase at the end of August. I'll share the numbers as soon as I get them. Thanks much for reading.

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Sunday, July 09, 2006

A New Record High for My FICO Credit Score: 721

I'm pretty excited about sharing the latest news from my debtscape: my FICO® credit score has hit a record high 721. I was actually expecting a bigger jump this month, because I made two $1,000 payments on two separate credit card accounts. 2 payments in the $1,000 range should have caused my score to jump higher than 2 points, according to the handy FICO Score Simulator that's available to me when I access my Providian account online. But I'm thinking that perhaps only one of the two payments is being reflected in my new 721 score, because there's always a lag with these types of updates.

You know, the only reason I keep my Providian (which, by the way, is now Washington Mutual) account open is to have access to my FICO score for free. The credit line on my Providian account is $9,500, which is decent, but I don't use the card, because the annual percentage rate is close to 20%--actually, it may be higher, but I have no idea because it's been a very long time since I used the card for purchases (as you've probably already figured out, I got my Providian card way back when my credit score was pretty bad.) I really have too many credit card accounts open right now, which can look bad in the eyes of certain creditors, so if it wasn't for the free FICO access, my Providian card would have been consigned to the cruel and efficient teeth of my shredder many months ago.

At this point in my life, it feels good to be able to say, "I'm comfortable with my current debt burden," and mean it.

I'm trying to see if I can make a ~$700 payment to one of my Citibank® credit cards, which would bring the account balance on this particular card down to zero. If I can manage to spare the cash, it would be a great thing, because then I would be left with only one consumer credit card with a balance. I have two business credit cards, each with a very manageable account balance, but I'm OK with carrying business debt at this point: the business-related credit card debt is helping to build a credit history for my company, and I need to be able to cycle in and out of debt for certain business expenses (I'm enjoying a year-long, interest-free period on 1 of my business credit cards, so my business-related debt really isn't pinching me that much at this point.)

For those of you who like visuals, I've posted an updated screen shot image of my charted FICO credit score below:


Updated Chart of my FICO Credit Score: 721


That's it for now. Stay tuned, and thanks much for reading.

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Thursday, April 27, 2006

FICO Score Retreats to 697: Am I Worried--NO!

I recently checked my FICO credit score to find that my score has dipped from 709 to 697. No surprise, really, as I was expecting a slight decline in my score this month, because I've been moving some debt around in order to avoid interest charges wherever I can.

Am I worried about the dip in my score? Nah.

Some folks out there are warning that a dip in your credit score can result in the interest rate on your credit cards going up. While this is true if, for example, you hit a major financial bump in the road and can't make the minimum payment due on any of your credit cards, this is certainly not the case if you have been paying all of your bills on time. The bottom line is, the credit card companies don't want to do anything to scare off or otherwise punish responsible consumers, and raising your interest rate because of a slight dip in your credit score would be unprofessional and unreasonable--even draconian, in my opinion.

Now, if I decided to max out all my credit cards all at once, I'm certain that my credit score would dip to a level that might cause the interest rate on my cards to up. But this should be expected, because my maxed out status would logically make me an increased credit risk in the eyes of my creditors, which makes sense.

I won't need to move my debt around for a while, so by next month I'm betting that my credit score will be back up in 700 territory. I'll be paying at least 3 times my minimum amount due--as usual--on all my credit cards this month, and I've also just paid down one of my accounts to $0, so I may end up with score in the 715-720 range as a result. Wish me luck!

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Tuesday, December 27, 2005

FICO Credit Score Back Down To 688: Good Grief!

Some good news and some bad news today. First, the bad news: my FICO credit score has dropped down to 688. My FICO score had recently jumped from 686 to 706, but it's back down again, and I have to deal with the fact that I am once again a sub-700 borrower! The FICO system is just too cruel! I am placed in the near-elite class of 700-720 FICO borrowers, only to have my status taken away from me 2 months later. It's not right!

Actually, I'm not surprised about this recent change to my FICO score. My baby girl--who is growing at an incredible rate (she's off the height chart @ the doctor's office)--needed new clothes, so I charged some baby shopping. I also invested in a bunch of space heaters for my home, an investment that has already shaved plenty off my heating bill, so no regrets there. Lastly, I took advantage of a "3.99% APR until transferred balance is paid in full" balance transfer offer from Citibank, which, again, will save me plenty in the long term, but may have contributed to the latest (temporary!) decline in my credit score (sometimes transferring a credit card balance helps my credit score, but then sometimes transferring a similar balance with similar circumstances hurts it. Makes me wonder if some credit card companies/banks have more "weight" than others...Hmmm...)

Don't get me wrong: I know that 688 is still a good FICO score, a score that will still get me a favorable to excellent rate on just about any loan product, so I'm not really crushed. Furthermore, I know that within a few months, I'll be back here reporting that my score is back up above the 700 mark, as I plan on making some large payments to certain creditors in the near future, and I don't plan on missing any credit card or car payments! I am no way near ready for my own home, so I can wait.

The good news is that I have completely paid off 2 credit cards by taking advantage of the Citibank balance transfer offer I mentioned above. I managed to pay off 2 relatively high balances, and, even though those balances have been transferred to one of my Citibank credit cards, my Citibank card is still OK, as my balance on that card is still below the halfway point of my total credit line, and that's important.

And kudos to Citibank for offering a credit line increase in conjunction with the "3.99% APR until transferred balance is paid in full" balance transfer offer. That's what basically sold me on using Citibank, as opposed to a going with a competing bank or credit card company. By offering a credit line increase with the balance transfer deal, Citibank is basically communicating to me, "yes, we want your business, and we know that having a high credit card balance can hurt your credit rating and put you at risk of "maxing out" your account. So we'll give you a credit line increase with this deal, so that you don't have to worry about that stuff."

What am I going to do with the credit card accounts that I've managed to pay off? Well, I'm keeping them, as it's the right thing to do. Bottom line: Lord FICO, master of my credit destiny, likes to see accounts that are "old." The benefits of having long-standing relationships with creditors outweigh the benefits gained, if any, by canceling the accounts.

I'm hoping that banks will be offering some exceptional balance transfer offers in January; I predict that transferring credit card balances will be all-the-rage next month, as holiday shoppers try their best to avoid the interest charges related to all that shopping done for Xmas/Hanukkah/Kwanza 2005.

Peace and prosperity to all in 2006!

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Saturday, October 29, 2005

A Test of My New Credit Score Results In Failure!

As I reported here recently, my credit score jumped from 686 to 706 this month. Emboldened by this development, I decided to test the power of my new FICO score by applying for a new business credit card.

I'd had my eye on one particular business credit card offered by Chase for about 8 months; I was attracted to it's exceptionally low interest rate (APR) and excellent benefits. I hadn't had the courage to apply for the card before because I knew that a card with such a low interest rate would not be easy to get: I knew that only folks with truly excellent credit would be able to get this card and enjoy its benefits.

Well, my application was rejected, and I'm certain that my personal credit history and my personal FICO credit score influenced the outcome of the application. Darn' it!

Of course I'm disappointed that I won't have this credit card in my wallet--Chase was offering an exceptionally juicy 0% balance transfer offer with the card!--but I'm not devastated. I currently have 2 business credit card accounts and I am quite satisfied with both. However, the bottom line is that if my recently rejected application had instead been accepted by Chase, I would have been able to save some cash in the long term by a) taking advantage of the 0% balance transfer offer by transferring one or two balances to the new card and b) having and using a business credit card with a fixed annual percentage rate that is as close to the prime rate as I have ever seen.

Looks like I flew too close to the sun this time around. But I'll apply again in about 6 months. Wish me luck!

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Friday, October 28, 2005

A 20 Point Jump In My FICO Credit Score!

I've been waiting for my FICO credit score to hit the 700 mark for over 2 years now. Well, it looks like it's finally happened! Yesterday, I checked my score and found that it had jumped from 686 to 706! Yippee! Pretty exciting stuff!

In October of 2004, my score was 628. I really don't know if it is a real accomplishment to go from 628 to 706 in a year, but I think it is.

How did I finally get over the 700 mark you ask? Well, I recently made a nice sale of one of my online properties which left me with a decent chunk of cash to play with. After making some investments, I was left with about $4,000. I could have put that money into the bank, but I realized that it made more sense for me to use the money to pay down some of my personal and business debts. Why? The answer is quite simple:

The money I am saving in interest charges that I would have paid to the credit card companies is greater than any interest I would earn by putting the money away or even by making some safe investments (like a Certificate of Deposit.)

And, of course, paying down my debts would cause my FICO score to rise, and an improved FICO score has many obvious benefits.

I did not realize, however, that my FICO score would jump by 20 points as a result of my actions. I was expecting a 10 point increase, or maybe even a 15 point increase at most.

I think that other factors may have contributed to this favorable jump in my score. Perhaps I had reached a 2, 3 or 4 year anniversary with one or more of my creditors this month, and that could have been a contributing factor.

Well, whatever the reasons, I am still seeing some somewhat discouraging language in my credit report, i.e:

1. The proportion of balances to credit limits on your revolving/charge accounts is too high.

Analysis of consumer credit behavior repeatedly finds that owing a substantial balance on revolving/charge accounts (Visa, MasterCard, Discover, American Express, Diners Club, department store cards, etc.) relative to the amount of revolving/charge credit available to you represents increased risk. In fact, the level of revolving debt is one of the most important factors in the FICO score. The score evaluates your total balances in relation to your total available credit on revolving/charge accounts, as well as on individual revolving/charge accounts. For a given amount of revolving credit available, a greater amount owed indicates a greater risk, and lowers the score. (For credit cards, the total outstanding balance on your last statement is generally the amount that will show in your credit bureau report. Bear in mind that even if you pay off your credit cards in full each and every month, your credit bureau report may show the last billing statement balance on those accounts.)


2. The length of time your accounts have been established is relatively short.

This factor is based on the age of the accounts on your credit bureau report (the age of the oldest account, the average age of accounts, or both). Research shows that consumers with longer credit histories have better repayment risk than those with shorter credit histories. Also, consumers who frequently open new accounts have greater repayment risk than those who don't.

Source: FairIsaac

So it would seem that I still have a long way to go before I will reach my ultimate goal: debt free, with an 800+ FICO score. Wish me luck!

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