Credit Q&A: “How often to check your credit report?”
Credit reporting seems to be all the rage these days, now that a ton of companies have realized how profitable the fear of the unknown can be.
Now don’t get me wrong – staying on top of your credit history is extremely important, especially when it comes time to apply for a credit card or a loan.
But it may have been blown out of proportion just a bit in recent years.
There are a ton of services out there nowadays to keep track of your credit, such as credit monitoring, which tracks it continuously, and free credit reports, which allow you to access your credit report for free for a week or so, before converting into full blown credit monitoring programs.
See credit monitoring vs free credit reports for more on that.
Choosing which is right for you will depend on your unique situation. As I mentioned earlier, if you’re planning on applying for an important loan in the near-future, knowing your credit score is pretty darn important.
After all, if it’s lower than you anticipated, you may be completely out of luck and stuck without a Plan B.
Keeping an eye on your credit report is also important to ensure there isn’t any identity theft happening, as any recent credit inquiries and new lines of credit will show up.
That said, if you’re simply interested in making sure no funny business is going on, a free credit report from AnnualCreditReport.com will probably be sufficient.
The program allows you to order a free credit report from all three credit bureaus once every 12 months.
So you could order one report from each bureau every four months to do your own type of credit monitoring.
Just remember this service doesn’t provide a free credit score (credit report vs credit score), and the information may vary between bureaus, so it’s not full proof.
If you plan on applying for something like an auto loan or a mortgage in coming months (or weeks), signing up for a free credit score (trial offer) may be the best move.
You can always cancel without incurring any charges, but you’ll need to provide a credit card number and your social security number.
And there’s always the option of using Credit Karma, which gives you a quasi-Fico score and some decent credit report info to ensure nothing out of the ordinary is happening.
(photo: joelanman)
This post was written on August 31, 2010
As of the end of February, there were 576 million credit cards in circulation in the United States alone, according to CNBC.
And US consumer revolving debt was $864.4 billion as of the beginning of the year, with 98% of it tied to credit card debt.
So who are the top issuers of all these credit cards?
Well, you may be surprised to hear that Bank of America was the leader, with $194.7 billion in credit issued.
That includes business outside the US, in places like the UK, Canada, and Spain.
Chase came in a close second with $184 billion in credit issued via 119.4 million credit cards, making it the largest credit card issuer in the United States.
At third was Citi, with $148.9 billion in credit issued on 92 million credit cards.
Top 10 Credit Card Issuers
1. Bank of America/MBNA – $194.7 billion
2. Chase – $184 billion, 119.4 million credit cards
3. Citi – $148.9 billion, 92 million credit cards
4. American Express - $105 billion
5. Capital One – $68.8 billion
6. HSBC – $58.5 billion
7. Discover – $49.6 billion, 54.4 million credit cards
8. Wells Fargo – $36.4 billion, 17.3 million credit cards
9. Barclays – $32.6 billion
10. Lloyds TSB/HBoS – $19.3 billion
If you’re wondering where Visa and MasterCard are on this list, note that they’re not credit card issuers, but actually payment processing companies.
This post was written on August 25, 2010
Yesterday, the latest set of new credit card rules went into effect. Among other things, they ban inactivity fees and limit credit card late fees to $25.
While it’s seemingly good news for consumers, the rules will clearly cost credit card issuers dearly.
And in an effort to offset those losses, interest rates on credit cards have been rising steadily.
So much so that they’re now at their highest point since 2001, according to research firm Synovate.
During the second quarter of the year, the average interest rate on existing credit cards climbed to 14.7%, up from 13.1% a year ago.
At the same time, the prime rate, which is used as a benchmark to price credit card interest rates, has fallen precipitously.
It now stands at just 3.25%, having fallen from 8.25% as recently as mid-2006.
The spread between the prime rate and average credit card rates is now at 11.45%, the highest in at least 22 years, which is as far back as the Synovate data goes.
Strange, considering other consumer loans like mortgages are at record lows, though much of that has to do with government involvement.
So the plan for credit card issuers going forward is to make more money via finance charges, all the more reason to pay down your balance in full each month.
Tip: How to pay off credit card debt.
This post was written on August 23, 2010
Credit card Q&A: “How do credit card companies make money?”
Credit card companies make money in a variety of different ways. The first and most obvious way is via consumer-related fees.
We’ve all paid late fees, over-the-limit fees, and so forth. Credit card companies make a ton by charging fees for all types of different slip-ups made by us cardholders.
For example, your credit card issuer may charge you for making a late payment or going over your limit.
Here is a list of common fees charged by credit card issuers:
- Late payment fee
- Over-the-limit fee
- Pay-by-phone fee
- Balance transfer fee
- Annual fee
- Return payment fee
- Return check fee
- Cash advance fee
- Foreign transaction fee
- Finance charges
Most of those fees are self-explanatory. The last one on the list, finance charges, refers to the money credit card companies make by charging you interest on your purchases.
The higher your APR, the more they make in finance charges. If the APR on your credit card is 20%, and the associated balance is $5,000, they’d rake in $1,000 annually (using simple math).
Credit card issuers and payment processors like Visa and MasterCard also make billions annually in interchange fees, which are essentially transaction fees.
It works like this: When you make a $100 purchase, the merchant will actually only receive around $97.50, with the remainder being split between Visa/MasterCard and the card issuing bank, such as Citibank, Bank of America, or Chase, just to name a few.
These fees drive up prices for consumers, whether they pay with cash or plastic, and explain why banks are so eager to issue more and more credit cards.
Read more: The cost of credit card use.
This post was written on August 18, 2010
All this credit stuff can get pretty complicated.
But two things you should have a handle on are credit reports and credit scores. Each are important in their own right, and both are necessary to assess your overall standing as a consumer.
While the pair certainly overlap, they are two entirely different things.
Credit Reports
A credit report contains a wealth of information about you, including basics like your name, address, social security number, and employment history.
Additionally, your credit report will list your credit history, with information on the types of accounts you’ve got open, how long they’ve been established, what their associated balances are, and if they’re current or derogatory (collections, charge-offs).
Any recent credit inquiries will also show up on a credit report so creditors can determine if you’ve been shopping around for new credit.
While all this information can be very helpful to both consumers and creditors, both parties seem to be most interested in credit scores.
Credit Scores
A credit score is simply a three-digit number between 300-850 (credit score range) for Fico scores, and slightly higher for VantageScore.
Generally, a credit report will contain three credit scores, one for each of the main credit bureaus. These credit scores are based on the aforementioned information found in your credit report.
Without all that information, you wouldn’t have a credit score, so the two can’t really exist without one other.
These credit scores are simply a numerical representation of your credit risk, based on all that information.
So if you’ve got a lot of good information on your credit report, your associated credit scores should be high to reflect that. The opposite is also true.
Tip: If you order a free credit report from the official AnnualCreditReport.com, don’t expect to receive a credit score. Those are not included, and can only be purchased for an additional fee.
If you want a free credit score, consider enrolling in a trial credit monitoring program and canceling before incurring any charges.
This post was written on August 10, 2010
