Credit scores are important, and can be improved. Image: Flickr / pyxopatamus / CC-BY-SA

A credit score is a number intended to indicate how risky a financial gamble a person may be. There are three big credit reporting agencies in the United States, and each one reports its own score. There are numerous factors that affect your credit score, and you can control your credit score by taking specific actions.

The history of credit scores

Credit score reporting, in its current form, has been around since 1841. Store owner Lewis Tappan started keeping files on customers and their payment history. Tappan hired thousands of correspondents to report on the credit worthiness of individuals in their communities. These reports on individuals soon had hundreds of customers, and the modern credit reporting system was born.

How credit scores are used

Credit scores were originally intended for informing decisions about extending credit to customers. Credit scores are used much more extensively now. Many lenders check credit reports on individuals applying for a credit card or loan. Landlords, potential employers and insurers may run credit reports in order to inform their decisions. There is controversy over the use of credit scores to make decisions that do not deal directly with the issuing of credit or providing of financial services, but the practice is legal and widespread.

What goes into a credit score

Each of the three credit reporting agencies has a different formula for creating a single credit score. The FICO score, developed by the Fair Isaac Corporation, is the most widely used measure of credit in the United States. The general information included in these reports has been determined to be:

• 35 percent payment history – how often you make payments on time
• 30 percent debt – what type of debt and how much debt you have
• 15 percent length of credit history – how long you have used credit
• 10 percent credit diversity – how many different types of credit you make use of
• 10 percent hard inquires – when a creditor checks your credit report

Defining good credit

The FICO credit score ranges from 300 to 850. What is considered a good credit score depends on the creditor doing the checking. However, the relative risk factor associated with each score can be estimated. In general:

• A FICO score of 770 to 850 is considered “choice”
• A FICO score of 710 to 770 is considered “good”
• A FICO score of 600 to 710 is “average” or “medium” credit
• A FICO score below 600 is considered “bad” credit or “high risk”

Taking control of your credit score

The federal government mandates that every credit reporting agency provide a free copy of its credit report on an individual once a year. These free federal reports generally do not include the numerical credit score, but they do include all the information on your report. The government-supported AnnualCreditReport.com provides access to these free reports. There are also numerous services that provide a “free” copy of a credit report in exchange for subscription to services. Once you have a copy of your credit report, check it for accuracy. Credit report errors must be disputed in writing, with a copy of any relevant documents included. The agency has 30 days to investigate the dispute and inform you of the outcome.

Improving your credit score

Once you determine the information on your credit report is accurate, you can improve your credit score by taking a few simple steps. First, pay your bills on time. Second, take a close look at the debt you are carrying and how it is being used. If your credit card balances are close to their limit, pay down that debt. You should also try to keep your debt to income ratio – the ratio that compares your total monthly debt payments to your total monthly income – below 30 percent. For an income of $2,000 per month, a 30 percent debt-to-income ratio is $600. Rebuilding your credit really is simple – make payments on what you owe on time and in full. Once you are doing that, it simply takes time.

Sources

MyFICO.com
PBS.org
FTC.gov
Investopedia
CreditScoring.com

Experian is being sued for fraud; customers say the company doesn't provide relevant information in the credit reports it provides to customers. Photo Credit: Swampyank/Wikimedia Commons/CC-BY-SA

A lawsuit has been brought against credit bureau Experian in California. Experian is one of the three main credit bureaus, along with TransUnion and Equifax, and credit ratings from those bureaus are used in creating a persons’ credit score. The plaintiffs in the suit, which may become class action, are alleging fraud.

Plaintiffs say free credit report sites give false info to consumers

Plaintiffs in the California lawsuit against credit bureau Experian are saying the bureau has defrauded. They say Experian provides misleading information on the websites where the company sells copies of credit reports, according to MSNBC. The suit claims that Experian provides the wrong score, purposefully, through FreeCreditScore.com and FreeCreditReport.com. The sites, which charge a $14.95 per month fee to users so they can monitor their credit report activity, provide the Experian PLUS score. The reason why the plaintiffs are seeking a class action status is because that isn’t the score lenders would look at if a person applied for a personal loan.

Lenders look at FICO scores

When lenders or other parties check a person’s credit score, they aren’t looking at a score that one credit bureau comes up with. Lenders look at the FICO score, or the number from the credit scoring system developed by Fair Isaac and Company. Fair Isaac scores are calculated by looking at certain data about a person and coming up with a numerical rating of that persons’ credit worthiness. Experian, Equifax and TransUnion all produce credit scores with the FICO formula, and those scores are reported to lenders. The lawsuit accuses Experian of fraud because the PLUS score is not reported to anyone and would not be considered if someone applied for a job or installment loan. The suit says Experian misled consumers by advertising worthless information for sale. Experian had to be compelled by threat of a Federal Trade Commission suit to advertise the link to the government site where consumers can request the one free report from each bureau that people are allowed by law.

States trying to get employers to mind their own business

Labor rights advocates have never been enthralled with the idea of employers checking the credit scores of potential new hires. At least half of the United States isn’t either; 49 bills in 25 states are currently before state legislatures to legally bar employers from checking credit scores of a potential new hires. Though credit bureaus that sell the reports to businesses and some businesses contend that it can catch a potential problem employee, civil rights and labor advocates insist that it is prying into an area that no employer has a right to.

Sources

MSNBC

USA Today

Many NPSL card users have difficulty keeping credit utilization low and FICO scores high. (Photo: Andres Rueda/Flickr/CC-BY)

Everyone knows about the misleading and predatory credit card practices that characterized the pre-Great Recession personal finance landscape. We know how malicious credit card companies preyed upon vulnerable demographics, making money for themselves and dragging down Americans’ credit in the process. However, many people believe that these practices are largely a thing of the past, that the Great Recession is over and that the new credit card laws (CARD Act) have helped protect consumers. While these things are indeed true to a certain extent, unscrupulous credit card practices still persist, and not all target those with bad or little credit history. In fact, some of the most popular credit cards and charge cards for people with excellent credit are inherently deceptive products that have the potential to damage the credit standing of those who use them.

NPSL cards – the background

If you have a Visa Signature credit card, a World MasterCard credit card or an American Express charge card, you are in possession of what is known as a No Preset Spending Limit (NPSL) card. People with excellent credit gravitate to NPSL cards as a result of the common misconception that they provide unlimited spending capabilities.

In reality, however, NPSL cards do have limits; they just are not disclosed to consumers. Credit card companies refrain from providing users such crucial information in order to prolong the lucrative myth of endless spending. While this practice lines issuers’ pockets, it also creates problems for NPSL card users. Because consumers have no idea how much they can spend with NPSL cards, they are extremely vulnerable to their cards being unexpectedly declined, an occurrence that can be both logistically difficult to manage and downright embarrassing.

NPSL Credit Risks

NPSL cards also have the potential to drag down users’ credit scores. Although NPSL cards do have spending limits, issuers do not report them to the credit bureaus. Instead, according to a No Preset Spending Limit Card Study conducted by CardHub.com, they either report proxy limits for their NPSL cards or no limits at all. This is important because the largest credit scoring agency in the U.S., FICO, uses information about consumers’ credit limits to determine the balance-to-available-credit ratio, known as credit utilization, that factors prominently into their credit scoring calculations. Exhausting much or all of one’s available credit leads to high credit utilization and a lowered credit score.

However, according to the Card Hub study, no uniformity exists in what faux limits credit card companies report for their NPSL cards, and three of the top 10 issuers — Chase, HSBC and U.S. Bank — refuse to be upfront about how they report. Consequently, NPSL card users have difficulty keeping credit utilization low and FICO scores high.

Avoid NPSL Card Use

As a result, use of an NPSL card is simply not worth the risk. All they truly provide is a great deal of uncertainty and the potential to affect consumers’ credit standing in unpredictable ways, ranging from FICO not rewarding you for your NPSL card’s available credit to your FICO score falling because of high utilization. What they don’t provide is unlimited spending power. Therefore, people with excellent credit should refrain from using NPSL cards and open credit cards that reward rather than punish them for having such high credit standing.

This guest post comes from Odysseas Papadimitriou, CEO and Founder of CardHub.com, a website that helps consumers compare credit cards and gift cards.

Raising a credit score will save money on interest payments that can be invested to finance retirement. Thinkstock photo.

A good credit score is more important than ever. The  credit crunch has raised the bar on credit scores. Raising a credit score is necessary now to get a loan and get a good interest rate on that loan. A good credit score saves money. A bad credit score costs money. A FICO credit score of 650 is considered fair to poor. A FICO credit score of 750 is considered good to excellent. A select few, with discipline and focus have credit scores higher than 800. A man in Arkansas is doing everything he can to achieve a FICO credit score of 850. His diligence could translate into a rich retirement.

Raising a credit score to 850

A FICO credit score of 850 has been achieved by 0.5 percent of Americans, according to FICO. A CNN profile of Chris Plepinski of Rogers, Ark., chronicles his quest to achieve that elusive number. Plepinski is currently at 813, putting him ahead of more than 82 percent of his fellow Americans. His burly credit score will save him a fortune over his lifetime. But CNN reports that Plepinski won’t be satisfied until he hits 850. To do that he studies every factor of a FICO score in detail. He checks his FICO score every 90 days and adjusts his personal finances to squeeze out every possible point. He once took out a car loan even though he could pay cash, figuring that adding the variety to his credit mix could bump up his score.

FICO credit scores and how to raise them

A FICO credit score is distilled from credit report data collected by the Equifax, Experian and TransUnion credit bureaus. Bankrate.com reports that FICO scores range from lows of 300 to 400 to highs of 800 and higher. The number is a result of the following:

1. Payment history – 35 percent
2. Total debt load – 30 percent
3. Length of established credit – 15 percent
4. Types of available credit – 10 percent
5. Recent new credit – 10 percent

Based on the above, tips for raising credit scores include always paying on time, making up missed payments, maintaining low credit card balances, paying off debt instead of transferring it, not applying for new loans or credit cards and not closing existing credit card accounts.

A higher credit score brings a better quality of life

A fair-to-poor credit score can cost a fortune over a lifetime, according to Liz Pulliam Weston at MSN Money. Weston penciled out a comparison between two people over 50 years. One has a credit score of 750 and the other 650. She calculated the difference each person paid in interest on several loans, including student loans, credit cards, auto loans, mortgages and home equity loans. Over a lifetime of borrowing, the person with the 650 credit score paid $201, 712 more than the person with a 750 score. Weston divided $201,712 over 50 years and figured an 8 percent average return. In interest saved, the higher credit score could allow a retirement account to grow to more than $2.3 million.

More Americans with low credit scores face tougher prospects for finding jobs, getting loans and participating in U.S. economic recovery. Franco Folini/Flickr photo.

Credit plays a central role in the U.S. economy. Economic recovery and the credit scores for a big chunk of the U.S. population are mired in the same pit of quicksand. Millions of Americans have reneged on their debts in the past couple of years. Some who lost their jobs had no choice. Others, like strategic mortgage defaulters, walked away rather than losing more money even though they could pay. Either way, these people face the challenge of living with bad credit. After the immediate relief of defaulting on debt, a long-term financial obstacle course lies ahead for them. And U.S. economic recovery will have to limp along without their help.

More people have low credit scores

In the past few years the recession has rendered millions of Americans no longer able to qualify for a mortgage, a car loan or a credit card. The Christian Science Monitor reports that in normal times, about 15 percent of consumers fall into the poor credit category with a FICO score under 600. In April, that figure stood at 25.5 percent, according to a recent FICO report. The continuing high rate of foreclosures and unemployment and a looming second dip in housing prices suggest the credit picture could worsen before it improves.

Low credit scores left out of lending

With 25 percent of Americans with credit scores below 600, one in four won’t be able to borrow money for a major purchase for quite a while. The Wall Street Journal reports that some may be able to get mortgage loans through Federal Housing Administration programs, which allow for credit scores as low as 580. But none will qualify for loans guaranteed by Fannie Mae  or Freddie Mac, which account for the lion’s share of the market and typically require credit scores of at least 650. Getting auto loans or credit cards will also be tough.

Job credit checks increasing

For people who reneged on their debts because they lost their jobs, finding a new job will be tougher with a low credit score. CNN reports that an increasing number of employers are using credit checks to screen potential job applicants. Missed payments on a mortgage, car loan or credit card could keep them from getting hired. According to a survey by the Society for Human Resource Management, 60 percent of employers are using job credit checks when filling at least some of their openings. Only 35 percent reported checking credit in a 2003 survey, and only about 13 percent did so 1996.

Rebuilding a credit score can take years

Millions of cash-strapped Americans have gotten immediate financial relief from defaulting on debt. But people thinking about following suit should know that the short term gain will have long-term consequences. The Journal article said that rebuilding a credit rating can take anywhere from three to seven years. Bad credit brought on by the recession will make it more difficult for many Americans to work their way out of it.

Credit score numbers

Your credit score reflects many elements of your financial history. Your credit score is also sometimes called a FICO score, for Fair Isaac and Company, and it can be a number between 350 and 800. Higher numbers are considered better scores. In general, 700 and above is a very good to excellent credit rating. A score of 680-699 is a good score, 620-679 is fair and at 580-619, you might still be able to get a loan, but at a high interest rate. A credit score of 580 or below is considered bad credit and you most likely will not be able to get a loan. Let’s take a closer look at your credit score number.

• Payment History and Amount Owed: 65 percent of your credit score is made up from your payment history and amounts owed. So if you have missed some payments and carry a lot of debt, you have done some serious damage to your FICO score. Most credit scarring happens from just these two factors.
• Length of Credit History: The length of time you have had credit contributes 15 percent to your score. You are considered financially healthy if you have had more experience managing your payments and have had longer to show that you pay on time and are, therefore, a responsible borrower.
• New Credit and Type of Credit: Each contribute at 10 percent. Potential lenders don’t want to see that you are always searching for and acquiring more debt, such as credit cards. And debt may be classified into types, as well. Credit card and revolving debt will count against your score more than a home mortgage, which is considered an appreciable investment.

Your personal credit score and payday loans

So, is your credit at a healthy 700 or is it scarred at 590 from missing a few payments? Making payments on time is vital to your credit score and your future ability to get new loans. If you find yourself in a short term financial emergency and need an unsecured loan fast to pay your bills on time, consider an online payday loan. Getting an online payday loan is a fast and easy process, and it can get you as much as $1,500 in as little as two hours in most cases. And the best part is there is rarely any credit check and the loan will not be reported to the credit bureaus, so your credit will not be affected by a payday loan.

Credit Karma is one of many sites emerging on the web supported by advertising that allows users to access credit score information for free. Vramak/Flickr photo.

Credit Karma is one of many websites that have emerged offering free credit scores. Learning your credit score is easier now, thanks to the financial reform bill signed into law this month. Financial reform legislation, otherwise known as the Dodd-Frank Wall Street Reform and Consumer Protection Act, requires lenders to show you the credit reports they used to turn you down. But you can keep that from happening by knowing your credit score beforehand and taking steps toward credit repair. Websites like Credit Karma offer to make your credit score available for free anytime, as often as you want to check on it.

Credit Karma service supported by advertising

Credit Karma is a free service supported by advertising. That makes it different from most websites that offer free credit information and then try to lure you into paying for your credit score. Consumer Commentary reports that Credit.com offers a similar free service. Among their differences, Credit Karma evaluates more categories than credit.com when assigning users their credit grade. However, credit.com offers a range for several different types of credit scores. Credit Karma only offers one score directly from one of the reporting bureaus that isn’t a FICO Score.

Is Credit Karma enough for credit repair?

When it comes to credit repair, the usefulness of the credit score available from Credit Karma is questioned by some. At mymoneyblog.com, there’s a catch: it’s not a real FICO score. Your credit score from Credit Karma is a “FICO clone” with a range from 300 to 900. FICO scores range from 300 to 850. Credit Karma, which says it pulls data from Experian, Equifax and Transunion, doesn’t say which bureau supplied the data your credit score is based upon. Plus, you only get your credit score, not who’s pulling your credit, how often they are doing it or information about your existing credit lines.

Are free credit scores really free?

Objections aside, Credit Karma and credit.com appear to be extremely helpful for building, maintaining and repairing credit. Giving up some personal information in exchange for useful credit data is much better for most people than paying $89.95 a year for FICO’s Score Watch. Free credit information is also available at the government-sponsored credit site AnnualCreditReport.com. The site will not give you a numeric credit score, but it will deliver a detailed rundown of factors that affect your credit score. Stay away from sites like creditreport.com and freecreditreport.com. They say you can sign up for free, but after seven days they start billing your credit card $14.95 per month until you make them stop.

Get professional credit repair help

Speak to a professional today and take proactive steps to repair your credit. For a FREE credit consultation, call 1-877-563-2076.

A FICO report shows a record number of people in the lowest credit score categories, and tighter lending standards make short-term credit alternatives a lifeline for millions of consumers. Flickr photo.

Credit scores are falling to new lows for millions of Americans. Lower credit scores and tighter lending standards have economic recovery caught between a rock and a hard place. Figures provided by FICO Inc. show that 25.5 percent of consumers — about 43 million people — now have a credit score of 599 or below. These consumers probably won’t be able to get the affordable mortgages, auto loans and credit cards that economic recovery is depending on.

Millions fall into lowest credit score categories

Along with a high unemployment rate and depressed home prices, plunging credit scores seem to be canceling out what should be positive things like record low mortgage rates and no-interest auto loans. The Associated Press reports that FICO’s findings show an additional 2.4 million people fell into the lowest credit score categories during the Great Recession. Historically, just 15 percent of 170 million consumers with active credit accounts, or 25.5 million people, fell below 599. Borrowing for these consumers is often limited to short term credit alternatives such as installment loans, personal loans and payday cash advances.

A lifeline for people with low credit scores

Already at record lows, the number of consumers with credit scores below 599 is expected to increase. The Associated Press article indicates that it can take several months before missed payments drive down a credit score. The Labor Department says about 26 million people are out of work or underemployed. Millions more face mortgage foreclosure, which can delete 150 points from a credit score. Once the damage is done, it could be years before this group can restore their credit scores, even with a strong short-term credit history. Fortunately, with access to short term credit alternatives, they won’t be completely left out in the cold.

Lending standards lowering credit scores

Leave it to banks to do their part to lower credit scores. Creditcards.com reports that by cutting credit lines and increasing interest rates, banks are lowering their customers’ credit scores. This happens because FICO scores compare debt levels to credit limits. Lower credit lines make it look like a borrower is closer to being maxed out when they haven’t increased their debt at all. Plus, higher interest rates make it tougher to pay off existing debts. And for a personal loan to help pay the bills, they can forget about talking to their bank.

Can the  economy recover without easy credit?

Consumer spending based on credit fueled an unsustainable U.S. economic boom that was destined to bust. Considering the latest FICO report on record low credit scores, it’s no wonder a U.S. economic recovery is stuck in neutral, according to the Dallas News. consumers who can’t borrow money can’t buy houses and cars, invest in home improvements, or make other major purchases that drive economic growth and give businesses reasons to hire workers and ramp up production. For credit scores to improve, the economy has to recover and Americans have to change their spending habits. For an economy driven by consumer spending, that will be an amazing feat indeed.

You have the power to find the road to financial freedom

Everyone has financial power. Those who realize this know how to harness their power and use it for something great. Those who are unaware of their power end up misusing it to create excessive debt, bad credit, and a life of financial struggle. The following five keys can help you take control of your financial future and proceed toward prosperity.

Key 1: Resolve to make a change

Sure, many people daydream about having financial control over their lives, but without a dogged determination to change, they remain in debt. Instead, those who prosper are those who make a firm decision to do so. The first key to unlocking your financial power is to place your focus on making strong, positive changes in the right direction. Mark this date on the calendar, because it is the day that you are taking your first step towards prosperity.

Key 2: Let go of fear

Most people don’t want to stay in debt, but most people are afraid to take the steps necessary to get out of it. Some people have a genuine fear of handling money. Sure, they can spend it, but when it comes to actually balancing a checkbook, creating a budget or even speaking to bill collectors about debts owed, they prefer to bury their heads in the sand. This produces overwhelming feelings of financial inadequacy and does nothing but make a bad situation worse. The second key to unlocking your financial power is to face your fears head on. Whatever you personally avoid in handling your finances, make this the day that you simply stop and face reality with bold confidence.

Key 3: Build your confidence

It’s one thing to say you’re going to face your financial fears, but it’s another to find the confidence to do so. Financial confidence comes from financial education. Take a seminar on financial planning, read consumer-friendly books on personal finance, talk to friends and family members who have credit ratings and strong saving habits, and ask them for advice. Accept where you are, start right there, and take baby steps to educate and empower yourself for a better, more confident financial future.

Key 4: Face up to your credit report

If you’re determined to change and willing to face your fears, take the next step and order a credit report. People with bad credit often don’t want to face up to seeing their credit reports, but there’s no way to improve a disaster zone if you’re not even willing to look at it. Each year the three major credit bureaus allow every consumer one free credit report. If you don’t know your current FICO score or if you have no idea about what’s actually on your credit report, then it’s time to find out.

Key 5: Ask for help

Armed with concrete information about your financial situation and a new resolve to change, your final step to unlocking your financial power is to ask for help. Whether you need a personal loan or whether you need to consolidate debts, this is the time to seek help from professionals and people whose advice you trust. It can be tough to admit that you’re in over your head and need help, but it is better to speak now and reach for a helping hand than to continue to struggle with overwhelming debt. Financial counselors, credit counselors, and financial planners are easy to find in your local yellow pages or online. This may be a good time to shop around for one who can help you with your budgeting and financial concerns, so that you can begin your trek toward financial prosperity.

It’s never too late to improve your future

It’s never too late to make a change for the better. In unlocking your financial power, you will discover that you are fully capable of making the changes necessary to improve your future. If you’ve put this decision off for years, make today the day you stop making excuses. Commitment, persistence and confidence in who you know can be, will enable you to pull yourself up out of debt and live the life of your dreams.

The contents of your credit report can make or break your next loan application and your ability to borrow money. A good FICO score is the key to success. However, if your credit has taken a beating in recent times, you will have to do a little dusting off. The good news is there is still hope and you can easily impress a scrutinizing loan officer by implementing a few simple strategies discussed in this article.

How lenders grade your credit worthiness

There are various factors that lenders look at when it comes to underwriting a loan. To keep track of all these factors in today’s credit-driven environment, lenders use FICO scores to put everyone on a standardized scale. Doing this is useful in making quick decisions about a borrower’s:

- loan balances

- ability to pay

- payment habits

- history of seeking credit

To repair your credit, follow the steps below and your FICO score will improve accordingly.

Step 1: Make a plan

Planning to apply for a loan in advance of actually putting in your application can affect your outcome tremendously. If you have a poor credit score, a window of 3-6 months will give you plenty of time to make important changes. What is most unfortunate is how little attention people devote to planning.

A poor (or, less than stellar) credit rating can not only affect your approval status, but it can also affect the amount of interest you will pay. As such, planning before applying not only improves your chances for getting approved, but it also saves you money in the long run by lowering your borrowing costs.

Step 2: Decrease your loan balances

In simple terms, if you are using all of your credit (or worse, exceeding it), you are not likely going to be approved to add yet even more credit to your portfolio of debt.

As a general guideline, you should not exceed 75% of the credit limit on each account. Notice how I’ve said the credit limit for each account rather than all of your accounts combined. If you have a credit card with a $1,000 limit, pretend that the limit is actually only $750 and commit to sticking to this personally-imposed reduced limit. Apply the same formula to all of your other cards and their respective limits. This practice can impact your score dramatically, which will ultimately help you borrow money successfully. Use the next 3 – 6 months to bring down your limits to ideal levels.

Step 3: Know about your ability to pay

Aside from usage, there is another factor that relates to loan balances that can affect you. If you have too many accounts open and not enough income to service those accounts, lenders might classify you as a risk that they’re not willing to take.

Unfortunately, if this is the case, there’s little you can do. You could pay down your balances, which would be good for your FICO score anyway, but it won’t eliminate all the excess credit you have (which will still affect your debt ratios).

If you are tempted to close down some of your accounts that you don’t use, think again. Closing down various accounts is not always a good idea because that can affect you credit negatively. The only advice I have here is to refrain from opening up useless accounts in the first place (like department stores or specialty cards that you really don’t need in the long run) and simply lower your balances. Working to improve other factors will help your score overall.

Step 4: Improve your payment habits

If you have had many late payments in the past, your score is bound to be bruised as a result. However, if you start to improve your payment history from this day forward, your improved activity will be reported and you will start to notice boosts in your FICO score. Vow to make all of your payments on time – from this day forward!

Step 5: Do not seek credit

If you plan to apply for a loan in the next 3 – 6 months, do not seek any credit whatsoever between now and the time that you apply. Each time you seek credit, you get what is known as a ‘hit’ on your report. Hits lower your FICO score slightly. While they don’t make huge impacts, having plenty of them (and, being subsequently rejected) is not a good situation for prospective lenders to discover when they pull your report.

Put the above strategies into play and you will start to see dramatic improvements in your FICO score. To borrow money, lenders just want to make sure you are a good credit risk. They actually want to lend out as much money as they can. That is how they profit, after all. However, before profits, lenders have another priority and that is to protect their capital. If you do all your homework, and launch a plan in advance and put the strategies discussed in this article into play, you will come out ahead.

Get professional credit repair help

Speak to a professional today and take proactive steps to repair your credit. For a FREE credit consultation, call 1-877-563-2076.

Apply for No Credit Check Payday Loans HERE!

Using credit cards can be a pleasure and a pain. Will anonymous credit cards make security one less thing to worry about? (Photo: flickr.com)

Credit cards are both a blessing and a curse for millions of people worldwide. Managed use of this form of consumer credit can help build one’s credit score and provide a convenient means through which to transact with merchants who require a credit card in order for a consumer to secure services (automobile rentals, hotel rooms, etc). The key to managing one’s credit card usage, however, is a something that many consumers do not practice: paying off the balance each month. By making only the minimum payment, credit card debt grows significantly as interest is compounded. Revolving lines of credit like credit cards can saddle a consumer with a lifetime of debt.

Then There’s Identity Theft

Use of credit cards can expose consumers to the nightmare of identity theft. Whenever you pay a restaurant bill with your card, you’re exposing yourself to risk if the server is less than honest with your sensitive information. If you’re shopping online at a site with less than industrial-strength security, great potential for an information leak is there. Giving your credit number over any form of telephone connection is highly problematic as well.

Such scenarios of financial pain and horror might cause you to wonder how you can keep yourself from becoming a victim. One answer is to use payday loans rather than credit cards in emergency situations where you need quick cash, as the process does not generally expose you to potential identity theft. However, having a small number of credit cards can be beneficial to your FICO score (indicating diversity in your credit portfolio, which creditors like to see), so perhaps a better long-term answer would be how to make credit card usage less dangerous.

Make it Anonymous, Perhaps?

Elli Androulaki and Steven Bellovin of Columbia University recently published a study entitled “An Anonymous Credit Card System” which proposes a system that could serve as a solution to this problem with credit cards. Consumers would be able to kept close track of their credit card usage while banks would be able to justify the payments it makes to merchants through an anonymous E-cash system.

An Anonymity Barrier

One of the benefits consumers enjoy when using credit cards is that logs of transactions are readily accessible. In addition to convenience, this provides a level of security in that consumers can challenge erroneous charges. However, such logs can be a double-edged sword in that banks can (and often do) sell that consumer profile information to third parties. What the study authors propose is a system that maintains the benefits while at the same time protecting consumer and bank privacy through a barrier of anonymity. For consumers, however, the anonymity system express is conditional in that the consumer must make honest attempts to keep up with payments. If an overspending transaction occurs, the consumer is blacklisted from the anonymous service.

For online retail, truly anonymous credit cards would prevent any unauthorized outsider from acquiring information about a transaction or those involved in the transaction. Androulaki and Bellovin stress that banks would not be able to create profiles that they sell without the cardholder’s permission. In order to achieve this level of privacy and security, the authors have created a theoretical system whose high points will be discussed here.

The Dawn of Credit Card Security

According to previous studies of credit cards and state-of-the-art security methods, measures have existed since at least 1994, but such schemes have involved extraneous trusted parties to maintain security. Furthermore, previous credit card protection schemes offered no expense reports or means of error correction for consumers. Using E-cash as a money substitute that cannot be copied or spent more than one time has furthered security schemes, but it requires prepayment to function and works only for online transactions. It also provides no avenue for error correction or clear listing of transactions. Prepaid debit cards are limited in their security application for similar reasons.

What the authors propose is a system that combines an E-cash system for making payments and a combination of “blind and plain digital signatures” for other operations. Consumers, merchants, card-issuing banks, acquiring banks (institutions merchants are authorized to receive payments through) and credit card associations (Visa, MasterCard and others who set transaction rules between the different bank types named here) would all be served by this system. Credit cards under the new system, write the authors, “should not be forgeable or usable by any third party. It should be possible for cardholders to track their transactions (Expense Report Service) and provide an undeniable proof of any mischarge (Error Correction Service) without endangering their privacy.”

How E-cash works

There are two types of E-cash used in this system, drawn from “wallets.” One is accessed by the consumer while the other is where merchants deposit E-cash received from the consumer. Blind signature schemes are used to ensure that merchants get paid and consumer identities are protected from third parties. If set limits are exceeded, conditional anonymity of the consumer is revoked – an added incentive to make payments, which appeases the banking establishment. For the most part, merchants and consumers are identified only by signature keys when they open their E-cash accounts with their banks. In order for consumers to access their E-cash credit cards, they create an anonymous pass code. Backups, multiple layers of encryption and loss recovery systems are present here, as are timestamps for online transactions; consult the study for a more detailed account. It is interesting to note that encryption is performed by the consumer during the anonymous credit card origination process, via secure home software. Thus, a home computer would be required.

How are Anonymous Credit Cards Paid?

Obviously a consumer honor system would be inappropriate, so the consumer is required to report the amount of money spend each month to the card-issuing bank. Regular backups and reporting are required to protect both banks and consumers. Spending is proven through receipts. The card-issuing bank then computes the consumer’s monthly payment through the same formula used today for standard credit cards.

How Does Error Correction Work?

The consumer has the right to contact their credit card association in the event of an error or fraudulent use. In the event of a error, a receipt is required in order for a correction to be made. When the merchant makes the correction and gives back funds via E-cash, the currency passes the refund to the credit card association, who in turn moves it to the merchant’s acquiring bank. It is the acquiring bank who finally moves the funds back to the consumer’s card-issuing bank. If fraudulent charges require purchase cancellation, the exchange is handled in a similar fashion.

Breaching the Veil of Anonymity

As mentioned previously, consumer anonymity is dropped if credit cards are charged over their limit. In that instance, all E-coins withdrawn by the consumer are traced. The authors mark this as necessary for loss recovery. But seeing as how a cardholder may open as many anonymous accounts as desired, being able to achieve transaction linkage is possible.

Buying into the Checks and Balances

The anonymous credit card system proposed by the study authors could eliminate identity theft altogether (until someone figures out how to introduce decryption technologies in the middle of the process). That could occur, but the system proposed could be the best current option for safe credit card use.

I find it interesting that the proposed system would require consumers to hang on to their receipts. It’s something consumer groups and banks (not to mention mom and dad) always advise us to do, but how often do we practice what they preach? If you’re a conscientious consumer who already keeps track of such things, your adjustment to such an anonymous credit card system would likely be painless. For those of us who are forced to become more accountable, the transition would be more difficult. However, it is a much safer financial road to travel. It is also a responsible road. Sure, payday loans are still be more desirable in situations where carrying a balance over from month to month becomes too expensive, but credit cards will still have their place. The layers of checks and balances that preserve security may sound inefficient to some, but remember that the financial world rarely gives us something for nothing. This isn’t trading freedom for protection, in my opinion.

(Photo: icanhazcheezburger.com)

You know this happens to countless people; you’ve probably been there yourself. I know I have. I’m talking about the dreaded expense or bill that you never saw coming. How many times have you prepared your budget and had a soft a cushion after paying bills, only to see it thrown off by a trip to the emergency room, a request for money from your child’s teacher or the dreaded car that broke down again? I feel your pain, but that doesn’t mean we should sit around swapping stories and crying in our beer. Do something about it; find a secret weapon to knock out that debt.

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Networking. It’s a great thing.

Personal Money Market, with its working relationship with a wide network of lenders offering low-fee installment loans, payday loans, secured loans and quick cash for those of us whose credit has hit a few speed bumps, wants to be the only place that you keep in mind when your financial situation is in a state of chaos. Whatever your current or past credit situation is like, one or more lenders just might be able to wire you the installment loans or payday loans you need in only a little bit of time upon approval.

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Now, you might have a few questions on your mind as to whether or not conducting your business with Personal Money Market for all of your cheap payday loans needs is a smart move. After all, a lot of people still have cold feet about conducting any type of business transactions over the Internet. Why? It seems an increasing number of security threats such as identity thieves or other cyber criminals. And frankly, why would some people not worry, especially with an estimated 1 in 20 or more adult Americans’ identities being stolen every year.

Your information is secure with us

Let us be the first to assure you that should you opt for utilizing the resources that Personal Money Market has to offer, not only will you be stuffing your cash crunch with installment loans, payday loans, secured loans and quick cash, but you’ll learn a little bit in the process. Browse our blog and you’ll learn  some other financially-sound tips and tricks that we all can use. And through it all, your data will remain safe, as we use industrial-strength 128-bit encryption. That makes your identifying information as safe as can be online. Considering how convenient online transactions are, it’s no wonder consumers look to Personal Money Market when they’re in a jam.

What about your credit rating?

Will applying for one damage your FICO score? No; the entire application and/or transaction process will not damage your credit today, tomorrow or beyond. Not only is the information you share with us secure, but typically only a soft credit pull is performed to determine your loan worthiness. In other words, we don’t leave an inquiry on your report. The more inquiries you have, the less apt new creditors are to lend you money, so this is certainly significant.

We’re here to help you

But the best thing about coming to Personal Money Market for help obtaining installment loans, payday loan, secured loans and quick cash is the fact that we’re always working to help you get the money you need as quickly as possible. In fact, with some lenders we have relationships with; you could have your money as early as the end of the same business day. Apply now and see what we can do for you!

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