DHP FINANCIAL TOPIC - 9 STEPS TO CLEANING UP CREDIT SCORE

[Leslie]

I learned a few intersting things in this article:

Scoring drive
Nine tips for improving your credit score
By Andrea Coombes, CBS.MarketWatch.com
Last Update: 10:06 PM ET Oct. 21, 2003


SAN FRANCISCO (CBS.MW) -- If you're a consumer who likes to spend to prop up the economy, it's a good idea to first prop up your credit score so you get better rates and terms on purchases.

Some simple actions can help hike your FICO score, the most common credit measure, within a couple of months. And an improved score can mean lower interest rates and better deals on everything from credit cards to a new car, insurance or a home.

"In today's climate, lenders use credit scoring to determine if people get approved for credit, how quickly they get approved for credit, what kind of terms they get approved for, what kind of credit limits they get," said Stephen Snyder, an expert on credit scoring and author of "Credit After Bankruptcy." "It affects everything."

Despite the importance of FICO scores, few people pay attention: 75 percent of Americans don't know their credit score, and nearly 20 percent have never seen their credit report, according to a recent survey of 1,000 adults conducted for Household International, a financial services company.

Of course, the time it takes for an action you take to register as an improved score is not entirely under your control. "Let's say you pay down a maxxed-out card," said Craig Watts, consumer affairs manager with Fair Isaac Corp., which created the FICO score system and operates MyFico.com.

"You mail off your check tomorrow, the creditor gets it, posts it, it gets into your account right away, then (a few days later) the creditor reports your information to the three credit bureaus. You could easily see that being posted to your credit report in a month," he said.

But, "the worst-case scenario is double that or triple it if you catch each part of the cycle" at the wrong point, he said.

Here are nine tips experts say can give a power boost to your FICO score:

1. Check your score the right way to avoid a credit ding

Be wary of taking advantage of Web sites offering free or easy credit reports. Sometimes, requesting your credit report from these companies leads to what's called a "hard inquiry" into your credit -- essentially the FICO system thinks you've asked to borrow money and a creditor is checking your credit. That can lower your score.

"The only place we know that's not happening are the three national credit bureaus and the MyFico Web site," Watts said.

2. Refrain from consolidating credit cards and transferring balances

Consumers who consolidate all cards into one are "effectively killing their credit history from other cards," said Steve Rhode, president of MyVesta.org, a nonprofit consumer-credit counselor. "If you're trying to improve your credit report, your credit history is one of the biggest factors."

Others agreed. "It's better to pay off the revolving debt or pay it down to increase your scores," Snyder said.

3. Keep old accounts

Instead of closing out old accounts, leave them be.

"We don't look at the amount of credit available to you in isolation. That's something of a myth," Watts said.

Instead, the FICO calculator looks at the ratio between your credit limit and the amount of credit-card balance on your cards, or your credit utilization. That's "the amount of debt you owe today for revolving credit cards divided by the credit available to you on those accounts," Watts said. "That should be a fraction less than 1. If it reaches 1, you've maxxed out your credit cards."

Closing an unused credit-card account reduces the amount of credit available to you without paying down the amount of debt you have. "That makes it appear you're a little closer to maxxing out your credit cards. That can hurt your FICO score," he said.

4. Resist the in-store temptation

Each time you apply for a retailer's credit card, your report will get dinged. Such applications "can reduce your credit score as much as 20 points in just one day," Rhode said. "As long as you can fog a mirror, you can get one of those cards. They're not great evidence of creditworthiness."

Plus, those new accounts lower the age of your credit history, not good when it comes to FICO scores. "The relative age of your credit history will change because you now have a new (account), and we take an average of your credit accounts," Watts said.

5. If you must close an account, close a newer card

Consumers, understandably enough, often seek to close out high-interest-rate cards. They're "looking at their credit from a smart consumer point of view not a credit point of view," Rhode said. However, "you might be better off to close the newer cards even if they have lower interest rates, and keep the older cards with the history."

6. Take charge of your credit applications

When you fill out a credit application, the car dealer or other vendor may send it out to numerous banks or other financing firms that then check your credit.

While credit checks requested by a bank, credit union or dedicated auto-financing company within a 14-day window will total just one credit ding, other types of companies won't fall into that category. That means a general finance company checking your credit would add a separate credit check to your report, Snyder said.

"You have to take control and limit" how many credit checks are run through your account, he said. When buying a new car a few days ago, he told the finance department his scores "are between 760 and 800, and she said with those scores I can take you to Huntington Bank. I said great, I give you permission to shop Huntington Bank," Snyder said.

7. Pay down debt

Keeping individual card balances to under 30 percent of the card limits will help improve your score, said Deborah McNaughton, president of Professional Credit Counselors, a consumer-credit counseling firm.

8. Don't assume timely payments are the only score driver

People often pay bills by credit card to stay current, Rhode said.

"It's like putting your debt into turbo," he said. "If you've got several cards and they're maxxed out, that's definitely a sign that bigger issues are brewing. It's not uncommon for someone to have all their bills paid on time but their credit score is like 580 because they're maxxed out on so many cards."

9. Put a rush on fixes

Check your report for errors, and once you've fixed any problems, ask the credit agencies to update your report quickly.

"If you are trying to purchase something right away like a home or auto, contact the bureaus directly and ask them to put a rush on updating your report," McNaughton said, and be ready to provide proof of any errors.

One final word of caution: The calculation used to figure a FICO score is complex, with a number of variables.

"There are a lot of factors that go in," Watts said. "Making one change can have multiple impacts on your score, and not always have the impact you intended." Check out MyFico.com for more information.

Andrea Coombes is a reporter for CBS.MarketWatch.com in San Francisco.







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[JMJ]

Good article......JMJ ;)

[Keith Blackstone]

Printed this puppy out to take home and stick on the wall... thx!

[mdpm99]

graemlins/thumbsup.gif

d

[JoeB]

hail.gif thanks for posting this! graemlins/respekt.gif

[imported_Gman]

Yes good article. Maybe instead of comparing johnsons all the time on this page we could compare FICO scores ? :D Anyways lots of info on things to avoid that hurts your score.

Thanks

[Leslie]

3. Keep old accounts

Instead of closing out old accounts, leave them be.

"We don't look at the amount of credit available to you in isolation. That's something of a myth," Watts said.

Instead, the FICO calculator looks at the ratio between your credit limit and the amount of credit-card balance on your cards, or your credit utilization. That's "the amount of debt you owe today for revolving credit cards divided by the credit available to you on those accounts," Watts said. "That should be a fraction less than 1. If it reaches 1, you've maxxed out your credit cards."

Closing an unused credit-card account reduces the amount of credit available to you without paying down the amount of debt you have. "That makes it appear you're a little closer to maxxing out your credit cards. That can hurt your FICO score," he said.


Well this was the biggest news to me, before I bought my place in the 18 months prior I had closed out all accounts I had not used or just had high interest rates and paid them all off - it didn't affect me adversly but I see now that it was a mistake. But it seems as though the part of the FICO scoring penalizes you for trying to get yourself out of debt.

[Brut by Faberge]

great info...thanks! smile.gif

[darrow]

The intersting thing about the closing accounts issue is that in terms of theft identity, you'll find the opposite opinion. The suggestion is to close unused accounts (though typically identity theft experts will warn you that your FICO score might get lowered).

[imported_Gman]

Originally posted by Leslie:
3. Keep old accounts

Instead of closing out old accounts, leave them be.

"We don't look at the amount of credit available to you in isolation. That's something of a myth," Watts said.

Instead, the FICO calculator looks at the ratio between your credit limit and the amount of credit-card balance on your cards, or your credit utilization. That's "the amount of debt you owe today for revolving credit cards divided by the credit available to you on those accounts," Watts said. "That should be a fraction less than 1. If it reaches 1, you've maxxed out your credit cards."

Closing an unused credit-card account reduces the amount of credit available to you without paying down the amount of debt you have. "That makes it appear you're a little closer to maxxing out your credit cards. That can hurt your FICO score," he said.


Well this was the biggest news to me, before I bought my place in the 18 months prior I had closed out all accounts I had not used or just had high interest rates and paid them all off - it didn't affect me adversly but I see now that it was a mistake. But it seems as though the part of the FICO scoring penalizes you for trying to get yourself out of debt. Yeah it seems that the banks want you to reduce your debt to credit ratio by closing those accounts in order to make you a better credit risk.

Not closing unused accounts was news to me as well even though I have been lazy about closing them. I am glad I didn't.

[Fletch]

Dumb question. Could you request that the cardholder reduce the interest, especially if you've been a cardholder for over 15 years? Would they grant it?

I was talking with my moms about this. If this procedure is possible, it may be way better than closing the account, because: 1) closing an account may hurt your score; and 2) Even a 1% reduction in the interest makes a ton of difference! Answer may be no, but it still doesn't hurt to ask. Peace.

[Rodney Ransom]

THANKS LESLIE graemlins/thumbsup.gif

[JMJ]

Originally posted by Gman:
Yes good article. Maybe instead of comparing johnsons all the time on this page we could compare FICO scores ? :D

Thanks It'd still be a pissing contest.....JMJ

[Leslie]

Originally posted by Fletch:
Dumb question. Could you request that the cardholder reduce the interest, especially if you've been a cardholder for over 15 years? Would they grant it?

I was talking with my moms about this. If this procedure is possible, it may be way better than closing the account, because: 1) closing an account may hurt your score; and 2) Even a 1% reduction in the interest makes a ton of difference! Answer may be no, but it still doesn't hurt to ask. Peace. Threaten to close the account and go elsewhere and they will probably lower the rate. But it all depends on how good a customer you've been.

[JMJ]

Originally posted by Fletch:
Dumb question. Could you request that the cardholder reduce the interest, especially if you've been a cardholder for over 15 years? Would they grant it?

I was talking with my moms about this. If this procedure is possible, it may be way better than closing the account, because: 1) closing an account may hurt your score; and 2) Even a 1% reduction in the interest makes a ton of difference! Answer may be no, but it still doesn't hurt to ask. Peace. Yes you can and it usually works, as long as:
A - Your account is in good standing with the lender.
B - You use the card on a semi-regular basis.

Tell the lender about "other" card offers you've been receiving in the mail with lower APR's and no transfer fees. More than likely they'll meet or beat the "offers" you told them about. In business, nearly EVERYTHING is negotiable. Don't take NO for an answer either. Push the issue until you get a supervisor to resolve the situation if they give you any slack......JMJ

[djLesCole]

Thanks Leslie! I needed this.

[Bernie]

I remember doing some consulting work for the company that came up with the FICO system, Fair Isaac a few years ago...

[mhd]

Originally posted by Leslie:
3. Keep old accounts

Instead of closing out old accounts, leave them be.

"We don't look at the amount of credit available to you in isolation. That's something of a myth," Watts said.

Instead, the FICO calculator looks at the ratio between your credit limit and the amount of credit-card balance on your cards, or your credit utilization. That's "the amount of debt you owe today for revolving credit cards divided by the credit available to you on those accounts," Watts said. "That should be a fraction less than 1. If it reaches 1, you've maxxed out your credit cards."

Closing an unused credit-card account reduces the amount of credit available to you without paying down the amount of debt you have. "That makes it appear you're a little closer to maxxing out your credit cards. That can hurt your FICO score," he said.


Well this was the biggest news to me, before I bought my place in the 18 months prior I had closed out all accounts I had not used or just had high interest rates and paid them all off - it didn't affect me adversly but I see now that it was a mistake. But it seems as though the part of the FICO scoring penalizes you for trying to get yourself out of debt. how was it a mistake if it did not affect you adversely?

[Leslie]

Fletch:

Low-Rate Credit Cards

Still carrying that 18-percent credit card in your wallet? Time to switch to a lower-rate card. As long as your credit rating is in pretty good shape, you should be able to pick up a card in the 10 to 12 percent range with relative ease. To find one, check out the lists of low-rate cards at Cardweb.com.

About Jean Chatzky
Jean Chatzky writes the back-page column in Money magazine and is a featured columnist for USA Weekend and Time magazine. She is the financial editor of NBC's "Today" show and her "Money Minutes" airs weekly on CNBC. Chatzky is the author of Talking Money and The Rich and Famous Money Book.

[ivanjb]

That's a great article, especially the term "ding" for a check on your credit and the advice to limit them.

[mhd]

some of this advice doesn't make sense, like not closing unused accounts, you can only close them if you pay them off, paying off credit card debt is always a good idea, but following their advice makes you a greater risk of identity theft. also, if the article advises to keep accounts with higher rates over newer accounts with lower rates, that makes zero financial sense, to me. fact is, you should not have many cards anyway

[Basecore Boy]

Always looking out. Good one.

[imported_Gman]

Here is a good article on Identity Theft


October 2003 Issue of Consumer Reports:
Stop thieves from stealing you

At a time when your good name and credit are used to judge you as never before--from whether you’ll get that next job to the rates you’ll pay for insurance policies--your good name and credit have never been more at risk.

Identity theft--the fraudulent use of your name and identifying data by someone else to obtain credit, merchandise, or services--claimed seven million victims in the U.S. last year, according to a recent survey by Privacy & American Business, a publication of the Center for Social & Legal Research, a nonpartisan think tank. That’s 10 times as high as past estimates. Canada, Japan, and the United Kingdom are among those countries also reporting ID-theft epidemics.

CR Quick Take

Seven million Americans were victims last year of ID theft. The fastest-growing financial crime, it involves
the fraudulent use of someone else’s identity to get credit or merchandise.
• Victims typically lose $800 and spend two years clearing their name.
• Your best defense: Order your credit-bureau report annually from each of the three major credit bureaus and check for errors and bogus accounts.
• ID theft insurance is typically not worth paying for. And credit-monitoring services don’t prevent the crime.
• For tips on how to prevent ID theft and what to do if you become a victim, see What you can do.

It is an equal-opportunity crime, affecting victims of all races, incomes, and ages. Overall, more than 33 million Americans, about 1 in 6 adults, say they have had their identities used by someone else sometime since 1990, the survey found. Indeed, the Department of Justice says ID theft is the nation’s fastest-growing financial crime, and the damages to consumers are becoming ever more pernicious.

Margaret Murray, a disabled homemaker from Spartanburg, S.C., was arrested in front of her son after a thief passed bad checks in her name. Frances Green, a beautician from Jamaica, N.Y., discovered that the house she was about to buy had already been sold--to an ID thief posing as Green who, with a phony seller and fake lawyers, defrauded the mortgage company and ruined Green’s credit. Identity fraud has become a major element in crimes ranging from international drug trafficking to terrorism; Al Qaeda operatives in Spain used stolen credit and telephone cards and false passports and travel documents to open bank accounts and pay for travel and communication abroad, an FBI agent testified before a congressional subcommittee last year.

Many victims don’t learn of the crime for a year or more, only after something goes terribly wrong, because thieves often shield their actions by using a different address when they open new accounts in the victim’s name. Typically, federal laws cap monetary losses to consumers, but even in routine cases, it takes victims two years on average to clear their names, according to the Privacy Rights Clearinghouse, a nonprofit advocacy group. Some victims say that during that time, they haven’t been able to get a car loan or a mortgage; they couldn’t even use their cell phone. Moreover, all consumers end up paying for ID theft: The $4.2 billion that businesses will lose this year to the crime, a figure expected to mushroom to more than $8 billion by 2006, they recoup by charging you higher fees and prices.

Identity theft is a problem largely because financial institutions, merchants, credit bureaus, and the government do not adequately safeguard vast databases and other records containing consumers’ sensitive information, making it relatively easy for thieves--often insiders--to access these data. Many institutions use Social Security numbers when other identifiers would suffice, fail to notify consumers when security breaches occur, and provide little help or recourse for consumers stuck cleaning up the mess.

"ID theft usually occurs not because of the carelessness of the individual consumer, but because of the carelessness or vulnerability of the organizations they deal with, including the government," says Robert Richardson, editorial director of the Computer Security Institute, a research and training organization for computer- and network-security professionals.

Many businesses don’t bother to report problems. A recent nationwide survey of 530 large and small businesses by the San Francisco office of the FBI and the Computer Security Institute found that 56 percent said they had experienced the "unauthorized use" of a database, but only 30 percent had reported the incident to law enforcement. Prior years were even worse; while the percentage of break-ins was roughly the same, only 17 percent were reported.


HOW CROOKS GET YOUR ID

FALSELY ARRESTED
NAME: Margaret Murray, 48, homemaker, Spartanburg, S.C.
PROBLEM: For months, Murray had tried in vain to get Nations Bank to close a fraudulent checking account that had been opened in her name after her driver's license was lost or stolen. Instead, Murray was arrested at her home, in front of her son, on 13 warrants stemming from bad checks. It took five court appearances in two counties to clear her name. “It was hurtful and embarrassing,” Murray says. She recently won a $300,000 negligence verdict against the bank, which did not verify information before opening the account. Bank of America, successor to Nations Bank, declined to comment for this report.


Photo by Stephen Stinson


All that ID thieves really need to open credit or bank accounts under your name or to drain your existing accounts are three pieces of information: your full name, Social Security number, and date of birth. They can get by with less when financial institutions fail to check identifying information. What follows are seven ways in which thieves can get information about you and how to stop them:

1. Stealing company data. Millions of identities can be stolen at one time when hackers or insiders break into company databases or commercial Web sites where credit-card information and other personal data are stored. Such databases are proliferating; businesses and governments share everything from marketing lists to property records on the Internet. The federal Gramm-Leach-Bliley Act of 1999, which allows financial institutions to share customer data with affiliated companies, opened the floodgates to the exchange of financial information, some privacy experts say.

These databases are often poorly protected. Last fall, a clerk on a computer-help desk in a Bay Shore, N.Y., banking-software company was charged with using access codes obtained on the job to download and sell 30,000 credit reports from credit bureaus to other crooks for $60 each. The resulting losses to victims: more than $2.7 million, federal prosecutors say.

Earlier this year, Visa, MasterCard, and American Express confirmed that an unknown hacker had accessed 8 million credit-card records, including 3.4 million Visa accounts and 2.2 million MasterCard accounts, from a merchant processor, Data Processors International. The card companies said no information was used fraudulently, but Gartner Financial Services, a technology research and advisory company, estimates that at least 1 percent of those accounts, or 80,000 consumers, will become targets of fraud since stolen credit-card data make ID theft easy.

Last year, the Federal Trade Commission censured online merchant Guess when a 19-year-old novice programmer, testing the site’s security before buying a pair of jeans, was able to break in and retrieve 200,000 customer names and credit-card numbers, despite the site’s claim of being "secure." A Guess spokeswoman says the company has settled the case with the FTC and upgraded security.

The fix: Financial institutions and other businesses should use encryption and better systems to prevent and detect computer hackers and to control access by insiders, computer security and privacy experts say. But only 10 percent of businesses encrypt their data, according to Avivah Litan, vice president and research director of Gartner Financial Services.

2. Pretexting. E-mail spammers, telemarketers, and even some clerks and salespeople use a false pretense to lure you into revealing personal information. Twice this year, New York City police arrested the same 18-year-old on different versions of this scam. Police say that first, the teenager sent "spoofed" e-mail to AOL account users. Claiming to represent AOL, he requested personal information, including credit-card numbers, to "update" accounts. When AOL users complied, police say he charged more than $10,000 in merchandise. In the other case, police say he used stolen identities to buy $30,000 worth of electronics, which he sold on a spoofed amazon.com Web site.

The fix: Don’t use e-mail to send your Social Security number or other personal data. If you must, make sure that you use a secure Internet connection by checking your browser window for a secure-connection icon. We recommend against giving personal information to someone who has called or e-mailed you unsolicited. At least, independently confirm the legitimacy of the request by phoning or e-mailing the company.

3. Dumpster diving. Criminals dig through trash for bills, medical statements, or other papers that can be used to obtain credit or access to your accounts.

The fix: Shred papers containing personal information and preapproved credit offers before discarding them. (See our test results for shredders.) Businesses and governments also need to do a better job of disposing of old files. Only California, Georgia, Washington, and Wisconsin have laws requiring businesses to shred files.

4. Mail theft. Individuals and organized rings steal mail from unlocked mailboxes, trying to find letters containing personal information, preapproved credit offers, and "live" checks. Mail theft is a federal crime that carries stiff penalties, but criminals take the risk because the payoff is so large.

The fix: Homeowners and landlords can help prevent mail theft by replacing regular mailboxes with locked boxes. Businesses should stop using Social Security numbers in routine correspondence and create alternative ID numbers.

5. Account takeover. Thieves use stolen or fake IDs to take over existing bank or credit accounts. They escape detection by forwarding mail to private mailboxes or new addresses.
UNLIKELY VICTIM




Name: Jerry Coleman, 51, assistant
district attorney, San Francisco
PROBLEM: Twice while leading out-of-town ID-theft seminars and a third time locally, Coleman was the victim of “skimming” frauds that charged $28,000 to his accounts. In the first case, which resulted in several convictions, a hotel clerk swiped Coleman's credit card through a second, hidden card reader that transferred information onto the magnetic strip of a hotel key. The crooks then tried to charge perfume, among other things, to Coleman's account. The other two cases are unsolved. “If you can get them mid-scam, you can bust them,” Coleman says.


Photo by Robert Houser


A recent case involved 17 conspirators, including lawyers and an unlicensed real estate agent. They were indicted in Queens County, New York, in connection with a $1 million mortgage fraud ring that victimized Frances Green and others whose houses were literally sold or refinanced out from under them. Imposters used fake IDs, including driver’s licenses, to pose as the homeowners at staged closings to steal money from mortgage lenders. A real-estate office employee may have supplied the victims’ names and Social Security numbers to the conspirators, says Detective David Moore of the New York Police Department.

The fix: Better ID verification by mortgage lenders and other financial institutions, such as cross-checking at least four types of identification, would cut down on this kind of fraud, experts say. So would validating Social Security numbers with the Social Security Administration.

6. Skimming. Thieves use handheld magnetic card readers that can be bought on the Internet or improvised to glean personal information off the magnetic strip on credit and debit cards. Sometimes the data are transferred to other magnetic strips to make counterfeit credit cards. The culprits have included waiters, gas station attendants, and store clerks paid by organized-crime rings. Some private automatic-teller machines also have been rigged to skim account numbers and PINs.

The fix: Better employee screening might curb ID theft. Tighter federal regulation of ATMs may also be needed.

7. Raiding your old computer. According to a recent study, MIT graduate students were able to recover sensitive files from hard drives on one-third to half of the used computers they tested. Last year, 150 million computers were discarded, the study found.

The fix: Businesses and individuals should use hard-drive shredding software or remove and destroy hard drives before discarding a personal computer.


HUGE LOSSES ARE A WAKE-UP CALL

Until recently, identity theft seemed to be regarded by police and many financial institutions almost as a victimless crime. Many victims say they had trouble reporting the crime; local police wouldn’t pursue the case. Even today, only 678 of some 18,000 law-enforcement agencies participate in a federal ID-theft database to share tips and leads.

Meanwhile, lenders and merchants chalked up losses to "bad debt," which can be written off on income-tax returns and may cost less than paying for security. Also, businesses have seldom been held liable in lawsuits stemming from ID theft, so there has been little incentive to act.

However, 60 to 80 percent of losses originally classified as bad debt actually may have resulted from ID-related fraud, according to a study by ID Analytics, a San Diego-based supplier of ID-theft-prevention software.

Those losses have been too great to ignore. Financial Insights, a research and advisory company to financial institutions, says that ID-theft losses, if they continue at today’s pace, could reach $8.5 billion in 2006. The current cost to business is $18,000 per incident, the FTC says.

Pressure on business and governments to act is also coming from other quarters. The European Union’s 1998 European Data Privacy Directive prohibits transfer of personal data to any country that does not have adequate privacy protection. The United States’ approach to privacy has been considered inadequate by the EU.

New studies suggest that consumers want businesses and the government to do more, too. In a recent survey of 2,000 consumers by Star Systems, an ATM network, more than two-thirds of respondents said they want financial institutions to verify customers’ identities during transactions, even if that is less convenient. Nine in ten said the government should take action concerning ID theft.

Some businesses and governments are taking steps, but critics say more needs to be done.
AUTHORITIES WOULDN'T LISTEN




NAME: Lance Nail, 37, chairman of the finance department at
the University of Alabama in
Birmingham
PROBLEM: In July, five years after Nail discovered that his name and Social Security number had been used to open cell phone and utilities accounts in Atlanta, he was finally able to clear up a bogus mobile-phone account. Police in neither Birmingham nor the Atlanta area wanted to investigate. “I wish people would stop calling this a victimless crime,” he says. “It takes a lot of time to fix.”


Photo by Deborah Thornhill


Tighten security. Visa and MasterCard now require merchants and big banks that issue their branded cards to use secure Internet technology. They’re using new identity verification and authentication systems for controlling transactions among customers, merchants, and banks. In addition, both now require member banks and merchants to encrypt personal data stored on their servers.

Credit-reporting agencies say they have spent millions upgrading computer-system security. But they have done little, it seems, to control access to credit reports by unscrupulous employees of credit-bureau clients such as car dealerships, which have been sources of theft and reselling of credit reports.

Robin Holland, senior vice president of customer service at Equifax, says the company inspects clients where its machines are used. If rogue employees of their customers breach security, "I don’t see why we would be blamed for that," she says. But Litan, of Gartner Financial Services, says companies could protect against insider threats by limiting those employees with access to credit data.

The largest single source of ID theft is "the corrupt individual on the inside," says privacy expert Alan Westin, president and publisher of Privacy & American Business.

Indeed, thousands of businesses and government institutions impose too few limits on access to sensitive information, privacy and security experts say. Ligand Pharmaceuticals recently settled a negligence lawsuit in San Diego over ID thefts that occurred when personnel records were left in an unlocked area after Ligand acquired another company in a merger. A worker discovered the records and used them to open fraudulent credit accounts.

"Too many people have access to the documents," says Margaret Byrne, an attorney who represented the Ligand ID-theft victims. Few managers should have access, and records should be kept under lock and key, she says.

Detect fraud. Some companies that are frequent targets for identity fraud, including cell-phone services, retailers that offer instant credit, and large banks, are investing heavily in systems designed to detect fraudulent credit applications. ID Analytics has designed one that assigns a score like a credit score to a credit application. A high score means the identity of the applicant is probably stolen or fake. The software has detected fraud in 7.5 percent of credit applications.

Under another system, a Social Security number that doesn’t correspond to the birth year of the applicant might trigger a warning. But too many merchants still don’t check.

Prevent hacking. Systems that monitor an organization’s connections to the Internet and that prevent and detect hacking are a must to deter ID thieves and virus attacks, says Richardson of the Computer Security Institute. On the horizon: "trustworthy" computing systems that require authentication and verification before allowing information-sharing among computers or computer networks. The systems work by not allowing one computer to talk to another unless it knows the "secret handshake."

Such systems are costly, however, Richardson says. They also limit the free exchange of information that many users have come to expect from the Internet.

Pass stricter laws. California leads other states and the federal government with its identity-theft laws. Consumers Union’s West Coast Regional Office helped push for many of them.

Many consumer-rights, privacy-rights, and law-enforcement advocates say they want to see other states copy the laws, which do the following:

• Require that consumers be notified of security breaches that could compromise their personal data, including Social Security numbers.

• Entitle fraud victims to a free credit report every month for a year after they notify credit-reporting agencies that they have been victims of fraud.

• Require individuals requesting birth or death records to provide proof of identity and to sign a form indicating the reason for the request.

• Allow customers to freeze their credit reports if they have been victims of fraud. This requires credit-reporting agencies to get permission from consumers before disseminating their credit reports to lenders. Also, state law requires credit issuers to honor fraud alerts on files and to deny new credit requests until the consumer is notified. Texas enacted a similar credit-freeze law, which Consumers Union supported.

• Require law-enforcement officials to take reports of identity theft in the jurisdiction where the victim resides.

• Limit the use of Social Security numbers.

Proponents say such laws go a long way toward preventing identity theft and helping victims to limit the damage. In addition, more than 20 bills concerning identity theft are pending in Congress.

"Anyone who stores information needs to do more," says Eliot Spitzer, New York Attorney General, whose wife, Selda Wall, was an ID-theft victim. But, he added, "federal legislation is going to be necessary."

[imported_Gman]

Originally posted by mhd:
some of this advice doesn't make sense, like not closing unused accounts, you can only close them if you pay them off, paying off credit card debt is always a good idea, but following their advice makes you a greater risk of identity theft. also, if the article advises to keep accounts with higher rates over newer accounts with lower rates, that makes zero financial sense, to me. fact is, you should not have many cards anyway You can't have your cake and eat it to. Higher risk for ID theft vs. higher FICO score ;)

What I got from the article is to keep the older higher interest rate cards open but don't necessarily use them in place of the newer lower interest cards. He was making the point that it would be far better in terms of keeping a high FICO score to close down the new cards with the lower rates than to close the older cards because they carry so much more weight in computing the score. No one would continue to charge on a higher interest credit card when they have a lower interest one available.

-G

[mhd]

Originally posted by Gman:
</font><blockquote>quote:</font><hr />Originally posted by mhd:
some of this advice doesn't make sense, like not closing unused accounts, you can only close them if you pay them off, paying off credit card debt is always a good idea, but following their advice makes you a greater risk of identity theft. also, if the article advises to keep accounts with higher rates over newer accounts with lower rates, that makes zero financial sense, to me. fact is, you should not have many cards anyway You can't have your cake and eat it to. Higher risk for ID theft vs. higher FICO score ;)

What I got from the article is to keep the older higher interest rate cards open but don't necessarily use them in place of the newer lower interest cards. He was making the point that it would be far better in terms of keeping a high FICO score to close down the new cards with the lower rates than to close the older cards because they carry so much more weight in computing the score. No one would continue to charge on a higher interest credit card when they have a lower interest one available.

-G </font>[/QUOTE]i'm not buying it,
consider the relative impacts, if you don't protect yourself from identity theft and someone abuses your identity, don't you think your fico score will go up?

what about this quote:

"Consumers, understandably enough, often seek to close out high-interest-rate cards. They're "looking at their credit from a smart consumer point of view not a credit point of view," Rhode said. However, "you might be better off to close the newer cards even if they have lower interest rates, and keep the older cards with the history."

how can being a smart consumer be against your better interest? doesn't make sense, unless you consider how many big ticket items or transactions will the typical consumer make? one maybe two home purchases, a car here and there? so the importance kinda diminishes if you look at it that way, meanwhile if you follow these guys advice you will actually pay more for a high fico score. being a smart, savvy and safe consumer should be consistent with a fico score, in other words, you should be rewarded for doing the right thing for yourself. besides, my history is my history, it just doesn't vanish just because i'm paying 8percent for two years rather than 18 percent for twelve years. getting back to those big purchases, imo, fico is somewhat of a mystery, a combination of factors, which tells me it is also one of the MANY elements of a transaction that are negotiable, and if not, its negative impact surely can be offset by things that are negotiable.
finally, i'm waiting for an answer from leslie, who apparently did not follow the advice in this article and guess what "no adverse implications"

[imported_Gman]

Originally posted by mhd:
</font><blockquote>quote:</font><hr />Originally posted by Gman:
</font><blockquote>quote:</font><hr />Originally posted by mhd:
some of this advice doesn't make sense, like not closing unused accounts, you can only close them if you pay them off, paying off credit card debt is always a good idea, but following their advice makes you a greater risk of identity theft. also, if the article advises to keep accounts with higher rates over newer accounts with lower rates, that makes zero financial sense, to me. fact is, you should not have many cards anyway You can't have your cake and eat it to. Higher risk for ID theft vs. higher FICO score ;)

What I got from the article is to keep the older higher interest rate cards open but don't necessarily use them in place of the newer lower interest cards. He was making the point that it would be far better in terms of keeping a high FICO score to close down the new cards with the lower rates than to close the older cards because they carry so much more weight in computing the score. No one would continue to charge on a higher interest credit card when they have a lower interest one available.

-G </font>[/QUOTE]i'm not buying it,
consider the relative impacts, if you don't protect yourself from identity theft and someone abuses your identity, don't you think your fico score will go up?


You mean your FICO score will go down if someone stills your identity. Yes. I guess considering all the ways that your identity can get stolen having those few extra accounts open is not going to increase your risk that much more than it already is what about this quote:

"Consumers, understandably enough, often seek to close out high-interest-rate cards. They're "looking at their credit from a smart consumer point of view not a credit point of view," Rhode said. However, "you might be better off to close the newer cards even if they have lower interest rates, and keep the older cards with the history."

how can being a smart consumer be against your better interest? doesn't make sense, unless you consider how many big ticket items or transactions will the typical consumer make? one maybe two home purchases, a car here and there? so the importance kinda diminishes if you look at it that way, meanwhile if you follow these guys advice you will actually pay more for a high fico score.


I hear what ya saying Mark, but my point was keep the old credit accounts open but don't be stupid and keep using them being a smart, savvy and safe consumer should be consistent with a fico score, in other words, you should be rewarded for doing the right thing for yourself. besides, my history is my history, it just doesn't vanish just because i'm paying 8percent for two years rather than 18 percent for twelve years.


If this FICO score is so important and thats what the lenders are looking at first then the implication is that by closing those accounts that account history does lower the score getting back to those big purchases, imo, fico is somewhat of a mystery, a combination of factors, which tells me it is also one of the MANY elements of a transaction that are negotiable, and if not, its negative impact surely can be offset by things that are negotiable.


The FICO score's negative impact may be able to be offset by things that are negotiable but I just want them role out the red carpet smile.gif finally, i'm waiting for an answer from leslie, who apparently did not follow the advice in this article and guess what "no adverse implications" </font>[/QUOTE]I thought she simply meant that she could have had a higher FICO score after it was all said and done.

-G

[ October 23, 2003, 08:29 AM: Message edited by: Gman ]

[Leslie]

mhd what is your problem? If you don't agree with the article fine. As Gman stated I viewed my circumstance as possbily being able to have a higher FICO score if I just left those accounts open as opposed to closing them. What is the big deal with how I chose to view it? I posted an article for reference purposes, how people choose to interpret the information is clearly their choice. Why you've chosen to yell at me about a minor comment I made concerning my personal circumstance is clearly escaping me.

[DJ Keith Porter]

Thanks Leslie! I needed this too.
Trying get my shit together.... graemlins/remybussi.gif

[mhd]

Originally posted by Leslie:
mhd what is your problem? If you don't agree with the article fine. As Gman stated I viewed my circumstance as possbily being able to have a higher FICO score if I just left those accounts open as opposed to closing them. What is the big deal with how I chose to view it? I posted an article for reference purposes, how people choose to interpret the information is clearly their choice. Why you've chosen to yell at me about a minor comment I made concerning my personal circumstance is clearly escaping me. whoa, chill, how am i yelling at you?,i just asked a question, this is very important stuff. i listen to jean chatzky all the time. i'm glad you posted the article, i'm just pointing out some flaws in their reasoning that other people may not have noticed. you mentioned your situation, i didn't, but its a very good example of whether these guys' advice makes sense, apparently it does not, if you had said: "had i followed their reasoning i would have paid a lower interest rate" that would be very persuasive to me, notwithstanding the fact that you could have refinanced at a lower rate later. my bottom line is the fico score is only one factor and consumers need to realize how much power and leverage they have in the transaction.

[JMJ]

One thing to keep in mind regarding credit scores is that mortgage payment and car credit history far exceed credit card accounts in terms of importance to the score itself. The bureaus are mortgage and/or auto "enhanced", meaning those accounts will more positively or negatively affect your score than any other type of account, mainly because these are the two largest accounts ($$$$) most people open. Civil judgements, tax liens, and charge offs are major contributing factors to low scores. Bankruptcies, reposessions, and foreclosures are credit killers.....JMJ

[ October 23, 2003, 09:57 AM: Message edited by: JMJ ]

[imported_Gman]

Source Myfico.com:

FICO Scores are calculated from a lot of different credit data in your credit report. This data can be grouped into five categories as outlined below. The percentages in the chart reflect how important each of the categories is in determining your score.

http://www.myfico.com/Images/breakdown.gif

These percentages are based on the importance of the five categories for the general population. For particular groups - for example, people who have not been using credit long - the importance of these categories may be somewhat different.

Payment History
--------------------------------------------------------------------------------

Account payment information on specific types of accounts (credit cards, retail accounts, installment loans, finance company accounts, mortgage, etc.)
Presence of adverse public records (bankruptcy, judgements, suits, liens, wage attachments, etc.), collection items, and/or delinquency (past due items)
Severity of delinquency (how long past due)
Amount past due on delinquent accounts or collection items
Time since (recency of) past due items (delinquency), adverse public records (if any), or collection items (if any)
Number of past due items on file
Number of accounts paid as agreed
Amounts Owed
--------------------------------------------------------------------------------

Amount owing on accounts
Amount owing on specific types of accounts
Lack of a specific type of balance, in some cases
Number of accounts with balances
Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts)
Proportion of installment loan amounts still owing (proportion of balance to original loan amount on certain types of installment loans)
Length of Credit History
--------------------------------------------------------------------------------

Time since accounts opened
Time since accounts opened, by specific type of account
Time since account activity
New Credit
--------------------------------------------------------------------------------

Number of recently opened accounts, and proportion of accounts that are recently opened, by type of account
Number of recent credit inquiries
Time since recent account opening(s), by type of account
Time since credit inquiry(s)
Re-establishment of positive credit history following past payment problems
Types of Credit Used
--------------------------------------------------------------------------------

Number of (presence, prevalence, and recent information on) various types of accounts (credit cards, retail accounts, installment loans, mortgage, consumer finance accounts, etc.)

Please note that:

A score takes into consideration all these categories of information, not just one or two.

No one piece of information or factor alone will determine your score.

The importance of any factor depends on the overall information in your credit report.
For some people, a given factor may be more important than for someone else with a different credit history. In addition, as the information in your credit report changes, so does the importance of any factor in determining your score. Thus, it's impossible to say exactly how important any single factor is in determining your score - even the levels of importance shown here are for the general population, and will be different for different credit profiles. What's important is the mix of information, which varies from person to person, and for any one person over time.

Your FICO score only looks at information in your credit report.

However, lenders look at many things when making a credit decision including your income, how long you have worked at your present job and the kind of credit you are requesting.

Your score considers both positive and negative information in your credit report.

Late payments will lower your score, but establishing or re-establishing a good track record of making payments on time will raise your score.

[ October 23, 2003, 10:34 AM: Message edited by: Gman ]

[imported_Gman]

Originally posted by JMJ:
One thing to keep in mind regarding credit scores is that mortgage payment and car credit history far exceed credit card accounts in terms of importance to the score itself. The bureaus are mortgage and/or auto "enhanced", meaning those accounts will more positively or negatively affect your score than any other type of account, mainly because these are the two largest accounts ($$$$) most people open. Civil judgements, tax liens, and charge offs are major contributing factors to low scores. Bankruptcies, reposessions, and foreclosures are credit killers.....JMJ Thanks for the info smile.gif

[imported_Gman]

Originally posted by mhd:
my bottom line is the fico score is only one factor and consumers need to realize how much power and leverage they have in the transaction. graemlins/beerchug.gif

Now lets assume I have a middle of the road fico score. Just for the sake of a list what other factors are considered ?

[ October 23, 2003, 10:44 AM: Message edited by: Gman ]

[mhd]

Originally posted by Gman:
</font><blockquote>quote:</font><hr />Originally posted by mhd:
my bottom line is the fico score is only one factor and consumers need to realize how much power and leverage they have in the transaction. graemlins/beerchug.gif

Now lets assume I have a middle of the road fico score. Just for the sake of a list what other factors are considered ? </font>[/QUOTE]your post gave a pretty good description of what this is about, will you pay this money back. so other factors would include your relationship, the willingness of the parties to do the transaction, money, downpayment, timing

[julian_kelly]

Credit is a funny thing. Its important, but on the other hand it isn't important. If you learn another set of rules and business practices, you can eliminate the need of having to have good credit. If it makes anybody feel better - for the record, my personal credit sucks graemlins/rofl.gif In the past, Ive had around 20k in credit card debt with at least 10 charged off items on my account; but that hasnt held me me back or stressed me out because I know another set of rules.

I remeber reading an article several years ago (I think in Business Week) about Janina Pawlowski, the co-founder of E-Loan. Her company offers many types of loans over the internet and had a very successful ipo a few years ago; the woman is worth millions.

The article blew my mind because she stated that if she applied for a loan on her own website, she could not qualify for it because of her horrendous personal credit :eek: :eek: But on the other hand she is worth millions and can buy anything she wants in life. In her situation, credit doesnt matter because she knows how to build a business and build wealth.

She doesnt have to buy a house with her personal income...her business does...she doesnt have to buy a car with her personal income...her business does it.

I know of a guy who filed for bankruptcy and lost everything he had. He went to a car dealership and it took him two days and tons of stress to buy a cheap car. A few years later, after learning to build wealth and a successful business, his money bought a Benz s500 over the phone in under 30 minutes and he had them deliver it to his home graemlins/rofl.gif


I'm not advocating that one should forget about trying to have good credit, because having good credit is definitely a plus. Good credit can help you get jobs, and lower interest rates on mortgages and other loans. If a person ONLY desires to have a regualar job and CHOOSES NOT to be active and successfual in building wealth thru businesses and other investment, credit is CRITICAL and can make or break you. Conversely, if a person is dilligent and successful in building a business and/or other investments, credit isnt important because your business/investments can purchase items...personal credit becomes irrelevant.

I'm merely stating that if you have bad credit, it isnt the end of the world - just learn another set of rules and side step the issue. By all means, clean it up, but having bad creidit isnt the end of the world. If you learn how to make money, there is a ray of hope for bad credit people graemlins/rofl.gif


julian kelly

[mhd]

word, julian, funny, i know the other co-founder of e-loan, chris larsen

[JMJ]

Originally posted by Gman:
</font><blockquote>quote:</font><hr />Originally posted by mhd:
my bottom line is the fico score is only one factor and consumers need to realize how much power and leverage they have in the transaction. graemlins/beerchug.gif

Now lets assume I have a middle of the road fico score. Just for the sake of a list what other factors are considered ? </font>[/QUOTE]Assuming you're applying for credit, here are the things creditors look at that affect their decisions:

Score (obviously)
Length of time in the bureau
Income
Time on job
Time at residence
Mortgage or rent?
Income to debt ratio (ability to pay)
Recent payment history (last 18-24 months)
Recent credit inquiries
Car credit history (if applicable)
Collateral or down payment (if applicable)

Score is important, but most creditors know the FICO, Beacon, and Emperica scoring systems are flawed. Making credit decisions strictly based on score is a disservice to the consumer. It should be used as a guideline only. Just my opinion......JMJ

[ October 23, 2003, 11:52 AM: Message edited by: JMJ ]

[julian_kelly]

Werd... what is he like? how did you meet him?

I know their stock is nowhere close to where it used to be, but the owners should still have plenty of cheddar in the coffers.


Originally posted by mhd:
word, julian, funny, i know the other co-founder of e-loan, chris larsen

[mhd]

Originally posted by julian_kelly:
Werd... what is he like? how did you meet him?

I know their stock is nowhere close to where it used to be, but the owners should still have plenty of cheddar in the coffers.

</font><blockquote>quote:</font><hr />Originally posted by mhd:
word, julian, funny, i know the other co-founder of e-loan, chris larsen </font>[/QUOTE]young cat, cool as hell, he is good friends with one of my boys in san francisco and all of those companies that blew up in the dot com boom, all of the ceos know each other, but e-loan like e-bay survived when the dot com bubble burst and they were well positioned to take advantage of the real estate boom

[mhd]

Originally posted by JMJ:
</font><blockquote>quote:</font><hr />Originally posted by Gman:
</font><blockquote>quote:</font><hr />Originally posted by mhd:
my bottom line is the fico score is only one factor and consumers need to realize how much power and leverage they have in the transaction. graemlins/beerchug.gif

Now lets assume I have a middle of the road fico score. Just for the sake of a list what other factors are considered ? </font>[/QUOTE]Assuming you're applying for credit, here are the things creditors look at that affect their decisions:

Score (obviously)
Length of time in the bureau
Income
Time on job
Time at residence
Mortgage or rent?
Income to debt ratio (ability to pay)
Recent payment history (last 18-24 months)
Recent credit inquiries
Car credit history (if applicable)
Collateral or down payment (if applicable)

Score is important, but most creditors know the FICO, Beacon, and Emperica scoring systems are flawed. Making credit decisions strictly based on score is a disservice to the consumer. It should be used as a guideline only. Just my opinion......JMJ </font>[/QUOTE]J, great answers throughout this thread, props, could not agree with you more on this last paragraph. i can't tell you how many times i have been asked to write letters explaining why a certain item is not quite right on someone's credit report, and the deal goes through. also, i try to always do business with people i know personally or through referrals or friends of friends.

[JMJ]

Originally posted by mhd:
</font><blockquote>quote:</font><hr />Originally posted by JMJ:
</font><blockquote>quote:</font><hr />Originally posted by Gman:
</font><blockquote>quote:</font><hr />Originally posted by mhd:
my bottom line is the fico score is only one factor and consumers need to realize how much power and leverage they have in the transaction. graemlins/beerchug.gif

Now lets assume I have a middle of the road fico score. Just for the sake of a list what other factors are considered ? </font>[/QUOTE]Assuming you're applying for credit, here are the things creditors look at that affect their decisions:

Score (obviously)
Length of time in the bureau
Income
Time on job
Time at residence
Mortgage or rent?
Income to debt ratio (ability to pay)
Recent payment history (last 18-24 months)
Recent credit inquiries
Car credit history (if applicable)
Collateral or down payment (if applicable)

Score is important, but most creditors know the FICO, Beacon, and Emperica scoring systems are flawed. Making credit decisions strictly based on score is a disservice to the consumer. It should be used as a guideline only. Just my opinion......JMJ </font>[/QUOTE]J, great answers throughout this thread, props, could not agree with you more on this last paragraph. i can't tell you how many times i have been asked to write letters explaining why a certain item is not quite right on someone's credit report, and the deal goes through. also, i try to always do business with people i know personally or through referrals or friends of friends. </font>[/QUOTE]I spend a good portion of my day at work doing the same thing, rehashing applications over the phone with bank and finance company reps. Makes a HUGE difference, and those relationships are key to getting deals done, in my opinion. Numbers really don't tell the WHOLE story.....JMJ

[mhd]

Originally posted by JMJ:
</font><blockquote>quote:</font><hr />Originally posted by mhd:
</font><blockquote>quote:</font><hr />Originally posted by JMJ:
</font><blockquote>quote:</font><hr />Originally posted by Gman:
</font><blockquote>quote:</font><hr />Originally posted by mhd:
my bottom line is the fico score is only one factor and consumers need to realize how much power and leverage they have in the transaction. graemlins/beerchug.gif

Now lets assume I have a middle of the road fico score. Just for the sake of a list what other factors are considered ? </font>[/QUOTE]Assuming you're applying for credit, here are the things creditors look at that affect their decisions:

Score (obviously)
Length of time in the bureau
Income
Time on job
Time at residence
Mortgage or rent?
Income to debt ratio (ability to pay)
Recent payment history (last 18-24 months)
Recent credit inquiries
Car credit history (if applicable)
Collateral or down payment (if applicable)

Score is important, but most creditors know the FICO, Beacon, and Emperica scoring systems are flawed. Making credit decisions strictly based on score is a disservice to the consumer. It should be used as a guideline only. Just my opinion......JMJ </font>[/QUOTE]J, great answers throughout this thread, props, could not agree with you more on this last paragraph. i can't tell you how many times i have been asked to write letters explaining why a certain item is not quite right on someone's credit report, and the deal goes through. also, i try to always do business with people i know personally or through referrals or friends of friends. </font>[/QUOTE]I spend a good portion of my day at work doing the same thing, rehashing applications over the phone with bank and finance company reps. Makes a HUGE difference, and those relationships are key to getting deals done, in my opinion. Numbers really don't tell the WHOLE story.....JMJ </font>[/QUOTE]agreed, relationships are important in all transactions. btw, my boy just got the xle, you were right, very sweet