Lazy Man and Money

Hack Your Credit Score

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Seven years ago, I got back from a Peer-to-Peer (P2P) Lending conference and realized there was an interesting way you could “hack” your credit score.

At the time, Prosper.com had a model that allowed people to bid down loans so that the borrower got the best rate that the market place had to offer. If you worked with a friend, you could give him $1000 and tell him to use the money to bid on your loan at 1%. You’d get that same $1000 back to you through the marketplace. You’d use that money to pay off the loan. In the end, you’d be paying 1% ($10) plus Prosper fees (0.5% at the time I think), but would be reporting that you’ve been doing an excellent job paying back the loan to the credit reporting agencies. You’d look very responsible and the cost wasn’t that high.

Alas, Prosper’s model changed and I don’t think this is possible any more.

You might be able to do something similar to this hack at Lending Club, but the rates are predetermined by your credit score. So if you have bad credit, you aren’t going to get a great rate and it will end up costing you more. It could cost you 10-12% if your credit is bad. Would it be worth $100-120? It’s hard to say. One plus is that you wouldn’t have to find a friend to bid it down. Just get a loan at the fixed rate that Lending Club sets and use the loan money to pay it back.

Hack Your Credit Score with a Store Card

It has been years since I applied for a store card. By “years”, I think I might be able to say decades… as in two. It’s probably close to that since I got a Structure card in college.

If memory serves and if what I hear on the street is true, it is still very, very easy to get a store credit card. It seems like stores throw them at you. Of course the terms on store cards are typically terrible. If you pay off your card in full each month, most (usually all) of those terrible terms don’t come into play. However, you build good credit by showing a consistent record of paying debt on time.

Hack Your Credit Score with a Secured Card

If you have bad credit one way to re-establish good credit is with a secured card. It works a little like the P2P example above. You load a plastic card up with $500 in advance (notice that I didn’t call it a credit card, since you aren’t using credit, rather your own money.)

Secured Cards can be “bad things” with excessive fees and many consumer protection groups have gone after some. Bankrate has a good list of questions you should ask. I would focus on two:

1. What are the fees associated?
2. “Ask if the issuer will flag the report to the credit bureaus as a secured card. Consumer Action points out that such a flag could be a deterrent to rebuilding credit.”

If the card is flagged as a secured card you may lose the benefit. That means you are paying the fees for nothing. Alternatively, you want to stay away from excessive fees in the first place.

I can’t stress it enough that secured cards can be dangerous. I’d use this option only if I couldn’t get a regular credit card.

Build Credit by Paying Your Rent

Building credit by paying your rent relatively new and I’m not sure how much it helps. However, it probably doesn’t hurt. A bunch of companies have sprung up to provide this service. I did a quick search and I found Rent Track, WilliamPaid, and Rental Kharma.

I didn’t look into all those companies, but one of my recent prospective tenants wanted to use a service called ClearNow. The company facilitates the payment of rent online. I agreed if he was willing to pay the $15 monthly fee they charge. They don’t heavily push the building credit angle, but they mention it in a FAQ. It looks like you need to jump through hoops to get the reporting done.

I’m going to image that most companies work in a similar way. You pay a fee and the reporting is made. By now you’ll probably notice the running theme. If you have bad credit, it is likely to cost you a few dollars to get into something that is going to improve it. Many people don’t want to take the risk for free.

Check Your Credit

However, you decide to try to hack your credit, one thing you should do is look to make sure it is actually working. You can pay for all kinds of credit services, but Credit Karma gives you free credit scores. If you want to learn more, read my review.

Chase is Chasing My Business Away

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Earlier this weekend, my wife was saying that she’s not so much fun any more. I think she was alluding to the fact that she’s in her early 30s now and can’t party like she could a decade ago. I said, “It could be worse, you could be a curmudgeony, old man of 33 like myself.” I was half kidding. Well maybe 20% kidding as of late. If you’ve had one of those weeks, where every step forward puts you three steps backward, you probably know how I’ve felt.

So it was with great joy that my wife opened up her e-mail on Saturday and saw a new credit card – Chase Freedom. She had never applied for a Chase Freedom card, so how it arrived in her mail was a mystery to her, and to me. In looking closely, we noticed it was the same number as the Chase Rewards card she has used for years. This really confused my wife, because her card doesn’t expire for more than a year. I use the same credit card, and figured that whatever if happening to her, is going to happen to me. It was time to call up Chase and get the story, however, before I do, let me give you a little background on the Chase Rewards card we have.

The Chase Rewards is one of our best financial tools. It gives you 5% back on gas, groceries, and drugstores. Not only that, but Chase Autopay allows you automatically have money taken out of your bank account when a payment is due. Since I always keep enough in my bank, I would pay off the card completely, at the last possible day, saving money in interest and stamps. More importantly, I would never face a late payment, and I could be as Lazy as I want to be. Unfortunately they stopped offering a couple of years ago, so if you didn’t get in, you lost out. If you were part of the program like we were, you were grandfathered in… until now.

We called up Chase and got the story. Chase is migrating people from our reward program to another one, “with great additional benefits that we think you’ll enjoy.” I explained that I preferred the reward program that we signed up for and would like to decline the migration to the new reward program. (I told you I’m a curmudgeon.) Apparently they are really set in their belief that I’ll enjoy this new program. They declined my decline.

So now it looks like we are stuck with the Chase Freedom program. A good deal of both of our credit history is on this card, so I tried to convince my wife not to cancel the card (it’ll help us retain our credit scores). It seems like an uphill battle as she doesn’t seem to want to deal with them at all – or leave an orphaned account. The bigger question for me is which card do I turn to now to get the best rewards? (If you have a suggestion, please leave a comment.)

I can see why Chase is migrating people from the rewards program we were in. It was started in a different economic environment as well as under different credit legislation. Back then, banks had to lure people with big rewards program. With the credit change and the new credit card laws going into effect, a product that once made them money, probably either loses them money or doesn’t make them enough. In either event, it’s apparently bad enough to risk the anger of a lot of their customers. I think those customers have an idea for Chase’s new slogan, “Chase Freedom – two words for nothing to left to lose.” I wonder if Kris Kristofferson would sue them for copyright infringement (though trademark infringement is what all the people are doing these days)?

So I understand why Chase is doing what they are doing. I’d like to be put in some other exclusive program that retained some of the benefits (maybe 2% on the things we were getting 5% before) that new customers don’t get. Throwing out a little bone would do wonders for making us feel like we’d want to still be Chase customers. However, it looks like that wasn’t something Chase was looking to do either. It was a good ride while it lasted, and I knew, like everything, it wouldn’t last forever.

Glad I Have an Emergency Fund

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If it was a typical week, you’d be reading a well-researched article on identity theft, right now. However this week has been anything but typical. Monday the plan was for my wife and I to meet at a friends’ birthday party after work. However, I got a phone call that something was wrong with our 4-month old puppy, Jake. Being the curious pup that he is, he got into some mischief that isn’t “dog healthy.” My wife rushed him to the vet and I met up with them minutes later.

The good news is that Jake looks like he’s going to be creating mischief in our lives for years to come. The bad news is that the vet bills were $350. (From a cost perspective, getting a Sony Aibo is starting to make more sense.) That isn’t the way to start the week.

On Tuesday, I was on my way to work when I saw something that looked like a soda can or a coffee can. I know there’s a big difference, but sometimes it’s hard to tell. In any event, I thought I could just go over it. It really wasn’t that high. Well I heard it hit the bottom of my car and thought, “That can’t be good.” The next day, I got the dreaded “Service Engine Soon” light. Upon inspection, my mechanic asked me if hit anything with the bottom of my car… Yep. I had knocked out some oxygen detectors which set me back another $200.

This got me thinking how people survive without an emergency fund. I would think that $550 in a couple of days could put a lot of people in financial trouble. I suppose they’d get by with credit cards. Ugh.

Problems With American Airlines Credit Card

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This post is going to be bit of rant, due to very poor customer service. Many people probably don’t like reading rants, but in extreme cases (like this one), I find it necessary to document the case for those interested. Maybe it just makes me feel better that someone from the company may see it and offer to fix their service.

On Saturday, my wife was looking at her American Airlines Credit Card bill. We are going to a convention in March and she purchased the American Airlines tickets with the card. As you might imagine, this is one of the ways of earning more miles. The statement had an obvious problem – no miles earned from travel purchases. “How can this be?” she asked me. I told her it clearly looks like an error.

Having a little extra time on Saturday, she decided to call the credit card and get to the bottom of it. I thought this was destined to go poorly. Credit cards seem to be getting squeezed nowadays and I didn’t have high hopes that they were putting money into having the best customer service representatives available on a Saturday. I thought she was lucky to get anyone on the line to be honest.

That’s where the problems started. I may be wrong on some of the details, because I simply may have lost track after awhile. The first credit card person couldn’t answer my wife’s question, so she transferred her to another credit card person. After my wife explained the story again, the person said that she needs to talk to American Airlines about it. (I thought this was a bovine excrement excuse because the statement clearly says the purchase was from American Airlines.) So my wife got transferred to American Airlines and explained the problem once again. This customer service person, probably more used to hearing people looking to book flights than field calls about credit cards, sent my wife to the only place that made sense to her – the American Airlines card membership application program. Of course they are not set up to help someone who already has an AA credit card. So this is a dead-end.

She starts over with the credit card company and the chain of calls repeats itself. This time they transfer her faster before she can explain that she’s been through this. Starting off the conversation with “this is the 6th time I’ve been transferred, so please don’t transfer me to [fill in the last place she was at] doesn’t seem to help.” At this point, I decided to give her advice. Standard stuff like, “Make sure the call is recorded in the call log and get a reference number. This way so if you get disconnected or transferred you can come back to where you were in the chain.”

It really was a perfect blame game situation. The credit card company can blame the airline for not coding the purchase right. The airline can claim that they don’t know what’s going on at the credit card company. I suggest that she try to conference them all, but of course neither party will accept that solution – even if we are using our own phone to conference. It becomes clear to me that this is one of those fun customer service situations where you caught in the middle of two sides that won’t talk to each other. By this time, my wife is nearly in tears. Though the situation is annoying enough to warrant tears, I’m starting to wonder if it’s compounded by thoughts of how my wife is occasionally caught in the middle of a communication battle with her two divorced parents.

I’m getting ready to intervene and offer to try to get it resolved myself, when she tries one last call to the credit card company. This last call says that the statement appears to be in error and she deserves those miles. The statement is supposed to be fixed as I’m writing this. If it’s not, I’m going to have to suggest the “We’ve had this credit card for years and are a frequent customer of yours. What are you going to do to make me happy?” response. We’ll see how that goes if it comes to it.

Credit Karma’s Credit Simulator (and Other Credit Tools)

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Last April, I went to Finovate Startup in San Francisco. I was introduced to around 40 companies at the time, and I met a number of their founders personally. One of them was Credit Karma. You may remember that in the past, I told you how you can get, free credit scores from them. It’s important to realize that a credit score is different from a credit report (which are typically free, one per year, from AnnualCreditReport.com.

I got a little off-track with the credit score explanation.  I meant to report that Credit Karma won Best in Show at Finovate this year. What did they do to earn those honors? I’ll let you know, but first I wanted to mention a couple of other things that I noticed they were up to:

  • Recommended Credit Cards – They have a section of credit cards that is different than your usual credit card page. These credit cards seem personalized. Since they know my credit is excellent, they show me the cards in the excellent rating. They even have ratings based on what other Credit Karma vote, the approval rate of applications, and what Credit Karma users are actually signing up for.
  • Improved Credit Karma Blog – As a blogger, I tend to notice blogs – even corporate ones. This one has a lot of information about improving your credit as well as some timely credit news. My favorite is what is a good credit score. That’s exactly what you’d expect from a credit-focused company trying to transition from start-up to market leader.
  • Credit Simulator – This is the tool that carried Credit Karma to Finovate’s Best in Show award. Let’s pretend you signed up for Credit Karma when I reviewed them last time. Credit Karma gave you a score of 680. It’s not great, but you know you could do better. If you only knew what you could do to help it out. Enter the Credit Simulator. This tool allows you to see how your credit would change in a number of scenarios. Some of them include, adding a new loan, adding a credit inquiry, closing your oldest credit card, allow a monthly account become 30 days overdue, etc. This tool finally gives you some insight to how your credit score is affected. Granted, it’s not a FICO score, it’s a reason estimation.

Here’s one feature to look for in the future. My Credit Karma score dropped, and I didn’t know why. I figured that since Credit Karma is constructing my score from my report, they could tell me what I did to deserve the drop. Unfortunately, they couldn’t tell me what had changed in my account. After talking with the CEO, I have confidence this may be something you’d see in the future from Credit Karma.