Lazy Man and Money

Four Wrecking Balls That Could Take Down Your Credit

by 5 Comments

Recently, I saw the movies Deadpool and Deadpool 2. I had them on my list for awhile, but it’s rare for me to have the time to watch movies nowadays. I loved them. They seemed to be new and different. It’s going to be weird to see Detective Pikachu and not think of Deadpool when Pikachu is talking.

In Deadpool 2 there’s a character, Domino, whose super power is being lucky. It’s easy to write a lucky character in a fictional movie. We know that’s not real life. However, I couldn’t help but think that my life has been about as close as you can get to Domino’s.

That’s especially true when it comes to my credit history. I’ve always been responsible with credit and that’s not luck. However, there’s some amount of luck that plays into almost everything we do… and your credit is no different.

With that in mind, I thought I’d highlight four circumstances that where life’s hidden hazards could cost you thousands in future interest payments on houses, cars, and insurance.

1. Rental History

After college I moved back home and lived with my mom for a year while I got a job and started to save a little money. Fortunately, one of my best friends from college practically dragged me into sharing an apartment with him. I was also fortunate that he was very fiscally responsible. Together we never missed a rent payment or even came close.

I believe having a good rental history helped build my credit which became useful later in life. Here are some tips to get the same kind of boost:

  • Pay your rent on time – Late payments have the potential to reflect badly just like late credit card payments because some landlords report to agencies that then report to credit bureaus
  • Avoid owing back rent, especially upon move out – landlords have the ability to use collection agencies to recover this money and they report to credit bureaus
  • When moving out, clean your unit, don’t leave items to haul away, and repair any damages – all of these can add up to high fees and find their way onto your report as judgments against you if not settled upon move-out

Not only will a poor rental history with back due rent, damages, or constant late fees damage your credit, they will also play a huge role in keeping you from renting in the future.

2. Bank Accounts

Back in those days that we were renting (nearly 20 years ago!), you could write a check and count on having a few days before it was cashed.

Nowadays, things seem to move faster almost instantly*. With debit cards and online banking, money ebbs and flows as quickly as you make and spend it. I can take a picture of a check and it is instantly deposited into my bank account. With that in mind, it’s extremely important to manage your accounts carefully and conscientiously. Fees for insufficient funds that are not paid may eventually make it to a collection agency who then reports it to the credit bureaus. It doesn’t happen often, but it can happen.

3. Medical Bills

I think most people would agree that healthcare and student loans are the biggest financial challenges for many today. For this, I wanted to just focus on medical bills. After all it’s not like we are close to fixing health care.

We can do a lot of things to mitigate those bills. We can eat healthy and exercise. We can get appropriate insurance.

However, sometimes health is just dumb luck. If the fates are against you, you may still end up with out-of-pocket expenses like co-pays and patient portions. You may be able to negotiate some of the expenses, but if you can’t pay the bills, they’ll get onto your credit report and damage your score.

It’s not a bad idea to check your score with a free credit report after a few months following an incident just to make sure there aren’t any random bills still out there that may have been forgotten. Back when I almost died eating pizza the insurance and medical billing were pointing fingers at each other and the hospital threatened to send the bill to collections. I may have been lucky in escaping pizza death, but I was unlucky with the billing.

4. State and Federal Taxes

Owed tax is one of those debts that just won’t go away, even with bankruptcy. You don’t want to find out that you owe the government money. While that can be stressful, I’ve heard the IRA will work with you on the payments. Make those payments and you don’t have to worry about a credit score hit. This is one area, where luck doesn’t really come into play. If you are fiscally responsible it you shouldn’t be surprised by a bill that’s too big.

It’s easy to find articles improving your credit score. I even have on hacking your credit score. However, sometimes the best way to good credit is to avoiding the big pitfalls.

* The exception to this rule is when I’m trying to cash the checks from my tenants. Those still seem to take forever to clear.

Do Women Understand Credit Scores Better Than Men?

by 4 Comments

[The following is a guest post from Chloe Mulliner. She is a writer and editor for CreditSources.org, a website dedicated to information regarding personal loans and all things credit.]

A recent 2013 Consumer Federation of America and VantageScore Solutions survey of 1022 Americans uncovered that many adults don’t know much about their credit scores. The results revealed that between roughly one-quarter and two-fifths of the survey subjects were unable to correctly answer credit related questions ranging from who collects credit information to what affects credit scores.

So if this were a battle of the sexes, who scored better, men or women?

The survey results showed that women consistently answered more questions correctly than the men. Overall, according to the survey, women have a better understanding of what contributes to credit scores and the importance of checking them.

For starters, more women (74%) than men (68%) realized that credit bureaus are responsible for collecting consumers’ information for credit scores. And when it came to the factors that these credit bureaus use to determine credit scores, only 38% of women believed that age affected their scores, while 48% of men thought that age had some value. Similarly, just 34% women thought that marital status could contribute to one’s score compared to 46% of men who believed marriage played a role.

Just to get the facts straight, yes, credit bureaus report consumers’ information, but they do not use age or marital status to calculate the scores. Typically, the only way that a couple’s marriage will affect their individual credit scores is if they have joint accounts. Missed payments and current balances on a joint account will appear on both of their credit reports.

As for identifying a good credit score over a bad credit score, 36% of women were more in the know than just 29% of men who understood the differences. Generally credit scores range between 300 and 900, depending on the scoring system, but the higher the credit score, the better the score.

Although the women took the lead in correctly answering the majority of questions, the men did have better luck than women when questioned about credit repair companies. Only 32% men believed in the legitimacy of credit repair agencies compared to the 40% of women who saw these agencies as helpful. Men, more than women, understood that consumers need to remain skeptical of the services that credit reporting agencies offer.

Regardless of whether the women outdid the men or not, these statistics are rather alarming considering how much consumers’ credit scores can affect their financial lives. The results of this survey reveal that both men and women need to brush up on their credit scores and realize the importance of maintaining good credit scores.

[Editor’s Note: I have to stand up for my fellow men here who thought that age had some value in a credit score. Credit scores take into account the age of credit accounts. This means that younger people are at an inherit disadvantage and that disadvantage is reflected in a lower credit score on average.

Also it’s interesting that when the men perform better, it’s attributed to “luck.” Grrrr…]

Uncrunch America with Change.org

by 8 Comments

While most blogs are probably planning their New Year’s Resolutions, I’m taking action. I just voted to support Uncrunch America campaign in Change.org’s Solving the Credit Crisis From the Bottom Up. That’s quite a mouthful (or is it ten-fingersful since I’m typing?). Allow me to explain a bit.

Obtaining credit is getting more and more difficult in this country. For so long, it was really easy to get credit – too easy. We found that out all too well with the sub-prime mess. In an attempt to right the wrongs, lenders have over-corrected… they are requiring pristine credit scores to lend. “Once bitten, twice shy” isn’t just a Great White song to them. Uncrunch America has a plan to solve that.

Uncrunch America is looking to get people to lend to other people. If you think this sounds like peer-to-peer lending, you are right, Lending Club is one of Uncrunch America’s partners. It’s not just Lending Club though. Supporters also include Credit Karma (of which I should note has a great credit blog that tell me what is a good credit score) and popular online budgeting tool, Geezeo – two companies that I’ve talked with extensively in the past. Throw in On Deck Capital lending to small businesses and a public relations firm and you’ve got an organization with some clout.

However, some clout isn’t always enough. This is where Change.org comes in. This nonpartisan group is simply trying to create a platform where the people can vote on ideas of change. The Top 10 ideas will be presented to Barach Obama on Inauguration Day, January 20, 2009. After that Change.org supports an organization (in this it would probably be Uncrunch America) in getting the idea implemented. The details of all this are a little fuzzy to me, but you can read the FAQ here.

So if you think that this idea for helping make credit available should get Barack Obama’s attention, please vote for Solving the Credit Crisis From the Bottom up at Change.org. I would stress that this is the last day for round one (I just heard about the campaign myself), so you may have to put down your champagne for a minute or two. However, it’s close to reaching round two, and if it does votes there will be appreciated as well. Sadly, you do have register for the site, but the sign-up form is 4 input boxes and took me about 45 seconds of my time. I figure it’s the least I can do to give the idea a shot.