Earlier this month I joined Your Money Matters! radio host Marc Pearlman to discuss all things credit. In case you missed our hour-long chat, check out the audio page here. He asked me a slew of questions but I have a brief recap of some of our discussion points below. Your Money Matters! is heard in up to 19 states, as well as on iTunes.
Recession Setbacks & Your Credit
With the financial collapse in 2007 and the soaring unemployment numbers caused by the ensuing recession, many Americans have had their fair share of financial struggles. If your score has suffered as a result of financial setbacks stemming from the recession, will banks take that into account and give you a break?
No. Banks want the absolute best customers. If you’ve lost points on your credit score you need to take matters into your own hands. Don’t expect that a bank will sympathize and give you a top-notch interest rate with a 500 credit score – even if it was 750 last year.
Credit Scores by the Number
We know credit scores are used by lenders to decide whether or not to approve an application or request for credit. But what does that three digit number mean? How important are the incremental numbers? If someone has a 680 or a 700?
If you go to MyFico.com you can see what credit score ranges correlate to the best interest rates on mortgages and car loans. A 760 gets you the best rate on a mortgage. So a 750 might bump you down to the next best rate. At the end of the day if your score is in the high 700s you’re good to go.
Credit Cards and Your Credit Score
With credit scores, the amount of debt someone is carrying on their credit cards can have a significant impact on how high (or how low) their scores will be. If your score is suffering because of the amount of debt you’re carrying on your credit cards, would taking out or applying for another card (with the intention of not using it but to lower your utilization ratio) be a good idea?
The plus side is that you’re increasing your credit line and lowering your debt to credit utilization ratio. The potential risk to opening too many credit cards at the same time is that each time you apply for credit a credit inquiry gets placed on your report. Several inquiries can hurt your score. Note: those hard inquiries fall off your report after a year.
For the rest, check out Your Money Matters online.
Image: D’Arcy Norman, via Flickr.com