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Home buying isn’t the time to discover credit scores

Filed under: Finances on July 2, 2015 @ 7:54 am

Thinking back to when I bought my home about 8 years ago, it was the first time in my life that I ever saw a breakdown of my credit scores. I remember feeling pleasantly surprised that it was in the good range to qualify for a favorable rate, but I realize now that I should have known where I stood before I began serious house hunting. Lucky for my husband and me, our credit was good enough to move forward with the home buying process, but for many, that’s not the case.

Based on the recent Home Buying and Credit Survey Report by Experian, many people enter into the home loan arena just as green as we did. And for some, an unexpected poor credit rating puts home buying plans on hold.

Take a look at some of the report’s findings.

* More than 2 in 5 homebuyers worried they wouldn’t qualify for best rates and delayed purchasing to improve credit. Of the people who felt they were the most financially prepared, 70 percent of them knew their credit score going in. And, once their credit scores were revealed, 31 percent of people said they were surprised to see something negative.

Keeping tabs on your credit reports and credit scores is wise for so many reasons, but first and foremost, it’s to make sure that someone hasn’t opened a fraudulent account in your name. The longer such fraud goes unnoticed, the bigger the hassle it will be to repair the damage. If your goal is to buy a home, it could definitely set you back for some time.

* Working to improve credit is something that 55 percent of respondents said they did before applying for a home loan. That’s the good news. However, only half said they actually knew their credit score beforehand.

That’s kind of like trying to eat really healthy the week before you go for a physical to try to get better lab results. It doesn’t work that way at the doc or with your credit. You need consistent, good credit behavior over time at least for a few months to see significant progress in your credit score. And knowing which areas need improvement which is revealed when you analyze your detailed credit score report — is half the battle.

* Scary stat: 35 percent of future buyers said they don’t know what to do to improve credit.

If you have poor credit and no idea how to improve it, you probably need to have a conversation with a credit counselor or financial planner before you make a decades-long commitment to pay back hundreds of thousands of dollars involved in a mortgage. It’s hard enough dealing with a hefty house payment and other bills and expenses, but to do so without having a good handle on your finances first is a disaster waiting to happen.

* People are less informed about their credit’s impact on refinance applications. Only 62 percent who plan to refinance their mortgage said credit scores will affect their interest rate.

Once you’re locked into a 30-year mortgage, you might be less concerned about maintaining a stellar credit score. The problem is if you allow your credit score to slip too much, it could come back to bite you if you end up trying to refinance your mortgage at a better interest rate.

Because I bought my house before the real estate market plummeted, I was one of the people who really stood to benefit from a refinance, which would drop my interest rate more than 2.5 percent. My biggest hurdle ended up being that my home value dropped so much that I barely had enough equity to qualify. What I did have going for me, however, was a fantastic credit score. After a couple of frustrating failed attempts, I found a lender that was able to make the refinance happen, but had my credit been subpar, I would have missed out on saving hundreds of dollars per month.

As the survey illustrates, buying a home is often the first major reality check for people that their credit score does matter. Although credit scores matter in order to qualify for an auto loan, an apartment or a job, the stakes are probably the highest for homebuyers.

Don’t wait until you’re attending open houses or meeting with realtors to start thinking about your credit status. Pull your free credit report from the three credit bureaus (Experian, Equifax, and TransUnion) via annualcreditreport.com, and get your credit scores, too (for about $20 each from MyFICO.com. That way, you’ll have time to make necessary improvements, and there will be no surprises.

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Why foreign transaction fees matter even if you don’t travel

Filed under: Travel on June 24, 2015 @ 9:10 am

Many credit cards geared toward business or leisure travelers boast about no foreign exchange fees. If you don’t travel abroad often, you may think that doesn’t matter.

But as I recently discovered in a Kafkaesque exchange with customer service, you don’t have to leave home to get charged this fee. If you’re doing business online with a company that uses a foreign bank, that fee can also apply — even if the transaction is displayed in U.S. currency and there’s no mention of a foreign bank, foreign currency or foreign transaction. As business becomes more global, this is another good reason to add a card with no foreign transaction fees to your wallet, even if you rarely (or never) cross the border.

In my case, I purchased a year’s subscription to online content I can access through my smartphone. Several friends in the U.S. had recommended the company — and because the website didn’t scream: “Hey, we’re a British startup but we’ll take American money!” — I assumed the company was based somewhere in Silicon Valley, as many emerging tech companies are. When I checked out, I selected U.S. dollars, but that didn’t set off any red flags in my mind, because online content doesn’t require shipping, and theoretically you could buy and access the content anywhere in the world.

Then, when I checked my card transactions online (which I suggest you do often; Ashley at Saving Money in Your Twenties agrees with me), I noticed that my bank had tacked on a foreign transaction fee (fortunately, only 1 percent). I called (also a good idea; Miranda at Ready for Zero has tips on getting card fees waived) expecting to get the fee waived once I’d explained that the transaction was in U.S. dollars and was made from my home computer, so the fee shouldn’t apply.

The first not-so-helpful customer service rep told me that the currency of the transaction was irrelevant and the fee was actually charged because the company uses a foreign bank. “I understand that I’ll pay a fee if I use this card in another country, but there was no mention of foreign banks or foreign currency on the website,” I said. “I’ve had great experiences with this card for the past eight years, so can you waive the fee just this once for a loyal customer?”

No, she could (or would) not.

Instead, she suggested that she could transfer me to the disputes department, and I could dispute the transaction (Holly at Get Rich Slowly offers tips on disputing card transactions). That didn’t seem like the best approach (the company had delivered the content I wanted, after all), but I agreed to try that.

The next rep told me that I could not dispute the transaction because the fee had been charged by the card, not the merchant. “Shouldn’t the merchant disclose that there was a foreign bank involved?” I asked. “This doesn’t seem like a responsible business practice, and I’d like that money refunded.”

He responded that if a merchant is operating outside of the U.S., they wouldn’t be subject to any sort of U.S. rules around disclosure, and essentially it was my fault for not researching the company more carefully before buying. (“Really? Do consumers even know to look for a relationship with a foreign bank?” I wondered.) He offered to transfer me back to customer service so I could ask again to waive the fee.

Once transferred, I explained again that I was aware of the foreign currency fee and expected to pay it while traveling (unless I used one of my three other cards that don’t charge a fee — that’s the maddening part about this whole situation!), and got shot down one final time.

Out of curiosity, I checked the contact page on the company’s website and saw that it has offices in California and the United Kingdom (but no .co.uk URL, which would have made it obvious it was a UK company). I suspect they’re trying not to broadcast a specific location to appeal to a global audience, but it had never occurred to me to check the location for an online product.

I’m not going to close that card (after all, it’s one of the cards I’ve had the longest and length of history accounts for 15 percent of your FICO score), but I am going to use another card for all future purchases online just in case.

Bottom line: Never assume that an online purchase will be free from foreign currency fees. When in doubt, pay with a card that doesn’t charge foreign currency fees.

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‘Women on 20s’ campaign wants Harriet Tubman on $20 bill

Filed under: Finances on June 17, 2015 @ 8:41 am

Not only do American women earn 78 cents on the dollar of what a man earns, but they’re also vastly underrepresented on U.S. currency.

A group of women launched a campaign to change that, with the goal of putting a woman’s face on U.S. dollar bills by 2020, the centennial of women’s suffrage. Yes, technically Susan B. Anthony (my namesake) is pictured on the $1 coin, but fewer than 800 million of those coins were minted before it fell out of favor. The Women on 20s campaign hopes to replace Andrew Jackson (who helped pass the Indian Removal Act of 1830) from the $20 bill in favor of an influential woman. (more…)

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5 financial lessons learned from dad

Filed under: Finances on June 10, 2015 @ 1:21 pm

Dad taught us to ride a bike and drive a stick shift. Whether by positive example (a change jar on the dresser) or through a cautionary tale of what not to do (toss the credit card bills), we also picked up money habits from our dads.

With Father’s Day approaching, I reflected on five important money lessons my dad passed down to me.
(more…)

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Why my brother chose a card with an annual fee

Filed under: Credit Card Tips on June 5, 2015 @ 1:15 pm

Now that he’s learned to use credit responsibly and has built up a good credit history, my 28-year-old brother recently decided to up his credit card rewards game and apply for a card with an annual fee to get a larger signing bonus and other perks. Since I’d recently done the same thing, he asked my advice on choosing the right card.

Here’s a look at the areas we discussed.
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Can mystery magazine mean mystery card charge?

Filed under: Fraud and Privacy Issues on June 3, 2015 @ 1:09 pm

A few months ago, mysterious magazines addressed to my husband — ones he’d never ordered — started arriving in the mail.

It was an odd combo: Sports Illustrated, Entertainment Weekly and Midwest Living. First, I wondered if he’d randomly ordered some subscriptions from a niece or nephew doing a school fundraiser. But I figured he would have picked magazines he’d actually read, maybe Wired or Vanity Fair.
(more…)

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Study: More cardholders carrying balances

Filed under: Credit Card Tips on May 27, 2015 @ 11:07 am

If you have a good job and steady paycheck, but can’t seem to get ahead financially, you’re not alone. One survey shows many U.S. employees still struggle with debt, cash flow and saving.

For example, the 2015 Employee Financial Wellness Survey by audit, tax and consulting firm PricewaterhouseCoopers found that 47 percent of full-time employees carry balances on their cards. That’s up from 45 percent last year, according to PwC’s report on the survey.

And even more Gen X and Gen Y employees — 52 percent — consistently carry credit card balances, up from 51 percent for both groups last year.
(more…)

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5 ways to protect your identity from the Anthem breach

Filed under: Fraud and Privacy Issues on May 20, 2015 @ 12:04 pm

I stayed pretty calm when I learned I’d been a victim of the Target data breach, and later the one at Home Depot. But when I fell prey to the Anthem data breach a few months ago, I lost my cool.
(more…)

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How to cut costs on smartphones

Filed under: Finances on May 13, 2015 @ 10:33 am

I was really happy when I discovered a cellphone provider that charged by usage and cut my bill in half. But I recently found a downside: Expensive smartphones don’t always last for long.

Last year, I wrote about the no-contract  cellphone provider Ting and how happy I was with the company. I cut the bill (for both me and my husband) from $135 a month with T-Mobile to between $60 and $75 a month. But to use the service, I had to buy my own phone, which cost over $250.
(more…)

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Join our Google+ Hangout on medical debt

Filed under: Google Plus Hangout on May 8, 2015 @ 9:55 am

It’s not just designer shoe addictions or getting in over your head with house and family expenses that causes debt woes.

In fact, more than half of all debt listed on credit reports is medical in nature. That’s according to a report from the Consumer Financial Protection Bureau (CFPB) that found medical debt accounts for 52 percent of all reported debt.
(more…)

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