Introduction xxii
Chapter 1 Why Your Credit Score
Matters 1
How Your Credit Score Affects You 1
What It Costs Long Term to Have a Poor or Mediocre Credit
Score 3
How Credit Scoring Came into Being 6
How Credit Use Has Changed over the Years
7
Consumer’s Fight for Truth About Credit
Scores 8
Credit Controversies 9
Credit Scoring’s Vulnerability to
Errors 9
Credit Scoring’s
Complexity 10
Credit Scoring’s Use for Noncredit
Decisions 11
Credit Scoring’s Potential
Unfairness 11
Chapter 2 How Credit Scoring Works
15
What Is a Good Score? 17
Your Credit Report: The Building Blocks for Your
Score 18
How Your Score Is Calculated 19
The Five Most Important Factors 20
Your Payment History
20
How Much You Owe 21
How Long You’ve Had
Credit 22
Your Last Application for
Credit 22
The Types of Credit You
Use 23
Your Credit Scorecard 24
Your Results Might Differ 25
How Do I Get My Score? 26
What Hurts, and for How Long 31
New Versions of the FICO Score 33
Chapter 3 FICO Versus “FAKO”--Competitors to the Leading
Score 39
The VantageScore Scale 40
How VantageScores Are Calculated 42
Comparing the Scoring Systems 43
Some Rules Remain the Same 44
So Which Is Better? 45
VantageScore’s Future 45
Other Scores Lenders Use 47
Chapter 4 Improving Your Score--The Right
Way 51
Step 1: Start with Your Credit Report
51
Check the Identifying
Information 52
Carefully Review the Credit
Accounts 53
Parse Through Your
Inquiries 54
Examine Your Collections and Public
Records 54
Dispute the Errors
55
Step 2: Pay Your Bills on Time 56
How to Make Sure Your Bills Get Paid on Time,
All the Time 57
Step 3: Pay Down Your Debt 60
You Need to Reduce What You Owe Rather Than Just Moving Your
Balances Around 61
You Might Need to Change Your Approach to Paying
Off Debt 61
You Need to Pay Attention to How Much You
Charge--Even If You Pay Off Your Balances in Full Every
Month 62
How to Find Money to Pay Down Your
Debt 64
Step 4: Don’t Close Credit Cards or Other Revolving
Accounts 65
Step 5: Apply for Credit Sparingly 65
How to Get a Credit Score if You Don’t Have
Credit 66
Credit Scores Without Credit 70
Chapter 5 Credit-Scoring Myths
71
Myth 1: Closing Credit Accounts Will Help Your
Score 72
Myth 2: You Can Boost Your Score by Asking Your Credit Card Company
to Lower Your Limits 73
Myth 3: You Can Hurt Your Score by Checking Your Own Credit
Report 74
Myth 4: You Can Hurt Your Score by Shopping Around for the Best
Rates 75
Myth 5: You Don’t Have to Use Credit to Get a Good Credit
Score 76
Myth 6: You Have to Pay Interest to Have a Good Credit
Score 77
Myth 7: Adding a 100-Word Statement to Your File Can Help Your
Score if You Have an Unresolved Dispute with a
Lender 78
Myth 8: Your Closed Accounts Should Read “Closed by Consumer,” or
They Will Hurt
Your Score 79
Myth 9: Credit Counseling Is Worse Than
Bankruptcy 79
Myth 10: Bankruptcy Hurts Your Score So Much That It’s Impossible
to Get Credit 80
Chapter 6 Coping with a Credit
Crisis 83
Step 1: Figure Out How to Free Up Some Cash
86
Step 2: Evaluating Your Options 89
Task 1: Prioritize Your
Bills 89
Task 2: Match Your Resources to Your Bills and
Debts 91
Task 3: Figuring Out a Repayment
Plan 92
The Real Scoop on Credit Counseling 94
Debt Settlement: A Risky Option 97
Should You File for Bankruptcy? 100
The Effects of Bankruptcy Reform 101
The Type of Bankruptcy That You File
Matters 102
Should You Walk Away from Your Home?
104
Step 3: Choose Your Path and Take Action
106
Option 1: The Pay-Off
Plan 106
Option 2: Credit
Counseling 107
Option 3: Debt
Settlement 107
Option 4: Bankruptcy
107
Chapter 7 Rebuilding Your Score After a Credit
Disaster 109
Part I: Credit Report Repair 111
Scrutinize Your Report for Serious Errors
112
Know Your Rights 113
Organize Your Attack
115
What You Need to Know About Unpaid Debts and
Collections 116
What You Need to Know About Statutes of
Limitations 119
Should You Pay Old
Debts? 122
“But You’ve Got the Wrong
Guy!” 125
Part II: Adding Positive Information to Your
File 126
Try to Get Positive Accounts
Reported 126
Borrow Someone Else’s
History 127
Get Some Credit or Charge Cards if You Don’t
Have Any 127
Part III: Use Your Credit Well 128
Pay Bills on Time
129
Use the Credit You Have
129
Keep Your Balances Low
129
Pace Yourself 129
Don’t Commit the Biggest Credit-Repair
Mistakes 130
Chapter 8 Identity Theft and Your
Credit 133
New Options That Might Help 137
How to Reduce Your Exposure to Identity
Theft 139
Buy a Shredder 139
Get a Locking Mailbox
139
Protect Your Outgoing
Mail 139
Keep Track of Your
Receipts 140
Keep Your Financial Documents Under Lock and
Key 140
Get Stingy with Your Social Security
Number 140
Know What’s in Your
Wallet 140
Ask About Shredding
Policies 141
Don’t Let Your Debit Card out of Your
Sight 141
Opt Out of Credit Card Solicitations, Junk Mail,
and Telemarketing 142
Don’t Use a Cell or Cordless Phone to Discuss
Financial Matters 143
Be Wary of Telephone Solicitors and Emails
Purporting to Be from Financial
Institutions 143
Be Smarter About Social
Media 143
Safeguard Your Social Security
Number 145
Monitor Your Credit
Reports 145
Consider a Credit Freeze
147
What to Do if You’re Already a Victim
148
Keep Good Notes of Every Conversation You Have
Regarding the ID Theft 148
Contact the Credit Bureaus by Phone and Then
with a Follow-Up in Writing 149
Contact the Creditors by Phone and Then Follow
Up in Writing 149
Contact the Police or Local
Sheriff 149
Contact Bank and Checking Verification
Companies 150
Contact the Collection
Agencies 150
Get Legal Help 151
Don’t Give Up 151
What to Do if the Credit Bureau Won’t Budge
153
Chapter 9 Emergency! Fixing Your Credit Score
Fast 157
Repairing Your Credit in a Matter of Hours: Rapid
Rescoring 158
Boosting Your Score in 30 to 60 Days
161
Pay Off Your Credit Cards and Lines of
Credit 161
Use Your Credit Cards Extremely
Lightly 162
Focus on Correcting the Big Mistakes on Your
Credit Reports 162
Use the Bureaus’ Online Dispute
Process 163
See if You Can Get Your Creditors to Report or
Update Positive Accounts 163
What Typically Doesn’t Work 163
Disputing Everything in
Sight .164
Creating a “New” Credit
Identity 164
Closing Troublesome
Accounts 164
Chapter 10 Insurance and Your Credit
Score 167
History of Using Credit Scores to Price Insurance
Premiums 169
But What’s the Connection? 171
What Goes into an Insurance Score 175
Keeping a Lid on Your Insurance Costs
176
Start Thinking Differently About
Insurance 177
Raise Your Deductibles
178
Don’t Make Certain Kinds of
Claims 178
Be a Defensive Driver
180
Use the Right Liability
Limits 180
Drop Collision and Comprehensive on Older
Cars 181
Shop Around 181
Protect Your Score
182
Chapter 11 Can Bad Credit Cost You a
Job? 183
Chapter 12 Keeping Your Score
Healthy 189
The Do’s of Credit Health 190
Pay Off Your Credit Card
Balances 190
Have an Emergency Fund
192
Have Adequate Insurance
194
The Don’ts of Credit Health 195
Don’t Buy More House Than You Can
Afford 195
Don’t Overdose on Student Loan
Debt 196
Don’t Let Your Fixed Expenses Eat Up Your
Income 197
Don’t Raid Your Retirement or Your Home Equity
to Pay Off Credit Cards 198
Your Score 199
Get Your Credit Reports
200
Take Action 200
Don’t Be Late 201
Dealing with Mortgages, Car Loans, and Other
Secured Debt 201
Consider a Fraud Alert or Credit
Freeze 202
Look for Lenders Who Aren’t
FICO-Driven 202
In Conclusion: The Three-Year Solution
203
Index 205
Today, a good credit score is essential for getting decent terms on credit--or for getting credit at all. But that's just the beginning: You're now being judged on your credit score by everyone from employers to cellphone carriers. Now, MSNBC/L.A. Times journalist Liz Weston has thoroughly updated her best-selling guide to credit scores, with crucial new information for protecting (or rebuilding) yours.
Weston thoroughly covers brand-new laws changing everything from how your credit score can be used to how you can communicate with collectors. This edition also adds:
Weston also updates her guidance on using FICO 08 to raise your score… fighting lower limits or higher rates… maintaining the right mix of cards and balances… bouncing back from bad credit… choosing credit "solutions" that help, not hurt… and much more!
Liz Weston is a personal finance columnist whose
twice-weekly columns for MSN Money reach more than 10 million
people each month. She writes a money column, “My Two Cents,” for
AARP the Magazine, the largest circulation magazine in the world
with 22 million subscribers, and authors the question-and-answer
column “Money Talk,” which appears in theLos Angeles Times and
other newspapers throughout the country.
Liz is a regular commentator on American Public Media’s Marketplace
Money and has contributed to NPR’s “Talk of the Nation” and “All
Things Considered.” She has appeared on Dr. Phil, Today Show, and
NBC Nightly News, and was for several years a weekly commentator on
CNBC’s Power Lunch.
Her advice on credit and finance has been featured in Consumer
Reports, Marie Claire, Parents, Real Simple, Woman’s World, Woman’s
Day, Good Housekeeping, Family Circle, and many other
publications.
Formerly a personal finance writer for the Los Angeles Times,
Weston has won numerous reporting awards, including the 2010 Betty
Furness Consumer Media Award by the Consumer Federation of America,
designed to honor individuals who have made “exceptional progress
in American consumerism.”
Her other books include The 10 Commandments of Money, which the New
York Times praised as “a wonderful basic personal finance
book…[with] enough counterintuitive ideas to keep even people who
know a bit about personal finance reading further.” She is also the
author of Deal with Your Debt and Easy Money, both published by
Pearson.
Weston is a graduate of the certified financial planner training
program at University of California, Irvine. She lives in Los
Angeles with her husband and daughter. She can be reached via the
“Contact Liz” form on her Web site, AskLizWeston.com.
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