Annoying Myth: Paying off Full Each Month Doesn’t Build Credit Scores – Episode #106
Annoying Credit Myth
This is starting to be a pet peeve of mine. There are so many “so-called” experts out there in the credit space and it’s really starting to annoy me. Why am I so peeved? Well, the lack of good advice is the kicker. The latest – A website written by someone promoting payday loans [generally, I hate anything with 300% interest rates, but hey, that's just me]. Anyway, this guy says that by paying off the entire balance in full each month, the credit bureaus don’t see you as really borrowing any money at all. His article reads as a message to help someone to take on more debt and perhaps find themselves in need of a payday loan package. Perhaps, he just has his facts wrong. But, I find it annoying.
Since I have not carried a balance ever, well as long as I can recall, this means that I must not have a good credit score. Nonsense. In fact, I’ve achieved an 831 FICO in the past few years and currently have FICO scores in 800 range. In all my years at myFICO.com, I never heard this myth to be true. In fact, the card issuers sometimes refer to people who payoff their bills each month as “freeloaders” because we don’t get charged interest or late fees. The reality is the statement “paying off the entire balance in full each month, the credit bureaus don’t see you as really borrowing any money at all” is flawed. Paying off balances before they are due DOES show something about your credit behavior and IS a good prediction of risk. Remember, while credit card issuers want you to be late, no financial institution wants you to default.
Single Parents and Credit Scores – Episode #105
Single Parents and Credit Scores
According to the U.S. Census Bureau [August, 2007], there are approximately 13.6 million single parents in the United States today, and those parents are responsible for raising 21.2 million children. Approximately 84% of custodial parents are mothers who are carrying a large burden.
If you are a single parent, I realize that you don’t have a lot of time to learn about credit. So here is a quick action list.
- Make sure you are no longer “joint” financially with the absent parent. Too often, we hear about an absent parent who destroys the credit of the custodial parent by running up credit card debt on joint credit cards. If you are unsure, call your credit card companies and ask whether your credit cards are joint cards or individual cards. If they are joint cards, close them and open individual cards.
- Start pulling your credit report for free from annualcreditreport.com. This won’t give you a credit score, but you can see what’s in your report.
- Correct any inaccuracies that are in your report. If you don’t believe an account tradeline is correct, you can dispute it. Check out our free dispute form letters.
- If your credit is terrible consider credit counseling with a US Dept of Justice approved counseling agency.
- Teach your child or children about money and credit early on. Credit can make life easier. It can save time from having to make frequent ATM or Cash Checking storefront stops.
- Get “creducated” and learn how to build credit if you haven’t started or know you don’t have a credit score because you don’t have enough credit.
Without getting into a debate on credit’s benefits and drawbacks, I’ll point out that even the FTC believes that credit is necessary to help create wealth. Even if wealth is too lofty a goal right now, good credit score management can save you money and make life a little sweeter.
