Ask Liz Weston

 

Spiking foreclosures and higher credit card delinquency rates could easily give you the impression that a broad swath of Americans are watching their credit scores plunge.

But that doesn’t seem to be the case. Overall credit scores and bankruptcy scores seem to be stable, according to David Rubinger, spokesman for Equifax credit bureau.

The bureau monitors changes in its own, in-house credit score as well as its Bankruptcy Navigator Index (BNI 3.0) scores. Both types of scores have remained stable despite turmoil in the housing market and the uptick in credit card delinquencies.

The lesson to draw? The folks having the most trouble with their credit are the ones who’ve long had credit problems. The rest of us seem to be doing okay.

 

A little factoid I had to share: More than one third of us (37%) have received some kind of financial alert on our bank accounts this year, according to a report by Javelin Strategy & Research.

In 2004, about one out of five people (22%) reported receiving such an alert, such as a call or email from their bank or credit union about unusual activity in their accounts.

Banks are clearly stepping up their fraud alert activity, following the lead of credit card companies who’ve been doing this for years. People are also signing up for email or text alerts when their balances drop below a certain level, transactions worth more than $X hit their account, when deposits are made or any number of other financial events. If your bank or CU offers these voluntary alerts, take advantage–they can help you avoid bounced-transaction fees and alert you early to signs someone’s invaded your account.

 

One of the enduring myths about credit is that the damage you do to your scores is somehow permanent. But just as a few bad moves can devastate your score, a few smart moves–paying down your credit cards, getting rid of errors on your credit reports–can help your scores.

Experian underscored this with a recent release announcing that 3 of 10 consumers improved their PLUS credit scores by 1 to 50 points in a recent six-month period and 2 percent managed to boost their scores by 51 to 100 points.

I’ll offer the usual caveats here: that a PLUS score is not the same as the FICO score used by most lenders. But I’d be surprised if Fair Isaac’s figures were that much different.

Clearly, getting a major move in your scores in a short time is the exception, rather than the rule. And most people’s scores are pretty stable; Experian said 4 out of 10 consumers showed no change between January and June 2007. But improvement is possible; remind yourself of that if you’re digging your way out of a credit mess and losing hope.

 

Back in February, I asked a bunch of credit card experts what plastic they carried in their own wallets. The favorite: American Express Blue Cash, which currently offers a 1.5% automatic rebate on all purchases after you’ve charged $6,500 annually, plus 5% back on so-called “everyday purchases” at gas stations, drug stores and grocery stores.

Looks like the folks at Kiplingers agree. The personal finance magazine recently named Blue Cash the best cash-back card.

For airline cards, they picked Citi PremierPass Card Elite, which has a $75 annual fee but allows you to get free domestic tickets on any airline for just 20,000 miles. You can also get a free companion tickets every time you buy a domestic ticket for $299 or more.

If you’re an elite frequent flier looking for upgrades, or trying to save up miles for a business-class international ticket, these “any airline” cards aren’t a good fit–stick to your airline-branded card. But others who want tickets rather than cash back or other rewards can check this one out.

 

We’re starting to get a lot of posts on the Your Money message board from folks who are in mortgage hell. Often their payments have reset to higher, unmanageable levels, but home prices in their area have fallen so they’re no longer able to refinance their way out of trouble. Many were suckered into so-called “option” mortgages that allowed them to make interest-only or payments that didn’t even cover their interest, which means their mortgages balances have grown over time, putting them further underwater.

A few thoughts: if you’re facing a mortgage reset, your credit is decent AND you still have equity in your house, the time to refinance is probably now. If prices fall in your area, your equity could disappear and then you could be in the same boat as the folks in mortgage hell.

If you’re already there (in hell, I mean), consider contacting a HUD-approved housing counselor to discuss your options. Don’t delay. The longer you wait, the fewer–and worse–your options.

 

Experian and Equifax last week made it official–like TransUnion, they’ll be offering consumers the ability to freeze their credit reports. Sandra Block at USA Today wrote a nice little summary of what freezes are all about.

Basically, this will extend credit locks to folks in the 11 states that didn’t have already have laws allowing their residents to freeze their credit reports (Alabama, Alaska, Arizona, Georgia, Idaho, Iowa, Michigan, Missouri, Ohio, South Carolina and Virginia) and in the five that limit protection to ID theft victims or those who have been told their data has been compromised (Arkansas, Kansas, Mississippi, South Dakota and Washington).

This is a good thing, although I still believe (as I wrote in “Lock your credit away from ID thieves”) that it’s not an option most people will want to take once they understand the costs and hassles involved. There will be fees for locking your report and again for unlocking it when you need credit (figure around $30 each time for all three bureaus) and a delay of a few days–no more instant credit.

Those are among the reasons only 60,000 to 70,000 people have taken advantage of freezes so far, according to the bureaus. We have to consider the source, of course–bureaus are in business to sell credit info–but no one would contend that more than a tiny fraction of those who have had the ability to freeze their credit so far have done so.

Still, it’s something that should be available for everyone who wants this layer of protection.