The Consumer Financial Protection Bureau today called on major credit card issuers to provide free scores to their customers on their statements or online. The regulator’s idea is that low scores could tip people off to problems in their credit reports–problems they might not otherwise find, since too few people get their free credit reports each year.
Creditors use a variety of scores to evaluate and monitor their customers–scores that measure everything from the likelihood of default to the likelihood the user will stop using the card. It’s the score that measures the likelihood of default that the regulators want customers to see.
I believe you should be able to see any score that’s used to evaluate you, and that you shouldn’t have to pay for it. Getting scores from your credit card company could be a good start, assuming the companies aren’t allowed to sub in some “FAKO” score that no one actually uses.
The problem comes in the execution. Seeing their scores is likely to make a lot of people upset, and not just the folks with low scores. People with high scores usually want to know why their scores aren’t even higher. Credit card companies may not want to mess with having to explain how scores work or take the heat for a process they don’t control. (Credit scoring formulas are created by other companies, like FICO-creators Fair Isaac, and applied to data held by the credit bureaus.)
We’ll have to stay tuned to see if any major issuers bite. In the meantime, you can get free scores from sites like Credit.com and Credit Karma, although they aren’t the FICO scores most lenders use. For those, you’ll need to go to MyFico.com and pay.
Today’s top story: How to protect yourself during online transactions. Also in the news: Finding financial help when you’re not wealthy, saving money at the gas pump, and how to tell if your financial dreams are based in reality.
4 Tips for Secure Online Transactions
Protecting yourself while shopping online.
How to Find a Financial Advisor If You’re Not Rich
You don’t need to be loaded in order to get advice.
3 Secrets to Saving Money at the Pump
Following these tips could save you almost $500 a year.
Financial Goals: How To Tell If Yours Are Truly Realistic
Keeping your head out of the clouds.
Today’s top story: What to do when you’re retired and running low on cash. Also in the news: Starting a financial cleanse, what to do if your company switches retirement funds, and the five worst personal finance mistakes.
7 Suggestions for Retirees Running Low on Money
Getting the most from your retirement nest egg no matter how small.
5 Financial Cleanses to Break Bad Money Habits
Like a juice cleanse, but with money. And food.
Understanding How Employers May Change Your Retirement Fund
What to do if your company moves away from traditional 401(k) plans.
Top 5 Worst Personal Finance Mistakes
Mistakes you REALLY don’t want to make.
Are You Thinking About Starting A Business In Retirement?
Retirement isn’t just for golfing anymore.
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Today’s top story: A security flaw in the iPhone could expose your information to hackers. Also in the news: How to transform your finances, reducing financial adviser fees, and what to do when your parents ask you for financial assistance.
Don’t Use Your iPhone Until You Read This
A security flaw is leaving personal and financial information vulnerable.
Transform Your Finances With One 3-Letter Word
No, it’s not “win” as in “win the lottery”.
Are excessive financial fees eating your returns?
Why it’s crucial to pay close attention to financial adviser fees.
6 Do’s and Don’ts for When Your Retired Parents Ask for Financial Help
The difficult questions to ask when roles are reversed.
Oklahoma requires students learn personal finance to graduate
High school students will have to have a working knowledge of personal finance.
Exciting news: One of the most-respected experts in financial aid has written a book about filling out the Free Application for Federal Student Aid (FAFSA)–and right now you can get it as a free PDF download.
Mark Kantrowitz, who helmed FinAid.org for years and is now publisher of Edvisors, has this to say about the book he co-authored with David Levy, who has 30 years’ experience as a university financial aid director:
The book is packed with 250 pages of insights and advice about filing the Free Application for Federal Student Aid (FAFSA), along with a step-by-step guide to completing the application form. There are tips about increasing eligibility for need-based aid, avoiding the most common errors and appealing for more student aid. I have attached a tip sheet about Filing the FAFSA that is based on the book.
If you have a kid heading off to college, this book is a must read. To get the book, register (also for free) at the Edvisors site. The book is also available to buy on Amazon in paperback for $24.95. The Kindle version is $8.95.
Dear Liz: My husband and I have worked very hard and paid off our mortgage and all other debt. However, we find ourselves with no deductions now and are getting killed on income taxes. What can we do to lower our tax burden without incurring mortgage or student loan debt, child-care expenses and so on? We are in about a 33% tax bracket and it seems like we are being punished for being frugal and responsible.
Answer: There’s an old saying, “Don’t let the tail wag the dog.” Incurring expenses just to get a tax break is usually absurd. When you were paying mortgage interest, for example, your tax break was only a fraction of what you paid out. In essence, you were getting about 33 cents back for every dollar you spent in interest.
Better ways to reduce your tax burden may include maxing out retirement plan contributions, taking advantage of flexible spending accounts if your employer offers them and installing alternative energy equipment in your home. (The credit for installing solar panels and similar systems equals just 30% of the cost, but the long-term energy savings may offset the rest of the bill.) If you own a business, consult with a tax pro about the many ways to cut your tax bill when you’re self-employed.
Just remember that you’re not being punished for your frugality. Your reward is more money in your pocket year-round.
Dear Liz: I retired last year. I am 67, have more than $1 million in my retirement accounts, $80,000 in individual stocks, $50,000 in cash and more than $200,000 in equity in my home. I don’t need to tap my Social Security benefit yet and can afford to wait until I am 70 to get the maximum monthly amount. I recently purchased a new car with a 0% loan for five years. That and my mortgage are the extent of my debt. One thing I would like to do is some home improvement. My fee-only financial planner suggested getting a home equity line of credit to cover the repairs and upgrades. This makes sense to me in that it spreads out the burden over time and is tax-deductible. My credit scores are 736, 801 and 839. But I’m finding it difficult to get a commitment from either my credit union or my bank because they don’t see an income. I have been with both of these institutions for more than 30 years and the credit union holds the first mortgage. How do we get the lenders to factor retirement assets into the qualification calculations?
Answer: Last year, mortgage giants Fannie Mae and Freddie Mac issued guidelines on retirement fund annuitization that would allow mortgage lenders to calculate a borrower’s income based on his or her retirement assets.
Lenders, however, have to be willing to go to a little extra effort to learn the rules and apply them properly.
If yours aren’t willing to do so, then it might be time to take your business elsewhere. A mortgage broker (referrals from http://www.namb.org) may be able to connect you with a lender who’s more up to date.
Dear Liz: We are settling my dad’s estate. My dad found a rock, and it sat in my parents’ frontyard for years. He worked in a gravel pit for decades, and that was the only rock he found interesting enough to bring home. When my mom died, we held an auction of their household goods. My dad told me to take the rock home. I said that to be fair, the rock should be sold at auction. A family member then stole the rock and has been hiding it for more than two years. This person says it’s going to be placed on my dad’s grave site. I’m an executor, and I feel that the decision wasn’t the relative’s to make. It’s the only possession of Dad’s that I really want as a remembrance of him. We were extremely close. Dad knew the rock was taken to spite me, and it really bothered him. What are your thoughts?
Answer: Many of the items that trigger bitter family fights after a death don’t have much fair market value. Family members imbue these objects with sentimental value and then go to war over them. They might insist it’s the only thing they really want, or that they want it for their kids. Some go so far as to destroy their relationships with their loved ones to gain control of the supposed heirloom. (Which, often as not, winds up in the next generation’s yard sale, as appraiser Julie Hall once noted.)
Maybe this relative did swipe the rock to spite you. Maybe this is just the latest chapter in a drama that’s been playing out since childhood: “Dad always liked you better!” Maybe you’re especially chafed that your relative took advantage of your attempt to be fair.
But again, the rock probably has only the value you give it. If you decide it’s not worth fighting for, then it’s just a rock.