You know about your credit score . And you know that it is used, in general, to give a number of people, from landlords to lenders to employers, an idea of how fiscally responsible you are. But your credit score is not the only financial score being used to assign you risk. In fact, there are other “secret” scores used in conjunction with your credit score to determine what sort of financial person you are. And, unlike the credit score, companies are not required to disclose this stuff under the Fair Credit Reporting Act . If you ask me, there is waaaaaay too much of our information that we don’t have access to.

At any rate, Cash Money Life offers a list of eight secret scores that take your personal financial information and use it to make a number of determinations:

1. Response score - This is a score based on the probability you’ll respond to an offer they send you.
2. Application score - This score incorporates all the data on your application.
3. Bankruptcy score - This score tries to predict how likely you will to declare bankruptcy.
4. Revenue score - This score tries to predict if and how profitable you will be to the institution.
5. Attrition-risk score - This score tries to predict how likely you will stop using their products.
6. Behavior score - This score tries to predict future behavior, as nebulous as that sounds.
7. Transaction score - Every time you charge something to your card, a transaction score is calculated to determine whether to approve the charge.
8. Collection score - This score is used on accounts in collections by collection agencies to determine how “collectible” it is.

Honestly, I think the scariest of these are the revenue, behavior and transaction scores. These seem especially invasive. Especially since it would only take a little bit of tweaking for the transaction score to compile every spending choice you make . What happens if a night on the town, via transaction and behavior score, was used against you in the future? Maybe I’m starting to sound paranoid, but the fact that we don’t have a clear view of these scores — and that there are no immediate efforts to make them more transparent — does worry me. Does it worry you?

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Credit cards don’t just strong-arm people; they strong-arm businesses, too. Or at least try to. Back in the day, MasterCard tried to force businesses to accept debit cards branded with MasterCard at businesses where those credit cards were accepted. Many businesses (including Wal-Mart) took umbrage, claiming that the move created, in effect, a trust situation and tied the acceptance of debit to the acceptance of credit cards. Businesses claimed MasterCard was threatening them with revocation of the ability to accept its credit cards if they did not also accept branded debit cards.

In 1996, an antitrust suit was filed. In 2003, the suit was settled, reports TheStreet.com:

The Purchase, N.Y.-based company settled the suit in June 2003 with a number of U.S. merchants that took issue with certain antitrust aspects of the payment card industry. Under the settlement, MasterCard was required to pay $125 million in 2003 and $100 million annually each December from 2004 through 2012.

Instead of paying all of that through 2012, though, MasterCard wants to pay $335 million by the end of the 3rd quarter in order to be done with the obligation early. This is a discount, since MasterCard would pay $400 million if things went forward as originally laid out. A court will have to agree before the new payment schedule can take effect.

It’s a savvy move by MasterCard. Paying off your business debts early is always a good choice.

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If you are looking for a way to condense a great deal of personal finance information into a plan of action for your money, The 1-2-3 Money Plan by Gregory Karp will probably be helpful for you. Karp himself admits in the introduction that there really isn’t anything earth-shattering or new in this book; rather, it is meant as a financial tool to aid your planning.

One of the interesting things about The 1-2-3 Money Plan is the way it is organized. As the title implies, Karp has set up the book so that it revolves around the “rule of 3″. He reduces most personal finance principles down into 3 three doable steps that can help you plan . (He does this over and over again throughout the book.) Some of the topics covered in the book include:

• Spending
• Estate planning
• Identity theft
• Banking
• Insurance
• Retirement
• Saving
• Credit cards
• Credit score/report
• Choosing a financial adviser

The subjects are important for those floundering and attempting to make a plan. One of the things that struck me is that Karp sets up the book into three sections, all devoted spending smart: Today, Yesterday and Tomorrow. All of the steps given in The 1-2-3 Money Plan revolve around making a plan for your money that involves preparation and considering what you are doing with your money. The goal, of course, is to learn what you need in order to ensure that you set yourself up for success with money . Tips, examples and reminders throughout the book offer easy to read insights.

For those who are unsure of where to begin, The 1-2-3 Money Plan can be extremely helpful in terms of providing direction and helping you develop a cogent plan for your money. It may not be as useful for those who already have a money plan and their finances under control. But it can serve as a good reminder.

Have you read The 1-2-3 Money Plan ? What did you think of it?

Normally, when you borrow money to buy things, it is generally accepted that you will have to pay the money back — with interest. If you are having trouble with paying your debt back, due to financial hardship, you might be able to settle your debts. It is important to note that, for the most part, debt settlement only works with unsecured debt (such as credit cards, personal loans, medical bills, etc.). Your car or home will likely be repossessed if you try debt settlement on those types of secured debt. (Although in some exceptionally rare cases you may be able to convince a mortgage lender to agree to some measure of debt forgiveness.) If you can prove financial hardship, you can even settle debt you owe to the IRS.

With debt settlement, the creditor agrees to accept an amount that is less than you owe. In some cases, you may have already paid back the original amount you borrowed, but high interest means that you have a long way to go until your debts are discharged. In any case, some creditors may be willing to allow you to pay anywhere between 25% and 80% of what you owe them. In order to negotiate, though, here is what you will need to do:

• Stop making payments. (Don’t do this with secured debt. Your creditors will just take the item the debt is secured with.)
• After a few months, offer to pay a sum immediately. Realize that your initial offer will probably be rejected on general principle.
• Negotiate with your creditors until you can agree. Make sure that you keep a record of all contact. Correspond through the mail, using Registered mail to “prove” that the creditors are getting your offers.
• Get a settlement agreement in writing.

It is important to realize that settling your debt will result in a lower credit score. Not paying your creditors will reflect negatively, as will the fact that you settled. This will make it harder for you to get good loan terms in the future.

Also, you should be aware that if a creditor or collection agency does not wish to deal with you, a lawsuit may be filed. This can result in wage garnishment and other unpleasantness. Most creditors will not bother with this, preferring to settle instead, but there is a risk of it happening.

In general, it is best to try and work out a payment plan or to try some other method of paying of your debts. Debt settlement should be a step you take as a last resort — the very last thing you try ahead of bankruptcy.

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Yesterday’s non-farm payrolls data showed a rather dramatic drop off in job loss for the month of May. While the numbers of the unemployed are still staggering when compared with recent history (the last 10-15 years), the fact that lost jobs grew by “only” 345,000 instead of the expected 525,000 has many analysts declaring the end of the recession.

However, the recession may not be over yet — especially with regard to us “regular folks.” And, while the end is probably in sight, it’s not quite time to rest on our laurels. Kiplinger has a Recession Survival Quiz that can educate you while at the same time helping you determine what sort of shape you are in. The questions deal with credit cards, mortgages, retirement and employment. I missed one of the ten questions on the quiz, and I’m a recession survivor!

Have you taken the Recession Survival Quiz?

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One of the most common things you probably hear when you shop at a department store is this “Would you like to save 10% today?” And, of course, if you sign up for a store credit card , you get that promised discount. When you are spending a great deal of money, it is understandable that saving 10% might be desirable. However, in many cases, getting a department store credit card is asking for trouble. Here are some of downsides to getting a department store credit card:

• High interest rate : You will probably have to pay a higher rate of interest on balances that you carry.
• Credit score : While having more available credit can be helpful, it is worth noting that a department store credit card is not weighted the same way as a card from one of the big banks.
• Lack of rewards programs : Beyond your initial discount, you are unlikely to receive any sort of rewards for using a department store credit card.

If you do feel that you are making a large enough purchase that the discount is desirable and worth the ding your credit score will take when you apply, make sure that you pay off the balance as soon as possible. Do not wait for it to start earning interest. Even if you are getting a discount, the basic rules of responsible credit card use apply. And rule #1 is: Don’t buy something with a credit card that you don’t already have the money for .

image source: Paul Vlaar via Wikimedia Commons

The recession has caused many to re-evaluate their saving habits, and other financial habits as well. And one of the “other” financial habits that is seeing some reform has to do with debt. Many are deciding that debt is not worth it, and that paying off debt is a worthy goal. And it is. Here are 10 reasons to pay off your debt ASAP:

1. You keep more of your money. When you are paying interest, more of your money goes to others. This is money that you could be using, but instead you just pay to someone else. You don’t get services or goods. You just get the “privilege” of financing.
2. It frees up monthly household income. Consider how much you are making in debt payments. $300? $500? More? What could you do with that money? It allows more discretionary spending for you and your family.
3. Save more money. You could save more money for short term and long term goals if you could set that money aside each month, rather than putting it toward debt. Save the money in an interest bearing account (like a retirement account, CD or high yield savings account), and your money works for you — instead of against you.
4. Improve your credit score. You can get a better credit score when you pay down debt — and keep your debt low. A credit score is good for more than just helping you get other loans. Employers, insurers and others use your credit score to make decisions about hiring, premiums and other financial issues.
5. Teach your children by example. When you pay off your debt, you teach your children the importance of good financial decisions, and show them that it is a good idea to remain financially free. You can help your children down the right path.
6. You can give more to others. Once you pay off your debt, you can be free to help others. You will have more resources to donate to charity, as well as to family members who might need it.
7. You increase your financial security. When you pay off your debt, you are decreasing your risk. Debt increases the chance that an emergency will be financially devastating. Without debt, you are safer in terms of your financial situation.
8. Feeling of freedom. There is something very freeing about paying off debt and realizing that you are not financially obligated to your creditors.
9. Peace of mind. Along with financial freedom and security comes peace of mind. You will feel better about life, and your finances, when you have less debt.
10. Better relationships. Peace of mind, less stress and better finances often lead to better relationships. It is hard to nurture your family, spouse and friendship relationships when you are worried about money and your financial future.

Can you think of some other reasons to pay off your debt ASAP?

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Yesterday, Congress passed the Credit CARD Act of 2009, which will introduce new regulations for credit cards. These will take effect in February 2010, and are aimed at giving consumers a little more protection from some of the practices credit cards have been fond of in recent years. Some of the changes include:

• Interest rate changes: Credit card issuers will no longer be able to charge interest rates retroactively on old balances — unless you are 60 days overdue for a payment. Also, credit card issuers have to apply your payments to the debt with the highest interest rate first.
• Due date change: Congress standardized credit card due date rules, stating that as long as the payment arrived by 5 p.m. on the day it is due, it is on time. This replaces disparate credit card rules that include 2 p.m. deadlines, and other issues.
• Notice of changes to credit card agreements: When a credit card company changes the terms of a credit card agreement, it will be necessary for the company to notify you at least 45 days in advance. Right now, companies can change the terms on a whim, without giving you time to do anything about it. Now consumers will have some time to make changes.
• Over the limit fees: The law forces credit card companies to get an “opt in” agreement from you before they can approve purchases that put you over your credit limit.
• 21 is the new age for credit card use: Anyone who gets a credit card under the age of 21 must have a co-signer, unless the person can prove he or she has sufficient income to afford the payments.

Most of these provisions will probably protect consumers (maybe not the little addition about lifting the ban on concealed weapons in National Parks) — at least once the February 2010 date comes through.

What do you think of the new credit card regulations?

image source: Daylife

If you are looking for a lower credit card interest rate, you might want to beware: Credit card issuers are becoming pickier about who gets credit — and even whether you get to keep the credit line you already have. Calling to ask for a lower credit card interest rate may draw their attention to you. Indeed, asking for a lower credit card interest rate may trigger what is known as a “credit review” by your issuer. MarketWatch points out some of the possible outcomes of a credit review:

The outcome could be a lower credit line, higher interest rate or closed account. These actions could ding your credit score, and that, in turn, may trigger higher interest rates on your other credit accounts.

Before you try for a lower credit card interest rate, you should first consider your position. Ask yourself these questions:

1. Do you have a good credit score? (This may means something that is at least 720.)
2. Have you made all your payments on time?
3. Have you had any credit issues in the recent past?

If you have a good credit score, pay on time and in full and have no recent credit issues, you might get that interest rate reduction without any harmful side effects. But if you have any issues, asking for an interest rate reduction may actually cause more problems than it solves.

image source: Wikimedia Commons

This is a guest post from Credit Karma, a provider of free credit scores. It addresses 6 financial tips for the recent college graduate. I think these tips can help you start off in the “real” world on the right foot.

The average college graduate today leaves school with $3170 in credit card debt and over $19,000 in student loans, according to Credit Karma.  With this debt load, it can seem nearly impossible for new graduates to begin saving money and start building a savings. But by following some simple advice, new graduates can start their professional life on the right foot financially.

1. Automate, Automate, Automate. Take the time to set up accounts that automatically monitor your finances and monitor your credit score.  At Mint.com you can access all of your accounts in one place through a single sign-on, track expenses and project your budgeting needs out into the future. CreditKarma.com offers free, unlimited access to your credit score, and useful tools to manage it. It’s also good to consider automatic bill pay so you never have to worry about missing a payment.

2. Build your credit score. Your credit score is really an important cost savings tool for the rest of your life. Not only does it help get you the lowest interest rates on your credit card purchases and car loans, but employers and landlords also check it.  It affects so many components of your life.

3. Be informed. Understand the terms of your student loan and be prepared to start repaying it. You will probably get several offers to refinance your loan. Yes, interest rates are at all time loans, but do your homework.  These refinancing options aren’t always a better offer. Generally students start repaying six months after graduations so be responsible, keep your address updated with your student loan providers and pay your loans on time.

4. Pay off your debt – Start your professional life on the right foot.  Hold off on buying a new car or new wardrobe for a few months and start paying down the debt you racked up in college.  It’s important to get yourself stabilized so you can start to save for your emergency fund.

5. Find the right credit card for the next stage of your life – Now that you are out of college, your access to credit and use are going to change.  No longer will you just be using credit cards for emergencies or to buy books.  It’s important to find the right cards for the next stage of your life.   Do your homework.  If you use a credit card and pay the balance off in full every month look for a great rewards card like the Citi Forward Card.  If you carry a balance each month finding a card with the lowest APR is the way to go.

6. Save. As soon as you have can, begin to build out an emergency fund.  In today’s economy with hundreds of thousands of people being laid off each month, you’ll want to set aside enough cash to get you through should you lose your job or not be able to find one.  This money should be readily available at any time.

By following these simple steps, new graduates can set themselves up for a lifetime of savings.  Saving money, paying off debt and paying bills on time all help to build a good credit score and in today’s economy a good credit score can save you thousands of dollars on loans.

image source: sxc.hu