Posted by – October 26, 2010
According to Mint.com, FICO scores are at an all time low, with 35% of the U.S. population now scoring below 650. The three credit bureaus—Equifax, Experian and TransUnion—keep tabs on consumer scoring by maintaining between 200 and 250 million credit file records at any given time.
In credit parlance, a score of 650 is the breaking point between “prime” and “subprime” lending. Creditors consider a loan to someone with a score below 650 to be a subprime loan. It’s a risky investment and therefore carries a higher interest rate (and higher returns, for the investor who took the risk).
If your score falls below 650, the fact is that it will be more challenging for you to land a loan, and you’ll definitely pay the penalty of higher rates.
So why the drop in scores nationwide?
Mint says, “What this FICO data reflects is an extraordinary number of consumers who now have foreclosures, settlements, charge offs, collections, bankruptcies, liens, judgments, late payments and repossessions on their credit reports, and much lower scores as a result.”
Negative reporting affects your credit score for seven years, so this data is here to stay for a little while. The good news? You can take proactive steps to improve your credit now. Sign up for Centrro’s free newsletter to find out how you can improve your credit score by taking proactive steps over the course of 12 weeks.
Posted by – October 21, 2010
Our last post was about the benefits of smartcards versus regular old credit cards.
Smartcards are popular in Europe, but haven’t reached critical mass in the U.S. Part of the reason for this is that both the lenders and the point-of-sale terminals need to be updated to accept smartcard technology. U.S. banks — who seem to be doing just fine producing credit cards the “old fashioned way,” aren’t very motivated to upgrade.
Here are a few other reasons smartcards seem to be at a disadvantage here in the U.S. market:
- With traditional “dumb” cards, every time you make a transaction, a central mainframe actually processes the transaction and does a security check. Because of this, credit card companies and banks have the ability to make system-wide updates to the mainframes without having to update every single smartcard. In this way, the older technology is, ironically, easier to keep updated.
- Although smartcards are more fraud-proof, consumers don’t have a lot of incentive to care, because they already get such great fraud protection from their credit card companies.
- Consumers have traditionally been hesitant to jump on board with new technology when it concerns their money and credit. This is the “perception” factor. It took a while for people to feel comfortable with online shopping, and likewise it will probably take a while for the idea of smartcards to sound both smart and safe.
Visa and American Express have both introduced trial versions of smartcards. We’ll have to wait and see whether they take off!
Posted by – October 19, 2010
Regular credit cards have a magnetic strip down the back; smartcards, on the other hand, have an actual embedded chip, just like a computer. The chip is the card, so technically smartcards don’t have to be cards at all—they can be cell phones or other devices with a chip embedded in them that stores your account info.
Smartcards are popular in Europe, but they haven’t caught on very quickly in the U.S.
Benefits of smartcards
- Instead of the often clugey swiping process we go through with regular magnetic strips (which don’t work very well once they get dirty and scratched), a smartcard can simply be waived in front of a smartcard reader and is more durable. It cuts down on the amount of time you spend on a transaction.
- Smartcards carry the technical ability to feed you coupons right to your “card.” You simply waive your smartcard in front of the reading device, and it lets you know what special offers might be available to you in that store at any given moment.
- As Randy Vanderhoof of the Smart Card Alliance recently told the New York Times, regular old magnetic cards “are easily copied by criminals [but] smartcards are effective in blocking such counterfeiting.”
There are plenty of downsides to smartcards, however. We’ll talk about that in our post on Thursday…
Posted by – October 13, 2010
According to The New York Times, “Each time a credit score is pulled from one of the three credit bureaus as part of a loan application, it can decline by as much as 20 points, or more. Call it the Great Credit-Score Ding.”
In the credit industry this type of inquiry—when you authorize a lender to check your credit score in order to process an application you’ve submitted—is called a “hard pull” inquiry. The credit bureaus have the prerogative to knock points from your FICO score every time a hard pull occurs. Fortunately, your report will only receive one ding for all inquiries (of the same type) conducted within, say, a 2-4 week period.
(A “soft pull,” by the way, is when you check your own score or allow a lender to make a preliminary check.)
Credit inquiries and their resulting dings can stay on your credit report for two years, but will usually impact your FICO score for less time.
The good news? When you sign up for Centrro, your credit score doesn’t have to take a hit. We grab your data using a harmless soft pull, and then our algorithms do the legwork to match you up with loans that are most compatible with your score. This way, you can apply for just the right loans.
If you’re interested to hear more about the Great Credit Ding, read the full New York Times article online.