Having a credit card with a $1000 limit and carrying a $200 balance would give a utilization ratio of 20%: 200 divided by 1000.   Balances under 30% of the credit limit are optimal.  When the account balance is over 50%, half, of the credit limit, scores usually go down.  The closer an account gets to being at 100%, maxed out, the more severe the impact on credit scores.

Now, what is important is to keep the revolving accounts active so that they stay reported as OPEN on your credit file.  Yahoo Finance recently addressed this in an article on their front page May 5, 2010.  The article said that companies often close credit card accounts that are inactive for an extended period of time.  When these accounts get closed, the consumer’s overall available credit is reduced and this can have a negative impact on credit scores.

WHAT TO DO
Keep all revolving accounts active by using them regularly; we recommend doing this every three months.  Consider making a small purchase of something you were going to by anyway such as a tank of gas in your vehicle.  Use the credit card for the fuel, pay the bill in full when it arrives the following month, lock the credit card up until the next usage.  This will keep the account active and reported as open on your credit file.  This article has more information on keeping credit cards active to build credit.

NOTE: this recommendation is only for accounts that do not currently have a balance.  The monthly payment on accounts with balances keeps them active.

Keep in mind that revolving accounts include major credit cards such as Visa, MasterCard and Discover; retail store accounts such as Home Depot, Best Buy and Dillards, gasoline/fuel cards, and some lines of credit.

You can get step-by-step instructions on how and when to use each of your accounts with your Personal Credit Building Plan.  This Plan is part of the Credit Analysis we offer for only $100 and will tell you what each account balance should be for optimal credit growth.  Contact us today to get yours.

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The short answer is they are both good practices.   Not only for building credit scores but also for limiting the amount of interest you pay.

Credit card balances under 25% of the credit limit are optimal for credit score growth.   Revolving account balances that are over half (50%) of the credit limit usually have a negative impact on credit scores. 
NOTE: Revolving accounts include major credit cards, retail store accounts, fuel cards and some lines of credit.

It is okay to have zero balance on revolving accounts.  A persistent myth is that you must carry a balance to help your credit score.  No you don’t.  You can pay off a credit card and then have the full amount of unused available credit sitting there on your credit file helping your credit score.   

NOTE: DON’T close the account when it is paid off. 

WHAT TO DO
For credit building , we typically recommend that the first goal is to pay down all revolving accounts to under 50% of the credit limit for each account.  This is, of course, as individual budgets will allow. 

The second goal is to pay down all revolving accounts to under 25% of each credit limit. 

The third goal would be to pay off all revolving accounts and use them ONLY as credit building tools.  See this article for more info. 

We offer a Credit Check-Up for $100 that gives detailed strategies to have a positive impact on all five parts of the credit score.  Contact us today to get yours.

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We hear from many people who are experiencing reduced credit limits on their credit accounts, even though they have been good, long-standing customers with a stellar payment history.  This will likely continue as the financial industry and the credit card companies look for ways to reduce their risk for loss.

Some people are receiving notification that their credit card account is being close due to inactivity.  This happens if the account has not been used in a while; the credit card company might decide to close it rather than risk the customer using all of the available credit and then being unable to repay it.

WHAT TO DO
Use your credit accounts as credit building tools.  Keep your revolving accounts: major credit cards, retail store and gasoline accounts, active by using them once every three months, IF they do not currently have a balance on them.

NOTE: This does not mean that you should go out and charge big ticket items and use up your credit card limit.

HOW TO DO IT
Use your card for a small purchase of something you were going to buy anyway, perhaps a tank of gas or a pair of pants.  When the credit card bill comes the following month, pay it in full early, before the due date.  This should keep it reported as active and open on your credit reports where it will be included in your Utilization Ratio.  BONUS: You won’t pay any finance charges or interest fees by paying the account in full before the due date.

MAKE A DATE

Mark your calendar or planner to schedule regular use of the cards as CREDIT BUILDING TOOLS.  Remember, this strategy is only to help grow your scores, NOT to increase your credit card debt.  By keeping your credit accounts active, they remain open on your credit file, helping your credit scores grow.

You can get more details on this and other credit building strategies, specifically tailored to your accounts, with your Credit Check Up.

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1) Always keep your credit card in sight when checking out of a store or restaurant.
Skimming machines and cellphone cameras make it easy for your card’s information to be captured for possible fraudulent use.  Read more here.

2) Do not carry your Social Security card with you.  Period.
It should be locked in a safe place at home.  If you need it for proof of ID for a one-time occasion, carry it with caution and lock it back up immediately after the use.  This number is the best key identity thieves can get to unlock your personal and financial information.  Protect it.

3) Do not carry all of your credit cards with you.
Rarely will you need to shop at 5 different stores and use all 4 of your Visa, Discover, MasterCard and American Express accounts.  Keep them locked up, NOT in your wallet.  Speaking of your wallet, you should copy everything in your wallet, front and back, and keep that paper locked up in the same safe place as your Social Security card and other documents.  In the event your wallet is lost or stolen, you have all of the information of what was in it.  Click here for a printable sheet on what to do if you lose your wallet.

4) Keep credit card balances under 25% of the account credit limit.
The second largest part of your FICO score is Amounts Owed.  This is your debt-to-available-credit ratio.  When your account balances are over half, 50%, of the credit limit, credit scores typically go down.  The closer you get to maxed out, they really tank.  Keeping your account balances under 25% of the credit limit usually helps your scores.  This goes for retail store and fuel accounts, too.

5) Check your credit reports after the holidays.
Monitoring your own credit is an important part of identity theft prevention and keeping your good credit.  You can do this yourself at no cost or you can get your reports and FICO scores for a small fee.  Either way, look for unknown accounts, balances on accounts you haven’t used recently, and addresses of places you have never lived in.   Click here for info on getting your own credit reports.

Protect your credit and your financial future by taking some simple precautions this holiday season.

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TIP: Look at the URL, the address line, on the web page.  It should have https://, not just http:// to indicate a secure site.  You can also check on the page for the little padlock symbol or for the icons of well known security programs such as Verisign.

One thing consumers can do to protect themselves is to use a Virtual Credit Card, also known as substitute credit card numbers or controlled payment numbers.   Companies that offer this to their customers include Discover, Citi, Bank of America, and PayPal; this is typically a free service to these customers.

HOW IT WORKS
The Virtual Credit Card creates a one-time use number that is linked back to your actual credit card account.   However, the only thing a merchant ever sees is the temporary number.  It will be processed just like a regular credit card payment and is only good for that one-time use.  The purchase will be on your next monthly credit card statement.  You get peace of mind knowing that your actual credit card number was not exposed at all during your online shopping.

WHY USE A VIRTUAL CARD?

Even though the merchant has a secure website and your account information is safe while shopping with them, there are other companies that may be involved in the transaction after the initial purchase.  This includes the credit card processing company and there have been data breaches in the past few years involving some of these processing companies.

Another reason to use a Virtual Credit Card is to prevent recurring charges.  Sometimes you go to a site and sign up for a ‘trial period’ with the company’s product or service.  By using a virtual, one-time-use number, you can prevent the company from continuing to bill you after you cancel during the trial period.

NOTE: Virtual Credit Card numbers will not work  with purchases that require you to show the actual card for verification.  This includes rental cars, airline and hotel reservations, and some tickets that are purchased online.

For more information on Identity Theft Prevention, click here.

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WHY IT MATTERS 
The largest factor in your credit score is your payment history.  Just one 30 day late payment can cause a significant drop in your score.  Generally, companies do not report late payments of a few days or weeks to the credit bureaus;  They only report it when an entire month’s payment was skipped, that becomes the 30 day late on the credit file.

WHAT TO DO
If you are going to be traveling this holiday season, review your past three month’s bills to determine which bills are due on what date every month.  Then look at the current month to see which bills you have already paid.  You can then pay the bills that are due during your travel time BEFORE you leave.  It’s okay if they are early.  That is a much better alternative than having them paid late.

NOTE: Be sure to have the post office hold your mail or have someone you trust collect it every day to protect yourself from mail theft.  Click here for more identity theft prevention tips.

If you are not traveling, you still may want to get the monthly bill paying out of the way so that you can enjoy friends and family without having to take time out to deal with finances.  Getting out of our normal routine sometimes allows things to slip between the cracks and get missed.  Don’t let your credit score drop because of a missed bill.

For more information on how to keep and grow your credit scores, contact us to get your Credit Check-Up today. 

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The second largest part of the FICO score, accounting for 30% of it, is the “Amounts Owed” category.   Revolving accounts, such as credit cards, retail store accounts and fuel cards, fall into this category.  When your balance owed on the account is over 50% (half) of the credit limit, credit scores typically go down.  As the account gets closer to being maxed out, which is a balance near 100% of the credit limit, scores can be severely impacted.  Account balances of less than 25% of the credit limit are best to build good credit. 

EXAMPLE: A credit card with a $1000 credit limit should have a balance less than $250 to have a positive impact on credit scores.

The challenge many consumers are facing, Ms. Miller said, is that if they use their savings to pay down the credit cards, they may not have enough money left for the required down payment amount on their home loan. 

WHAT TO DO

If and when possible, pay down your credit card balances to under half of the credit limit for that account.  Then work toward getting them down to under 25% of the credit limit.  And do not close them when they are paid off!  They are an important part of a successful credit building plan when used as credit building tools.  Find out how to use your accounts to your credit advantage with your Credit Analysis from Complete Credit Services.

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Beware of ‘Skimming’

Skimming occurs when your card that is used for payment is ’skimmed’ through a second machine.  The second machine captures all the account data that can then be used or sold, while you get the receipt for your actual payment.

Watch for Cell Phone Cameras
There have been some reports of employees using their cell phone camera to take pictures of the front and back of a customer’s credit card to get the full name and account number, the security code on the back and the signature. 

WHAT TO DO
Keep your card in sight at all times.  At a restaurant, don’t send it off to places unseen in the little guest check holder that they bring your bill in.  Take it up to the register yourself.  Watch the processing of your card at all times.  If the employee seems to be fidgety or reaching in their pockets while your payment is being processed, they may be attempting to access their phone camera.

The Identity Theft Resource Center has a terrific list of prevention tips in their Holiday Consumer Alert.

If you or someone you know has been the victim or potential victim of identity theft and is finding it difficult to get their credit reports completely corrected, contact us today.  We have helped many clients over the past seven years correct and rebuild their good credit rating. 

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There is a place for your signature on the back of the card and many people have started putting “See Identification” rather than signing it.  The thought is that if your card is lost or stolen, someone would not only have the account number and verification code on the back, they would also be able to copy your signature.  In theory, the checkout person who is looking at your card will ask you for ID, see that it is indeed you, and process your purchase.

The person asking the question last night said that someone they knew with “See ID” on their card was told by the retail store clerk that they could not accept it unless the cardholder signed it right then and there.  So we decided to look in to this matter and here is what we found.

According to an article on creditcards.com, Visa and MasterCard say that, technically, a credit card is not valid unless it is signed by an authorized user.  This is according to their agreement with the vendors and retail stores that accept the credit cards.   This is spelled out for merchants at the Visa website, click here to see it.

These are private contractual agreements between the credit card companies and their vendors and their consumers; there does not appear to be a federal regulation regarding this.  So, what do you do if you’re concerned about fraudulent use?

Try the double approach: sign your card and then write “Check ID”.   This covers the merchant requirement to only accept signed cards and you let them know you want to show your identification to assure no fraud is occuring with your account.  And if they don’t ask, mention it to them as you take out your ID.

This week is National Protect Your Identity Week.  You can get more identity theft prevention information at the official website.

According to Todd Ossenfort, “The Credit Guy”, probably not.  Most corporate credit card accounts are set up for employees to access and utilize the company’s credit in the course of their job duties.  Typically, the employee is added as an Authorized User (AU) to the corporate account.  As an AU, they are not financially responsible for the debt.    If they did not sign a credit card agreement, they should not be responsible.  

The Fair Debt Collection Practices Act (FDCPA) provides consumer rights that include requesting validation of the alleged debt to find out who it actually belongs to.  This should be done as soon as any collection agency contact has been made as there are FDCPA time limits.

The account should not show up on the former employee’s credit reports.  Even though Authorized User accounts that are personal, or individual, credit can be reported on the AU’s credit file, the employer’s credit card should not be on there because it was corporate credit, NOT personal.

If you are currently using your personal credit card for business expenses, you may want to explore different possibilities that do not put your personal credit at risk.  If your company asks you to sign for a credit card for job related purposes, consider declining as it is your good name and credit scores that will be adversly affected if something changes or goes wrong with the employer or the payment of the account.

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