Your Personal Finance Pro http://yourpfpro.com Personal Finance for Young Professionals Fri, 20 Jul 2018 21:04:34 +0000 en-US hourly 1 31591919 Reader Question: What to do After Your Identity Has Been Hacked http://yourpfpro.com/reader-question-identity-hacked/ http://yourpfpro.com/reader-question-identity-hacked/#comments Fri, 04 Apr 2014 12:16:30 +0000 http://yourPFpro.com/?p=4446 (Editor’s Note: CVS unexpectedly squashed their Vanilla Reload program this week so the article I was planning on releasing today is now pretty much useless.  I still posted it since I worked hard on it but I thought I would give everyone another article to satiate their Friday hunger for personal finance!  2 articles for […]

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Reader Question: What to do After Your Identity Has Been Hacked

Credit

(Editor’s Note: CVS unexpectedly squashed their Vanilla Reload program this week so the article I was planning on releasing today is now pretty much useless.  I still posted it since I worked hard on it but I thought I would give everyone another article to satiate their Friday hunger for personal finance!  2 articles for the price of one today.)

I got an interesting question in my inbox last week from reader BB. It read:

So I have a question. My router got hacked and I had pretty much all my important tax files on a connected drive (idiot!). So I’m pretty sure my SSN is out in the wild now and bank account numbers too. I noticed this when I saw some fraudulent charges on my checking account. So I got new account numbers and passwords, and checked my wife’s and my credit history. So far so good as far as we can tell, and we both put 90 day fraud alerts up.

My question is, how can I continue to monitor my credit without paying for a service, or should I just pay for one. Do you know of a good monitoring service? Also is there anything else I should be watching closely now? This is such a mess, but will only happen more in the future I feel as more and more less savvy people will be vulnerable.

This is one of the more interesting questions I’ve received in a while because it’s something that(as the reader alludes too) will be a huge issue going forward. Criminals are turning to online thefts more and more these days and it’s best to take a proactive approach instead of waiting for something to happen.  I wrote about the Target data breach a couple months ago and why I thought it was a good thing but it’s still scary to think that someone out there can access your personal information so easily.

I actually didn’t even know that routers could get hacked but that’s going to make me think twice about the network security I’ve set up. Anyways, on to the question.

Discovering a Problem

First off, it’s good that reader BB caught onto these fraudulent charges quickly otherwise it could have been even more of a hassle. The nice thing about paying with credit cards or even debit cards is that you will never be held liable for any unauthorized charges. That’s one of the reasons why I don’t think it’s that big of a hassle if someone steals your credit card information. Honestly, who cares? You call up your bank and let them know what happened and most of the time they’ll even rush out a new card to you if you ask nicely. They wouldn’t want you to have to go more than a day or two without being able to spend money(on their card of course!).

In order to discover a theft as quickly as possible, I use Mint to track and manage all of my financial accounts. I have over 50 accounts with various credit card companies, banks, etc and they all link up perfectly with Mint. Every morning, I open up the app on my phone and spend about 5 minutes reviewing the last few days worth of charges(and to check my budget).

This is a side note but since I have all my accounts set on AutoPay I don’t have to worry about when bills are due or how much money I have in certain accounts. I keep a nice buffer in my checking account that is equal to my monthly bills and credit card charges and never have to worry about that stuff.  Keep it simple.

What to Do Now

Reader BB has already done a great job at minimizing the impact of this potential identity theft. Just because a criminal has your information, that doesn’t mean they’ll be able to use it without you knowing. There are a lot of paid services out there like LifeLock and Identity Guard but they aren’t going to do anything that you can’t do yourself for free. I use free monitoring services from Credit Karma, Credit Sesame and AAA in order to stay on top of my credit report. If there is any major activity like opening of a new account, address change, etc then I will know about it within 1-2 days. That part is completely free.

In addition, I like to stagger my three free credit reports throughout the year from AnnualCreditReport.com in order to monitor my reports that way. Again, that service is completely free. In this case, if you know that a theft has occurred, obviously you’re going to contact your bank about the fraudulent charges but you don’t have to waste your time contacting all your other credit card companies.

The reason why I wouldn’t do that personally is because I have over 25 credit cards and it would take a while to cancel all them and who cares if a criminal has your credit card information? As long as they don’t use it, you’re fine. If they do, call your credit card company and tell them the charges were unauthorized and you won’t be held responsible. A lot of criminals will sell credit card numbers in huge batches to third parties on the black market so your card number may never even get used.

Setting up a Fraud Alert

If you know that a deliberate theft has occurred, it’s a good idea to set up a 90 day fraud alert like reader BB has already done. According to their websites, the credit bureaus say that if you notify one of them, they will notify the other two bureaus(there are 3 total bureaus) for you. This fraud alert will only be good for 90 days though. After that, you’ll either have to renew it or monitor your accounts using the methods listed above. A fraud alert is more of a temporary fix when you know someone has your information. Going forward, you’re going to need a solid identity theft protection plan in order to stay secure.

Social Security Number Stolen

In BB’s case, the theft was a little more serious since the criminal may have gotten a hold of his and his wife’s social security number. If they try to open a new line of credit, your fraud alert or monitoring services will stop/notify you but one thing you’ll have to watch out for is your tax return. Criminals love to use stolen social security numbers to file fraudulent tax returns and claim a small return that way. No credit monitoring service will protect you from this so you need to contact the IRS directly if you feel your SS # has been compromised.

Conclusion

Ultimately, taking a proactive approach is best when dealing with identity theft. It’s so easy(and free) to sign up with services like Credit Sesame that if you don’t do it, you’re just asking for trouble. You can also set a calendar reminder for every four months to remind you to get your free annual credit report. And lastly, use an app like Mint to track all of your financial accounts and spend a few minutes every other day or so reviewing all of your charges.

Readers, what do you think about the advice that I gave reader BB?  Do you think you need to pay for monitoring services or are the free ones available good enough?  Have you ever had your information stolen and if so what did you do about it?

-Harry @ PF Pro

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Video Blog: What Makes Up Your Credit Score? http://yourpfpro.com/video-blog-makes-credit-score/ http://yourpfpro.com/video-blog-makes-credit-score/#respond Thu, 31 Oct 2013 12:46:13 +0000 http://yourPFpro.com/?p=3250 Today, I’m doing something a little bit different.  I’m posting a video blog post instead of a written one!  I’ve still included a transcript of the video below, but the video will have all the information you’ll need.  I get a ton of questions from readers, friends and family every week about credit so I […]

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Today, I’m doing something a little bit different.  I’m posting a video blog post instead of a written one!  I’ve still included a transcript of the video below, but the video will have all the information you’ll need.  I get a ton of questions from readers, friends and family every week about credit so I really wanted to break down what exactly makes up your score and present it in a unique and cool new way.

Please let me know what you think of my first video blog.  I think I look a little sleepy so maybe next time I’ll take a shower before I do the video blog 🙂

Transcript

All right, everyone.  How’s it going today?  I’ve got my first video blog for you today.  It has to do with building up your credit, knowing what’s in your score and what happens when you apply for a credit card or a new line of credit.

One of the most popular questions that I get to my inbox on a daily basis usually has something to do with credit.  “How do I build my score?”  “How do I repair my score?”  Things like that.  So I thought I’d make a video for those of you who don’t like to read.  And in the video I’m going to break down what’s in your score and what will happen to your score when you apply for a credit card.  So let’s get started.

The first thing you need to know is that your credit score is really a snapshot in time.  So anytime that you check your credit score, whether it’s with a free site like Credit Karma or Credit Sesame, or you go and use a free trial service like FreeCreditScore.com, that score is just a snapshot in time.  Those companies will go in at that exact moment and take data from your credit report in order to calculate your score

So the nice thing about that is that there are ways that you can manipulate your score.  For example, you can pay off your cards early and then go and check your score a week or two later.

So it’s very handy to know what makes up your score and what things you can do to control your score.  Some things you can control, other things you can’t.  But first, we’re going to talk about what things make up your score.

The first thing you’ll want to know is that there are five items that make up your score.  Payment history makes up about 35%.  Amounts owed makes up 30%.  Credit history is about 15%.  Credit inquiries are about 10% and types of credit is also 10%.  So hopefully, that all adds up to a 100% but the first thing we’ll talk about it payment history.

Payment history is pretty simple.  Do you make your payments on time?  Lenders and creditors want to see that you have a history of making your payments on time.  So if you’ve ever missed a payment or two that payment probably got reported to collections and your score probably dropped by a significant amount.

It can really hurt to have a late payment.  Obviously, in order to offset this, you just want to make all your payments on time and never miss a payment.  If you miss one or two here and there and you catch it quickly companies might be lenient about reporting it though.

Your amount owed makes up 30% of your score so it’s obviously a huge factor in your score(also known as your utilization).  You’ve probably heard that term before, “utilization”.  What utilization is, it looks at all of your available credit, so if you have four cards with $2,000 limit on each card, you have $8,000 in available credit.  Now, if you go out and spend $4,000 on two of those cards and max out those two cards, now you have $4,000 divided by $8,000, that’s a 50% utilization rate.  You want to have a utilization rate in the 20-30% range or lower.

But since a credit score is a snapshot in time, you can actually lower your utilization rate to 0%.  Right before you apply for a mortgage or right before you apply for new credit card you can pay off those cards early, wait a week or two so that it reports to all the three bureaus and then you go and apply and now that part of your score will be helped by the fact that your utilization will be very low.

One thing to also consider is that your utilization works across all your accounts.  But it also looks at your individual accounts.  So what I mean by this is you don’t want to go and max out one of your four accounts.  If you have four cards with $2,000 credit limit on each of the four cards that’s $8,000 in total limits.  If you’re going to spend $4,000 of that $8,000 you want to do it this way: $1,000 on each of the four cards.  That way you’ll never have 100% utilization on any one of the four cards.  We don’t know the exact algorithm that credit bureaus use but we have a pretty good idea what it is.  They tell us what percents are worth what, what matters more than other things, so it’s kind of like a little bit of a guessing game but we have a very good idea as to what matters.

So third we have length of credit history.  Length of credit history isn’t worth a ton but it can definitely affect you.  The perfect example of how it can affect you is when I was applying for a mortgage three and a half years ago for my first property.  I had a great credit score.  I was up in the 750, 775 range which is usually all you need to be approved and get the best rates.  But unfortunately my length of credit history was too short to get the best rates.  Even though I had a really good score, I only had credit cards for a few years so when I went to the bank and tried to get a loan they said “Hey, you’ve only been borrowing money for a few years.  Even though you have a good score, we can’t offer you the best interest rate because your length of credit history is so low.”

So one way to get around that is opening new cards as soon as possible.  Maybe you open one or two early on and you just keep those around forever.  That’s why I always tell people “You really don’t want to close cards.”  Even if you don’t use them, as long as there’s no fee, just keep them around and maybe make a purchase once every few months.  You only need to keep two or three of them at most, maybe even one or two.

If you open a new card and you have a 10-year old card now you’re at 5 years instead of if you had closed that card and you open a new card now your average age is at 0 years.  So that’s one thing to keep in mind.

One little trick that I keep telling people about is called the “authorized user trick.”  What you do is you get yourself added as an authorized user onto someone else’s card.  Amex will even backdate your credit cards if you open a card with them.  So for example, I have an AmEx card, a Hilton Honors Card that I opened in 2005.  It’s a no-fee card, I rarely use it but I keep around because it’s now 8 years old.  Every time that I open a new AmEx card now a days they’ll backdate that card to my original card in 2005.  So by opening a new card, it actually is helping that portion of my score whereas normally, it would be hurting it because I would have that low average age so that’s one thing to keep in mind.

The other part of your score that a lot of people get confused with is your new credit.  That basically deals with credit inquiries.  So when you go and check your score with Credit Karma or Credit Sesame those are soft inquiries, you can do that all you want it won’t affect your score at all.  But when you apply for a mortgage or a credit card or something like that, that will have an effect on your score.  Basically, when you do that, a hard inquiry will show up in all your reports, so a hard inquiry is basically just what it sounds like.  It’s an inquiry into your credit and creditors, lenders, they don’t like to see too many hard inquiries.  They’ll drop off your report after 2 years or sometimes earlier but generally they’re on your report for 2 years.  So if you’re applying for a ton of credit cards, that’ll probably be the limiting factor.  You’ll start getting denied or you’ll start to go pending because you have too many inquiries.

So in order to avoid that, you kind of just have to apply in moderation.  One neat thing is that if you’re applying for a mortgage or a car loan then you can actually do an unlimited number of inquiries within a certain timeframe.  So if I’m shopping around for a mortgage, I can go and get five different quotes from five different lenders, five hard inquiries and as long as it’s in a 2 to 3 maybe even a 4-week period and they’d all count as one hard inquiry.

But if you do that same thing with credit cards, you apply for five credit cards in one day that will be five inquiries and you might get approved for some of them of them but your credit score will definitely be hurting because of all those inquiries going forward.  So as long as you keep it in moderation you should be fine.

The last thing that makes up your score is the types of credit you have.  So your types of credit are basically what you have.  Do you have a student loan?  Do you have a mortgage?  And so basically all that portion is looking at are the varying types of loans that you have, the more, the better.

The last thing I want to touch on is what happens when you apply for a new credit card.  So obviously I have a lot of experience applying for cards, I know a lot of little tips and tricks here and there and I’m about to share some of them with you.

So what exactly happens when you apply for a card?  Well, usually you’ll see a three to ten point drop in your credit score when you apply for a card but it really is tough to tell.  Everyone’s credit is going to be a little bit different.  If you have a really high average age of accounts, when you open a new card it might not affect you as much as someone else who has a much lower average age of accounts when they open a new card.  Their average age is going to go down.  If I have an average age of 10 years across a few cards, when I open one new card my average age will only go down by a couple of years so that part of my score won’t be affected too much.  But if I only have one card that’s 2 or 3 years old, when I open that new card now my average age goes down to one and a half years which is pretty low and that will probably hurt your score.

The other thing that will hurt your score with a new card is the credit inquiry.  So like I said, you can’t have too many inquiries in a certain timeframe.  We don’t know exactly what the time frame is but we know that the more inquiries you have the worse it looks for creditors.  But with that being said there’s also some good that actually comes from opening a new account.

When you open a new credit card account, now you have a new account added so your number of accounts goes up which is a small part of your score and that will help.

Another big thing that helps is the fact that your utilization goes up.  If you add $10,000 to your credit limit, if you open a new card and they give you a $10,000 limit, you only had $10,000 before, now you can spend a lot more money or do whatever you want and your utilization percentage will be a lot lower.  So you can really gain right there from the utilization portion.

So that’s about all I have to say and hopefully you guys enjoyed my first video blog.

If you have any questions or if you want to hear any topics, videos, articles, whatever, you know where to find me.  You can log on to my site at www.YourPFPro.com or send me an e-mail at yourpfpro@gmail.com

Got any goals/resolutions for the New Year?

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Case Study: Build Credit for Someone by Adding Them as an Authorized User http://yourpfpro.com/case-study-build-credit-for-someone-by-adding-them-as-an-authorized-user/ http://yourpfpro.com/case-study-build-credit-for-someone-by-adding-them-as-an-authorized-user/#comments Mon, 29 Oct 2012 01:40:07 +0000 http://yourPFpro.com/?p=1359 When I first purchased my condo three years ago, I was not offered the lowest rate due to my insufficient credit history. Even though I always checked my credit score and it was in the high 700’s, the bank considered me a slight risk because my credit history was so limited(I was only 22). I […]

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add_authorized_user_to_build_creditWhen I first purchased my condo three years ago, I was not offered the lowest rate due to my insufficient credit history. Even though I always checked my credit score and it was in the high 700’s, the bank considered me a slight risk because my credit history was so limited(I was only 22). I thought my mom was doing me a favor during college by opening a credit card for me in her name but once I canceled it and opened my own card, all that history was gone.

In retrospect, I should have asked her to add me as an authorized user to her account. If you are the one being added as an authorized user, you’re able to ‘piggyback’ off of someone else’s established credit line. The authorized user can receive statements and pay their own bill, but ultimately, the main card user is responsible for any charges made by authorized users. Personally, I would only give out a card to someone I trust since in the end, I’m on the hook if they don’t pay.

There are a lot of stories out there of boyfriends/girlfriends(or even husbands/wives) being added as authorized users and racking up the bills when things go south. If you check your accounts daily, or weekly, or even monthly with Mint you don’t need to worried about this though. I would only add someone as an authorized user that you trust or that you dont mind staying on top of. If you’re the one adding authorized users, remember that you are assuming all of the risk.

How Does It Help Your Score?

Every time you add an account to your credit history, your score will increase. Contrary to popular belief, the more accounts you have the better(as long as they are managed responsibly). This shows to the credit bureau your trustworthiness since so many different lenders are willing to extend you lines of credit. When you become an authorized user, you will be issued a brand new card with a new 16 digit number and even a separate billing statement.

Depending on the average age of your accounts, adding an authorized user can help your credit score. If you are added onto a card that has a 15 year credit history, this will now factor into the calculation of your average age. And the same thing goes for the credit limit. If you can find someone with an extensive credit history and a high credit limit(think parents!), you should ask them nicely to become an authorized user on their account. You don’t even have to use the card, but just having it on your history will help a ton. But remember, if they ever close this account your account will be closed too, thus negatively affecting your score.

No Credit Check? No Way

Almost all of the benefits of adding an authorized user go to the authorized user, fortunately or unfortunately, depending on whom you are. Most credit card companies won’t even ask for a social security number for the authorized user. In fact, they claim they won’t even perform a credit check when you add an authorized user, all they ask for is a name and date of birth.

I have always thought you needed a social to get a hold of anything credit related, but apparently I was wrong. I signed up for a department store charge card once and although I gave them my address, I did not give them the correct social security number. But somehow, this card ended up on my credit report, haha! So even though you don’t give out your social, you can still expect it to show up on your credit report.

Real Life Experiment

I was curious to see how the whole process worked so I decided to add my girlfriend to my AMEX Gold as an authorized user. It’s a charge card, so there’s no monthly limit, but I wanted to see how it would affect her score. I added her as an authorized user on 10/1 and all I gave AMEX was her name and date of birth. I specifically asked them if there would be a credit check and they told me NO.

A few days later, I got a Credit Sesame notification that an account had been added to her credit history. Sure enough, there was no inquiry either. When I pulled her credit report from Annualcreditreport.com I saw a new account with Amex with an opening date of 10/1/12. So it looks like, TransUnion at least, did not give her the date that I opened the account(two years ago). I think this aspect may vary by card issuer and credit reporting company though.

After all was said and done, her score went up four points. I think it definitely would have helped more if I added her as an authorized user to a card with a high limit and longer history. I think I may have actually hurt her score a little bit in the average age department, but I helped it in the total number of accounts. Overall, it was a good experiment and I think I’ll have to do another with a different card, with her permission of course.

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Readers, have you ever added someone as an authorized user? Did it help your score, help their score or hurt their score? Let me know so I don’t have to keep experimenting with my girlfriend’s credit history.

-Harry @ PF Pro

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Credit Karma iPhone App Review http://yourpfpro.com/credit-karma-iphone-app-review/ http://yourpfpro.com/credit-karma-iphone-app-review/#respond Fri, 20 Jul 2012 05:26:35 +0000 http://yourPFpro.com/?p=847 As many of you know, I’m a big proponent of do it yourself credit monitoring and score checking.  I don’t think you should ever have to pay for something that is yours.  Credit Karma is one of the only companies around that allows you to check your credit score absolutely free.  I’ve been a member […]

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credit_karma_iphone_appAs many of you know, I’m a big proponent of do it yourself credit monitoring and score checking.  I don’t think you should ever have to pay for something that is yours.  Credit Karma is one of the only companies around that allows you to check your credit score absolutely free.  I’ve been a member for over a year now, and they are constantly improving and updating their site.  They’ve added a ton of new features since I’ve joined and the app is just another one of them.

Their new mobile app makes it even easier to stay up to date with your score.  Although it’s only on the iPhone platform, according to their website, it will be coming to the Android platform very soon.

I’ve graded the app below on some important factors

Usability: A

The app has a nice and simple interface that automatically updates your credit score every time you log in.  I like this feature because when you use the website, you have to manually update your score.  Obviously if I’m on the site or using the app, I want to know what my latest score is!

Navigation: A+

I like how they made navigation from page to page very simple.  The home page takes you to a dashboard that gives you your updated credit score and a notifications section below.  From there, you can look at your credit report card or take a look at your accounts.  I actually prefer using the app over the website  because of these simple features.  Aesthetically, the site is very pleasing and the navigation pages make a lot of sense.

From the homepage, you can go to your credit report that breaks down and grades you on the factors that affect your score: utilization, on-time payments, average age, total accounts, hard inquiries and derogatory marks.  You can also navigate to the my accounts section, which is clearly divided into home loans, credit cards and other types of loans.

Security: B-

This might be the only fault I see with the app.  If you were to lose your phone, someone could potentially access your credit score and credit report.  Personally this doesn’t bother me, in fact I’ve already shared my credit score 😉 so I’m not too worried about some criminal knowing my score.  But I could see how this might be a little troubling to some.

Cost: A

The app’s free so the cost must be an A right?  Well, not necessarily.  The trade-off here is the same as on the website.  In exchange for your score and report, Credit Karma shows relevant ads on the bottom of the screen.  I think this is a fair trade-off and the first ad I saw was for the Chase Freedom Card, which I think is a great starter card btw(no annual fee, and $100-$300 sign up bonus).

Overall, I highly recommend the app.  Ever since Credit Karma added their credit monitoring service, the site has become an extremely valuable part of my do it yourself identity theft protection plan.  I check my score about twice a month, but the credit notifications is their best feature.  The app has a nice notifications area too that will push notifications to your phone when there’s been a change to your credit history.

So are you ready to sign up with Credit Karma(aff link)?  If you’re already a member, you can download the app here.

Completely Free Credit Score
-Harry @ PF Pro

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Facebook IPO, Student Loan Debt Bubble and My Weekly Blog Round-Up http://yourpfpro.com/facebook-ipo-student-loan-debt-bubble-and-my-weekly-blog-round-up/ http://yourpfpro.com/facebook-ipo-student-loan-debt-bubble-and-my-weekly-blog-round-up/#comments Fri, 18 May 2012 02:38:19 +0000 http://yourPFpro.com/?p=564 Facebook’s IPO   The world’s largest social media site said Thursday that it had raised $16 billion for itself and early investors through an IPO that values Facebook at $104 billion.  Starting friday, investors like you and me will be able to purchase stock in the social network giant.  CEO Mark Zuckerberg is expected to […]

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Facebook’s IPO  
The world’s largest social media site said Thursday that it had raised $16 billion for itself and early investors through an IPO that values Facebook at $104 billion.  Starting friday, investors like you and me will be able to purchase stock in the social network giant.  CEO Mark Zuckerberg is expected to sell about 30 million of his 500 million + shares, but will still retain 32% of the company.

Facebook’s IPO culminates a year long period in which social media sites like Zynga and Linkedin have gone public with varying degrees of success.  But this is the one IPO social media investors have been holding out for.  Personally, I won’t be holding FB in my individual portfolio but I’m sure my Vanguard Total Market Fund(VFINX) will re-allocate to hold a small percentage in the near future.

My First Guest Post:  The Student Loan Debt Bubble

I’m really excited to share with my readers my guest post on Credit Karma’s blog.  It’s awesome to be able to write for a site that I use and has over 5 million users!  Check it out and let me know what you think

Blog Round-Up 

Here are just a few of my favorite articles from the past couple weeks:

Exponential Economist Meets Finite Physicist:  This one’s a little older, but it’s a really interesting dialogue about the possibility of infinite economic growth.  Definitely worth a read.

You Do Not Have To Work Forever:  This guy is actually a student blogger up in Canada and he writes about making small sacrifices now so you can retire early.

Are Financial Advisers Failing the 99%?:  I don’t think you should ever have to pay to get financial advice.  Great advice is in abundance from online blogs, forums and sites like mine!

What do you think about Facebook’s IPO?  Did you like my guest post on Credit Karma’s Blog?

-PF Pro

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My Do It Yourself Identity Theft Protection Plan http://yourpfpro.com/my-do-it-yourself-identity-theft-protection-plan/ http://yourpfpro.com/my-do-it-yourself-identity-theft-protection-plan/#comments Mon, 26 Mar 2012 04:50:22 +0000 http://yourPFpro.com/?p=404 These days, there are tons of ways criminals can steal your identity.  They can copy your credit card information at a restaurant or go through your mailbox at home.  There are some services out there that charge you to monitor your identity, but most of them only offer services you can get for yourself for […]

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These days, there are tons of ways criminals can steal your identity.  They can copy your credit card information at a restaurant or go through your mailbox at home.  There are some services out there that charge you to monitor your identity, but most of them only offer services you can get for yourself for free.

One of the things I hate most about credit scores is the fact that companies are allowed to charge you for it; this seems ridiculous to me.  I don’t think you should have to pay for any of these services and here’s how I get the same level of protection for free:

Credit Score Monitoring

I’ve already talked about Credit Karma and how they provide you with an absolutely free TransUnion score that you can update at any time.  Credit Sesame is a similar company that offers you your score based on your Experian credit report.  Both sites are completely free and do not require a credit card like some of the other so-called ‘free sites.’  I like to check my score once a month to stay on top of any changes to my credit history.

Credit Report Monitoring

Credit Karma now offers a free option to monitor your credit.  They will send you an update any time there is a significant change on your credit report.  Any type of new inquiry or delinquent payment will trigger an e-mail alert.  This is a great free service that will help you passively keep track of your credit report.

AAA also offers free identity theft monitoring service for it’s members.  Credit Check Select is free with your paid membership and it monitors your Experian credit report daily for changes.  Enrollment will also give you $10,000 identity theft insurance to help reimburse eligible expenses should you become a victim of identity theft.(Thanks to reader Jon for pointing this out!)

Lastly, you can use Annual Credit Report to get a free credit report from each of the three major bureaus once a year.  This is the ONLY site that will give you completely free access to your credit report.  I like to stagger my credit report every four months so that I can stay up to date for free.  I’ll get my TransUnion in January, Experian in May and Equifax in September.

Credit Freeze

The last and probably most extreme step would be to get a credit freeze.  A credit freeze essentially prevents your credit report from being given to credit card companies or other third party requestors.  Unfortunately, this option costs around $10 to freeze/unfreeze your credit report and you need to do it with each bureau.  If you decide to freeze, you must do so with all three agencies because you never know which one will be asked for your report.

Take any or all of these steps to help prevent identity theft.  Personally, I like to check my credit card transactions on Mint every day to watch out for any unauthorized purchases.  I also use Credit Karma to keep up to date on my score and I’m enrolled in their free credit monitoring service.  At a minimum, I recommend signing up for one of the free credit monitoring services since it doesn’t require any active management.

Completely Free Credit Score

Have you ever paid for your credit score or credit report?  Do you use any of the sites mentioned above?

-PF Pro

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Knowing Your Credit Score and Building It Up http://yourpfpro.com/knowing-your-credit-score-and-building-it-up/ http://yourpfpro.com/knowing-your-credit-score-and-building-it-up/#comments Mon, 30 Jan 2012 01:30:10 +0000 http://yourPFpro.com/?p=36 We have all seen, and laughed at, the litany of free credit score commercials on television now a days.  Whether it’s a funny rock band song that you can never get out of your head, or the overweight, balding credit score man seen on your left; we are constantly bombarded with ads for paid services to […]

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credit: freecreditscore.com

We have all seen, and laughed at, the litany of free credit score commercials on television now a days.  Whether it’s a funny rock band song that you can never get out of your head, or the overweight, balding credit score man seen on your left; we are constantly bombarded with ads for paid services to check our credit score.  So it must be important right?

This is where the magic of advertisement shows it’s power!  We are duped into running to our computer and signing up for a free trial just to make sure we don’t have a fat ugly bald guy in there.  The truth is, there are a couple great alternative sites that are completely free.  The service I use is called, Credit Karma.  It is a simple sign-up process and it will immediately give you one of your three credit scores.  They now provide credit monitoring at no charge too, so you can keep track of all your current lines of open credit.

Now that you know your credit score, what does it mean?  There are three main credit bureaus in the United States: Equifax, Experian and TransUnion.  All three take information from your credit history, such as number of lines of credit currently open, number of inquiries for credit in the past two years, etc and come up with a credit score based on all this information.  All three companies use similar, but slightly different statistical methods to come up with your score, hence the three different scores.  Credit bureau scores are often called “FICO Scores” because they were all developed on the principles used by the Fair Isaac Corporation.

Being a young professional, the one disadvantage you have when it comes to your credit score is time.  The average age of your lines of credit will be low due to the fact that you are young.  You want to have one or two “no annual fee” cards that will always be in your wallet to help raise the average age of all your accounts.  A quick example:  If you have a card with 10 years of history, and you open two new credit cards, this will only reduce your average age to 3.33 years.  Without this 10 year old card, your score could be adversely affected by opening one or two new cards in a short period of time.

Often overlooked, a hard inquiry can negatively affect your credit score for up to two years.  Every time you apply for a credit card, home loan, or even open a bank account, this causes a hard inquiry to show up on your account.  Whether you are accepted or rejected for the offer, each inquiry made counts against your credit score.  However, one important note is that rate-shopping for a mortgage, auto or student loan is actually encouraged.  All inquiries made within a 14 day period, for a mortgage loan for instance, are lumped into one credit inquiry.  Use this to your advantage when applying for these types of loans as rates can vary greatly depending on the type of institution you choose.

You can see a detailed breakdown of what’s in your credit score here.  Let me know what you think about my first post!  Love it? Hate it?  Disagree?  Do you think there is anything else a young professional can do to raise his/her credit score?  How many lines of credit do you have open?


Completely Free Credit Score

-yourPFpro

 

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