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Written By: Terry Price
Credit Secrets for Every American
Americans are all becoming much more educated when it comes to credit. We have to be to avoid financial ruin in these days of increasing bankruptcies and home foreclosures. You may think you know all the in's and out's of getting and maintaining good credit. Let's find out, as we present "credit secrets" that every American should know.
Secret #1. Your credit score may well determine how much you pay for health insurance. You knew that your credit score, sometimes called your FICO score, determines the interest rate you will pay on loans. But did you know that your FICO score may also play a role in setting your auto, life, and health insurance premiums? Insurance companies now request a copy of your credit report since they believe there is a relationship between your score and claims you might make against their policies.
Secret #2. Debit cards are more risky than carrying cash. Many of us have a debit card in our wallet. It may say VISA on the front, but it is a debit card that directly deducts funds from our checking or savings account every time we use it. So, what's the problem? More than $600 billion is lost to debit card fraud every year. If you carry cash, and you lose your wallet or are robbed, at least your loss is limited to the amount in your wallet. With a credit card, your liability is limited to $50 in the event of fraud. Not so with debit cards. Carry a debit card, and you put your entire back account balance at risk.
Secret #3. Use sub-prime merchandise cards to build your good credit. These cards are available to families with poor credit, but the catch is you typically have to put down a deposit, and you can only buy from the company that sold you the card. But many sub-prime merchandise cards report to the credit bureaus, and therefore using one will help raise your high credit limit and restore your debt-to-credit ratio. All good news for your credit report.
Secret #4. ATMs will give you money you don't have. Although this may sound like a good thing, it's not! Many people are not aware that if they try to make an ATM withdrawal for more money than they have in their account, the ATM will allow them to do it, but the bank will impose an overdraft fee that can be as high as $35. That's a stiff penalty to pay, if you only withdrew $20 in cash! The culprit is the bank's universal default clause (sometimes called "bounce protection").
Secret # 5. Married women with joint credit, have no credit. If you are a married woman who holds all your credit accounts jointly with your husband, you have no credit yourself. If you ever get divorced down the road, you will have to start from scratch to build your own credit history. It's better to start building credit in your own name now.
Maybe these facts aren't classified "top secret," but the more you know about how the credit business works, the better your financial picture will look.
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