Credit Bureaus/Reports/Scores

What You Need to Know About Your Credit

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223/365 - my bank sucks

A couple weeks ago Mrs. InACents received a call from the local authorities stating her debit card information had been stolen. Apparently when we ordered pizza from a local establishment several months ago, the pizza boy decided to lift the card information. The good news was it did not appear he ever used the card information to make a purchase. The bad news is that the card had to be cancelled and a new one ordered. We are also in the midst of finding new tenants for our rental home, and are reminded just how bad a lot of peoples credit is. So this is a good point in life to remind everyone of the basics of debt and credit cards and how it impacts you.

The use of debit cards come with inherent risks due to the nature of them being linked directly to your bank account. A thief with your debit card information can easily manage to drain the account of funds, while leaving you penniless. The advantage of using a credit card over a debit card is the built-in consumer protections.

In general, credit card companies are a lot easier at not holding you accountable for false charges. A credit card company will typically credit you the charge while being investigated. However, banks tend to go through a lot tougher review process to get your money back, which could take months, causing you to be without your cash until the complaint is completed.

That is my number two reason for always using a credit card to make a purchase, especially at riskier retailers like mom and pops restaurants or even vendors at a flea market (yes Mrs. InACents has been known to pull out the plastic with certain vendors). My number one reason for always using a credit card is for the rewards, but of course. Why would I want to use a debit card, that comes with more risk, and I do not get any rewards out of it? I would rather use my money in my bank account to pay off the balance each month.

What else can be done to protect us from debit card fraud?

Once my wife alerted me of the breach, and she was off correcting things with her bank, I immediately pulled our credit reports from annualcreditreport.com. The consumer needs to be careful where they go to get their “free” credit report. Type in free credit report to a search engine, and you will immediately see unlimited options offering to give you access to your report. However, see that little asterisk? The secret these companies hide in the small print is they want you to sign up for a subscription based service to monitor your credit, and as a result, you will be able to get access to your credit file, and possibly even scores.

The simple fact is, I do not think that level of monitoring is required. If you are the type that likes to check your report a lot, or wants a company to professional lock down your account from intruders, than maybe credit monitoring is for you. In my opinion, the free annual credit report is adequate enough for our family.

There are three credit bureaus that report your credit and have their own models for calculating your score, TransUnion, Equifax, and Experian. Once per year (every 366 days, not calendar year) you are allowed to see a copy of your credit report for free from each of the bureaus by visiting annualcreditreport.com. There are some exceptions to the rule of one report per year, the most notable being is cases where you are turned down for credit, where you then are allowed to see a copy of your report to understand why credit was not granted.

Typically, I like to space our free annual credit reports out once every four months. For example, since I pulled our TransUnion reports now, I will likely pull either Experian or Equifax around July, with the remaining pull around November. This allows me to monitor all of our accounts throughout the year to watch for unscrupulous activity and to make sure there are no reporting errors. If I were to pull all of our reports at once, I would have to wait until the next year, or purchase the reports anytime any sketchy came up.

Since I knew we had recent inquiries from Barclays for opening up US Airways credit cards (Wife/Me), I also knew they would more than likely pulled our credit report from TransUnion; therefore, I decided to pull that report to look for any errors or wrongly opened accounts by our new pizza guy friend.

Why did I only pull our TransUnion reports?

While I did want to see our inquiries on our accounts, the key for me was to see what accounts were currently open and active, to make sure Mr. Pizza did not open any cards without us knowing. I think opening up a new credit card would be really difficult if not impossible to do with just our credit card information, but you never know what loops the villains may take to open new accounts.

When you open a new account, whether it be a credit card, mortgage, or auto loan, to name a few, the issuing bank will pull a copy of your credit report, as well as start reporting your payment history. In most cases, only one of the three credit bureaus will get pulled to check your credit worthiness (called a hard or soft inquiry); however, once the account is opened, your payment history will be reported to all three bureaus.

A hard inquiry is performed when you are looking to open a new line of credit. The issuing bank will pull your credit report and review the file to make sure they want to work with you. A hard inquiry is indicated as such in your credit file, and will remain there for two years.

Hard inquires will immediately lower your credit score by approximately 5 points, but will bounce back after 6 months. This is why when you start to open a lot of credit cards to earn free rewards, issuers will sometimes say you have too many inquiries within a short period of time. The reason is because it can look like you are financially strapped and need a lot of credit, thus becoming riskier to the bank.

A soft inquiry is often pulled by an issuer to see if you pre-qualify for an offer. You know all of those junk mail offers for credit cards? They are often the result of a soft inquiry by the bank. Here is the good news! Soft inquiries do not impact your credit scores. The somewhat creepy thing is you do not even know they occur.

So for example, our Barclays’ issued US Airways cards were all completed through our TransUnion reports. Therefore, you will not see any mention of an inquiry on our Experian or Equifax reports. However, there are instances where issuers will pull from multiple bureaus.

In general, you want to minimize the amount of hard inquiries on your account, at least all at once. Those that open a lot of credit cards like to possibly open 3-5 cards at the same time, so that all the hard inquiries hit at the same time, and as a result, the card issuers do not see all the inquiries. The typical rule is that approximately every 90 days is a good period to apply for new credit when opening up a lot of cards. We tend to be a lot more conservative in our household, opening up only a handful of new cards per year. So really, our inquiries never come into question because they are so far and few between. With proper timing, and with hard inquiries falling off your credit report every two years, one can utilize their credit towards endless rewards, but it takes careful management and always paying off your bill in full and on-time each month.

What did I learn from reviewing our credit reports?

Food for the wallet

My wife has always been pretty good with managing her finances before meeting me. Unfortunately, now I pretty much manage all the money management aspect, although we review it together quite often. Before my wife met me, there were a credit card account that unfortunately had a couple of late payments.

In May 2006 (right after I first started dating my wife), she was more than 30 days late on payment. Then in August, the same account went 30 days past due, and then 60 days past due in September. Ouch. There was also another 30 day late payment in January 2007. I found all of this out years ago when I first started managing my wife’s accounts. So we immediately made a concerted effort to make sure it never happens again.

Why I bring this up is that after 7 years, reporting of an account falls off your report. Therefore, I am excited to know that by the end of September of this year, 3 of the 4 late payments will fall off Mrs. InACents report.

Keep in mind my wife’s credit scores overall are really pretty great. While I typically score in the 780-800+ range, she routinely scores in the 750-780 range. The above delinquencies are the only negative marks on her account, which I am excited will fall off in a matter of months. This means we should see a substantial credit score increase towards the end of this year. All of our hard work will pay off!

We were very fortunate that we took so many other measures to build a strong credit profile for Mrs. InACents, so that when we purchased our dream home in 2010, we had no credit issues, and even when purchasing our new van a couple months ago, there were no issues.

As for hard inquiry analysis on both our accounts, my wife had eight (8) in the past two (2) years, while I only had six (6). In all fairness, we put the new van in my wife’s name, so four (4) of the hard inquiries were all related to financing the car when applying for loans across various banks. Both of our oldest hard inquiries were related to our home purchase in mid-2011.

After financing the home, it is fairly typical for the bank to pull your credit report afterwards, which happened for us several months later. Therefore, by August of this year, we should both see a couple of our inquiries fall off.

Overall, I am happy with what we found within our reports, and will continue down our path towards correct credit management.

Is there something you still do not understand about your credit? Ask us in the comments below, and we will look to answer them for you.

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Source: InACents

Kids Are the Ultimate Car Negotiation Tool

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2010 Honda Odyssey

As I grow wiser and older, I have learned a thing or two about big-ticket item negotiations along the way. As we prepare for some life-altering changes in our lives (more on that in the future), we had to make a decision now on a newer, bigger vehicle. After several weeks of searching, just this week we settled on purchasing a used 2010 Honda Odyssey van from a local dealer. (Go on, give me heat for dropping the sports car for a…mini-van! Where is my manliness going?)

Like anything associated with the InACents lifestyle (saving money, deal hunting, etc.), we recently came across an offer to test drive a Chevrolet vehicle and in return for our time, we would receive a $50 Macy’s gift card. For me, it was a no-brainer, because I could easily dash up to the dealership over lunch, search for vehicles that met our criteria, be in-and-out over a hour period, and get paid $50 to do so.

Sure enough, the process worked flawless, so much so that the dealer activated the offer for both my wife and I, scoring us $100 in free gift cards for less than a hour of my time. By using this quick-in and quick-out process, I was also able to vet which vehicles would work for our family and start the process of price research.

As you can tell at this point, we did not purchase a Chevy, but a Honda from the used car side of the lot.

The Negotiation Process

Fast forward to later that same evening as my test drive, and the power went out in our neighborhood, making home dinner preparation difficult (who wants pot stickers by candlelight?). So after heading out to grab a bite to eat, our trip home past the dealership was a good opportunity to stop in quick and show the Honda Odyssey to my wife, and test drive the vehicle. The only dilemma…those two theatrical geniuses in the back seat.

Any parent of young children knows of the struggle of strapping in car seats into a vehicle. Having to wrestle seat belts through tiny crevices of a car seat while avoiding scraps of soggy cookies (is that even what this is?) is a job left for professionals. Fortunately, I have become quite the master at having to finagle those safety apparatus to the roof I mean seats.

The test drive went great and we both loved the vehicle. The boys even felt comfortable enough to nakify themselves, quickly ditching their socks and shoes despite the freezing weather. After our return, it inevitably meant the dealer wanted to talk numbers. After a short couple of minutes inside, the sales rep quickly learned the dilemma of two young boys during the witching hour. Up on the chairs, off the chairs. Run around the car, chase around the car. Push, pull, yell. What about me dad, what about me? (Somehow my teachings of patience to build wealth has not been going as planned; where did I go awry?)

All these kids at the negotiation table meant typical multi-hour beatings from the car dealership over price was infeasible. Within a few short moments, we had agreed upon a trade-in price for our vehicle, and just had to negotiate the price of the van.

I do not want to interject a long discussion on the negotiation process in this part of the story, so please scroll to the end for discussion on the tips to save you money at the negotiation table.

To our rescue at this point of the early negotiations was bedtime. When presented with the reality of having our kids with us during the negotiation process, the sales rep realized our urgency to get home. There was no closing the deal now. Which left the bottom line in the hands of the dealership. It was now their responsibility to get us to agree upon a price and back into the dealer.

By researching things ahead of time online, I was able to know a good price not only on the van, but also on our trade. This really is key to the negotiation to avoid wasting anyone time. In our case, there was very minimal negotiations for the most part. It was all spelled out online on what the vehicles were valued at, and they could either make the deal work, with or without us, and here comes the beautiful part.

By having the kids with us during the crucial negotiation process, we were able to get out of their quickly. With us not sitting in the chair at the dealership, the negotiations were on our side. It was in the hands of the sales team to come up with their best offer to get us back in the dealership. Typically, the dealers can wear the customer down through long, drawn-out negotiations in the office. When they tire you enough, they have you at their mercy.

So by getting the negotiations to happen over the phone, it saved us a huge amount of hassle. After a couple quick calls back and forth, we had agreed upon a sale price, and the hard negotiation process was complete, all without us hardly being in the dealership.

Online Vehicle Price Comparison

I am the type of person who is never satisfied with a deal. If I score a major money saving price, I am sure to keep shopping it around just in case the price drops again. My system works perfectly with travel, where prices constantly fluctuate.

So after securing our price on the Honda Odyssey, but before we went in to sign all the paperwork, I decided to do some online comparison shopping. This is where the internet becomes such an invaluable tool.

The Edmunds website has a built in chat feature when searching the used car inventory. With a couple clicks of the button, I was able to chat with various dealers on similar vehicles, telling them the exact deal I was about to finalize and see if they could beat the offer. If they were $10 cheaper, I knew I had some wiggle room. In all cases, no other dealer could match our price, helping me feel satisfied that my existing deal was good.

Again, the key here is that I, the consumer have the power in the negotiations when I am sitting at the information highway. If someone else wants my business and is willing to undercut the other guy by $100, then it is in his best interest to do so because as soon as I close the chat session, I am a lost customer.

Could the man-to-man negotiations in person had better results at these varying dealers? Possibly, but not in reality since dealers are experts in their field at the game of negotiation and wearing the opponent down.

The Wrap-Up

So what are the lessons to be taken away from this car buying experience?

Here is where I want to point out one major feature of the car buying negotiation process that you need to avoid! It pains me when I hear people say they went into the dealership to negotiate their car payment. That is the first thing the sales rep always asks. Yes, ultimately, all you really care about is how much is coming out of your pocket on a monthly basis. In reality, car payments allow the dealer to play the profit game to their maximum potential.

The dealer wants to get you into the 4-square method, where you negotiate the price, trade, down payment, and interest all on one sheet. To familiarize yourself with the dealing of the four square method, jump down on this page on the Confessions of a Car Salesman page on Edmund’s (you can go back and read the entire article, but this link jumps right to the page discussing the 4-square process). Great article into how the car buying process works, and your tool to better negotiations.

The real key to the negotiation is never letting them get to the square paper. You want to negotiate each terms independently, not together. If you are buying the car, only negotiate that price, not the trade, down payment or APR. Discuss the trade after the agreed upon price of the new vehicle. Financing and down payments will come at the end when you are finalizing the paperwork. If they do not meet your desired payment, either come up with more down payment or walk away. You are not locked in yet.

In our case, we finalized the trade first, allowing us to then lay the groundwork for the new car. We laid out our bottom line on both the new vehicle and the trade right away in the essence of time, but never discussed payments. Your monthly installment is what it is after the hard costs are finalized.

Investing in kids at the negotiation table.

I say this loosely, but having kids with us at the negotiation table was a crucial factor in saving hours worth of negotiating. I am not saying grab your sister’s kids everytime you go to negotiate a big-ticket item, but the reality is every time I stepped foot into that dealership, I made it known that my time was limited. Kids are hungry, need a nap, or I am on my lunch break all shorten the dealers time frame to make a deal happen.

In today’s information age, your biggest time and stress reliever is not sitting in the dealer chair. Make them work for your business to when you feel comfortable coming in to sign the final paperwork.

This is the first car buying experience where I walked away WITHOUT buyer remorse because I felt confident in all of the pieces of the purchase.

– New vehicle purchase price (CHECK)
– Trade in price (CHECK)
– Down payment (in our instance it was the equity in the trade; CHECK)
– Loan terms (CHECK)

Make sure before heading into the final finance office that you are aware of your credit scores AND have an idea of what kind of rates you qualify for the purchase at hand. With a couple clicks of the mouse, I knew exactly where my wife and I stood on credit scores and what comparable interest rates were being offered. If the dealer did not land me a good loan, I could easily have my bank issue us the funds by my prearranged deal).

Sitting at the negotiating table is going to mean the dealer figures out a way to make you pay a little more. It is the sales representatives job to make the most money possible, padding commissions. Avoid the negotiation table, and you just achieved…

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The Great Family Escape: You Don’t Have to Fly To Earn a Million Frequent Flyer Miles

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Back in early December, I stumbled upon a spectacular family blogging at The Great Family Escape. Justin’s (the dad from The Great Family Escape) journey with his family is tremendously inspirational to me, in that they are selling everything they own and embarking on an incredible journey to travel the world in less than a year from now.

I sometimes have a hard time putting together a bag of stuff for Goodwill. Or sometimes worse, I know the value of things all to well, and try selling everything instead for top dollar. Once my wife came along, my life changed for the better. Mrs. InACents is a thrower away of stuff and donates lots of stuff to charity. Coming from a “hoarder” type of family, it really helped me become unattached from material things. Then when our boys came along, I pretty much completely lost the desire to have much of anything material for my own enjoyment. However, to sell everything I own is a scary proposition. Especially when we just purchased our dream home recently. Maybe that is my problem of being too tied down with material things, and why I really am inspired by the bold steps Justin’s family is taking.

Today my article is being hosted at The Great Family Escape, which highlights some basics and guidance for users looking to get involved in the credit card game. I was honored when Justin contacted me several weeks ago to write a guest post for users interested in traveling the world. Without a doubt, the fastest way to build up your reward accounts, that are then used to travel the world for cheap or FREE, is through credit cards. For some reason when I talk to people about seeing the world for free, and explain the many advantages of opening credit cards for huge bonuses, they either do not get the concepts or are scared. In reality, there is not anything to be nervous about if you manage your credit responsibly. The article really should act as a great resource for people on steps and sites they can use to start earning rewards that can be used to fund your family adventures.

So please head over to The Great Family Escape and hopefully you can learn something new that inspires me. Thanks Justin for allowing us to share in your journey! If you have any questions, please feel free to comment on Justin’s post, or email either of us with any questions. Save Money, Travel More!