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A Credit Freeze

Question: I want to protect my identity, and I've heard individuals are now able to put a credit freeze with the credit bureaus. But it appears that it can get very difficult and expensive as I may need to lift this freeze for car loans or even simple things like getting a new cell phone plan. Is getting a credit freeze worth the cost and hassle for the protection or is there a better way? Tatenda

Answer: Before I give you my answer, here's an email I got the other day from John. He's unhappy with my favorable comments about putting on a credit freeze with the major reporting bureaus:

"I followed Chris Farrell's advice to freeze my credit report to avoid identity theft. Worst idea ever!!! I needed to refinance recently but could not get Experian to lift the freeze in a timely manner (Equifax and TransUnion were fine) and the mortgage company required all three credit reports. Could not contact anyone at Experian (which has made a fine art of avoiding any direct contact with a person at their company via phone, mail or e-mail). Lost my great re-finance rate. Cost me $45,000 over the life of the loan. Please caution listeners to think about all the implications of doing this."

So there's a cautionary note about freezing your credit. But I remain a fan of a credit freeze, and in recent months the credit reporting bureaus have made it a bit easier on their customers to create a freeze.

Still, John's email emphasizes that a credit freeze only works if you aren't doing much on the credit side. In other words, if you're satisfied with your cell phone contract, credit cards, mortgage and auto loan, and you don't see any need for new credit for the foreseeable future, then a credit freeze and the $30 total it will cost you seems like a good move to me. (It's $10 for each bureau to initiate a freeze.) When you need a new loan, make sure you act on the early side to lift the freeze. (Again, $10 for each bureau to temporarily lift the freeze.) But if John's experience gives you pause--don't do it.

02/08/08 by Chris Farrell

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Another Credit Reporting Bureau

Question: While I was checking my credit reports, I came across the name of a fourth credit reporting agency, Innovis. I was told they are not included in the "one free credit report a year". My understanding is that Fannie Mae and Freddie Mac are required by the government to report to them. Is this true? Who are they and why aren't they required to furnish a free report like the other agencies? Should I be concerned about checking this report as well? Judi

A: You're right--Ugh. There is another credit reporting bureau and, yes, Freddie Mac and Fannie Mae require that mortgage servicers report payment histories to Innovis. The federal government does the same. If you go to the Innovis website at www.innovis.com you can learn how to order a credit report, put on a fraud or security alert, freeze your credit report, and so forth. Problem is, few people realize it even exists.

Its basic business model is different from the Big Three credit bureaus. As I understand it, its main business is helping creditors put together mailing lists--the solicitations you get in the mail. If there's a black mark on your credit record with Innovis--whether it should be there or not--you won't get credit offers in the mail. Personally speaking, being free of mail solicitations isn't a bad thing. On the other hand, it's bad if you're denied a chance at a deal because of a mistake on a credit report that few people realize exists. And you don't want credit mistakes to linger anywhere.

I don't understand why Innovis isn't part of the yearly one-free-credit-report requirement. It's an oversight that should be corrected.

02/26/08 by Chris Farrell

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Boosting Credit Score

Question: I am looking for a way to boost my credit score. My fiancé and I plan on buying a house in about a year. My credit score is considered poor or medium-high risk. I had tried to get a credit card a few months ago and I was turned down.

My bills are all current and I've paid off any old debt I had accrued. But I do not have any credit cards right now- only a car loan and a student loan. Would you recommend getting a credit card and staying current and keeping a low balance for better credit? If so, is there a certain type of credit card that's more "forgiving" of a lower credit score? If not, are there any other ways? Could I pay one of those people who "repair" credit? I would really appreciate any advice. Thank you very much. Michelle, San Diego CA

Answer: Time is on your side. You've paid off your old debts, and you're current on your car loan and student loan. The longer you make your loan payments on time the better your credit score will become.

That said, it can make sense for you to get a credit card, assuming you use it and pay off the bill in full at the end of the billing period. (Technically, it doesn't matter if you carry a balance so long as you pay the bill on time. Your credit score will improve whether or not you're carrying a balance. I just don't want you to take on any credit card debt.)

One common maneuver for getting a credit card is to apply for a retailer's card. Retail credit cards aren't that attractive since they usually come with high rates. But if you use it and build a good credit history with it you can always get rid of it later on and apply for a better card. (And this time you'll qualify.) Another option is a "secured" credit card. With secured plastic, you open up a savings account with a bank that issues you a card that looks like any other credit card. Your credit is equal to or somewhat less than the amount you deposit. Eventually, after showing a pattern of paying off your bills on time, you can usually switch to a traditional "unsecured" credit card.

03/25/08 by Chris Farrell

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Co-signing a Loan

Question: I have a very good credit rating and am considering co-signing on a loan for a family member who has a very poor credit rating. Will her poor credit rating affect my credit rating in any way, if I co-sign the loan? Thank you, Bette, Richfield, MN

Answer: Her poor credit rating won't immediately affect you on co-signing--assuming that she then pays her bills on time. But if she defaults you're on the hook to make good on the debt. The lender will go after you for the money she owes. Your good credit rating could be ruined. It's understandable that you want to help out a family member, but co-signing a loan is very risky.

03/27/08 by Chris Farrell

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Free Credit Score?

Question: Hello Chris, I thoroughly enjoy your segments, keep up the great work.

I tried to get my free credit score at the sight that you referred to but it only provides a "report" from each company who then want to sell you access to your own score?

I still have never seen this magic number for myself or my wife.... Do you know of any way to get my actual credit score for free? It seems like this should be info that is available to each of us with out a for fee subscription but i am not finding it. Any help here? Cheers Joe. Talkeetna, AK

Answer: Thanks to a breaking story on May 30th, I need to change my answer to this question. Here's the top of the LA Times story:

More than 160 million Americans would be able to learn their all-important credit scores at no charge -- and with no strings attached -- under a settlement by credit reporting giant TransUnion Corp. of a long-running class-action lawsuit.

The agreement would entitle consumers to at least six months of a TransUnion monitoring service, giving them access to the latest information in their credit reports as well as their current scores at any time.

The service also would notify consumers by e-mail of significant changes to their files, including reports of late payments or accounts opened in their names. The latter information could help thwart attempted identity theft.

Of course, it's only for 6 months and at the moment it only includes one of the credit reporting bureaus. My guess is that this deal is a precursor to making credit scores more easily--and cheaply--available to the average consumers.

Answer: You can't get your credit score for free. It's annoying. These days, it's easy to get a free "credit report". Check out how at www.annualcreditreport.com.

But you have to pay for that all important "credit score"--the number that largely determines your interest rate on a loan. Even when I see ads promoting a "free" credit score it turns out you first need to buy a long-term contract. Now, I don't consider that "free" by any commonsense definition of the world.

05/29/08 by Chris Farrell

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