Monday, August 22, 2011

How Much Does a Bad Credit Score Really Cost You?

You could have a perfect credit score today and a terrible credit score in just a few months. All it takes is a few months of missed credit card payments to completely trash your credit score. Lot of things can hurt your credit score, but serious delinquencies hurt the worse because the credit scoring calculations place the most emphasis on payment history. But even late payments are mild compared to the damage that’s done from serious delinquencies like charge-off, collection, or worse, a bankruptcy or foreclosure.

Even people who are diligent with paying their bills on time can end up with bad credit after divorce, death of a spouse, job loss, or serious medically bills. All are situations that don’t directly affect your credit score but do impact your ability to pay on time.

Living with a bad credit score is tougher than you may realize. Lots of businesses depend on credit scores to decide who to give accounts to and how much to charge for those accounts. Businesses penalize people with bad credit by charging higher prices, additional fees, and higher interest rates.

Some companies charge an upfront security deposit to people who have bad credit. The deposit can range from $50 to $300 (possibly even more depending on what you’re applying for) and is held as a security for your account in the event that you cancel your service with a balance. Landlords, electricity companies, cable companies, and cell phone and internet service providers commonly charge security deposits. While you do get the security deposit refunded to you when you turn off your service or move out of the rental (as long as you don’t have a balance), it can be tough to come up with the extra money to establish these accounts.

It often surprises people to find out that you could pay a higher insurance premium when you have bad credit. Insurance companies are another business that charges higher rates to people with bad credit. Their reasoning is that people who have bad credit tend to file more claims than those with better credit scores. As a result of the increased risk of filing a claim, you’ll have to pay a higher insurance premium.

Not only does bad credit make you pay more money, it could also cost you the prospect of making more money. Your past credit mistakes may keep you from getting the job of your dreams. While employers don’t check your credit score, they do check your credit report, but only with your permission. If you have significant credit mistakes, like bankruptcy, lots of debt, or unpaid debt collections, you could be turned down for the job. Credit checks are common with jobs in the financial industry and higher-level management positions. Your current employer might check your credit, too, if you’re up for a promotion or a raise.

Bad credit makes it tough to get approved for new credit cards and loans. If you get approved, you can expect to have a higher interest rate, which means higher finance charges. On an installment loan, like a mortgage or auto loan, which has a fixed repayment period, the higher interest rate results in higher monthly payments. Credit cards don’t have a fixed repayment schedule, but you still pay a higher cost if it takes you longer to pay your balance in full.

Living with a bad credit score is costly, but it doesn't last forever. Most negative information falls off your credit report after seven years and you can proactively repair your credit even before the bad things disappear. The sooner you get a better credit score, the sooner you can stop paying extra money for services.

About the Guest Author
This guest post was written by James Quinn, a personal finance writer specializing in topics related to obtaining credit, debt relief, credit repair and more. Pass through the debt settlement blog for more tips and advice.

Wednesday, August 10, 2011

Yodlee MoneyCenter Alerts

Over the weekend, I received 11 Yodlee MoneyCenter Alerts by Email. I've written about these Yodlee alerts before. The alerts will, for example, inform me if an account balance drops below a certain amount, or a large transaction is processed. These alerts are meant to help in the early detection of fraud.

However, I received 11 of these alerts all at once, and they are for transactions going back as far as April. In most cases, the alert was to let me know that my paycheck was auto deposited into my savings account. But, the real question is why did I get 11 alerts all at once?  And, is it even helpful to know that I received my pay check nearly 4 months after the fact?

While I don't think that I could live without Yodlee to help keep track of my finances, situations like this add to my list of reasons why I have a sort of a love/hate relationship with Yodlee. Did anybody else get a bunch of Yodlee Money Center alerts all at once?