Understanding What Determines a Credit Score

First, to explain why credit scores vary so much, one must know what they are.  A credit score, better known as a FICO score is a three digit number money lenders use to determine your credit risk.  It assumes previous credit history, current credit balance and standing, and available credit and projects future risk for money lenders to easily and quickly assess.  Each lender applies this number in their own way.  How they associate that number toward your credit worthiness depends on their internal processes and procedures but the higher the score, the more likely consumers are to obtain credit.

But unlike FICO credit scores, general credit scores are also provided by the three main credit bureaus.  These credit bureaus are Experian, TransUnion, and Equifax.  Each one of these bureaus has a different scoring method that includes not only your FICO score, but a score that offers  different information about you.

Equifax uses the BEACON score, Experian uses their own model that focuses on the Fair Isaacs Risk method, and TransUnion uses EMPIRICA.  How these different models work would be a test in fruition, but simply put, they not only use your credit score, but also use other information about you to project an accurate score.  These scores are different because the information presented to them about you could vary from place to place.  One bureau may be missing an inquiry you made, or another may have you reported as 30 days late when that’s not actually the case.

As times change, your credit score will fluctuate.  Likewise when you are making improvements to your credit history, your credit scores should increase.  But the data from those improvements may take longer to show depending on when the credit bureau records your positive progress.  Changes to your credit history, both positively and negatively, could take months to be received by each bureau.

Not to fret, there are ways to maintain relatively consistent credit scores.  A few of which are …

1. Check your credit scores periodically.  For most Americans, at minimum, you should look at all three of your credit scores and full credit history yearly.  This can be done by visiting AnnualCreditReport.com.
2. Look for any and all differences between the scores and reported histories.  By doing so, you will be able to assess why your score is the way it is and will be able to make changes as early as possible if information is incorrect or missing.
3. Report missing or incorrect information immediately.  There are many mistakes that can be made from bureau to bureau and report to report.  Take the bull by the horns and maintain due diligence when dealing with your credit score.  Reporting errors can be done while viewing your credit score from any bureau.

As a consumer, it is of the utmost importance you monitor your credit score and do your part in maintaining its accuracy.  This means periodic evaluations of your credit score as often as once a month.  To get started, I would highly recommend using the free services that Credit Karma (TransUnion) and Credit Sesame (Experian) offer.  You’ll be able to monitor two of your three credit scores for free … FOREVER.

• Open a Credit Karma Account
• Open a Credit Sesame Account

Up Front $80 GoodYear Savings

GoodYear is currently offering a promotion where they rebate you up to $80 when purchasing a new set of their tires.  However, when using your GoodYear Credit Card they will double that rebate on a set of new tires, bringing their offer up to $160.  Other than that, there isn’t a lot of reasons to get excited to use the card.

GoodYear swears by “convenience” in all of their promotional efforts.  They start by allowing you to link your GoodYear Credit Card to your checking account so you can make payments using your GoodYear Credit Card and your checking account will automatically be debited.  In addition, they also offer a 25 day grace period where no interest generates after a purchase.  This is pretty typical of all credit cards, but it is strange that they promote it as being such a perk.

Awful Pricing Structure

There is no annual fee to use the GoodYear Credit Card, but like most store credit cards, there is a very high interest rate charged to the card, as gaining approval is much easier (and therefore, riskier to the bank).  With a 28.99% variable interest rate, the GoodYear Credit Card should be paid off monthly to maximize the benefit (only one) of the card, otherwise, this card becomes a BIG money loser.  An interest rate that high is one of the highest you’ll see on the market for any card.

I wish I had more good news to write for you, but the GoodYear Credit Card is one of the worst cards you’ll see today.  28.99% is an insanely high interest rate and anyone that considers the GoodYear Credit Card needs to sit down and do a cost benefit analysis.  Current credit card offerings offer excellent rewards programs as well as big up front bonuses, excellent perks and a solid pricing structure.  The only benefit you’ll find here is $80 on a full set of tires.

For those that own the GoodYear Credit Card, use it only when you buy a full set of tires.  For everyone else, STAY AWAY!

The Steps in Reducing Credit Card Debt

First, you need to sit down and face the reality of your debt.  An honest sit down with all of your credit statements and current debts is needed.  Analyze each credit situation you find yourself in.  After gathering all of this information and looking it over, the first question always is, “What credit card should I pay off first?”

What often happens is the cardholder will attempt to pay off all of the debt at one time.  That is not the way to go about beating down debt.  This kind of approach is going to take the longest time and as a result will cost the most money.  Attacking your debt takes strategy.  You want to pay off the debt as fast as possible while spending the least amount to do so.  So, first things first; calling each credit card company.

By doing this, you are letting each company know your current financial status and when you do that, it opens up a few doors you may not expect to be there.  You’d find it very shocking that these credit card companies, as long as you are in good standing, are open to working with you.  By calling each, you should look for two things up front.

1. Is there a settlement amount they’d be willing to make?
2. Is there a way to lower your interest rate?

Sometimes, card issuers will offer you a settlement amount that will clear your debt for potentially a fraction of your current amount.  This doesn’t often happen, but before you attempt to knock down your credit, you need to know the options available to you.

The opportunity is to lower your interest rate.  This will help slow down the amount of interest that builds on your account and will allow more of your monthly payment to go towards knocking down that balance. This is the option most credit card companies are willing to do to help work with you.

Once you’ve exhausted all of your options in the preliminary processes of analyzing your debt, it is time to look at all of your credit cards.  Two simple things to look for are:

• Your total debt on each card
• Your interest rates on each card

Simply put, the card you need to pay off first is the card with the highest interest rate.  Higher interest rates lead to more money owed. To pay these off, you have two options.  The first option is to simply throw as much money you can at the card until the balance reads zero.  Having a monthly budget is a great way to see just how much money you can put towards paying down this debt.  The second option is to apply for a balance transfer credit card.  Odds are your credit score isn’t going to be super high, but there are plenty of credit cards on the market today that offer a solid balance transfer offer.

Along with your high interest yielding cards, try and knock off the low balance cards as well.  Dave Ramsey was made famous by his debt snowball approach where consumers feel emotionally invigorated when seeing debts disappear.  It’s not the best mathematical approach, but debt can be emotionally painful as well.

Overall, the biggest key to paying down credit card debt is to stick with your plan.  That is why the assessment period is so important.  You need to exhaust all possible avenues before you even start, as to give yourself the best plan.  Once you confront the debt, the rest is easy.  Come up with a payment plan on your own and tear that debt DOWN.  You will find that with a lot of hard work, being debt free is an acheivable dream.

A Key ingredient to this strategy, however, is often neglected. First, you must find out what day of the month your credit card company reports your balance to the credit bureaus. Often times this can be a few days before your account’s due date. Armed with this information, you will want to ensure your balance is paid down to zero just prior to them reporting the balance. Otherwise, even though you have good intentions, they may report the balance on the account just before it’s paid off. This can then have a negative impact on your credit score since it will appear that you are carrying a balance.

You must also take into account what the current balance is at the time of payment and not at the end of the billing period. Typically, there can be days or weeks that pass between when you receive your credit card statement and when the payment is due. If you are like most consumers, you usually continue to use your credit card during that time. As a result, by the time you make your payment, if you only pay what’s due on the statement, a balance will remain from the new charges. To combat this, you can call your credit card company or check your account online prior to making your payment to accommodate any new or pending charges that arise after receiving your statement.

While paying your credit card balance in full every month may feel like the responsible thing to do, if you’re not paying before your credit card company’s reporting date or paying more than the amount due to accommodate any new charges, you may wind up hurting yourself financially.

Lord and Taylor Credit Card

The Lord and Taylor Credit Card, backed by GE Money comes in two versions – a basic, regular card and a premier version.  Like most store cards, the difference between the two comes from the total amount you spend on the card and can only be used in-store.  To become a premier cardholder, you must spend $1,500 annually.  Your account is automatically upgraded to this level once you hit the threshold and to remain a premier cardholder, you must continue to spend $1,500 per year.  As a regular cardholder, you get the following benefits…

• Exclusive Cardholder Events – As a Lord and Taylor Credit Card holder, you are entitled to experience 8 to 10 exclusive shopping events per year.  You’ll be able to get up to 10% off discounts during these events.
• 15% off Statement Coupons -  If your credit score qualifies, you could receive occasional 15% off your entire credit card statement offers.  This could be a big money saver.  If you made purchases already discounted, adding another 15% makes for good savings.
• 20% Birthday Coupon -  Shop at Lord and Taylor during your birthday month and you’ll get 20% off.
• 25.49% Variable APR – There is no annual fee to use the Lord and Taylor Credit Card, but like most store credit cards, there is a very high interest rate charged to the card, due to the more lax credit score needed.  At up to 25.49%, the Lord and Taylor Credit Card should be paid off monthly to maximize the benefits of the card, otherwise, this card becomes a money loser.

Also as a regular cardholder, you’ll be privy to receipt free purchases (making returns easier), 0% fraud liability, and in-store/online payment options.

Lord and Taylor Premier Credit Card

Now, as a Lord and Taylor Premier Card holder, you are eligible for a few more perks.  The most convenient and used perk is the ability to not have to bring any of the coupons or savings passes to the store to receive the discount.  Your payment will already include any of the discounts or savings that are being offered that month.  Also included is an alternative customer service number and offers that are not available to regular cardholders.

Sadly, the Lord and Taylor Credit Card offers no rewards or cash back program that most in-store cards feature.  Because of this, it makes the card’s value that much less.  Its high annual interest rate and lack of perks or flexibility give this card a thumbs down.

That being said, if you’re a regular Lord and Taylor shopper, maintain good money management, and make your payments every month, the discounts are a bit enticing.  Like all in-store cards if you pay your balance monthly, you can find some value to the Lord and Taylor Credit Card.

SimplyCash Cash Back Program

What makes the SimplyCash Business Card from American Express OPEN such an intriguing card for business owners is its high rewarding cash back program that will essentially repay the business up to 5% on select purchases with no annual fee to be a cardholder.  As a SimplyCash Business Card from American Express OPEN cardholder,  you will receive the following rebates on applicable purchases:

• 5% Cash back on office supplies when you spend at the nation’s leading office supply super stores.  So, whether its Office Depot, Office Max, or Staples, your purchases come with a redeemable 5% cash back.  Also, any wireless telephone costs associated as being paid with the card also receive the full 5% back.However, there is a catch.  American Express will only give the full 5% cash back on purchases up to $12,000 for each category during the rebate year.  So, if you spend $1,000 per month on Office Supplies and $1,000 on wireless telephone service for their small business, you can receive up $1,200 per year in cash back.  Any amount over the $12,000 limit spent will give cash back at 1%.  It is a simple way to repay your business by simply using the card for purchases you would make as a business owner every day.

• 3% Cash back on gas.  So, whether or not you are traveling to meet a vendor, traveling to and from work, or taking an afternoon cruise to escape the madness of the workplace you can receive 3% cash back on your gas purchases.  Gas, too, comes with a cap of $12,000 annually and every dollar over that mark is redeemable at 1%.  If you spend $1,000 per month on gas as a business owner and used your American Express SimplyCash Business Card for all of those purchases, you’ll have saved $360.

• 1% Cash back on everything else.  It can be a power lunch out to discuss business, getting your suit dry cleaned, or even getting lunch and if you use the SimplyCash Business Card from American Express OPEN, you’ll receive cash back on every dollar you spend.  There is no limit to the amount of cash back you can receive at this level and the rebates are even calculated on all employee cards.  Also, you never have to worry, as you can get your cash back credited to your account every month.  It is a hassle free way of getting the most out of your card.

American Express Perks and Pricing Details

As a new cardholder, depending on your the standing and history of the business, you can receive up six, nine, or twelve months of interest free purchases.  After the introductory period, a 12.24% to 19.24% variable APR will apply.  These are very competitive rates across the board if you are the type of business owner that carries a balance monthly.

Being an American Express cardholder, you’re able to take advantage of their award winning customer service and their basic perks for being a cardholder like their travelers benefits and purchase protection benefits.  If you’re a regular traveler and rental car user, you’re backed with insurance by American Express in case of an accident or damage to your rental car or yourself.  You also get access to GlobalAssist Helpline and Roadside Assistance in case of emergencies.

Purchase Protection, Return Protection, and Extended Warranty Benefits give you a peace of mind when you make you purchases with your American Express SimplyCash Business Card.  Protect your purchases up to 90 days from accidental damage or theft, be protected from lost receipts, and have an extra year of protection on all U.S. Warranties up to five years by making purchases with your card.  Plus, you’re backed by American Express’ fraud protection services.

As advertised, the SimplyCash Business Card from American Express OPEN gives you one of the best keep your business thriving in difficult times.  Its high yielding rewards, no annual fee, 0% introductory APR, and array of perks for being an American Express Cardholder make this card a must own for any business.

Having this kind of policy in place means that if someone tried to use your confidential credit information in a fraudulent way – like to apply for a credit card, for example – they would not succeed because their application would be incomplete without access by the bank or card company to your credit report.

No new accounts can be opened in your name, and no new loans can be taken out as long as this freeze is in place. That is a great way to protect someone who doesn’t plan on asking for new credit – such as, for instance, an elderly parent who may be too confused to manage their own finances anymore.

Oddly enough, not every state has laws in place about credit freezes.  As of November 13, 2008, forty-eight states and the District of Columbia have a credit freeze law. The states without mandatory credit freeze laws are:

• Alabama
• Michigan

The downside is that if you try to borrow money after setting up a freeze you will probably have to wait about 10 days for your permission to be processed, the freeze to be removed, and your loan application to be finalized. So if you have an active credit account “freezing may not be for you – but in other special circumstances it can help to lock down your account by locking out identity thieves.

When you sign up for The Limited Credit Card, you are considered a Classic member.  This is The Limited’s modest spender account.  As a Classic member you have the benefit of a wide array of perks and rewards exclusive only to The Limited.

The Limited Rewards Program

Like most cards, there is a standard point per dollar model to their program.  Meaning, for every dollar you spend, you will receive one point toward your reward account.  However, what makes The Limited’s reward program enticing, is the fact that for every 300 points earned as a Classic member you’ll receive a $15 gift coupon.  This actually averages out to 5% cash back which is extremely lucrative for a credit cards rewards program

Limited Pricing Details

There is no annual fee to use this card, but like most store credit cards, there is a very high interest rate charged to the card, due to the more lax credit score needed.  At 24.99%, The Limited Credit Card should be paid off monthly to maximize the benefits of the card, otherwise, despite all of the great perks, this card becomes a money loser.

Those monthly benefits include …

• Free Hem Service – Find a stunning pair of pants but find them to be a hair too long?  The Limited will offer you their free hem service to tighten things up for you.
• Monthly Coupon Books – Upward of $75 in savings per month from these books.  However, considering the amount of The Limited coupons that come through my e-mail and junk mail weekly, these may or may not be exclusive.
• Birthday Gift – Every year, during the month of your birthday, The Limited will send you an exclusive birthday discount.
• Access to private events and season previews – Be the first to get a sneak peak and purchase the seasons new garb.

Then, once you spend your 800th dollar using your Limited Credit Card,  you are automatically upgraded to Couture member; a more exclusive club of The Limited’s more regular users.  Not only do you still retain all of the perks and benefits of being a Classic member, but there are added bonuses such as:

• Upgraded Rewards – Instead of needing to earn 300 points for every $15 off, you only need to earn 250 points to cash them in for a $15 gift coupon.  This means you actually yield 6% cash back!
• Free Shipping on All Online Orders – Very convenient and a big time money saver for those who dabble in the world of online cloth shopping.
• Bonus Gift – Free gifts are free gifts and while I have no idea what that free gift is, it could be great or it could be a mystery box.

The ultimate deciding factor on the true value of this card is simple.  How often do you shop at The Limited?.  If you spend over $800 per year (meaning, you really love The Limited), this is one store card you might want to look into.  Its high yielding rewards in-store plus the exclusive perks for being a The Limited regular make the The Limited Credit Card worth it if and only if you are a faithful The Limited shopper.

However, to maximize this card’s quality, you will need to make sure you pay your balance off in its entirety monthly.  If you do, this is one store credit card that actually looks valuable.

Within 31 days of their latest promotion, where cardholders earned double rewards points for every purchase with use of their Capital One Venture Card, the lender gave one BILLION reward miles.  One point, the equivalent of roughly one cent, means the lender gave away over ten million dollars in rewards in the first month, making it pay for consumers to spend.

With a continuing rise in consumer spending, it is not out of the question for these profits to make their way back to consumer pockets.  The increasing use of credit cards coupled with the increasing reward programs away from the base point per dollar – or 1 percent – model has been making big profits for the major lenders.  With the influx of revenue, it will soon be time for the powers of the industry to notice the correlation and in turn, justify the causation of these rewards programs driving continued spending.

Most lenders are currently offering a base one points per dollar spent program with added tiered bonuses upwards of five percent, it is only a matter of time before six, seven, and eight percent or even higher becomes status quo in the industry.  As is, there are cards that offer six percent on select purchases (Blue Cash Preferred from American Express) with a cap, but with rising spending will break the glass ceiling on the industry standard in these programs.

While continued spending will yield higher rewards, it is not an excuse to spend freely and without good spending habits.  The average credit card debt per household is currently around $16,000 with over 75 percent of college graduates already in debt with credit cards up to $3,000 on average.  Spending on cards and earning rewards is great, but the rewards become moot if you’re the type of spender that continually carries a balance on their card(s).

The safest and best way to maximize your rewards are to spend, but make sure you pay off your balance in full at every statement.  If you must carry a balance make sure you are using a card that has as lowest an interest rate as possible.  Remember to take your time when choosing a credit card and always compare, compare COMPARE!

I’m personally not a military veteran, but am privileged enough to have access to it because my father-in-law served in the 1960′s. USAA has built an outstanding reputation for it’s customer service as well as business acumen dealing with customer claims’ and needs. It’s a company you have a feeling will treat you better than any other insurance company out there. My father, who is an attorney, recently had to deal with USAA for the first time in his career regarding a multi-million dollar client claim. After working with them, he stated that they were the best insurance company he had ever seen AND he’s been practicing law for over 50 years!

When I went to evaluate the USAA Rewards credit card, I expected that it would go above and beyond most credit cards in the market. Don’t get me wrong, there are aspects to the card that are as good as other credit card offerings, but right off the bat I felt that the rewards program was somewhat – blah. Nothing really exciting to say to me that this card is better than other reward cards such as the Capital One Venture cards or the Chase Freedom card.

The main highlights of the card:

• 0% APR on balance transfers for 12 months
• 2,500 bonus points with first purchase and $1 = 1 point thereafter
• Earn 2X points on gas and groceries
• No Annual Fee
• The main aspects are highlighted in yellow from a recent direct mail offer

USAA is partnered with American Express on this credit card and therefore becoming a card holder will require Excellent credit. What worries me the most is the possible 25.9% interest rate charged on purchases, balance transfers and cash advances. The disclosure chart provides a range of potential variable APRs from 9.9% to 25.9% which seems way too broad. Most credit card companies offer a 10% point range, while this card is 15% – a red flag for me.Two “fee positives” about the card is the 3% transfer rate with a maximum of $200 for a transfer. Many current credit card providers don’t put in place a maximum, which essentially means that if you made a $10,000 balance transfer, you could be charged a balance transfer fee of $300 versus a maximum of $200 with the USAA rewards card.

This card is an average rewards card. Because it’s USAA, I simply expected more perks as well as more military benefits – better discounts, stronger cash redemptions just to name a few. I mean at the end of the day, the men and woman currently serving our military deserve every best available financial feature in the market and frankly other credit cards are further ahead.

***UPDATE***

On 5/18, I was contacted by Lisa Carr in USAA’s corporate communications department regarding the added benefits for Military personal. I received a very professional email stating that USAA is working on better publicizing the benefits of their credit cards to Military Personnel.

A few additional features that weren’t on the direct mail literature that I received:

• USAA Military Affiliate Cards provide contributions to a military affinity association of choice.

• All USAA credit cards, including USAA American Express cards, provide benefits for deployment and PCS. Specifically when members notify USAA of their deployment or military campaign involvement, these benefits are applied:
• Interest rate on existing balances is reduced to 4% when activated into military service, instead of the 6% required by the SCRA (Servicemembers Civil Relief Act).
• Interest rate on new transactions is reduced to 4% for 12 months, which is not required by the SCRA.
• Refund on all interest that accrues during a member’s involvement in a qualified military campaign, which is not required by the SCRA.
• Foreign Transaction Fees are waived for 12 months, which is not required by the SCRA.  (Currently for Visa and MasterCard only but we’re working to make this available for American Express soon).

Quite frankly, this added insight confirms to me that USAA has a very strong credit card offering for our active Military. I was also reassured at just how passionate this company is about their product offering and doing right by its customers. USAA, you have a customer in me for life.

Disclaimer: This content is not provided or commissioned by American Express. Opinions expressed here are author’s alone, not those of American Express, and have not been reviewed, approved or otherwise endorsed by American Express. This site may be compensated through American Express Affiliate Program.