Credit Score Costs in 2014: An Updated Look at FICO Pricing, Free Scores and More

Unless you pay cash for everything, credit scores play a big role in your life. They affect your ability to obtain rental housing, take out a car loan, buy a house, and more. As a result, millions of Americans check their credit scores each year, to find out where they stand. And most of them pay a price for this insight.

Unfortunately (and perhaps unjustly), companies within the credit reporting industry charge a fee for these three-digit numbers. Which begs the question: How much do credit scores cost in 2014? Here’s an updated look at FICO credit score pricing in 2014, and other developments from around the industry.

Free Scores for Borrowers Who Are Denied Financing

There are certain cases where you might be entitled to a completely free credit score, with no strings attached. For instance, if you are turned down for a loan, or offered less favorable terms as a result of your current credit situation, the lender or creditor is required to give you a free copy of your score. This was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

If a creditor turns you down for any kind of financing or credit (whether it’s a home loan or a Visa card), they must give you an “Adverse Action” notice detailing the specific reason(s) for the denial.

According to the Federal Trade Commission, “If a credit score was a factor in the decision to deny you or to offer you terms less favorable than most other customers receive, the notice also will include that credit score.”

Call it a consolation prize for loan denial.

2014 Credit Score Costs on MyFICO.com: $19.95 Each

MyFICO.com is the website owned by FICO (formerly the Fair Isaac Corporation), the company that developed the commonly used FICO credit score. In addition to being the developers of this particular product, they also sell it directly to consumers via their website. The current cost is $19.95 per score, according to the MyFICO.com website.

It’s worth mentioning at this point that you actually have three different scores. That’s because there are three companies that create consumer credit reports in the United States. They are Experian, TransUnion and Equifax. You have one FICO score based on each of those reports. Three reporting companies, three separate numbers. And don’t be surprised if they are all slightly different.

MyFICO.com also sells a quarterly monitoring service that they claim will “reveal changes to your credit report that can affect your score.” But you can purchase the scores by themselves, if you choose.

Note: The cost and pricing information above was current as of  2014. For the most current price information available, visit MyFICO.com.

Congressional Bill Would Grant Free Scores to All, Annually

Last year, a bill was introduced in the Senate that could bring free credit scores for everyone. It is formally known as the Fair Access to Credit Scores Act of 2013, or Senate Bill 471. It was introduced by Sen. Bernie Sanders (I-Vt.) in March 2013. At the same time, Rep. Steve Chosen (D-TN) introduced a “companion bill” in the House of Representatives.

According to Sanders, credit scores “affects consumers’ ability to finance important purchases like homes and cars … everyone applying for a loan should be able to see the same information that banks rely on to judge whether a consumer is creditworthy.”

If passed, this measure would require scores to be included with the free credit reports that consumers are already entitled to receive once per year.

The bill was endorsed and supported by Consumers Union, the policy and advocacy organization that publishes Consumer Reports magazine. The bill was assigned to congressional committees in both the House and Senate on March 6, 2013. Those committees will consider the bill before possibly sending it on to the House or Senate as a whole.

Of course, there’s a large and powerful financial lobby that stands between the proposal and its passage. The aforementioned credit-reporting companies, for instance, regularly contribute to political campaigns on both sides of the aisle. So there’s a change this bill will die on the vine. At any rate, we are tracking the free credit score initiative and will report on its progress going forward.

Do You Even Need to Check Your Credit?

All of this raises the question: Does the average consumer even need to check his or her credit scores? That depends on how you manage your finances.

Some people go their entire lives without ever seeing their scores. This is particularly true for “low-ownership” consumers — that is, people who typically pay as they go and avoid taking on debt. These consumers follow the European model of rental housing, cash-only purchases, and very little debt accumulation. They have little need for their credit scores, free or otherwise.

But the average American will rely on financing at some point in his or her life, and probably on an ongoing basis. It might be a student loan to pay for college tuition, a mortgage to cover the cost of a home, or just a credit card for occasional purchases. For these people, credit scores become much more important. These three-digit numbers can make or break your chances of getting a loan. They also affect the amount of interest you pay on credit cards and loans. If you fall into this group, and you rely on creditors and lenders from time to time, you’d be wise to keep tabs on your score.

Credit Scores: 17 Things a Home Buyer Needs to Know

The Home Buying Institute offers hundreds of mortgage and home-buying articles, with new lessons coming online every day. But one topic reigns supreme when it comes to traffic and readership. It has to do with home buyer credit scores. Specifically, it attempts to answer the question: What score is needed to buy a house?

Clearly, home buyers are deeply concerned about their credit scores. And they should be. These three-digit numbers carry a lot of weight when it comes to mortgage approval. Some argue they carry too much weight, disqualifying home buyers and borrowers who are otherwise well-qualified for a loan.

Credit scores also confuse the heck out of home buyers, judging by the emails we receive. This is not surprising, given the needlessly complicated nature of the credit-reporting and scoring industry. In some cases, home buyers who take the initiative to research credit scores end up even more confused than when they began. (Do a Google search for the “different types of credit scores,” and see if you can make sense of it.)

Home buyers need to understand a few basic concepts about credit scores. But there’s also a lot they don’t need to know. When it comes to understanding this subject, less is more. There’s no need to get lost in the weeds.

What Home Buyers Should Know About Credit Scores

In the spirit of home buyer education (and sanity), we’ve compiled a list of “need-to-know” factoids about credit scores. So without further ado, here are 17 things every home buyer should know about credit scores.

  1. Your credit score is derived from information found within your credit report, which contains financial data going back seven to ten years. Your reports show how you have borrowed and repaid money in the past. Your scores are simply a numerical representation of this data.
  2. Home buyer credit scores are influenced by five key factors: (1) your payment history on loans, cards, etc.; (2) the total amount you currently owe on these various accounts; (3) the length of your credit history; (4) new credit accounts opened recently; and (5) the different types of credit you use.
  3. There are different types of consumer credit scores. Home buyers only need to be concerned with two, and possibly only one. Most mortgage lenders use some version of the FICO score or the VantageScore. According to MyFICO.com, the official website for the FICO scoring system: “FICO scores are the credit scores most lenders use to determine your credit risk and the interest rate you will be charged.”
  4. The FICO and VantageScore ranges both go from 300 to 850 (the old VantageScore range went from 501 – 990, but has been phased out). In both scoring models, a higher number is better. When someone talks about having “excellent credit,” they mean they have a high score relative to other consumers.
  5. Mortgage lenders use home buyer credit scores for risk-assessment purposes. They use them to measure the level of risk associated with each individual borrower, and to determine whether or not the borrower is qualified for a loan. They have other ways to measure risk, such as debt-to-income ratios. But the credit score is one of the leading risk-assessment tools in the lending industry.
  6. Home buyers with lower credit scores are statistically more likely to default on their loans. Thus, they present a higher risk to lenders.
  7. Home buyers with higher scores are generally viewed as low-risk borrowers. The higher number indicates that they have paid most or all of their bills on time in the past. In other words, they have borrowed and repaid money responsibly.
  8. Home buyers with lower credit scores generally have a harder time getting approved for mortgages. They usually end up paying a lot more interest as well, if and when they do get approved for a loan.
  9. Credit score requirements are not standardized across the board. They vary from one lender to the next. Some lenders set the bar higher than others, while some are willing to work with home buyers with lower scores. It all comes down to how the lender measures and defines risk, and how comfortable they are with risky borrowers.
  10. Our survey-based research shows that most mortgage lenders set the bar somewhere between 620 and 640 on the FICO scoring scale. As a result, home buyers with credit scores below 620 may have a harder time qualifying for a loan in the current market.
  11. Borrowers with scores below 620 may find it easier to qualify for a government-insured FHA home loan, compared to a conventional or “regular” mortgage. Generally speaking, FHA loans are easier to obtain than the stricter conventional mortgages.
  12. Late payments can cause serious damage to a home buyer’s credit score. In this context, we are talking about late or missed payments on cards and loans. According to Barry Paperno, community director for Credit.com: “a recent late payment can cause as much as a 90 – 110 point drop on a FICO score of 780 or higher.” A pattern of late payments and delinquencies can lower a score by 200 points or more.
  13. Over-relying on credit cards can also lower a home buyer’s overall score. In industry jargon, this is referred to as the utilization ratio. It measures how much credit you are using (or “utilizing”) in relation to your limits. For instance, when a person maxes out a credit card, he or she is using 100% of the available limit. The utilization ratio is another type of risk indicator. People with higher ratios represent a higher risk to lenders. As a result, a high utilization ratio can lower a person’s overall credit score.
  14. Home buyers can improve their scores by paying all of their bills on time, and by reducing their credit card balances. These are the two most effective methods, according to industry experts.
  15. By law, consumer credit reports are free. Consumers are entitled to one free report per calendar year, from all three of the reporting agencies that compile them (TransUnion, Equifax and Experian). Scores, on the other hand, are a different matter. In most cases, consumers have to purchase their scores. You can buy them directly from the three reporting companies for about $20 each.
  16. Many companies offer “free” scores to consumers who sign up for some kind of credit-monitoring or identity-theft-protection service. According to Consumer Reports, “do-it-yourself safeguards are just as effective as paid [ID theft protection] services.”
  17. There’s a chance the score you buy may be different from the one lenders use when considering you for a mortgage loan. But they are similar enough to make it a worthwhile purchase. We encourage home buyers to check their credit before applying for a mortgage loan. It gives you a sense of where you stand, in terms of your qualifications and your negotiating ability.

Credit scores are not the only factor lenders use to approve borrowers. Debt ratios, income stability, cash reserves and down payments are equally important. But these three-digit numbers are one of the most important factors when it comes to loan approval and interest rates.

Statistics show that borrowers with higher scores have an easier time getting approved for home loans. That’s a strong incentive on its own. But there are other benefits. These borrowers are also better positioned to negotiate a lower mortgage rate from the lender.

In contrast, home buyers with lower scores have a tough time getting approved for financing. And when they do get approved, they end up paying a lot more money in interest. This concept is known as risk-based pricing. Riskier borrowers encounter higher borrowing costs. A higher interest rate could add up to thousands of dollars over the life of the loan. So it literally pays to have good credit.

Consumer Reports Calls the FICO Credit Score ‘Useless’

Credit ScoreAn article in the July 2013 issue of Consumer Reports magazine (“Don’t Buy Useless Credit Scores”) highlighted the differences between the credit scores purchased by consumers and those used by lenders.

According to the authors, consumers typically purchase their FICO credit scores with the assumption it is the same one lenders use when considering them for a loan. But that may not be the case, after all.

Consumer Reports Calls FICO Product ‘Inferior’

FICO credit scores were created in 1958 by a company called Fair Isaac. FICO is actually an acronym for the Fair Isaac Corporation, the company’s original name. This company often accuses its competitors of using “FAKO” credit scores – that is, scores that are different from the ones used by lenders in their credit-making decisions.

However, according to Consumer Reports, the FICO credit scores that are sold to consumers for around $20 a piece can also differ from  the scores used by creditors and lenders (including mortgage lenders). Is the crow calling the raven black? Having reviewed the scoring information that FICO typically provides to lenders, Consumer Reports researchers went so far as calling the scores consumers can buy “inferior.”

If the consumer group has its way, we could eventually have free access to the same credit scores lenders use when considering us for car loans, mortgages and other types of financing. In March of this year, new legislation was proposed that would require the “free annual disclosure of scores that lenders actually use.” This legislation was introduced by Sen. Bernie Sanders (I-Vt.) and endorsed by Consumers Union, the parent company of Consumer Reports magazine.

Under the current system, consumers do not have access to the scores given to lenders. If it becomes law, the new legislation would change the status quo and usher in a new era of transparency.

CFPB: Consumers Should Not Rely on Credit Scores

In the fall of 2012, the Consumer Financial Protection Bureau (CFPB) – a financial watchdog agency created by the Dodd-Frank Act – examined the differences between the credit scores given to consumers and those used by lenders. The CFPB concluded that “consumers should not rely on credit scores” as a way of getting inside the minds of lenders.

The CFPB found that consumer and lender credit scores are often significantly different. In 20% to 32% of the cases they examined, reporting data was scored differently depending on the end product. In fact, the differences were so great that in some cases “the scores were one or more credit-quality categories removed from each other.”

The CFPB pointed out that “consumers can’t know ahead of time whether the scores they purchase will closely track, or vary moderately to significantly, from a score sold to creditors.” If that is the case, consumer credit scores would seem to warrant the “useless” label assigned by Consumer Reports.

The Increasingly Complex World Of Credit Scores

The further you dig into the credit scoring industry, the more complicated and convoluted it becomes. The study conducted by the Consumer Financial Protection Bureau last year considered five different scoring systems, some of which have become outdated. According to Steve Wagner, president of the Experian credit-reporting bureau, there are actually “hundreds of different scores.”

What’s a consumer to do or think? When you encounter a website that offers to sell you your FICO credit score, it all seems straightforward and simple. They typically claim the score you are buying is the one used by lenders when making decisions about you. But, as we have learned, this is not always the case. If these companies were more frank and candid about the incredibly convoluted world of credit scoring, consumers would probably be less likely to buy their scores. It’s a lack of transparency, to say the least.

It is the Home Buying Institute’s position that credit scoring, as a whole, needs a major overhaul. The current system is needlessly complex and suffers from a serious lack of transparency. If consumer financial information is collected and later used by lenders to make credit decisions, it should be made available to consumers.

Current federal laws require the three credit-reporting bureaus (Experian, TransUnion and Equifax) to provide free reports to consumers once per calendar year. But there is no such law for credit scores – unless the aforementioned legislation is passed into law.

The Consumer Reports article concludes by pointing out Fair Isaac (FICO) currently sells 49 different FICO score products to mortgage lenders and other creditors. But a subsidiary of this company, myFICO.com, only offers consumers two of those scoring products. The authors liken this to “handing someone a Diet Coke and calling it Classic.”

Survey: Lower Credit Card APRs Available for Responsible Borrowers

Do you have good credit? If so the credit card companies really want your business. And they’re willing to offer you a lower interest rate to get it.

A report published recently by Card Hub, a credit card comparison and research website, found that creditors are offering lower rates these days to well-qualified borrowers.

If you fall into this particular category (meaning you have a credit score of, say, 750 or higher), you can consider yourself lucky. Increased competition within the industry has card issuers scrambling to snap up customers with good credit scores. To attract such customers, they are willing to offer credit card rates (APRs) a few percentage points below the industry average.

So what is the industry average? And what kind of ‘discount’ are good-credit borrowers getting these days? Here are the latest numbers pulled from CreditCards.com and CardHub.com:

  • 15.49% – Average interest rate for all cardholders across all types of credit cards (source: CreditCards.com)
  • 12.79% – Average interest rate for cardholders with excellent credit scores (source: CardHub.com) *

* The 12.79% average comes from Card Hub’s ‘Credit Card Landscape Report’ for the first quarter of 2013. This in-depth report includes a wealth of data and trends from the industry.

The 12.79% average for well-qualified borrowers is 1.69% lower than the same average a few months ago. So creditors are clearly offering better rates these days for well-qualified customers.

So how does the average consumer stack up? Depending on the source, the average credit score in the United States right now is around 690. Experian reports a higher U.S. average, but that’s for their own proprietary ‘VantageScore’ product. A score of 690 is generally not considered ‘excellent’ by creditors, so it would not qualify for the best interest rates available. Most sources put the excellent bar at 750 or higher.

How to Get Excellent Credit

If you want to qualify for the lowest credit card rates available today, you’ll need to have an excellent credit score. We’ve covered that. But how do you achieve this? There are literally thousands of articles and tutorials online that cover this subject. You’ll find one here on the Home Buying Institute. Most of it you’ve heard before: pay your bills on time, don’t max out your credit cards, etc.

Let me share my own experiences in this area. My wife and I recently had our credit scores checked in conjunction with a rental property. The rental agent said they were the highest scores she had seen in a long time. If memory serves, we were both in the 810 to 820 range. This is considered excellent by most creditors. As a result of our scores, we are frequently offered enticingly low credit card rates by mail.

How did we reach this level? Let me start by saying neither of us is a financial genius. But we are detail-oriented and responsible consumers. Over the last 10 years, we have never missed a single mortgage payment (during the years when we were homeowners). We’ve been a few days late on bill payments on occasion, but never more than 30 days late. Beyond 30 days is typically when creditors report you to the credit bureaus.

We also try to maintain a reasonable level of credit card debt, relative to our card limits. This is referred to as your credit utilization ratio. Maxing out your cards is one of the worst things you can do for your credit score. The same goes for late payments, delinquencies and defaults. All of these things will reduce your score, and by extension reduce your chances of qualifying for the best credit card rates available.

Disclaimer: This story contains data provided by third-party sources. All information contained in this article is deemed reliable but not guaranteed. The numbers presented above are merely averages. The credit card rate you receive from a creditor will largely depend on your individual qualifications, such as your credit score. As a general rule, it’s wise to obtain card offers and rate quotes from more than one source. That way, you will have a basis for comparison.

Credit Card Rates: Average APR Holds Steady for Ninth Week in a Row

The average annual percentage rate (APR) for credit cards held steady at 14.95% this week. This is according to the latest weekly rate survey by CreditCards.com, which was published yesterday. Credit card rates have hovered at this level for nine consecutive weeks. In fact, today’s average APR is only 0.05% lower than it was six months ago.

Of course, we all know there are different APRs for different types of credit cards. To make things even more confusing, there are different APRs for different types of transactions on the same card. For instance, you might pay one rate for a regular retail purchase, and a much higher rate for a cash advance.

Stagnation or stability, call it what you will. Credit card rates are simply not moving right now. What does this mean for card shoppers? It means there is probably no point in waiting for rates to drop.

Federal Reserve Keeping Rates Low

The stability in credit card rates we are currently seeing is partly the result of actions taken by the Federal Reserve. In response to ongoing economic challenges in the U.S., Fed officials said they will continue to hold the federal funds rate near 0%. This is the interest rate the Fed charges other banks when lending them money. It has a broad ripple effect across the economy as a whole, affecting credit card rates as well.

As The Economist points out: “If recovery proceeds as the Fed anticipates, its interest-rate target will remain at near zero until at least 2015.”

This partly accounts for the long-term stability we are seeing with credit card rates right now. We expect this stability to continue for the foreseeable future.

Average APRs By Credit Card Type

The average APR mentioned at the start of this article (14.95%) was a national average across all types of credit cards. CreditCards.com also tracks average APRs for individual card types. Here are some highlights from the individual categories:

  • Student credit card rates remained steady this week, averaging 13.16%. There has been very little movement in this category for the last few months. (Washington Post story: How student loan debt is dragging down the U.S. economy)
  • Balance-transfer credit cards, which typically offer 0% interest on balance transfers, had an average APR of 12.59%. That was down slightly from six months ago, when it averaged 12.62%
  • Cash-back credit cards have showed the most movement over the last six months. The average APR in this category dropped from 14.47% last year to 14.13% in the most recent survey.
  • The average rate for borrowers with bad credit averaged 23.64% this week, the same level as six months ago. Creditors view these borrowers as a higher risk, since they’ve had trouble repaying their debts in the past. Creditors charge higher rates, and sometimes additional fees, to offset the higher risk.

In other economic news, the Federal Reserve recently stated the U.S. economy grew at a moderate pace in February and March. They partly attribute the growth to strong activity in the housing market and robust auto sales. The U.S. unemployment rate fell to 7.6% last month, down from a recession high of 10% in 2009. Overall, the U.S. economy appears to be taking ‘baby steps’ toward a full and sustained recovery.

Disclaimer: This story contains data from a third-party provider. Credit card rates mentioned in this article are averages. The rate you receive from a creditor may differ from those reported above. Rates are influenced by a variety of individual factors, such as the borrower’s credit score. This story contains predictions and outlooks regarding interest rates and other economic factors. Such statements are matters of opinion and merely represent an educated guess. We make no claims or guarantees about the future of credit card rates, or economic conditions in general.

What Credit Repair Companies Don’t Want You to Know

The recession ruined a lot of credit scores. Over the last four years, millions of Americans watched their credit scores plummet, and for many of the same reasons. Job and income losses forced people to over-rely on credit cards. Foreclosures and bankruptcy filings reached an all-time high. Bill payments were neglected. You know the story.

Credit repair companies have capitalized on the trials and tribulations brought on by the recession. While other companies and industries sank beneath the waters, the credit repair industry soared to new heights. Between 2007 and 2012, the industry grew at an annualized rate of 3.9%, reaching annual profits of nearly $10 billion (source: IBISWorld). Indeed, bad credit is good business for some.

Interestingly, there is no 800-pound gorilla among the credit repair companies. No single company has emerged to take a dominant share of the market. Instead, the industry is comprised of thousands of small companies, one- and two-person operations for the most part. Nationally, the industry employs about 158,000 people, according to a 2012 research report by IBISWorld.

Despite their enticing promises, credit repair companies have limited power. At best, they can help consumers take certain steps they could’ve taken on their own. At worst, they dupe consumers into paying up-front fees and then fail to deliver any results.

What Do Credit Repair Companies Do, Exactly?

How do credit repair companies operate? What types of services do they provide to consumers? In order to answer these questions, we need to take a look at how the reporting industry as a whole operates.

If you take out a loan or open a credit card account, the lender / creditor will report that new account to the credit reporting bureaus. There are three of these companies operating in the United States: Experian, TransUnion or Equifax. They are commonly referred to as ‘agencies’ and ‘bureaus,’ which makes some people think they are affiliated with the government. But they’re not. They are profit-driven companies, plain and simple.

So creditors report your credit accounts to these three agencies. But that’s not all they report. Your payment history gets reported as well. Timely payments, late payments, charge-offs, debt collections — all of these things get reported to the three bureaus.

The compiled data can then be processed through a credit-scoring algorithm to produce a three-digit score. This is the almighty credit score you’ve heard so much about. So your financial activity is captured in credit reports, and that information is used to generate scores.

credit reporting at a glance

How do credit repair companies factor into all of this? Most of these companies claim to help consumers by doing two things: (1) removing harmful credit entries that are dragging down the person’s score, and (2) counseling the consumer on the responsible use of credit. The first item is usually the main focus. Specifically, these companies offer to dispute negative information found within a consumer’s credit report, in order to improve his or her overall score. This is where the word ‘repair’ comes into the picture.

Pulling Back the Curtain

There are certain things you should know about these companies. Before you sign a contract or pay some kind of monthly fee, consider the following:

1. You can do it yourself for free.

Credit repair companies charge you for things you can do for yourself, for free. There are laws that regulate the removal of inaccurate information from consumer credit reports. The reporting bureaus must follow outlined procedures to investigate disputed information, and to remove that information whenever warranted. It all starts with the initial dispute, which you can do online. All three of the reporting bureaus have a “Disputes” section of their websites, for this very purpose.

Here’s an in-depth guide to disputing inaccurate or outdated entries that appear on your reports. You can also research this process on the FTC’s website.

2. They don’t have secret knowledge or techniques.

Credit repair companies often claim to have ‘specialized knowledge’ and ‘proven techniques’ that allow them to accomplish things you couldn’t accomplish on your own. Here is the source of their so-called specialized knowledge. As for their proven techniques, those are things you can easily do for yourself. We already talked about the online dispute sections of the three bureau websites. You can use these to dispute erroneous or outdated items found in your reports.

But here’s the thing. No one can remove negative but accurate information from your credit report. Let’s say you check your reports and find you have some late payments that were reported by your credit card company. You recall when it happened, so you know it’s a legitimate and accurate entry. By federal law, this kind of entry can stay on your reports for up to seven years. Credit repair companies may claim to have the ability to remove such items. But the fact of the matter is the reporting bureaus don’t have to do a thing. They have to investigate the dispute, sure. This much is required by law:

“If you identify information in your file that is incomplete or inaccurate, and report it to the consumer reporting agency, the agency must investigate unless your dispute is frivolous.” –Source: Federal Trade Commission

But if the reporting agency finds it to be an accurate and legitimate entry (and the entry hasn’t yet reached its ‘drop-off’ age), they will leave the item on your reports. And you’ve just poured money down the drain, in the form of whatever fees you paid to the credit repair company. It’s a common scenario in this industry. The consumer pays good money for services undelivered.

There are two scenarios where you can have information removed from your reports:

  • The entry is erroneous. Examples include a credit card account that is not yours, a collection event that never actually happened, etc.
  • The entry is accurate but beyond its allowable reporting period. Example: A late payment that happened eight years ago.

On the contrary, if a negative entry is (A) accurate and (B) within the allowable reporting window, it will likely remain on your reports no matter how many times you dispute it.

3. They are heavily regulated by the FTC.

You have to be wary of an industry that warrants special attention from the federal government. Such is the case with credit repair companies. Indeed, this is one of the most heavily regulated and frequently investigated industries in America.

The Credit Repair Organizations Act is a good example of such legislation. Technically, it’s not an act, but a provision of the Consumer Protection Credit Act. Whatever your call it, this set of laws imposes a number of restrictions on the claims made by credit repair companies. It is designed to prevent the kind of false and misleading advertising that is so rampant in this industry (see item #4 below). It also enables government officials to impose fines, and even prison sentences, on individuals who violate those guidelines.

Here are two key provisions from this set of laws:

  • No up-front payments. “No credit repair organization may charge or receive any money … for the performance of any service which the credit repair organization has agreed to perform for any consumer before such service is fully performed.”
  • Contracts are required. “No services may be provided by any credit repair organization for any consumer unless a written and dated contract (for the purchase of such services) … has been signed by the consumer.”

These companies must also provide you with certain disclosures relating to their services. Specifically, they must point out that you can dispute inaccurate information in your reports all on your own, if you choose. The company must also disclose that “neither you nor any ‘credit repair’ company … has the right to have accurate, current, and verifiable information removed from your credit report.” Sound familiar?

When an industry is heavily regulated by the government, you can rest assured there are good reasons for it. (The banking industry, anyone?) This is true of credit repair companies, as well. And that brings us to the next item on our list.

4. They are one of the more scandalous industries in the financial sector.

There have been hundreds of cases where a credit repair company was investigated for violations of the law. These violations usually fall into one of two categories: (1) false or misleading advertising, or (2) collecting payment for services not delivered. In many cases, both of these violation occur simultaneously. It’s a common pattern in the credit repair industry. A company makes bold and far-reaching promises about its ability to clean up the consumer’s credit report. It charges ongoing fees for these services. But all too often, nothing productive comes out of the process.

Take the case of Kevin Hargrave, for example. His Florida-based credit repair company ‘served’ people all across the country. According to one of his radio advertisements: “Hargrave & Associates covers all three major credit bureaus, slow pays, charge-offs, repossessions can be erased for two-hundred, fifty dollars.”

The Federal Trade Commission filed a complaint against Hargrave in 2008, alleging false advertising and the illegal collection of up-front fees for his so-called credit repair services. In 2010, a U.S. district court agreed with the FTC and barred Hargrave from making misleading statements and charging up-front fees. In May 2012, the court had to freeze his assets and issue a restraining order, in response to what they viewed as continued violations of the injunction. You can view the full legal history here.

This is a common scenario among credit repair companies. And it begs the question: Are there any good apples in this bunch? Possibly. But who wants to sift through all of those rotten apples?

New Jersey credit adThese scams are so common that federal and state agencies have created extensive educational campaigns to counter them.

This ad from New Jersey’s Division of Consumer Affairs is a good example. On their website, they offer a consumer brief entitled “Credit Reports and Credit Repair.” Here’s a quote from the brief:

“You have seen ads, billboards and TV commercials where credit repair companies promise to ‘erase bad credit.’ Typically they charge $50 to help you, but frequently they do nothing to help before taking your money and disappearing.”

This is just one example of state officials protecting their constituents from credit repair companies. There have been dozens of similar efforts in recent years, at all levels of government.

5. Non-profit credit counselors will help you for free, or for a very low cost.

Don’t confuse the credit repair companies mentioned above with non-profit credit counselors. They are two different things entirely. Unfortunately, the former gives the latter a bad name, as they are often lumped together in the minds of consumers.

Non-profit credit counselors provide a legitimate service, and often for free. When they do charge for their services, it is typically a very small fee to help cover their operating costs. They do not make bold but empty promises. They do not promise to ‘wipe the slate clean’ or boost your credit score in 90 days or less. They teach consumers how to take control of their credit, how to dispute erroneous information found on their reports, and how to develop good habits that pave the way to financial success. They are the unsung heroes of the credit world. Perhaps it is time to sing their praises.

The National Foundation for Credit Counseling (NFCC) is a legitimate non-profit counseling agency, with offices located in all 50 U.S. states. Springboard (credit.org) is another legitimate non-profit in this sector.

Here are some tips for choosing the right counselor:

  • Consider the two organizations mentioned above.
  • Review the FTC’s guide to choosing a credit counselor.
  • Check out the Department of Justice’s list of approved counseling agencies.
  • Watch out for imposters. Just because a company claims to be ‘non-profit’ doesn’t mean that it truly is. A lot of for-profit credit repair companies run advertisements on Google’s search engine with ‘non profit’ in the text. Do your homework to be sure. Use the DOJ list provided above.

What to take away from this article: You can do it yourself, for free. There are legitimate counselors who can steer you in the right direction, for free. You can dispute items on your credit reports, for free. And you can obtain your reports from all three bureaus once a year, for free.

Identity Theft Protection Services – A Needless Expense?

social security cardLast week I heard Rush Limbaugh on the radio promoting identity-theft protection services. To be clear, I don’t normally listen to Rush Limbaugh. I was a captive listener in the back of an airport shuttle. But I digress.

Specifically, he was plugging a company called LifeLock, Inc., which paid millions of dollars in 2010 to settle claims of deceptive advertising. Limbaugh’s pitch was a classic ‘scare-and-sell’ advertising strategy, where alarming statistics are used to drive sales. Think of the home-security company that sends you crime statistics in the mail.

But Rush got me thinking. Are these identity-theft protection services a legitimate form of protection? Or are they a waste of money? What do you get in exchange for the monthly fees you pay? And how big of a problem is ID theft, anyway? Let’s take a closer look at these pseudo-services.

What is Identity Theft?

Identity theft occurs when someone obtains personal and sensitive information about you without your consent. This is typically done for criminal purposes. An example of identity theft would be someone using your name and Social Security Number to obtain credit or financing. This is one of the most common ID-theft strategies, though it’s certainly not the only one.

How do thieves get their hands on your identity? According to the Federal Trade Commission, there are many different techniques, with new ones emerging all the time. Here are some of the most commonly used identity-theft techniques:

  1. Dumpster Diving: The thief rummages through a trash can or dumpster in search of paperwork with sensitive information (hopefully contracting tetanus in the process).
  2. Phishing: The thief sends you a phoney email and claims to be someone else, such as a bank or retailer.
  3. Skimming: A high-tech form of ID theft where the thief uses a handheld card reader to ‘swipe’ information from your credit card. This one is mostly used in restaurants and retail settings, where you actually hand the card over to someone.
  4. Wireless: The thief obtains personal information from your computer by tapping into a wireless Internet connection.
  5. Organizational: The thief steals information from hundreds or thousands of people at once, by accessing the electronic records of a company that has legally obtained the information. This is commonly referred to as a data breach. A recent example: Utah Department of Health
  6. Pretexting: The thief obtains your personal information directly from financial institutions or telephone companies, by pretending to be you. The person has obtained the information under a false pretext, hence the name.
  7. Old School: The thief steals your purse or wallet, or gets lucky and finds a lost purse or wallet. Either way, the result is the same. Some of your personal information is now in the hands of a criminal.

Again, these are not the only forms of ID theft. Technology evolves constantly, giving crooks new ways to access our sensitive information.

Identity-theft protection services cannot stop these things from happening. But they may be able to spot the resulting activity, so you can clean up the mess before it gets any worse. That’s the idea, anyway. We will talk more about these services in a moment. First, let’s look at some identity-theft statistics to see how pervasive this problem really is.

Statistics: How Big is the Problem?

Are the identity-theft protection services worth the money? To answer this question, we need to know two things: (1) How pervasive is the problem? (2) How do these services protect you from ID theft? Let’s start with the first question. Here are some statistics to put things into perspective.

Consumer Sentinel Network
ID theft statistics. Click image to enlarge.
  • According to the Federal Trade Commission, as many as 9 million Americans have their identities stolen each year.
  • In 2010, approximately 8.6 million households in the U.S. were affected by identity theft. Source: Bureau of Justice Statistics, part of the Department of Justice.
  • Consumer Reports magazine reports even higher numbers. In a June 2012 article, they stated that 15.9 million households were affected by identity theft during the previous 12 months. Source: Consumer Reports National Research Center.
  • In 2010, more than 64% of the population experienced the misuse, or the attempted misuse, of a credit card. Source: Bureau of Justice Statistics.
  • In 2010, government documents / benefits fraud was the most common type of identity theft, making up 19% of all cases reported to the Consumer Sentinel Network. Credit card fraud was the second most common (15%), followed by phone or utilities fraud (14%), and employment fraud (11%). Bank fraud rounded out the top five with 10% of reported cases. Source: Consumer Sentinel Network, a database of consumer complaints from law enforcement and governmental organizations.
  • In the United States, 65% of adults are worried about identity theft. Source: Credit.com.

Note: At the time of publication, identity theft statistics for 2011 were not available through these sources.

Putting the Numbers Into Perspective

These numbers can be frightening on the surface. So it’s important to view them in a broader perspective. According to the U.S. Census Bureau, there are roughly 115 million households in the United States. So let’s consider the 15.9 million statistic offered by Consumer Reports in relation to the total population. Based on their data, only 13% of U.S. households were affected by identity theft during the 12-month period when they gathered their data. The other 87% of households were apparently untouched by the problem. Based on these numbers, you can see that there is a statistically small chance you will be affected by ID theft.

And then there’s this. The latest data available to us, from 2010, shows a 27% decline in identity fraud. The financial impact of those crimes has also declined. According to a study conducted by Javelin Strategy and Research, consumer out-of-pocket costs associated with ID theft have actually decreased by 44% since 2004. Consider these trends before you shell out $20 – $30 a month for some kind of ‘protection’ service.

ID Theft Protection: Shield or Scheme?

And that brings us to the question at hand. Do you really need identity-theft protection services? Are they worth they money? And do they protect you from the types of crimes we just examined?

The exact features of an identity-theft protection service will vary from one provider to the next. But most of them monitor your credit reports for unauthorized activity. If and when they spot something amiss, they will send you an alert. Just bear in mind you can check your own credit reports once a year for free.

Some services claim to go above and beyond credit-report monitoring. Experian, for example, says they conduct “daily internet scanning for unauthorized use of your SSN, debit and credit cards.” I can’t imagine why an identity thief would post this information in a public and searchable location online. So the value of this daily scanning is, in my view, questionable at best.

For the most part, the identity-theft protection companies are glorified credit monitors. They do not provide any type of frontline defense against identity theft. They cannot stop it from happening. They simply look for it on the back end, after it has already happened. So in this regard, one could argue that these services don’t really offer any protection at all. Detection would be a better word for it. They merely spot the crime after the fact. Of course, that doesn’t stop them from plastering the words “protect” and “protection” all over their websites.

It’s important to know what you’re getting — and what you’re not getting — when you sign up for one of these services. For instance, most of the so-called protection services do nothing to protect you from theft or fraud relating to (A) tax return filings, (B) account takeovers, (C) misuse of credit cards, or (D) people who obtain a driver’s license or Social Security card in your name.

According to a February 2012 Consumer Reports article, cases of identity theft are declining because financial institutions are doing a better job preventing them. The article goes on to state:

 “In the past we’ve found that these protection plans provide questionable value. And some promoters of these services have been slapped by the Federal Trade Commission for misleading sales practices and false claims.” -Source: ‘Debunking the Hype Over ID Theft,’ Consumer Reports Money Adviser, February 2012

Additionally, there are plenty of things you can do to prevent ID theft on your own, without paying for an identity-theft protection service. You can check your credit reports once a year, for starters. If someone has opened a credit account or taken out a loan in your name, it will show up on your credit reports.

You can also sign up for free alerts through your credit / debit card issuer, to be notified anytime a purchase is made over a certain amount. Use your bank’s online tools to keep a close eye on your checking and savings accounts. Take the money you would spend on identity-theft services and buy a shredder for your sensitive documents (this will reduce the risk of ID theft from ‘dumpster divers’).

Most consumer groups seem to be in agreement on this subject. You’re better off protecting your identity with good old-fashioned common sense, rather than paying for an identity-theft detection service.

FICO Score of 750 Needed for Mortgage? Lenders Say No

Editor’s note: Before we get into the details of this story, I’d like to stress that the mortgage-lending industry is rarely standardized across the board. Borrowers should not be discouraged by the comments made below. It never hurts to apply for a loan, regardless of your FICO score. It’s the only way to find out where you really stand.

Mark ZandiMark Zandi, the chief economist from Moody’s Analytics, recently spoke with Michael McKee and Sara Eisen on Bloomberg Radio’s On the Economy. At one point, he was discussing how mortgage lenders are still being fairly tight with credit. He said most of them are requiring a FICO score of 750 or higher on mortgage loans.

This would be noteworthy (if accurate), since more than half of all Americans have a score below 750. So they might not qualify for a home loan under a supposed 750 FICO requirement.

“To get a mortgage loan you have to have a 750 FICO,” Mr. Zandi said. “Even to get an FHA loan, because of the overlays on the FHA program that the banks are imposing, you need a 750 FICO score.”

An “overlay” is when a mortgage lender imposes a stricter requirement on top of the minimum requirements established by the FHA (in this case). Learn more about lender overlays.

He went on to point out that the median credit score in the United States is 700. This means half of the consumers in this country have a score above 700, and the other half are below 700. Most lenders, according to Zandi, are lending at FICO 750 and above.

Does this statement accurately reflect conditions in the “trenches” of the mortgage world? We will explore that in a moment. But first, some definitions are in order.

The FICO Score Defined

Mr. Zandi mentioned the FICO score in particular, which is one of several scoring models used to produce consumer credit scores in the U.S. These computerized models use the raw data from a person’s credit report to produce a three-digit number. The FICO score was developed by the company of the same name (formerly known as Fair Isaac Corporation). The FICO scale goes from 300 – 850, where a higher number is better.

The three credit-reporting companies in the U.S. — Experian, TransUnion and Equifax — have a joint scoring system known as the VantageScore. They created it largely to compete with FICO. To date, however, most mortgage lenders rely on the FICO score when screening loan applicants.

Mortgage lenders and other creditors use these scores to analyze the risk of lending to a particular borrower. A person with a history of shaky borrowing (for example, failing to make payments on time) will generally have a lower score. People who pay all of their bills on time will have comparatively higher scores. The higher the score, the lower the risk — statistically speaking.

[See also: 5 factors that determines your credit score]

So the credit score partly determines (A) whether or not a person can qualify for a mortgage loan, and (B) what interest rate the lender will offer. These two things are equally important to borrowers.

Many Lenders Use 640, Not 750, as a Minimum FICO Score

The question is, how accurate is Mr. Zandi’s statement? Are most lenders indeed requiring a FICO score of 750 or higher for mortgage loans? And what about the FHA program? How does it compare?

To get some more insight on the subject, we spoke to Chad Baker, a loan officer with Prime Lending. Mr. Baker specializes in purchase loans and works in the San Diego area. His company works with borrowers using both conventional and government-backed mortgages. (Note: We have no vested interest in this company whatsoever.) We asked him the following questions:

  1. For conventional mortgages, have you seen a trend where lenders are requiring a FICO score of 750 or higher?
  2. For FHA loans, are some lenders indeed imposing overlays on FHA loans with a FICO 750+?

In other words, we asked him if he felt Mr. Zandi’s statement was accurate. Here is some insight from the “trenches” of the lending industry.

Regarding conventional mortgages, Mr. Baker stated:

“There have been many changes in residential mortgage finance over the past 24 months. Programs have disappeared. Stated income, Alta A, or limited documentation loans are a distant memory. One thing that has not changed is the FICO score requirements for conventional mortgage loans. PrimeLending is issuing Fannie Mae backed conventional loans with credit scores as low as 640.

Regarding overlays on FHA loans, Mr. Baker stated:

“I have never heard of any lending institution placing an FHA overlay of 750+ … FHA is back in full force and has positioned itself as the new ‘sub-prime mortgage.’ PrimeLending will provide FHA financing down to a credit score of 600. There are mortgage banks that are providing FHA financing below a FICO score of 600. FHA has limited its requirements for condo financing and has increased their required monthly mortgage insurance, but raising credit requirements has never been anything we have heard of.”

Mr. Baker’s comments echo the conversations we have had with other lenders. Most said they would offer conventional loans to borrowers with FICO scores in the 620 – 640 range or above (as long as the person qualified in other areas, such as income and debt). A borrower might need a score of 750+ to qualify for the lender’s best rates. But for basic mortgage approval, the bar is typically set lower — closer to the 640 range mentioned above.

“Mark Zandi is a very well educated economist and was instrumental in calling out the imposing crash of the housing market before it happened,” Mr. Baker added. “I believe he is truly trying to call attention to the fact that access to government-insured mortgage financing is becoming increasingly difficult for the consumer. Unfortunately, these credit score requirements are not an accurate requirement of any Fannie Mae, Freddie Mac or HUD insured lending program.”

Disclaimer: Every lending scenario is different. We have presented these insights for educational purposes, and to illustrate the challenges some borrowers face today. But this article should not be taken as gospel. The only way to know for sure if you’re qualified for a mortgage loan is to apply for one.

Survey: What Factors Determine Your Credit Score?

Visa recently completed a survey to find out what consumers know about credit scores in general, and the factors used to produce those scores. As it turns out, many consumers don’t understand which credit score factors count the most toward their overall score — and which factors aren’t used at all.

The company surveyed more than 1,000 consumers, by way of phone interview. They asked a series of questions pertaining to credit scoring. The survey revealed some common misconceptions about credit score factors.

Credit Scoring Misconceptions

Your credit score reflects how you have borrowed and repaid your debts in the past. A pattern of responsible borrowing will result in a higher score. A pattern of missed payments, debt collections and other forms of financial negligence will result in a lower score.

There are different types of credit scores. For consumer financing (such as mortgages and auto loans), the FICO and Vantage scores are the ones most commonly used by lenders. These scores affect your ability to qualify for loans, and they also influence the interest rate you receive from the lender.

If you want to improve your score, you need to understand the primary credit-score factors used to produce it. And this is where the myths and misconceptions come into the picture. According to Visa’s survey, many consumers don’t understand the factors used to determine their credit scores. For example:

  • Nearly 60% of the people surveyed believed that their employment history is used to determine their credit scores. This is false. While your employment history might be considered by a mortgage lender, it is not used as a credit scoring factor.
  • Approximately 53% of consumers thought the interest rates assigned to their current debts partly determined their credit scores. This is another misconception. Your score will certainly influence the rate you receive on a new loan. But the reverse is not true — your current interest rates are not used as credit-scoring factors.
  • There was also widespread confusion about the use of assets. In the survey, 53.1% of consumers believed that their assets / savings were used to determine their credit scores. This is also false. Lenders may consider this factor when considering you for a loan (especially mortgage lenders). But it’s not used to determine your score.
  • Other misconceptions included age and place of residence: 38.6% thought age was a credit score factor, and 25.3% thought that scoring was partly determined by where they lived. In reality, neither of these factors is used to determine a person’s credit score.

Consumers actually have a lot of control over their credit scores. These three-digit numbers are not assigned arbitrarily. Nor do they incorporate demographic factors such as age or location. They are derived from the consumer’s financial activity. They are a direct reflection of how a person has borrowed and repaid money in the past.

So Which Factors Are Used to Determine Your Score?

We’ve talked about the things that are not part of the credit-scoring mix. Your employment history. Your age and location. The interest rates you hold on your current loans. None of these factors are used to determine your credit score. So where does your score come from? In a nutshell, it comes from your history of credit usage.

The amount of credit you are currently using. The number of accounts you have open. The number of times you’ve neglected your debts in the past. These are the primary factors used to determine your score. For example, here are the five categories of information used to create a FICO score.

FICO Score Chart
Chart: The 5 factors that determine your FICO credit score

Here’s a breakdown of the five items listed above:

  1. As you can see from the chart above, your payment history counts more than any other factor. This category shows how you have repaid your debts in the past. It includes all of the accounts that show up on your credit report (auto loans, personal loans, credit cards, retail accounts, etc.).
  2. The amounts owed on your various accounts is another major factor that determines your score. Primarily, we are talking about credit cards and installment loans. If you are only using a small portion of your available credit, it should have a positive effect on your score. On the other hand, if you have “maxed out” one or more of your accounts, it will harm your credit score.
  3. The length of history refers to the amount of time you’ve been using credit. It probably dates back to the first time you opened an account or took out a loan. Unlike the first two items above, there isn’t much you can do to optimize this category.
  4. New accounts is another key factor used to determine your credit score. This refers to the number of recently opened accounts, recent inquiries or “credit checks,” and other factors. If you obtain multiple quotes from lenders (i.e., rate shopping), you should do it within in a narrow time-frame.* The scoring models are designed to recognize this, and they shouldn’t penalize you for it. But if you have a lot of credit inquires from loan applications over an extended period, it may lower your score.
  5. Types of credit is a lesser category that doesn’t weigh as much. This refers to the different types of accounts you have open at any given time (mortgage, retail accounts, installment loans, etc.).

* Source: MyFICO.com (the company that developed the FICO credit-scoring model)

It’s important for consumers to understand that factors used to determine a credit score. In this context, knowledge is truly power. You can’t improve your score until you know what makes it “tick.” And that includes understanding the five factors listed above.

Bad Credit Auto Loans are More Available, But Still Pricey

Shopping for an auto loan to pay for your new ride? Have bad credit? This time last year, I would’ve said you were out of luck. But it seems that an increasing number of lenders are offering bad-credit auto loans again. Of course, you’ll pay a premium for it, in the form of higher interest.

The number of people with bad credit has increased steadily since the recent recession. Millions of people have had to max out their credit cards in the wake of a job loss. Many more have been foreclosed upon by their mortgage lenders. Both of these things will put your credit through the wringer.

A low credit score can reduce your chances of getting any type of financing, and that goes for auto loans as well. Ever since the economy tanked in 2008, banks and lenders have backed away from making bad-credit auto loans. These are loans made to people with a subprime credit score, which is usually defined as being below 620 on the FICO scoring scale.

Over the last few years, subprime borrowers would’ve had a hard time getting an auto loan with bad credit. But things are starting to change.

Bad Credit Auto Loans More Accessible?

Experian Automotive compiles (and sells) data related to consumers, especially those who are in the market for a new car. Yes, this is the same Experian that maintains credit reports on consumers in the U.S.

According to their recent analysis, consumers with bad credit scores are finding it easier to get approved for an auto loan. The percentage of non-prime borrowers who obtained financing for a new car rose from 18 to 22 percent over the last year.

That’s not a huge increase by any means. But it does show that some lenders are more willing to make bad-credit auto loans these days.

Note: Experian defines a “non-prime” car buyer as someone with a credit score below 700 on their scale. This bar is set a bit higher than the traditional “subprime” category used by mortgage lenders. But for the most part, these terms are interchangeable. These borrowers will have a harder time finding an auto loan, and they’ll pay a higher interest rate if they do find financing.

This is good news for responsible borrowers who suffered credit damage resulting from an isolated event (like a foreclosure during the housing crisis). I’ve always felt that a single negative event should not overshadow a lifetime of responsible credit usage. So if you’re one of these borrowers, you may find it easier to qualify for a bad credit loan.

You’ll Pay a Lot More Interest

There’s a downside to this type of financing, and you can probably guess what it is. I gave it away with the subtitle above. If you get approved for an auto loan with bad credit, the lender will probably slap you with a higher-than-average interest rate. How much higher will depend on the exact nature of your score, along with other factors.

When this article was published, the average rate for a 4-year auto loan on a used car was 4.17% (source: Bankrate.com). The average rate for new-car financing was slightly higher at 4.36%. However, if you have a bad credit score, you won’t get a rate anywhere near this level. You might even be pushed into the double-digit range.

Why? Because your credit score tells lenders how likely you are to repay your debts — statistically, at least. It’s a measure of risk. That’s why bad-credit auto loans usually come with a much higher interest rate. It suggests that the borrower brings more risk, so the lender prices the loan accordingly. They charge more when there is a higher likelihood of default. Mortgage lenders do the same thing, by the way.

Percentages aren’t very telling by themselves. So let’s look at a real-life example to see how much more you might pay with a bad credit score. I used the car-payment calculator at Bankrate.com to come up with these numbers.

  • John has an excellent credit score in the upper-700 range. He has a history of paying all of his debts on time, including his previous auto loans. So the lender gives him an interest rate that is better than the average mentioned above. He gets a rate of 3.75% on a $20,000 auto loan. When spread over four years, his payments come out to around $449 per month.
  • Frank has bad credit as the result of some unpaid bills in the past. So he looks like a bigger risk, as far as the financing company is concerned. They charge him an interest rate of 10% on the loan. By definition, he is getting a bad-credit auto loan. Here again, the amount financed is $20,000 spread over four years. Frank’s payments come out to around $507 per month.

So Frank is paying $58 dollars more than John each month, just because his credit is bad. When you spread that out over the full term of the loan (four years), you see that Frank is paying an extra $2,780 in interest charges.

This is what I mean when I say bad-credit auto loans are pricey. Of course, if you need a car to get to work or school, then you have little choice in the matter. You need a car. There’s not much you can do to change that.

But there are plenty of things you can do to improve your credit score over time. Here’s a detailed list of those things. And you can start by making those car payments on time!