Update February 2011: Use coupon code FICO25 for 25% off!

Here’s a newly released coupon for 25% off real FICO scores at myFICO.com. Use the promotional code FICOHELP25 to get 25% off, the best discount currently available:

Update: For the Equifax credit score only, you can get it for $10.95 using the code SW94608. $5 off equates to a little over 30% off.

You enter the promo code relatively late in the buying process, right before entering your credit card information. Look for this:

Experian no longer allows Fair Isaac to sell FICO scores to consumers at all (even though lenders still buy and use them). They sell their own “FAKE-O” version now. Lenders almost always use FICO scores in their decisions, so those are the only ones you should pay for.

For the diligent, a cheaper alternative is to sign up for a free 30-day trial of ScoreWatch, which includes two free Equifax scores and reports. Just remember to cancel as soon as you decide you don’t need it anymore. You are allowed to cancel online, without having to even call in.

You can always request your credit reports (not scores) once every 12 months at AnnualCreditReport.com. If you’ve already done that, you can still try these other direct methods for the unemployed, those denied credit, and victims of identity theft.

If you’re like me, you keep receipts to reconcile with your credit card transactions online. If you dine somewhere you leave a tip, you might be wary that the waitperson might alter your tips, either by accident or on purpose. If you just see the total amount charged and lose your receipt, it’s hard to remember what your tip was. Well, I just noticed on an American Express credit card statement that they actually break down the food and tip charges for your convenience.

I didn’t bother scanning, but it looks just like this:

MOM & POP INDIAN CUISINE $26.44

FOOD/BEVERAGE $22.44
TIP $4.00

A nifty feature, I wonder why others don’t do this as well. However, I am still sticking with the Citi Forward for the 3.5% cash back.

I am not a big fan of purchasing credit scores. I can understand why a lender would pay to get a calculation of your likelihood of defaulting on your loan, but if it’s based on our data, why do we have to pay just to see it? Even if I am declined for a loan, I can only see my report, not the numerical score that supposedly defines my financial life.

There are plenty of “fake” credit scores out there, but there is no way to get your real FICO scores anywhere but myFICO. If you must order your score, use the promotional code CPPSAVINGS to get 20% off all credit report and monitoring services orders. It’s the best coupon I found that worked:

Whenever you do buy a score, I would recommend trying to correlate your score and the current information on your report. Then you can start to learn beyond the generic rules they spit out, and see how changes really affect your score. I’ve applied for 12 credit cards and canceled 5 with almost no affect to my scores – despite all the “rules” – only to have a huge balance on my mom’s credit card (with me as authorized user) show up and drop it by 30 points.

An possibly cheaper alternative is to sign up for a free 30-day trial of ScoreWatch, which includes two free Equifax scores and reports. Just remember to cancel as soon as you decide you don’t need it anymore.

* Experian no longer allows Fair Isaac to sell FICO scores to consumers at all (even though lenders still buy and use them). But they’ll happily charge you money for their own attempt at a credit score.

If you haven’t heard already, several large credit card issuers (Chase, Washington Mutual, Citibank, Capital One, HSBC) are currently closing millions of consumers’ credit cards without prior warning due to inactivity. This is their legal right, but it can also negatively affect your credit score. Here’s why and some steps that you can do about it:

How Can Closed Credit Cards Affect My Credit Score?

FICO has previously revealed the following breakdown of factors considered in credit scoring. We can also read between the lines of the questions asked by the free FICO Score Estimator by myFICO.

Capacity used. This simply means how much of your available credit you are using, sometimes referred to as utilization ratio. A lower ratio is better, either by lower balances or higher credit limits. If you’re maxed out on all your cards, obviously that’s not a good sign. Logically, closing credit cards means you have less available credit.

Length of credit history and past credit applications. To be specific, not the only length of your oldest line, but also the average age of all your accounts matters. In addition, you’ll have less need for new credit applications if you can keep your existing purchasing power.

Closed by creditor or consumer? A lesser concern is whether the account is marked as “closed by creditor” as opposed to “closed at consumer’s request”. Since FICO doesn’t release the details of their scoring algorithm, it is still debated whether this matters to the numeric score. Some credit repair experts say it does, others disagree. However, if someone does a manual review of your credit report, it can raise some questions as to why the account was closed by the lender.

How To Protect Your Credit Score

Okay, so we’ve established that just waiting for our inactive cards to be canceled can be bad. So what should we do about it? Here’s an action plan:

1. Gather up or make a list of all your credit cards. I have mine in a spreadsheet – it is a pretty long list! Misplaced some? Grab your free report from the official AnnualCreditReport.com, which should list them all.
2. Rank them according to importance to your credit score. From above, we see that credit cards with high limits and long histories are the best. Newer credit cards with low limits are least important.
3. Start using the important ones! If you have a cell phone or cable bill, chances are that they accept credit cards. Not only that, but you can use multiple charges across multiple cards. I spent 20 minutes just charging $5-$10 to my Sprint bill across about 8 different cards to put some activity on them. Start from the most important card onwards.
4. Consider canceling the rest. If you have a newer card with a low limit that you don’t ever plan on using again (just wanted the sign-up bonus?), it may actually help your score to simply cancel it. This way, it will also show as “closed by consumer”.

   Make sure that it has a zero balance first, otherwise you make be stuck with penalties or your credit limit will be lowered to your balance amount, jacking up your utilization percentage and hurting your score.

I was too late for two Chase accounts and one Washington Mutual account I mentioned before, but I ended up closing a few cards preemptively and put some activity on the rest. All in all, perhaps this worked out for the best. Don’t we all want less clutter for the new year? 🙂

I just got a letter from Washington Mutual / Chase telling me that they have closed my credit card account with them effective November 14th, 2008. That’s nearly a month ago! The reason stated was simply that I hadn’t used it in over 12 months. I normally wouldn’t care too much, but this is a relatively old card (back from when they were Providian) which helps your credit score and it also gave me a free FICO score update each month. Doh! I might call them and see if there is anything that can be done.

Now, it’s totally within their rights to do this, but it is kind of annoying and not the best customer service in my opinion. Last month, I got a similar letter from Citibank, but it warned me that if I didn’t use it within a month, it would be closed. So I just used it quickly and everything was fine. That seems like a more reasonable response.

The easy solution is to remember to use each of your credit cards at least once per year. I would simply use it to pay $5 towards your cell phone or cable bill online, since they let you do multiple partial payments. Then mark the card and tuck it away again.  Here’s a solid list of the best credit cards for 2012 to get you started.

Schwab brokerage is offering a new credit card that gives you 2% cash back on all purchases. The only catch is that the rewards can only be redeemed into a SchwabOne brokerage account. When linked to the Schwab card, the SchwabOne account has no minimum balance requirement or monthly service charges.

With no annual fee and no cashback limit, this is a very competitive card. I just hope it sticks around – many, many 2% cashback on everything cards have come and gone, from Farm Bureau to Countrywide, as that level of rewards make the issuer’s cut very slim. I’m sure they are counting on fees from the SchwabOne brokerage account to make up for the difference. Fidelity has a similar 2% back American Express card.