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Hi,
Scott.
First off, I want to thank you for
your great book, "Talk
Your Way Out Of Credit Card Debt." I ordered it along with
your two free books ($25.65 total) specifically because my credit
card company had just charged me a $40 annual fee, and I didn't want
to pay it. With a single phone call, they removed the annual fee
PERMANENTLY. In one day you saved me $14.35, counting the cost of
the book. (So I got the book for free and $14.35 in change!) If I
keep this credit card for ANOTHER seven years, you will have saved
me an additional $280, and that's assuming they don't raise the fee
over that time. So, great job! Thanks for saving me my money. I told
my wife about my success, and she's eager to replicate it. She has a
card with a FIFTY-dollar annual fee!
Now for my question: FICO scores
seem like the king of the credit world, and the scoring system is so
secret and counterintuitive that it's frightening to me to make ANY
changes with my credit card "portfolio." I'm eager to
pursue more of your advice but am terrified of damaging my credit
score (which is in the low-mid 700's). I know it hurts your score to
close a long-standing account. Does it hurt your FICO score to
increase the credit limits on your cards? Does it hurt your score to
open new credit card accounts? Any proven, tested advice you can
give on managing my FICO score would be much appreciated. Perhaps
you have a special report on it? Also, what do you think of the idea
of borrowing money from a 0% APR card, investing it for a return,
and paying back the loan with no interest so you pocket the
difference?
Thanks again! Love your stuff. I
especially love your story about buying
a car with 0% APR credit cards. What a gem!
Judd
Judd,
Thanks for writing to tell me about
your success with my book!
It's a great feeling to make the banks waive these ridiculous fees.
They have to keep in mind that there is fierce competition out there for
their services and that good customers, like us, will go somewhere
else
if we're not treated like gold!
It's true that the formula for the
FICO score is a secret. Fair Isaac shares general information
about how the score is determined. The result is that it's difficult
to determine exactly what will make one's score go down (get
"hurt").
Certainly, closing long-standing
accounts will hurt your score, but increasing your credit limits may
not. That's because part of your score is based on your debt ratio.
This calculation is the percentage of debt as compared to your available
credit--how maxed-out you are. So, if you have $8,000 in debt and
$10,000 in available credit, then you're using 80% of your credit
lines. If that credit limit is increased to $16,000, then you have
decreased this debt ratio to 50%. Of course, your credit limit being
raised could affect the score negatively if it goes too high because
some lenders may see this as the ability to get in over your head.
I
manage my FICO score and credit reports at MyFico.com. By
getting all my reports, I'm able to check the score plus review all
activity in the reports to ensure the information is accurate.
As far as using 0% offers to make
money goes, it certainly can be done! I have done this very strategy
that you are proposing and have written about it previously in an
article titled, How
I Made an Easy $1,800 Profit with My Credit Cards. Check it
out--it will answer your questions about that topic.
Talk to you later.
Regards,
Scott
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