The Credit Crunch Finally Hit Me
In last week's post Emergency-Proof Your Emergency Fund, I said I decided to apply for an unsecured personal line of credit from Wells Fargo, where I also have a checking account.
I submitted the application online. The questions were as expected: name, address, Social Security Number, employment information, income, size of the credit line requested, and the purpose of borrowing. They said a decision typically takes two business hours. I waited all day but I didn't hear anything. I finally called and they said my application was declined! If you can believe it, they asked me if I would like to be referred to Wells Fargo Financial, their subprime unit. Me? Subprime? No, thank you.
The underwriter said the reason for the decline was that the size of the credit line I asked for was too high for my income. Fine, tell me what you can give me. No, they just flat out declined me. It's been widely reported that credit card companies are cutting people's credit limits. They have spared me so far. Ah, the credit crunch finally hit me.
Credit Scores After Canceling Oldest Credit Card
My mortgage lender sent me my credit scores. That's the only time I look at them. Otherwise I don't bother. I compared the latest scores with what I got from my last refi in February 2008.
| Credit Bureau | Model | Feb. 2008 | April 2009 | Change |
| Equifax | FACTA Beacon 5.0 | 803 | 794 | -9 |
| Experian | Fair Isaac (Ver. 2) | 780 | 796 | +16 |
| TransUnion | FICO Classic (04) | 797 | 784 | -13 |
| Average | 793 | 791 | -2 |
Two years after I canceled oldest credit card and lowered my total available credit limit by about 25%, my credit scores are still going strong. They changed very little since I looked at them a year ago.
Quit Obsessing with the Credit Score
I've said it before, and I will say it again: dear media, please quit obsessing with the credit score. Last week's episode of the NPR program Marketplace Money was about credit and credit scores (listen online or download mp3). One of the stories was The power of FICO. It featured Pete Deibel of Winter Park, FL (emphasis added by me):
"Here's how Pete got punished. Without warning, the credit card companies slashed his credit limits. This even though he kept up his payments as he always had. With lower limits, his card balances instantly shifted from making up 20 percent of his available credit to 80 percent. Suddenly, Diebel looks like a guy who's living off his plastic. His FICO score dropped 10-points [sic]. That may sound miniscule on a scale of 300 to 850, but it could translate into thousands more in interest payments."
Book Review: Your Credit Score
Today I'm reviewing the book Your Credit Score by Liz Pulliam Weston. The author Liz Pulliam Weston is a columnist at MSN Money. I picked up this book from the library when I browsed for new personal finance titles.
I hear a lot of buzz about the credit score and I don't understand what the hype is about. After reading this book I still don't understand why people think everybody should care about what their credit score is and everybody should manage their financial affairs around how the credit score is calculated.
The book gives information on what the credit score is, how it is used, what factors influence the credit score calculation, and how to improve your credit score if you have a bad one. Then it also says:
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