Nifty Chart and Web App to Help You Find a Better Cell Phone Plan

BillShrink's Cell Phone Advisor is a useful web app that helps you search for a cheaper cell phone plan. You enter your current monthly bill, the name of your carrier, and other information, and the Cell Phone Advisor presents other plans that could save you money. If you find a plan you like, Cell Phone Advisor will send you over to the carrier's website to complete the purchase.

They've also created a handy infographic, titled "The New Generation of Smart Phones," which compares side-by-side the features of the three hottest smart phones: the iPhone 3GS, the Palm Pre, and the Motorola Droid. It surprised me to see the last row of numbers, which is the total cost of ownership for a 2-year contract. The iPhone and Droid each come in at $2,839 and the Pre is $2,359. Those monthly bills really add up!

Mark Frauenfelder – Editor-in-chief of MAKE magazine and the founder of the popular Boing Boing weblog, Mark was an editor at Wired from 1993-1998 and is the founding editor of Wired Online.

Financial Literacy Q & A with UGA College Students - Part II

Yesterday I shared some of the excellent student questions that I received at a lecture I hosted earlier this week at the University of Georgia.  Here are the remainder of those questions. Enjoy!

Q: How many times a year do you get a credit report? What determines if your credit report is good or bad?

You should order a copy of all of your credit reports once a year. It’s free. Your score is the definition of good/bad. If you have a good score, then you have good credit, and vice versa.

Q: How often does your credit report change?

For someone like me who has had credit for years and has many open accounts, it changes multiple times each month. If you only have one or two accounts, your reports will only change once or twice per month. A good rule of thumb: However many open and active accounts that you have equals the number of times your report will change each month.

Q: Why does your credit report change so often and what are the best times to check it?

See the above question/answer. I always suggest checking ALL of them once per year.

Q: Is there a credit bureau that is better than the rest?

No, they’re all equally good/bad… depending on your perspective.

Q: What is the best way to estimate your credit score? Can you calculate it personally?

You can estimate your credit score for free at these sites…
https://www.credit.com/r/credit-report-card
http://www.bankrate.com/calculators/credit-score-fico-calculator.aspx

Q: Does a person have three credit scores or an average of the three as their official score?

You have one score per credit bureau, so you have three scores total.

Q: How do free credit report websites end up costing you?

Most of them make you sign up for a trial subscription and if you forget to cancel they start charging your credit card. The websites I gave you above truly are free and give you an estimate of your credit scores.

Q: Do lenders make inquiries about our credit from the same companies that we’ve used to see our credit reports and scores?

No, they can pick and choose why they buy your credit report from. Most lenders only get one of the three. The exception is a mortgage lender, who will generally get all three.

Q: Why do you have to pay for your credit score?

Short answer: Because it’s a way to make money. Better answer: There is no law that requires the credit bureaus to give away your score. As such, they have chosen to charge for it. Supply and demand… they know there is a demand and they own the supply.

Q: Is there a way to check my credit report in person?

Yes, there is. The Fair Credit Reporting Act requires the credit bureaus to allow for “in person” disclosure. If you went down to 1550 Peachtree Street in Midtown, Atlanta you could drive up to Equifax’s corporate headquarters and tell them you wanted in-person disclosure.

Q: Why do you only get one free credit report each year? Why does your credit score go down when other people pull your credit?

You actually get three free per year because you’re a GA resident. Residents of other states get at least one free copy of each of their three credit reports for free, and some states will give you more than one free copy. Your credit score COULD go down if too many lenders pull your credit reports because it indicates that you’re loading up on credit obligations and that’s predictive of future credit risk.

John Ulzheimer – Credit scoring and credit reporting expert and author, John is the President of Consumer Education for Credit.com. Formerly with Equifax and Fair Isaac, John shares his unique insight of the inner workings of credit scoring models and the credit reporting industry on CreditBloggers.com.

Financial Literacy Q & A with UGA College Students - Part I

On Tuesday, Oct 27, I was a guest lecturer at the University of Georgia in Athens, Georgia. The students submitted some fantastic questions, which I share with you. Enjoy!!

Q: How do you get a credit report? What is it exactly?

www.annualcreditreport.com or at each of the individual credit bureau websites. It’s a record of your credit, collection, and public record experiences.

Q: How do you read a credit report? How do you know your credit report includes everything?

There is no guarantee that it includes everything. It’s a voluntary system and has gaps. They all come with legends that will help you read and interpret what the entries mean.

Q: How do you improve a bad credit score? How long does it take to fix a low credit score?

Each low score is low for a reason. Missed payments, too much debt, and excessive applications are some of these causes. Identify WHY your score is too low and stop doing those things. Low scores caused by debt can be improved simply by paying it down, so it’s very fast. Low scores caused by negative info take longer to improve because there’s no way to net out the damage quickly. It takes time. Remember what I said in the class: 7-10 years.

Q: How long does it take to get a credit report fixed if you have been a victim of identity theft? How does it affect employment, buying a home, etc.?

You would think that it shouldn’t take long to correct after ID theft, but it does. The credit bureaus are inefficient and bogged down with consumer disputes. It’s much easier to NOT become a victim by taking some simple precautions. Data that’s on your files because of ID theft can hurt your job and home applications just like legitimate negative data. Credit scores don’t separate it out. The credit bureaus have to get it corrected or it will haunt you. 

Q: What are ways to build your credit without creating more debt for yourself?

You can certainly open credit cards and never use them. That’s building credit without getting into debt. 

Q: Can late payments on utilities affect your credit score?

Not right away. I assume you’re asking because you have a roomie who pays late. Utility companies don’t generally report to the credit bureaus unless the account goes significantly delinquent. Then they’ll hire a collection agency to collect it and that’s when it will show up on your credit reports… for the next 7 years.

Q: Should you close or keep open credit cards after you cut them up? Does checking your credit hurt your credit score?

Keep them open. You checking your own credit does not hurt your scores.

Q: If a person has several credit cards, does it hurt their credit more than if they have one, even if they are in good standing (making payments on time) for all of the cards? If so, does it hurt the person if they close the cards they aren’t using?

It’s better to have many versus a few. Don’t close them. Use them all periodically for small stuff (gas, socks, dinner) and then pay them off. This will ensure the credit card issuer doesn’t close them because of inactivity.

Q: How should you use multiple credit cards to raise your credit report/score?

Keep your utilization to no higher than 10 percent. That’s the balance divided by the credit limit. That should never go above 10 percent if you’re in the market to finance something. Plus it acts as a safety net to keep you out of credit card debt.

Q: How does having no credit history affect potential employment? Does your credit score go down when a potential employer checks your credit history?

Second question first: No, an employer looking at your credit report does not lower your score because you’re not applying for a loan. Employers recognize that new grads aren’t going to have a long credit history. That’s not a secret. On the plus side… you also won’t have all of the debt and garbage that generally concerns them either.

Q: What is a good credit score?

My favorite question. A good credit score is whatever score gets your approved at the best deals a lender has to offer. For some that’s a 700. For others that’s 750. I closed on a loan in 2008 and the lender told me that I had to have a 780 to get the best rate. It varies by lender, but if you can get to 750+ then you’ll be fine.

I hope you enjoyed the first round of questions.  Stay tuned for tomorrow's post, where I'll share the remainder of the questions!

John Ulzheimer – Credit scoring and credit reporting expert and author, John is the President of Consumer Education for Credit.com. Formerly with Equifax and Fair Isaac, John shares his unique insight of the inner workings of credit scoring models and the credit reporting industry on CreditBloggers.com.

Big Spenders Living in Denial

The current issue of Details has an article about people who refuse to scale back on their spending, either because they are still making a lot of money despite the recession or because they insist on keeping up appearances even if it means going deeply into debt.

In the article, you'll meet the following unabashed overspenders:

• "Paul," a 43-year-old with a household income of $2 million a year who refuses to stay in a hotel that costs less that $1,000 a night, flies business class between the US and Asia and is blithely going over-budget on a $1 million renovation on his house in the Hamptons.
• "Jon," a Manhattan commercial-real-estate broker who was earning in the "high six figures" until the crash, after which his commissions "nosedived." Despite Jon's reduced earnings, he continues to buy increasingly expensive suits. He's also addicted to expensive watches -- he paid $2,000 for his first, $6,000 for his next, and his most recent timepiece cost him $10,000.
• "Mark," a 41-year-old executive who makes a six-figure salary but fell into debt because he doesn't believe in self-sacrifice: "I have a sort of moralistic self-righteousness that I deserve good things," he says. "And because I'm surrounded by luxury all day, I know what's good quality and what isn't."

It's easy to criticize Paul, Jon, and Mark. But if I look at my own spending habits and how they've changed since the recession began, I realize I share some traits with these three big spenders. I've certainly cut back on vacations, gadgets, computers, clothes, and other costly things, but I still insist on treating myself to 5-lb bags of Black Cat espresso beans from Intelligentsia coffee and a weekly date with my wife that involves a baby sitter, dinner at a nice restaurant, and a movie or a massage. (If I keep thinking, I'm sure I could come up with other lavish habits, but I'll stop now.)

Instead, let's talk about you. What indulgences do you keep indulging in, even though our economy is still in the dumps?

Mark Frauenfelder – Editor-in-chief of MAKE magazine and the founder of the popular Boing Boing weblog, Mark was an editor at Wired from 1993-1998 and is the founding editor of Wired Online.

New Boom on Metal Detectors

When I learned that Rolling Stone Bill Wyman has a passion for metal detecting, I smiled at the thought of the bass player for the quintessential bad-boy rock band pacing back and forth across the English countryside with his sweeper, like any other senior citizen hoping to hit pay dirt.

Wyman is such a big fan of the hobby that he sells a "Bill Wyman signature metal detector." You can see it on his website, BillWymanDetector.com. He has also written a book about his treasure hunting adventures, called Bill Wyman’s Treasure Islands.

I stopped laughing, however, when I read that Wyman has found "hundreds of coins going back to Roman Britain, as well as blades from 3,000 years ago," along with "gold coins from the 1300s which are worth £1,000 each."

Maybe he's onto something. And in light of a 55-year-old metal detector enthusiast's discovery of Anglo-Saxon treasures earlier this month -- estimated to be worth $10 million -- in a farmer's field in Birmingham, England, other people are looking at the hobby with a golden gleam in their eyes, too.

American Public Media's Marketplace has a report on the recent boom in metal detectors. In addition to increased sales of detectors, the article says the much-publicized discovery has also resulted in an increase in "nighthawkers" -- people trespass onto farms at night and sell whatever artifacts they find on the black market. I have no desire to nighthawk, but I am thinking about the 30-year-old metal detector I owned as a kid, which is still in the attic of my parent's house. I plan on bringing it back home with me the next time I visit. I might not find Anglo-Saxon battle plunder in Los Angeles, but who knows how many iPods and digital cameras I might find under the sand at Zuma Beach?

Mark Frauenfelder – Editor-in-chief of MAKE magazine and the founder of the popular Boing Boing weblog, Mark was an editor at Wired from 1993-1998 and is the founding editor of Wired Online.

When They Stick the Knife In: The Subprime Mortgage Con

I recently got a call from a guy who wanted an FHA streamline refinance. He had already talked with two other lenders and he was then referred to me by his brother, for whom I had done a loan a few years ago.  We discussed his deal a bit and he finally asked why he should use my services. I immediately told him, "Look, there isn’t much pricing leeway on FHA loans, but if you go with me, you can be assured that I will treat you honestly."

There was a long silence as he evaluated this obviously unexpected remark. I'm sure that he was like the millions of people who get loans every year who think that they are ALWAYS dealing with someone who will not take advantage of them.

Wooops! Helloooooo! It's time for a reality check.

America is currently reeling from the economic tsunami that was triggered in part by massive borrower abuse by the subprime lenders. But it wasn't just the subprime lenders; it was a significant chunk of the entire mortgage origination industry. Even executives at otherwise ethical companies could see this highly profitable business and they could not resist the temptation to set up incentive compensation plans for loan officers that, bluntly, encouraged them to take advantage of the borrowers' ignorance wherever and whenever possible.

Even though there are enumerable laws at the federal and state levels that are designed to protect consumers, they are simply not enforced. As a result, the mortgage industry attracted tens of thousands of loan officers and executives who wanted to gorge themselves at the mortgage table without interference from pesky regulators.

So why were those loans so profitable? In large part because the borrowers were ignorant of the process and they didn't really know what they were qualified for. Every person I ever met who was involved in subprime lending said that 40 percent of borrowers would have qualified for a normal A-paper loan at attractive rates if they had just gone to a normal lender, like their bank.

The subprime lender who took the application knew this too, but his company didn't offer normal loans so he wasn’t going to say, "You ought to go to your bank." If he had said that, he would have said goodbye to that fat commission, and he certainly wasn't going do that.

Even A-paper borrowers don't understand how lenders increase their commissions by delivering above-market-rate loans. Congress thinks that "competitive market forces" will keep everyone honest. Not true. It seems that once a borrower chooses a lender, he has so much faith that he will be treated honestly that he forgets about caveat emptor – buyer beware. We now know that such trust was misplaced.

How did this happen to so many people? The simple truth is that people who are con men are good at tricking people and people are so gullible that when the loan officer stuck his knife in, the borrowers didn’t even feel it.

Randy Johnson – Author of How to Save Thousands of Dollars on your Home Mortgage and Savvy Borrower articles, Randy is a mortgage broker who has financed over $1 billion in properties. He writes about home buying and real estate finance topics for CreditBloggers.com.

Free Credit Reports Might Actually Become Free

The word free, as defined by Wikipedia, means obtained without payment. The problem in the world of credit reports is that the word has been redefined as "conditionally free." Many of the free credit report offers – well, all of them – require you to enter a credit card number and sign up for a subscription service that would monitor your credit reports for suspicious and potentially fraudulent activity.

Now, there are certainly good things about these services. But, they are not free. You could make a very strong argument that exchanging a free credit report for a trial subscription to a fee-based credit monitoring service doesn’t really fit the “obtained without payment” definition of the term. And while scholars will argue back and forth these fine points about free or not free credit reports, the Federal Trade Commission has no ambiguity on the subject.



On October 7, 2009, the Federal Trade Commission, the government body that enforces the free credit report laws, announced that they would seek public comments on proposed changes to the free credit report laws, often referred to as the "Free Credit Report Rule." This is less than a year after the FTC released several video clips parodying the freecreditreport.com television spots where out-of-luck twenty somethings are living in their parents’ basements or working in fast food restaurants because of trouble with their credit, which most credit experts agree are gross exaggerations of the downside to being a victim of identity theft. 



The proposed new rules would help to clean up some of the confusing marketing of "free—in exchange for trial subscriptions—credit reports. For example, any television, print, radio or Internet ads where a free credit report is being offered, the new rules would require disclosures that clearly state that “This is not the free credit report provided for by federal law." Now, this won’t completely prevent people from signing up for a subscription service in exchange for a "free" credit report, but it will provide another level of protection for people who really truly wanted to get their free credit reports.



It will also do a good job to further educate consumers that they do, in fact, have the right to free credit reports every year. And, ironically, these services that bury us with advertisements for free credit reports and free scores will help serve the public by having to display the message that consumers are entitled to free credit reports. To learn more about the proposed changes to the free credit report law, you can go to the FTC website and search for "Comment on free credit reports."

John Ulzheimer – Credit scoring and credit reporting expert and author, John is the President of Consumer Education for Credit.com. Formerly with Equifax and Fair Isaac, John shares his unique insight of the inner workings of credit scoring models and the credit reporting industry on CreditBloggers.com.

Capital One Credit Reporting Causes New Problems for Small Business

Small business owners may see their credit scores drop as Capital One Small Business credit cards begin appearing on their personal credit reports. This change has me shaking my head -- what are they thinking?

Quick background: Small business credit cards traditionally do not appear on personal credit reports unless the business owner defaults. This can be a big plus if the business is carrying high balances or using the card heavily to maximize rewards.

As regular readers of Creditbloggers know, carrying a balance on a card can hurt your "utilization ratio" – the amount of debt you carry in relation to your available credit line. It's an important part of your credit score. The ideal utilization ratio is around 10 percent or less, according to my colleague John Ulzheimer. Even if you pay your balances off in full, if you use a card heavily, you can get dinged for this factor since the credit report simply lists the balance at the time the lender reports.

For years, Capital One did not report small business accounts on the owners' personal credit reports. Personally, I think that’s the way it should be. If you truly have a separate business, and it pays its debts, then those accounts should remain with the business. If you default, then the personal guarantee kicks in, and it will be reported. I am okay with that.

This Cortera blog post does a good job detailing how hard the credit crisis is hurting small business owners right now. Capital and credit are hard to come by, and if this change lowers entrepreneur's personal credit scores it will only make things worse. I’ve outlined some steps Capital One Small Business cardholders can take on the blog I write for AllBusiness.com.

I’d love to hear from some cardholders on this topic. Has this affected your credit? How are you going to respond?

Gerri Detweiler – Personal finance author and Credit Advisor for Credit.com, Gerri contributes budgeting, debt recovery and savings information online. She is also the co-author of a new ebook, Business Credit Success: Get on the Financing Fast Track.

Higher pay equals worse performance

The Pop!Tech ’09 event is taking place this week, and GOOD magazine is providing summaries of the what the star-studded cast of speakers have been presenting. (You can watch a live stream of the Pop!Tech here.)

Yesterday, Dan Ariely, author of 2009's Predictably Irrational: The Hidden Forces that Shape Our Decisions, spoke at Pop!Tech about an experiment he recently conducted. He gave mental tasks to three groups of volunteers, offering different cash amounts for correct answers. The first group was told they'd get a day's wages for performing well; the second group would get more than that; the third group would get five months' pay.

You would expect that the third group would do the best, because they were being offered a bigger reward. But the actual results (shown here in the graph) tell a different story. The third group performed far worse than the first group. Why is that? Ariely sums it up to performance anxiety. Money is a motivator as well as a stress-inducer, explained Ariely. With so much at stake, the volunteers had a harder time concentrating on the assignment.

I wish I hadn't missed the video, because I have a question about the experiment that Ariely might have cleared up -- did he really reward five months' salary to the volunteers of the third group who performed well? If so, he must have one heck of a research budget!

Mark Frauenfelder – Editor-in-chief of MAKE magazine and the founder of the popular Boing Boing weblog, Mark was an editor at Wired from 1993-1998 and is the founding editor of Wired Online.

Advance Fee Loan Scams Busted

Over the years, we’ve received numerous complaints from consumers who have been ripped off in advance-fee loan scams. We’ve been naming names in an effort to get the word out and prevent this kind of financial heartbreak from happening to others.

It’s hard to nail these crooks because they just close up shop, move somewhere else, change their names, and start all over again. So finally the Federal Trade Commission has stepped in and going after their tool of the trade: money wiring services.

(If you are not familiar with this crime, read this post we wrote three years ago about how advance fee loan scams work. Basically, these firms tell desperate consumers that they can get a loan as long as they make several “payments” upfront, or perhaps buy “credit insurance to protect the lender.” The applicant wires the money to the company and of course never gets a loan.)

The FTC has just announced that MoneyGram will pay $18 million to settle FTC charges that it allowed its money transfer system to be used for fraud. And MoneyGram will have to put systems in place to prevent this type of fraud in the future. The FTC charges that the company let its money transfer system to be used by fraudulent telemarketers to bilk consumers out of tens of millions of dollars. (Advance fee loans were just one of the fraudulent programs involved. Others were told they had won a lottery or were hired for a secret shopper program. While $18 million sounds like a lot, consumers lost a whole lot more to these schemes – a minimum of $84 million.

That’s one small victory for consumers, but keep in mind that these crooks are creative, and they’re cooking up new schemes even as I write. If you are concerned about a fraudulent loan offer, be sure to share your loan scam story on our forums.

Gerri Detweiler – Personal finance author and Credit Advisor for Credit.com, Gerri contributes budgeting, debt recovery and savings information online. She is also the co-author of Reduce Debt, Reduce Stress: Real Life Solutions for Solving Your Credit Crisis.