Give your finances a work out for the New Year

by Shelton on February 6th, 2015

filed under Finances

Give your finances a work out for the New Year

WITH THE festive period having taken its toll on our wallets, now is the perfect time to make a New Years resolution to knock your finances into shape.

Banks compete on free credit score offers

by Shelton on February 6th, 2015

filed under Credit Scores

Millions of consumers will start getting regular reminders of their financial health as more financial institutions roll out programs to offer customers their credit score for free this year.

President Obama put weight behind free credit scores when he announced earlier this month that Bank of America, Ally Financial and JPMorgan Chase would all begin to give customers their FICO score in some capacity in 2015. But the move toward more transparency in the credit industry has been gaining momentum for the past several years, in part due to pressure from the Consumer Financial Protection Bureau, as a way to both educate consumers and ultimately create more creditworthy and profitable customers.

o Discover became one of the first financial institutions to put customers FICO scores on their monthly statements when it adopted the practice in 2013. Scores are also visible on online accounts.

o Capital One started giving customers their TransUnion credit score, a FICO competitor, and report in March 2014.

o CitiCard holders started getting free monthly access to their FICO score online this month.

o Experian announced this month that it will start offering members in its credit tracking program their FICO scores instead of the Plus credit score. FICO scores are used most frequently by lenders to determine creditworthiness.

o Credit Karma said last month that it will now offer credit reports from both TransUnion and Equifax for free, updated weekly. It formerly just offered the TransUnion report.

For banks, offering the scores not only encourages customers to work toward better credit — and become eligible for more banking products — but fosters positive brand recognition in a competitive environment.

We are always looking for ways to add more value for our card holders, says Roger Hochschild, president and chief operating officer of Discover. The feedback has been overwhelmingly positive. They feel like it shows were trying to help them.

Hochschild says internal data also show that looking at your score frequently leads to more responsible financial behavior. Customers who are actively looking at their credit score tend to be less likely to get delinquent and in trouble with their accounts, he says.

Discover customers also get access to personalized analysis of their score: Discover displays the three factors influencing the score the most, such as whether the customer has opened a lot of credit cards recently or is too close to using the full amount of their credit line.

For an industry historically shrouded in secrecy and confusion, reducing barriers to credit scores is a win for consumers, says Matt Schulz, senior analyst for Few outlets have offered consumers their credit scores for free or only offer them periodically.

It has a big bearing on the rates that you can get for basically anything that you would borrow, Schulz says. Its significant that these banks, that have so much control and so much power when it comes to making lending decisions, are taking the steps to open up some of the process and let people see more clearly where they stand.

Credit scores can affect everything from the credit cards youre eligible for to your rate on auto loans and mortgages. They even sometimes play a roll in whether you get a job or are approved to rent an apartment. Consumer advocates and banking experts say the value of these latest programs is that they put credit scores in front of consumers eyes on a regular basis, instead of forcing consumers to seek the scores out on their own, and pay for them.

Seeing your credit score with regularity gives people the opportunity to catch certain trends, like identity theft, says Bruce McClary, spokesperson for the National Foundation for Credit Counseling. Although, credit scores alone wont tell people why the number has moved up or down. For that you still have to get ahold of your credit report, which is only available for free once a year from each of the three credit-reporting agencies.

Still, advocates are encouraged by the trend and say it will help consumers build better habits. In terms of modern living, having and maintaining a good credit score is critical, Hochschild says.