Mapgirl’s Fiscal Challenge

First off, I don’t give out financial advice because I’m not an advisor. If you need that, ask someone who is certified and pledges to do business ethically. I’m not that person. I’m here to *entertain* you.

That being said, someone asked this question:

I did recently check my credit report and found that I have five credit cards open that I have not or never used in several years. Does keeping them open, albeit unused, help or hurt my credit score? Would you suggest that I close the accounts if I never intend to use them?

I think you’re best off reading about FICO or Vantage credit scoring models. There is some benefit to having revolving credit accounts open for a long time. Now the question is do you have too many open that hurts your score in another way? That’s up to you to decide. I mean you could go ahead and close them but that could also lower your score in the short-term, but in the long-term that could be beneficial if someone is looking at your ability to get in revolving debt overnight and evaluating you as a credit risk in 2 years down the road.

Does monitoring these unused accounts put an undue burden on you? Closing them could ease your mind.

A strategy you might want to try is to get a credit score report and then close one account and get your credit score again afterwards. Because so much goes into scoring though, so you’ll have to control the experiment by making sure your payments are on time during that time period and watch to see if your balances cross the 35% of available credit on that account. (Up or down. Either one will trigger a score change.)

The biggest score impacting item is on-time payment. Just make sure that you vigilantly pay on-time for a minimum of 24 months. Small open accounts may represent only annoyance and possible security risk without a lot of other score downsides, so it’s up to you if you want to keep them open.

SMART: Specific, Measurable, Achievable, Relevant, Time-Bound

Goal #1
Specific - Contribute to my 401k plan
Measurable - X% of my total salary
Achievable - With each paycheck
Relevant - Yes. Because it will help my retirement funds grow
Time-Bound - All of 2008

I will not get a corporate match for my first 12 months, but my new company will match 100% of the first Y% of my salary, so there are some extra benefits to doing this, but I won’t see them till 2009. That’s fine. Because of other goals, X=Y, i.e. I’m only putting in the minimum to get the match.

Goal #2
Specific - Reduce my credit card debt
Measurable - By 50% or $9,137 (rounded up to $10K)
Achievable - Monthly payments of $762
Relevant - Yes. Because it will help my net worth grow faster
Time-Bound - December 31, 2008

My NCN Network chart/Save-O-Meter number is $18,273 and I have not made much progress at all. In fact, I’m probably going over that when I finish tallying my December net worth numbers. What really burns me is that Tricia has paid off more debt that I have. I’m really proud of her, but dammit. I gotta get moving!

Goal #3
Specific - Reduce my credit card debt on my highest balance card ~$10K
Measurable - By 50%
Achievable - ~$450 a month
Relevant - Yes. Because it’s killing my credit score
Time-Bound - December 31, 2008

This leaves about $312 per month for my other credit cards. Though they have higher interest rates, the balance to available credit ratios are so low they aren’t detrimental to my credit score. I’m not buying anything any time soon, bu I would like to push my score higher for the heck of it. There is an implied goal here of breaking a FICO score of 720.

2008 is going to be very simple. Three goals and three goals only. I am focused on saving for retirement and reducing my credit card debt. That is all. Once I get going on these three things, I feel my larger goal of having nothing but my mortgage will come to me more easily in 2009.

First, the update. I forgot to tell you. I gave away the pet birdie. I found someone off of Craigslist who is really going to enjoy having her. She now lives in a house full of kids and pets. I admit, the stray kitten they found looked a little in need of veterinary care, but there were other birds who will keep Papagena company. I just couldn’t stand keeping her when I couldn’t spend time with her. She really needed constant company.

Now, onto the juicy confession. Remember when I had a boo-boo with my credit card payment in May? Well, I’ve been avoiding telling you that the credit card decided to put me into the universal default interest rate of 32.0%. Luckily it didn’t trigger a rate change on my other cards. I was damned lucky on that.

But I did decide to balance transfer off most of what was on the card to my HELOC, going from 32% to 10.38%. The interest savings was too great to ignore. I still use the card because there are some recurring charges on it (EZ Pass fees), but I pay it off religiously and in full now. (Side note on my net worth data, I do not include the transferred amount into my mortgage line item. I have left it on the credit card line.)

When I first realized the rate jumped, I re-read the card agreement and found out that the 32% rate was going to last 6 months, i.e. till November. I was all prepared to wait it out and keep paying things on time and in full, without carrying a balance. However, I decided that since 4 months have passed without an incident, I would call them anyway. I wanted to see if I could also get a really low teaser rate balance transfer later as well. Because 10.38% is ok, but not great.

I called them this week and they lowered my rate back down to 13.74%. It was very easy. I also inquired about balance transferring but they told me to call back in a few days. We’ll see about that. I’m not sure that I really want to do the transfer. I just liked the idea that I was doing SOMETHING to improve my situation rather than nothing.

The takeaway for you:
Even if you’ve triggered off a default interest rate on your card, you don’t have to wait a full six months to get your rate lowered back down. Call them after a few months of on-time payments and ask if they will lower them again. It can’t hurt you to ask. There is only the upside here of a possible yes that lowers your rate again.

Final note: I paid to check my credit score the other night and it’s a 696. The main thing is that I need to lower my utilization which is why I was interested in a balance transfer. I have 3 cards, and one is at 80% utilization. I figured if I started spreading that onto two cards, the score would lift. But I have no major purchases coming up in the next 2-4 years so I don’t really need to do this at all. I just need to get all of it paid down.

I love the Washington City Paper. I was at the Yarn Harlot book signing event last night. As I waited for my friends to get their books signed, and deliver her a beer, I flipped through the paper and found a lovely ad on page 49.

Financial and Credit Literacy Day
Hosted by the Washington Area Community Investment Fund

Saturday, September 29th
9am-4pm
Kellogg Conference Hotel
Galludet University
800 Florida Avenue, NE
Washington, DC

RSVP: 202-529-5505

FREE ADMISSION and FREE PARKING!!!

The financial literacy seminar/workshop list looks very good. (link goes direct to an Adobe PDF file) There are seminars on targeted to teens/youth and women. Topics include Small Business Management (including federal contracting), Homeownership, Selecting a Mortgage, Managing Foreclosure, Credit Scores, Budgeting and Consumer Rights.

The ad says, “Bankers and housing counselors available all day.”

I do not know very much about this organization, but they do have an impressive list of sponsors. They were formed out of Arlington with the help of the local Catholic diocese, which if you don’t know, has one of the craziest liberal parishes in the US, St. Charles Borromeo. I actually have worshiped there because one of my closest friends used to attend. If you know their ministry, they’re very into social justice, often to the chagrin of the archbishop. I mention this because St. Charles is very active in low income housing initiatives in Arlington County and I could definitely see them supporting an organization like this.

It’s technically a non-profit loan fund, with 501(c)(3) status. I’m going to look into investing in it.

Yes indeedy. I did it.

I am cheesed off with Wachovia for charging me to download from within Quicken, but not so cheesed off as to kill that account. I really do feel more comfortable with a brick and mortar bank locally. So this means my Philadelphia based checking bank is going the way of the dinosaur. I feel so bad because I opened that account in 2003 at the bank branch I used to go when I was a little kid with my piggy bank. I still think of it as my bank, even today, though I don’t even take cash out of their ATM’s when I go home. Screw the sentimentality, let’s talk brass tacks on why I chose ING.

1) I already have a relationship with them: I really didn’t want to go through the annoyance of learning a new GUI with Virtual Bank or NetBank. It was extremely easy for me as an existing account holder to click a few clicks and open a checking account.

2) It’s paying 4.00% APY: My old checking account paid no interest at all and was free with direct deposit. Seems to me, for the $1000+ deposits I would make there for my fixed expenses, I might as well earn some interest on the float while the funds were still in the account.

3) It uses Quicken! Sounds crazy, since all banks pretty much have an interface with Quicken. But for some reason my old bank in PA was really behind the times on this and did not integrate well with it. I had to get crazy stuff set up by calling a rep, etc. It was phenomenally stupid, so I didn’t bother with transaction download. Because this is a low-traffic account for fixed expenses. I could pretty much balance it once or twice a month with Quicken’s reconcile feature and it would work just fine.

4) My girlfriend did it first: One of my local friends was asking me about it. I told her I really didn’t know much about it, but then she decided to do it because of Reason #2. She seems pretty happy with it and has no serious complaints other than the fact the ATM card hasn’t arrived yet. But for me, I won’t even use the ATM card since I have my local brick-and-mortar bank which is convenient enough to home and office.

5) I think there is a hard credit pull: There is an overdraft protection feature that offers you X dollars of credit. I am pretty certain this means they’ve done a hard credit inquiry. Yes, I realize this possibility may drop my credit score, but I don’t really care since I haven’t opened a credit account since June 2006 and have no plans to open another for any reason whatsoever in the next 2 years. EDIT: Per Reader Dave, there is no hard credit pull, via the ING FAQ. THANKS DAVE!!

I haven’t done anything yet with it. I am in the process of transferring over my direct deposit from work. I did set up some of my regular outgoing expenses and that was fairly easy. I don’t like going entirely paperless, but I don’t think this transition will kill me, and perhaps it will help me tame “the paper tiger” around the house. I keep too much paper crap and it’s bugging me. I actually spent some time de-cluttering the mess on my desk and I am happier as I write this post.

PS - I just noticed that the DST change has effected the posting of my posts since March 11th. I just added an hour to the time on this post to reflect the accurate time.

Credit Bloggers has a good article about how late payments effect your credit score. It points to an article at Credit.com.

Nicole is spot on about college degrees. A nice examination of ‘good debt’. I am not convinced college tuition debt, nor the whole experience of college is for everyone.

Citibank Driver’s credit card analysis by Jonathan. I’m seriously thinking about it since I rack up the miles. Of course, I do get a lot of free gas right now…

Madame X amazes me again with her will & determination to TCB on her own. Try as I might, I still get little things here and there from my folks (see the above regarding free gas). I am still holding off on my Bank of Mom & Dad commentary/editorializing. I’m still twitchy about it.

Not PF-related, but it highlights one of my fears about blogging. It’s like going to a party of crunchy people and taking a drink whenever you hear someone say,’I heard on NPR…’ during conversation. It may require registration. Go to Bugmenot. BTW, you must sip your on-hand beverage whenever I mention NPR in this blog.

Digging out something else I haven’t posted yet.

I’ve always had a natural interest in finances, but one of the things that got me focused was folks in an online debt reduction community who were looking for answers to improving their credit score. Kiplinger’s has a great article on it from their March issue. Particularly page 2.

The main thing is to pay your bills on time, for a long time. Slow and steady will win the race on this one.

It debunks the myth that you should close your accounts.

It should alleviate fears about marrying someone with a low score. Just play it right and it shouldn’t matter.

It’s good stuff.