Tuesday, October 21, 2008

10 Credit Questions and Answers at GlobCredit.com (October 21, 2008)

As I have said before, I can see how my readers find GlobCredit.com. I don't collect any personal information, but I can see search terms that people use to find the site. This information is like the center of Lifesavers candies. Or doughnut holes. Rather than letting them fall by the wayside, I figure that I should put these search queries to good use.

Here are the game rules: I will edit search queries for syntax purposes. Otherwise, I will leave them alone. I'll also phrase queries in the form of a question whenever possible. By request, these Q&As will now be published whenever I have received 10 questions (through Google, Yahoo, and AOL searches). I used to publish 20 questions at a time, but some of my readers think this Q&A format would be better if it was done ten questions at a time instead. You asked for it; you got it.

Q: Does American Express have to notify you when they lower your credit limit?

A: American Express and other credit card companies do not have to notify you before they lower your credit limit. However, these card companies are required to send you a written statement detailing the reason for the adverse action. (See the Equal Credit Opportunity Act (link here), 12 CFR Section 202.9.) (See also Fair Credit Reporting Act (link here), Section 615(a).)

Q: Why would a creditor let me skip a payment?

A: Creditors allow borrowers to skip payments for a host of reasons. I'd guess that the most common reason, though, is so that card companies can generate even more interest (call me a skeptic). Even though a creditor allows you to take a "payment holiday," your balance will continue to accrue interest. Unless you have an emergency, I would never recommend skipping a payment.

Q: What if you don't have credit?

A: If you don't have credit, you need to devise a plan for yourself. The accumulation of credit is a life-long endeavor. It should be undertaken slowly. As I like to say: it's a marathon; not a sprint. If you are young, and just starting out, you might want to read a story I wrote back in July (link here). You might also want to check out this story (link here) as well. And this one (link here), too (in case you had credit before but trashed it).

Q: Denied credit because bankcard balance is growing too fast?

A: Absolutely. That's a very common reason to get denied for credit. If your balances are growing too fast, that means other creditors are worried that you are taking on too much debt -- debt that you may have trouble paying back. As a result, would-be creditors are shy about extending new credit to you. I have an old saying: Get credit when you can, not when you have to (link here). When you need it most, creditors are reluctant to give it to you. That's because you appear desperate. My advice? Pay down the debt you currently have. That will help your utilization ratio and it will free up some of your available credit.

Q: American Express ruining FICO scores?

A: I'm not sure that American Express is ruining FICO scores, but I can say that some of American Express's risk-management techniques leave a lot to be desired. Amex's favorite risk-management tool (link here) right now seems to be credit-limit reductions. If you have a balance on your card, and American Express is lowering your limit to just above your balance, you're being subjected to balance chasing. Chasing the balance sucks. It sucks because it makes your card look maxed out. I've written a nice primer on chasing the balance. Give it a read (link here).

Q: 4506-T Amex cancel -- apply again.

A: Sure have been getting a lot of American Express questions lately. Add this one to the list. I'm thinking that this particular reader was thinking about not complying with American Express's financial review request. If that's the case, here's what happens if you don't comply with the request for tax records. Your account will be shut down. If you apply for a card later, and get approved, you'll be required to provide that 4506-T tax request. If you don't, American Express will not open the new account.

It's also possible that this particular reader was trying to find out what happens if you do comply with the 4506-T request and Amex still cancels you. Can you apply again later? The answer is yes (though I would wait for a good period of time). But do know this: there is nothing to prevent American Express from eventually doing another financial review if you do reapply and get a new card.

Q: FICO adverse action reasons?

A: Officially, these are called "reason codes." In a recent story, I listed the top nine reasons for being denied credit (link here). The list comes from Equifax.

Q: Fair Isaac calendar listings.

A: Here you go. Here is a full listing (link here) of everything that Fair Isaac has on its calendar. Note that it has several webinars scheduled. I have written about Fair Isaac's webinars in the past. You should check them out (link here).

Q: American Express card close reconsideration address?

A: Either this person got his or her card closed or this person narrowly missed getting approved. If it's the latter, then the person is interested in trying to get the application reconsidered.

Here is the address for American Express reconsideration:

American Express
P.O. Box 31525
Salt Lake City, UT 84131
Attention: Reconsideration Request

And here are some phone numbers that might help as well:

1-801-945-2884 (Credit Dept)
1-800-297-6197 (Executive Offices)

Thanks to Justin ("Tuscani" to people who know him at creditboards and myfico) for providing this information.

Q: How to get my MasterCard's CID online?

A: Let's start at the beginning. MasterCard does not refer to it as a CID (American Express does). Instead, MasterCard calls it a card verification value code. MasterCard's is officially called the CVC2. The CVV code is used for transactions when the card is not present. Think Internet purchases. The CVV code for MasterCard, Visa, and Discover can be found on the back of the card. It's three digits. The American Express CID is four digits and can be found on the front of the card (above the last five digits of the card number). These codes are used to reduce the amount of fraud that takes place with credit cards. As far as I know, it's impossible to get these numbers online.

READER ALERT: For more credit questions and answers, the entire 10 Credit Questions & Answers index can be found here (link).


TheVibeRAIDER said...

The Skeptic says Do Not Skip.

I approve of this message.

GlobCredit.com said...

Thanks, Virgil. Quiet day around here. Thanks for visiting.

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