I was talking to a person about car insurances today and it was kind of interesting as we talked about how even if you say never intended to drive a vehicle until way later it could be beneficial to get your license anyways. Reason being is that the insurance rates are heavily dependent on whether or not the person has been accident free for an X number of years.

So like in the case here with the insurance provider in this province getting your license and then simply leaving it dormant can make your reputation go higher in order to get the better rates. Kind of like a credit card in some ways I suppose where you would sign up for one and then just leave your balance at zero until you are ready to use it. In many ways it can make you look good in terms of being like a person who always pays off your balance and hence can get more credit while looking good from a credit a score point of view.

So I got the new credit card today that has the security chip in it. The chip part seems shiny and I believe the intent is that a terminal can simply scan this part as oppose to you having to swipe the card. As well, your PIN number is supposed to eliminate the need of a signature. I am really wondering how this is more secured for items like Internet purchases though considering the chip can’t do much in that sense.

There was something I found kind of funny as a result of getting this new card. Basically, in the mail it gives you a breakdown of all the benefits that you get as well as the interest rate that you would pay. The interest rate they have given me for this card is 19.500%. I personally don’t care since I always pay my balances off in full.

However, in this mail it indicated that if I am the type of person that normally carries a balance I can pay a $35 annual fee to take advantage of an 11.9% interest rate. I was just thinking, can’t you normally just reduce your interest rate by asking them many times? I guess that is a new way for credit card companies to make money.

Wonder if I’ll actually get to test out these card features any time soon as I haven’t seen any of these new terminals live yet.

I was reading some incredible stories today of people who signed up for these low interest credit cards where to entice people to sign up the offer was something like 2% of the entire balance until you pay it off. Essentially, you can treat it like a bank loan where you can take a cash advance option for say $10,000 and then only pay 2% once until you pay off the balance.

Of course, in the fine print it indicated that the rate could change at anytime. Guess what? After a few months all those people kept revolving their routines around taking cash advances out of the card with little thought about paying it back anytime soon. All of a sudden, they are then told that the interest rate will be changed to about 20% now. Saying that they are definitely paying for it is an understatement.

Living life through a credit card is risky enough as it is I’d say which no one should be doing. But this example sure shows you that if you were thinking of getting a free ride of sort through these types of promotional credit cards that you better think twice.

I was watching that web cast of Suze Orman just yesterday and boy did that open up some interesting moments such as that restaurant owner that is mad over the advice of not dining out for a month. But I’ll save that for another post as watching that web cast made me realize that a lot of people actually don’t know how to obtain their credit scores/credit reports. Figured it would be better to talk about that first since there was a discount offer too.

In a nutshell, a credit score is basically used as a way to determine your “credit worthiness” as it is based on how well you can mange your credit and finances. If you are the type of person that always pays your bills on time then you will have a higher score compared to someone who only pays the minimum or worst doesn’t pay their bills at all.

That way, the lender can determine whether or not you are responsible enough to give credit to. In some cases too, employers use this information to determine your suitability for a job. If you want a little more detail about what a report can show, I posted my own online credit report way back that you can see at my personal credit score and profile post.

Just for clarification too, there is a difference between a “Credit Report” and a “Credit Score”. The Credit report essentially has all of your personal details such as your contact information and job history. At the same time, if you have any type of existing credit (such as a credit card or mortgage) it will appear on your credit report. As well, any outstanding debt that you have.

A “Credit Score” is basically taking all that information from your credit report and putting a number to it in order to show the lender your “risk level” in giving you credit. A low score means you are a risky person to give credit to as you are not likely to pay them back whereas a high score shows the opposite. A score usually ranges from 300 to 900 in Canada and 300 to 850 in the US. (People in the US often refer to the score as a “FICO score”)

While getting your credit report online is easier and more convenient, I’m surprised that web cast didn’t mentioned anything about how you can get it for free. (Especially for a segment that focused on helping people to save money). I believe the only difference between Canadian and US residents is that Canadian residents can get as many free credit reports as they wish when it comes to requesting for the report to be sent by mail.

While the process itself should be similar, I will use the Canadian system as the example (Since I am from Canada too). You would first have to choose a credit bureau to contact and here in Canada the two largest ones are TransUnion and Equifax.

Let’s use Equifax as an example. To obtain a free credit report, you would need to fill out a form such as this located at http://www.equifax.com/ecm/canada/EFXCreditReportRequestForm.pdf .

As you can see, it requires some very basic information such as your contact information along with a copy of two pieces of ID. Afterwards, you simply mail it off to the address listed and you can expect to get a report in the mail by 5 to 10 days. It’s actually that simple and you will receive a lot of insight to your credit history. This is the free way to get your report for those that need to save every penny.

For US readers, you can visit the website at annualcreditreport.com and obtain your free credit report that way.

Now the more convenient way is to simply order it online nowadays. Usually the fees can range from $9 to $15 to obtain a basic report and about $25 to get your score with it(Keep in mind too that your credit score could be slightly different between the credit bureaus).

While there are normally higher priced packages available, the main difference is that they usually provide you with more services such as giving you monthly reports as well as advise on how to improve your score. But for a person like myself that just wants the score and report, the basics is good enough. Here are some links to various providers where you can get them online:

Canada:

Equifax – The price to obtain an Equifax credit report is $15.50. Although, the “Score Power” package might be better for $23.95 as you will get your credit score with it.

TransUnion – You can get the report online for about $14.95 and with the score it is $22.90

US:

Equifax – While you can get the credit report only for about $11, I think getting the $15.95 option to get your FICO score as well is the better way to go. They do also have an option to get a report from all the three large bureaus at once (Equifax, TransUnion and Experian) and a monthly report plan for about $12.95/month.

Experian Triple Advantage – The company offers a monthly packaged deal costing $14.95 a month that grabs the score from all three credit bureaus. While it says free on the page, it is a free 7 day trial and so if you don’t want to pay you would need to cancel it before the promotional date expires.

TransUnion – They operate a brand called “Truecredit” where the service costs $14.95 a month and reports your credit score from the top three credit bureaus.

MyFicoScore.com – This was the one that Suze Orman was clamoring about on the Oprah Web Cast. Apparently until about January the 22, 2009, by using this link at http://www.myfico.com/Products/FICOKit/Description.aspx?lpid=SUZEWEB3&promocode=50FICOKIT you can get the FICO report package that is normally $49.95 for $24.97. Apparently the discount will apply automatically at the end of the transaction. From what I see, you are most paying a premium fee for her branded kit.

So hopefully that gives everyone some good ways to get your credit history. There is pretty much a good option for everyone to go with depending on your budget and needs.

What a crazy story this was. I was just watching this clip about how some credit card companies and banks in the US are apparently keeping an eye on the type of things people use their credit cards for as a potential warning sign of the person having financial difficultly.

For example, if the person used their credit card for a medical related bill they may do things such as increase one’s interest rate or how it could be a sign to drop one’s credit score. I personally don’t see how that can be truly relevant compared to whether or not a person pays their bills on time.

It’s almost like saying that if a person purchases a bunch of financial management books or making money videos with their credit card that it would be a good sign to increase their credit limit and score. Sounds kind of silly to me.