Credit/Debt Recovery

Correcting Lifehacker on credit scores

Lifehacker is a very good blog I visit frequently. They often cover credit and credit-reporting issues, but today they got something wrong.

Their post started with "You have the right to see your credit score once a year..." Not true, of course. You can see your credit report for free, but not your score. The commenters on the post were alert and immediately corrected this error, which hasn't been updated in the article itself yet.

In the article, Lifehacker links to annualcreditreport.com, which is the right place to get one's credit report for free, but should absolutely be avoided if you're looking for a credit score. the scores they try to tack on to your report for an additional fee at annualcreditreport.com are FAKO scores, and are useless. If you need your actual credit score (the one with a proven track record that lenders use), you have to go to myfico.com. Avoid buying your score directly from the credit bureaus if you want information of real value.

On the Credit CARD Act of 2009

It's been weeks since this credit card legislation was signed into law, and I haven't been completely sure what I wanted to add to the discussion. On the one hand the law is onerous and will have negative unintended consequences. It already has started having negative consequences, in fact. 

But on the other hand, the intended victim of this new law is the credit card industry, for which I have NO sympathy. So it's hard to really get worked up to rant against a law that puts them in the crosshairs.

The problem is, the law doesn't do the simple things it needed to do, and instead does a bunch of other meaningless things. Here's what we needed out of credit card reform:

• Strict contract enforcement. Creditors need to be compelled by law to abide by their signed contracts with consumers and not be able to change them at will. The new law still lets them revise the credit card agreements on the fly, and only requires that they provide 45 days notice to consumers before they change your terms. That's not good enough.   
• The burden of revising a credit card agreement needs to be shifted to the creditors. Traditionally, the burden is entirely on the consumer. If you get a rate hike or other change in terms that is detrimental to you, you have to take action to cancel the account, by sending snail mail to an address buried in fine print in a seven-page revised credit card agreement. The burden be shifted toward the creditors, by requiring that they get a new signature from their borrowers whenever they revise a credit card agreement. If they can't get one, the account gets cancelled. That's as it should be. 
• We need a law that protects consumers, instead of one that punishes them. The provisions of the law that were intended to rein in credit card lenders are easily passed on to consumers in the form of higher fees, interest, no grace periods, and fewer rewards. In the end, the creditors will be making the same amount of money, because the people who still qualify for credit will be paying a lot more. 
• Smarter protections for college students. The law makes it very difficult for adults under 21 to get a credit card. A better way would have been to require personal finance education to prepare college students for the responsibility of using credit. 

Here's a brief summary of what the law does, if you're curious.

Articles on teaching your children about money

Here are a couple of short articles that offer some good advice for parents who want to help their children become more financially literate:

6 Guiding Principles to Teaching  Your Children About Money

One of the principles mentioned at the above link is establishing an allowance for your children. Here's another article that just deals with handling your kids' allowance:

5 Tips for Your Kids' Allowance

I'd also add that parents should repeat the best advice ever given by a parent to his child: "Neither a borrower nor a lender be."