Seeking Credit in a Tough Market: A Round-Up of Advice

With the turbulence in the financial markets and the resultant liquidity crunch, it's becoming harder for people and businesses to get credit. The Wall Street Journal recently reported that USAA Federal Savings Bank raised credit-score cutoffs and Citigroup is charging higher auto-loan rates for borrowers with less than perfect credit.

Of course, other factors besides your credit score may affect whether you're offered a loan and at what rate. Marketwatch.com reports today on an MIT Department of Economics working paper on other determiners of loan rates. Check out the in-depth article for more insights.

But credit scores still reign supreme. In response to the credit crunch, media outlets and bloggers of all stripes are offering tips, insights and advice on the arcane art of the spotless credit report. Here's a round-up:

1. Having a small dispute over a payment for a product you were less than satisfied with will not have a big impact on your score, so don't listen to anyone ranting on about 'ruining your score.'
2. FICO has been known to be a little secretive about how scores are determined, but they've opened up recently. Check out the inner workings of your score here.
3. Visa also recently released research that most Americans are unaware that employers can refuse to hire them based on their credit report. Over 50% thought it was illegal. It's not and it's becoming more common.
4. Be careful when paying off old debts. The very act of settling the debt turns an old problem into "new activity" and can actually harm your credit score. Ron Litt, president of Market Kinetix, suggests, "contacting old creditors in advance of paying what you owe and asking, "in exchange for full and prompt payment," if the company will report the debt as "paid as agreed" instead of the usual "paid settled."
5. Think before you consolidate. The Wall Street Journal explains: "Two cards, each with a $10,000 limit and a $5,000 balance, are generally better than one card with a $10,000 limit and a $10,000 balance." Also older accounts improve your score, so consider carefully before closing old accounts to open new ones.

(Image of happy checkbook by lemonjenny, CC 2.0)