As director of consumer education for Credit.com, author and consumer-credit expert Gerri Detweiler is dedicated to helping people understand their credit and debt. She contributes regularly to the Credit.com blog, and she writes about those issues as well as financial legislation, budgeting, debt recovery and savings strategies. She is co-author of Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights, and Reduce Debt, Reduce Stress: Real-Life Solutions for Solving Your Credit Crisis. Her TalkCreditRadio.com podcast archive features many hours of discussion of smart credit habits and other personal-finance issues.
The Score caught up with Detweiler between speaking engagements, and she graciously spared a few minutes to share her insights.
As the economy rebounds, are you seeing any interesting shifts in the concerns or priorities among the consumers who seek your advice?
We are seeing a great deal of interest among consumers who want to work on their credit. Some of them have been through very difficult financial setbacks, but they are determined to get past them. We get a lot of questions from consumers who want to know about tips and strategies for better credit scores, how to resolve collection accounts, and how they can purchase a home again.
Come tax time we will also get a lot of questions from consumers who received 1099-C forms for canceled debt. Those questions often start rolling in mid-January, when those forms start going out from lenders.
If there were one credit scoring misconception you could dispel forever, what would it be?
The biggest misconception consumers have is that there is one “real” credit score, and by extension that all others are fake. If a lender uses a score to make decisions, then in my view it is a real score. There are many different types of credit scores and often scores are customized to particular industries. For example, auto lenders may use one type of score, while mortgage lenders will likely use another. When we show consumers their free credit scores, we really try to help them understand that it’s less about the particular number and more about the factors that make up their scores. Are they strong? Or are there areas where they can do better? Toward that end, we give consumers two free scores each month, and one of them is a VantageScore 3.0 credit score. By showing them two scores – which in most cases will be different numbers – we can emphasize that point.
As a seasoned provider of consumer credit-scoring advice, is there a credit-scoring question you get especially tired of having to answer? Can you answer it one more time?
I really like to help and answer questions when I can, but if there’s something that frustrates me I would have to say it’s when I get a call from someone saying “I want to buy a home as soon as possible. Can you help me fix my credit fast?” Those calls usually come to me through real estate professionals locally who are hoping there is a quick fix for a potential client. (I don’t offer credit repair, by the way! But I have spoken to local real estate groups, so I suppose that’s where it comes from.)
That question is problematic for a couple of reasons. One is that there isn’t always a quick fix. If you want to buy a home and you know your credit is going to be an issue you should be working on it at least a year ahead of time. But the other problem is that it’s impossible to say exactly what a consumer should do without reviewing all of their credit reports and the information that goes into their scores.
How do you feel about expanded consumer access to credit scores, through free online services such as the one offered by Credit.com, and how do you advise consumers to take advantage of that access?
It’s exciting to be part of the movement that is helping consumers take more control over their own credit and personal data. Most people don’t understand just how much their credit can impact their finances. We just developed a Lifetime Cost of Debt tool that shows people in very clear terms that bad credit can potentially cost them hundreds of thousands of dollars in interest alone over the course of their lives.
I believe that giving consumers free access to their credit scores and credit education is just the beginning, and we’re going to see a lot of new and interesting opportunities to help them protect and manage their data in the coming years.
Do you have tips for consumers who want to maintain healthy credit through the holiday season and on into the New Year?
First of all, think carefully about whether you want to open new credit cards before you are at the cash register and the salesperson is telling you that you can get a big discount if you open a credit card. In a recent survey, we found that about a third (31 percent) of respondents said they felt bullied by a store clerk into opening a new account during the holidays. More than a quarter (28 percent) said they had given into one of these pitches, but when they did about half regretted opening a new account. There are great retail cards out there, but I don’t think opening one should be an impulse decision.
Another thing to watch over the holidays is your balances on your credit cards. If you’re charging a lot, the balances that are reported to the credit reporting agencies may be higher than usual, and that may result in a higher ratio of balances to credit limits, which can affect your scores.
Finally, I do believe that using a credit card is the safest way to pay for your holiday purchases. In light of all the recent data breaches, I’d suggest sticking to credit cards rather than debit cards if possible, but if you do use a debit card check your account balance on a regular basis to look for fraudulent activity.