The end of the semester is always a useful time to remind people about options for consolidating federal student loans. A few starting points (general do’s and don’ts):
- You CANNOT consolidate until you graduate.
- If you consolidated in the past to take advantage of lower rates (good for you!), you CAN [and want to] reconsolidate assuming you have borrowed something since then.
- You CAN consolidate wherever you want – you are not required to use your lender even if they are your only lending source.
- NEVER consolidate federal loans with private loans (for those with private loans, I have a link in the resource section to provide information about refinancing them).
- ALWAYS shop around for the program that will best meet your needs.
The most commonly asked question is always where to do it. Keep in mind that as long as you are doing a federal consolidation loan (which is the only thing you should do), the only difference between the products are (1) who you are paying each month; and (2) the financial benefits the companies offer [or don’t offer]. Everything else about the loans (eligibility for deferment, etc.) are identical, the lender chosen won’t offer anything better than another. Those two items listed are the only real differences with one ‘new’ (as of October 1, 2007) exception which I’ll outline later.
For the vast majority of people, item one (who you pay) is obviously not a real big deal – whether I make my payment to Sallie Mae, MOHELA, Dept of Ed, Citibank, or anyone else doesn’t matter. The second item (financial difference in benefits offered) is really the primary criteria that should be used in evaluating loan consolidation offers. How you look at the products is based upon how you intend to repay your loans.
If you plan to repay your debts quickly (2 years or less).
Find the program that offers the largest “up front” (principal balance) credit. Key Bank used to offer a 5% principal balance credit; I’ve been told this is still available, but it is not listed on their website, so you’ll want to do some homework. I’ve never seen a principal balance credit larger than this.
If you plan to repay your debts over time (graduated/extended).
If paying over time, an upfront benefit will be much less meaningful than a reduction in your interest rate. There are two states that currently offer the most substantial interest rate incentives. New Hampshire (which is open to anyone) offers a .5% reduction for auto payment, an additional 1% reduction when repayment begins, and a $250 principal balance reduction after 12 consecutive on-time payments (so the total rate benefit is 1.5%, given on day one). North Carolina offers a slightly larger benefit (2.25%), but the benefit is provided in a tiered fashion over time (.25% reduction for paying automatically; .5% additional interest rate reduction after 24 on-time payments, .5% additional after 12 more months (36 total), and 1% more after 12 more months (48 total) – 2.25% total rate reduction after 4 years). Obviously if I’m planning on repaying my debt in ~5 years, a program like New Hampshire where that benefit is immediate would serve me better than a principal balance credit and will also serve me better than a program like North Carolina where I have to wait 4 years to fully realize the benefit. North Carolina is going to best serve those intending to utilize an extended repayment (12+ years) option. North Carolina does require people to have a “state connection” in order to utilize their program. The easiest way to create that connection is to open up a 529 college savings plan for a child, sibling, niece/nephew – you can do so online in about 5 minutes with as little as $25. Once that is opened, you then have your connection and are eligible for their State Consolidation program.
EXCEPTION.
I mentioned above that there is one exception where I would not consolidate with a company offering the best financial incentives – that case would exist if I am being hired [and plan to continue working] as a “public service” professional. The best working definition I’ve seen is at http://projectonstudentdebt.org/2669_forgiveness.vp.html (is still being crafted). If I fit this definition, then I am the “potential” exception. An example of who this new program would serve is a student that just completed a graduate program in a field like social work; has a high level of student loan debt working in a field where their salary will never likely dramatically increase over time. This is the prime person for this program. How it works: Consolidate with the Department of Education (ONLY scenario where consolidating with the Dept of Ed will make financial sense) and select the income sensitive repayment. After 10 years of payment, the remaining balance will then be forgiven [you’ll be responsible for taxes on the forgiven amount, but the remaining loan amount will be wiped away]. This scenario is ONLY available if you use the income sensitive repayment option and ONLY if you consolidate through the Dept of Education. Even if I am a public service employee, if my debt level will not require me to repay my debt over more than a 10 year period, I will be better served by one of the other programs previously outlined!
Additional Resources.
Accessing your Federal Loan Info
OFS Consolidation Resources (Weighted interest rate calculator, repayment plan information, payment calculator, and other resources)
Private Loan Consolidation (READ PRIOR TO DOING – often not smart)
Kamis, 13 Desember 2007
Kamis, 06 Desember 2007
Mortgage bailout is the object of my ire
Ok, I know it's been a while--more than three months since my last post. In that time, I've welcomed a new daughter into the world, passed another test on my way to a Chartered Financial Consultant designation, and scrambled to find and buy a replacement car for my Sentra, which unexpectedly died on the Pa. Turnpike. So I've been busy.What prompted me to write today? Outrage. The culprit? The Bush mortgage bailout plan. It's even made me do something that I've never done before: write to my congressman and senators. (That would be Jim Saxton, Frank Lautenberg, and Bob Menendez--and you didn't even think I knew who they were, did you, Dad?)
Wish I had the government in step in to freeze the rate on the ARM I took out on my first house back in 1999, when I didn't know any better. Would have been nice to pay the low initial rate I got for an extra five years.
Better yet, wish M and I had used an ARM to buy that oh-so-nice $464,000 house we looked at a few years ago. We knew we could never afford it with a fixed-rate mortgage on our five-figure income. What were we thinking? We could still be living there, sitting pretty with an affordable rate until 2012. And who knows, by then I could have turned this blog into a money-making machine, become CEO of my company, or hit the lottery, so we could afford the payments when the rate resets then.
One anonymous poster on Real Time Economics sums up my feelings about the Bush plan pretty well, plus gave me a chuckle:
"I would like the government to help me out with my gambling debt in Vegas. The casino didn’t explain the rules very well. And I didn’t realize that the house had the advantage. I would like my life savings back. If you could just give me a little more time, I think I could win it all back. Please help me!"
Shhhh, anonymous...Don't give Washington any more bright ideas.
Credit Cards ('Risk-Based Re-Pricing')
Congress has been talking about revising current regulations surrounding credit cards for several months now. Some members of Congress are being very vocal about current practices in the credit card industry (practices described by one critic as “abusive and confusing”). You’re likely aware of one common practice referred to as ‘universal default clause’ – a provision in a card agreement that enables the cardholder to raise your rate if you miss a payment to anyone [doesn’t need to be that particular card]. Universal Default is a concept I’ve outlined in prior tips on card management.
Earlier this week I read about a Senate subcommittee scrutinizing a newer practice that was being called “risk-based re-pricing.” Ultimately, this takes universal default one step further. The idea behind universal default was to raise the interest rate because of the increased risk placed on the card company; with risk-based re-pricing, rather than raising rates due to missed payments, rates can be raised in any circumstance where your credit score is lower than it was when they initially gave you the card. Keep in mind that 30% is commonly the rate charged when one’s rate is raised! Obviously the high rates were of concern to the subcommittee, but they were also concerned about consumers having little notice of the increased rate [often automatically triggered by unexplained declines in ones credit score]. In some cases, merely opening another account (i.e., dept store card) triggered the downgrade in credit score … One of the curious cases cited was a consumer that had four credit cards from the same company (the argument is that she should have similar rates based upon this type of model); her current interest rates: 8%, 14%, 19%, and 27%.
My opinion – legislative change often never occurs; I wonder how much of this “conversation” is in hopes that the credit card companies will change questionable practices on their own prior to changes in law. Not a bad start. Citigroup and Chase recently have said they will discontinue the practice (Citigroup has already stopped) and Chase will take effect in March. We’ll see if others follow suit.
What are legislators seeking? Ultimately, everything I’ve read really boils down to two requests:
(1) Clarity for Consumers. The Truth in Lending Act [specifically Regulation Z] is designed to promote consumer awareness of loan terms. The argument on the part of consumer advocates is that credit card billing and interest rate practices are much too complex for an “average” person to understand. The proposed rule change would require card issuers to ultimately redesign card applications and solicitations [enhancing disclosures] providing clearer [more easily understandable] information on fees.
(2) Mandatory Notification. The second item currently being requested would require card companies to give its customers at least 45 days notice before ‘penalty pricing’ (raising rates).
Additional Resources.
- AP Article: Credit Card Execs Defend Rate Policies
- Truth in Lending Act
Earlier this week I read about a Senate subcommittee scrutinizing a newer practice that was being called “risk-based re-pricing.” Ultimately, this takes universal default one step further. The idea behind universal default was to raise the interest rate because of the increased risk placed on the card company; with risk-based re-pricing, rather than raising rates due to missed payments, rates can be raised in any circumstance where your credit score is lower than it was when they initially gave you the card. Keep in mind that 30% is commonly the rate charged when one’s rate is raised! Obviously the high rates were of concern to the subcommittee, but they were also concerned about consumers having little notice of the increased rate [often automatically triggered by unexplained declines in ones credit score]. In some cases, merely opening another account (i.e., dept store card) triggered the downgrade in credit score … One of the curious cases cited was a consumer that had four credit cards from the same company (the argument is that she should have similar rates based upon this type of model); her current interest rates: 8%, 14%, 19%, and 27%.
My opinion – legislative change often never occurs; I wonder how much of this “conversation” is in hopes that the credit card companies will change questionable practices on their own prior to changes in law. Not a bad start. Citigroup and Chase recently have said they will discontinue the practice (Citigroup has already stopped) and Chase will take effect in March. We’ll see if others follow suit.
What are legislators seeking? Ultimately, everything I’ve read really boils down to two requests:
(1) Clarity for Consumers. The Truth in Lending Act [specifically Regulation Z] is designed to promote consumer awareness of loan terms. The argument on the part of consumer advocates is that credit card billing and interest rate practices are much too complex for an “average” person to understand. The proposed rule change would require card issuers to ultimately redesign card applications and solicitations [enhancing disclosures] providing clearer [more easily understandable] information on fees.
(2) Mandatory Notification. The second item currently being requested would require card companies to give its customers at least 45 days notice before ‘penalty pricing’ (raising rates).
Additional Resources.
- AP Article: Credit Card Execs Defend Rate Policies
- Truth in Lending Act
Kamis, 29 November 2007
Debt Settlement
Debt has in many ways become “The American Way” … it has become so commonplace that meeting someone debt-free is often more surprising than meeting someone with substantial debts. Once someone finds themselves in the debt trap, the question becomes ‘now what?’ Several potential options are often thrown around: using a credit counseling agency to administer a DMP (debt management program) to manage the unsecured debts, arranging lower rates/ payments directly with your creditors, bankruptcy, and debt settlement/ negotiation. If you watch much TV late at night, you are aware that advertisements for debt settlement abound – it sure sounds good – “cut your debts in half,” “eliminate your debts in ½ the time,” “drastically reduce your monthly payments,” and other amazing claims. What is the truth? How does it really work? Let’s explore the issues and realities of debt settlement as a potential option in managing one’s debts …
What is it? Simply put, debt settlement is attempting to negotiate [‘settle’] a debt with a creditor in an effort to get them to take less than the amount owed. So what is the rub? Obviously, a creditor has no reason to settle on a debt unless there is evidence that you can’t pay it back. So, if you anticipate calling your creditors when you’re current on your accounts expecting to negotiate down the balances, don’t hold your breath. The account will normally need to be past due several months (typically 6 months for most debt settlement companies to work on your behalf; some will do it within 120 days of non-payment). So, if you were to see an advertisement and call them, they will inform you to stop making payments on your accounts and then they will ride in on the proverbial white horse and attempt to negotiate the debts on your behalf. A couple points of fact: if the debt is legitimate, a creditor isn’t required to negotiate; they can refuse to accept a settlement. Realize that becoming delinquent on debts is not a sure-fire way to get out of paying the full amount owed; you don’t have that guarantee [and avoid any company making such promises]. Second, if you are delinquent on your debts, you may be as successful negotiating on your own behalf as a debt settlement company would (without the cost – typically 10% to 25% of the amount you’re being saved).
The Federal Trade Commission offers the following suggestions [steer clear of companies that]:
- Guarantee they can remove unsecured debt
- Promise debts can be paid off with pennies on the dollar
- Claim their system will let you avoid bankruptcy
- Require substantial monthly service fees
- Demand payment of a percentage of savings
- Tell you to stop making payments and communicating with creditors
- Require you to make monthly payments to them, not creditor
- Claim that creditors never sue consumers for non-payment of debt
- Promise that using their system won’t negatively impact your credit
- Claim they can remove negative information from your credit report
With that said, there may be times when approaching debt settlement as a strategy may make sense [assuming you’ve also examined other options]:
- You have enough money set aside to offer a settlement
- You are paying the debt of another without obligation (i.e., parent)
- The debts are already approaching 6 months past due
- The debts are fairly small (<$1,000) or large (>$10,000)
- The impact on your credit isn’t going to matter
- The total costs of settlement are less than what you owe
- You are “judgment proof” (your assets [if any] are exempt)
Helpful Resources:
National Consumer Law Center – (An investigation of debt settlement companies)
Federal Trade Commission – (Ads promising debt relief may be offering bankruptcy)
What is it? Simply put, debt settlement is attempting to negotiate [‘settle’] a debt with a creditor in an effort to get them to take less than the amount owed. So what is the rub? Obviously, a creditor has no reason to settle on a debt unless there is evidence that you can’t pay it back. So, if you anticipate calling your creditors when you’re current on your accounts expecting to negotiate down the balances, don’t hold your breath. The account will normally need to be past due several months (typically 6 months for most debt settlement companies to work on your behalf; some will do it within 120 days of non-payment). So, if you were to see an advertisement and call them, they will inform you to stop making payments on your accounts and then they will ride in on the proverbial white horse and attempt to negotiate the debts on your behalf. A couple points of fact: if the debt is legitimate, a creditor isn’t required to negotiate; they can refuse to accept a settlement. Realize that becoming delinquent on debts is not a sure-fire way to get out of paying the full amount owed; you don’t have that guarantee [and avoid any company making such promises]. Second, if you are delinquent on your debts, you may be as successful negotiating on your own behalf as a debt settlement company would (without the cost – typically 10% to 25% of the amount you’re being saved).
The Federal Trade Commission offers the following suggestions [steer clear of companies that]:
- Guarantee they can remove unsecured debt
- Promise debts can be paid off with pennies on the dollar
- Claim their system will let you avoid bankruptcy
- Require substantial monthly service fees
- Demand payment of a percentage of savings
- Tell you to stop making payments and communicating with creditors
- Require you to make monthly payments to them, not creditor
- Claim that creditors never sue consumers for non-payment of debt
- Promise that using their system won’t negatively impact your credit
- Claim they can remove negative information from your credit report
With that said, there may be times when approaching debt settlement as a strategy may make sense [assuming you’ve also examined other options]:
- You have enough money set aside to offer a settlement
- You are paying the debt of another without obligation (i.e., parent)
- The debts are already approaching 6 months past due
- The debts are fairly small (<$1,000) or large (>$10,000)
- The impact on your credit isn’t going to matter
- The total costs of settlement are less than what you owe
- You are “judgment proof” (your assets [if any] are exempt)
Helpful Resources:
National Consumer Law Center – (An investigation of debt settlement companies)
Federal Trade Commission – (Ads promising debt relief may be offering bankruptcy)
Kamis, 15 November 2007
Spring Courses - OFS Award Winner!
I'm out of state at a conference this week ... Tomorrow I will be accepting an award on behalf of our Office for Financial Success which is being recognized by the Association of Financial Counseling and Planning Educators as the Financial Counseling Center of the Year.
A couple things I wanted to bring to your attention this week:
- In addition to the tip being e-mailed, the tip is also posted to a blog site each week (http://mufinancialtip.blogspot.com) - this is a good way to read the tip if the e-mail comes 'garbled' ...
- An archive of tips [sorted categorically] is available at: http://financialsuccess.missouri.edu/archive.
- The Financial Survival & Success one-credit courses are available this spring (see below). There are NO PREREQUISITES for either class.
FINPLN 1183 (Financial Survival).
A one-credit course geared to underclassmen; class focus is on "student-specific" financial issues: credit cards, student loans, debt management, avoiding common financial pitfalls, credit issues, etc. Offered pass/fail.
Reference #77602
Thursdays -- 2:00-2:50
Meets once/week for full semester
Instructor - Dr. Mark Oleson
FINPLN 4483 (Financial Success).
A one-credit course geared to upperclassmen; class focuses on common post-graduation financial issues: Beginning Investing (stocks, mutual funds, bonds, etc.), Retirement Planning (401(k)s, IRAs), Managing loan and other accumulated debt after graduation, Insurance issues, Purchasing a home, etc. Offered pass/fail.
Reference #82422
Tuesdays -- 2:00-2:50
Meets once/week for full semester
Instructor - Dr. Mark Oleson
A couple things I wanted to bring to your attention this week:
- In addition to the tip being e-mailed, the tip is also posted to a blog site each week (http://mufinancialtip.blogspot.com) - this is a good way to read the tip if the e-mail comes 'garbled' ...
- An archive of tips [sorted categorically] is available at: http://financialsuccess.missouri.edu/archive.
- The Financial Survival & Success one-credit courses are available this spring (see below). There are NO PREREQUISITES for either class.
FINPLN 1183 (Financial Survival).
A one-credit course geared to underclassmen; class focus is on "student-specific" financial issues: credit cards, student loans, debt management, avoiding common financial pitfalls, credit issues, etc. Offered pass/fail.
Reference #77602
Thursdays -- 2:00-2:50
Meets once/week for full semester
Instructor - Dr. Mark Oleson
FINPLN 4483 (Financial Success).
A one-credit course geared to upperclassmen; class focuses on common post-graduation financial issues: Beginning Investing (stocks, mutual funds, bonds, etc.), Retirement Planning (401(k)s, IRAs), Managing loan and other accumulated debt after graduation, Insurance issues, Purchasing a home, etc. Offered pass/fail.
Reference #82422
Tuesdays -- 2:00-2:50
Meets once/week for full semester
Instructor - Dr. Mark Oleson
Kamis, 08 November 2007
Credit Card Selection
The debate on the good, bad, and ugly about credit cards is one not likely to end anytime soon. The reality is that most people have them, few people understand them, and many people create untold credit and financial problems as a result of misuse. What I want to address are some of the common criteria that should be evaluated when considering what card I should get [the whether I should or shouldn’t get one is a post for another day] … the type of card should largely be a byproduct of how you will use the card (pay in full each month, carry balance, etc.). There are plenty of options – 30,000+ to choose from.
ANNUAL FEE. Fee charged for membership privileges – typically $50 to $100 per year. By shopping around, this is a fee I can/should avoid – 75% of cards do not charge an annual fee.
INTEREST RATE. This is obviously a high priority if my tendency is to carry a balance. Rates can vary dramatically – common rates on the low end are around 8.9% (you can get lower – I have a card I got a while ago with a fixed rate of 4.9%); on the high end, I’ve seen fixed rates approaching 30%. For students, a ‘normal’ range for a “good rate” will be 12% - 16% (unless of course you already have established credit). Pay attention to the fine print: introductory vs. long-term rate, variable vs. fixed rate, and default rate (if I am late on a payment) are all important elements.
BENEFITS. More and more credit cards are offering ‘perks’ to members for card use … the benefits vary dramatically: cash back, flight miles, insurance (rental car, flight, etc.), shopping discounts, gas rebates, and donation of % of charges to your charity are some of the more common examples. Read the fine print – Do I have to spend a certain amount to receive the benefit? Are there limitations on how much I can receive? Do the rewards expire? Are there other caveats/ stipulations? Ultimately, ask yourself ‘does the benefit exceed the cost?’ It doesn’t make sense to pay 21% to a credit card company in exchange for 1% cash back …
FEES. Annual fees can be avoided – if I’m late, or over-the-limit, my card is going to charge me. The question is how much? The answer is $35 [or more] per ‘offense’ in most cases. Balance transfer, convenience check, and cash advance are all other transaction fees to inquire about.
OTHER ISSUES. The items mentioned above are some ‘general’ questions to ask about – you may have other ‘specific’ questions you want to have addressed: customer service, level of credit limit, penalties (universal default?), how widely is the card accepted (Discover, AmEx), etc.Many websites are available to help you examine these criteria more closely as well as search amongst the wide array of card options to find one that will be most suitable for your needs.
CARD SEARCH/COMPARISON TOOLS:
- Bankrate
- CardRatings
- CardTrak
- Credit Card Clients
- Credit Cards Compare
- Credit Cards.com
- Index Credit Cards
- LowCard$
INFORMATION/RESOURCES:
- Bankrate
- Choosing a Credit Card – FRB
- Credit Card Blog
- Getting Credit – FTC
- Wikipedia – Credit Cards
ANNUAL FEE. Fee charged for membership privileges – typically $50 to $100 per year. By shopping around, this is a fee I can/should avoid – 75% of cards do not charge an annual fee.
INTEREST RATE. This is obviously a high priority if my tendency is to carry a balance. Rates can vary dramatically – common rates on the low end are around 8.9% (you can get lower – I have a card I got a while ago with a fixed rate of 4.9%); on the high end, I’ve seen fixed rates approaching 30%. For students, a ‘normal’ range for a “good rate” will be 12% - 16% (unless of course you already have established credit). Pay attention to the fine print: introductory vs. long-term rate, variable vs. fixed rate, and default rate (if I am late on a payment) are all important elements.
BENEFITS. More and more credit cards are offering ‘perks’ to members for card use … the benefits vary dramatically: cash back, flight miles, insurance (rental car, flight, etc.), shopping discounts, gas rebates, and donation of % of charges to your charity are some of the more common examples. Read the fine print – Do I have to spend a certain amount to receive the benefit? Are there limitations on how much I can receive? Do the rewards expire? Are there other caveats/ stipulations? Ultimately, ask yourself ‘does the benefit exceed the cost?’ It doesn’t make sense to pay 21% to a credit card company in exchange for 1% cash back …
FEES. Annual fees can be avoided – if I’m late, or over-the-limit, my card is going to charge me. The question is how much? The answer is $35 [or more] per ‘offense’ in most cases. Balance transfer, convenience check, and cash advance are all other transaction fees to inquire about.
OTHER ISSUES. The items mentioned above are some ‘general’ questions to ask about – you may have other ‘specific’ questions you want to have addressed: customer service, level of credit limit, penalties (universal default?), how widely is the card accepted (Discover, AmEx), etc.Many websites are available to help you examine these criteria more closely as well as search amongst the wide array of card options to find one that will be most suitable for your needs.
CARD SEARCH/COMPARISON TOOLS:
- Bankrate
- CardRatings
- CardTrak
- Credit Card Clients
- Credit Cards Compare
- Credit Cards.com
- Index Credit Cards
- LowCard$
INFORMATION/RESOURCES:
- Bankrate
- Choosing a Credit Card – FRB
- Credit Card Blog
- Getting Credit – FTC
- Wikipedia – Credit Cards
Kamis, 01 November 2007
Credit Inquiries
Properly managing credit is a common concern for many people. Being able to do so effectively involves balancing many issues, one of which is understanding the impact of inquiries on credit. Fair Isaac (the company that developed the most commonly used credit scoring model – the FICO score) estimates the impact of inquiries to be 10% of one’s overall credit score. This definition of “new credit” as it is referred is comprised of:
A credit inquiry is “an item on a credit report that shows a business with a ‘permissible purpose’ has previously requested a copy of the report.” What do I need to know about inquiries?
- Number of recently opened accounts.
- Number of recent credit inquiries.
- Time elapsed since recent account openings; by type of account.
- Time elapsed since inquiries.
A credit inquiry is “an item on a credit report that shows a business with a ‘permissible purpose’ has previously requested a copy of the report.” What do I need to know about inquiries?
- Personally viewing your credit DOES NOT negatively impact your credit.
If you get nothing out of this tip other than this one fact, I’ll be happy. Don’t be afraid to review your credit because of the negative impact the inquiry will have. IT DOES NOT HURT YOU. Viewing your credit for mistakes, potential fraudulent activity, etc. is the responsible thing to do. Remember to use the government’s free site to order your report(s) - one free report per year per bureau. - Understand the two general types of inquiries.
There are two main types of credit inquiries – often referred to as “hard” and “soft” inquiries/pulls. Hard pulls are voluntary, meaning that you initiated the action for a particular company to view your credit. Fair Isaac mentions that the impact of hard inquiries can vary (depending on your ‘level of credit’ – the more established the credit, the less the impact); but they can temporarily lower one’s credit score up to 5 points [it will lower the score for 6 months after which time it will go back up]. Soft pulls on the other hand, are involuntary (offers for pre-approved credit, credit checks by prospective employers, inquiries by companies with whom you do business, etc.) they are visible on your report but only for informational purposes. Soft inquiries have no impact on your credit, although both types of inquiries will stay on your report for two years. Only hard inquiries are visible to people looking at your report; they won’t see soft inquiries (only you will see them). This fat wallet resource documents which companies will use a hard pull when reviewing your credit and under what circumstances. Some banks will do a hard pull when you apply for a checking account, cell phone account, [or other “non-credit” account] – others will do a soft pull to open the same account. I think it’s helpful to know how they do it since one impacts you and one doesn’t … - Don’t be afraid to shop for rates.
Many people [because of the impact of inquiries on credit] are afraid to shop around to find the best loan terms for auto/mortgage or other loans. Shopping for a loan [through multiple sources] will show up as multiple inquiries on your report (since they are viewing your report). To compensate for this (since someone obviously isn’t going to get four mortgages), a credit score will ignore all mortgage and auto inquiries made 30 days prior to scoring. For inquiries more than 30 days old, the model will treat inquiries made in a “normal shopping window” as one inquiry. If your lender is using the ‘new’ scoring model, that window is 45 days; the window in the ‘old’ model is 14 days.
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