05.04.23 Building Or Rebuilding Your Credit / Free Returns - While They Last

It's my pleasure to welcome you to the Clark Howard Show, where our missions deserve you and empower you. She makes better financial decisions in your life. One decision I hope you'll take is to subscribe to our podcast, our YouTube channel, or our newsletters. You know the cost of each of them? Absolutely free and at the same time. You can also join our community at clark.com slash community. Follow us on social media, submit a question on Clark Stinks, or get one-on-one free advice, information guidance, which we've been doing for more than 30 years. You can see how to do that at clark.com slash C-A-C. So I want to talk about trying to build up our credit. There's so many people who don't know how to get going, where to start, what to do after a rough patch. And I'm going to begin this episode today about taking you on the glide path to steadily better credit. It doesn't have to be that perfect 8.50. And later I recently talked about free shipping, having more and more ring fences around it, because it ain't free in the first place. What about returns? Returns have been a curse on retailers and are actually becoming more difficult for you with more and more places. We're going to talk about that later. So for whatever reason, you're needing to establish credit. You have had bad credit, whatever it is. And I've talked about so much and we got so many questions about the best this card, the best that card, the best reward card. The best travel card. It's always these cards that are for people who've got really solid credit, everything's hunky, dory. You know, I love the cash back cards. So you've got so much of the focus that you've heard from me on this. And I haven't done enough to talk about what happens when things are not the best. My first answer with this always is credit unions. I love what credit unions offer with fresh start programs. But for various reasons, you may be in a credit union that doesn't offer a fresh start program. You may not qualify for their fresh start program. Whatever the circumstance, the credit union angle doesn't work for you. So what should you do? Well, we have a write up at Clark.com. The best choices for you when you're trying to get this going. And we even did it like Olympic medals, gold, silver, bronze. And our gold medal winner remains one that I first talked about. Gosh, I don't even know how many years ago. The pedal card, P-E-T-A-L. And it's actually the pedal two card. That was absolutely the best. And then we came in silver with one that's a controversial company because people have had time to time customer no service issues with them, but the Chime Credit Builder card. And in third place, winning the bronze, the Discover It Secured Card. Discover is overlooked, but Discover It Secured Card is a very unique product. Each of these in their own way, very, very unique. And I want to tell you at Clark.com, if you have a family member, you yourself, a friend who's trying to establish a re-established credit, go read our review and you'll see why these are our three favorite opportunities for you to establish a re-established credit. They don't have a lot of the guy choose. You know, if you've had a problem with credit, you're going to get a lot of solicitations from absolute trash cards. I mean, just, there are some despicable characters out there that are pushing really, really substandard products, taking advantage of people's desperation. And that really upsets me. So these three are one place show, if you like horse racing. These three all do good jobs and you can go through and read the explanations and they'll help you with the possibility of you establishing a good credit record or re-establishing one, pushing the credit scores up the point that you won't need these kind of things and you can then graduate to regular credit and ultimately go to graduate school and the greatest cards, the ones that throw all kinds of candy at you, all kinds of rewards that come your way. Krista? First question is about credits from Cynthia in Wisconsin. She says, my credit score recently dropped from 820 to 730. Oh, 90 point drop. How can I find out why when my finances have not changed? I don't have debt and have not missed any payments. Okay. So the likeliest immediate cause of a 90 point drop and particularly if this is the vantage scoring model that Equifax TransUnion and Experian have a joint venture company trying to compete with Fair Isaac with FICO, the FICO score which is the one most often recognized as like the gold standard of credit scores. The credit bureaus came up with their own called Vantage. And Vantage scores move very rapidly based on how much you charged in that month. Remember, even if you pay in full, your ratio, the amount of your available credit you're using accounts for a big chunk of your credit score and more volatile for some reason with the Vantage model than Fair Isaac. And most of us are FICO. Most of us, if we have access to our scores, they're going to be Vantage scores. So if you are not signed up yet, go set up a credit karma account and you'll be able to see the factors and the likeliest cause is in fact what I'm talking about, how much you charge in a prior cycle. Again, regardless if you paid the balance in full, it's how much of the credit available to you you used in a cycle. If you like, I'll get these notices based on Vantage and I got one the other day and it was like this exclamation point about my score had gone up like 63 points or something. It was simply because I had very low utilization of credit cards that month and the month before because of travel, I had a much higher utilization rate and they just clobbered me with it. But it's a good idea with, since credit karma is free, you'll be able to track your scores with a good reasonable sense of how you're doing and what things you can do to improve by using the free credit karma tools. And then I use, I actually don't use, I use my credit cards that offer me free scores and I usually get notifications about that and check it regularly too because those will give you some insight depending on the. And it's funny because some of the credit cards use FICO and some use Vantage and I'll get a notice in the same day from one saying my score went down and the other says my score went up because their algorithms are different. All right, this is from Ken in Texas. I've had a Coles department store charge card for about the past five years only because it gives a seven and a half percent discount on Coles merchandise, which is better than Target. So they said that which is better than five percent discount with a target card, which I also have. But I don't shop at Coles often maybe one to two times per year. Recently they messaged me that I was approved for an upgrade to a Coles co branded Capital One rewards Visa card. I don't want another major credit card. And then the other shoe dropped Capital One sent me the welcome letter and the details showed that they will charge a 30.44% APR. Although I never carry a balance on my Coles card or my target red card, I was appalled by the sky high interest rate, contacted Coles and canceled the card altogether. My question now is did I hurt my credit score by canceling this still nuisance store credit card before it converts to a major credit card. And if so, how long will it take for my credit score to recover? Okay, so I wish I'd been able to answer your question before you canceled the card because the quote unquote upgrade or approval to this that's instead of being a monoline only in a Coles, but one that had a Visa or MasterCard logo on it through Capital One, that was actually an advantage for you because store cards are considered to be junk credit. Major cards are considered to be good credit. So since this is kind of a trade off because you gave up the opportunity to have one more major card fit in your credit mix. And at the same time you got rid of a junk credit, which depending on your overall credit picture could actually harm your credit having a store only card. So your situation is kind of a wash. The interest rate on store branded or co branded cards, as you have so wonderfully pointed out, is outrageous. In this case, 31%. Many of the co branded store cards that are tied in with a Visa or MasterCard issue are now at 36%. Store credit is junk credit. Whether it's got the logo or not, the interest rates charged are so bad ugly that the only reason ever to use store credit is as you were at Coles for the 7.5% discount and as you are at Target for the 5% discount. John in New York says Clark has always maintained car loans should be of a term no longer than three to four years, yet that does not seem realistic in 2023. You just talked about this the other day. Here's a fact cited in a recent CNN article. In 2004, only 1% of auto loans lasted six to seven years. Now those long term loans are 30% of the market. Only 5% of loans are paid off in two and a half to three years. Can Clark update or offer more up to date advice on this subject? Actually, it's so distressing what you tell me. The actual, if this is real, that a third of loans are ultra, ultra long term. This is a recipe for disasters I addressed the other day you mentioned. But this is a huge problem for consumers because they're upside down in vehicles, meaning you owe more than what the vehicle's worth for years and years to come. The answer is not disrespectful and I'm not being disrespectful to you, John, or to anyone else and sometimes people take it this way. The reality is if you cannot afford the purchase of a vehicle at 42 months or less, you cannot afford that vehicle. You have to buy a cheaper vehicle if you need to replace the one you have. If your vehicle is still driving fine, you need to keep it on the road because the thing is over time, you want to create financial security in your life, not voluntarily create financial insecurity in your life. Something that is changing as well. Your example of the ultra long car loans being a third of the market horrific to me. We've gotten so spoiled by something I talked about the other day, free shipping and the other half of that free returns. Both sides are changing. The fastest changes, free returns. I'm going to fill you in. This podcast is brought to you by Progressive Insurance. Hey listeners, whether you love true crime or comedies, celebrity interviews, news or even motivational speakers, you call the shots on what's in your podcast queue, right? And guess what? Now you can call the shots on your auto insurance too. Enter the name your price tool from Progressive. The name your price tool puts you in charge of your auto insurance by working just the way it sounds. You tell Progressive how much you want to pay for car insurance, then they'll show you a variety of coverages that fit within your budget, giving you options. Now that's something you'll want to press play on. It's easy to start a quote and you'll be able to choose the best option for you fast. It's just one of the many ways you can save with Progressive Insurance. Quote today at progressive.com to try the name your price tool for yourself and join the over 29 million drivers who trust Progressive. Progressive Casualty Insurance Company and Affiliates. Price and coverage match limited by state law. So free returns. I mean, what a great country. You buy something, you decide it's not right for you or you don't like it and you return it. We've gotten so conditioned to that that now return rates have just gone through the roof. So online sellers are cracking down. Amazon itself is starting to charge. You may have heard this already. Starting to charge returns on certain items in certain situations and you have to pay the return fees, go to like UPS or whatever. You have to pay the UPS shipping charge, send the stuff back to Amazon. Even things that are just have a problem with them. You're having to pay to send them back to Amazon and this is part of a move I speculated on recently about Amazon that Amazon is going to different levels of service for different people based on likely how profitable you are for them or to them. And these are called profitability index scores. This is coming alive in industries all over. And if you are very heavy in return rate, your profitability index score for any retailers going down, down, down, down, you're going to find that people will be part of whatever club they call it. And those are people that will get free shipping and free returns, whether it's not a membership or is a membership. We're going to be more and more put into a box and you got to know before you buy, I don't care if they got free shipping. You got to know what's the policy on returns, refunds and exchanges. Know that before you buy because we become so conditioned to free shipping and free returns that you can get caught not realizing even with a retailer you frequented that the policies have changed. This is going to give a direct advantage to clicks and bricks. Those are retailers that both sell online and have physical stores because with the physical stores, you will still have the ability typically to return the item where you towed it to them and return it at the physical store. You'll avoid the return charge. You're also going to find more and more with clicks and bricks that you'll pay a shipping charge potentially if something is shipped to you, but it'll be free if it's from the dot com to the store for pickup. And it all makes sense to me because if you don't have a system, we've been trained that free, free, free, free without consequences. And we need retailers to survive and putting up those barriers I think is necessary, but it's up to us, unfortunately, to know when we're going to be burned and when we're not. And I wish Amazon was a little more forthcoming with its customers when you might not be eligible for free returns when you buy something. Because it says in little type, it'll say free returns, they need to put in bigger type when it's not free returns. I actually have something about that from Kevin in Pennsylvania tip. Be sure to read the entire refund policy of a website before ordering. I was about to order an expensive item on sale from a website until I checked the refund policy. The policy sounded OK. At the bottom, it stated that sale items are not returnable. There was no mention of this anywhere even in the cart. Maybe non-returnable would have popped up after I entered my personal info, but I did not go any farther. And whenever I'm thinking about ordering from a new website, I take a screenshot of the refund policy for my records in case I have trouble with a return. Kevin, thank you for that. And that fits right with what we're talking about. Another thing, if you're buying from a new website to you, check out the reputation first online. There are a lot of times I'll consider ordering from a UFO I haven't ordered from before and I'll go read reviews and after reading reviews ain't no way I'm ordering from them. Harry in North Carolina says, I want to thank Clark for bringing up the point that there is no such thing as free shipping. Could he address the point that there is also no free labor? I'm in the flooring business and our technicians are skillful and well paid. We urge customers to check the bottom line price. We are consistently lower than the big boxes that advertise this. Unfortunately, we do not get to see some customers because they fall for this and often pay more for this embedded charge. While I'm a business owner, I'm a consumer as well. Sometimes the goalability of consumers really gets to me. There is one story out there that a person that had a whole house carpet installed with free labor felt so sorry for the installer that she gave him a $300 tip. This free labor ruse is also rampant in the bathroom model business and others. Thanks for letting my fellow consumers know about this. Harry, thank you. This is something we have addressed in the past. The other thing consumers should know is that many times when you go to a big box to buy something that just to buy it doesn't even have to have free labor or whatever, when there's a problem with the installer or whatever, the big box retailer is like, huh, what? Us? Huh? Where do we fit in this? It's their name on the deal. They mark it up because whatever company it is behind the scenes is getting the referral business from them that they might not have otherwise. When there's a problem, often the big box is like, I don't know why you're looking at us. We didn't do any of the work. Know that that extra markup sometimes comes with worse customer no service than even normal. From Dave in Florida, my neighbor has a rental that has a dead tree leaning over toward my house, ready to take out my fence and roof. Wow. The neighbor lives out of state and I do not know them. What steps can I take to protect myself documentation wise if the worst happens? Take pictures and send a certified letter asking him to take it down. I'd love for him to do the right thing and pay to remove the tree himself, but I can't assume this would happen. So, gosh, Dave, you are so on the right wavelength. You must document that the tree is dead or diseased, either conditioned because the way it works, I think everywhere in America, is that if a tree appears to be healthy or is healthy, so on your neighbor's property, storm knocks that tree down. You're responsible for the damage on your side of the property line. The neighbor's responsible for whatever damage on their side of the property line. On the other hand, if a tree is clearly visibly diseased or dead, the neighbor is liable because they've been negligent for the damage that occurs to your house and your property that would normally be your problem. The key you've already stated is you've got to document that. So yes, you take pictures. They will be automatically time stamped on your phone. Yes, you send the certified letter to the address you think is the address for the owner of this property and lives out of state absentee. Third, check with neighbors. You may have a neighbor near you who knows this individual. They may be a very nice, honorable person. You may be able to, with the neighbor's help, reach this individual because certified letter by its nature is never a friendly thing. It is an unfriendly communication. If you're going to engage in unfriendly communication, that should be after you have tried the other route. Failing to be able to contact this person, you absolutely send the certified letter because then not only do you have proof of the problem, you have proof that you have properly notified this individual and then it's up to them if they're going to leave you in harm's way in your life and your safety and harm their wallet in the future because you will have given proper notice and you live in Florida, I see. The insurers are under enormous financial pressure in the state of Florida. You have no idea what kind of coverage this individual has next door. They may not be carrying insurance on the property if they own it mortgage free. So everything you can do up front is really important to protect yourself, your family, and your wallet and your mindset is right to take these steps and document now. And I hope you have an absolutely great day. That's it for us today and I hope the rest of your day is perfect. Way beyond fantastic. Perfect. ♪♪♪♪