Is a cash only lifestyle truly possible in today’s world? Is cash only a viable option in a world where you are expected to build up credit in order to buy a house — or even get insurance? What about at the car dealership? At many dealerships, it’s actually harder to plunk down $10,000 in cash for your car than it is to finance it. Additionally, what about the security of risk of carrying that kind of money around with you?

Some people compromise by getting a debit card. With a credit card logo on the card, it is possible to use a debit card where credit is accepted, but it comes out of your checking account — mean that it is a way to use cash. This can be a good way to use money you have available now to make purchases that would ordinarily be made with a credit card. Of course, there are pitfalls to the debit card. You have to keep careful track of your expenditures so that you do not overdraw your bank account. And it doesn’t have all of the protections against liability that a credit card has. Besides, you can’t build a credit history with a debit card.

Building credit without a credit card

There are ways to build credit without a credit card — but some of these methods include borrowing money. You could get your car financed, and then pay off the whole amount much faster with the money you have saved up. You can also get a secure credit card (which is really just a debit card that is reported to the credit bureaus) to help you build a credit rating without using true credit. But watch out for the fees.

Additionally, there are some companies that can help you get a credit rating when you are functioning with a cash only lifestyle:

• FICO offers the Expansion Score, which looks at how you pay your bills — such as rent and utilities.
• Payment Reporting Builds Credit is another site that allows you to use your payment history to build a credit profile. Fees are involved in set-up.

Unfortunately, the credit card remains the fastest and most reliable way to build a credit history. And — even more unfortunately — we live in a world where a credit history is necessary if you want to buy a car, finance a home purchase or even get cable TV. Some employers even look at credit reports before they hire. Living a cash only lifestyle is admirable, but it isn’t always practical. But if you do live cash only, consider participating in some alternative ways of building a credit profile.

Do you live a cash only lifestyle?

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Can You REALLY Live a Cash Only Lifestyle?

(FYI: My post about the new FICO formula is including in this week’s Carnival of Personal Finance.)

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Carnival of Personal Finance: Up at The Fraud Files

Biggest FICO credit score change: Fine shadings

The change that will have the biggest effect on your credit score is likely to be the fact that the FICO score formula will now take into account degrees of your habits and credit history. One missed or late payment will be graded differently than if you have three missed payments. This change will likely boost many FICO scores.

However, there is an issue with what FICO will be considering. Will the company — with the availability of technology to better track habits — begin to include the types of purchases you make in your overall credit score? That remains to be seen.

Keep an eye on your credit score, though. There are estimates by FICO that between 40% and 50% of consumers could see their credit scores change by 20 points, in either direction.

Improving a credit score through piggybacking

Piggybacking (the practice of being an “authorized user” on someone else’s account) is also being affected by the new FICO score formula. It will look at who is piggybacking (children, spouses), and also make it harder to improve one’s credit score through piggybacking. This, according to Credit.com, is most likely to affect a large amount of women, whose credit scores are partially dependent on their husbands’ scores.

What do you think of the changes to the FICO score?

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FICO Prepares to Change Its Credit Score Formula

As you might guess, it didn’t take long until someone figured out that you could make money doing this. Want to improve your credit score before buying a house? Lay down your money and get paired up with someone else who is willing to let you “piggyback” on their account. The person with good credit gets paid, and you — even though you never actually use (or even see) the credit card account on which you are an “authorized user” — get the score you need to get the loan you want.

Closing — and reopening — the “authorized user” loophole

Last year, FICO, the leading credit score provider, decided that it was time to close the authorized user loophole. The company announced that it would no longer count “authorized user” accounts. The idea was to prevent people from buying their way to a falsely improved credit score.

Now, though, FICO is changing its tune on “authorized user.”

Using a new system (that will be top secret), FICO will weed out which authorized users are legitimate (children, spouses) and which are paid. This way, students and spouses can still enjoy the benefits of an improved credit score for first time loans, but unrelated folks can’t just pay someone to instantly boost their scores.

It is nice that FICO is addressing this problem. The decision to deny “authorized user” accounts probably put several responsible students out of luck for car loans and home loans.

But we will have to wait and see how effective this turns out to be.

*Read this past post for ways to improve your credit score the “natural” way.

image credit: sxc.hu

Post from: EveryJoe

FICO Backtracks on “Authorized User”

From now through July 31st, myFico is offering online communities a 20% discount on the FICO Credit Complete (all 3 FICO scored and reports) from. Visit http://www.myfico.com/Products/FICOThree/Description.aspx and enter the promo code BLOG20 to take advantage of this special offer.

This could be a good time to get everything at once, and see a complete personal finances snapshot — at least the snapshot of how lenders and others see you.

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Money Saving Tip: Get a Discount Credit Scores and Reports at MyFico.com

The MedFICO will be a way of rating those that obtain healthcare. Basically, it is a credit score that you receive for hospital payment. If your insurance company is slow (or doesn’t pay at all), you get dinged. If you don’t have insurance (an increasing problem for many of us), and you set up a payment plan that slows down how fast you pay your total bill, you get dinged.

Of course, the developers insist that it won’t affect the care you receive. But in a medical business where money does affect the care you receive, that’s a bunch of bull. Here’s what Jeanne Roberts at The Panelist believes will be the outcome:

Given the large percentage of uninsured or under-insured in the U.S., coupled with the notorious inaccuracy of credit-scoring companies (which have a 29 percent inaccuracy rate due to slow or inaccurate reporting), the healthcare outlook is grim. Add to that the tendency of insurance companies to pay late or not at all, and healthcare in this country – if based on credit scores – is likely to become unavailable to many Americans, beginning with immigrants and the poor and “trickling up” to middle-income earners caught in the most recent Federal financial fiasco we now call recession. This is not a sustainable policy, and puts American healthcare below the par set by Third World Countries like India, Mexico and China.

Do you agree with her assessment? Is it really a good idea to add this to an already-questionable US healthcare system?

Post from: EveryJoe

A Special Credit Score — To Determine Your Healthcare Treatment