Monthly Archives: November 2012

This is Good Karma

Of all the confusing topics in personal finance, credit scores (a number that represents the cumulative health of your credit) and credit reports (the report that compiles your personal credit history) have to be near the top of the list. Not only are there three different credit bureaus (Equifax, Transunion, and Experian) that each report information a little differently, but each bureau also calculates a FICO score that is likely different for each of the bureaus.

Your FICO score is called a FICO score because it is calculated using software from Fair Isaac and Company. This model is the predominant scoring method in the industry at the moment and many banks use a version of FICO to make lending decisions. However, since each bureau may collect a different combination of credit information, and because they each have their own formula for how to calculate the score, the three scores are rarely the same.

In addition, each bureau calls its FICO score something different: Equifax uses the Beacon score, Transunion calls theirs an Empirica score, and Experian simply calls their score the Experian/Fair Isaac Risk Model.

As if that wasn’t bad enough, the three bureaus don’t appreciate the stranglehold Fair Isaac has on the industry so they each have their own proprietary scores and in 2006 they collaborated to create a score called the VantageScore to compete with the FICO.

Finally, the bureaus want you to pay for their scores. These scores can vary significantly, it may be difficult to really gauge the health of one’s credit, and the score you pay for may not even be the score a bank uses to determine creditworthiness.

So, what’s the good news?

One of these bureaus has finally decided to create a FREE tool consumers can use to monitor and track their credit history and score over time. creditkarma.com is a service that tracks your score and credit report changes for free. The site provides daily updates to your TransRisk score (Transunion’s proprietary model), VantageScore, and Auto Insurance Score (score used by insurance companies to gauge one’s insurance risk).

I highly recommend checking out this website. Not only do they provide free score updates, but they also show changes in balances, risk ratings, and other alerts so it becomes much easier to understand how a credit score moves over time. And even though there are a myriad of different scores out there, consistently tracking one score can be useful and can also be very helpful when determining the best time to apply for a new loan. I use their free App on my iPhone and also access their website from my desktop.

Considering how difficult credit can be to manage, it is refreshing to see Transunion create a service that makes the whole process easier.

Does your iPhone do your Banking?

Right now I’m reading a book about banking called Bank 2.0 by Brett King that feels completely out of date. It was written in 2010.

Banking is changing so fast because of technology that many banks–and consumers–may be having a difficult time keeping up. A few short years ago mobile banking (banking on a mobile phone) was a novelty. Now almost every Top 100 bank (biggest banks by size in the United States) and many community banks like First National offer mobile banking.

At FNB (and many community banks) the branch has traditionally been where all business is transacted. With the introduction of various technologies (online banking, mobile banking, direct deposit, etc) now only about 15% of First National Bank’s client transactions happen physically in the branch. The rest happen electronically or online.

I’m curious to know what your experience has been with banking and technology. Do you use mobile banking? If so, what do you like? And if not, is there a specific reason?

There are still only a few of the largest banks that offer check deposit with a mobile phone. Do you use this service at Chase, PayPal, or another institution? Does the service work as promised?

CEP and OCAP: Acronyms that stand for small business

Community Banks and small business tend to give government a hard time for often making it more difficult for small businesses to be profitable and grow. So when a government program comes along that effectively encourages small business growth, it is worth noting.

In this case, the State of Ohio has developed several lending programs after receiving more than $55 million from the US Treasury for the State Small Business Credit Initiative (SSBCI). This initiative was designed to encourage lending to small businesses. The two programs mentioned above are the Collateral Enhancement Program (CEP) and Ohio Capital Access Program (OCAP). Both programs help mitigate risk for Banks who are working to put together loan packages for small businesses that may be creditworthy but lack a traditional down payment or do not have adequate collateral. Typically government programs (i.e. the Small Business Administration) have funds available but the requirements and/or underwriting are often prohibitive and difficult to navigate. These state programs, on the other hand, are easy for banks to use and the State wants these funds to be distributed to small businesses that need them.

Check with your local community bank to see if they participate in these programs or visit the State website to see a list of participating banks. The website also lists eligibility requirements and explains more about program details.

As of 11/1/2012 the State has awarded $3.452 million of the $33 million available in the program. Your community bank’s small business lender should be knowledgeable about these programs and can help you explore your options. This is one instance where community banks, small business, and state government can work together to create jobs and improve communities.

Thinking Small is Big after Black Friday

Black Friday has come and gone and retailers hopefully had a great start to their holiday season.  Big stores like Wal Mart, Macys, and Best Buy had their day yesterday.  And now today is Small Business Saturday, where the real shopping starts.  According to the Small Business Administration, 2 out of every 3 jobs is created by a small business.  Small businesses are the lifeblood of the United States and are especially important to keeping communities vibrant in places like Bluffton, Pandora, and Findlay.  So, get in the spirit and support your local small businesses on Small Business Saturday and every other chance you get!

http://www.facebook.com/SmallBusinessSaturday