If you’ve done enough research about credit scores, you’ve probably heard the term “soft credit check” and “hard credit check.” They’re sometimes referred to as “soft pulls” or “hard pulls,” but the terms mean the same thing. A soft credit check is any check of your credit score or report that doesn’t affect your score.

It’s soft because it doesn’t hurt, things that hurt are hard. Hard credit checks can, and usually do, hurt your credit score. (OK, I don’t know why it’s called a soft check vs. a hard check, I just made that “hard things hurt” bit up)

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For many parents, the idea of teaching their children about credit cards seems absurd. The thinking is that mentioning credit cards encourages irresponsible financial behavior. As a result, some parents avoid the subject of credit cards altogether.

It is important to realize, though, that just ignoring credit cards won’t guarantee that your child won’t use them — and use them irresponsibly — in the future. Your best option is to teach your children about credit cards, and how they can be used appropriately.

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If you recently received a 1099-MISC from a credit card company or a bank and wondering if it’s a legitimate form, try to remember if you opened up any new accounts for the cash or reward point bonuses in the last year. In the tiny print at the bottom, the financial institution likely stated that a 1099-MISC would be issued in the event you satisfied all the promotion conditions. The 1099-MISC is a legitimate 1099 form and is used for Miscellaneous Income, banks consider these promotional payments to be miscellaneous income.

On the flip side, they don’t consider reward points earned through purchases as income. It’s like getting a rebate, you’re ultimately getting a discount on your purchase, not a commission payment for doing something (like signing up for an account). So, it’s generally accepted that you do not pay taxes on credit card rewards, but the IRS has yet to formally weigh in on the subject.

Here’s the kicker – some financial institutions are issuing 1099-MISCs for promotions involving reward points. So those promotions where you got 50,000 miles for signing up for a credit card? They’re valuing those miles in terms of dollars (well, in terms of cents) and issuing a 1099-MISC for it. What stinks about that scenario is that you didn’t get actual cash to start with and you’ve effectively “purchased” those miles at whatever rate they determine. It’s very sneaky (or very clever, depending on how you look at it).

You know the old maxim – if it sounds too good to be true, it probably is. Does Credit Karma sound too good to be true? You can see your TransUnion credit score for free? You can get absolutely free credit monitoring? These are services that people pay good money for and Credit Karma, a company that isn’t affiliated with any of the credit bureaus, is giving it away for free. It does sound too good to be true.

That begs the question – is Credit Karma a Scam?

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Contrary to what the banks and card companies want you to believe, credit cards don’t exist for your benefit. They exist to make money for the company issuing the credit and there’s no doubt that they make money. As of November of 2011, American Express reported a profit margin of 15% while Visa report nearly 37%. Even with a 5.62% charge off rate, credit card companies are making money and it’s not just on what you charge.

You’ve probably received all of the mailings, e-mails, and automated messages trying to convince you to pay a little extra each month for some exciting service you must have but should you? Here are a few of those services that seem like a good idea but are far from it.

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Kenneth Lin emailed me the other day about a new feature in Credit Karma called My Accounts. It’s a simple listing of all your revolving accounts, like credit cards, and whether there are opportunities for you to move them elsewhere and pay less in interest. It’s best for folks who carry a balance but I think it outlines opportunities for anyone.

Here’s a look at what mine looks like:
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If you’re open to the idea of cosigning a loan or credit card for somebody, I don’t want to tell you that in all cases it is a bad idea but I will say that I’ve always had a hard time finding a good reason to say yes to a family member who needs a cosigner. I will also admit that when it comes to money I’m the family bad guy but it’s something I’ve had to get over.

Here’s my opinion: We need to make the world far more scared of cosigning. Kind of like we scared people in to kicking the smoking habit and now we’re scaring people in to eating less junk food, we need to do the same with cosigning because from a financial perspective it’s no different than the health version overeating. It may never cause you problems but if it does, it’s going to be one heck of a problem.

Don’t believe me? I have some reasons why I’m so against cosigning.
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Americans are strangled with credit card debt. If you’re the average household, you have a balance of $15,800 at an average APR of 14.89%. That’s $2,352 in interest payments annually. What could you do with that extra money?

There’s a way to avoid paying those interest payments at least for a short period of time now that banks are forgetting about the recent credit crisis and once again deluging our mailboxes with credit card offers with 0% interest on balance transfers. Some of these too good to be true offers give you 6 months or even a year without interest payments. That’s a lot of money that you’re saving that could go towards the payment of that interest.

Not so fast! One of the many statements that we attribute to wise people from generations past is, (say it with me) “if it’s too good to be true, it probably is.” Before you sign up, you better keep reading.
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If a friend or family member has ever asked you for money you know how awkward it is. Your money is something that you worked hard to get and your relationship with that person is important and valuable to you. You don’t want to lose your money or hurt your relationship with that person so the idea of a loan doesn’t sit well with you but helping somebody often takes precedence over sound reasoning.

If you’re going to make the loan, make it in a way that minimizes any damage to your relationship with that person. Here’s how.

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Like your weight, your credit score isn’t something that you can safely change overnight. It takes months and years of responsible credit usage, regular payments, and living within your means. If you were fortunate to avoid credit card debt in your youth, chances are your road to recovery will be easier than someone who has been tripped up by all the tricks and gimmicks of the credit and debt industry. If you’re one of the many who avoided credit and now have no history to speak of, your road to recovery will be different, but not necessarily easier.

All that said, there are a few ways you can give your credit score a quick shot in the arm. These tips won’t boost your score overnight and they will not increase your score by much. If you’re planning on buying a something with credit in the next few months, it behooves you to take some of these steps if you can.

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