As everyone probably knows, credit scores play a very important role in an individual’s personal finances. It can determine how much interest one will need to pay and even whether they will be granted a loan or not in the first place. The credit score, though most might not be fully aware of it, affects a person’s lifestyle and standard of living simply because of the number of financing options available to you depends on it.

This week’s round-up will focus on the blogs that talked about credit history, credit rating, and the tips that will help your record. Essentially, the important aspect that can affect your credit score is outlined here:

Jim Wang @ Bargaineering wrote a useful post titled, “How to Build Your Credit History with Tradelines“. He starts the blog post by simply stating that getting a good credit history depends on how you act when given credit. This particular article goes into the core of what goes on in establishing credit history. Tips on how you can use tradelines to build a good record are also outlined here.

David @ My Two Dollars tries to help a reader prevent their credit record from being damaged in his post, “What Damages Your Credit Score the Most?” His answer to this is straightforward: late and missing payments. The credit score always comes back to a person’s ability and willingness to pay their financial obligations. This ability will show in one’s payment history.

JC @ Get Rich Slowly posted an interesting article, “Should Repaying Debt Be an Obsession?” As mopst are probably aware, the economic crisis today occurred not only because of banks’ careless behavior, it actually became worse because the average American simply has too much debt. So is going to the other extreme the solution to today’s problem? JC doesn’t seem to think so; he states that balance is important.

Carrie Reader @ Hints Club shares her thoughts about getting a good FICO Score with her article, “Good FICO Credit Score? Tips to Getting the Most Out of Your Home Mortgage Loan with Good Credit“. Well, the title actually says it all. The blog post basically talks about how homeowners can take advantage of their good credit history with the four tips outlined in the article.

After months of severe economic downturn, lay-offs, and high foreclosure rate, it hardly seems possible but a significant number of US banks will pay back the bailout money they previously received from the government. After regaining some level of financial stability and some of their old swagger, the nation’s largest banks now want to pay back billions of dollars back to the taxpayers.

Very few people in Washington and perhaps those from the financial industry themselves expected such a quick turnabout. Most legislators believed that banking institutions will need to rely on the government’s help for years because the subprime crisis and their other troublesome assets were dragging them down. But now, a number of banks say they will repay the government by year’s end.

Two weeks after the stress test results came out, several banks including JP Morgan Chase, Morgan Stanley, Goldman Sachs, Bank of New York Mellon, and US Bancorp, and State Street have talked with regulators about repaying part of the $700 billion rescue package they received. Regulators are trying to identity when the banks should be allowed to return the bailout money and whether such measure will leave these institutions vulnerable in case another crisis occurs in the near future.

A few details have emerged about these developments. For example, it is believed that regulators will not let any major bank repay first because it will give some institutions “bragging rights”. Instead, the Federal Reserve will organize the banks into a group that is ready to pay first. The Treasury Department will be assigned to handle the repayments.

For many ordinary Americans, the repayment scheme is a welcome development. After several months of multi-billion dollar bailouts that are given to the financial industry, auto industry, and other industries, the breathing space this will allow is good for the economy. However, it is also important to recognize that repayment the bailout now carries some risks.

Right now, many major banks have plugged crippling losses but the industry is still vulnerable. The continuing troubles in real estate as well as the high number of credit card defaults will surely be felt by the banks. In addition, if the government allows the banks to pay back the bailout money so soon, they will cede authority over the same institutions that caused the economic crisis.

Everyone is aware that today’s current financial system is problematic and the Obama administration is now trying to do something about it. Last Wednesday, the government sought to gain more authority over the financial instrument referred to as derivatives. These derivatives played a significant role in the collapse of the financial market following the huge drop in home prices.

Trying to right the wrong, the administration has encouraged Congress to pass on a legislation that will permit federal oversight on the previously deregulated industry. It will enable the government to oversee various types of instruments including the credit-default swap which nearly caused American International Group (AIG) to collapse until the government bailout.

Treasury Secretary Timothy Geithner said the proposal will require derivatives to be traded on clearinghouses that are backed by capital reserves. This works similar to the capital cushions banks are required to have for when a borrower can’t make good on a loan. These, along with the new rules will be most costly for all parties including the dealers, the buyers, and the issuers. Despite its expensive price tag though, this move will force a majority of derivatives to be traded out in the open. This reduces the role of the banking system that has surrounded them in the past.

According to Geithner, the “financial crisis was caused in large part by significant gaps in the oversight of the markets”, the proposal aims to clean up the system. If it pushes through, the trading of derivatives will become more transparent. Regulators will also be authorized to limit the number of derivatives an institution is allowed to sell or hold.

In addition, the Obama administration wants to repeal important portions of the Commodity Futures Modernization Act which was implemented in the December of 2000. Previously, it was backed by Democrats and Republicans alike with heavy lobbying from Wall Street.

Fortunately, the proposed change is well-received in Congress, for the Democrats in particular. The move has long been expected. In fact, experts in the financial industry even say that it is inevitable because everyone understands that changes need to happen. Steven Elmendorf said that “the only question is how the change happens.” From the looks of things, it seems like everyone is about to find out.

Wanting to leave its own problems behind, auto and mortgage-financing firm GMAC LLC has dropped its own name and re-launched itself as Ally Bank. The company has been suffering from billions of dollars in losses since the mortgage crisis hit. Currently, it has an $11.5 billion in capital shortfall.

The bank’s chief marketing officer, Sanjay Gupta, has revealed that the company wanted to new name that will eliminate the baggage that most banks have to deal with after they received billions in bailout money. Last December, GMAC received $6 billion in bailout money including $5 billion from the Trouble Asset Relief Program.

Plugging the Capital Shortfall

“Ally” was selected as the new name because of its implications that the bank is a friend and a trusted partner for consumer’s banking needs. Gupta said that, it contains the “attributes we are trying to convey”. GMAC LLC expects that this move will help them gain more customers. The new image is expected to attract retail depositors which are a crucial funding source with today’s credit squeeze.

The improved bank deposits will help fill the gaping $11.5 billion capital hole as was revealed in the stress test results. Nineteen banks took the so-called stress test and ten banks, including GMAC, were told to raise their capital. Despite all strategies on the contrary though, many experts still believe that the company will need another bailout in order to survive.

Attracting Retail Deposits

Long before GMAC LLC decided to rename itself as Ally Bank, it was already offering above-industry average industry yields for consumers. A lot of lenders have tried this strategy since the financial crisis hit in 2007. Ally Bank will offer a 2.8 percent rate on a one-year certificate of deposit even if the industry average is around 2.29 percent.

This strategy appeared to work. The bank’s deposit showed a significant increase during the first quarter. It experienced 16.5 percent improvement to $22.5 billion which is broken down as $11 billion in retail deposits, $9.5 billion in brokered deposits, and $2 billion in other types of deposits. In addition, Ally Bank expects more federal funding because of its status as the preferred lender for vehicles made by the now-bankrupt Chrysler LLC.