“Why Your Credit Score Really Matters - In Ways You Might Not Know - And 6 Ways To Improve It”
July 24, 2008
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According to Yahoo, “Improving Your Credit Score” was a real mover and shaker for searches this week. No need to search, Ill give you some pointers right here…
Why Does It Matter?
Most of you know that a low credit score will hurt you on mortgage, car and credit card interest rates. But did you know that a low credit score can hurt you in other areas, too? Such as…
- Car and Home Insurance
- Getting a Job or a Promotion
- Utility Deposits
- Cell Phones
- Some Medical Procedures
- School Loans
- Your Marriage
6 Ways To Improve Your Credit Score:
1. Make Sure Its Right
Mistakes in your credit report will ruin your score. So, get copies of your Credit Report through Annual Credit Report.com (not free credit report.com) or by calling 877-322-8228 (it’s OK to give your Social Security Number because you called them).
For those of you who keep up with your Credit Report, Annual Credit Report.com is just fine. If not, I recommend myFico because it’s easier to read and you’ll be able to see all the info at once. It’s also the most like the one that will be sent to your creditors. Annual Credit Report.com gives you one report for each (lots and lots of pages.
You can dispute any errors by writing a letter to the credit reporting agency (you’ll have to do it for all three if the error is on all your reports). Tell them what’s not correct and send copies of any documentation you may have. Request that it be removed or corrected. Go to the post office and send it “return receipt requested” so someone has to sign for it. Keep copies of everything.
Next, let the creditor know that what’s incorrect because if they keep reporting the error, it won’t be removed from your credit report.
2. Know the Truth
Before you can improve your score, you have to know what it is!
You can get copies of your credit report at Annual Credit Report.com for free but you’ll have to pay for the credit scores.
I recommend getting your FICO score straight from the source…
If you get your score regularly and just want to make sure nothing creeps in, you can use two new free credit score website: Quizzle and Credit Karma. I tried both and was impressed with them.
3. Pay Your Bills (on time)
The best “secret” for having and keeping a great credit score is to pay your bills on time. And watch out because the credit card companies are getting sneaky - if your bill arrives after the specified due time (not just the date), it will be late, you will pay a late charge and it will affect your credit score. Mail it in plenty of time or pay online at the creditors’ website (check the fine print first). You might also want to set up automatic payments for at least the minimum payment so you’ll always pay on time even if you are out of town. You can always pay more separately.
Paying any bills late may affect all your other bills. This includes unpaid parking or speeding tickets, library fines, medical and utility bills. These creditors are reporting late and non-payments to the credit reporting agencies, too. I received a bill the other day from my daughter’s college town for a parking ticket shed thrown away; I made her pay it immediately before it hurt my credit score.
By the way, if you are on on-time payer and are late, call the creditor and ask them to reverse the late charge and not report it. Most will but you have to catch it promptly.
4. Don’t close old credit cards.
After you’ve paid it off, put the card in a safe place and keep the account open. The length of your history is an important part of the calculation. Another reason to keep it open is that your “utilization ratio” is another big part of the calculation. This means how much of your credit limits you’ve used up. The ideal is in the 30% range.
Weird, I know. Why would they give you a high credit limit and then not want you to use it? Statistics show that people who are bumping up against their credit lines have a higher chance of defaulting.
5. Don’t Go Crazy
Be cautious about applying for lots of credit in a short time frame. Lenders call this “excessive credit seeking” and it makes them think you’re desperate.
If you’re applying for home or auto loans, you have a 30 day window where multiple applications will only be counted once. You’ll want to shop around before actually applying.
6. Don’t Delay
Unfortunately, these steps will not fix your credit score overnight. It can take 3-9 months before you see improvements. However, I can pretty well guarantee you won’t see improvements if you do nothing.
The good news is that even if your score is really down in the dumps, you can improve it and the last 2 years count the most.
What Next?
I know that all of this can be overwhelming from ordering it to reviewing it to making the corrections. If you need help with your credit report, call me. I’m a Certified Credit Report Reviewer and I’ve reviewed hundreds of credit reports.
You’ll order your credit report and send it to me by mail or email. I’ll look it over and well have a 30 minute review to tell you exactly what you have to do. And… If you don’t want to write the letters, I’ll do that, too and send them to you by email so you can put in your private information, sign them and send them out. What could be easier?
You can call me directly at 541-387-2995 to find out more.
Warmly,
Cindy
Update: Take Your Money And Run?
July 23, 2008
I received lots of comments and questions on my last article about the safety of banks and how the FDIC insurance works. Here’s a quick rundown:
Yes, you can be covered for more than $100,000 based on how the account is titled. For example, you can have account(s) for 1$00,000, your spouse can have account(s) for $100,000 and you can have joint accounts for $200,000. Note: Joint Trust accounts are not included in this ownership. For more information, see the FDIC publication, “Insuring Your Deposits.”
You can also confirm that your accounts are covered by the FDIC at EDIE - Electronic Deposit Insurance Estimator. It will allow you to calculate the insurance coverage of your accounts at each FDIC-insured institution.
Someone else wrote in to ask why anyone would have that much cash in a bank anyway? That’s a good question and I’ll address that in a future article.
Warmly,
Cindy
Take Your Money And Run?
July 14, 2008
Does IndyMac Bank’s failure this week make you want to run right down to the bank and take your money out?
I received that very question from some clients this morning. David and Rhonda had heard that one of our local banks was in trouble and wanted to get my opinion on getting their money out. I hope my response caught them before they made the mad dash to the teller window.
Here’s what I told them:
“I doubt there’s a big rush to pull money from XYZ Bank.”
Remember, your money isn’t really “in” the bank. They’ve lent it out to others and they are required to have amount of deposits on hand to cover normal business. However, if everyone takes their money out at once it’s a “run on the bank” and will certainly cause the bank to go under (a la The Depression). Remember what happened in “It’s A Wonderful Life“?”
According to CNN, the FDIC had to close IndyMac because customers made a run for their money withdrawing more than $1.3 BILLION. Ouch!
“This institution failed today due to a liquidity crisis,” OTS (Office of Thrift Supervision) Director John Reich said.
What Should You Do To Protect Your Money?
- Make sure you don’t have more than $100,000 in any one bank
- Sit tight and don’t increase the chances your bank will fail by withdrawing your money. That’s why there’s an FDIC (Credit unions have the NCUA so they’ll be OK, too).
The last thing the government wants to see is banks failing and there are programs in place to make sure you don’t lose your money (up to $100,000 per person - not per account). It just increases all our costs when you take yours out.
There’s lots to worry about in the economy right now but so far, this isn’t one of them. You can be sure that if I’m concerned, I’ll be letting you know.
Warmly,
Debt Payments Higher Than Income
July 7, 2008
This is part of our Pay Debt Quickly series sponsored by
PDQ Pay Debt Quickly kit.
Question:I don’t know how to pay off my debt. My debts are more than the money I earn each month. What can I do? ~ Naomi
Answer: Hi Naomi, that’s a tough spot to be in. I’m not quite sure from your question if your total debts are higher than your monthly income or if the payments are higher than your income. I’m going to address that your debts are higher than your income but you’re still able to make the payments.
It sounds like this is really worrying you — maybe that you won’t be able to make the payments soon. So, now is a good time to be asking this question.
Since you can make the payments, every month, you’re actually in a good position to be able to eliminate the debt over the next couple of years (perhaps sooner). Here’s what to do…
- From Minimum Payments to Fixed Payments. Convert all your current minimum payments to fixed payments. That means that if you are paying $55.55 this month, you’ll pay that every single month until the debt is paid off — no matter what the minimum payment is on your bill.
- Stop Using Your Credit Cards. There’s no grace period on cards that have a balance so you start paying interest on new charges immediately.
- Get Clear on Your Debt. List every one of your debts on a piece of paper (you can get my form here) so you know exactly what you’re dealing with. Sometimes it’s worse than you thought and sometimes not so bad but you won’t be able to really know until you see it all in black and white.
If you’d like to instantly create a Debt Payoff Plan and see exactly the date you’ll be out of debt, try our PDQ Pay Debt Quickly system (with a 30 day no-questions asked guarantee). It’s great to have a plan that you can follow every month.
Naomi, please let me know if you have any other questions.
Warmly, 
Shopping Too Much?
July 3, 2008
I’m seeing more and more clients who are banking on retail therapy to get them through this recession. They’re using shopping to numb the worry and stress of unsteady income, shaky jobs, treacherous home mortgages and rising food and gas prices. When they feel bad for whatever reason, off to the mall, bookstore or even grocery store they go. We’ve all heard it: “When the going gets tough, the tough go shopping!”
Amanda recently came to see me because she was at her wit’s end. Amanda has a stressful job as a Chiropractor and she often goes shopping after work. She says, “I just need to relax before I go home to Steve and the kids”. She has a closetful of clothes many she’s never worn - and some still have the tags on.
6 months ago, Amanda tried to hide her purchases from Steve but he found out when he opened the bills and yelled at her. Recently she opened up a new credit card in her own name and used her office address so Steve wouldn’t find out. She’s scared that he’ll leave her if he ever finds out.
At the end of our last phone appointment, Amanda said, “I’m so glad I found you, Cindy. It’s such a relief to be able to tell somebody everything and not have you get mad at me or tell me I’m a bad person.”
Most of us know in our heads that this is a dangerous road but we all have a vice or two. If you’re faced with this dilemma here are a few things you can do:
- Shop with a friend or family member who will hold you accountable (and who won’t join you in making purchases you both know you shouldn’t)
- Use a list and promise yourself not to deviate from it
- Use your debit card (did you know that if you are carrying a balance on your credit card, there is not grace period - interest starts adding on immediately)
- Create a “cooling off” period by putting items on hold and coming back in 24 or 48 hours
- Ask yourself “Do I need this or do I want it?” (Download my free “Needs and Wishes” Worksheet)
- Develop a list of fun things to do and choose one when you feel like shopping
- Know that it’s OK to have the urge to shop and not respond
- Find another way to get your “fix” (thrift stores and garage sales can be just as addictive)
- Stay out of the stores and off the internet if that’s your shopping vice
What’s your vice? What are your alternatives? How will you keep from feeling deprived with your new choices?
If you’d like to talk about your shopping worries (or anything else), check the Event Calendar for my next open office hours.
Warmly,
