Monday, July 24, 2006
Credit counts
To benefit from today's low interest rates, you've got to keep your credit clean. Here's how.
Time was when most folks prided themselves on paying cash for what they needed. Not anymore. Today even teens have their own credit cards, and it's nearly impossible to rent a car, shop on the Web, or book a flight without one.
From the time you start putting your purchases on the plastic, you're creating a history of your credit worthiness-at least in the eyes of financial, retail, and insurance institutions. Even employers are now looking at the credit records of job candidates. A clean credit record puts you in the clear, while spotty credit habits will make it harder for you to get insurance or benefit from today's low interest rates on cars and home mortgages. It may seem frightening that so many decisions can be made about you based on seemingly superficial facts. But even if you don't agree with the rules, you've got to play by them.
Some ways to get and maintain a good credit history:
Don't apply for too many credit cards.
Lenders look at the total amount of credit that is available to you on your cards. If your credit lines total $20,000, that counts against you, even if you owe only $150. Two or three cards are plenty.
Pay bills on time.
"If you don't pay on time, it will haunt you for seven years," says Nancy Castleman, editor of The Pocket Change Investor. That's how long it takes to clear negative information off your credit report. A bankruptcy filing stays on your record for 10 years.
Never get behind on student loans.
Once you fall behind, the interest is added to the principal and it can be difficult to get out of "the student loan nightmare," Castleman says.
Before you plan a big purchase or a job change, check your credit report.
The three major bureaus (www.equifax.com, www.experian.com) and www.transunion.com) maintain credit reports on you. These reports frequently contain errors; cleaning up mistakes take longer because you must contact each of the bureaus. Don't risk losing a job opportunity or a mortgage approval because of an error on your report. Dispute errors as soon as you become aware of them.
If you are denied credit, ask which credit bureau provided the report.
You are then entitled to a free copy of your report from that bureau. Otherwise reports cost $8.50 each.
If your credit is damaged, apply for a "secured" Visa or MasterCard.
Subscribe to Posts [Atom]
