Who’s keeping score? Financial institutions and credit card companies are, and hopefully you are too. Every time you apply for a new credit card, mortgage, perhaps even an insurance policy or a job, your application could be judged in part on your credit score. Your credit score reflects your payment history, total debt, length of history and credit. If you have a high credit score, you will enjoy better rates and more offers. If you have a low credit score, you may be turned down for loans and credit and will pay a higher interest rate than borrowers with high scores. It’s important to review your credit report every year, or you could be unpleasantly surprised like in the example below…
The situation: Bryan and his wife are expecting their second child and are quickly outgrowing their home. With mortgage rates being so low right now, they decide now may be a good time to buy. Bryan applies for a mortgage and discovers much to his dismay and shock he only qualifies for the high rate. Bryan begins to review his credit history. He calls for his free credit report and discovers he still has credit cards that have never been officially closed. He also notices his wife has made several late payments, and there is some suspicious activity on one of his accounts. In addition, he learns he has a lot of smaller debts accruing high interest.
The solution: Bryan calls his old credit card companies and officially closes any unused accounts.* He signs up for Alabama Telco’s Online Bill Payment and schedules all of his future payments to insure they are never late on a payment again. He works with an Alabama Telco representative on consolidating his smaller debts into one with a better rate. He calls the Credit Reporting Agency to investigate what he feels are errors on his report. He decides to wait until after the baby is born to reapply for a mortgage, giving him enough time to correct his credit and hopefully earn a better rate.
If you want to follow in Bryan’s footsteps and build or repair your credit, start today. There are simple things you can do now, such as:
- Reviewing your credit report every year. In 2005, the Federal Fair Credit Reporting Act was issued and basically requires all three major credit bureaus to provide you a free credit report, at your request, every 12 months. Call 1.877.322.8228 or visit www.annualcreditreport.com to request your report.
- Electing automated payment to ensure timely payments. Credit reports track every payment past due 30 days or more.
- Signing up to receive your account statements online. By receiving e-Statements, you are preventing possible mail fraud which can lead to identity theft and ultimately bad credit.
- Developing a personal debt payment plan. (Check out Avadian’s “Debt in Focus” tool at www.avadiancu.com/credit/debt/.)
- Speaking to someone in Alabama Telco’s Financial Planning Services for tips and investment advice to get you financially back on track.
Be sure you’re the one keeping score! For more tips on how to manage your credit, check out our Find Advice section on the homepage of our website. Simply click “Managing Your Credit”.
*Note: Closing some cards may actually hurt your credit. Contact Consumer Credit Counseling Services (CCCS) at 1.800.388.2227 or www.nfcc.org before taking action. The credit union is federally insured by the National Credit Union Administration. Additional coverage up to $250,000 provided by Excess Share Insurance Corporation, a licensed insurance company. We are an Equal Housing Lender.