What is Your Credit Grade?

With all of the changes going on in the credit markets, your credit score is more important than ever. Your score does not just affect your application for a mortgage or car loan, but can also be in a factor for things like your cell phone service and auto and homeowner insurance premiums.

We have been encouraging our clients to check their scores at least annually through www.annualcreditreport.com. This site will give you access each year to a free credit report through the three nationwide consumer credit reporting companies – Experian, TransUnion, and Equifax. You also have the option of paying a minimal fee to check your score through the site.

I recently discovered another great tool that allows you to quickly and easily get a feel for your score. It’s the website www.credit.com. After you enter your name, address and social security number, you are asked to verify the monthly payment of one of your outstanding debts. Within a few minutes you will have a very easy to read report card with a letter grade in each of the areas (payment history, debt usage, credit age, account mix, and inquiries) in which your credit score is calculated as well as an overall grade. There are action steps you can take in each area to improve your grade. When you use this service it is considered a “soft” inquiry and does not affect your score.

One thing I really like about this website is it also gives you an estimate of your score with several credit rating agencies and your approximate FICO score – all for free. If you want the exact number, you can always buy your score for $15 at www.myfico.com.

With these tools, it is easy to keep tabs on your credit and make sure you have not become a victim of identity theft. Every 4 months I use www.annualcreditreport.com to browse my outstanding debt and will now check www.credit.com at least annually or prior to applying for new credit to make sure I have an A on my report card.

Chris Carleton, CFP
clcarleton@taaginc.com
www.taaginc.com

No Good Deed Goes Unpunished

If you haven’t heard a word about all the changes that have been going on in the credit card industry, you’ve probably been living under a rock…That and you haven’t come in to meet with your advisor in over a year! Some people haven’t paid much attention because they don’t think they will be affected by the changes, but you might be more vulnerable than you thought:

· So you planned to stop using your credit cards altogether to avoid fees? Not necessarily. Many cards have instituted inactivity fees, so if you go too long without using your card, don’t be surprised to see a charge on your statement. Also, if you don’t charge enough in the year, there might be a fee for that, too.

· Maybe you’re a person who pays off your balance consistently every month? You might not be exempt in this either. Credit card companies are desperately seeking ways to fill the revenue streams that they’re losing, and that means instituting fees for just about anything they can get away with. Also, watch your due dates! You don’t want your due date to get moved up and you inadvertently miss the payment.

· Some people might choose to take it to the extreme and cancel all of their credit cards (or even just a few). While this might feel like you’re doing something good, beware! 45% of your credit score has to do with the length of your credit history and the mix of how much you owe compared to how much credit you have available. If you cancel a credit card that you’ve had for 20 years, you could be doing serious damage to your credit score. Don’t worry so much if you’re just closing store brand credit cards. Just make sure they aren’t carrying a major credit card logo like MasterCard or Visa.

Keep these things in mind as we come closer to the day in February when these reforms take effect. Be sure to read ALL correspondence from your credit card company, even the fine print.

Amanda Bashore, CFP
arbashore@taaginc.com
http://www.taaginc.com/