Today, having a good credit report and score is a necessity. Below are some methods for establishing or reestablishing positive credit, so that when it comes time to apply for a job or establish a utility account, you can provide your credit information without fear or being denied or being asked to pay large fees. 

First a bit about credit reports and scores

A credit score is a number used to help lenders identify the credit risk associated with lending you money and there are a variety of scoring methods used to determine an individual’s score.  There is the FICO Score, the Vantage Score, Equifax’s ScorePower, and Experian’s Scorex PLUS.  Additionally, some large lenders have developed their own scoring models.

You can get a free copy of your credit reports one time per year at www.annualcreditreport.com however, to receive the credit score there is a nominal fee.  This is the only site where you can receive a truly free copy of your credit report.

No credit score

It is hard to believe that some people do not have a credit score, yet it’s true.   This occurs when there is no data or a lack of data for the credit scoring methods to calculate. 

Adults that have never used credit and young people just starting out may find that it is difficult to get credit or a loan.  This is because without that information, lenders do not know if you are a good credit risk or if you will make your payments on time.   Follow these tips to begin your positive credit history:

1. Apply for a secured credit card through your bank.  A secured card requires that you put money down to secure the credit card. This makes it less risky for the lender because they know if you do not pay, they will get their money. 
2. Ask someone with a good credit history to co-sign for you.  A co-signer becomes liable for the debt in the event you do not make the payment. 
3. Once you get credit, be certain to make your payments on time, every time. 
4. On credit cards, avoid charging more than thirty percent of the limit.  For example, if the limit is $300 avoid using more than $100.
5. Avoid opening multiple credit card accounts.  Build your credit slowly and methodically.
6. Remember that you are building your history, the longer you keep an account the better. 

Low credit score

Low credit scores may be caused by a number of factors such as a short period of time using credit, late payments, too much credit, collection accounts and bankruptcy.  If you find that you have a low credit score, you are not alone.  Turn your focus to improving your credit score by following these tips;

1. Dispute any invalid or incorrect information in your credit profile.
2. Pay all existing credit accounts on time, every time.
3. For bills you have fallen behind on, get current and stay current.
4. Focus on paying down debt and credit card balances.  Avoid using more than thirty percent of any revolving credit balances. 
5.  Avoid opening new accounts in order to transfer existing balances.
6. Keep accounts with a long, positive credit history open.

It takes about six months to begin establishing credit and two years to see significant changes in a negative credit report and score. On the other hand, it can take one late payment to undo the positive credit you have established. Keep track of what is on your credit by checking it annually at www.annual creditreport.com.  Your future job, home or auto insurance rate depends on it.

• Late fees – creditors must provide at least 21 days from the date the bill is mailed, for you to pay your bill. In addition, bills cannot be due on weekends or have adjusting due dates (the 17^th one month and the 18^th the next). 
• Over- limit fees – before you can make a purchase that exceeds your credit limit, you will have to “opt-in” and authorize receiving an over-limit fee. If you do not, the purchase will not go through. 
• Interest rates and interest calculations –
  • A creditor cannot increase your interest rates on your current balance due to clauses in agreements such as, “any time, any reason” or “universal default.” The ban also severely restricts retroactive rate increases due to late payment.
  • Interest on promotional rate credit cards must last for a minimum of six months.
  • Payments made that exceed the minimum payment due must be applied to the highest interest rate portion of accounts. So, if you have an account with an interest rate of 23.99% for cash advances and 14.99% for purchases, the excess amount must go to the cash advance balance.
  • The practice of calculating interest for the current month on the previous month’s balance is now prohibited. 
• Plain language and Clear Information –
  • Contract terms must be in written in clear language and disclosed in such a way that consumers can understand them and effectively manage their finances.
  • Information regarding how long it will take and how much it will cost the consumer to pay off an account, if they only pay the minimum due each month, must be shown on monthly statements.
  • The creditor must also show the payment and interest cost if the consumer were to pay the debt off in 36 months. 
• Other new rules –
  • Fees on subprime or low-limit credit cards are substantially reduced and regulated. Consumers can no longer be charged numerous fees on the credit card, just for opening the account.
  • Store cards and gift cards – the law limits inactivity fees on cards for the first 12 months it is open.  In addition, any fees for the cards must be clearly disclosed.

As always, it is up to us, the consumers, to carefully read the terms of any credit card we have or decide to open. The rules and regulations in the CARD Act are meant to provide consumers a clear and concise foundation to successfully navigate the world of credit and personal finance.

1. Your credit report. Visit www.annualcreditreport.com and request your free credit report from each one of the major credit reporting agencies; Experian, Equifax and TransUnion.
2. Analyze your auto insurance coverage to make sure you are getting the best deal and that you are adequately covered.
3. Check your savings and investment accounts. Make sure you are taking full advantage of employer matched savings programs and check the diversity of your investment portfolio. If you need help with investments, talk to a certified financial advisor.
4. Determine your net worth. Make a list of the value of all of your assets and the amount of your liabilities. Then subtract your liabilities from the assets. If the number is negative, you owe more than the value of your assets. If part of your debt is unsecured look for ways to reduce it or eliminate it as soon as possible. Every dollar that goes to repaying interest on unsecured debts, like credit cards, is a dollar you cannot use for securing your financial future, buying a home or meeting your personal financial goals. Certified Credit Counselors can help you determine your net worth and develop plans for managing your debt. Visit the Association for Independent Consumer Credit Counseling Agencies at www.aiccca.org to find a counselor.
5. Once you know the worth of your belongings and investments, determine the level of home or renters insurance you may need.
6. Finally, evaluate your need for life insurance.  MSN Money has a great calculator you can use to determine how much life insurance would be necessary if something happened to you.

The above is just a bare bones list of items you should evaluate on, at minimum, an annual basis. By reviewing these critical areas you will have the information you need to create a plan for your financial success!

In addition, the extension provides a tax credit of $6,500 for families who have already owned a home. In order to qualify, you must have lived in your current home for at least five years.

Finally, for military members who have been assigned overseas, these tax credits have been extended until May of 2011.

So, whether you are a first time home buyer or already a home owner now may be the right time for you to buy. Talk to a realtor and lender to learn more!

Income Based Repayments

The first thing to do if you have Federal Family Education Loans (FFEL) or Federal Direct Loans is to contact your lenders and apply for Income Based Repayments (IBR).  IBR payments are calculated on your (and your spouse’s) adjusted gross income from the previous tax year and your family size. If you currently owe more in student loans than you earn, you will, most likely, qualify for the IBR. One woman, with $45,000 in loans did qualify for reduced payments while earning a salary of $75,000. 

If you do not know who your lenders are, or what type of loans you have, visit the National Student Loan Data System at http://www.nslds.ed.gov/nslds_SA/. You will need your Social Security number and your four-digit FASFA pin in order to access your lender information.

Another great benefit of the IBR plan is the loan forgiveness.  After making payments for 25 years, the remaining debt is forgiven (you do not have to pay it). It does not matter what line of work you are in for this forgiveness program – the only stipulation, is that you have made payments for 25 years. At this time, the remaining amount of the loan that is discharged after 25 years is considered taxable income.

Public Service Loan Forgiveness

The second part of the College Cost Reduction and Access Act, implemented in July of 2009, is Public Service Loan Forgiveness. Under this program borrowers must make 120 qualifying loan payments to their lenders after which any remaining loan will be forgiven. Unlike the IBR forgiveness, the amount of debt discharged under this plan is not considered taxable income.

So, what are qualifying payments? There are four criteria and you must meet all four of them. To qualify, you must:

1. Be employed for the government (local, state, or federal), a 501 (c) (3) non-profit agency, AmeriCorps or PeaceCorps.
2. Be considered working full-time (an average of 30 hours per week per year).
3. Be making payments on qualified loans. These are Federal Direct subsidized and unsubsidized loans, such as Stafford or Ford loans, GradPlus loans and Direct Consolidation loans. If you have FFEL loans you can consolidate those into the Direct Loans and still qualify.
4. Make loan payments under an income-contingent plan (similar to the IBR, but only for Direct Loans), IBR plan or the standard 10-year repayment plan.

 It is important to note, that the 120 payments do not have to be consecutive and they do not have to be with the same employer. Also, if you are on an income contingent repayment plan or an income based repayment plan and your monthly payment is $0.00, these payments do count toward the 120 months of payments.

Even if you are not sure you qualify, take the time to contact your lenders and ask. Wouldn’t it be great to save some money now, and plan for eliminating those student loans in the future?

For more information visit www.ibrinfo.org or go to the Direct Loan Servicer Online at https://www.dl.ed.gov.

One of the largest benefit programs for working families is also one of the most overlooked. It’s called the Earned Income Tax Credit (EITC) and, as the name implies, it’s for people who work for a living but don’t make a lot of money.

Rural residents, self-employed people such as farmers, childless workers and grandparents raising grandchildren are among those who may be eligible, but often fail to claim EITC. [2] You could receive a credit of up to $5,657 when you file your 2009 taxes. If you are owed a refund, this credit would increase the amount you receive. If you owe taxes, the credit may lower or eliminate the amount of tax you have to pay. You could use this money to catch up on bills, build up your savings or open a bank account.

IRS income eligibility guidelines

In addition you:

• Must have a valid social security number for each individual listed on your tax return.
• Must have earned income from employment or from self-employment.
• Cannot file taxes using the “married filing separately,” status.
• Must be a U.S. citizen or resident alien all year, or a nonresident alien married to a U.S. citizen or resident alien and filing a joint tax return.
• Cannot be a qualifying child of another person.

If you do not have a qualifying child, you must:

• Be age 25 but under 65 at the end of the year,
• Live in the U.S. for more than half of the year,
• Not qualify as a dependent of another person.

It is clear to see how EITC can make life a little easier in these hard times. A married couple with three children and an income ranging from $12,570 to $21,420 could be eligible for the maximum tax credit of $5,657.   Taxpayers making as much as $48,279 could qualify for EITC and can get tax returns prepared for no charge at a Volunteer Income Tax Assistance site or AARP Tax Assistance site in their local community. Many communities offer 211 or 311 telephone numbers to locate vital services. If not, you can call the IRS volunteer assistance locator number at 1-800-906-9887 to locate free tax assistance in your community.

[2] Internal Revenue Service, Final Breath Easier. http://www.eitc.irs.gov/public/site_files/FINAL_BREATH_EASIER_7×10_local.pdf

1. Open a checking and savings account at a bank or credit union, manage your accounts carefully and never bounce checks. This is the initial step to take to start proving your credit worthiness.
    
2. Get a copy of your credit report from all three of the major credit bureaus once per year and check the accuracy of your reports. If you find discrepancies, follow the directions on the report and dispute them with the credit bureau. There may be inaccuracies on your credit reports and it is up to you to monitor them. You are entitled to one free copy of your report from each bureau once per year. Go to www.annualcreditreport.com or call 1-877-322-8228.
    
3. Pay all of your bills on time, every time. Your payment history accounts for 35% of your credit score and it only takes one missed payment to hurt your score. Set up automatic payments when possible and keep a calendar of due dates and a payment reminder system.
    
4. On your revolving accounts (credit cards) keep the balance you owe under 30% of your credit limit. One more thing; paying your bill in full each month is the smartest way to use credit and will have the greatest positive impact on your score.
    
5. Be sure that your lenders are reporting your credit limits accurately. If the limits are too low, it can affect your score. Remember the 30% rule!
    
6. Do not apply for more credit if you already have open, unused credit lines. Also, do not open new accounts simply to pay off existing accounts. Opening several new accounts can cause your score to drop.
    
7. If you do not have a credit history and are trying to build one, consider a secured credit card, but shop carefully! The lender will require you to deposit money up to the credit limit. Try your own bank or credit union first and make sure that the card you pick:
    
   1. Has no (or a very low) application or annual fee
   2. Converts to a regular unsecured credit card after 12 – 18 months of on-time payments
   3. Will be reported to all three credit bureaus. If the issuer does not report to the credit bureaus, the card will not help build your credit history

    

8. Keep older credit card accounts open. *One thing you shouldn’t do if you’re just trying to boost your score is close unused accounts, says Craig Watts, consumer affairs manager for Fair Isaac Corp. “If someone tells you to close unused accounts to improve your score, they’re pulling your leg,” he says. “It won’t help you and it can hurt you.”
    
9. Be patient. It takes time to build or rebuild credit. Continue paying all of your debt on time, and if you are behind on accounts – get current.
    
10. Look for help if you feel overwhelmed. Credit counselors can help you put together a plan to manage your credit. You can find a credit counselor by contacting the Association of Independent Consumer Credit Counseling Agencies by visiting www.aiccca.org, or calling them at 1-866-703-8787.
     

Source:

*Curry, Pat. 2007 August 3. Tips for Boosting Your Credit Score. Bankrate.com. Retrieved from http://www.bankrate.com/finance/credit-debt/tips-for-boosting-your-credit-score-1.aspx.

Just like a food diet that helps you watch what you eat, a spending diet helps you manage what you spend. Last year a poll conducted by American Research Group showed that Americans planned on spending an average of $431 on Christmas gifts.  However, intentions are not the same as actions. In evaluating the difference between what people said they were going to spend and what they actually spent, Catherine Rampell, Economics Editor for the New York Times, said, “Consumers may say they’re going to spend less [this year], but they buckle when they actually hit the mall.”

So how can you make a reasonable shopping budget and stick to it? Below are some actions you can take on your spending diet which will make this holiday season more enjoyable and less expensive.

Get organized

First create your own budget and see how much money you have available to spend on holiday shopping. It may not be very much and that is okay. Having an enjoyable holiday season does not mean it has to be an expensive one. What do you enjoy about the holiday season? Visiting with friends and family, singing carols or holiday songs, enjoying a good meal? Some people spend an evening driving or walking around their neighborhood looking at the decorations. 

Make a list of everything you want to buy this season; decorations for all the upcoming holidays, gifts, costumes and special foods. Now review your list and find items where you may be able to cut back. If you plan on having a dinner party at your house, could you make it a potluck instead? Could your children make decorations rather than purchasing new ones from the store? Really evaluate whether or not the items in your list are necessary for enjoying the holidays.

Impulse spending

Leave your credit cards at home and pay cash when you go shopping. Credit cards make it easier to spend more than you budgeted. According to research conducted by Dunn and Bradstreet, people spend, “on average, 12 – 18% more when making a purchase with a credit card as opposed to cash.” When the cash is gone you are done shopping.

Stick to your list. If you have trouble saying no to sales or “good buys”, avoid going to the store without a list or a reminder of what you know you can afford. If only certain stores cause temptation, try to avoid those completely.  Finally, take a notebook with you when you shop. Jot down the items you purchase and the amount of money you have spent. This will help you stay within the limits of your holiday budget.

Reduce the obligations

If you typically purchase gifts for extended family and friends, think about ways to change that tradition. Talk to them about limits on spending, drawing names, simply exchanging cards, or having a get-together instead. Chances are they would like to reduce their spending as well and would appreciate the suggestions.   

Be realistic

Many people feel the need to spend a lot of money on gifts for their children in order to show them that they love them. Others worry that telling kids there is a limit to the amount of money spent on gifts or that they need to scale back the holidays will cause the child to worry about the family’s financial situation. In reality, parents are a child’s primary financial teacher and holidays are a perfect opportunity for learning about budgeting.  However, rather than explaining that they’ll receive less gifts this year due to money constraints, let them know that you’d like to have a simpler holiday. Emphasize being together as a family and creating new, fun memories.  Perhaps spend an evening together baking holiday treats as gifts for friends and neighbors.

Finally, remember, you do not have to accept every invitation to a party, or buy the biggest and the best gift to show someone you care about them. Just like eating a well balanced meal will keep you healthy, a well balanced budget will keep you in solid financial shape.

First, you have to know that the condition of your credit impacts many areas of our lives now. If you want to rent a place to live, qualify for certain jobs, pay less for auto insurance or pay a smaller down payment on things like utilities and cell phones, you must have good credit.

The popular credit scoring model from FICO uses the following model to show people how information in their credit report impacts their credit scores. We’ll start with the items that make the biggest impact and work our way down to the smallest.

Payments – if you are not current, get current. The most damaging items on credit reports are late payments, items in collections, or items that have ended up in court. Manage your bills carefully.

• Don’t skip payments – if you are juggling or struggling with bills, contact your creditors and ask to make payment arrangements.
• Pay your bills on time.
• Try to avoid bankruptcy. Declaring bankruptcy is one of the worst things you can do for your credit score.

Debt – if you have it, get rid of it.

• If you have credit cards and carry a balance on them, pay those balances down. Carrying a balance that is more than 30% of your available credit limit may have a negative impact on your score.
• Review your credit report for any errors and correct mistakes that are not accurate (but are still hurting your current score).
• Manage your bills carefully.  Monitor your checking account carefully to avoid bouncing a check or worse – having it returned.
• Don’t skip payments – if you are juggling or struggling, contact your creditors to see if some accommodation can be arranged.
• Pay off debt rather than moving it around. Avoid balance transfers.

Length of history matters – Keep accounts that you have had for a long time!

• If you have an old credit account that you’ve always paid on time, keep the account. Closing the account may negatively impact your amount of available credit and prevent the positive history from helping your score.

Mix of credit and new credit –

• It is good to show you can handle different types of accounts. Having a credit card, auto loan, student loan, etc. looks better than having only credit cards on your credit report.
• Refrain from opening a lot of new accounts over a short period of time, especially if you have very little credit history.
• Don’t open any credit lines you probably won’t use. For example, don’t open store credit cards just to get the initial 10 percent discount.

The bottom line – to have a good credit score, you need to:

• Make payments on all bills and debts on time.
• Use less than 30% of your available credit limit on credit cards.
• Keep open 1 or 2 credit accounts, use them responsibly, and again, make your payments on time.
• Try to use your credit cards less – even better, pay them off every month. Too much credit is just as detrimental to your credit report as not enough.
• Get help from a credit counselor if you need it!

Keep in mind; negative items have a lot more power over your credit score than positive items. A little effort will save you a lot of money in the long run!