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Coaches Corner
Legal

Credit Consciousness

by Jeff Isaac

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Just as with a retirement and saving's account or stock market investments, one's credit standing is a controllable asset that can have a notable impact - either positive or negative - on one's wealth. Consumers should understand that ones credit worthiness carries tangible monetary value; Build your credit score and you can build your bank account in kind.

Consider these “Credit Wealth Quick Tips” to help safeguard your financial solvency:

--You are allowed to check your credit once per year with each of the credit bureaus without adversely affecting your score. It's recommended you check one of the three majors (Equifax, Experian, and Transunion) at the beginning, middle and end of each year to ensure all information is correct.

--www.annualcreditreport.com is only one webs ite authorized to fill orders for the free annual credit report you are entitled to under the law, but it does not offer free credit scores – just credit reports.  You can buy your credit score for about $15 at www.MyFico.com. Other web sites and TV ads claiming to offer “free" credit reports or scores are not part of the government’s free annual credit report program.  In many cases the “free” product comes with strings attached.

--Be aware that some imposter sites use terms like “free report” in their names and others have URLs that purposely misspell annualcreditreport.com in an effort to lure you to their site in error.

--Annualcreditreport.com and the nationwide consumer reporting companies will not send you an email asking for your personal information.  If you do receive such an e-mail, see a pop-up ad, or get a phone call from someone claiming to be from annualcreditreport.com or any other consumer reporting company, do not reply or click on any link.  It is likely a scam.  You can forward any such e-mail or information to the Federal Trade Commission at spam@uce.gov .

--Those who are unemployed, planning to apply for jobs in the next 60 days, receiving public welfare assistance or believe the credit file contains mistakes resulting from fraud qualify for a free credit report.

--If you've had problems paying previous loans, bounced checks, or made late payments in the past, it’s possible to lessen the negative impacts to your credit with simple dialogue. Call your creditors and talk such issues through.

--It can often take longer than expected to fix mistakes on a credit report. As such, be sure to check credit well in advance of a major purchase: 3-6 months before applying for a mortgage, 2-4 months for an auto loan, and 1-2 months for credit cards.

--Ensure negative information is appropriately expunged. By law, bankruptcies must be removed from credit history after 10 years. Law suits and judgments, tax liens, arrest records, and other types of undesirable information must be removed after seven years.

--If false information on your credit report is identified but is not removed, by law you may be entitled to actual damages, plus punitive damages. Any credit-reporting agency or creditor can also be sued for letting unlawful parties view your credit history.

--According to a new law, individuals may now "piggy back" a credit card with authorized users (spouse, children) to assist in increasing credit scores.

--According to another new law, those with good credit scores may have one may have one large transgression with less impact to their credit score than in the past.

--Debts of less than $100 are no longer applicable to the degrading of a credit score.

--The 20-year old credit rating system is being overhauled, with the resulting changes expected to affect scores as much as 20 points.  Among the new changes that will take effect in the spring of 2009, credit ratings will take into account the amount of available credit actually being used and the lack of account activity.

--720 is now the minimum FICO score to qualify for "good" credit rates -  an increase from the old benchmark of 680.

--FICO score classifications are as follows: 720 - 850 - Excellent – The best financing terms and represents the best score range, 700 - 719 - Very Good – qualifies to receive favorable financing, 675 - 699 - Average – will qualify for most loans, 620 - 674 - Sub-prime – May qualify but will pay higher interest, 560 - 619 - Risky – Might have trouble getting a loan, 500 – 559 – Very Risky – You need to work on improving your rating.

--FICO score considerations are as follows: Pay bills on time 35%, Reduce what you owe 30%, Hold cards and maintain a history 15%, Limit credit applications 10%, Mix up your credit (credit card and car loan), Diversify 10%.

--If you are paying too much interest and/or want to consolidate credit cards, you may execute a Balance Transfer of all accounts to one single new card with better terms. Sites like cardtrak.com give many options of cards at lower interest rates.  Once the balances are transferred, cancel accounts with a zero balance to positively affect your credit score.

About the Author:

Jeff Isaac, principal attorney at The Lawyer in Blue Jeans Group, renders expert legal opinion and services including Loan Modifications/Mortgage Mitigation, Revocable Living Trusts, Articles of Incorporation, Probate Representation and Estate Administration.  He may be reached through his web site at www.LawyerInBlueJeans.com

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