Doing it all means that you have to be fiscally fit. With the economy the way it is, it is harder to get credit and buy the things you want and need on someone else’s dime. Like Dave Ramsey, author of The Total Money Makeover, I don’t endorse spending money you don’t have. But, unlike Mr. Ramsey, I believe credit has its place. Financing transportation, your home, and even a credit card for emergencies are all financially responsible debts to have. Unless you have credit and pretty darn near perfect credit these days, it is hard to get a loan or line of credit. So before you go applying for your first mortgage or get a credit card, here are some things to consider.
Two to Ten Years
Credit history lasts longer than most Hollywood couple’s relationships. A simple late payment stays on your report for two years. And, it can sometimes do more damage than a bankruptcy. Bankruptcies stay on your report up to ten years and paid charge off (accounts that went to collection and the company wrote of as an expense) stay on for seven years, even after they’ve been paid. It is imperative that you pay on time to keep your score tip-top.
Early isn’t Always Best
While most companies would love for you to pay your monthly bill early, some won’t give you credit if you pay too early. Most credit cards have a window in which you can make your monthly payment. So not only is it bad to wait too long to pay your tab, but you must read your disclosures or talk to an account rep to make sure you don’t pay too early. They’ll credit the principle amount, but not your monthly payment and you’ll stay a month behind racking up the late pays on your credit report.
Free Credit Report
We’ve all heard the catchy jingle sung by the cute guy in a pirate hat, but there really is a free credit report and not one that you have to give your credit card number in order to get the “free” service. Annual Credit Report.com is a free site that will give you your three credit reports for free, for real.
Different financial institutions use different credit bureaus to judge credit. And, the three reports may have different information. Once a year you get a free look at your credit. In the past you only got a glimpse of YOUR credit either by buying the report or being denied credit. You can still get a copy if you’re denied credit and Experian, TransUnion, and Equifax would all love to sell you their services.
Anti Theft Device
Not only will checking your credit once a year help give you an idea on where you are credit wise and what you need to work on, but it also is a good idea to check for mistakes and accounts that aren’t yours. If you see something that is not yours, such as a credit card account that you’ve never heard of, dispute it immediately.
You can dispute it through the credit bureau’s website or you can contact the merchant directly. Going through the bureau, the merchant has thirty days to either correct your report or give evidence that you opened the account. Most credit card companies and banks have fraud specialists who will gladly help you resolve any issues. They should have policies in place to quickly resolve the problem. They don’t want to lose any money either, so they do all they can to cover themselves which helps you at the same time.
Banks are really buckling down to whom they lend money. Know your situation. Don’t spend more than you can pay. And finally, be a responsible consumer. Loans are not bad, but getting over your head is hard place from which to dig.
