The Observer, September 19, 2008
Volume XLI, Issue 4
Get an "A" on your credit (part 3 of 3)
In the previous articles we talked about understanding your credit score and history as well as how to start building the strong foundations for a great score. Today we will talk about continuing your efforts throughout your lifetime since your credit score stays with you.
Manage
Once you have built a solid base, focus on managing. Any time you are opening a new line of credit (bank account, credit card), think long term. You want to open and hold it for a while, as this also contributes to a positive score. However, let's say you have four credit cards, all carrying balances. It will have a smaller impact on your score if you close one (15 percent) and make on-time payments for the rest instead of being late with one or two of them. Stay on top of your accounts and make sure all the charges are correct and ones that you made.
Manage your debt, consolidate if you can, and take advantage of lowered federal interest rates while continuing to make your payments on time. If you have credit card debt, look for promotional offers with zero percent interest for introduction. Even though you are opening a new card, it is better to lower your debt first (only 10 percent impact compared to 65 percent for making payments on time and owing less).
There are three credit report companies that offer a free annual look at your credit report: Equifax, Transunion, and Experian. Check one every four months. With so many identity theft instances these days, this is also a great tool to catch offenders. If you notice unfamiliar companies looking at your credit history, it could be someone else applying for loans or accounts in your name.
With this said, don't be afraid to dispute any mistakes that you see. It will keep your name in the clear. Most importantly, keep making those payments on time. A friend of mine is all electronic now and uses online banking and calendar reminders to keep her on track. It all seems a little complicated to me, but find what works for you and do it.
Ultimately, your credit score is ongoing and continuously changing. If you understand it, you can start building a strong foundation for the future. Don't forget about it because it could easily slip out of your hands. It doesn't matter how much you make, but how you handle the money you have. You should take charge of your finances. Believe me: you'll be happy you did when you're paying less than others due to smaller interest rates.
Valbona Bushi graduated from CWRU last spring with a bachelor's degree in accounting. She is an Ohio Society of CPAs student ambassador and is currently at Case working toward a masters degree in accounting.
