If You Don't Use Credit, You Don't Have Any Credit!

This morning I received a phone call from a good friend, who started by saying, “I have a friend . . .” No honestly she really did say that. Anyway, her friend has paid off her mortgage, paid off the car loan, and paid off and closed her credit card accounts. She is totally debt free.

Knowing that she should be a great candidate, she went to her lender to talk about a new mortgage and found out that she currently has no credit scores. When her lender told her to go get a credit card account and come back in six months, she was shocked. In her defense, she has always had great credit, paid everything on time, and never been overwhelmed by debt. Why would she not be a stellar candidate for a loan?

Credit models have tightened up like everything else and the last six months to a year of your credit history is more important than ever. If nothing is there, then the credit repositories don’t want to recommend you as a good credit risk.

Credit counseling and advice is a big part of what I spend time talking with my customers about. Although I warn them against doing anything while we are in the mortgage loan process, I speak very candidly with them about developing and maintaining their credit history throughout their lives.

So, here is the 20 second version that I recommend to my customers:

• Always maintain at least (2) open credit card accounts.
• Never close credit card accounts unless you are having a problem with that particular credit card. The date opened of the oldest card you have is significant also.
• Use your cards routinely every 3-4 months.
• Always make at least the minimum monthly payment, if you miss the due date, pay it before 30 days passes
• Keep your open balance(s) below 50% of the credit limit(s) of your credit cards, this shows good utilization of credit

One last item of advice, never co-sign for anyone on anything unless the bill is coming to you. The problem occurs that if they get into trouble making their payments, you will always be the last to know and by that time, it has destroyed your credit also.

Credit affects many things in your life including, background checks, security clearance, insurance rates, and what you pay for future loans. Be aware of what affects your credit and know how to maintain good credit.


© 2012 Richard Swan
This blog is for informational purposes and is the opinion of the writer. In financial matters always solicit professional advice and legal counsel if necessary.

Identity Theft Costs Everyone Money: Protect Yourself

A friend called me today desperate for help. She had her debit card number stolen and over $10,000 had been removed from her checking and savings account. After calling her bank and filing a police report, she called me to find out what else could be done to prevent and limit the damage that can be caused by fraud.

In her particular situation, an additional card reader had been attached to an ATM or other credit card scanning device to pick up the account number of her card. The thieves then created an actual card that could be used at stores, restaurants, ATM’s, etc. This practice has been around for some time and should remind us all to be more aware and think about the location and machine that we use to scan any bank card.

Once she realized her account had been compromised, she wanted to make sure that her credit and identity were not vulnerable. The first step is to alert people that can help you, and then to monitor your credit carefully over the next several years. She was diligent and filed a local police report, but the FBI may also be interested in hearing about your situation, especially depending on the dollar amount. You can find out more about identity theft by visiting this FBI website: http://www.fbi.gov/about-us/investigate/cyber/identity_theft .

If you suspect you are a victim of identity theft, here are some important contact numbers that can help you respond:
Federal Trade Commission:
Identity Theft Hotline: 877 ID THEFT (877) 438-4338

You can also put an alert on your credit by contacting the three credit bureaus listed below:
Experian Fraud Division: (888) 397 3742
Equifax Fraud Division: (800) 525 6285
TransUnion Fraud Division: (800) 680 7289


This blog is for informational purposes and is the opinion of the writer. In financial matters always solicit professional advice and legal counsel if necessary.