Hurricane Season - Financial Tips to Weather the Storm

It may be hard to believe that hurricane season is only half over. There is no better time than the present for Louisiana, Mississippi, Texas, Alabama, Florida and East Coast residents to review their personal financial preparedness plan.

Many residents learned the hard way during recent hurricanes that financial planning can be the difference between peace of mind and heartache. A good financial plan for disasters such as hurricanes should include easy access to funds, protection of personal financial information and communication with other family members.

Here are some tips you should consider when developing a hurricane financial plan:

1. Make backup copies of all of your records. Make copies of
   important records and documents and safely secure them in
   another location. Items should include photos of everything
   you own, credit card numbers, insurance policies, financial
   records, deeds and titles, wills and trusts, Social Security
   cards, prescriptions and medical records, emergency contact
   lists and spare keys.
2. Maintain a one-page key financial contacts list. These are
   phone numbers of companies you would call to alert them of
   your special circumstances and discuss your options. Include
   phone and account numbers for your bank, mortgage, credit
   card, investment and insurance companies.
3. Create a "grab and go" fire and waterproof box with important
   financial documents. Include recent checking, savings, credit
   card and investment account statements; your key financial
   contacts list; federal and state tax returns; mortgage and
   insurance information; your social security card; and a supply
   of cash.
4. Ensure you have access to cash.
5. Carry your ATM or debit card with you at all times.
6. Build a "safety balance" in your checking or savings
   account that can be tapped at times of crisis, and
   consider an "emergency" line of credit (like a home equity
   line of credit).
7. Consider overdraft protection, linking your checking
   account to a savings account or credit card.
8. Use direct deposit of payroll so your pay is automatically
   deposited into your checking account.
9. And since there may be no power after a disaster, stash a
   sufficient amount of cash, traveler's checks, a prepaid card and a roll
   of quarters (to use in pay phones) in a disaster supplies
   kit that you keep at home and can take with you.
10. Understand your expenses and create a budget. Know how much
    you spend each month on your rent or mortgage, food, gas,
    medicine, and other basic expenses. This information will be
    helpful if you are receiving financial assistance from a
    nonprofit or government agency.
11. Review disaster insurance policies. Don't feel overly secure
    simply because you have insurance. Review plans and ask your
    insurance providers questions about:
    a) Replacement of home or property. Your mortgage could
    exceed the value assigned to your property. Find out the
    maximum value of "full replacement" insurance, and
    consider a guaranteed replacement cost policy.
    b) Home contents. Renters and homeowners can insure their
    belongings. Standard policies are for actual cash value,
    not replacement cost.
    c) Watch out for deductibles, restrictions or omissions on
    floods, hurricanes and other "natural disasters."
    d) Clarify what "living expenses" are if you need to stay in
    a motel for an extended period of time.
    e) Consider a rider policy if your homeowners policy doesn't
    cover computers, home offices, jewelry, artwork or other
    expensive items.
    
    

8 Secret Scores That Lenders Keep

Did you know that every time you use your credit card you are being scored? Lenders track every last detail of your spending habits, then use the data to estimate not just how big a risk you are but how profitable a customer you might be. You are probably pretty familiar with the FICO score and I've written about it in detail previously. I encourage you to get your credit reports and monitor your credit score on a regular basis. But there are 8 Secret Scores that lenders keep that you should know about too.

1. RESPONSE SCORE: This score predicts the likelihood a consumer will respond to an offer of credit, such as a new card or a balance transfer offer. Credit card issuers use response scores to decide whom to target and how to customize offers to appeal to particular consumers.
2. APPLICATION SCORE: This score scoops up data from your credit application that's not included in your credit scores that includes how much you earn, how long you've lived at your current address and how long you've worked for your current employer. Application scores are typically used in combination with other scores, such as credit and bankruptcy scores, to determine whether to open the account, what rate to give and how much credit to extend.
3. BANKRUPTCY SCORE: Credit scores typically predict the chance you'll miss a payment in the next two years. Bankruptcy scores predict the likelihood you'll throw in the towel on your debt entirely and file for Chapter 7 liquidation or a Chapter 13 repayment plan. The leading Bankruptcy Navigator Index or BNI ranges from 1 to 300, with the higher the score, the lower the predicted risk. Most lenders use both credit scores and bankruptcy scores to help assess the risk that you won't pay.
4. REVENUE SCORE: Lenders want to maximize the profitability of each account, and one way they do that is to gauge how much money each account is likely to generate.
5. ATTRITION RISK SCORE: Attrition risk refers to the likelihood a user will stop using a card, and attrition-risk scores are typically used in combination with other scores to determine what to do next if you look ready to bolt. If your account generates a lot of revenue and is deemed at low risk for default or bankruptcy, for example, the issuer might aggressively try to keep your business by jacking up your credit limit, lowering your rate and pelting you with convenience checks. If your account isn't that profitable or is deemed risky, on the other hand, the issuer might just let you go.
6. BEHAVIOR SCORE: Credit scores provide a snapshot of how a consumer is handling all of his or her credit accounts. Behavior scores, by contrast, typically focus on a single account (the one you have with that particular creditor) but take in a broad view. Does the user pay off her bills every month, carry a balance occasionally or frequently pay only the minimums on her cards? That information typically isn't available on a credit report, but is contained in the issuer's databases, along with other data that helps the score describe how she handles her account. A behavior score might be used in conjunction with other scores, such as credit or bankruptcy scores, to decide whether an overdue payment is an aberration (maybe he's traveling?) or a sign of impending financial crisis (maybe we should call the consumer today and find out what's going on).
7. TRANSACTION SCORE: These are the scores run each time you use your plastic to determine whether the transaction should be approved. Issuers are typically looking for signs the transaction might be fraudulent, but transaction data can be used in other ways as well.
8. COLLECTION SCORE: You've failed to pay for long enough that your card has been turned over to a collection agency. These agencies use collection scores to assess the likelihood that you'll be able to pay them and sort their list of debtors accordingly. Collection agencies watch for all kinds of evidence that your financial situation may be improving, from better credit scores to another collector's account suddenly being reset to 0, indicating it's been paid off. If, on the other hand, your credit is in the dumps or the amount involved is small, the collection agency may make minimal effort.

Obviously, how issuers decide what to do with the scores depends on their companies' policies, and even those are often changing targets. Credit card issuers constantly tweak their systems to maximize profits and minimize losses. Most of these 8 secret scores kept by lenders are probably not available to you as the consumer (unlike your credit reports which you have a federal right to see and check regularly) as they're considered to be 'proprietary information'.

Time to Take a Look at Gas Rebate Cards

Even with gas prices declining just a little, we still need to do whatever we can to make our gas dollar go farther. Hopefully now we're waking up and looking at what we need to do - right now - to end our dependence on foreign oil. Getting more alternative fuels going, of course, is paramount but will take many years. America is working on it. The here and now is for drilling, drilling, drilling. We need to get busy and get drilling. We must support efforts to get going now to responsibly and aggressively drill!

Now on a personal level in our day-to-day activities - we have little control over the price of gas but there are things we can do to save a little. I for one have cut my driving. I limit my trips and organize my destinations as best I can. I'm keeping my tires inflated. I'm driving slower on the freeways - down from 70 plus to 60 to 65. I try to avoid stop-and-go traffic, and I drive as smoothly as I can by slowing down gradually and accelerating gradually. The next thing I need to do is get an oil change and have my filters replaced.

It's also time now for us to take a look at gas rebate cards as another possible method to economize. It may sound funny to say that 'credit cards' can be a way of saving money, but actually they can be if thought is given -- and if you're careful in their use. I found an article recently that addresses this very well. I'll give you the high points below.

The right piece of plastic could save you hundreds of dollars a year at the pump. Credit card experts look at the current crop and pick their favorites.

Want to knock 20 cents a gallon -- even 40 cents -- off that upcoming $4-a-gallon gasoline?
Some gas-rebate credit cards can do just that.
Introductory rebates on these cards are now as high as 10%, while longer-term rewards tend to be in the 3% to 5% range.

Are they worth the hassle? If you're driving a 20-mpg car 15,000 miles a year on $4 gas, a 5% rebate would save you $150. But the wrong card could actually cost you money.
Any rewards card, whether air miles or gas rebates, is a gamble, really, that you can pay off the bill before the interest outweighs the rewards. Carrying a balance will probably wipe out any savings from a gas rebate. If you carry balances, your concern should be the lowest rate possible, not rewards.
But if you pay off your balance from month to month, doors open. You're free to hop from card to card, grabbing introductory rebate terms and jumping ship as they expire. For some people, that's a smart strategy.
The damage to your credit scores should be minor.

A final note of caution: The best annual percentage rates, or APR's, are reserved for those with the best credit scores. Rates of some cards can vary by close to 10 percentage points, depending on your credit scores. And a person with truly bad credit scores might not be able to get a card at all.

PICKING A CARD:
To evaluate cards, consider two basics: your driving habits and credit habits.

For instance, if you drive the same route daily and gas up at the same station regularly, then a card co-branded by that gasoline company might work best.

But if you tend to carry monthly balances on your cards, then you'll probably do that as well on a gas-rebate card and the APR becomes a concern. In that case you should seek the lowest interest rate.

For instance, the Chase BP Visa Rewards card scores high on most every card-rating Web site. It offers a 10% gas rebate for the first two months on gasoline purchases at BP and Amoco stations and 5% thereafter. The Chase BP card, however, has one of the higher APRs on balances: currently more than 12% (though it's 0% for the first year). If you usually carry balances, this may not be the card for you. If you don't keep the account open at least six months, you can lose the double rebates.

Also of note: the Chase BP card gives no rebate for any purchases at establishments that sell gasoline other than BP or Amoco.

The ExxonMobil MasterCard requires that rebates be used within six months of being earned. Otherwise, they expire.

You also need to check closely how rebates are paid. Some cards issue monthly or annual checks. Other plans apply the rebates to future purchases. Still others accumulate points that may be redeemed for cash, merchandise or airline miles. Some cards cap the amount of rebates.
A consumer should take at least 20 or 30 minutes to research the reward plans.
You'll find the details on top-rated rebate cards from CreditCardsPlus.com here.

The Experts' Picks:

• The Chase BP Visa Rewards card drew kudos from most experts. Its drawbacks are noted above, but it's the biggest rebate going.

• The American Express Blue Cash Card pays a comfortable 5% rebate on purchases at supermarkets, gas stations and drugstores, but only after $6,500 in charges. Until that point, it rebates only 1%. One expert states, “The aggressive charger might find the Blue Cash card is just for them,” noting that a family that charges most of its purchases could rack up $6,500 pretty quickly.

• The Discover Open Road Card, which offers 5% back on gas and auto-maintenance purchases. One expert notes, “But there is a $100-a-month spending limit on that rebate". Spend more than $100 a month, or $1,200 in a year, and the rebate drops to 1% or less. But partnerships with 80 other companies can as much as double the value of the rebate.

• Costco’s American Express TrueEarnings Card offers an unlimited 3% rebate on gasoline and dining expenses, 2% on travel and 1% on all other purchases. The rebate comes annually in the form of a coupon redeemable at Costco for cash or merchandise. Though the card can be used at any gas station, if you shop at a Costco that sells gasoline, its rock-bottom gas prices are an added bonus to the rebate.

• Many experts also like the Chase PerfectCard MasterCard (3% on gas and 1% on other purchases, 6% for the first three months) and the Capital One No Hassle Points Rewards (5 points per dollar on gas and 1 point per dollar on other purchases), though points can be more of a hassle to redeem than straight cash.

Building a Credit Profile - Starting Out Right

If you are just starting out you'll find life without a credit card in the United States can be hard. Not only do you face challenges when renting a car, shopping online, and accessing emergency funds, but your loan rates could suffer due to a lack of credit history. Luckily, establishing credit is easy!

I've found an article which outlines five easy steps for opening a credit card and building your credit profile.

Step 1 – See where you stand. Have you had a credit card or loan before? Have you had an account in the past 7 years? Have you never had an account in your name? Check your credit reports online before you start to shop for a credit card offer. If you have never had a credit or loan account, your credit reports will probably be reported as “thin files.” This means that there is not enough data on your credit report to accurately evaluate. You may see that you have records on your credit report that you didn’t expect. Co-signed and joint accounts could be reported on your credit file. It will be easier to open a new account if there are some positive records already on your credit report.

Step 2 – Consider your options. If you have never had a credit card or loan account, you probably want to apply for a gas card or a secured credit card. These cards are easier for first time borrowers to obtain. College students opening their first accounts should look for specially designed student credit cards. If you have had credit problems in the past, a secured credit card or prepaid card that reports to the credit bureaus may be your best option. You can shop and compare credit card options today using a great interactive resource service Free Credit Search.

Step 3 – Apply for your card. Send in an application for the card that you think fits you best. You should hear back from the creditor in a few weeks by mail. If you are accepted, congratulations!, and move on to step 4. If you were denied the card, the creditor will send you a letter explaining why and will offer you a free credit report. Try to apply again, this time for a card that has easier acceptance standards, like a secured credit card.

Step 4 – Use you credit card responsibly. It is best to use your new credit card at least once a month for small purchases. Keep your credit card balance below 35% of the credit limit. Pay your balance in full and on time each month. If you use your credit card responsibly, your credit score should start to improve pretty quickly. Borrowers with no previous credit history could see a credit score in the 600’s after 3-6 months. Borrowers with negative records on their credit history will probably see a slower score improvement.

Step 5 – Once your credit score has improved and you have established your new card for a few months, you may want to consider opening another new card. If you previously opened a gas card, secured card, or a pre-paid card, try applying for a standard credit card offer. If your first account had a high APR or annual fees, you may want to close it after you open the new account and start using it regularly. Closing old accounts can harm your credit score and isn’t always a good idea, but it can be a smart move if the card is expensive.

If you use your credit cards responsibly, your credit score will improve! Aim to have between 2-6 open and active credit cards on your report in order to have the best credit score.

Women Aren't Saving Enough

I recently read an article (New York - AP) about women and saving and it confirmed what I was afraid of – women are just not saving enough for their retirement years! Failing to save and contribute to retirement funds is a problem for men and women alike, but women in general seem to be more greatly behind the curve in this financial area then men. Obviously there are a number of reasons for this and I found the article especially helpful in bringing these important issues to light. Let me know what you think, and more importantly, whether you’ll be making any changes in your financial planning.

Women may not earn as much as men or fly up the corporate ladder as quickly, but they get the last laugh since they live longer. Right? As it turns out, women probably aren't saving enough to bankroll those extra years in style. They invest more conservatively, start saving later and are more likely to be in and out of the work force, according to a study released Wednesday by Hewitt Associates, a human resources consulting firm.

Suddenly, retirement isn't looking so rosy.

Women live an average of 22 years after retirement versus 19 years for men and medical costs are rising, so women will need to save 2% more than men every year over 30 years to maintain their standard of living upon retirement, the study found.
The importance of saving didn't dawn on Jerre Laughlin until she was in her 40’s and started working in human resources.

"I was looking at pensions all day and was seeing what happens to employees who don't save. That's when reality set in," said Laughlin, now 63 and a resident of Kansas City, Kansas. She's been playing catch-up since and doesn't plan to retire until she's 67.

Laughlin isn't the only one who's learning her lesson the hard way. The Hewitt study found women today still do worse by every measure: they start saving later (by two to four years), invest less (7.3% versus 8.1%) and are in and out of the work force more often for family reasons - gaps that can result in hundreds of thousands of dollars in missed earnings, raises and benefits.

The study looked at the projected retirement levels of nearly 2 million current workers of varying ages at 72 large U.S. companies and used actual employee balances.
"Women tend to be a little more risk averse, more fearful of losing money," said Alison Borland, an author of the study.

Women's saving habits haven't improved significantly over the past several years, either, Borland said.

The study also found a quarter of women didn't contribute at a high enough level to take advantage of the company match, which is typically 50 cents for every dollar up to 6% of pay. On average, women earned $57,000 versus $84,000 for men.

Yet women will have longer retirements than men by an average of three years. Socking away more now can improve the quality of those extra years.

If a woman who earns $57,000 a year boosts her contribution from 2%to 4% - an extra $95 a month - she can save an extra $81,000 by the time she retires, according to the study. That doesn't include her employer's matching contribution.

Delaying retirement can have a big impact too; every additional year is more time earning and less time sapping savings.

One of the biggest missteps people make is cashing out plans when switching jobs; that wipes out 30% or more of the account's value in taxes and penalties.
Not surprisingly, the study states 90% of women were unsure about managing their finances. It also found that more companies are offering investment guidance, however.

Overall, four out of five men and women aren't saving enough to keep up the same lifestyle after they stop working. Because of inflation and rising medical costs, Hewitt estimates workers will need to replace 126% of their salary after retirement to maintain their lifestyle. Both men and women are on track to replace an average of just 67% of that amount.

But with a longer retirement stretching before them, women may want to think about closing the savings gap fast.

The Difference between Unsecured and Secured Credit Cards

The basic difference between the two types is that an unsecured credit card does not require you to put up a security payment, deposit or collateral of any sort. Your qualification is usually based on your financial history and status and the issuing company’s determination of your ability and likelihood of making payments on time. The secured credit card does require a security deposit. This option is usually for people with imperfect credit histories or with credit and debt problems of substance. This generally means that secure credit cards can be expected to have relatively high interest rates.

UNSECURED CREDIT CARDS
Most companies will issue unsecured credit cards to credit worthy customers based on their credit history and earnings potential. VISA and MasterCard are the two most convenient major credit cards since they are accepted at most establishments. American Express is accepted at many businesses now and in many cases is considered a great travel and business card. Discover offers a variety of unsecured credit cards with emphasis on rewards programs, cash back and other incentives like low interest rates.

The requirements for qualification for a credit card differ from company to company, and within companies, different types of cards may be offered based on a customer’s financial details. It is common for companies to charge relatively high interest rates (some percentage over the prime rate) for customers without the most favorable qualities. A number of credit card companies are now charging no annual fees for credit card accounts and this seems to be spreading. A common marketing feature and incentive is the low introductory annual percentage rate which a number of companies will offer new customers. Customers must understand that these rates have limited duration and it is advisable to find out how long the introductory rates last until the fixed annual rate kicks in.

Keeping up with your payments is very, very important. The great risk of lax management of a credit card is that late payments can initiate a number of punitive fees which can cause interest rates to skyrocket. It is therefore crucial that you pay attention to deadlines and keep track of your account figures. Unsecured credit cards come with credit limits based on the type of account. The best qualified candidates receive the highest credit limits.

SECURED CREDIT CARDS

These cards require a deposit with the issuing bank. This amount, to secure a credit card, is usually only in the hundreds of dollars. It is held as collateral while the bank issues credit of some percentage of the deposited amount. In many cases, the card is reported to the credit bureaus as a normal credit card. This allows the cardholder to establish a positive credit history over the duration. Based on good payment history over an extended duration, some banks will then issue the customer an unsecured credit card. Secured credit cards are often a tool for debt consolidation and credit management programs.

Three More Ways to Cut Spending Without Pain

Cutting spending doesn't have to be painful. It doesn't necessarily mean that we have to do without the things we want. There are plenty of places in our everyday lives where just being smart and careful will yield up some extra dollars.

I found another good article that looks at ways to save money now. Some of the following information was referenced from the August Consumer Reports magazine.

1. Cheaper Auto Insurance. Most people tend to stay with their car insurer for a long time, but they could be missing out on saving hundreds by shopping around once and a while. To find a better plan, start with the National Association of Insurance Commissioner's, www.naic.org, then click on NAIC States and Jurisdictions to find your state's insurance department. Here you can find comparative premium quotes based on standard customer profiles. Other sites to check where you can compare premiums include www.insweb.com and www.insurance.com

2. Cut your Credit Card balance. If you have a credit card balance, you're paying annual interest charges all the time. For example, a balance of $2,200 on which you pay 15.2% interest, means you are paying $28 per month. Eliminate that balance, and you'll save $336 a year. Of course, eliminating your balance is not easy, but here are the two most effective ways to tackle high interest charges:
a) Start paying more than the minimum immediately. A good rule of thumb is to pay at least double the minimum payment.
b) Take advantage of attractive balance transfer credit cards. To compare the best current balance transfer cards, some with 0% interest rate, check out www.CreditCardsPlus.com.

3. Be smart about buying food. According to the Department of Agriculture, the average family of four can cut down its grocery bill by $190 a month by shifting to a lower-cost mix of foods. That's a lot of money to save just by changing food-buying habits. You can adjust your habits by planning menus around sales on fresh poultry, fish, meat, dairy, and produce, and by making use of leftovers. Avoid costly prepared foods. And start shopping in lower-cost stores: Costco, Trader Joe's and Wal-Mart, to name a few.

Great Ideas to Stretch Your Dollars and Save Big Money

In scouring news sources looking for helpful financial information, I came across these ideas that we all might think about. I’ve already completed the first and second on the list!

To help stretch your dollars, here are five places to look for savings:

1. Bundle Up. If you’re dealing with separate companies - and separate bills - for your cable TV, phone and Internet service, think about bundling up. Many companies offer reduced rates if you purchase all three services at one time. There’s even a website, http://www.bundlemyservices.com/, that offers tips and comparisons for more than 20 companies nationwide.

You can call your local phone or cable TV provider and ask about lowering your rates by combining services. Take advantage of special deals and limited-time deals.
One warning: If you sign up for a limited-time offer, be sure to call and cancel or renegotiate before the rates jump back up.

2. Auto Insurance. If you’ve been with the same insurance company for years, it can pay to shop around for a better rate. Some state Departments of Insurance websites offer handy calculators that allow you to get general comparisons on basic annual premiums from dozens of auto insurance companies. The rates are not firm quotes but a general comparison of sample rates.

3. Credit Cards. Here are two ways to save, depending on whether you carry a credit card balance.
If you’re trying to pay off a monthly balance, pick up the phone. With so many credit card offers flooding mailboxes these days, there’s lots of competition. Ask your current card company for a lower rate, and if you get rebuffed, call again in another month or so, advises one credit card expert.

“Persistence pays off,” says Eileen Rector, spokesperson for CreditCardsPlus.com, a website that allows consumers to easily find and compare credit card offers and then apply online.
On a $5,000 balance, for instance, if your interest rate is lowered by three points-say, from 18% to 15%-you’ll save about $12 a month, or $144 a year. If you’re paying off the balance at $100 a month, you’ll knock off 15 months of payments and save $1,500.

Perhaps the biggest savings of all is sometimes the hardest: whittle down your credit card debt. Pay more than the monthly minimum to avoid paying excessive interest over the long term.
If you don’t carry a monthly balance, consider getting a credit card that pays you. Lots of companies, from Southwest Airlines to Home Depot to Golden 1 Credit Union, are dangling rewards cards to customers. Typically, for every dollar you charge, you accumulate points toward merchandise or services.
Some cards, like Discover More, offer cash back.

When choosing a rewards card, it’s crucial to look at the terms and conditions, especially on how to accumulate and redeem rewards. Some companies post it automatically to your account once a year; others require you to call in to request your cash back or risk losing it.
For more information visit http://www.creditcardsplus.com/ for a comprehensive listing and comparison of current credit card offers.

4. Major Purchases. Most of us don’t want to be shopping for a new fridge or washer/dryer, but if the old one dies, you have no choice. As with any major purchase, it pays to do some comparison shopping. Pick the model and features you want, then call or go online to compare prices at several appliance stores or retail outlets.

Also, check the manufacturer’s website, such as http://www.kitchenaid.com/, to locate discounts and rebates that might not be available in the store.
Another option: Some retailers, like Sears, have warehouse outlets where they sell discounted merchandise for anywhere from 20% to 60% off regular retail. Typically, it’s returned merchandise, discontinued models or those with slight dings or nicks-cosmetic blemishes that don’t affect the appliance’s durability or performance.

Thinking about buying an extended warranty for that new dishwasher or dryer? According to Consumer Reports, it’s not necessary. Unless you sleep better knowing you have extended coverage, most of the time the repairs won’t outstrip the cost of the policy.

5. Treasure Hunting. OK, it’s not really treasure but there may be a stash of cash just waiting for you to uncover. We’re talking about unclaimed property-old savings accounts, utility refunds, dividend checks, product rebates and other money that is rightfully yours. In many cases, long-ago deposits are sitting dormant in banks or safety deposit boxes.

In many states, financial institutions must turn over all dormant bank accounts, safety deposit boxes and the like that have gone untouched for three years or more.
It’s a big piggy bank waiting to be tapped. Each state is sitting on about thousands of unclaimed property accounts worth. You may visit http://www.unclaimed.org/ for a state-by-state listing of where to hunt for unclaimed property.

The Seven Best Tips to Improve Your Credit Score

I came across a great article that outlines information and tips to improve your credit score and ways to avoid common credit pitfalls. Having a low credit score (or FICO score) will hurt you every time when you go to apply for a credit card or for a loan of any kind. It’s plain and simple - if your credit score is low, you will be paying higher rates of interest. So it’s important to gain any knowledge you can to get your credit score in the best shape possible. I’ll summarize and share the 7 best tips and high points with you:

1. Late Payments (The number one and most costly credit mistake of all!)

Always make your payments on time. If you are late on an obligation that reports to the credit bureaus, your score will drop about 75 to 100 points. Timely payments account for 35% of your overall FICO score. This particular factor in your credit score is the biggest factor of all.

2. Balance Owed

If you have credit card debt, and the balanced owed vs. the allowed credit limit is more than 30%, your score is affected. The amount owed accounts for 30% of your overall FICO score. You should keep your credit debt well below 30% of the allowed credit limit.

3. Length of Credit History

Once you are granted some credit, the FICO score model looks at how long you have been in good standing with your credit. If you have a good history with your creditors, you can count on it helping your overall credit health. The length of your credit history accounts for 15% of your score.

4. Mix of Credit

By “mix of credit” we mean combination of credit cards, installment loans, auto loans, department store credit, etc. Mix of credit accounts for 10% of your FICO score according to Fair Isaac so you need at least 3 or 4 lines of different types of credit to get the best overall score.

5. New Credit

New credit accounts for 10% of your FICO score. The FICO score model does not like to see you applying for too much credit. Too many hard credit inquiries will affect your credit score. Be prudent and research and compare credit card offers before applying.

6. Identity Theft and Credit Monitoring

Make sure you are pulling a copy of your free credit report regularly. With the identity theft problem it is recommended to set up some type of credit monitoring with immediate alerts. So if something happens you will know about it quickly.

7. Co-Signing (just say 'no')

Co-signing is a big problem as well. We don’t recommend co-signing for anyone. If a family member or friend does not have the credit to buy, the best thing they can do to get credit established is to get a couple of secured credit cards. This is the fastest way to improved credit health. With a little history, usually 12 months of good payment history - the creditors will open the doors of credit.

Protect Your Identity

Prevent identity theft by taking precautions such as the following:

- Monitor the balances of your financial accounts for unexplained charges or withdrawals

- Order a copy of your credit report to check for new credit accounts in your name

- Avoid common passwords such as your mother’s maiden name, your birth date or the last four digits of your SSN

- Don’t give out personal information on the phone, through the mail, or over the Internet unless you’ve initiated the contact

- Remove mail from your mailbox promptly and shred receipts, medical records and any sensitive financial information

- Keep your Social Security card in a secure place and give your SSN only when absolutely necessary

- Limit the identification information and the number of credit cards that you carry with you

- Secure your computer by updating your virus protection software, firewall and operating system regularly. Avoid using an automatic log-in feature on your computer

To learn more about the FTC’s Privacy Policy, visit www.consumer.gov/idtheft

Understanding Your Credit Score

What is Credit Scoring?
Credit scoring is a system lenders use to help determine whether to give you credit. Information is collected from your credit report and your credit application to calculate your credit score.

A statistical program compares your credit information to those of hundreds of thousands with similar profiles. Based on this comparison, a score is generated which identifies the level of future credit risk you present to a lender.

In order to calculate a credit score, your report must contain at least one account which has been opened for six months or greater. In addition, the report must contain at least one account that has been updated in the past six months. This ensures that there is enough current information on which to base a score.