Sunday, September 30, 2007

Reviewing Your Credit Profile

by Thom Fox
Community Outreach Coordinator
Cambridge Credit Counseling Corp.

It’s important to realize that if your credit score is poor, it won’t necessarily remain that way forever. Your current score is simply a snapshot of your credit profile at any given point in time. As long as they are accurate, negative credit notations that appear on your reports will only remain for seven years, and then they must be removed. Bankruptcy notations are treated differently. They stay on your report for ten years. In the meantime, it’s your responsibility to make sure that every new addition to your report shows evidence of better payment patterns.

Credit reports and scores are very time-sensitive items. Your score from three months ago is probably not the same score a lender would get from the credit reporting agencies today. If you do have negative notations on your report, even before the seven years have passed, if you’ve re-dedicated yourself to meeting your obligations on time, your credit score should begin to reflect these efforts. If you can be patient and make the necessary adjustments, it is possible to improve your overall credit profile and your credit score. The bottom line is, it’s up to you to improve your credit performance from this day forward.

Perform a Credit Check-up
To begin the process of improving your credit profile, order a copy of each of your credit reports from TransUnion, Experian, and Equifax, the country’s three major credit-reporting agencies. Many businesses and lenders report information to only one or two of the agencies, but rarely to all three. This causes the information in your reports to vary greatly. Reviewing each of your reports will provide you with a clearer picture of your overall credit profile.

During your check-up, be on the lookout for errors contained within your credit reports. It has been estimated that more than 40% of the reports on file contain mistakes. Do you have negative entries on your report that are incorrect, invalid or that have been in some way misrepresented? You should also look closely for unauthorized inquiries, incorrect mailing addresses and Social Security numbers, as these may indicate that you have been a victim of identity theft.

If you do find errors within your report or discover that you’re a victim of identity theft, there are steps you can take to correct the items in question. As stipulated in the Fair Credit Reporting Act (FCRA), both the credit reporting bureau and the information provider (the person, creditor or organization that provided information about you to the credit-reporting agency) are responsible for correcting inaccurate or incomplete information in your report. They won’t make these fixes on their own, however; it is up to you to notify them of any mistake.

Managing Credit Responsibly
The following are some additional strategies you may make use of when attempting to improve your credit profile.

Keep the balances as low as possible on your credit card accounts. High outstanding debt can have a negative effect on your score.

Pay off debt rather than move it around. The best way to improve your score in this area is by paying down your revolving credit accounts. In fact, owing the same amount but having fewer open accounts may actually result in a lower score.

Don’t close unused or old credit cards as a short-term strategy to raise your score. Shutting down credit accounts lowers the total amount of credit available to you, and it also gives additional weight to any balances you do have when it comes to calculating your credit score. Closing your oldest accounts can actually shorten the length of your reported credit history and make you seem less creditworthy.

Don’t open a number of new credit cards that you don’t need. This approach could backfire and actually lower your score.

Don’t open a series of new accounts in a short period of time. If you have only been managing credit for a little while, don’t open a lot of new accounts too rapidly. New accounts will lower your average account age, which will have a negative effect on your score, especially if you don’t have a lot of other credit information.

Re-establish your credit history if you have had problems in the past. Opening new accounts responsibly and paying them off on time will help raise your score in the long term.

Add positive information whenever possible to show stability in your credit profile. If you have extremely poor credit or have even filed for bankruptcy, don't let your credit status go dormant. The faster you begin to re-establish positive credit, the faster you'll improve your credit profile. One way to achieve this is to get a secured credit card.

It’s okay to have credit cards, but you must manage them responsibly! In general, having credit cards and installment loans (and making timely payments) will raise your score. Someone with no credit cards, for example, tends to be a higher risk than someone who has managed credit cards responsibly.

Improving you credit profile takes time. Unfortunately, negative items tend to affect your credit score much more quickly than positive items. Late payments can negatively affect your score in just a few months, whereas paying bills on time may take 6 to 12 months to generate a significant improvement in your score. The best course of action is to adopt healthy credit habits and maintain them.

Wednesday, September 19, 2007

Seniors Gamble Their Retirement on “Risky Business”

by Thom Fox
Community Outreach Coordinator
Cambridge Credit Counseling Corp.

Instead of playing shuffleboard or golfing in Florida, many recent retirees are engaging in a more dangerous activity - entrepreneurship. An increasing number of seniors are opting out of the traditional retiree lifestyle to become players in the 21st-century economy, choosing instead to start businesses ranging from dry cleaners to sandwich shops. Experts are worried, however, that they’re often using portions of their retirement funds to get things up and running.

While these authorities recognize the importance of a healthy and fulfilling lifestyle, starting a business is notoriously risky. Statistics show that two-thirds of all new businesses fail within the first few years. When retirement funds are used as seed money, the risk may outweigh the anticipated return.

If you are in your golden years and want to contribute to the economy, you should seek guidance from as many business experts and community sources as you can before investing in a new business. It’s recommended that individuals set aside 80% of their annual income for each year of retirement. With our rising life expectancy, people naturally need to increase the amount of their retirement savings. Using the money it has taken decades to save is quite chancy.

How can you ensure that your investment is worth the risk?

Write a business plan: Writing a business plan is a good way to see if your idea is realistic, and it will force you to conduct valuable research. If you discover that the local market is over-saturated or that businesses similar to yours have failed, it can save you a tremendous amount of money.

Immerse yourself in your chosen industry: You’ll need to become an expert within the industry you’ve chosen. Join related industry or professional associations before you start your business to get the edge you need.

Get professional help: Talk to your local Small Business Association (SBA), a personal Financial Planner, your Tax-Accountant, basically anyone who can offer the support you need in your venture.

Seek alternative financing: Your idea may be attractive to other investors. Consider applying for an SBA loan or bank loan before tapping into your valuable retirement savings.

As with any aspect of personal finance, it’s best to be prepared for every outcome. Starting your own business can be rewarding, but you don’t want to jeopardize your retirement savings by investing beyond your capacity for loss.

Thursday, September 13, 2007

Save Some Green by Thinking Green

by Thom Fox
Community Outreach Coordinator
Cambridge Credit Counseling Corp.

Global warming has been the focus of a great deal of attention recently, from full-length documentaries to world-wide concert broadcasts urging consumers to “think green.” But what if there were a way to help the environment and save money in the process? Well, there is and it’s quite simple – avoid impulse purchases.

Every day, advertisers urge consumers to spend their money on the newest, most advanced products, and many people have difficulty resisting such temptations. That’s because shoppers typically focus on their wants, not their needs. Beyond such unnecessary spending, however, is the obvious fact that every MP3 player, laptop, PDA or other gadget has to come from somewhere on the planet, and additional energy must be expended to bring these products to market. Despite the best efforts of manufacturers and shippers, there are tremendous amounts of waste involved in the processes that create and deliver the goods we seem to think we can’t live without.

For example, the creation of a desktop computer requires more than 700 different materials, including metals that must be mined, oil that has to be extracted from wells, and chemicals that must be produced in factories. The manufacturing processes that combine these resources also require large amounts of energy, mostly involving the burning of fossil fuels. This often results in the release of CO2 and other pollutants into the air, contributing to the planet’s natural greenhouse effect. In fact, for every pound of electronics in a typical computer, an astounding 8,000 pounds of solid and liquid waste are created!

Analyzing your wants and needs not only helps curb your reliance on credit, it can also be good for the environment.

To learn more about Cambridge Credit Counseling Corp., please click here.