Exercise Your Financial Health

Nor' east Thinkin'

You'll be shocked by what's in your credit report

Published on: December 2, 2008

Boy, I’m thankful that Thanksgiving is over! After the media barrage about how we can undo the damage done to our waist lines, I can now get back to focusing on my financial “waste lines” – fixing my spending habits, past and present.

 

Judging from what I’m hearing from ag financial advisors, credit is tightening down even for farms. And our financial health is going to become just as important as our physical health. Both will cost us dearly if we aren’t vigilant.

 

I used to think that using low-interest or no-interest credit, it was to my advantage. (Call me gullible.) But recently, I figured out that all those nice people who extended me that credit weren’t doing me any favors. (Yep, I’m a slow learner.)

 

My wife and I keep a couple major credit cards. One of the credit card companies “fessed up” that an employee had absconded with personal financial data. So we received a free one-year subscription to a credit monitoring report. (If you’re wondering, I have an excellent score.)

 

But we were shocked to discover a number of retail store accounts still open – from as far back as 20 years ago. Some were multiples of the same store. When we bought furniture, for instance, apparently it was easier for the sales person to open a new account than pull up the old one. (No, I don’t buy much furniture. In our house, it’s got to be worn out or broken to replace it – much to my wife’s chagrin.)

 

My point for mentioning it . . .

 

Unused credit accounts – not just credit cards – drag down your credit score. As lenders become more selective about who merits their lowest interest rates, you want your best score possible. The difference between just a good and an excellent credit rating can easily be a 1.60% difference in interest rates. And, I’m told that 79% of credit reports contain errors.

 

I strongly urge doing what I resisted doing: Have a credit agency send you a report from the three major credit analysis agencies – TransUnion, Equifax and Experian. If you’re on really good terms with your banker, they might give you one for free. You’ll be as surprised as we were.

 

Your comments are welcome and wanted. If you aren’t already registered, just click on the ‘register” tab at the bottom of this page. Then come back and share your thoughts.

 

Post Tags:

Comments:
Add Comment
  1. J. Mitchey says:

     Wednesday, December 03, 2008

    Oh!  And in case anyone  would like to check their scores for free the following addresses may be help to you.

    www.annualcreditreport.com
    www.freecreditreport.com

    I think the first one is best.

    Josh Mitchey
    Business Development Manager
    Farm Plus Financial
    www.FarmPlusFinancial.com

  2. J. Mitchey says:

     Wednesday, December 03, 2008,  10:11:11 AM

    I have to say, not all unused "tradelines" (as they call them) are bad for your credit.  When applying for credit, open tradelines are good even if they are older with $0 balances.  This shows a responsible credit history with that particular creditor even though no activity is shown.  Now, if you have too many open tradelines it can be  bad and even worse, tradelines with large balances (CREDIT CARD balance to limit ratio greater than 50%).  This  does not apply however to installment tradelines (mortgages, vehicle loans, personal loans).  When you superceed 50%  balance to limit ratio you can really start to damage your credit score,  sometimes up to 25 points per credit card tradeline. 

    There is definately a happy medium as to how many open tradelines you should have.  Of  course none of the credit bureaus will give you an exact science to this but typically 2-3 open credit card tradelines and 2-3 open installment tradelines are healthly as long as you keep the balance of the open credit card tradelines below 50% and all tradelines are paid on time.  The ratio trick does not apply to installment tradelines  since it is not revolving and rather an agreed upon loan amount / term. 

    Josh Mitchey
    Business Development Manager
    Farm Plus Financial
    www.FarmPlusFinancial.com

  3. J. Mitchey says:

     Wednesday, December 03, 2008,  10:11:11 AM

    I have to say, not all unused "tradelines" (as they call them) are bad for your credit.  When applying for credit, open tradelines are good even if they are older with $0 balances.  This shows a responsible credit history with that particular creditor even though no activity is shown.  Now, if you have too many open tradelines it can be  bad and even worse, tradelines with large balances (CREDIT CARD balance to limit ratio greater than 50%).  This  does not apply however to installment tradelines (mortgages, vehicle loans, personal loans).  When you superceed 50%  balance to limit ratio you can really start to damage your credit score,  sometimes up to 25 points per credit card tradeline. 

    There is definately a happy medium as to how many open tradelines you should have.  Of  course none of the credit bureaus will give you an exact science to this but typically 2-3 open credit card tradelines and 2-3 open installment tradelines are healthly as long as you keep the balance of the open credit card tradelines below 50% and all tradelines are paid on time.  The ratio trick does not apply to installment tradelines  since it is not revolving and rather an agreed upon loan amount / term. 

    Josh Mitchey
    Business Development Manager
    Farm Plus Financial
    http://www.FarmPlusFinancial.com