Credit Card Debt Management

Last night marked a tense moment in marital history. My husband needed to check his credit report to apply for a job that requires extensive background information. After logging on to AnnualCreditReport.com, he discovered that someone (don’t look at me!) had already used up his three free credit report checks over the past year. He would not be eligible for another free peek at his credit report until April. We could have paid, but it’s the principle of the thing. How annoying!

Fortunately, there happened to be a saved copy of his credit report on Experian’s web site and the report number and log-in information just happened to be in my possession! Don’t know how that happened. Morals of this story:

Check your credit reports sparingly. You only get three free checks a year, so really pay attention to when you are accessing that information. Try to space it out evenly.

Don’t use up the free credit report checks of others. How rude!

Print your credit report. It is a good idea to have a hard copy of your credit report on hand. Just keep it in a safe place, away from prying eyes. Next time you check your report, you can then print off the new copy, compare it to the old copy and keep your files up to date. Checking your report throughout the year also helps you stay on top of any possible identity theft issues.

Save all pertinent information to re-access your report online. These reports are typically saved for 30 days, so consumers can log back onto the web site and review their report again within that time. Save the web site, log-in info, report number and any other details neccessary to do so. Even if you print a copy off, you’re better safe than sorry!

The unsavvy consumer may not understand the importance of checking one credit rating, let alone three. The FICO score, invented many years ago by the Fair Isaac Corporation, can range from 300 to 850, with a higher score being more ideal. It is directly used by lenders to determine your credit risk, i.e. whether or not they should loan you money.

Relatively simple, right? Well, not really. Inexplicably, three major credit bureaus keep track of Americans’ credit history and use different formulas and information to calculate a FICO score. These companies are TransUnion, Equifax and Experian. Lenders can pull one or all three of your credit scores. They will often pull all three and use the middle score, or use the average of all three.

According to Business Week:

“For the most detailed explanations on your FICO scores, go to myfico.com. A score from one credit bureau costs $14.95, all three are $44.85. It’s useful to buy all three because large lenders either average the scores or take the middle one. You’ll want to check your FICO scores once a year or several months before you apply for a loan.”

The point differential between your three credit scores could be as much as 50 points, because different bureaus track different information at different times, directly affecting the score they give you. So be your own most thorough investigator and give yourself the advantage when going in for a loan.

The American Chronicle had a fabulous article recently about “The Six Questions Lenders Will Ask You After Your Bankruptcy.” The largely first-person article by Stephen Snyder, founder and president of the After Bankruptcy Foundation, offers sound, common sense advice for those who have undergone the financial nightmare that is bankruptcy. Don’t forget, however — nightmare as it is, bankruptcy is not the end of the world. There is life after bankruptcy, and here are a few of the highlights to help you along:

Pay on time, especially after bankruptcy.

Establish new credit. These are typically going to be high-interest loans and lines of credit. Retail credit cards are a good way to get started. They’re not terribly picky about credit scores, but they are higher interest. Whatever new credit you choose to get back on your feet, use it responsibly or it will be all for nothing.

Know your credit score. Knowing your FICO score is essential to gaining a slight upper hand when going in to talk to a lender. Knowledge truly is power.