Wouldn’t it be nice to be debt free and have a great credit score? - STEP 1

          Of course it would. However, there are reasons we still need a good credit score.  A good credit score isn’t just used for loans anymore. Did you know, when you apply for a job many employers use our credit record in their background checks? Insurance companies base the rates they charge not just on your driving record but also on your credit score and finally creditors determine whether or not they will allow you a checking account or approve you for loans. How many of us have the cash we need to purchase our own home with no mortgage?  How many of us even have the cash to purchase a new car or even a used car, for that matter with a large chunk of cash. For the newly married young couple to the consumers hoping to downsize to a smaller home, to the young person buying their first car to get to work to the family who needs a larger vehicle or home it seems that credit is the only option.

          One of the most important, if not the very most important things you want to focus on in your financial life is obtaining the best credit scores you can and keeping them. Why? For starters, some very good reasons were cited above.  For our purposes here, take for example, that credit scores will determine whether or not you can get credit in the first place and it may be the difference between paying 15% or 3.5% on a loan, 7% or 3.25% on a mortgage, and 24.9% or 6.9% on a credit card.  Over time, the difference in interest rates that you pay will either cost or save you a lot of money, money that you can keep in your pocket.

             As a consumer you have to put your best financial foot forward and this means making the highest credit score possible a priority in your financial management toolbox. But does this mean that you have to go into debt to achieve a high credit score and dishonor your commitment to become or remain debt free?  If you have established a credit score and just need to improve it, no. If you have no credit score and need to establish one, perhaps. Just as there are no two people who are exactly the same, it’s almost the same with credit histories. Your situation is unique to you and how to get a credit score or improve one is entirely dependent on whom you are in regard to your money management traits.

            The first step towards the goal of achieving the best credit score possible is to either: 1) determine whether or not you have a credit file; or 2) find out what is currently in your credit files.  Every year the federal government says you are entitled to one free report from each of the three credit reporting agencies; Experian, Equifax and Trans Union.  The following article from the federal government: http://www.consumer.ftc.gov/articles/0155-free-credit-reports will be helpful in determining what you need to do, what information you will need and the pitfalls of imposter sites that you need to avoid.  If you haven’t already done this, do it now. If you have no credit file you will not be able to get any report. This will mean that you will need to go to the next step which will help you determine how to establish credit.  If you do have a credit file it costs nothing to get the report but for an added $7.95 or so on each of these sites you can get your current score based on the free report.  Credit scores are NEVER free because they are sales information owned by the individual credit bureaus. This is the information Experian, Equifax and Trans Union sells to potential lenders and marketers. This is how the credit bureaus make their money to stay in business. The purchase of your credit score by potential employers, insurance companies, banks and other creditors makes your credit score and your credit history a necessary investment by you for your financial management and financial well being. It is every bit as important for your financial life as your medical records are for your physical health.   To be continued…..

Questions and comments welcome.

Getting a Loan in this Economy

What a major mess. Regardless of how we got here in the first place as a country each of us wonders, what's in it for me and how does this affect me? That answer depends on a large part defining who "me" is and how you are sitting financially at this minute.

We hear about the Federal Government giving the big banks a stimulous infusion of cash so that they can lend more to each of us. That doesn't mean that tomorrow you will be able to head out to Wachovia, Bank of American, Wells Fargo, US Bank or Chase just to mention a few and expect a loan officer to welcome you with open arms just waiting to dole out his cash to you for any one of your needs. In fact, unless Congress becomes more vigilant in specifying that goverment money is specifically for lending, we are not entirely sure banks will do just that. Moreover, the credit requirements to get a loan in any of these major banks are tightening in an atmosphere where the average consumer's credit scores are suffering for any meriad of reasons such as unemployment, mortgage issues, bankruptcies and the list goes on.

So where do you go? Right now the best bet is the Credit Union. I have always extolled the virtues of the Credit Union because they carry better loaning interest rates, have cash rich reserves, are run by all of its customers who are its members, like banks are insured in deposit accounts to $250,000, don't have absorbitant compensation for its officers and tend to have that smaller home town releationship with its customers. There is a credit union available to just about everyone, either on-line or in a physical location close to you. Some have membership requirements such as living, working or going to school in a specific community, membership in specific organizations such as the armed forces or job specific industries, and referrals from existing members through a family relationship. However, more and more Credit Unions are open membership oriented where anyone can join.

Consider going to a Credit Union for your next loan.