How Do You Score? A+ or Needs Improvement?
Knowing your credit score and how to boost it can save you thousands.
By Deborah A. Wilburn
Most of us are familiar with credit scores. Ranging from 300 to 850, they are a sign of financial health and, to lenders, they indicate the likelihood that a consumer will be able to repay a loan. Any score above 700 is considered good, while scores below 600 tell lenders that, based on your past credit history, you may have trouble paying them back. A low score doesn’t necessarily mean you won’t get a loan—but if you’re approved, you might end up paying a higher interest rate. That’s why it’s important not only to manage your money wisely, but also to know your scores. Even a difference of 60 or 70 points could cost you thousands of additional dollars in interest over the life of a loan.
The first step, then, is to find out what your scores are (you have three, issued by each of the three major credit reporting agencies—Equifax, TransUnion, and Experian). Although you can get some credit reports for free, you have to pay for credit scores. You’ll need to order them through http://www.myfico.com/ , or call (800) 319-4433. Expect to pay about $16 each.
That said, there are general guidelines anyone can use to keep their credit rating high. Here are a few steps recommended by financial experts:
Fix any mistakes in your credit reports, because your score is based on the information in them. If something is wrong—for example, if one of the reports states that you’ve missed one or more payments, but you know you always pay on time—notify the agency so the error can be corrected. Note: You are entitled to a free copy of your credit report each year from Equifax, TransUnion, and Experian. To order, call (877) 322-8228 or go to www.annualcreditreport.com. It’s important to check all three reports, because these agencies don’t share data and a mistake in one may not show up in another.
Make payments on time. The most common way that people damage their credit is by not paying bills on time, says Gary Herman, president of Consolidated Credit Counseling Services Inc. in Fort Lauderdale, Florida. “Once a bill is 30 days late, it’ll be reported to the credit bureaus,” he says.
Don’t max out your credit cards. Owning several cards with balances near the limits will ding your score. “Ideally, balances should be no higher than 35 percent of the credit limit,” says Herman.
Don’t close out old accounts and consolidate everything onto a new card. Demonstrating that you’ve managed an account over a long period of time is attractive to lenders. Don’t be too quick to close out your oldest accounts, especially if you’re a young educator with a fairly short credit history. Leave the account open, even if you’re not using the card.
Don’t open up several new accounts at once. This suggests you may be having financial trouble.
How long does it take to boost a low score? “A lot has to do with the type of damage you’re recovering from,” says Herman. “Chapter 7 bankruptcy stays on your report for 10 years, but if you make a late payment and start paying on time, each month when your report is updated, it will improve incrementally.” That’s because recent payment history is given more weight than past mistakes.
And that’s good news for anyone who goes through a time of financial stress: If credit scores take a hit, there are more than enough chances to improve them.
Best Summer Travel Deals
Whether you’re planning to get away this summer for some much-needed R&R, or sticking to business by traveling for conferences and training, remember that the best way to get the lowest airfare is by not following the herd.
Traveling on Saturday, Tuesday, or Wednesday tends to result in the lowest fares, especially for those willing to board in the early morning hours or late at night. When it comes to travel search engines, everyone’s heard of the biggies, like expedia.com and orbitz.com, but before locking in a fare, check out Kayak.com, which searches over 100 sites and offers alternatives like smaller airports outside of major cities. Mobissimo.com, another comprehensive site, also has a cool blog where armchair travelers can learn about wacky and wonderful things in the world of travel, including updates on the three man-made islands being built off the coast of Dubai, or Virgin Galactic—the world’s “first commercial spaceline.”
Homes for Sale, Half Off!
Sound like a deal too good to be true? Actually, the offer is real, thanks to an initiative that’s come about through NEA working in partnership with the U.S. Department of Housing and Urban Development (HUD).
Called “Teacher Next Door,” the program allows teachers to buy houses in revitalization areas—HUD-designated neighborhoods in need of economic and community development—where they teach, at 50 percent off the listed price. This program is a step in the right direction toward helping more educators realize the American dream of home ownership.
And we can do more. NEA is currently working with HUD to improve the program to include all categories of education support professionals (ESPs) and to expand the program in high-cost areas. For more information, go to www.hud.gov/offices/hsg/sfh/reo/goodn/tnd.cfm.
How I Saved a Buck!
Christine Carlson, elementary school teacher, Stafford, Virginia
Over the years, I’ve collected sturdy, reusable (but not breakable!) plates, forks, and spoons to use in our kindergarten classroom. I have enough for a whole class set, plus extras. Now, whenever we have a class party or share a snack, I don’t have to buy paper or plastic plates and utensils. Plus, we help the environment by not using disposable items. The kids also get to practice good table manners because they are using real items. (I bring them home and throw them in the dishwasher.)
Got a great way to save some cash at home or at work? E-mail firstname.lastname@example.org.
Is It Worth It?
Road Hazard Warranty for Tires
You’re about to shell out $300 for a new set of tires, so it’s only natural to wonder if you really need to pay more for the extended warranty the salesperson is pushing. In most cases, no, but let’s take a closer look. The insurance that comes with the tire usually guarantees that it will last for a certain number of miles—from 40,000 to 100,000, according to Eugene Peterson of Consumer Reports’ Automotive Testing Center. Most manufacturers also guarantee that it will be free of defects for the life of the tire.
Extended warranties typically cover damage as a result of road hazards, punctures, and potholes. “That’s it,” says Peterson. The extended warranty may cover one year or the life of the tire, depending on the plan. Expect to pay about 12 percent of the cost of each tire. So on a $75 model, that would be an extra $9, or $36 for four tires. In some cases the coverage is offered for “free,” but the seller increases the price of the tire.
When is it a good idea to spring for this type of coverage? Peterson suggests that personal experience may be the best guide. “If your tires have been damaged by roads a lot in the past, the added warranty may be a good thing,” he says. But if you don’t live in an area that is particularly prone to potholes, construction sites, or other hazards, you’ll probably be OK passing this up.
If you opt for tire insurance, Peterson recommends making sure you’re clear on how long the warranty runs, whether or not you’ll get 100 percent reimbursement, and whether mounting and balancing are included in replacing the tire. Finally, find out what happens if there’s a simple puncture—that is, whether the tire will be repaired or replaced. Armed with that knowledge, you’ll be able to make the best decision for keeping those wheels rolling.