Credit Counts

To benefit from today's low interest rates, you've got to keep your credit clean. Here's how.

Time was when most folks prided themselves on paying cash for what they needed. Not anymore. Today even teens have their own credit cards, and it's nearly impossible to rent a car, shop on the Web, or book a flight without one.

From the time you start putting your purchases on the plastic, you're creating a history of your credit worthiness--at least in the eyes of financial, retail, and insurance institutions. Even employers are now looking at the credit records of job candidates. A clean credit record puts you in the clear, while spotty credit habits will make it harder for you to get insurance or benefit from today's low interest rates on cars and home mortgages. It may seem frightening that so many decisions can be made about you based on seemingly superficial facts. But even if you don't agree with the rules, you've got to play by them.

Some ways to get and maintain a good credit history:

Don't apply for too many credit cards.
Lenders look at the total amount of credit that is available to you on your cards. If your credit lines total $20,000, that counts against you, even if you owe only $150. Two or three cards are plenty.

Pay bills on time.
"If you don't pay on time, it will haunt you for seven years," says Nancy Castleman, editor of The Pocket Change Investor. That's how long it takes to clear negative information off your credit report. A bankruptcy filing stays on your record for 10 years.

Never get behind on student loans.
Once you fall behind, the interest is added to the principal and it can be difficult to get out of "the student loan nightmare," Castleman says.

Before you plan a big purchase or a job change, check your credit report.
The three major bureaus (www.equifax.com, www.experian.com, and www.transunion.com) maintain credit reports on you. These reports frequently contain errors; cleaning up mistakes take longer because you must contact each of the bureaus. Don't risk losing a job opportunity or a mortgage approval because of an error on your report. Dispute errors as soon as you become aware of them.

If you are denied credit, ask which credit bureau provided the report.
You are then entitled to a free copy of your report from that bureau. Otherwise reports cost $8.50 each.

If your credit is damaged, apply for a "secured" Visa or MasterCard.
A secured card means you deposit money to borrow against. It might not be the ultimate convenience, but it's a great way to reestablish credit. Make certain that the card issuer reports your payments to the credit bureaus just as if you had a regular credit card.

Don't pay for "credit repair."
You can rebuild your credit on your own or by going to free consumer credit counseling.

Credit scores also include factors the credit bureaus use to measure stability. For example, you'll get more points if you've been at the same address for some time and if you have a stable employment history. Often college students make mistakes with credit before they understand these arcane rules. It's never too late to repair your credit.

For More:
See Marc Eisenson's article, "15 Steps to a Thinner, More Beautiful Waste Line," at www.goodadvicepress.com/15steps.htm.

Driving for Dollars

Dreaming about a new car? The following tips can help smooth the road to getting a new set of wheels:

• Decide whether you must have it immediately or if you can fix your existing car to allow you time to do research. Buying a car in a rush costs. A lot.

• Prioritize. Must you have air con-ditioning? A CD player? A spoiler? What's essential and what can you do without?

• Do your homework. Web sites like www.Edmunds.com and www.kbb.com are excellent resources: you'll find the market value of of various models in your area, tips on how to appraise your trade-in, and calculators to determine what you may be able to afford as a monthly payment. The sites also track manufacturer rebates and dealer financing options. Check on these before you go shopping.

• Consider a used car. This option is not as dicey as it once was. Information online helps you discover the market value in your area for a particular make and model. Buying a two-year-old car can save you thousands of dollars in depreciation.

• If you aren't the type to dicker for the price, you don't belong at a dealership. Don't tell the salesperson how much you can afford or bring up leases or trade-ins. Negotiate for price first. Bring along a printout of the true market value.

• Check out insurance costs before you buy. Even the color of a car--red for instance--can raise your premiums.

What's Your Tax IQ?

What do you know about how the new tax law will affect your 2003 income taxes?

1. The top tax rate under the new law is:
   a) 39.6 percent; b) 38.6 percent; c) 35 percent

2. True or false:
   The new law makes bonds, bond funds, and savings accounts less attractive.

3. Which of the following is true under the new law?
   a) short-term capital gains are penalized
   b) the marriage tax penalty is reduced
   c) the child tax credit is increased
   d) all of the above.

Answers:

1. C. All rates go down under the bill signed into law in May 2003. New rates are 15 percent, 25 percent, 28 percent, 33 percent, and 35 percent.

2. True. The tax on capital gains and dividends has been reduced from 20 percent to 15 percent (or 5 percent for those in the lowest brackets). Income from bonds or savings accounts is taxed at the same rate as regular income. So taxpayers should reconsider the pros and cons of income vs. dividends.

3. D. Short-term capital gains, which are gains on assets held for a year or less, are taxed at regular income rates. If you hold the asset one additional day, it becomes a long-term capital gain taxed at a maximum of 15 percent. The marriage penalty results because a married couple pays taxes at a higher rate than two singles. The new bill brings relief. The child tax credit is available for each qualifying child under the age of 17. It begins to phase out at $75,000 in income for singles and $110,000 for couples.

--From NEA Member Benefits

No member dues dollars are ever used to support NEA Member Benefits programs.

Make Insurance Claims Pay Off

Often the claim an insurer pays when you suffer a loss is akin to a first offer in a negotiation, advises Janet Bamford in her book Smarter Insurance Solutions (Bloomberg Press, 1996). You don't have to accept it. But in order to fight it, you must present proof that your claim is sound.

• Keep impeccable records including insurance policies, canceled checks for premium payments, and receipts for all purchases and bills.

• After you call in your claim, follow up with a detailed written account, including receipts, physician's statements, and bills. When filing a car or homeowner's claim, send pictures of the damage.

• If your medical claim is partially denied as beyond the "usual, customary, and reasonable" fee, check to make sure the procedure code is correct. Ask your doctor for assistance in explaining why the fee charged is reasonable. Call other doctors in the area to see what they charge for the same procedure.

• If you are insured through your employer, enlist the aid of the human resources department to help negotiate your claim.

• Ask to speak to the supervisor at the insurance company. The person who answers the phone is often too busy and harried to provide individual help.