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Monthly Archives: May 2016

Question and Answer Credit Reports and Credit Scores

# Why is my credit history important?
At some time in your life, your credit report becomes essential to obtaining mortgages, insurance, credit cards, car loans, and other credit, and may even be seen by your current employer or a potential employer. The best way to ensure that your credit report is accurate and positive is to check and monitor it regularly.

# What information is contained on my credit report?
All credit reports contain a variety of personal data about you; specifically, your name, last known address, birth date, Social Security number, and employment history. Though this information is included on your report, it is not used in determining your credit score.

The next section of your credit report contains all pertinent details regarding any loans that you have taken out in your name, for example: type of account, current balance, payment history including any delinquencies, loan term, and the date the account was opened. Bankruptcies, judgments, and foreclosures, if relevant, are also included on your credit report.

Another section of your credit report lists inquiries into your credit history. Potential creditors may view too many inquiries in a short period of time negatively.

# Who reports to the credit bureaus?
Any company that supplies you credit, from student loans and mortgages, to personal loans and credit cards, reports information about your loan to the three major credit agencies. That information can be included on your credit report. You may have slightly different information on each of the three credit agency reports.

# How often is a credit report updated?
Credit reports are updated as frequently as the supplied information changes. Most accurate negative information remains on your credit report for seven years.

# Where do I get copies of my credit reports?
The Fair and Accurate Credit Transactions Act (FACTA) gives every consumer the right to a free annual credit report from each of the three major credit bureaus: Equifax, Experian, and TransUnion. To get your free report, visit AnnualCreditReport.com or call 877.322.8228. You can request a free credit report from one agency at a time, or all three at once.

Factors of Credit Score

You may have recently seen your credit score and wondered how you could improve it. Understanding what is used in the calculation of your credit score is the first step. While the exact formula used in the calculation of the score is proprietary, there are some known factors. According to the Fair Isaac Corporation, creators of the FICO score, the key factors are:

  • Payment history
  • Amounts owed
  • Length of credit history
  • New credit
  • Types of credit used

There generally isn’t any action you can take that will immediately result in a higher credit score, but applying good credit practices over time can help improve your score.

Making payments to creditors on time is the most important thing. While not all creditors report on time payments, they do report payments that are delinquent. The length and severity of delinquencies is also considered.

In addition, you should make sure that you aren’t using the full credit limit available to you. Creditors generally report to the credit bureaus once per month, and even if you pay off the balance every month, it could be viewed negatively if you are using a higher percentage of your total credit.

If you do have some negative items included in your credit report and score, those items will most likely not be removed for at least seven years from the date the negative activity occurred. However, making on time payments in the future will continue to improve your score, as more recent history is given greater weight.

In most cases, keeping credit accounts open is likely to help you, not hurt you. While potential creditors do look at the amount of outstanding credit you have available, they also look at the length of your credit history, as well as the percentage of credit used. Closing older, lesser-used accounts can hurt your score by decreasing the length of history you have, as well as increase the percentage of your total credit you are using. New credit, which is one of the factors used in calculating the score, includes number of recent account inquiries, and number of new accounts opened.

It’s also important to review the type of credit that you are currently using. Different types of credit cards, for instance, are viewed differently in the scoring algorithm. While getting rewards points and a first time discount sound appealing, department store credit cards are generally not as good for your credit score as a major credit card. Mortgages, automobile loans, and student loans are also considered “good” kinds of credit.

The largest impact you can make on your score is continuing on time payments, and taking on debt with a thoughtful approach.

Pros and Cons about Home Based Business

# Pro : You are your own boss.
When you are calling the shots, your business can be structured around your passions. You choose the work, the clients, and the hours. You alone are responsible for the success of your business, and that is this best motivation.

# Con : You are also your own accountant, marketer, tech support, customer service representative, and custodian.
Running your own home-based business is a lot of responsibility. The job encompasses more than just doing work you love, at times you will also have to do support work to make your business successful.

# Pro: Balanced career and family life.
Working from home allows you to spend more time with your family. Setting your own hours and vacation time allows you to fit your family’s schedules together seamlessly.

# Con : The scale can easily tip toward home responsibilities.
Working from home can be a distraction, especially if you have young children or have a difficult time ignoring home-related chores and errands. Setting up a distraction-free area to work and allotting a certain amount of time per day to focus on your work can help increase productivity.

# Pro : Increased tax benefit and write-offs.
If you have an area of your home dedicated solely to your business, you may be able to take a home office tax deduction. Other expenses can also be deducted as well, just be sure that you are able to justify the expense as the cost of doing business.

# Con: No health insurance benefits unless you pay out of pocket.
Paying for private insurance is expensive, but is worth the hefty price tag in case of a medical emergency.

# Pro: Your office is down the hall and you can work in your pajamas. No commute and no required office wardrobe are two of the money-saving perks of working at home.

# Con: You may miss the interaction with coworkers.
If having a sounding-board for your ideas is important to you, consider joining a networking group or professional association so you can interact with others in your field.

# Pro: Increased income potential.
Owning your own business allows for far greater earning and growth potential. Plus, all your hard work and determination directly benefit you.

# Con: No set income.
While there is the potential for greater income, there is also a possibility that you will have some periods where the work and the money dry up. Having an emergency savings account can be a great relief during times when you are not making any income. In addition, having a spouse’s salary to fall back on can also be beneficial.