Get financially fit in the new year

FARM FINANCE 12

Let’s Talk Credit

By Erin Harvey Now is a great time to get financially fit With the arrival of the New Year I’m sure you have the factors can vary by industry, generally the most popular one seen ads or commercials for exercising, getting that lenders use is the FICO. FICO takes into account how much your home organized and many other popular reso- credit you have, how much is in use, repayment history, types lutions. Now is also a great time to get financially fit. I get asked of credit, and length of time you have had accounts. Generally, lots of questions about credit. Scores, freezes, and all the caveats scores range between 300 and 850. The higher the score, the betin between? Let’s take a basic look at how it all works. ter, and generally indicates you are less risk, which means you are

Still today, the five Cs of credit provide us guidelines to protect more likely to be approved for credit and could pay less for your both lender and borrower from excessive risk. Credit history plays home and auto insurance for example. Having a lower score could a big role in the Character factor. In today’s environment, credit make it more difficult for credit approval and potentially cost you matters to practically everything. It can affect your ability to get more in higher interest rates and premiums. a loan or credit card, a job, renting a home and even your insur- As fraud continues to be on the rise you may have concerns ance premiums. Lenders, landlords, employers and others want about identity theft and hackers. One way to limit exposure of to know how you handle your bills and finances. Most people are your report is by placing a credit freeze. This can be done by simsurprised to find out that in addition to open debts listed on the ply contacting each of the bureaus. Keep in mind, if you do dereport, public records like tax liens are also reported. Often ac- cide to apply for credit at some point, you will need to request counts such as utilities, taxes and medical debts that were sent those freezes be lifted to allow for the credit check and then put to collection agencies are also reported, in addition to previous the freeze back on once the lender has retrieved the information. bankruptcies. Inquiries are also disclosed so every time a credit While placing a freeze does prevent access to the report, it doesn’t report is pulled, it becomes part of the report. completely stop the fraudsters. It’s important you still review your

Did you know the Fair Credit Reporting Act provides you the bank statements, credit card bills and insurance to ensure there right to get a free copy of your credit report once every 12 months haven’t been charges or changes you didn’t authorize. from the major credit bureaus (TransUnion, Equifax and Experi- Bottom line, your credit report and score impact much more an). To get your free reports go to annualcreditreport.com. Be sure than just credit approval and denial. Take the time and dig into to take the time to review and check the report for correct informa- your credit. Lenders can quickly determine how well you have tion. A great first step in improving your credit is knowing what is handled your finances, so I urge you to ask questions and be open actually there. Unlike the free report, unfortunately, there is no free and honest with your lender regarding your credit. This will not annual credit score. Be careful of services that charge for the score have any impact on your credit score, but will go a long way in and credit monitoring. You may pay for something you don’t need. establishing a long term relationship with your lender. A few othBefore you decide to pay a company to get your score, ask yourself er quick tips I can provide you with are to pay all of your bills on if you really need to see it. If you know your credit history and per- time, every time, keep the balances on your revolving credit cards formance is good, then your score will be too. While knowing your to 30 to 50 percent or less of the available credit, and have at least score is interesting, do you really need to pay money for it. one active major revolving account, such as a bank credit card.

Credit scores are calculated by complicated algorithms and each Erin Harvey, is the CRCM, vice president at Community National of the three main bureaus have their own calculation. There are Bank & Trust in Lamar, Mo. She may be reached at erin.harvey@ different weighted factors that affect your credit history. While communitynational.net