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Protecting Your Credit

Your good credit is like your good name. You need to protect it carefully. A bad credit history can follow you for years, making it difficult for you to borrow money when you need it.
You can best protect your credit by paying your bills on time. This means creating and living within a budget.
Your credit history is contained within a credit report. You can obtain a copy of this report to insure the information contained on it is correct.
Rules for Protecting your Credit
Rule 1: Pay your bills on time
Rule 2: Establish a budget and live with in it
Rule 3: Limit the number of credit cards you have
Rule4: Don't apply for too many credit cards at the same time
Rule 5: Be careful if you must borrow to get out of debt
Rule 6: Shop around for the best deal
Rule 7: Don't increase your debt burden to pay off debts
Rule 8: Don't pay a finder's fee to get a loan
Rule 9: Don't call 900 numbers to get a loan
Credit Reports
Your credit history is contained with a credit report. A credit report lists personal infromation about you plus a list of all your obligations, past and present, for the previous 7 years.
Information older than 7 years automatically drops off the history, to be replaced by new information. But if you have negative information on your report, 7 years is a long time to have it haunt you. And it's difficult to re-establish good credit.
You can check your credit report for errors and correct information



Checking Your Credit Report


Credit reports are kept by companies called credit bureaus. If you've been denied credit and can't understand why or if you're just curious about what your credit history looks like, you can obtain a copy of your credit report.


If you have been denied within the last 60 days based on information on that report, you are entitled to a free copy of your report. Othewise, you may have to pay a nominal fee to obtain...but it is worth it. Often there are errors in the data. A study found errors in almost half the reports examined.


What If There Is An Error In Your Credit Report?


If there is an error in the infromation contained in your credit report contact the creditor that reported it. If you can prove there's an error, the Fair Credit Reporting Act requires the creditor to correct it. If, on the other hand, there is a dispute about the information, you may write an explanation which is attached to your credit report.


If you still can't resolve the problem satisfactorily, write to:


The Federal Trade Commission

Division of Credit Practices

6th Street & Pennsylvania Avenue NW

Washington, DC 20540


But remember, you can't erase bad credit information that is true. You're stuck with it for the next 7 years. So your best bet is to take care of your good credit.


Re-Establishing Your Credit

You'll see an occasional ad promising to fix a bad credit history. Don't be misled by this scam. There is no way to repair a bad credit history. Only time and 7 year of paying your bills promptly will fix your credit.


Wise Loan Shopping

Not all loans and credit cards are alike. Remember, if you take out a loan for $1000 you will not have to pay back just the $1000. You will also have to pay back all the interest over the term of the loan. So total cost of the money you borrowed will equal the original $1000 plus all the interest payments you made as well.


The amount of interest you pay, the size of your payments, and the length or term of your loan can make a big difference how much the loan costs you in the end.


When you borrow, shop around for the best deal.


How Your Monthly Payment is Determined


Four things influence how much the money you borrow costs in the end:

  1. Annual Percentage Rate: The amount you pay to borrow is quoted in many ways. But the only one that matters is APR. This is the true amount of interest you'll pay per year, plus any fees divided by the term of the loan.
  2. Length (Term) of Loan: The longer it takes to pay off a loan, the more interest you will pay.
  3. Size of Payment: The larger your monthly payment, the faster you'll eat away at the principal of the loan and the faster it will be paid off. The faster it is paid off, the less total interest you pay.
  4. Original Amount of the Loan: Even if all the terms are highly favorable, the more you borrow, the more you'll still end up paying. It costs more in cold cash to borrow $100,000 than it does $1000.


Smart Shopping Tips


Tip 1: Limit your borrowing to the amount you really need. Save for what you want, rather than borrowing to have it now.

Tip 2: Pay off your loan as rapidly as you can.

Tip 3: Select the highest monthly payment you can afford.

Tip 4: Choose the lowest APR you can find.