Thursday, October 11, 2012

Does History Matter?

I received an industry publication today. The theme, in anticipation of International Credit Union Day (celebrated this year on Thursday, October 18), was: does the history of credit unions matter?

The short answer is a resounding yes. People who are thinking of joining a credit union today should know that credit unions, while offering services that banks offer, operate differently. Those principles make a difference in the decisions that are made within credit union walls on a daily basis. And that "people helping people" idea that credit unions like to mention? It's more than just a principle; it's an action taken every day by members of the credit union community.

So, yes, history mattersbut so does the future. And that's where you come in. This blog is, after all, sitting out here to provide some financial tips (or in the case of the ATM safety blog, tips related to things of a financial nature).

Your Financial History

Let's take that history lesson and apply it to you. Does your history matter? Again, the answer is YES.

How you did in high school is one of the pieces of your history that colleges and universities are interested in. How you performed at one job is considered when you're interviewing for a new job.

When it comes to your financial life, how well you manage your money has an impact on getting loans and credit cards. A strong credit history is something each person builds on his or her own. Each of usby how we spend and pay off debtearns a credit score. You want to make sure that your credit score is healthy.

Keeping a Healthy Credit Score

These tips from the Financial Planning Association can get you started in the right direction, so you can keep your credit score healthy. Do you need all of these tips now? Maybe not, but

Know your score. Request a free credit report from (1-877-322-8228). Review the report for inconsistencies and other issues that need addressing.

Know what it is and how it is calculated. Credit score is used by lenders to help determine whether a person qualifies for credit, based on an assessment of the individual’s ability to pay off their debts. The higher one’s credit score, the lower the credit risk they present to lenders. Credit scores are calculated from data in five categories. Payment history (on bills, loans, etc.) and amounts owed (credit balances) account for about two-thirds of the score; length of credit history, new credit and types of credit used comprise the rest. Credit scores range from 300 to 850. A score of 750 or higher is considered “excellent”; 720 to 749, “very good”; 660 to 719, “good”; 620 to 659, “fair”; and 619 or lower, “poor.”

Know why it matters. Credit score is not just a factor in determining whether you get a loan or a line of credit, it often determines how much you will pay for credit (the better your credit score, the lower your interest rate, for instance). So having a healthy score can save you money.

Pay bills on time. Nothing impacts a credit score more than your bill-paying history and habits. And no bill is too small to overlook. Even one skipped bill to the utility company can have a negative effect on your credit score.

Automate. If you struggle to pay bills on time, set up your online banking to make automatic bill payments or provide payment reminders.

Make a payment. Instead of skipping a payment altogether, make a late or short payment.

After a late or missed payment, get, and stay, current. Positive payment patterns going forward can overshadow a past payment problem.

Keep credit card balances low and avoid maxing out cards. Carrying a high level of debt likely will hurt your credit score. Maxing out your available credit surely will.

Pay down your debt over time.

Think twice before closing the accounts of credit cards you do not use. Closing credit accounts may actually lower your credit score. If you plan to close an account, start with one you opened recently, and for the sake of credit history, leave your oldest credit card account open.

What About You?

What steps are you taking to get and/or maintain a good credit history?

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