By Anessa V. Cohen
When was the last time you checked to see what kind of credit scores you rated with the three credit bureaus (TRW, Equifax, and Experian)? For those of you who said “never,” we have a lot to discuss.
In today’s new world of “identities and qualifications,” credit ratings and how you score are in the top ten of what counts in evaluating people for a variety of purposes–employment, all types of insurance (including home, auto, and medical), tenant applications for apartments, co-op board approval for buying an apartment, and obtaining a mortgage, to name but a few. Credit scoring has become the #1 system for assessing the risk of advancing credit, or just evaluating your track record in financial responsibility.
Even business owners, when dealing with new accounts or businesses, must depend on their credit scores for acceptance in whatever new business venture they may be contemplating, or vice versa.
But many people don’t even think twice about their credit scores until a situation arises where they find out there was a problem on their credit report that caused them either to lose out on a deal or be penalized for the lowest interest rate for a mortgage they were trying to achieve. Usually by the time they find out a problem exists on the credit report, it is already too late to correct it to help with whatever financial transaction they were working on.
Some people take for granted that as long as they eventually pay their bills–even if it takes a few months–their credit scores are good. Uh-uh! Credit bureaus not only take into account whether or not you paid a bill, but also whether or not you paid that bill on time. “On time” means either paying the minimum amount or complete amount (depending on what type of account it is) within 30 days of receiving the bill. Each time a bill goes unpaid beyond a 30-day period, points are deducted from your credit score and a delinquency is posted. If you go beyond a 60-day or 90-day period, your score is seriously demoted.
The biggest motivation for regularly checking what is going on with your credit status in any of the three credit bureaus is the latest phenomenon being experienced globally–credit fraud. As most of you have probably heard already, at least one of the credit bureaus has been hacked and the information of millions stolen from their server to be utilized in who-knows-what kind of schemes.
The only way to protect yourself in that scenario is to freeze your accounts on the credit bureaus so no new information can be pulled without your permission. This way, in the event someone tries to create credit in a fraudulent way, with your account frozen they will be unable to allow whatever credit source they are attempting to create to have access to your credit file.
“Inquiries,” which is a category on the credit report that also affects your score, takes into consideration how many times within a 90-day period you allowed a lender of any kind (credit card, mortgage lender, automobile dealership, etc.) to pull a credit report for the purpose of obtaining new credit. If too many “pulls” within a short period of time are noted, this also causes some reduction on your scoring.
Just as you would sit down and calculate how much money you have to purchase a home and how much a mortgage would cost you for that home, it is important to also be mindful of what kind of scoring you have on your credit report, since good scoring (over 700) always gets you the best rates and terms on the market.
This is not to say that if you do not have a credit score over 700 that you will not be able to obtain credit or a mortgage. There are plenty of products available out there for everybody, but if you are striving to get the best value for your dollar, the best deals available are going to be waiting for you if you take the extra time to maintain your credit portfolio carefully.
Anessa Cohen lives in Cedarhurst and is a licensed real-estate broker (Anessa V Cohen Realty) and a licensed N.Y.S. loan officer (FM Home Loans) with over 20 years of experience offering full-service residential, commercial, and management real-estate services as well as mortgage services. She can be reached at 516-569-5007 or via her website, www.AVCrealty.com. Readers are encouraged to send questions or comments to anessa@AVCrealty.com.
