Q: How do I obtain copies of my credit report from the three main credit reporting agencies?
A: Information on your credit report can affect your ability to get a job, a mortgage, a loan, a credit card or insurance. CCCS recommends consumers request a copy of their credit report from the three main credit reporting agencies once a year. By law, everyone is entitled to one free yearly credit report from each agency. There is also no charge if you have been denied credit, employment, and/or insurance in the last 60 days. Use one of the methods below to access your credit reports:
Online: www.annualcreditreport.com
Call: 877-322-8228
By mail: Annual Credit Report Request Service
PO Box 105281
Atlanta, GA 30348-5281
Q: I want to buy a house. What can I do to clean up my credit report?
A: Start by getting copies of your credit reports from the major credit reporting agencies. Review them for accuracy. Dispute any items that are incorrect. Start now to make regular monthly payments on your debts; you want to show a consistent history with no missed payments. By doing this you will be developing a good payment record.
Q: I have a number of credit cards that I don't use. Will it hurt my credit if I close these credit card accounts?
A: While closing accounts may seem like a good choice, be careful when doing so. Your credit score looks at the difference between the credit you have available to you and the amount of credit you are using. If you shut down accounts, your total available credit actually gets smaller, making your unpaid balances a larger portion of your total available credit, which could hurt your score. The credit score also takes into consideration the length of your credit history. If you close older accounts it could make your credit history look younger than it actually is, which can hurt your score. If you want to improve your credit score it is better to pay down your credit card debt instead of closing accounts.
Q: I've heard about home equity loans where I can borrow the value of my home. Is that a good way to pay off my credit cards at a lower interest rate?
A: You are turning home equity, an asset, into debt. Be careful. You're replacing unsecured debt with debt backed by your home. If you are unable to make payments, you could lose your home.
Once you pay off your credit cards by using your home equity, will you stop using your credit cards? If you continue using them, will you pay the balances in full monthly? If so, great. However, if you start running up balances again, you'll have more debt than before and will fall behind in reaching two goals; owning your home free and clear, and reducing your debt load.
Q: Is it true that if I pay $1 every month to each of my creditors, that they can't do anything to me?
A: Not true. This is one of those "urban legends" that circulate. Every loan agreement has payment requirements. If you do not pay as agreed, you can incur a number of costs as well as face collection action.
If you are having trouble making payments, seek help. Options include working out a hardship plan directly with your creditors, seeking help from a counseling service, or seeking legal advice.
Q: Is it a good idea to transfer balances to a lower-interest-rate credit card?
A: In general it's always a good idea to lower your interest costs. But make sure the rate on the new card isn't a temporary, introductory rate. It could be a teaser rate that will jump to a high rate in a few months. Also, if you switch, be sure to stop carrying any type of balance on the old account so you won't be tempted to charge on that card or carry more debt.
Q: How can I evaluate credit counseling providers? There are several listed in the phone book.
A: A number of new entrant credit counselors have begun offering services over the last few years. Some questionable practices in some new entrants have been identified in the industry by the Federal Trade Commission and the IRS. Agencies upholding the high standards of the National Foundation for Credit Counseling (NFCC) can be trusted. Review credit counseling services against some guidelines, such as: - Is their agency accredited? By whom?
- Are their counselors certified? By whom?
- Are they licensed in states where it is required?
- Can they meet with you face to face if needed?
- Do they provide counseling and education workshops?
- Can they work with all your unsecured creditors?
- Are they not-for-profit?
- Are client deposit accounts audited annually?
- Do they have a board of volunteer trustees?
- Can they provide proof of director and office, errors and omissions, and employee dishonesty insurance?