Your Good Credit Score Might Not be Good Enough Anymore

There was a time when a 680 credit score yielded great interest rates for consumers. Today, however, according to Bankrate.com, the best rates and mortgage programs go to those consumers with credit scores over 700. According to Lawrence Finn, Jr., CEO Owner/Broker, of Coach Real Estate Associates consumers with less than a 700 credit score may see additional fees of 1% or more and increased interest rates as high as 1% over the base rates. These increased fees and interest rates could mean about $3,500 in extra fees and as much as $134 a month in additional monthly mortgage payments for a new home buyer purchasing a $350,000 home. "Due to the tumultuous landscape of our current economy, many consumers are finding that their credit scores are dropping...even though they've continued to pay all their bills on time," says Finn, Jr.. "This is happening unknowingly to millions of consumers across the country that have good to excellent credit. Unfortunately, there are many factors now affecting consumers' credit scores that they're unaware of." For example, a consumer might have had their oldest and most established credit card closed by a creditor due to non-usage. Second, two other creditors may have dropped the consumer's available credit limits, which negatively impacted their credit utilization ratios (i.e., amount spent each month compared to the credit limit). In each case, these changes occurred for no other reason than the creditors' overall concern for risk in the marketplace. So what should you do? According to Finn, Jr. and the credit experts at ApprovalGUARD (www.approvalguard.com), here are three suggestions to keep in mind: 1. Understand how credit works. Although you may think you understand how credit works (i.e., "As long as I pay all of my bills on time, I will have good credit"), there are many misunderstandings. Understanding how credit reports and scores work to create an excellent credit profile is important and becomes the foundation to strong financial self-management. 2. Credit and debt optimization. Take a snapshot of your current debt profile compared to your current income and liquid assets, then look for ways to optimize your debt. Examples could include strategies to reduce credit card balances owed to lower limits that will help you strengthen your credit scores, reduce interest rates and/or create opportunities to move balances to lower interest rate debt alternatives. 3. Know what's going on. It's important to review your credit at least three or four times per year. By doing so, you can monitor it for changes that may have occurred without your knowledge. It's also a great opportunity to self-monitor your profile for errors or suspect activity such as identity theft. The Fair Credit Reporting Act guarantees you access to a free credit report every 12 months. For more information visit the Federal Trade Commission website at http://www.ftc.gov/. Once on this page, click, "Free Credit Reports" for information on how to obtain your annual credit report from each of the three major credit reporting agencies free of charge. "Understanding, building and self-managing your credit is like changing the oil in your car," says Finn, Jr.. "If you do it regularly, then the car runs better. If you do it only when the engine has problems, you often find yourself in a challenging situation."

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