In a sluggish, down economy ... protect your good credit history

By David Burge / El Paso Times
Article Launched: 09/01/2008 12:00:00 AM MDT

EL PASO -- The nation's lenders are tightening up on whom they give loans to, experts say, and now it's even more important for consumers to manage their finances and credit wisely and maximize their credit scores.

Your credit score, a three-digit mathematical summary of your credit history, is important because it helps to determine whether you qualify for loans and at what interest rate, experts say.

Your credit history also can be used to help determine your insurance premiums and can be looked at by employers during the hiring process, by landlords and for security clearances, said Mike Sullivan, director of education at Take Charge America in Phoenix.

"Not too long ago, they were practically throwing credit cards at people," Sullivan said. "If you could breathe, you could get one. Now, it's tougher."

Greg McBride, a senior financial analyst with Bankrate.com, says lenders are "returning to the ABCs of lending where borrowers need to have good credit, proof of income and money for a down payment."

Don't despair, though. Consumers can take some simple steps to manage their credit, experts say.

"Consumers spend too much time focusing on credit score minutiae," McBride said. "Instead, grab the low-hanging fruit, such as collecting your free credit reports, paying your bills on time and paying down your debt."

Maureen Hankins, director of the El Paso YWCA's Consumer Credit Counseling Service, said the easiest and simplest steps to maintaining a good credit score are to make at least the minimum payment on time every month and to pay down your debt.

Hankins recommends that you pay down your open lines of credit to at least half of your available credit limit. This can help you improve your score, she said.

Eastsider Jaime Castor, 39, said he attended the YWCA's Consumer Credit Counseling Service program about six years ago.

He's taken control of his finances by paying off his smaller debts to get "the satisfaction of making progress." He's now focusing on his bigger debts.

Paying your bills on time is also important because it "gives you peace of mind," Castor said.

The program "showed us the mistakes we were doing and did an overall analysis of what we were doing with our finances," Castor said. "They showed us our downfall and our mistakes and how to discipline ourselves. They were very helpful."

Steven Katz, director of consumer education for credit bureau Trans Union's TrueCredit.com, which provides tools and education for consumers to manage their credit, said it's always important to take steps to manage your credit, whether the economy is good or bad.

"Regardless of what's going on in the economy or the world, you may want to do things in your life and you may need credit to accomplish those things," Katz said.

You may want to purchase a new car or you've been offered a great job in another part of the country and you need to sell your home and buy a new one, he said.

Some basics about credit scores, credit reports and how to manage them:
Pull your free credit reports. Under federal law, each U.S. consumer is entitled to one free credit report from each of the three major credit-reporting bureaus -- Trans Union, Experian and Equifax.

Visit www.annualcreditreport.com or call 877-322-8228. Beware of impostor sites, experts advise.

Looking at your free credit reports, whether you stagger them throughout the year or get them all at once, is a great way to check on the accuracy of your credit information and serves as a first line of defense against identity theft, McBride said.
Keep in mind that your actual credit score is not included with your free credit report. Most people don't actually need to see their score. Just check your credit history for inaccurate information or unauthorized activity, experts say.

If you have a burning curiosity or are in the market for a major loan, you can purchase your credit score.

When you order your free TransUnion credit report from www.annualcreditreport.com, for instance, you have the option of purchasing a credit score for $7.95, Katz said.

At TrueCredit.com, you can purchase a service where you can look at all three of your reports and scores as often as you like for a monthly fee of $14.95, he added.
The most well-known credit score is the FICO, developed by Fair Isaac. A FICO score can range from 300 to 850, Sullivan said.

In the past, a score of 720 or above was considered good. "Now, it's more like 760, because it's harder to get credit in this down economy," Sullivan said.

The easiest place to get your credit score is at myFICO.com, he said. For $15.95, you can get one credit score and one credit report.

Katz said there are hundreds of different credit scoring models that lenders use, and each can have different numbers that they consider good.

"The point is (what's considered a good) score is increasing, and creditors are tightening up," Katz said.
Take care of the basics, such as paying your bills on time and paying down debt. These are the two most important components of your credit score, experts say.

David Burge may be reached at dburge@elpasotimes.com; 546-6126.