Credit Crunch

From buying a home to finding a dream job, there is one looming shadow which controls everyone like a puppeteer controlling a puppet.   Credit pulls the strings which grant access to homeownership, employment, and lower interest rates.    The importance of credit is undermined by the confusion many Americans have about their three little numbers.  Below is not an exhaustive explanation of credit, it merely scratches the surface and breaks down the basics of what you need to know about your credit.

What is Credit?

According to JP Morgan Chase & Co., credit is your financial trustworthiness.  Credit measures how likely a borrower is to pay back the loan.

What does Credit Control?

Among other things:

·         Helps secure lower interest rates

·         Improves opportunities to secure a credit card and other loans

·         More options when shopping for loans and a mortgage

·         Increased spending limits

·         Quicker approval for renting

·         Better rates on car insurance

·         Can help avoid paying a security deposit for utilities

What is on your Credit Report?

There are four sections on your credit report.  These sections give reporting bureaus important information which is then used to calculate your credit score. By law, you are guaranteed a free credit report once every twelve months.  To order your credit report visit annualcreditreport.com.  your credit score is NOT included on your credit report.

1.    Identifying Information

This includes your name, birthdate, permanent residence,…

2.    Open Lines of Credit

Any account you have open being a loan, credit card, mortgage … is considered an “open line of credit.”  This section outlines when the account was opened, the credit limit/ amount of the loan, account balance, and payment history. 

3.    Credit Inquiries

Every time someone checks your credit within the last two years, it is notated on your credit report.  This section includes both voluntary inquiries (inquiries done by your request) and involuntary inquiries (pre-approvals for loans and credit you have not requested). 

4.    Public Record and Collection Items

Information made public through court proceedings, collection agencies, bankruptcies, foreclosures, liens, wage attachments…are included in this section. 

What is your Credit Score?

Your credit score is calculated by three different credit reporting bureaus: Experian, Equafax, and TransUnion.  Each company calculates your credit score based on their own formulas developed to determine trustworthiness.  Since there are three different reporting bureaus and they employ three different formulas, you have three different numbers which compose your credit score.   Even though there are three different formulas, there are several common elements used in each equation. 

1.    Types of Credit in Use

·         Loans

·         Credit Cards

2.    Payment History

·         Do you usually pay before the bill is due?

·         How often do you let your balance roll over?

3.    Amounts Owed

4.    Length of Credit History

·         How long have you had a particular line of credit?

5.    New Credit

-NWP

Tax Day Debacle

It was a brisk spring day when I was overcome with panic and anxiety. The sweat continued to build on my forehead as I began to think about what was fast approaching. I had been dreading this all year, but it was converging on me faster than a hungry cheetah. Time was expiring; I could no longer run or ignore its importance. No, it is not my wedding day . . . Its April 15th, tax day. Do I get Earned Income Credit? I don’t even know what Earned Income Credit is. This form says “EZ”but it should say it’s a “liar” instead.

For most students, if not most Americans, the word “tax”strikes fear in their hearts easier than screaming “boo” behind a group taking a tour of the morgue. Unfortunately, closing your eyes will not make the IRS and taxes go away. There are tips which can vanquish your fears like an Ecto Containment Unit to a ghost, a wooden stake to a vampire, and a silver bullet to a werewolf.

There are several common mistakes which the IRS cautions the public to guard against, the first of which happens to be calculation error. A calculation error epidemic is raging across America faster than the bird flu and whatever disease was in Contagion. The IRS reports calculation error is the most widespread mistake, but not to worry, it is the easiest to fix. Adding and subtracting lines can be like a demented math story problem, however, online filing services can take your mathematical skills (or lack thereof) out of the equation. Using online services or computer-based programs not only help to eliminate mathematical errors, but also help to keep information organized and on the correct line.

Second, according to the IRS “Amrk Smith” is not the same person as “Mark Smith,” and the IRS isn’t too amused with spelling and grammatical errors. Proof reading your return can eliminate the headache attached to a missing return or even worse…an audit. As the saying goes, practice makes perfect and you can practice FOR FREE with extra copies of tax forms in local libraries and post offices.

Lastly, don’t procrastinate – file early! April 15^th should not be treated like a due date for your English 101 final paper. The IRS is more of an uber-nerd English teacher that wishes all students would turn in their papers the day they were assigned. Theoretically, you can file your taxes on or about January 1^st because your last pay check for the year will have all the information needed to file. This tip is kind of like an IRS cheat code because the earlier you file, the earlier you get your refund. The sooner you file, the sooner you can blow your return on those super-cute Coach boots and help stimulate this nation’s slumping economy.

With these tips you can come out of hiding and file more confidently than ever before. Fewer headaches and more returns sounds like a recipe for success and a sure fire way to finally ordering that Highlander replica sword from eBay. So, double check your calculations and spelling while practicing filling in the lines because there can only be one…perfect return filed.

- NWP