Three Tips to Protect Your Credit Rating

Find out your credit score, understand what it means, and learn how to protect it.

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The Boomerater™ Report, our weekly collaboration with online baby boomer resource Boomerater, this week explores how to get a free credit report and protect your credit rating from being lowered.

[See 6 Money Lessons of the Great Recession.] “I have heard about websites that offer free credit reports. Are these safe and reliable?" a member asks. "Are they really free? My bank informed me it is possible my security may have been breached. I am keeping a close look at all of my accounts, but am concerned because I am retired and live on a fixed income. Also, I am hoping to sell my house and move to a retirement community in Florida. I don’t want a bad credit report to keep me from being able to buy a condo. Would like to learn any other ideas about securing my credit standing.” Here are some replies from other Boomerater members:

Know your score. It is wise to scrutinize all of your accounts. Everyone should do this, even if they do not suspect a problem. And checking your credit report is crucial. The highest credit score is 850, but most people's scores do not reach those heights. Each lender has their own way of interpreting the score. Most lenders agree that any score above 750 is considered excellent, scores around 650 are fair and scores under 600 are considered poor. The closer you are to a 750 score, or above, the more likely you will be approved to buy your condo and pay lower interest rates. Everyone should review their credit reports annually. Each year you can receive a free copy of your credit report from AnnualCreditReport.com. There are a number of other websites that say you will receive a free credit report, but if you have to provide a credit card [number] to get a free report then it is not really free. Only AnnualCreditReport.com provides "free and no strings attached" reports. Reports are provided from the three major credit reporting agencies (Equifax, Experian and TransUnion). Once you have your reports in hand, verify the reports and determine if there are inaccuracies. Clear up anything that is not correct by contacting the credit reporting agencies with the correct information. Inaccurate information can cause you to be denied credit or pay a higher interest rate.

[See How to Get Your Finances Back on Track in 6 Steps.]

Don’t fall prey to credit card promotions. Every time you take out a credit card or cancel one it can have a major effect on your credit rating. Most people don’t realize this; I didn’t. I signed up for three different credit cards because they were offering free airline miles—basically a free ticket for keeping each of the cards for a year. I never even used the cards after the first initial purchase to activate the cards, and I paid the bill immediately. I couldn’t believe that just signing up and cancelling these cards would so negatively impact my rating. And there doesn’t appear to be anything I can do about this, but if someone has an idea, please let me know.

Keep informed and in control of your credit card balances. Learn from my mistake. My husband handled all of our finances. After he died I found out he had not been keeping our credit cards paid off. My being delinquent in paying these bills harmed my credit rating, which resulted in being turned down for a home improvement loan. Understand your accounts, don’t let your spouse take control of all the banking, and have at least one credit card in your name, separate from your spouse’s. Also, open all bills immediately and pay them, or if necessary dispute them, so you don’t get a black mark on your credit rating.

[See Smart Ways to Access Your Housing Wealth.]

Read other ideas or add your own comments about knowing and protecting your credit score on Boomerater. Boomerater is an online resource for baby boomers, with local directories to help you find everything from top financial advisors to senior living communities. The site also contains forums where boomers can post questions and swap first-hand experiences. If there are questions on your mind that you would like answered by other people who have faced similar situations, or you have advice of your own to share, go to Boomerater.com and participate in the forums. Say that The Best Life sent you.