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By: Owen Malcolm
Gwinnett Business Journal
From the May 2006 print edition
Like it or not, every American is profoundly affected by their credit report and corresponding credit score. You don't have to be wallowing in credit card debt for this issue to be relevant to you.
For example, let's say you walk into a car dealership to purchase a new Ford or Buick sedan. You've never missed a payment to a creditor, yet your above average credit score of 680 doesn't entitle you to the "premium" financing rate the dealer is offering: 0 percent interest for 60 months. Instead, you purchase that $25,000 sedan with a 6.99 percent interest rate - which is still a very competitive rate (historically speaking). By the end of the car note term, you will have paid $5,000 in interest - money that was essentially wasted, and something that would not have happened if you had taken simple steps to improve your credit score.
Unfortunately, common sense and high credit scores do not go hand-in-hand.
Only a third of your credit score depends on the timeliness of your payments. The other two-thirds depend on how you manage your credit, so you must actively "work" your credit keep your scores high. It's generally better to keep a credit card account open, rather than closing it immediately upon payoff. In addition, using 20-40 percent of your total credit line (rather than using nothing or maxing out) helps ensure the highest credit scores. Another common misconception is that your personal income is factored into your credit score - not true! Your credit score is solely a function of how you manage your various lines of credit.
A serious threat to a good credit rating is identity fraud. It takes 175 hours on average to clean up your credit after identity fraud. To prevent fraud, we recommend that every client sign up for a credit monitoring program offered by one of the three major credit bureaus (such as Equifax). For a little over $100 a year, you can sign up for a service that provides unlimited copies of your credit report from all three bureaus. In addition, you will be notified by e-mail anytime an account is opened in your name. You must keep abreast of your credit activity so that you can stop fraudulent activity before it gets out of control.
Here are a few other pointers to help secure your identity:
Shred all personal documents that contain account numbers or any other confidential data (including pre-approved credit card offers).
Never respond to a phone call or e-mail to "verify" personal information like bank account numbers, Social Security numbers, PINs, or passwords. No legitimate business or financial institution will ever ask you to do this.
Never carry sensitive data in your wallet or purse: Social Security numbers, bank account numbers, passwords and/or PINs.
Consider using a credit card instead of a debit card (if you pay your credit card balance every month). By law, the maximum amount you can lose out-of-pocket due to credit card fraud is $50 - but this protection does not apply to debit cards (even though they may have a Visa logo on the card).
Make sure your Social Security number is not your driver's license number (this is still not automatic in many states), and do not put your Social Security number on your personal checks.
Actually read your bank statements when they arrive in the mail to look out for unusual charges. Better yet, check on your bank accounts daily by using the Internet.
Being a victim of identity theft is devastating because it doesn't only affect your financial situation, but it can also tarnish your good name. Identify thieves aren't novices - most are very adept at exploiting their victim's personal information. There-fore, take these recommendations to heart and take the necessary steps to protect your credit and identify.
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