Raising Your Credit Score: A follow up

As a follow up to yesterday's post about improving your credit score. The comment below is from Gary Loechle, Vice President of Commercial Services for Hawthorne. Gary will soon be retiring from Hawthorne after a successful career in banking that included many years as Vice President of Lending at Hawthorne and other financial institutions in our area. Gary had this to say:

"Sandy, Interested in another point of view?

Your two tips are correct. Prompt payments and low balances.

However, in this time of uncertainty, I would have to think long and hard before advising friends to drain savings to pay off a credit card.
Traditionally, the credit score is adversely affected when the balances owing on credit cards are higher than 80% of the credit limit.

While I would always recommend keeping a tight reign on the use of plastic, I would suggest that maintaining, and if possible, building a savings balance is probably more critical today as long as the credit card balances are less than 80% of the credit limits and within our ability to make the payments while saving.

The problems today that would affect my thinking include:

Credit card companies and some home equity lenders have been reviewing accounts and reducing credit limits. Therefore, I would prefer to rely on my savings rather than find the credit, which I thought would be there for emergencies, had evaporated.

Another concern would center on the possibility that a person could lose his/her job. If so, the credit would quickly dry up anyway.

So, the more urgent needs to maintain a good credit score during these times of economic uncertainty would include:

Always make scheduled payments promptly;

Keep credit and charge card usage in check. Use them for emergencies only. Definitely, keep balances below 80% of the credit limits.

Make sure the person considers himself a creditor that also must be paid something each payday, in the form of a savings deposit.

The equivalent of three months of expenses in savings is a very worthy goal. But, for most of us, it will take time to build up the savings to that amount. But, if we don’t start on it today, we’ll never achieve it.

Just a thought from Uncle Gare."

Thanks Gary!

Don’t Let Your Holiday Debt Last Longer than it needs to:

With holiday spending over, our debt recovery time may just be starting. Our credit card bills will start arriving in the mail soon. Recent stats by the National Retail Federation show that the 2007 holiday season got off to a record start with “Black Friday” sales by US shoppers rising 8.3% to a record $10.3 billion. Figures for the following “Cyber Monday” shopping holiday, the Monday following Thanksgiving, also showed a healthy increase with a new one-day record of over $700 million in total purchases.

It is too bad that most of the record consumer spending was paid through the use of credit cards. Most consumers, including me, don’t hesitate to place $300 in goods on a credit card but certainly would think twice if they were forced to purchase the same amount of goods solely with cash? Because of this it is no surprise that the average credit card debt per US household is expected to rise again in 2008 as it has every year since the early 1990’s.

What will this increased spending mean for the New Year? According to John Silva, chief economist for Wachovia, “(Consumers) will still be spending money (in 2008) but it will be on credit card interest and minimum payments, not on apparel or eating out.”

So what’s the average consumer with thousands of dollars in credit card debt to do in 2008? Consider these five suggestions to get your debt under control in the New Year:

1. Reduce your card interest rate - Hawthorne members can now qualify for great rates and Reward points when they transfer balances between February 1 and March 31, 2008.

Visa Platinum Reward Cardholders receive 2,500 bonus points on balance transfers .**
Visa Platinum Savers credit card - 3.99% APR* for 9 months on balance transfers.
Visa Classic credit card – 6.99% APR* for 9 months on balance transfers.

Click here for more information.

2. Stop Using the Cards - seems simple enough? Stop using the cards now and stop accumulating more debt on top of the debt you couldn’t afford in the first place.

3. Pay more then the minimum – For example if you have $5,000 in credit card debt with a 16% interest rate and a minimum monthly payment of $110. Did you know that just paying the minimum means it takes 25 years to pay off your debt and that $5000 debt will end up costing you $12,000 in total? This total includes an extra $7,000 that you will have to pay in interest. A good alternative would be to DOUBLE your minimum payment to $210 and pay off the card in 28 months, which will save you about $6,100 in interest.

4. Consider a Debt Management Program - If you have over $5,000 in debt then a debt management program may be for you. Hawthorne’s Balance Financial Fitness debt management program can help.

*APR=Annual Percentage Rate. **Minimum balance transfer of $1,000.00. Also offering 1 bonus point per dollar of balance transfer up to a maximum of $10,000.00.

Get Rich... Slowly

Who wouldn't like to have that one silver bullet to get rich quick. But the fact is, most of us will never find it. Still, we can accumulate wealth slowly over time. One way is to earn more. But another way is to spend less - think smaller, be satisfied with what we have instead of wanting something else.

I recently saw an ad for a credit card that was targeted toward people who have poor credit, over their heads in debt. It showed images of people that looked like clips from "Lifestyles of the Rich and Famous". I thought it must be so appealing to folks who've found themselves in difficult situations that resulted in high debt.

Getting over your head in debt is easy to do - an illness, a job loss, or a divorce and before you know it creditors are calling every day. It's an overwhelming, stifling and oppressive place to be because it's so hard to resolve. Ads like that credit card ad I saw don't help.

Many years ago I had too much debt, and I didn't know how I'd ever get out from under it. It really took years of living simply that made the difference: cutting back, living with less and thinking smaller. And paying off the bills slowly but surely. That's a difficult task in our culture because our society encourages spending more than saving or not spending. I'm grateful to say that my finances are significantly more healthy today.

Even if you're not in debt over your head, I hope you're not, living simply can help you accumulate wealth, too. There are two books that changed the way I think about money and helped me get out of debt:

Voluntary Simplicity, by Duane Elgin (Quill/William Morrow Publishers NY ISBN 0688-12119-5)- This book taught me about living "toward a way of life that is outwardly simple but inwardly rich." It's about learning to appreciate what you have instead of looking outside yourself for happiness. The tenets of Elgin's voluntary simplicity are frugal consumption, ecological awareness and personal growth.

Your Money or Your Life, by Joe Dominguez and Vicki Robin (Penguin Books NY ISBN 014-016715-3) - I learned how to determine what to spend money on by looking at my values and my goals and putting more money into things that propel me toward my goals. The subtitle is called "Transforming Your Relationship With Money and Achieving Financial Independence".

These books are great reads, regardless of your financial health. But if you are over your head in debt, we have a program that can help relieve some of the stress of living with debt every day. Check out Balance Pro on our website or contact Member Services for more information.

Protect Yourself by Joining us for "Shred-It Day"!

Hawthorne Credit Union will sponsor its 1st annual “Shred-It to Prevent Identity Theft Day” on Saturday May 19th from 10 am to noon, to help raise awareness about the dangers of not properly disposing unwanted personal documents and information. A FREE Identity Theft Seminar will also be offered.

Shred-it day will allow you to bring your personal documents to the credit union to be shredded. Anything that contains drivers license numbers, social security numbers, or any account numbers, really needs to be shredded to protect your identity. The smaller shredders can be very time consuming, so this is our way of saying thank you to the community. You can bring up to two bankers boxes of documents here and have them shredded in a fraction of the time.

We have all heard stories about how incredibly unsafe it is to rip up those credit card offers you get in the mail. I found a particularly interesting story while searching the web and thought it was worth sharing with you. A man, we will call him Rob, took a credit card application that he received in the mail, ripped it up, taped it back together, filled it out using a different address (his father's), using his cell phone as a phone number, and submitted it. A few weeks later his Dad received the credit card.

Is that messed up or what? Can’t you just picture a worker at the bank opening the envelope and entering the data into the system without giving any thought about why the application was torn up and re-taped? Please learn a lesson from this!

If you rip up your credit card offers and throw them away (or even worse, don't rip them up at all), a thief can fish them out of the garbage, tape it back together, fill it out with his/her address and phone number and receive that card at his/her address, and then go shopping.

My advice: SHRED ALL CREDIT APPLICATIONS YOU RECEIVE IN THE MAIL

Some of the ways that ID thieves can get personal information include:
* Rummaging through your trash, the trash of businesses, or public trash dumps in a practice called "dumpster diving." * Stealing a wallet or purse * Stealing personal information found in the home. * Seventy-two percent of the information involved in identity theft is stolen offline by accessing paper documents.

Identity theft is the fastest growing crime in America, with nineteen people becoming a victim every minute. Nearly ten million people fall prey to identity theft each year, costing them over six-thousand dollars on average. Don’t let yourself fall victim to this growing crime. Protect yourself by joining us at Hawthorne on May 19th for Shred-it Day!


If the response is good, you can count on future Shred It Days at Hawthorne!