Montana 1st CU Blog

What factors impact my credit score?  Our staff get asked this question daily.  To help we have provided a brief description of credit report basics-

Doing the following typically has a positive impact on your credit score:

• Pay your bills on time. Delinquent payments and collections can have a significant negative impact on your score.
• If you have missed payments, get current and stay current.
• Pay off debt rather than shifting it to other accounts.
• Re-establish your credit history if you have had problems. Opening new accounts responsibly and paying them off on time may help in the long term.
• Apply for and open new credit accounts only as needed.
• Keep credit cards but manage them responsibly. In general, having credit cards and installment loans (and paying timely payments) may favorably impact your credit score in the long term. If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor.
• Keep balances low on credit cards and other revolving credit.
• Shop for rates for a given loan within a short period of time

The following factors typically do not have a positive impact (or may even have a negative impact) on your credit score:

• Close unused credit cards as a short-term strategy to try to raise your score.
• Open a number of new credit cards, just to increase your available credit. This approach could actually have a negative impact on your score.
• If you have been managing credit for a short time, avoid opening a lot of new accounts too rapidly. Adding new accounts will lower your average account age, which could have a negative impact on your credit score, particularly if you are a new credit user.

Why is my credit score different from my Equifax, Experian and TransUnion credit scores?

• Your credit score from each credit reporting agency is based on the information in your credit file at the credit reporting agency, and the credit history information each credit reporting agency has about you can differ. This can result in your score at the other credit reporting agencies being different.
• Each of the credit reporting agencies, may use their own scoring models. These models may evaluate your credit file differently.

How is a credit score determined?

A credit score is based on information contained in your credit file. Credit scores are typically calculated using the following credit file items:

• Payment history
• Amounts owed
• Length of credit history
• New credit
• Type of credit used

Keep in mind that there are many different scoring models that can be used to calculate a credit score, and each scoring model may give more or less weight to the various items of information in your credit file.

How long does negative information stay on my credit report?

In general, negative information that is more than 7 years old from date of last activity (10 years for bankruptcies) must be removed from your file.

The positive or negative information in your credit report does not come from Credit Reporting Agencies; any positive or negative information is reported to Equifax, Transunion or Experian by others that have granted you credit, is included in public record information or reported by collection agencies. Credit reporting agencies are merely a repository for the information that your credit grantors report, collection agencies report, or is in public records.

Our staff is always available for your questions including questions about your credit rating and how it may affect your financial security.

WAYS TO OFFSET EDUCATION COSTS

College can be very expensive. To help students and their parents, the IRS offers the following ways to offset education costs:

1) The American Opportunity Credit.

http://www.irs.gov/newsroom/article/0,,id=205674,00.html

This credit can help parents and students pay part of the cost of the first four years of college.

The American Recovery and Reinvestment Act modifies the existing Hope Credit for tax years 2009 and 2010, making it available to a broader range of taxpayers. Eligible taxpayers may qualify for the maximum annual credit of $2,500 per student. Generally, 40 percent of the credit is refundable, which means that you may be able to receive up to $1,000, even if you owe no taxes.

2) The Hope Credit

http://www.irs.gov/formspubs/article/0,,id=177996,00.html

The credit can help students and parents pay part of the cost of the first two years of college. This credit generally applies to 2008 and earlier tax years. However, for tax year 2009 a special expanded Hope Credit of up to $3,600 may be claimed for a student attending college in a Midwestern disaster area as long as you do not claim an American Opportunity Tax Credit for any other student in 2009.

3) The Lifetime Learning Credit

http://www.irs.gov/individuals/article/0,,id=96273,00.html

This credit can help pay for undergraduate, graduate and professional degree courses – including courses to improve job skills – regardless of the number of years in the program.  Eligible taxpayers may qualify for up to $2,000 – $4,000 if a student in a Midwestern disaster area – per tax return.

4) Enhanced benefits for 529 college savings plans

http://www.irs.gov/newsroom/article/0,,id=213034,00.html

Certain computer technology purchases are now added to the list of college expenses that can be paid for by a qualified tuition program, commonly referred to as a 529 plan.  For 2009 and 2010, the law expands the definition of qualified higher education expenses to include expenses for computer technology and equipment or Internet access and related services.

5) Tuition And Fees Deduction

http://www.irs.gov/publications/p970/index.html

Students and their parents may be able to deduct qualified college tuition and related expenses of up to $4,000. This deduction is an adjustment to income, which means the deduction will reduce the amount of your income subject to tax. The Tuition and Fees Deduction may be beneficial to you if you do not qualify for the American opportunity, Hope, or lifetime learning credits.

For more information, see Publication 970, Tax Benefits for Education, which can be obtained online

http://www.irs.gov/pub/irs-pdf/p970.pdf

or by calling the IRS at 800-TAX-FORM (800-829-3676).

Form 8863, Education Credits

http://www.irs.gov/pub/irs-pdf/f8863.pdf

There are new laws being passed in our industry what seems like everyday.  Your statements may look a bit different and in the case of Overdraft Privilege you may have to communicate your continued interest in our services.  If you have any questions about changes that you see or have heard about, feel free to contact us directly anytime!