Understand your credit rating

A weakening economy and fears of unemployment have many people uncertain about their financial future.

Already, bankruptcies and housing foreclosures have wracked parts of the nation, including Florida and California, while families elsewhere are feeling their high credit ratings slip away, thanks largely to less money to pay their monthly credit card bills on time.

"Your credit report is your credit history, and it will stay with you for some time," said Rod Griffin, director of public education at Experian, one of the three national credit reporting agencies in the United States. "The good news is that the positive information will remain on your report indefinitely, and the negative information will be deleted after a period of time."

In a best-case scenario, Griffin said, an individual would never pay late on credit card or mortgage payments, and his credit rating would continue to go up.

As it is, however, a single late payment on a credit card can linger on your credit report for between six and 12 months, as long as no other late payments are accrued in that time. A late payment in the financial world is anything that's paid 30 days past its due date.

"When a lender looks at your credit report, he's going to look at a pattern of behavior over time," Griffin said.

"It's possible, that as a situation changes, people may not be able to keep current, so what the lender is looking for is a turnaround in credit history that would bring the account current.

"The best thing to do if you see your circumstances are changing is to contact your credit agencies and work with them on a solution, which could bring down your monthly payments," Griffin said.

Without a job or even the prospect of one, however, many Americans have been driven to bankruptcy court as a means by which to manage their debt.

Tony Brewer, vice president of the Avalon Avenune branch of Bank Independent in Muscle Shoals, said he "never, ever recommends bankruptcy. In fact, there are very few cases I would recommend it, and the only one that I can think of would involve a medical hardship."

He said bankruptcy has been perceived as the easy way out among consumers, but it's a move that can have a long-term impact on your credit report.

Like Griffin, Brewer said the best thing to do is to call your creditors and get them to work with you because "a lot of time, the last thing a bank wants is your house back."

Unfortunately, he's seen too many people come into his office in search of a loan and be turned down because they have filed for bankruptcy, which remains on their credit report for as long as seven years.

"It can be the difference between getting a 5.75 interest rate and an 8.75 interest rate," Brewer said. "I see this on their credit report, and it makes me irate because they weren't counseled better about their options. A lot of times, people can overcome the financial situation they're in in a shorter amount of time."

A bad credit report is surmountable as long as an effort is made to correct the mistakes, Brewer said, but it can also delay your ability to get a mortgage for a new home.

Other big purchases often involve vehicles, and Chris Cantrell, who handles financing at Long-Lewis Ford Lincoln Mercury in Muscle Shoals, said getting people into new cars hasn't been a problem lately, but it can mean paying a higher price in the end for something that might not be a necessity.

"Credit scores are lower, which means they'll get a higher interest rate," he said. "The biggest thing I see is people who are behind on their house payments trying to buy cars. We're able to do that, but it does mean a higher interest rate."

Michelle Rupe Eubanks can be reached at 740-5745 or michelle.eubanks@TimesDaily.com.