DEBORAH CORRAO / L’Observateur / April 19, 1999

A good credit record, like a good reputation, can open many doors for you.

Good credit can make it easier for you to buy a home or a car, take a vacation or put your children through school.

Bad credit can put all those dreams on hold for years.

According to Myrt Digirolamo, Credit Bureau of St. Charles, Inc., the bestthing you can do to protect your credit is keep it good to start with.

First of all, Digirolamo said, you must be very honest with yourself about your income and not fool yourself about how much money you have to spend. Secondly, you should prepare a budget and a chart for all yourmonthly bills and stick to it. It’s important, she said, to pay your billsregularly and promptly whether you choose to pay them as they come in or all at one time on a certain day of the month.

Tom Collens, vice president of administration for Consumer Credit Counseling Services, a non-profit organization to help people manage their money and get out of debt, agrees.

Collens said many people plan poorly, spending money expected in overtime pay or bonuses that never materializes. An unexpected layoff ormedical bill can wipe out good credit that took years to establish. Andassuming a payment such as a large car note can start making you feel the financial pinch.

Collens said there is a formula, called the debt-to-income percentage, you can do on your own to figure out if you may be on the verge of financial trouble. First, you’ll need to make an honest assessment of your debts,including car payments but not rent, mortgage or utilities. Divide thatamount by the amount of your net income. If the result exceeds 15 percent,you’re starting to get in financial trouble. If it’s 25 percent or more, youhave a problem.

What if you have a good credit record and have always paid your bills on time but think you may be in over your head? Collens said there are a few warning signals to look for to determine if you need outside help to manage your debt.

Ask yourself these questions: Are you unable to make minimum monthly payments? Are you unable to save money? Are you tapping into savings to meet monthly debts? If you answered yes to any of these questions, you may need some help to get back on track.

Digirolamo said there are steps you can take to correct credit problems if you’re willing to do a little legwork. First, contact creditors and explainyour financial situation. Ask them if they’d be willing to change yourpayment plan and reduce your monthly payments until your bill is paid off.

Some creditors will do this for you on a six-month basis.

If this does not work, she advises consumers to contact an agency such as the Consumer Credit Counseling Service which has offices in New Orleans and Kenner.

Advisors there will help you create a budget and work with your creditors to pay off bills and maintain a good credit record.

If you seek counseling services, a trained counselor will first sit down and work up a monthly budget with you. The counselor will determine youractual living expenses and subtract it from your net income. If you haveenough to meet your obligations, the counselor will help you budget your income and show you how to put more disposable income toward paying off your debt.

If you’re unable to meet living expenses and minimum payments on consumer debts, the agency will determine how much of your income is available to service your debt. The agency will work with your creditorsto reduce or eliminate interest or monthly payments.

The program is voluntary and you may remain in it until all of your debts are paid off.

During the time you are in the debt management program, you will turn over income not needed to pay living expenses and Consumer Credit Counseling Services will pay your debts for you. You will be required toclose your accounts, including cutting up all credit cards, and maintain a strict budget until you have settled your debts.

Counseling services are free. There may be a small monthly fee of between$8-$16 for services while in the debt management program. Extremehardship cases may have that fee waived.

Collens said the repayment plan may or may not affect your credit report depending upon the individual creditor.

Digirolamo, whose company does credit checks for mortgage institutions, said what’s important to remember if you’re trying to buy a house or make a loan that being 30 days late on bills is a red flag to potential creditors.

If you are 90 days or more behind on your accounts, especially if they’ve reached the collection stage, you’re usually considered to have bad credit.

Other situations that can adversely affect your credit record are judgments, tax liens and bankruptcies, which are kept on your credit report for 10 years.

So, what if you’ve worked all your life to build a good credit record and pay your bills on time but you are turned down for a loan? Could be there’s a mistake on your credit report. What should you do?If you are turned down for credit, the Federal Fair Credit Reporting Act gives you the right to a free copy of your credit report.

You should first call one of the three credit repositories in the United States: Experian, Equifax or Trans Union. All have toll free numbers.If you feel the report is inaccurate because of a mistake in credit reporting, ask for a dispute form which will be mailed to you. All you haveto do is fill it out and the credit repository will investigate.

Digirolamo cautioned that, although most big creditors such as Ford or GMAC, report monthly, small creditors, especially those who handle accounts such as 90 days same as cash may report only once every three months. Therefore, if you’ve paid out an account, it may not show that wayon your credit report for several months.

On the other hand, having too much credit can also have an adverse effect on your ability to make a loan. If you’re in the market for a big ticketitem, such as a home, consider paying off credit card balances and canceling credit cards that you do not use. Too much available credit canappear as potential debt to a creditor.

Getting out of debt for good may take hard work on your part, such as cutting up credit cards and maintaining a strict budget until you have settled your debts.

One thing to beware of, said Digirolamo, is so-called “credit clinics” that promise that, for a fee, they will clean up your credit report. Digirolamosaid you should be able to clear up legitimate mistakes by yourself by contacting a credit repository.

In other cases, these clinics may take your money, sometimes, in the hundreds of dollars, and do nothing to get you out of debt.

The Consumer Credit Counseling service has an office at 3701 Williams Boulevard in Kenner. You can reach it by calling 443-1015.You can contact one of these credit repositories if you have a dispute about something on your credit report: Experian, 1-888-397-3742; Equifax, 1-800-685-1111; Trans Union, 1-800-916-8800.Back to Top

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