Wednesday, February 25, 2009

Common MoneyMistakes Part 3

7. Staying Debt-Free

In a topsy-turvy economy, you may be tempted to avoid all debt like the plague. It's a good idea in theory, but if you don't have a dime of debt to your name, lenders have no way to gauge whether you'll be a reliable borrower. "It's a double-edged sword," Levin explains. "The good news is, you can sleep at night. The bad news is, when you're trying to get something that requires credit and you have a thin file, they really can't find much of a history."

A sizable chunk of your score reflects your ability to handle a few types of credit (such as mortgages or revolving credit). No debt means no track record -- and that could cause your score to suffer.

8. Crossing Your Fingers

You don't want to find out about a flaw in your credit report when you're bidding on a new house or negotiating with a car dealer. So be proactive: Once a year you may request a free copy of your report from, which is sanctioned by the Federal Trade Commission.

Should you need access to your credit reports at other times throughout the year (if you're about to make a home purchase, for instance), you can always request the three-in-one credit report from Equifax
, for a small fee. Comb through it to make sure there are no glaring errors, and be extra-vigilant if you have a common family name. "John Smith III could have creditors that show up on John Smith II's credit report," Davis cautions. If you spot anything fishy, file a dispute form immediately and keep a written record of it. After all, you've worked hard to ensure the best credit score possible -- and it's up to you to make sure your prudence is paying off.


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