Get your financial house in order

I have a couple of suggestions on how to save some money, not by investing in the stock market or real estate, but in an activity we all do every month - pay bills.

It all started with my wife Rita opening a piece of mail from Pemco Insurance Company; we have our home and 1993 Buick insured with them. Rita read me the new premiums, which it turns out were significantly lower than the previous year. "Why?" I wondered. "Because we have a good credit score," she replied.

Rita went on to read other reasons for lower monthly premiums: a good record, a home security system and longevity with the company. Having both our car and home with the same company also proved a positive factor.

With all those components added together, we save 41 percent on our annual payments.

Reading further, we noticed that we still had room to save monies - we were not at the company's highest percentage scale. It was reported that better credit scores would enhance our ratings and enhance our ability to save added dollars.

So I requested our credit report from Equifax, and Rita and I poured over all the accounts listed. We called and wrote letters to retail stores and gasoline companies and closed all our old, unused credit cards. We made certain that the only accounts open were those we currently use.

And here is something important I learned about credit cards issued by retail stores (these cards usually are offered during a retail purchase, the catch being a one-time saving of 20 or 30 percent on said purchase if you sign up on the spot). Last month, when I visited a Pemco office to apply for their highest rating, I learned that the two retail cards Rita and I held actually reduced our collective risk factor with Pemco.

Yup - opening up such a credit account, even if you pay it off and maintain a zero balance, reduces a person's ratings, at least in the eyes of an insurance company.

I learned that credit agencies like Equifax, TransAmerica and Experian use a formula to compute scores based upon an individual's ability to pay off debt. However, insurance companies use a totally different algorithm which computes a client's risk compared with the overall population of insured people.

Although the two scores are related, they do not move in tandem. In fact, they move in opposite directions. We discovered this fact when, the following year, our insurance rates were increased due to a pair of retail cards we held.

I suggest that Magnolians who desire immediately to save money on monthly bills do two things. First, do not open department store credit cards just to qualify for those one-time reduced discounts, and second, do everything possible to increase your credit score.

The aim is to get your financial house in order. Credit bureaus in the United States have been mandated to offer consumers the ability to check their credit report for free once a year.

Starting Dec. 1, 2004, residents of the western United States were able to get their free credit report by visiting, or calling toll-free at 877-322-8228.

This plan was rolled in in stages. Folks in the Midwest waited until March 1, 2005. Southern residents had access starting June 1 this year, and those on the east coast waited until the first day of this month.

In addition to helping you take a close look at your credit habits, this service is invaluable in helping you discover if you've ever been a victim of identity theft.

A local Magnolia resident had an experience that she recently shared with me. In an email she wrote: "I found out something interesting regarding insurance. When I was asked to renew the insurance on my condo, my insurance company noted that I couldn't receive the lowest premium because of something related to my credit.

"I called and found out that it was because my credit rating had been requested so many times in the past few months that it increased my premium. I was applying to buy another property and had gone to different banks to find the best rate, so naturally each had asked for my credit rating, which incidentally is over 800, so nothing to worry about.

"Anyway, the amount of my insurance on the condo was so low I didn't really worry about it and I actually don't know if they changed it or not. Interesting.

"You have to stay on top of everything all the time it seems," she finished.

Bernie Sadowski is a freelance columnist and longtime Magnolia resident. You can write him at[[In-content Ad]]