Reasons To Check Your Credit

Gregory J. Cook, EA, CPA+
Accredited Tax Advisor
Past President Alabama Society of Enrolled Agents
Past President Alabama Association of Accountants

The Top 5 Reasons To Check Your Credit

There are some serious reasons why you should check your credit on a regular basis. Some you may already know, while others you may not. Your credit score is what will not only determine if you are approved for financing, but will also directly determine the interest rates that you receive.

1. You will want to check your credit on a regular basis in order to detect fraud and identity theft. Look for any open accounts that you do not recognize, as well as any charges on existing accounts that you do not recognize. Should you see anything suspicious, contact the account holder company immediately. Additionally, report this to the credit reporting agency. The sooner you do this, the sooner you can have any false entries removed from your report.

2. It is important to always know who is making credit inquiries about you. This information will show up on your report. It is possible that too many inquiries can lower your score. No one should make an inquiry without your permission. However, this happens frequently. See who is looking at your score, and feel free to contact any unauthorized parties that are doing this. It is possible to have unauthorized inquiries removed from your report by contacting the credit reporting agency directly.

3. Know where you stand before applying for a credit based account. There is no reason to add an unnecessary inquiry to your report if you know in advance that you will not be approved. Many credit card companies will tell you what your score needs to be in order to be approved. Loan providers may give you this information as well. Check your credit in advance of filling out an application. This will save you from wasting time, or incurring any unnecessary hassles.

4. Those that are trying to rebuild their credit will want to keep tabs on the progress that is being made. It does take time for bad marks to be removed from a report, but over time this will happen. You may find it uplifting to closely monitor your progress, and see how your score improves from month to month. Rest assured that your hard work will eventually pay off.

5. Check to see if the balances owed are correct. It is not unheard of for payments to not be processed correctly, or for unknown fees to show up on accounts. While most companies are indeed reputable, there are a few that could take advantage of you if you do not closely monitor your balances. Pay special attention to accounts that are closed. Those totals should not increase.

These are not the only reasons why you should check your credit on a monthly basis. Your score will determine in what ways you are able to control your finances, and will always be a part of your financial future. Taking the time to see where you stand each month can pay huge dividends. The process is easy, and will only take a few minutes of your time.

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The Recovery Act was passed by Congress and signed into law by President Obama on February 17, 2009. The purpose of the $787 billion Recovery package is to jump-start the economy to create and save jobs. The Act specifies appropriations for a wide range of federal programs, and increases or extends certain benefits under Medicaid, unemployment compensation, and nutrition assistance programs. The legislation also reduces individual and corporate income tax collections (to an extent), and makes a variety of other changes to tax laws.

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This Act will have far reaching consequences and we will be dealing with it for years to come (at least until 2018). Twenty-eight different agencies – such as the Departments of Education; Health and Human Services; and Energy – have been allocated a portion of the $787 billion in Recovery funds. Each agency develops specific plans for how it will spend its Recovery Act funds. The agencies then award grants and contracts to state governments or, in some cases, directly to schools, hospitals, contractors, or other organizations. The agencies are required to file weekly financial reports on how they are spending the money and their specific activities related to Recovery funds.

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Have You Refinanced Your Home?
If you are one of thousands who locked into a lower home mortgage interest rate, then you've hit the savings jackpot! Besides getting one of the lowest rates in decades, you may be able to deduct some of the refinancing costs when you file your tax return. The “points” paid to get a home mortgage may be deductible as mortgage interest when you itemize on Form 1040's Schedule A. Points paid to get an original home mortgage may be fully deductible in the year paid. However, points paid solely to refinance a home mortgage usually must be deducted over the life of the loan.

For a refinanced mortgage, you figure the interest deduction by dividing the points paid by the number of payments you will make over the life of the loan. You may deduct points only for those payments made in the tax year. Say you paid $2,000 in points and you will make 360 payments on a 30-year mortgage. You could deduct $5.56 per monthly payment, or a total of $66.72 if you made 12 payments in one year. If you used part of the refinanced mortgage money to finance improvements to your home and if you meet certain other requirements, the points associated with the home improvements may be fully deductible in the year the points were paid.

Also, if you are refinancing a mortgage for a second time, the balance of points paid for the first refinanced mortgage may be fully deductible at pay off. Other closing costs – such as appraisal fees and other non-interest fees – generally are not deductible. And the amount of your adjusted gross income could affect the amount of deductions you can take. Any way you look at it, between the lower interest rates and the tax savings, that's money you can take to the bank. For more information on deductions related to refinancing, contact your Cook and Co. Advisor.