Personal finance with Ralph and Al: Store cards

Catawba College is offering a one-hour-credit personal finance course led by retired (2002) Catawba College Professor Al Carter and Food Lion co-founder Ralph Ketner. The Post plans to attend the weekly class and share nuggets of the information presented by Carter, Ketner and guest speakers. This is the second installment.

By Emily Ford

eford@salisburypost.com

Resist the offer at the cash register to save 10 percent or 20 percent by applying for a store credit card, banker Jaime Garrett told Catawba College students.

While it sounds tempting, that credit card could ruin your credit score by encouraging reckless spending and racking up interest charges, said Garrett, a relationship manager for Wachovia, a Wells Fargo company.

Your credit score is more valuable than saving a few dollars at American Eagle, she said.

A good credit score can save tens of thousands of dollars in interest over a lifetime by helping applicants qualify for better rates for mortgages, car loans and credit cards, Garrett said.

“I can’t stress enough for you to be in control of this, especially at your age, and always being in control of this,” she said. “It will make you financially successful.”

Credit scores range from 300 to 850. Try to reach 760, Garrett said.

Payment history is the biggest component of a credit score.

“I can’t stress enough to you how important it is to make your payments on time,” Garrett said. “Every time you pay a bill late, it is killing your credit score.”

Based on a simulation, paying her car loan and mortgage late just one time would drop her credit score by an astounding 65 points, Garrett said.

Never allow balances to reach 70 percent of the limit on a credit card, she said.

“It looks like your credit is maxed out,” she said.

Even if you have bad credit, you can rebuild your score over months and years by paying bills on time, keeping balances low and not opening new credit cards, Garrett said.

“No one can wave a magic wand, I don’t care how much you pay them,” Garrett said. “No one can go in with an eraser and fix your credit.”

After seven years, closed activity will fall off your credit history, although outstanding debts a company is trying to collect will remain.

Garrett suggested several ways to build credit:

• Find someone with excellent credit to authorize you as a user. A woman authorized her 17-year-old daughter to charge up to $500 on the mother’s major credit card, which she paid off each month.

The daughter picked up her mom’s eight-year history of on-time, full-balance payments and had a credit score of 785.

• Take out a small loan. Put the money in an account and have the monthly loan payment drafted from the account. When the principal is gone, you will have to pay the interest, but it’s worth it to build good credit, Garrett said.

• Apply for a secured credit card with a bank. Pay the credit limit, maybe $300, which will be returned after a year. During that year, make small purchases like gas and pay off the balance every month.

Credit score tips

• Check your credit history for free once a year at www.annualcreditreport.com. The site charges a small fee to get your actual score — Garrett says it’s worth it to know the actual number.

• Utility payments, including cell phones, aren’t included in your credit score unless you fall behind and your account is turned over to a collection agency.

• Inquiries from outside sources about your credit history, which is maintained by three credit reporting agencies, can bring down your score. Try to limit the number of times someone checks your credit. When applying for a car loan, for example, tell the dealership you want your credit pulled only one time.

• You should have one or two major credit cards and keep them as long as possible, paying them off every month.

• Take responsibility for every bill. Garrett said she has seen a $30 collection ruin someone’s credit score.

— Jaime Garrett of Wachovia,

a Wells Fargo company

Contact reporter Emily Ford at 704-797-4264.