Money Missteps That Matter
Small-change mistakes today can wind up costing you big bucks tomorrow. How to keep your financial foibles from owning you.
by Teri Cettina
Who would think that something as innocent as a forgotten $5 library fine could leave a mark on your credit score? (It can.) Or that paying your mortgage late--even once!--could make it tough to get a car loan? (It may.) While most of us fret over the big financial issues, like buying a home and investing in the right growth-stock mutual fund, we tend to dismiss the more minor money concerns. The thing is, those can cost us dearly, or even derail our financial future. here, experts explain how to rectify eight seemingly small slip-ups so they don't hurt your fortunes down the road.
Small Mistake: You overlook old library fines or parking tickets.
Big Complication: To raise revenue, many U.S. libraries and municipalities
are turning unpaid debts over to collection agencies. Once an agency
takes over your debt, even if it is only $20, you can count on a big
dent in your credit score—100 points or more, according to Craig
Watts, a spokesperson for Fair Isaac Corp., the financial-management
company that developed the FICO credit score, a number that determines
a borrower’s credit history.
Cut Your Losses: Take care of fines and tickets as soon as you’re aware of them, and make sure the payments clear your bank account. If they aren’t received and processed by the library or the city agency, your account will be marked delinquent. Also, check your credit report (it’s free) at least once a year (annualcreditreport.com). If you find a debt there that isn’t yours, follow the credit-reporting agency’s steps to dispute the charge.
Small Mistake: You carry even a small credit-card balance.
Big Complication: If you pay only the minimum monthly payment on a $2,200
balance (the amount the average consumer carries), it could take you
12 years to clear the card. In that time, you will have paid an additional
$1,968 in interest (calculated at a modest 14 percent).
Cut Your Losses: If you’re already carrying a balance, look for ways to step up payments. If that’s not possible, take out a personal bank or credit-union loan to pay off the card, suggests Kathryn Nusbaum, managing director of Middle America Planning, a financial-advisory firm in Pittsburgh. Some personal loans are not secured by an asset (so if you default, you don’t lose your car, say), and their rates tend to be lower than those for credit cards.
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