Minimizing Your Taxes and Managing Your Complex Affairs

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Steps to Improve Your Credit Score

Most creditors use the FICO credit score (named after the Marin County company Fair Isaac & Company). Each of the three major credit bureaus also has their own proprietary score. In addition, the three credit bureaus also commonly created a score called Vantage-Score (which includes a numerical score and letter grade).

Tips to maintain good credit health:

·         Closing unused accounts may reduce your score since it reduces your combined credit available and therefore makes it look like your maximum capacity is smaller.

·         If replacing an old credit card with a new card, wait to cancel the old card after the new one is received. If the cards have the same credit there should be no impact on your score.

·         If you have multiple credit sources and sometimes will skip payments on one credit source, making small partial payments to each creditor will improve your credit.

·         Paying off credit cards rather than home loans first may improve your credit score since it reduces your percentage of utilized credit on the card. Financially you are better off since credit card interest rates are higher than your mortgage interest rate. In addition, credit card interest is a personal expense that is not tax deductible.

·         Your credit score is calculated, in part, by comparing how much credit you are using to how much credit you have available on the day the credit card company reports to the credit bureau. So even if you pay off your card every month, you might have a high balance on the day the report is made. As a result, if the report is made just before your bill is due and you have run up a large balance, your score will go down even if you pay it off the next day. So if improving credit is a goal, contact your lender to see what day reports are made to credit bureaus.

How to get free credit reports.

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Richard Pon CPA, CFP