How to improve your credit score

The days of easy credit, offered to anyone who can breathe, are history. In this sluggish economy, lenders want to know whether borrowers are likely to stay current on their loans, mortgages, and credit card accounts. Banks and other lending institutions are looking more closely at credit scores, the numbers that (in theory at least) predict the likelihood that a borrower will default on his or her outstanding debts. As a result, knowing your score and ensuring that it's climbing toward the upper percentiles should be a part of your regular financial planning.

The most commonly used credit score is the FICO, developed by Fair Isaac Corporation. FICO scores range from a low of 300 to a high of 850 and may be obtained (for a fee) at myfico.com. The score is considered a predictor: the higher the score, the more creditworthy the consumer. Not so long ago, a score that just nudged the 700 mark would bring lenders to the table with their lowest interest rates. Over the last few years, however, higher scores are often required to get premium rates.

About 35% of the FICO score is derived from your payment history, and another 15% comes from the length of that history. Ten percent of the score is based on the types of credit you use—credit cards, retail accounts, and other types of loans. Another 30% takes into account the amounts you owe as a fraction of your available credit. These numbers and others are fed into the FICO calculator to determine your overall score.

To raise that score, focus on the numbers that matter most:

• Avoid late payments. If you must juggle payments because of cash flow problems, try to limit the number of past-due accounts. A history of late payments on several accounts will hurt your score more than delinquencies on a single account.
• Mix it up. Spread your debt over several types of accounts: installment loans, credit cards, and accounts with retail merchants.
• Curb spending. Keep your outstanding balances to less than 50% of your available credit.
• Check your credit report regularly. By law, you're entitled to a free annual credit report from the three main credit-reporting agencies. Check the report for errors, and follow up to ensure that problems get fixed. One vendor's erroneous reporting can tank your score.

Good credit is a valuable commodity. Guard it carefully.

More money saving tips for small business

If you're the owner or manager of a small business, you've undoubtedly felt the pain of this economy's ever-so-slow recovery. Demand for your products or services may have dwindled and when revenues are down, businesses need to adjust by tightening their belts. But reducing expenses is a balancing act. Cut costs that make a significant contribution to your income, and you may find revenues declining further. Trim expenses that are "fat" - unnecessary because they don't bolster the bottom line - and your firm can become leaner and better able to compete.

Here are a few suggestions for targeting and trimming some of these "fat" expenses.

• Scale back on utilities. Take a hard look at your phone system. Do most of your employees use cell phones? If so, perhaps you can reduce the number of phone lines or dispense with that expensive in-office system entirely. Is your electric bill going through the roof? Try installing motion sensor lights in some areas, and turn off lights in unused spaces. Consider switching to laptop computers instead of desktop models that consume significantly more energy.
• Exploit the Internet. Use the World Wide Web for everything you can, from teleconferencing to market research to buying discount office supplies. Look for deals on office items on Craigslist and eBay. Find free business forms online, everything from purchase order templates to marketing brochures.
• Bolster your procurement practices. Force vendors to compete by getting multiple bids, and ask suppliers to match the lowest prices.
• Lease that unused office space. If you have space that's, well, taking up space, consider subletting to another company or asking your landlord for a price reduction.
• Buy in bulk. Everything from office supplies to lunchroom goodies can be purchased at a discount in larger quantities.
• Dump the company car. If your company owns a vehicle, it may be time to rethink whether it's really needed. Gas, insurance, car payments, and other costs can go away if the car isn't on the company books.
• Review your insurance policies. It may be time to discuss discounts or umbrella plans with your insurance agent. Shopping around can be a good idea as well. After all, insurance companies are feeling the effects of the down economy too, and may be willing to work with you to retain your patronage.

If you'd like to discuss additional ideas for reducing business costs, give us a call.