June 4, 2008 • June Walbert
Q: I'm completing a one-year tour in Iraq, have paid off my
bills (except for my car loan and a rental home mortgage), and set
aside money in savings. Though I’ve had late credit card and bill
payments in the past, I have not been late on any bills for nearly two
years. I don't want to use my credit cards any longer -- should I
cancel them? Also, I'm hoping to buy another home someday. Now that I'm
sitting well financially, what else can I do to improve my credit
rating and own my dream home?
- June, Woodbridge, VA
A: Thank you for your service in Iraq. It sounds like your finances are
moving in the right direction! And based on what you have told me, your
credit score should have improved over the last few years. Your first
step is to check your credit report to make sure it’s accurate. You can
do this once a year at no cost at www.annualcreditreport.com. For a small fee, you also can receive your credit score.
I recommend that you keep at least one credit card for convenience.
Let’s face it -- there are a lot of things that are difficult to do
without a credit card (renting cars, hotel reservations, etc.). Beyond
that, you could cancel other cards with the shortest payment history.
In the short-term, this might actually hurt your credit score since it
will reduce your available credit, but for the long haul it makes sense
to help keep spending under control. Keep paying your bills on time
(using online bill pay can help make sure you don’t miss payments) and
using credit responsibly, and you should continue down the path toward
a better score. A high credit score (they range from 300 to 850) will
help increase your chances of qualifying for a good interest rate on
your next mortgage.
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June Walbert is a CERTIFIED FINANCIAL PLANNER TM practitioner with USAA Financial Planning Services, one of the USAA family of companies.
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