The basic concept of Occam’s razor, that the simplest explanation always works, just doesn’t seem to work in the sometimes strange world of determining a credit score.

For example, the simple-is-as-simple-does theory of credit card management says that you should have one credit card, use it sparingly and pay off the entire balance every month. Such fiscal responsibility has to reflect well on your credit score, right?

Well, not exactly. Though it may seem counter-intuitive some, your credit score—the all important number usually between 300 and 850 that is used by creditors to determine your creditworthiness—may not rise as quickly as you like if you use this logic, according to many credit counselors. By their point of view, if you only have one credit card, you are not giving them many opportunities to demonstrate your credit worthiness.

Instead, credit counselors suggest that you have two or even three credit cards that you can successfully manage. Additionally, your credit score will improve if you successfully make payments on different kinds of debts such as credit cards and installment loans, like a loan for a car or any other loan where you make regular, monthly payments.

Of course, the key word is to successfully make payments on these credit cards and loans. If you take on more debt than you can handle, you will hurt your score.

Conventional logic also suggests that it is always best to pay off your balance in full every month. If you maxed out your credit card with one large purchase, and paid the balance five days later, you would be both money ahead and demonstrate your credit worthiness, basic logic would seem to suggest.

While that may be a sound financial decision and one that could save you from having to pay finance charges, that line of thinking may not boost your credit score as much as you would think. Instead, what matters to those keeping score is the amount you charge much lower than you credit limit.

Ideally, credit counselors say, you shouldn’t charge more than 30 percent of your credit limit. What’s more, your credit insurer takes note of your balance and sends a report to the credit bureau once a month. If that snapshot of your account happens immediately after you have made a large purchase, but before your credit company received your payment, it may give potential lenders the impression that you are overextended on your bills.

Though it may be counter-intuitive at first, it may make sense to determine how your credit score is calculated so that you can boost your credit rating, and potentially be able to secure a lower interest loan. That’s a strategy that makes sense and could save you more than a few cents.

By David Plowman

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You should be aware that there are rigid penalties and interest that the IRS charges for late or non-payments of income tax owed. The IRS also is very diligent about charging the penalties and interest and is usually timely in sending notices after the review of the tax return.

April 15th is the deadline for most people to file their individual income tax return and pay any tax owed. If you have not paid the tax in full and if there is any money owed, you will be sent a bill. Generally, interest is charged on any unpaid tax from the due date of the return until the date of payment. The interest rate is determined every three months and is the federal short–term rate (currently 7%) plus 3 percent. Interest is compounded daily.

If you file on time but don’t pay all amounts due on time, you’ll generally have to pay a late payment penalty of one–half of one percent of the tax owed for each month, or part of a month, that the tax remains unpaid from the due date, until the tax is paid in full or the 25% maximum penalty is applied. Further, the one–half of one percent rate increases to one percent if the tax remains unpaid 10 days after the IRS issues a notice of intent to levy. For individuals, who file by the return due date, the one-half of one percent rate decreases to one-quarter percent for any month in which an installment agreement is in effect.

If you owe tax and don’t file on time, the total late–filing penalty is usually four and one-half percent of the tax owed for each month, or part of a month, that your return is late up to five months. If your return is over 60 days late, the minimum penalty for late filing is the smaller of $100 or 100 percent of the tax owed.
You must file your return and pay your tax by the due date to avoid interest and penalty charges. For individuals, the due date is April 15th of each year unless that date falls on a weekend. In that case, the due date is the first Monday after the 15th.

For additional information, visit the tax advice resource at 411taxrelief.com.

By Charely Dargan

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If you are falling behind on your monthly bills, you may want to consider seeing a credit counselor, who may be able to consolidate your debts and negotiate with your lenders to secure lower payments. Rather than sending multiple checks to all of your lenders you send just one check to the debt counselor.

But consider this decision very carefully, as consolidating your debt may create a ding on your credit report. However, it is better than declaring bankruptcy, which remains on your credit file for ten years,

Not everyone who is in debt will qualify for debt consolidation. The counseling company may not be able to negotiate a better deal with your lender, and consequently would not be able to offer you significantly lower payments.

When looking for a credit counselor, it is a buyer-beware market. Once a field dominated by non-profit agencies, credit counseling has become a $7 billion industry with many for-profit agencies looking for a piece of the action. While there are certainly many legitimate credit counseling agencies, there are some bad fish in who may be operating a scam that takes your money and leaves your bills unpaid.

When shopping for a credit counseling service, keep in mind the following:

• Be skeptical of organizations that charge high up-front fees. This may be a scam to take your cash without performing any service.
• Check their accreditation. Most credit agencies will belong to The National Foundation for Credit Counseling (www.nfcc.org.) or the Association of Independent Consumer Counseling Agencies (www.aiccca.org.) .
• Avoid agencies that charge a month’s “processing fee” instead of forwarding the money to your creditors. Some agencies will simply pocket your first month’s fee instead of forwarding it to your lenders. Remember, you are still ultimately responsible for making payments, not the agency. Check with your creditors to ensure they are receiving your payments.
• Have realistic expiations. Organizations that promise to settle your debt with little or no money are probably not legitimate. While most consolidators will be able to negotiate lower interest rate, none will be able to settle for “pennies on dollar.”
• Find out if any complaints were filed. Check with the Better Business Bureau or your local attorney general’s office to see if the organization you are considering has had any complaints filed against them.

While it is not a solution for everyone, signing up with a credit counselor may be effective way for you to get caught up on bills.

By David Plowman

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This April 15, you’ll likely see your favorite procrastinators dancing in the street, celebrating a two-day reprieve from the tax filing deadline. Since the traditional tax deadline this year falls on a Saturday, tax filers have until Monday, April 17 to complete their return. (Lucky folks in Washington D.C., Maine, Maryland, Massachusetts, New Hampshire, New York and Vermont have until April 18, as their processing center in Andover, Massachusetts will be closed for Patriot’s day, a state holiday.)

Even so, taxpayers can’t put the task off much longer, so if you’re still scrambling to file, here are a few basic tips:

• Forms can be downloaded at www.irs.gov and are also available at many post offices and libraries.
• You can also file your return electronically. By filing on-line and signing up to receive your refund via direct deposit, you may be able to receive your refund in as little as two weeks, according to the IRS.
• If your adjusted gross income is $5,000 or less, you may file electronically for free by logging onto www.irs.gov and clicking on the “Free File” link.
• Avoid common errors such as failing to include the correct social security number for you or your spouse, making a math error, failing to report income from interest, dividends and capital gains.
• If you owe taxes and can’t pay, you can apply for an IRS installment agreement.
• If you can’t get your taxes done by the 17th, you may file for an automatic, six-month extension by filing form 4868. However, you still need to estimate your tax liability and, if you owe, must make a payment.
• If you are choosing a tax preparer, the IRS suggests you be wary of any preparer who says they can grantee you receive a larger refund than its competitors. Also avoid preparers whose fee is based on a percentage of your return. Do not sign a blank tax return and give it your preparer.

While filing taxes may be time consuming, the good news is so far, the amount of the average refund is $2,314, up $104 from last year.

Good luck, and enjoy the extra two days.

By David Plowman

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While there are many things you can do to protect yourself from identity theft, there is no way to guarantee that you’ll never fall victim. Therefore, knowing how to report identity theft is just as important as knowing how to protect yourself from it.

1. Request a fraud alert from one of the three major credit reporting agencies. This alert is placed on your credit file and makes it more difficult for another person to obtain credit in your name, by making creditors take more stringent steps to protect your credit. You only have to contact one of the reporting agencies to request a fraud alert. That agency will in turn notify the remaining two agencies. The initial alert remains on your report for 30 days, but you can request an extended alert that will remain on file for seven years. You will have to include a police report or another document supporting your identity theft claim in order to receive the extended fraud alert.
2. Review your credit history. After you request an alert, each of the reporting agencies will send you free copies of your credit report. You may also receive two additional free reports up to 12 months after you requested the alert. Carefully review these reports to see if there are any additional signs of fraud. Report any incidents.
3. Contact your creditors. Notify all of the account holders that you believe may be affected by identity theft. If you notify them in a timely manner and provide sufficient proof of your claim, you may be able to recoup most of your losses.
4. Close any of the accounts you believe were used fraudulently. If you open new accounts, change your PIN number or any passwords.
5. File a report with the police. Keep a copy of the report, so you can use it to verify the theft.
6. Report the theft to the Federal trade Commission.

By following these steps you can protect yourself from the effects of identity theft.

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