Managing Your Financial Profile
THE NEXT DDS
Financial lenders examine multiple factors when making
decisions regarding your credit worthiness, and two important aspects of your
financial profile are your personal debt and your overall credit rating. Consequently, having good, well-managed
credit and a healthy financial profile make it easier to secure the financing
necessary to purchase or build a dental practice.
Contents of Your
Credit Report
Your credit report provides a broad picture of your credit
history, as reported by lenders who have extended credit to you. This includes any type of credit (e.g.,
school loans, credit cards, car loans, mortgages) you have, inclusive of credit
limits and/or the original loan amount.
Also encompassed in your credit report are your current account
balances, payment histories, and, if applicable, any bankruptcies, liens, or
judgments. Since your credit score is a
reflection of your credit risk, it is critical to your financial future. Generally speaking, credit applicants with a
higher credit score are a lower credit risk—which usually results in a higher
credit limit decision.
It is also important to understand what types of information
most creditors evaluate. Some of the elements that factor into your credit
score include:
- History
of bill payment
- Type
and number of accounts
- Late
payments
- How
long you have had the account(s)
- Unused
portion of lines of credit
- Any
collections actions
- Outstanding
debt
Protecting Your Financial
Profile
There are several simple steps you can take to protect or
even improve your financial profile.
First, maintain at least two or three revolving credit accounts. Do take care not to apply for credit from too
many lenders. Make on-time monthly
payments on any credit facility, even if only remitting the required minimum
payment. Review too your personal credit
report at least once each year; it is advisable to also review your report
incrementally before you finance a major purchase. Residents of most states can
obtain one free credit report yearly from each of the three credit reporting
agencies (i.e., TransUnion, Experian, Equifax). You may also check your credit report at www.annualcreditreport.com.
To obtain your free credit report, you will need to provide
your name, address, social security number, and date of birth. You may have to
provide your previous address if you have recently moved. Depending on the
credit reporting agency with whom you are working, you may be asked for some
personal information only you know in order to protect the security of your
account.
Managing Your
Payments
If you encounter trouble paying your bills, contact your
creditors immediately. Try to work with them to reduce your payments to an
amount you can manage, as regular payment is important to the health of your
financial profile. It is important too for you to maintain a detailed record of
all conversations and correspondences with creditors, as you may need to
reference them throughout the engagement.
What is a “Good”
Credit Score?
According to the three major credit rating agencies
(Experian, Equifax, Transunion), the average credit score is in the 600-750
range. Anything above 700 is generally considered a “Good” or “Healthy” score,
and will usually, barring other potentially negative factors, allow you to take
out a loan with a low interest rate. For the purchase of a dental practice, an
exemplary credit score is essential. For instance, a score below 650 from any
of the three major agencies could result in you not being able to purchase the
practice at the price or the interest rate that you wanted, and might even
prevent you from making the purchase altogether. You should always be mindful
of things that might negatively impact your credit score, such as:
- The
total number and severity of late payments
- The
type, number of, and vintage of credit accounts
- Total
overall debt
- Publically
accessible records (payment records and otherwise)
Identity Theft
Protection
Identity theft has become a serious issue that has affected
the lives of thousands of Americans in recent years. Identity theft could
potentially ruin your credit score, which could in turn prevent you from
purchasing the practice of your dreams in the future. Some quick tips to follow
to help avoid identity theft include:
- Always
protecting your social security number
- Using
extreme caution/sound judgment when divulging any personal information
- Being
wary of what you throw in the trash
- Protecting
postal mail
- Always
checking monthly bills/bank statements
- Checking
your credit score regularly
- Removing
your name from credit bureau marketing lists (888-5OPTOUT)
- Ask
questions when engaging in transactions that involve personal information
- Protect
your computer (use firewalls, anti-virus software, anti-spyware, etc)
- Use
caution when shopping online
Some insurance agencies also offer Identity Theft Insurance,
which will ensure the protection of your identity and personal information.
Conclusion
As a dental student or recent graduate, proper management of
your financial profile is important--particularly given the debt you accumulate
while pursuing your degree. It
influences numerous aspects of your personal life as well as your professional
career. With periodic monitoring and
implementing some of the simple steps referenced above, however, you can
maintain a healthy credit score and be in a position to most effectively manage
your financial future.
Further Reading:
- http://www.creditscoring.com/pages/bar.htm
- http://www.experian.com/credit-education/what-is-a-good-credit-score.html
- http://www.transunion.com/personal-credit/credit-education.page
- http://blog.equifax.com/credit/
- http://antivirus.about.com/od/securitytips/a/idtheft.htm
- http://www.ubalt.edu/template.cfm?page=1764
- http://www.ftc.gov/bcp/edu/microsites/idtheft/consumers/about-identity-theft.html