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.

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Managing Your Financial Profile

THE NEXT DDS