Tips for taking charge of your credit

Today, your credit score impacts so much of your financial life. It determines whether or not you qualify for a loan or credit card, dictates what your interest rate will be, and is a major factor considered when renting or owning any property. It may come as a surprise, then, that 1 in 10 Americans don’t have any credit history, and nearly 40% don’t have any idea how credit scores are calculated.

With March 1 kicking off the start of National Credit Education Month, it’s the perfect time for Americans to educate themselves on the ins and outs of credit. Below are six tips for consumers to improve their credit scores:

   – Check your credit report regularly. In March 2020, the three credit reporting agencies — Equifax, Experian, and TransUnion — began offering free weekly credit reports to all Americans so they can protect their credit from hardships experienced due to the pandemic. That offer continues through April 20, 2022. After that date, consumers can still get one free credit report per year. The free credit reports are available at annualcreditreport.com .
   – Dispute errors. Credit reporting errors are common. In fact, the FTC has found that 1 in 5 Americans has an error on at least one of their three credit reports. Check each of your reports for late payments that you know you’ve paid on time, closed accounts reported as open (and vice versa), and being listed as an account owner when you are an authorized user only. Look for errors that show an incorrect current balance or credit limit. Ensure that all name spellings and addresses are correct. Dispute errors quickly and directly with the reporting agency that shows the inaccurate information.
   – Pay on time — always! Making on-time payments is the number one factor in determining your credit score. Even a single late payment drags down your score, and it stays on your credit report for up to seven years. If you absolutely cannot make a payment, contact your creditor to see if they will work with you so you don’t get dinged.

   – Apply for credit only when you need it. Applying for a new loan or credit card triggers a hard inquiry on your credit report. Those inquiries lower your score for a while. It’s minimal if it’s only one, but if you apply for many different types of cards or loans over a short period, those inquiries will lower your score dramatically.

   – Keep a low balance. Another aspect lenders check is your credit utilization rate — in other words, your current balance in relation to your credit limit. Lenders suggest using no more than 30% of your limit overall — meaning all of your cards combined. The better your utilization rate, the better your score, so keep those balances low.