Page 45 - The Magazine of AAA Ohio Auto Club – November 2020

Don’t Let Poor Credit
Define You
Tips on how to improve your credit score
A credit score is perhaps one of the most critical three-digit numbers in a person’s life. It decides a lot and, in a lot of cases, can make or break you. It helps lenders decide the terms, interest rates and amounts of credit-card lines and loans. It’s no secret that the higher your scores, the better. But what do you do if your credit history leaves much to be desired?
For starters, it helps to know you aren’t alone. Many Americans suffer from subpar credit scores. Thankfully, those scores can change. Improving your credit score will take time, but the sooner you address your credit issues and take steps to improve it, the sooner those numbers will start to rise.
The first step to improving your credit score is to check it. There are three major credit bureaus (Experian, Equifax and TransUnion) with their own credit report, so you will have three credit scores, not just one. Checking your report will show you what your credit is currently at and can help identify errors. Mistakes can occur on a credit report, so it’s a good idea to check your score. You have the right to one free credit report a year from each of the three major credit bureaus mentioned above. A simple way to do this is at AnnualCreditReport.com, sponsored by the three major credit bureaus and backed by the Consumer Financial Protection Bureau. Your report will show you your credit scores and certain risk factors that might affect your scores the most. You also can get a report from a free-scoring website but be aware of their terms of service before signing up.
Once you’ve checked your score, you might or might not find that it needs some work. There are different factors that you’ll need to consider. Your payment history is one of them. Are you making your payments on time? How much are you paying each month? Other factors are the amount of debt you’ve acquired and the age of your accounts. Your history of credit applications, like how many times someone has accessed your credit account, also can affect your score.
So, what can you do to improve these things? Start with taking a good look at your payments. Ensure you
are vigilant in making your payments on time, whether they be credit card, loans, utility or cell phone payments. On-time payments are one of the biggest factors in improving your credit score.
Pay off your debt and keep your balances low on your accounts. If you’re paying the minimum amount every month and are acquiring more debt than you’re paying off, that will negatively affect your credit score. Lenders like to see that you know how to manage your credit, and this is a great way to do it.
Be aware of your opening and closing of credit accounts. Only open new accounts as needed, as unnecessary credit can work against you. Also, don’t close all of your unused or paid off accounts. As long as they don’t cost annual fees, keep your unused credit cards open. Your credit utilization ratio – or the amount you owe compared to the number of accounts you have – can increase if you close unused accounts.
Finally, if you think there are discrepancies on your credit report, make sure you report them. Inaccuracies on your credit report could lower your score. You can dispute errors online, by phone or by mail with any of the three major credit bureaus (Experian, TransUnion and Equifax).
Rebuilding your credit score will not happen overnight. The amount of time it takes to increase your score depends on your score itself and the many things that affect it. Be patient, stay vigilant with acceptable credit practices and over time your credit will improve.
NOVEMBER 2020 | 43
Photo: Shutterstock/ Shift Drive