Georgians are paying attention to their credit scores.
In a Georgia Credit Union Affiliates survey featuring 8,069 responses, 61 percent of respondents reported checking their credit scores within a three-month period. That’s compared to 10 percent who had checked within the last year and 5.5 percent who’d last sought their scores more than a year ago.
The average American isn’t quite as conscientious. According to a survey from WalletHub, 59 percent of Americans don’t check their credit reports more than once a year.
But frequently checking scores and reports can be crucially important to financial health. Consumers who have a good idea of their credit score understand where they stand should they need to borrow money to fund a major life purchase. A low credit score, for instance, could hinder the purchase of a new house or car.
Consumers who regularly check their credit reports are also more likely to catch identity theft before it becomes a major problem. An unusual change in a credit score or report could be the first indicator of identity theft, a crime which affected 16.7 million victims in 2017, according to a MarketWatch article. By regularly checking credit reports, consumers may be able to catch credit inquiries they don’t recognize – catching a potential fraudulent new account before it’s even opened.
Georgians understand the importance of checking their scores. In the GCUA survey, 59.9 percent of respondents said they place a high importance on their credit scores and make it a point to check those scores often.
The average American may be checking their credit score less frequently, but it’s not because they don’t understand the importance. According to the WalletHub survey, 84 percent of Americans think they should be checking their credit reports more often.
The complexity of credit reporting is the biggest factor deterring people from checking their reports and scores. According to the WalletHub survey, 66 percent of Americans said they would check their credit reports more often if they were presented in a simpler way.
Even Georgians admit the system can be confusing. In the GCUA survey, 16.2 percent of respondents said they knew the difference between a FICO Score and a Vantage Score. That’s compared to 43.4 percent of respondents who have heard of the two scores, but don’t have a clear understanding of what makes them different and 39.4 percent of respondents who have “no clue” about FICO and Vantage scores.
- Tips to raising your credit score:
- Check your reports annually.Everybody is entitled to a free copy of their credit report from all three reporting agencies once every 12 months. To request a copy, visit the authorized website – AnnualCreditReport.com – or call 1-877-322-8228. You will have to provide your address, Social Security number and birth date to receive the reports. Taking advantage of the annual credit report checks allows you to keep an eye out for any account activity you don’t recognize and gives you a barometer on your borrowing habits.
- Be wise about opening and closing accounts. Think about how it might affect your credit score before opening or closing credit accounts. While it positively affects credit scores to have a wide array of accounts – including credit cards, personal loans, home equity lines of credit, etc. – it can be much more harmful to open more lines of credit than you can keep up with. Falling behind on payments can quickly drag down a healthy score.
- Make on-time paymentsPayment history, or how reliably you make on-time payments, is the most important factor considered in calculating your credit score. This information indicates to potential lenders how likely you are to pay them back should they choose to lend to you. Consider using automatic bill payments or setting up alerts to avoid missing payments.
- Optimize your credit utilization ratio.Your credit utilization ratio is your debt-to-limit ratio; it measures the amount of the credit card limit you’re using, according to an Upgrade article. High credit utilization ratios may cause potential lenders to think you’re overextended and unlikely to make timely payments on future debts.
- Dispute errors. If you see something on your report you don’t recognize, don’t assume it should be there. Contact both the credit reporting company and the organization or company that provided the information (that would be your lender or credit card company). The Federal Trade Commission recommends sending a hand-written letter with copies of all relevant documents via certified mail.
Lindsey Exley, lending manager at HALLCO Community Credit Union, said she’s seen a recent increase in the interest people have in their credit scores – although that doesn’t always correlate to concern.
“In the last couple of years, members have been exposed to a lot of marketing encouraging them to know their credit score,” Exley said. “While members have become more aware of their score, they tend to worry less about it when it is already low.”
That’s exactly when consumers should worry the most about their scores, she said.
“A good credit score is very important in day-to-day life because it helps determine your day-to-day budgeting for expenses such as premium insurance, mortgage or rental premiums, car payments and utilities,” Exley said. “It can also prevent the ability of obtaining money or credit for life’s unexpected expenses such as tires, car repairs, medical expenses and rental cars. Basically, having a good credit score opens up a world of opportunity, giving you more favorable buying power.”
But understanding how to maintain a good credit score isn’t always simple. Exley said credit union members she meets with sometimes have a difficult time understanding how aspects of their payment behavior can affect their scores.
“Members are confused the most when their credit score has been adjusted for proportion of balances to credit limits being too high,” she said. “They feel that if the credit provider gave them a certain limit, it shouldn’t affect their credit score for utilizing the maximum amount available.”
Her advice for fixing damaged credit: start with what’s easiest – and most rewarding.
“The first step anybody should take to increase their credit score is making sure all their minimum required payments are paid on time as agreed,” Exley said. “Since payment history is 35 percent of the credit score, making payments on time is the best way to see immediate results. The sooner consumers can see the benefits of their hard work and determination, the more they will want to work to continue improving their credit scores.”