A recent survey reveals that many Americans lack important knowledge on maintaining their credit.
FreeCreditScore.com found that more than a quarter of respondents, 28%, never check their credit score because they don’t find it “necessary.” Troubling findings considering just how important credit is in some of life’s major financial decisions: buying a house, paying for college or purchasing a car.
It’s not all bad news, however. According to the same survey, 83% of Americans do know their credit scores. In addition, 65% indicated that they consider their credit score when engaging in activities that could affect it, and 42% said they’d like to improve their credit scores — they just don’t know how.
Don’t go into the new year with an old attitude about your credit. Here are a few key factoids about credit scores, along with tips to begin improving your credit today.
Understand Your Score
Your credit score signifies to lenders how credit-worthy you are and is a primary deciding factor in whether you get approved for everything from an apartment lease, car loan to cell phone contract. And the quality of your score, whether it’s high or low, also determines if your eligible for deals and interest rates that will save you money in the long run. FICO scores range from 300 to 850 with a score of 740 or higher making you eligible for the lowest interest rates. Start on your path towards better credit by first obtaining a free credit report from AnnualCreditReport.com, where you can receive a report once a year from each of the three major credit reporting firms. Unfortunately they won’t provide you with the all-important score. For that, head over to myFico.com, where for $20, you can get your FICO score, which is the score most lenders use to review loan applicants.
Dispute Errors On Your Report
It’s been estimated that nearly 25% of credit reports contain errors serious enough to cause a denial of credit. For that reason it’s especially important to go over yours with a fine-tooth comb. It should reflect your credi history, current accounts, inquiries and any accounts you have in collections, if that’s the case. You’ll want to dispute and correct any inaccurate information on your credit report, especially account balances and items older than seven years. The reports available through AnnualCreditReport.com all have user-friendly features that allow you to single out items on your report and dispute them electronically. You can also do it the old-fashioned way by writing to your creditors and, for that, The Federal Trade Commission has a handy guide to writing a dispute letter.
Manage Your Credit Wisely
Your credit score is a tricky formula made up of your payment history (35%,) amounts owed (30%,) length of credit history (15%,) new credit (10%) and types of credit used (10%.) In rebuilding your credit, FICO spokesman Anthony Sprauve says, “The three most important things are to do are: First, pay all bills on time every time. Then, keep revolving credit balances low and, finally, only open new credit when you need it.” He says do this and you will start to see improvements within six months. Meanwhile, keep track of your credit. Credit Sesame, Credit Karma and Credit.com all offer credit-monitoring services to users.