Are you one of the more than 30 million people in the U.S. with a low credit score (below 620), making it difficult to obtain loans and credit cards?
Your credit score is a number derived from your credit report -- essentially the record of your financial behavior. It contains identifying information about you and indicates how responsibly you have used credit and met your financial obligations.
Establishing and maintaining a good credit record is very important. A low credit score could deny you access to a credit card, mortgage or car loan, insurance, electric and telephone service, an apartment rental or even a job. And it could result in thousands of dollars a year in additional finance charges that youll have to pay.
Whats more, a poor credit record can follow you for years -- even decades. Late payments, defaults and other flaws can generally remain on your credit report for up to seven years. A bankruptcy can remain on your report for 10 years, and unpaid tax liens can remain for up to 15 years.
People with excellent credit files receive the best interest rates and payment terms from lenders. If you practice good credit behavior, you should have no problem securing credit when the need arises.
The BBB offers tips on how to improve your credit score:
Review your credit report at least annually. Errors on your credit report could hurt your score. The Fair Credit Reporting Act requires each of the nationwide consumer reporting companies -- Equifax, Experian, and TransUnion -- to provide you with a free copy of your credit report, at your request, once every 12 months. Georgia residents are able to get two free copies each year. Only one website is authorized to fill orders for the free annual credit report you are entitled to under the law: www.annualcreditreport.com.
Pay your bills on time. While it may sound like simple advice, many people let late payments tarnish their credit score.
Dont ignore traffic tickets. Tickets for simple parking and moving violations and any other fines owed to your local government can end up marring your credit score.
Keep your credit card debt and balance low. Aside from the impact credit card debt has on your score, even carrying a large balance relative to your limit can have an negative impact.
You can have credit cards, just not too many. New credit cards reduce the average age of your accounts and can have an adverse effect on your score.
Consider credit counseling. If you are sinking in debt, credit counselors can help you get a handle on your finances by helping set up a budget or even setting up a debt management plan. Just make sure you check out the organization with the BBB first or find a trustworthy one at www.bbb.org.
Dont get blindsided with a low credit score when youre trying to purchase a home or automobile. Be proactive now to protect your credit so you can enjoy the benefits of lower interest rates.
Kelvin Collins is president/CEO of the Better Business Bureau of Central Georgia and the CSRA Inc.