National Credit Education Month, Part 2
How do I get my score and why does it matter right now?
I know your credit score is probably the last thing on your mind right now, but we also know that you’re sheltering in place, and may be looking for a way to structure your day outside of watching breaking news. We all need to keep up our physical as well as our mental wellness. I’m sure you’re also undated with lots of information, and wanted to give you a place here on our blog to check in regularly for tips and ideas for passing the time and leveraging the resources that are being made available by the hour.
We’re lucky at ARB to have resident experts not only on staff, but also on our Board and Management Team. We’ve all committed to providing you information from each of our areas of expertise as often as we can. Check in daily for topics like tax relief and insurance considerations, as well as tips for credit check ups and resources to access funds, such as SBA disaster relief loans. We promise it will be worth your while!
Today, let’s talk credit score. Your score determines quite a lot when a bank is making a decision on your loan. Can you qualify for an interest-only loan? Or a will it be a 30-year fixed? Can you rent an apartment? Qualify for a job? We realize maintaining your score in times like these is tough, given climbing credit card bills due to layoffs, reduced hours, or increased expense related to childcare while schools remain closed. It’s tough right now. No lie.
So consider this a plan for your future. What can you do to make sure that you’re able to get that apartment once life returns to “normal”? And let us know how we can help. Visit our disaster resource page here for what we have in place today.
Why does it matter? Because consumers with excellent FICO scores (usually around 760 fico score range or higher) are likely to get the best rates when they borrow, as well as the best discounts on insurance. You also stand a better chance at a new job opportunity as many employers pull a credit report when determining who to rent to. As a business owner, your personal FICO bears a lot of weight in a bank’s decision to make a loan to your business. Your FICO is even considered when you are guaranteeing a loan for a corporation.
So. Now that you know why it’s important, what’s next?
Check Your Scores Frequently¶
Even if you think your credit history is good right now, things change. Like COVID-19. And when we come out of this you’ll want to make sure there are no errors on your personal or business credit report. You’ll want to understand why your score could fluctuate based how often you use credit card, or whether you make payments on-time, among other factors.
In addition to factors that are in your control, you should also check your scores to ensure you haven’t been a victim of identity theft. If any of your credit scores drops unexpectedly, you should be sure to investigate further! Crooks love to take advantage of current events to commit fraud. They certainly don’t stop because of a Shelter in Place order!
Make it a consistent initiative to monitor your scores, and be prepared with a plan to improve them.
See How You Rank¶
While every business is different, it’s important to know how your credit scores fare in terms of other businesses. If your score is below the national average, then it is imperative that you work to raise it. As we discussed last week, the average score of around 700 according to FICO. By knowing the average scores, you can set credit goals for your business to meet.
Focus on Meeting Payment Deadlines¶
If you’re serious about boosting your personal credit score, a good place to start is to ensure that you’re paying your bills early or on-time.
If times are tough and you’ve been unable to paying bills on-time or at all, once you’re able to think about getting current, set up payment reminders through your online banking, so that you’re notified before a payment is due. By making payments on-time moving forward, you’ll likely see your personal credit score increase. Same goes for your business credit score – pay outstanding balances on your business accounts on-time, too!
Know your score!¶
Next, you’ll want to request a credit report from one of the three major reporting agencies:
- Experian
- TransUnion
- Equifax
Under federal law, you’re allowed one free report per agency every year at www.annualcreditreport.com. Don’t be fooled by fake sites or flashy TV advertisements! Usually the first month is free but you’ve opted in to unnecessary monthly charges. You can find more information about how to order your reports and spot potential scams on the site:
You can also use any number of monitoring services but be careful of costs! You’ll typically get charged when you order your score. You can also pay up to $15 per month or more for “credit monitoring” services. Instead, monitor your report yourself! Consider creating a tickler every 4 months to order a free report from each of the bureaus.
Look for any mistakes on your credit report, including:
- Unusual spending activity
- Charges you don’t recognize
- “Unpaid” balances (you’ve already paid)
If you spot anything out of the ordinary, it’s important to correct it ASAP by contacting your bank, any “named” merchants, and the reporting agencies to sort the process.
It can be a time-consuming and laborious process. If you let these errors remain on your record, though, your credit score will suffer, making it harder to get out of debt due to increased fees and interest rates.
Make a Plan!¶
Finally, you’ll need an action plan for paying down the remaining “legitimate” debt. Even if your credit report looks clean, the ultimate goal is to improve your score as much as possible. Doing so will help you qualify for lower interest rates in the future. Watch our blog for future posts on methods to tackle outstanding debt to effectively improve your score.
We wish you good health, and want you to know we are here for you! Thanks for reading!