The first time someone pulled my credit report, I had this sinking feeling. It felt like waiting for a grade to a test I couldn’t recall taking.
The score must have been OK. It was June 1996 and just days before starting my first reporting job. A bank loaned me money for my first car – a fully unloaded 1994 Chevy Cavalier – and an apartment complex rented me the first place I didn’t have to share. The queasiness returned last year when my husband and I were buying our first house. We each scored in the 700s – essentially two As. I practically wanted to hang our reports on the fridge. Our mortgage banker said she’d give us as much money as we wanted. (Um, we did not take her up on that.) Friends and co-workers often ask me how they can improve their credit rating. I turned to Experian, one of the nation’s three credit reporting bureaus, for answers. Here’s what Samah Haggag, 32, and manager of analytics for the Costa Mesa, Calif., company, had to say.
Why do younger consumers have the lowest scores?
It’s not really what’s hurting them. One of the top reasons is these are people who are still establishing credit and probably don’t have high credit limits but at the same time have credit balances. We also see a slightly higher-than-average number of late payments for the younger age group.
What is that late payment average?
For the 18-29 group, it is 1.26 late payments per consumer, during the last 12 months. For the next age group, 30-39, it’s 1.37.
Can younger consumers quickly improve their scores?
There’s not anything you can do to quickly improve your scores. Generally, if you do some key things like paying your bills on time and keeping your debt low compared with balance limits, you will see that the scores increase over time. The most important thing is to pay your bills on time.
How low should your debt be compared with the balance limits on your accounts?
It is going to vary based on the consumer’s profile. If you go to nationalscoreindex.com – on our site – we talk about the various factors that are looked at in a score.
What’s a good score?
It’s going to vary by lender. Every lender has their own criteria. Some will say 700. Some will say 750. Some might go down to 680. Generally, anything over 700 lenders will say, “Yeah, that is a good score.’
I know every time a potential creditor pulls your report that that is noted on the report, and having a lot of inquiries in a short amount of time can hurt your score. What about my colleague who wants to know if he gets a hit on his report every time he transfers credit card balances to a card offering zero interest for a limited time?
When you get the offer in the mail, that is what we call a soft offer and it doesn’t count against you or go on your report. If you call and apply for the offer and they pull a credit report on you, then it will count as an inquiry.
I’ve heard that scores are more fluid now – that you can improve them or harm them more quickly. Is that true?
I don’t know if that is true. If you just follow those key things you can improve your score over time.
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5 WAYS TO IMPROVE YOUR CREDIT SCORE
-Pay bills on time. Late payments, collections and bankruptcies hurt your score the most.
-Check credit report regularly – ideally once a year. If you find an error, contact the creditor associated with the account or the credit reporting agency to correct it immediately.
-Watch your debt. Keep your account balances below 50 percent of your available credit. For instance, if you have a credit card with a $1,000 limit, keep the balance below $500.
-Give yourself time. Time is one of the most significant factors in a strong credit score. Establish a long history of paying bills on time and using credit responsibly. You may also want to keep the oldest account on your credit report open to lengthen your period of active credit use.
-Avoid excessive inquiries. A large number of queries about your credit over a short period of time could be interpreted by creditors as a sign that you are overextending yourself by taking on more debt than you can repay or are opening numerous credit accounts because of financial difficulties.
Source: www.myvesta.org
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WHAT’S THE AVERAGE?
Experian PLUS credit scores — nation averages
– Average score for consumers age 18-29: 637
-Age 30-39: 654
-Age 40-49: 675
-Age 50-59: 697
-Age 60-69: 722
-Age 70+: 747
According to experian, a plus score is a numeric representation of financial behavior, based on information found in a credit report. It can range from 330 to 830. Source: experian nationwide survey released this summer
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ORDERING YOUR CREDIT REPORT
Starting this year, federal law allows everyone one free copy of their credit report annually.
To order: www.annualcreditreport.com or (877) 322-8228. Or fill out the Annual Credit Report Request Form (www.ftc.gov/credit) and send to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.
If you’re willing to pay between $10 and $40 for more frequent reports, check out: www.myvesta.org or myfico.com, www.trans union.com, www.equifax.com and www.experian.com.
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Amy Baldwin covers money-related topics for 20- and 30-somethings in “Out of the Red.” Have a question about your personal finances? Contact her at (704) 358-5179 or abaldwincharlotteobserver.com. Leave your name and daytime phone number.
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