Find a reputable business?

Business Consumer Alliance Blog

Does Your Credit Score Matter?

credit scores

Do you know your credit score? If you don’t, you may want to check it out, especially if you’re considering applying for a loan, credit, or even insurance. Lenders look at your score to determine how creditworthy you are. In other words, how likely you are to repay a debt in a timely manner. Not only can your credit score influence whether you receive credit or a loan, but also how much you will pay in interest, fees, or even a deposit. Although many people loath credit, it can play a critical role in your daily life.

What Your Credit Score Says to Creditors

Your credit score takes into consideration factors such as your bill paying history, whether you pay your bills on time, the number of accounts you have, the type of accounts you have, the amount of debt you carry, and collections. A credit scoring system weighs these factors and more to predict the risk factor in offering credit. A high credit score makes you more likely to be approved for a credit card or loan, auto financing, or a mortgage. It also plays a factor in the amount of interest you pay. A low credit score can have the opposite effect. Persons with low credit scores often are turned down for loans, pay much higher interest rates, or are required to make higher deposits or payments.

Things That Can Negatively Impact Your Credit

Obtaining and maintaining a good or high credit score takes effort and time. Here is a list of items that can lower your credit score:

  • Late payments
  • Accounts in collections
  • Bankruptcy
  • Insufficient credit history
  • Applying for too many accounts at once
  • Too many credit cards

Some other things that can affect your credit are delays in paying rent, ignoring medical bills, not paying back taxes, missing utility payments, closing an account too soon, and maxing out credit cards. Paying close attention to all of these matters and monitoring your credit can make a world of difference.

Ways to Improve Your Score

Now that you know how your credit score can affect you and some factors that can bring down your score, you may be wondering how to make your score better. The first thing you want to do is see what your creditors or potential lenders see. To do so, you need a copy of your credit report. There are three nationwide credit reporting agencies, Equifax, Experian, and Transunion. The law allows you to receive a free copy of your credit report every 12 months from each of these companies. You can obtain your copy online through annualcreditreport.com by calling 1-877-322-6228 or writing to Central Source, LLC at P.O. Box 105281, Atlanta, GA 30348-5281.

You may wish to consider the following if you’re looking to improve your score:

  • Pay your bills on time
  • Reduce the amount of debt that you owe
  • Watch your credit card balance
  • Correct errors on your credit report
  • Set up payment reminders
  • Be smart about the type of accounts you have
  • Diversify your credit use
  • Avoid getting too many new credit accounts

Watch out for companies that offer to improve your credit but want an up-front fee. Federal law makes it illegal for credit repair companies to collect or require you to pay a fee before they complete the services they’ve promised. Many consumers have become victims to credit repair scams or businesses that overstate their ability to raise a consumer’s credit score, remove negative information from credit reports, or fix credit. Here are some warning signs to keep in mind:  if the company doesn’t inform you of your rights and what options are available for free; companies that say they can get rid of negative credit information, even if the information is accurate or current; suggestions to create a new credit identity by applying for an Employer Identification Number to use instead of your Social Security Number; or, companies that prompt you to dispute all the information on your credit report, regardless of its accuracy. Remember to always check out a company with Business Consumer Alliance before doing business with them. Read our guide, "How-To Guide On Credit Repair" for details on things you can fix to increase your credit score.

If You Are Denied

If you are denied credit, a loan, or insurance, the creditor must inform you of the specific reasons your application is rejected or inform you of your right to request that information within 60 days. If your credit score is the reason you are denied, you are entitled to receive a free copy of your credit report. The notice should include what your score is, where the information was obtained from, and the contact number for the reporting agency. If your application was denied due to your being too close to your credit card limits, you may want to pay down the balances and reapply.

Click on the articles below for more information regarding credit, debt settlement, and self-help options:

Credit Repair

Debt Settlement and Debt Negotiation

How to Clean Up Your Credit Report

About Business Consumer Alliance Business Consumer Alliance (BCA) is a non-profit company that started in 1928. The broad purpose of BCA is to promote business self-regulation. BCA's mission is achieved by assisting consumers in resolving complaints with businesses and using that complaint information, along with other relevant information such as customer reviews, to forecast business reliability. With community support, BCA can identify trustworthy and ethical businesses and warn the public to avoid unscrupulous businesses whose purpose is to defraud the marketplace. BCA also helps businesses promote themselves by providing services and tools to protect their business and reach out to their customers. BCA obtains its funding from member businesses who support the mission and purpose of the organization and who agree to abide by high standards of ethical business practices.