We all know that credit scores are important—they demonstrate our creditworthiness to lenders and make a real difference in whether or not we can get a loan and how much interest we will have to pay.
But how much control do we have over our credit profiles?
The answer may surprise you.
I have first-hand experience that I am thrilled to share with you today. About two years ago I called and made an appointment to sit down with my personal banker, Shannon Brooks of FirstBank, to talk about how to improve my credit score. She reviewed my credit report with me and helped me develop a specific plan to strengthen my credit.
One of my challenges was not having enough credit, therefore not having enough positive information to build my score. She advised me to stagger these actions over the next 12 months:
1. Get a gas and grocery cards, use them routinely, and pay off the balance each month.
2. Make a purchase with a store card and make regular payments.
3. Get a major credit card, use it sparingly and pay off the balance each month.
I followed her advice and anticipated merely clawing my way up and out of the low 600s. This year, with the drop in interest rates, I looked into refinancing my home. After completing the mortgage application, I was pleasantly surprised to see on the courtesy copy of my credit score that it had soared to 783!
You can do it too. Here’s what worked for me:
1. Request a copy of your credit report from all three credit reporting agencies: Experian, Equifax, and TransUnion. Read them. Depending on your credit history, the reports may be several pages, so get comfortable and be prepared to take notes. Review the items listed carefully; there may be errors that are hurting your credit score. You're entitled to one free copy of your credit report every 12 months from each of the three nationwide credit reporting companies. Order online from annualcreditreport.com, or call 1-877-322-8228. If you find an error on your credit report, follow the reporting agency’s protocol for disputing the item (Experian, Equifax, Transunion).
2. Pay all of your bills on time every month. This may sound like “Credit 101,” but you would be surprised at how many people struggle with it. When you get paid, pay all the bills that are due before your next payday. Even if you just get paid once per month, and a bill is not due for two weeks, just go ahead and pay it. That way you don’t risk forgetting something or misjudging how much you can spend. If you have paid all your bills, you can spend whatever is left worry-free and not waste money on late fees.
3. Sit down with your banker—and you don’t have to be rich to have a personal banker. Wherever you do your banking, set an appointment to meet with someone to discuss your finances and poof! You have a personal banker! There are banking professionals ready and willing to help you. Talk to them about your financial goals and ask them to help you develop a plan.
A word of warning during this difficult time: A lot of people are facing financial challenges due to the Coronavirus and layoffs or furloughs. Again, I encourage you to be proactive. Talk to your banker to discuss what they can do to help, as there are resources available. Proceed with caution! If you are having trouble with your mortgage payment, for example, don’t hastily jump into a forbearance; forbearance doesn’t mean forgiveness, it just reschedules the skipped payments. Be very clear that you understand when those payments will be due and whether you will be able to fulfill that obligation, or you may wind up in much worse condition.
Disclaimer: This article is solely for informational purposes, to share my personal experience and encourage you to be proactive where your finances and credit profile are concerned. I am not a financial counselor and everyone’s situation is different. Please consult your banker or financial advisor about your situation. Historic Union County and Kathy Chesney will not be held liable for any financial decisions made by individuals.