While most of us check our credit scores and try to pay our bills on time, maintaining and monitoring your credit can be slightly more complicated than it seems. And bad credit can be costly.
“Places might run your credit and use your credit score to decide whether or not you need to put a deposit down and then how much of a deposit,” said Darby Sweeney, assistant vice president and loan officer at Peoples Bank in downtown Kankakee. “They might still rent to you, but they’re going to require a much higher deposit or might still let you open an electric account but require a big deposit. It really can affect you monetarily, not having good credit.”
Sweeney shared her tips for improving your credit score at the monthly meeting of Women in Networking a subcommittee of the Kankakee County Chamber of Commerce that works to connect and empower professional women.
Don’t rely on Credit Karma
“Your score can be off by 100 points or more depending on what scoring model is being used,” said Sweeney. “People will come in and say ‘I just checked my credit on Credit Karma, and I have a 720 credit score.’ Then I check and they have a 610.”
Depending on the scoring model used, your credit score can vary widely. The free online credit check at Credit Karma uses a different version of the model than many institutions, so someone who thinks they have good credit could find themselves rejected for a loan.
While Sweeney says Credit Karma can be a handy tool for spotting inconsistencies or monitoring changes in a score over time, it’s not a good idea to rely on that number. Instead, try annualcreditreport.com, which offers annual scores from the three nationwide consumer credit reporting companies. They might not be 100 percent accurate, but they offer a few perspectives.
Diversify your credit
“You have to have the right kinds of credit. Someone who only has credit cards can’t get to that 800. Ideally you should have a mortgage, an auto loan, and a major credit card with a high limit and a reasonable balance,” said Sweeney.
Opening accounts and keeping them open is a great way to maintain a good credit score, within reason. Think of the ratio of money owed versus your total credit limit, and remember to keep using them and paying them off.
Sweeney added that you should rarely close an account, including store-exclusive cards available at places like Target or Kohls. If the balances on those are paid off, the limits of those cards you use less often will help your score. Check store policy to make sure that your cards won’t be closed if left inactive for too long.
Look for flexibility
Starting this past September, the three major credit reporting agencies changed their rules on medical debt. In the past, a late medical bill could damage your credit in a manner of weeks, but there’s now a 180-day grace period and debt that is later paid by your insurance company will be erased from your score altogether.
When it comes to old bills you might not have realized weren’t paid, Sweeney says there’s nothing wrong with calling up and asking for a “pay for delete” arrangement.
“You can say ‘I’ll pay you in full, but you will you delete it?’ Some companies have the authority to do that,” she said. “They might say heck no, but why not ask?”