CONSUMER ALERT: TIPS FOR IMPROVING CREDIT SCORES
LITTLE ROCK – Credit scores may affect a consumer’s ability to obtain a credit card, finance a loan at an affordable rate or even get a job. So, higher credit scores may result in tangible economic benefits for consumers.
Arkansas residents’ credit scores fall below the national average, according to studies from credit reporting agencies. One study showed that the average credit score in Arkansas was 683, compared to a national average of 696. That put Arkansas ahead of only 10 other states.
Because credit scores are important in many consumer transactions, Attorney General Dustin McDaniel issued this consumer alert today with recommendations on how Arkansans can increase their individual credit scores.
Major credit bureaus set credit scores as a method of summarizing a consumer’s credit history. Though the credit reporting agencies have different scoring systems, they are all influenced by factors such as a consumer’s bill-paying history, type and number of credit accounts held by the consumer, payment history, outstanding debt, and debt-to-income ratio.
The higher the credit score, the more likely a consumer is to receive higher credit allowances and better credit terms.
“A low credit score can make it difficult to obtain a loan or may cause interest rates to be prohibitive,” McDaniel said. “And, employers increasingly look to credit scores to screen applicants. Fortunately, consumers can successfully improve their credit scores with some simple steps.”
McDaniel offered these tips to Arkansas consumers seeking to boost their credit scores:
• Review reports from the national credit bureaus. Consumers should always be aware of what is contained within their credit reports. A consumer may obtain a free copy of his or her credit report annually from each of the three major credit bureaus: TransUnion, Experian and Equifax. To obtain a free copy of a credit report, visit www.annualcreditreport.com. Inaccuracies in information contained in a credit report can negatively affect credit scores.
• If there are indeed errors in a credit report, have those errors removed. Consumers should contact the credit-reporting company in writing, specifically describing the inaccurate information. McDaniel advised consumers to keep copies of all correspondence, as well as original documents such as receipts or billing statements.
• Resolve delinquent accounts and keep up with payments. Typically, payment history constitutes about 35 percent of a credit score and outstanding debts can account for 30 percent of the score. Consumers should keep payments current and should pay off debts in a timely fashion.
• Don’t “max out” credit cards. Keeping credit cards at the limit will negatively impact a score.
• Keep older credit accounts, since credit history length can constitute a portion of a credit score. Keeping the cards without incurring additional charges may improve a credit rating.
• Make sure credit balances are as low as possible. Credit bureaus take into account the amount of credit available compared to how much credit is actually utilized. The less used, the better for a credit score.
For more information about improving credit scores, or any other consumer issues, contact the Attorney General’s Consumer Protection Division at (800) 482-8982 or visit www.GotYourBackArkansas.org.