What if I have bad credit?

From the President's Desk...

A question our lenders often hear from prospective borrowers is a scary one to ask. “What if I have bad credit”? The follow-up question often seems equally daunting. “How do I fix bad credit”?

Credit scores impact many areas of your life. The obvious ones involve the ability to obtain financing to acquire assets, such as cars and houses, along with the cost of that credit in the form of the interest rate charged. However, the reach of credit scores hardly stops there. Consider that many landlords check credit before renting to prospective tenants. Insurance companies check credit prior to issuing policies. Potential employers may check credit before extending a job offer.

As for some advice with those questions…

1. Check your credit annually. Don’t assume that things are as bad as you believe. Instead, check for yourself. Federal law allows you to obtain a copy of your credit report every twelve months from all three providers at no charge. Go to annualcreditreport.com for your Equifax, Experian, and TransUnion credit reports (be sure to receive all three), and see firsthand how things look. Make sure all information is accurate, report any incorrect information (which may be a sign of identity theft), and follow up frequently to ensure false information is removed.
2. Pay your bills on time. This is the most important factor in determining the quality of your credit, and your credit score itself. There is no substitute for making all payments in a timely manner. Some tips to help include establishing automatic payments that are pulled from your bank account on or before the due date, asking your lender to change your payment due dates if they don’t fit your cash flow needs, setting calendar reminders on your cell phone or favorite app when payment due dates are approaching, and proactively contacting your lender if you are experiencing financial problems.
3. Only borrow money when it’s truly necessary. When you apply for credit, lenders will check your credit history, which will slightly reduce your credit score. Lenders also get nervous when they see people frequently attempting to borrow money from multiple sources, especially in a short amount of time.
4. Keep credit card balances low. Balances that are near the card’s limit reflect increased risk. It especially helps to pay more than the minimum balance each month, and is even better to pay the full balance monthly whenever possible. Also, keep your oldest card active, as doing so helps to reflect a longer history of responsible credit usage.

A poor credit score creates many potential problems, but that doesn’t need to be the end of the story. Following these tips and educating yourself can go a long way toward improving your score and opening the door to more possibilities for your life.