Presidents’ Day weekend has passed, and Tax Season has arrived. This presents a great opportunity to take a closer look at the state of your credit. March is National Credit Education Month, meaning there is no better time to learn the facts of your credit score, and what can affect it. Additionally, learning how to actively manage and maintain your credit score will help you remain in good financial health.
Credit ratings were introduced in the early 1920s, according to Investopedia. It took until 1968 for the U.S. Government to pass the Consumer Credit Protection Act. This act mandated disclosure requirements that must be followed by banks, credit card companies, and other lenders in order to protect consumers. It also prohibits discrimination when considering an applicant for a loan, as well as instituted strict laws on advertising practices.
Your credit can be considered an indication of your financial stability. Having a healthy credit score means your history of payments, employment, and other financial factors make you a candidate to receive a loan. Having unhealthy credit means you have a history of delayed payments, and can make it difficult for you to receive a loan.
If you have poor credit, don’t fret; there are steps you can take to start in the right direction. Consider these tips:
- Pay your bills on time – staying current with payments will show that you can be counted on to repay your debts.
- Keep debt to a minimum – understand your credit utilization ratio, which is the amount of debt you carry compared to your available credit. Lenders like to see that you aren’t maxing out your credit.
- Once you start on the right track, keep going! – The longer you maintain a good credit rating, the better. Accounts that have been in good standing for a long time are good for your credit score.
- Open new credit accounts only as needed – Applying for credit cards is a “hard inquiry” on your credit report, and having too many hard inquiries can have an impact on your credit rating for several years.
- Establish credit, even if it’s just a gas card! – Even if you don’t need credit right now, establishing a history of payments may help you down the line when you need to make a major purchase, such as a car or a house. Secured credit cards are a great way to establish or rebuild credit.
- Check your credit reports – make sure to check your reports from all three nationwide credit bureaus (Experian, Transunion, Equifax) at least once a year to ensure that your information and credit history is accurate.
Credit can be complex and confusing, but there are a lot of resources out there to help. Your bank, financial experts, and many reputable websites are available to you. If you are interested in more helpful information about building and maintaining credit, the Consumer Financial Protection Bureau’s website is a reliable resource to look into!