Take Control of Your Credit

March 17, 2021

Text: Credit score, bad, poor, fair, good, excellent.  Dial is pointed at Good.
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March is National Credit Education Month, but anytime is the right time to educate yourself on how to take control of your credit. So where and how can you start?

Understanding How Credit Scores are Calculated

Credit bureaus determine the likelihood a person will pay back a loan on time by using their credit report to review their credit history. A credit score is then calculated using the information in the person’s credit report.  

Credit scores fall within a range from low (Poor) to high (Excellent). The scores are based on statistical models (mathematical formulas) that compare the credit behavior of people with similar profiles to predict the likelihood a person will repay a debt on time.

Your credit report is a summary of your credit history, which includes information such as how many credit cards you have, how much money you owe, and if you pay bills on time. There are ways to improve your credit score based on your personal situation; some of the most common ways are to make debt payments on time, pay down existing debt, and to build or rebuild your credit by using certain products like secured credit cards.

Checking Your Credit Report

A good place to begin taking control of your credit is by checking your free credit report at least annually to make sure there are no errors or fraudulent charges. Checking your own credit report has no effect on your score.

Consumers are entitled to a free credit report every 12 months from each of the three major credit bureaus: Equifax, Experian, and TransUnion. You can request your free credit reports from AnnualCreditReport.com. Learn more about how to dispute errors on your report by visiting the Consumer Financial Protection Bureau’s website.

If you believe you are the victim of identity theft, it is important to alert the credit bureaus by placing a fraud alert in your credit report. You may also place a security freeze on your credit record to stop identity thieves from opening new accounts or taking loans in your name.

Read more about what to do if you suspect identity theft on the Consumer Financial Protection Bureau’s website.

Credit Counseling Services

If you find your credit score is not where you want it to be and need help getting back on track, there are organizations that offer credit counseling services and financial education services. Be wary of debt relief and credit repair scams; the State of New Jersey Department of Banking & Insurance maintains a list of financial counseling organizations on their website.

Note: The information provided in this article is meant for educational purposes only and is not advice.