Georgians, like consumers across the U.S., seem to grasp the importance of the credit score – but may fall short of understanding the specific behaviors that affect the score.
In a survey of more than 2,000 Georgians conducted by Georgia Credit Union Affiliates, the trade organization for credit unions in the state, the majority of respondents – about 83 percent – indicate they know their credit score.
This number closely mirrors that of consumers on a national scale. According to a 2018 Credit Health survey by Discover, 85 percent of U.S consumers are aware of their credit standing, a statistic that increased 12 percentage points over the previous year.
The increase in personal credit score awareness among consumers can be attributed to a few factors. More companies today offer free credit score estimation, enabling Americans additional access to their credit performance. Data security incidents – such as the 2017 Equifax Data Breach that exposed the personal information of close to 143 million Americans – have also motivated consumers to check their reports more frequently for accuracy, as have the reported frequency of credit report errors.
The Consumer Financial Protection Bureau recommends consumers check their credit report at least once a year. The Bureau also suggests consumers check their credit scores if they suspect fraud and when they’re applying for a job or line of credit.
GCUA’s survey suggests Georgians check their credit scores often. A total of 73 percent of the 2,078 respondents indicated they check their score annually and another 12 percent check it every 2-3 years. The majority – 85 percent – believe a good credit score is extremely important to maintain.
Despite this belief, Experian’s 2018 State of Credit report shows Georgia remains among the five lowest-ranking states for average credit score in the U.S. Georgia’s average score lies at 654, while the national average credit score is 695. Georgia joins Mississippi, Louisiana, Nevada and Texas all show average credit scores of 659 or lower, a score considered “sub-prime” (lower than average) by lenders.
Those low scores may come about as the result of poor understanding of factors that affect credit scores. A study from U.S. News & World Report on Americans’ understanding of credit score suggests though 60 percent of consumers know they should check their credit report at least once a year, many are not clear about the actions that impact their score.
The survey showed only a third of consumers know using more than 30 percent of a credit card’s credit line could hurt their credit score; just 26 percent of Americans know that closing an old account could be a problem for their credit; and more than 20 percent of consumers believe checking their credit can hurt their score. Further, nearly half of consumers understand bad credit could deny them new credit or subject them to a higher interest rate, but many do not realize credit can affect their ability to access other financial products.
Tips to Improving Your Credit Score
- Obtain copies of your credit report. You can find your report at annualcreditreport.com. Be sure to review thoroughly for accuracy. Under federal law, consumers can obtain a free report from each of the three national credit reporting companies every 12 months.
- Pay bills on time. When it comes to improving your credit score, paying all your bills on time is crucial.
- Keep credit utilization under 30 percent. Actively using credit cards is a great way to keep your credit score healthy, but make sure you’re not using more than 30 percent of your available credit at any given time.
- Always pay your credit card balance in full each month. You don’t have to carry a balance and incur interest charges to build good credit.
- Leave old debts on your report. Once you finally pay off a debt, you might want to eliminate it from your report, but as long as your payments were timely and complete, those debt records can help your score.
- Start using credit early. Don’t wait to start using credit. Even if you open a card and then charge and payoff a small amount each month, you’ll be building a solid credit foundation.
- Diversify your credit. Research alternative credit options such as financing a car or consolidating credit card debt with a loan. Paying off different types of credit can improve your score.
Learn more about how a credit union can help you prepare for a fantastic future by visiting aSmarterChoice.org to find a credit union near you.