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The Scariest Number of All: Your Credit Score
By: Jaci Buscher | Date November 2, 2014
Banks and other financial institutions rely heavily on your credit score for determining how much money they are willing to lend you. However, what people oftentimes don't realize is that insurance rates are also dependent on your credit score. According to a survey from the National Foundation for Credit Counseling, more people are embarrassed to admit their weight (12%) than their credit score (30%). This means that either our country is full of people who are confident in their weight, or we could use some advice on how to improve our credit score.

First and foremost, you should check your credit score and see if any information on the report is incorrect. If any information is wrong, you can dispute the error online through Equifax, Experian, or TransUnion. Another thing you want to look at is your history of late credit card payments. If you generally pay on time but have just a couple hiccups in your history, you might be able to talk with the company and ask them for a good-will adjustment. If you are able to negotiate with a company, be sure to get their promise in writing before giving them any extra money or paying off your account.

If you don't yet have a credit card, look into getting one or two. If you already have a couple credit cards, you can also improve your credit score by increasing your credit limits. Even if you don't need a credit card or more credit, having the ability to spend more money but not actually spending it shows companies that you have restraint. When determining your credit score, your credit utilization ratio is analyzed based on your credit limit and how much you actually charge. This ratio should be no more than 30% but preferably much lower.

People also don't usually realize that closing a credit card can negatively impact your credit score. To you it might seem that you are being responsible for getting rid of unnecessary credit, however financial institutions see it as a decrease in your credit limits. Instead of closing that card, use it for an automatic monthly payment to keep it active without having to actually think about using it.

Finally, instead of paying all of your bills at the same time each month, sit down a couple times per month and pay just a few bills. Using a lot of your credit all at once doesn't look good so it is better to split up those large payments into smaller amounts.

There seems to be a lot of uncertainty associated with credit scores and how they are calculated. Even if these tips only boost your credit score a couple points, it is well worth it in the long run to take control of your credit instead of letting it control you. If you have any further questions on how insurance companies use your credit score, please feel free to give us a call.