Last week in Credit Scores and Your Insurance Premium – Part 1, we discussed how your credit scores, good or bad, can affect your insurance premiums for your auto and your home. This week we will discuss how to find out what your credit rating currently is and what you can do to improve your score.

You can obtain a free credit score report at www.annualcreditreport.com once a year from three different reporting bureaus, Experian, Equifax, or TransUnion. The scores can be different from all three companies. Some creditors report to one of the bureaus where others report to more than one.

If you find an error on any of the records, it is best to dispute it. There is no penalty for disputing an item on your report; in fact, it could help your credit. Also if you want to ensure that your credit report stays correct, order a different report every 4 months. By rotating them, you can stay on top of your credit and address any errors quickly.

According to The Pennsylvania Insurance Department, Insurance scores depend on, but are not limited to:

• Payment history for credit cards, loans, mortgages, bankruptcies, liens, any past due payments or collection activity. It will also include accounts paid on time.
• Current debt levels
• Credit history
• New Credit
• Types of Credit

You can improve your credit score by first paying attention to your credit reports and correcting any errors. According to www.myfico.com, “since payment history contributes 35% to your score calculation, this category has the greatest effect on improving your score, It can also be one of the most difficult to improve.” A way to improve if you have a history of past due payments is to set reminders in Outlook or some other electronic calendar if you pay online, or have the creditor send you a text or email reminder. It is also a good idea to set up automatic draft payments from your checking account on payments that don’t change. If you have missed payments, work to get current and stay current.

Another area that can be a reason for poor credit scores is misuse of credit cards. Try to keep your balances low, paying them off instead of just moving the balance from credit card to credit card. Don’t open a number of new credit cards that you don’t need; that can actually lower your credit score.
If you are new to credit, don’t open a lot of accounts too rapidly to build credit. That can actually lower your average account age and lower your score. This can have a large effect on your credit score especially if you don’t have other credit information.

Building credit slowly and maintaining it well by paying your debt on time will go a long way to raise your score.

“In general, having credit cards and installment loans (and paying timely payments) will rebuild your credit score. Someone with no credit cards, for example, tends to be higher risk than someone who has managed credit cards responsibly. Raising your score after a poor mark on your report or building credit for the first time will take patience and discipline.”….www.myfico.com