One of the three most important rating factors used to determine insurance premiums is a person’s credit score. Having good credit can greatly reduce the cost of insurance. But what does it take to improve a credit score?
How do you get a good credit score?
The short answer: Have a long history of paying your bills on time with a mix of different types of credit accounts, but only use a small percentage of your available credit limit. The long answer: Below are some explanations about how credit scores are calculated and advice from myFICO for getting a good score.
- Avoid Making Late Payments (about 35% of score)
- The number of late payments which are reported by lenders to the credit bureau has a huge affect on the credit score. Late payment statuses are typically reported if they are 30 or more days past due. Even making one late payment can have a big effect as it can be visible on your credit report for 7 to 10 years, although grace periods vary by lender.
- Poor: 4+ late payments
- Fair: 2 – 3 late payments
- Good: 1 late payments
- Great: 0 late payments
- Your payment history considers your repayment behavior over time. Consistently making on-time payments reassures lenders and is perceived as less of a risk.
- Paying bills on time every month is important to maintaining a good credit score. If you remain behind with any payments, bring them current as soon as possible, and then make future payments on time. Over time, this will have a positive impact on your score.
- The number of late payments which are reported by lenders to the credit bureau has a huge affect on the credit score. Late payment statuses are typically reported if they are 30 or more days past due. Even making one late payment can have a big effect as it can be visible on your credit report for 7 to 10 years, although grace periods vary by lender.
- Keep Your Oldest Account Active (about 15% of score)
- The age of your oldest credit account is very important. Keeping it open, even if you don’t use it, can help you avoid a dip in your credit score, especially since closing an account also impacts your available credit.
- Poor: 0 – 4 years old
- Fair: 5 – 7 years old
- Good: 8 – 24 years old
- Great: 25+ years old
- Your credit history covers both how long you’ve been building credit, as well as the types of accounts you have. A mix of accounts can help out your credit score.
- Maintaining open and active accounts in good standing can help improve your credit score.
- The age of your oldest credit account is very important. Keeping it open, even if you don’t use it, can help you avoid a dip in your credit score, especially since closing an account also impacts your available credit.
- Keep Credit Usage to a Minimum (about 30% of score)
- Your credit usage is a comparison of your overall balance to your available credit for your revolving accounts, including any home equity, installments, credit cards and more.
- Poor: 61%+ of available credit used
- Fair: 31% – 60% of available credit used
- Good: 10% – 30% of available credit used
- Great: 0% – 9% of available credit used
- Your credit usage deals with the amount of available credit you’re using. It takes into account your access to credit, as well as how much has been tapped into. Keeping your balance under 30% of your total limits can help your score.
- Paying down the balances on your accounts will benefit your score.
- This includes the unused credit you have readily available.
- Use credit responsibly and always make payments on time with your existing accounts. After a period of successfully managing your accounts, you can seek increases to your credit limit.
- Your credit usage is a comparison of your overall balance to your available credit for your revolving accounts, including any home equity, installments, credit cards and more.
- Credit Mix (about 10% of score)
- FICO Scores will consider your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans. Don’t worry, it’s not necessary to have one of each.
- Your total balance is your total owed across all accounts. Different accounts may update at different times, so this total might not reflect recent changes.
- Your total balances include your recently reported balances (current and delinquent) across accounts and might not reflect recent changes. Reducing outstanding debt is one way to boost credit health.
- Keep low balances on your accounts. This will benefit your score.
- Minimize Opening New Credit Accounts/Hard Inquiries (about 10% of score)
- This is the number of hard inquiries into your credit over the past two years from prospective lenders. A hard inquiry occurs when a prospective lender or creditor reviews your credit report to make a lending decision. Lots of inquiries in a short amount of time can hurt credit scores, but if you’re comparing options for something like a car loan, all of the inquiries made within 14 days will only count as one on your credit report.
- Poor: 6+ hard inquiries
- Fair: 3 – 5 hard inquiries
- Good: 1 – 2 hard inquiries
- Great: 0 hard inquiries
- Your recent credit considers account openings as well as inquiries into your credit standing over the past two years. Fewer inquiries can help your score.
- This is the number of hard inquiries into your credit over the past two years from prospective lenders. A hard inquiry occurs when a prospective lender or creditor reviews your credit report to make a lending decision. Lots of inquiries in a short amount of time can hurt credit scores, but if you’re comparing options for something like a car loan, all of the inquiries made within 14 days will only count as one on your credit report.
What is a credit report?
A credit report is a summary of your personal credit history. Your credit report includes your identifying information, such as your address and date of birth, and information about your credit history, such as how you pay your bills or if you filed for bankruptcy. Three nationwide credit bureaus (Equifax, Experian and TransUnion) collect and update this information. Most national department store and bank credit card accounts are included in your file, along with loans, but not all creditors report information to credit bureaus.
How can I get a copy of my credit report?
Federal law gives you the right to get a free copy of your credit report every 12 months. The Federal Trade Commission (FTC) recommends checking your credit report every year to make sure it’s accurate.
Through December 2023, everyone in the U.S. can get a free credit report each week from all three nationwide credit bureaus (Equifax, Experian and Transunion) at AnnualCreditReport.com.
Also, everyone in the U.S. can get six free credit reports per year through 2026 by visiting the Equifax website or by calling 1-866-349-5191.
To view your credit report, visit: AnnualCreditReport.com, call 1-877-322-8228 or complete the Annual Credit Report Request Form and mail it to:
Annual Credit Report Request Service
PO Box 105281
Atlanta, GA 30348-5281
You might see companies and sites offering free credit reports, but there’s only one authorized place to get the free annual credit report you’re entitled to by law: AnnualCreditReport.com.
Are there other ways I can get a free report?
Under federal law, you’re entitled to a free credit report if:
- You receive a notice saying that your application for credit, employment, insurance, or other benefit has been denied or another unfavorable action has been taken against you, based on information in your credit report. That’s known as an adverse action notice. You must ask for your report within 60 days of getting the notice. The notice will give you the name, address, and phone number of the credit bureau, and you can request your free report from them.
- You’re out of work and plan to look for a job within 60 days.
- You’re on public assistance, like welfare.
- Your report is inaccurate because of identity theft or another fraud.
- You have a fraud alert in your credit file.
If you fall into one of these categories, contact a credit bureau by using the credit bureau contact information below:
- Equifax: 1-800-685-111
- Experian: 1-888-397-3742
- Transunion: 1-888-909-8872
How can I protect my credit from identity theft?
If a criminal steals your identity, they can potentially ruin your credit by opening a credit account in your name. In many cases, if a criminal uses your credit to make purchases or buy services in your name, you may not find out for a month when the bill comes in the mail, or worse, when you receive a notice from a collection agency. By then, the criminal is long gone, your credit is ruined and you’re left with a big financial mess to clean up. You’ll need to file a police report, explain to the creditor(s) that you didn’t open the account(s) and may have to hire an attorney.
Most creditors pull credit reports prior to loaning money or opening credit accounts. Two methods of protecting your credit from identity theft are fraud alert and credit freeze. An easy way to explain the difference between the two is by comparing a fraud alert to a burglar alarm for your home and a credit freeze to bolting shut the doors and windows to your home. A fraud alert will warn you if your credit report has been accessed and a credit freeze will prevent your credit report from being accessed.
- Fraud Alert/Monitoring Services
- Placing a fraud alert on your credit report will notify potential credit lenders to verify your identification before extending credit in your name in case someone is using your information without your consent.
- Monitoring services offer you access to your credit report and may also send you alerts/notifications when your credit report is accessed.
- The three credit bureaus promote fraud alerts and monitoring services, but may charge a fee for these services.
- In some cases, you may receive a notification that your credit report has been accessed, but the hacker has already secured a loan in your name, spent the money and is nowhere to be found.
- Visit each of the three credit bureaus to sign up for fraud alerts.
- Credit Freeze/Security Freeze
- A credit freeze is also known as a security freeze. A credit freeze prevents access to your credit report. You can unfreeze your credit temporarily or permanently, depending on your needs.
- A credit freeze is a free service offered by the three credit bureaus.
- Freezing and unfreezing your credit may be a hassle if you are unorganized.
- When you freeze your credit, the credit bureau gives you a code that must be used to unfreeze your credit. Keep the code in a safe place and don’t share it with anyone! It’s not uncommon for the victim to know the bad actor personally.
- A credit freeze must be done at all three credit bureaus to be effective.
- A credit freeze may not be ideal for people that need to access their credit report frequently. You can temporarily unfreeze your credit while shopping for mortgages, applying for student loans, an auto loan or a credit card.
- You must unfreeze your credit temporarily to access your free annual credit report.
- Visit each of the three credit bureaus to freeze your credit.
Report Scams
If you see a scam, fraud, or bad business practices, tell the FTC. Go to ReportFraud.ftc.gov.
An ounce of prevention is worth a pound of cure. However, if you have a disaster, identity theft coverage can help protect you from financial ruin. Identity theft insurance can help cover the expenses of getting your life back to the way it was before your identity was stolen. Identity theft coverage can be added as an endorsement to many standard homeowners and renters insurance policies.
How can I buy identity theft insurance in Oklahoma?
There are two easy ways to get a quote or request more information for identity theft insurance in Oklahoma:
- Call/Text (405) 605-9891
- Email jp@schererinsurance.com
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