One in 10 adults in the U.S. is credit invisible, or have no credit histories or record at the three known credit reporting bureaus.
Being credit invincible makes you unable to access many financial services and affects your ability to get credit according to Samantha Barry. She came into the U.S from the U.K for a job with CNN but couldn’t even get a private phone or housing service due to lack of a credit history.
To build her financial record, she had to start using prepaid credit cards. That’s when she found a landlord willing to take her in but only after she paid 6 months of rent.
The takeaway: Your credit rating matters.
A poor score can be the reason you don’t realize most of your dreams in the US — an apartment, a small loan to launch your startup, or even a phone call to speak to your loved ones. Yet an entire 4 in 10 people in the US don’t know what factors into a credit score.
According to Samantha Barry, “it is a feminist issue” because over 40 years ago, women couldn’t even get access to a credit card or a line of credit. The changes came in 1974 when Congress approved the Equality Credit Opportunity Act, that made it illegal to discriminate against anyone seeking credit on the basis of sex, age race, religion or marital status.
And with low salaries, women have very little finances left to settle high interest rates. So, if you’re still lagging behind, here are a few things to remember according to Samantha Barry who now works with Glamour Magazine.
- Know your rating
“In essence, your credit score is a three-digit number that could be anywhere from 300 to 850. It is what tells a lender how likely one is to stop settling their bills, “in the words of Liz Weston, a financial planner and columnist for NerdWallet.
This score is used by nearly all service providers you’ll go to for help, including cell phone firms and landlords,” she added. “Your auto insurance premiums will be sky-high if you have a poor score.” You’re also bound to suffer high interest rates on mortgages and credit cards.
Use apps like Credit Karma, to monitor your credit score at zero costs at any time and receive notifications whenever it changes. A good score begins at 690 according to Weston; ratings of 760 gives you the key to the best rates everywhere you go.
- Know what factors into your score
What’s the math behind your credit score? The major factor is credit utilization— the amount, in dollars, of credit you’re using (in comparison to the amount you are assigned) at any instance.
“Be sure to keep you credit utilization below 30 percent, and if possible, under 10 percent,” warns Weston. Watching your credit utilization matters even if you clear all your balances by end month.
- Avoid late payments
“A 30-day lateness can take 100 points from your score. While missing a payment is the worst you can do,” said Weston. This could take you as long as three years to recover your score.
Set up autopay, put calendar reminders, or do whatever it takes to have your bills cleared on time. Call your lender to discuss options if you can’t make any payment; that may stop them from making hurried alerts to the credit reporting companies.
- Have multiple credit lines
Over-depending on one line of credit puts you at a risk, and hinders you from building credit. Samantha was only able to improve her score once she was offered several cards and larger lending limits, which she used to improve her rating.
Mortgages, auto loans, as well as other installment loans are excellent ways to diversify your credit and look creditworthy to lenders, according to Weston.
Do not panic. Nothing is carved in stone. You always have a chance to establish your credit regardless of how pathetic it looks. These days, there are even chances of getting a merchant account with bad credit.
Author Bio: Electronic payments expert Blair Thomas is the co-founder of high risk payment processing company eMerchantBroker. He’s just as passionate about his business as he is with traveling and spending time with his dog Cooper.