One of the most common questions I get is “how do I improve my credit score?”. Megan Leonhardt has a recent article on CNBC.com offering tips on what affects a credit score and ways to improve a credit score.
How Credit Scores Are Calculated
Some key factors in calculating your credit score are:
- Any missed payments
- Any personal bankruptcies
- Any high credit card balances
Improving Your Credit Score
To improve your credit score, she suggests the fastest way is to make timely payments on your debts. You can also focus on first paying off debts that have already gone to collections and then start paying down the balance of a high-balance credit card. If you have a large amount of debt, she suggests using the “snowball method” where you pay off small debts first and then move to the next largest bill.
States with the Best Credit Scores
Her article also gives statistics on which states have the best average credit scores. The south (specifically Tennessee, Alabama, and Mississippi) generally are in the low average credit score range where the average is under 670. Nationally, Minnesota has the highest average credit score, and Mississippi has the lowest average credit score. The article says over 50% of states have a “good” credit score, meaning it falls in the 670-739 range. 22.3 percent of Americans have a “very good” credit score, at or above 781.
It often feels like we live or die by a credit score. So much of our world is governed by credit scores from the rate you get on car and house insurance; the interest rate you get on mortgages, car loans and credit cards; and it can even determine the type of job you can get. In my consultations with debtors, two concepts really shock people. First, bankruptcy can sometimes improve your credit score. Second, the “snowball method” does not always work because life happens. Creditors can become impatient and sue you or you may have an unexpected expense putting you further behind. Don’t disregard the option of bankruptcy if you have a low credit score and are frustrated on trying to get out of debt. The Bond & Botes offices offer a free consultation to discuss your financial difficulties and what is the best plan for your financial future.