Some individuals’ credit scores went up recently because of changes at the three major credit bureaus. All will start excluding tax liens when calculating scores.
Last year, the credit bureaus removed nearly 100 percent of civil judgments from credit files. These changes came about at the urging of the Consumer Financial Protection Bureau. It is estimated this change could affect about 11 percent of credit files and raise those scores by up to 30 points.
While this change will help some people, lenders may increase standards or raise interest rates to offset additional risk from some borrowers.
The No. 1 complaint about credit bureaus remains mistakes in credit files. This is why it is important to check your credit file every year. Credit scores can range from 300 to 850. A score above 700 is considered good. Your score will determine whether you receive a loan and what the interest rate will be. Sometimes, they are used in employment decisions.
The best way to improve your score is to make payments on time. Also, pay down debt and don’t max out your credit cards. Creditors usually only like to see you utilizing about a third of your credit line. Opening new accounts can also affect your score.
Everyone should regularly review their credit files, even if the Equifax crisis had not happened. The official government website to do this is www.annualcreditreport.com. There is no cost to do this every 12 months, and you can see all three major credit reports. If you find mistakes, such as accounts you did not open, you can have them removed. You cannot remove negative information about your credit if it is factual.
Most individuals also should place a credit freeze on all three of their credit files immediately. This freeze prevents anyone from opening new credit in your name until you unlock it. If you will not need to open something in the next few weeks, to buy an auto or real estate for example, you probably should lock down your credit.
A credit freeze does not prevent you from using existing credit. Your credit cards and other credit lines will stay in place and continue to function. The big thing is no new accounts can be opened by criminals trying to establish new credit in your name.
An astounding 142 million people had their most sensitive personal information stolen, such as Social Security number, date of birth and other items that thieves would love to get their hands on. This information is readily available in your Equifax credit file.
You need to file the freeze at all three bureaus because some potential creditors do not check all three. This may cost $10 for each, and you may have to pay the same amount to unfreeze. Congress and a large group of state attorney generals are trying to take actions to remove these fees. That could take time, so don’t wait.
You can freeze by telephone or online: Equifax 866-349-5191/www.freeze.equifax.com; Experian 888-397-3742/www.experian.com/freeze; and TransUnion 888-900-8872/www.transunion.com/credit-freeze/place-credit-freeze.
Credit is an important financial asset. Protect it and use it responsibly.
Gary Boatman is a Monessen-based certified financial planner and author of “Your Financial Compass: Safe passage through the turbulent waters of taxes, income planning and market volatility.”