By Will Lewis
Global Director of Diversity, Equity and Inclusion, Experian
There are many ways to approach financial success. We know it’s important to spend within our means and save, making sure we have a rainy day fund for unexpected expenses like a car repair. However, one topic that is not covered enough is how to manage credit wisely and the importance of a good credit rating.
The challenges of being “invisible credit”
Unfortunately, today more than 28 million Americans do not have access to quality credit because they are “credit invisible”, meaning they have little or no credit history. credit. African Americans make up about 28% of that population, according to a report by global consulting firm Oliver Wyman. Lack of credit or good credit can lead to denials from lenders or high interest rates. Milestones like renting an apartment or buying a car can be hampered by the invisibility of credit.
According to a national survey by Experian, 74% of African Americans agree credit is necessary to get what they want in life, but 49% say credit is confusing and nearly one in two don’t unfamiliar with the credit system. As a result, Experian is committed to putting more credit information and financial tools into the hands of the African American community.
Understanding the Credit Landscape
A credit report is a historical record of how and when you pay your bills, how much debt you have, and how long you’ve been managing credit accounts.
Your credit report lists things like unpaid accounts that have been subject to collections, bankruptcy filings, and car seizures. The information is provided by the financial institutions and other companies with which you do business, including the courts, collection agencies, and state and local governments.
Four key factors used to calculate a credit score:
1. Payment history: Account for about a third of your credit score. Too many late payments can lower your score.
2. How much you use your card: Credit card balances must be less than 30% of your credit limit, on one or all credit cards. Keep balances low to keep your score high.
3. Length of credit history: Credit accounts open and active for long periods of time reflect positively on your score.
4. Create a healthy combination: Various accounts such as some credit cards and a car loan will keep your credit in good shape.
Managing your credit – the steps you can take to establish a good credit rating.
1. Pay your bills on time. Payment history is the most important factor in calculating your credit score, and paying bills on time each month is essential to maintaining good credit.
2. Pay the debt. Reducing credit card balances is a great way to keep credit utilization low.
3. Make pending payments. Paying as soon as possible if you’ve missed a payment can avoid a significant negative impact on your credit score. The longer it has passed, the greater the impact. Make the payment even if you are late.
Experian Go can help you
Experian’s mission is to bring financial power to everyone. As a direct result of this, Experian recently launched a free program designed to help credit invisibles build credit on their terms. It’s the only program that helps consumers establish their financial identity by building an Experian credit file without going into debt. Personalized recommendations help users add accounts to their Experian credit file to start building a credit history. The member may be able to obtain a credit score for the first time once they have sufficient credit history. Members also receive ongoing education and referrals to deepen their credit history, including access to Experian’s free credit reports, credit monitoring and more. To use Experian Go, download Experian’s free mobile app and sign up for free. For more information, visit experian.com/go