Tips on Maintaining a Good Credit Score

The better your credit score, the better your chances are of getting a loan, being issued a credit card, renting a house, getting a job or receiving good auto and homeowner insurance rates. It all starts with building a track record for paying your bills on time.

Businesses build actuarial based credit score models to predict future behavior. For instance, banks and mortgage companies use credit score models to predict your ability to meet debt obligations while insurance companies use credit score models to predict the frequency of future claims activity. Different credit models exist depending on the intended application. An individual’s credit score generally ranges between 300 and 850. Your score is calculated using a mathematical equation that evaluates the information in your credit file and compares it to patterns in millions of other credit files.

Closed or inactive accounts stay on your record for up to 10 years from the date of their last activity. Matters of public record obtained from government sources such as courts of law-including liens, bankruptcies, late payments and overdue child support-can alter your credit score for up to seven years.

Factors that may have a detrimental affect on credit scores include:

• Owing too much, especially if you’re approaching your total credit limit.

• Opening multiple new accounts in a short period of time.

• Multiple inquiries into your credit score within a short period of time. Inquiries that are created from an insurance quote or renewal have no impact on insurance credit scores.

There are many factors that are not a part of your credit report and its score. There is no information on your credit report about your checking or savings accounts, bankruptcies more than 11 years old, race, national origin, color or creed, gender, ethnicity, religion, political affiliation, medical history or criminal record. Insurance credit scoring models that are used to predict the frequency of future claims activity do not include a person’s income.

Under federal law, anyone with what is considered a permissible purpose can look at your report. They include: Potential lenders; landlords; insurance companies; employers and potential employers; or a state or local child support enforcement agency.

It is never too late to try to improve your credit score. Steps you can take are:

• Pay your bills on time.

• Keep your credit card balances low.

• Set goals and determine ways to limit your expenses.

• Consider using savings to wipe away debt and high interest rates.

• Don’t apply for unnecessary credit cards.

In 2003, the Texas Legislature approved a number of consumer safeguards on the use of credit scores that are used for determining insurance rates, including requiring insurers to file actuarial support for review with the Texas Department of Insurance prior to using. Other Texas safeguards require insurers to make their credit models open to public inspection and to make exceptions for consumers facing life-altering circumstances such as: Divorce; death of a spouse; medical catastrophe; temporary loss of employment or identity theft; or an error on a credit report. If an error is found, insurance companies are required to adjust your score and rates accordingly.

Beginning June 1, 2005, consumers in Arkansas, Louisiana, Oklahoma and Texas could begin receiving, upon request, a free copy of their credit report once every 12 months. Reports can be ordered online at www.annualcreditreport.com, by calling (877) 322-8228, or by completing the Annual Credit Report Request Form at www.ftc.gov/bcp/conline/edcams/ credit/docs/fact_act_request_form.pdf and mailing it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

You will be asked to provide your name, address, Social Security number and date of birth. To verify your identity, you may need to provide some information that only you would know, like the amount of your monthly mortgage payment.

There are three companies that keep credit scores on policyholders and their scores can vary. If you discover an inaccuracy on any report, contact the company to correct it. Below are the toll-free phone numbers and Web addresses for the companies that keep credit scores:

• Equifax: (800) 685-1111, www.Equifax.com.

• Experian: (888) 397-3742, www.Experian.com.

• TransUnion: (800) 916-8800, www.Trans-Union.com.

Mark Hanna is manager of public relations and
membership for the Insurance Council of Texas. Prior

to ICT, Hanna handled public information for four
commissioners at the Texas Department of Insurance.

Topics Texas