Know the Score

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Football and school are in full swing, the temps are dropping and pumpkin spice everything has debuted again…  It’s finally fall in the Ozarks, folks! 

I think I can speak for most everyone involved in agriculture; the summer of 2022 is one for the books. My family, like many others, has anxiously awaited relief for our livestock and pastures from the summer heat. Now, as we forward look to the final quarter of the year it’s time to set our sights on year-end financial goals and what may be on the horizon as the new year begins. It’s also a great time to sit down and dig into your credit history. More and more in today’s financial arena ag vendors and lenders are more often using credit reports and scores in their processes.        

Your credit history and score are essentially a quick measure of your financial health. Credit matters to practically everything. It can affect your ability to get a loan or credit card, a job, renting a home and even the amount you will pay for insurance premiums. Lenders, landlords, employers and others want to know how you handle your bills and finances. Most people are surprised to find out that in addition to open debts listed on the report, public records like tax liens are also reported. Often accounts such as utilities, taxes and medical debts that were sent to collection agencies are also reported, in addition to previous bankruptcies. Inquiries are also disclosed, so every time a credit report is pulled, it becomes part of the report.

The Fair Credit Reporting Act provides you the right to get a free copy of your credit report once every 12 months from the major credit bureaus (TransUnion, Equifax and Experian). Due to the COVID-19 pandemic, you may check your report once a week for free through the end of 2022. To get your free reports go to annualcreditreport.com. Be sure to take the time to review and check the report for correct information. A great first step in improving your credit is knowing what is actually there. Unfortunately, there is no free annual credit score. Be careful of services that charge for the score and credit monitoring. You may pay for something you don’t need. Before you decide to pay a company to get your score, ask yourself if you really need to see it. If you know your credit history and performance is good, then your score will be too. 

Credit scores are calculated by complicated algorithms and each of the three main bureaus have their own calculation. There are different weighted factors that affect your credit history. While the factors can vary by industry, generally the most popular one that lenders use is the FICO. FICO considers how much credit you have, how much is in use, repayment history, types of credit, and length of time you have had accounts. Generally, scores range between 300 and 850. The higher the score, the better, and generally indicates you are less risk, which means you are more likely to be approved for credit and could pay less for your home and auto insurance for example. Having a lower score could make it more difficult for credit approval and potentially cost you more in higher interest rates and premiums. 

Bottom line, your credit report and score impact much more than just credit approval and denial. Take the time and dig into your credit. Lenders can quickly determine how well you have handled your finances, so I urge you to ask questions and be open and honest with your lender regarding your credit. This will not have any impact on your credit score, but will go a long way in establishing a long term relationship with your lender. Pay all of your bills on time, every time, keep the balances on your revolving credit cards to 30 to 50 percent or less of the available credit, and have at least one active major revolving account, such as a bank credit card. These small steps will set you on a successful path for strength in your credit and provide peace of mind for the next time your history is investigated. 

Erin Harvey is a CRCM and assistant vice president at Lamar Bank & Trust Company in Lamar, Mo. She can be reached at [email protected]

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