March is National Credit Education Month

Why is credit education important?

Because credit, and credit scores, can oftentimes be confusing. The best way to understand your current credit situation is to see how your credit score compares to the national average. Determining whether your score is above or below that average will provide insight into what actions should be taken to manage your credit in the future.

How to observe National Credit Education Month

1. Check your credit score. 
   It is important to know your credit score for a variety of reasons. One of the benefits of a high credit score rating is being able to borrow money at a lower interest rate. When you need to purchase a new car, for example, they will check your credit rating to determine the interest rate of your car loan. Even when you believe your credit score to be in order, it can change very quickly so be sure to check it out this month!
2. Focus on meeting payment deadlines. 
   One of the best ways to maintain or build a good credit rating is to make all your payments on time. If you have a bad habit of forgetting to pay bills timely, set up payment reminders through your personal calendar system. Even better, you can enroll in auto-pay with many of your accounts ensuring you never miss a payment. 
3. Teach your children about debt.
   Recognize the importance of teaching your children good overall money habits from an early age. Did you know more young adults aged 20-24 declare bankruptcy than graduate from college? Credit cards are the biggest contributor to this. Teach them about saving money, wise spending, and how to build good credit sooner rather than later.

5 tips to improve your credit score

1. Pay bills on time.
   Past performance is a predictor of future performance so pay all bills off timely – rent, utilities, loans, and credit card.
2. Keep debt to a minimum.
   Understand your credit utilization ratio which is the amount of debt you carry (total amount of credit balances) compared to your combined credit limits; lenders like to see a credit utilization ratio of less than 30%.
   
3. ​Keep up the good work.
   The longer you can maintain a good credit rating, the better. Accounts that have been in good standing for a long time add to your credit score.
4. Open new credit accounts only as needed.
   Applying for credit results in a “hard inquiry” on your credit report which has a negative on your overall credit rating that can last for up to two years.
5. Check your credit reports.
   If you find inaccurate information on any credit report, you can dispute the information to have it corrected.

Source: nationaltoday.com.

Consumers who have questions should contact the Securities Division at tn.gov/securities or 800-863-9117 for more information.

Rachel Carden serves as the Director of Investor Education for the Securities Division of the Tennessee Department of Commerce and Insurance.

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