“Get Smart About Credit” day is Oct. 17, and as part of this annual campaign by the American Bankers Association Foundation, Arvest Bank is helping to raise awareness about the importance of building good credit by offering tips to improve credit scores.
According to FICO, a data analytics company whose FICO credit scores are widely used in
consumer lending, the average credit score in Arkansas was 696 in 2023. That’s below the U.S.
average of 718, which hit a record high. When broken down nationally by age groups, the
average credit scores for Gen Z, Millennials and Gen X were also below national averages at 680,
690 and 709, respectively. Baby boomers and the silent generation (78-plus) bolstered the
averages, coming in at 745 and 760.
“Credit scores say a lot about financial health and habits, as they indicate to prospective lenders
how much of a financial risk a person is when requesting a loan for a big-ticket item,” says Jack
Farley, Consumer Lending Sales Manager. “A good credit score can mean the difference between
being denied or approved for any type of loan. The better the score, the better the interest rate
could be on the loan, too.”
Improving a credit score significantly will take some time, but it can be done. Whether you’re
just starting out building your credit, needing to repair it or simply wanting to move it from
“good” to “very good,” Farley suggests these tips to begin the process.
Request a credit report and make sure it is correct. Credit reports are designed to help banks
and other institutions make lending decisions. It illustrates a person’s credit performance and
needs to be accurate to apply for loans – such as a mortgage loan. Consumers can get free
annual credit reports from the three major credit reporting agencies by visiting
annualcreditreport.com.
Pay bills on time. Payment history tends to be a significant factor in determining a credit score.
According to FICO, payment history makes up 35 percent of a FICO credit score. If a consumer’s
report indicates bills were paid late or an account was referred to collections, those actions
could negatively affect the credit score. Avoid missing payments by setting as many bills as
possible to automatic bill pay. The longer bills are paid on time, the better the credit score.
Keep balances low on credit cards. Many scoring systems evaluate the amount of debt a person
carries compared to their credit limits. If the amount owed is close to the credit limit, it’s likely
to have a negative effect on the score. Maintaining high balances can hurt credit scores,
regardless of whether bills are paid in full each month.
Open new credit accounts only as needed. Applying for too many new accounts could hurt a
credit score. Although establishing credit accounts is generally considered a plus, too many
credit card accounts may have negative effects.
Don’t close old, paid-off accounts. According to FICO, the age of your accounts is one factor
that affects your credit score – the longer your credit history, the better. Some of the most
significant factors in credit scores, like credit card utilization rates and the average age of credit
accounts, could take a hit with closing old accounts.
Build a strong credit age. Generally, scoring systems track the length of credit a person has
developed during the years. A good average credit history is five years and up. An insufficient
credit history may affect credit scores, but timely payments and low balances can help offset
this issue.
Talk to a credit counselor. Using legitimate credit counseling can help manage debt and won’t
hurt a credit score. For more information on debt management, contact the National
Foundation for Consumer Credit (www.nfcc.org).
