Road to Recovery: Increasing your credit score

By Josh Harvison - bio | email

JONESBORO, AR (KAIT) – More Americans across the country are having a tough time getting loans and low interest rates, according to information from FICO Inc. According to FICO Inc, more than 25%, or 43.4 million people, have a credit score of 599 or below. According to Paul Hindman at Liberty Bank, a good credit score would be in the 700 range.

"Some small business owner needs some new equipment, needs to expand a working line of credit. Without those needs the bank supplies, that small business owner would find it hard to maintain the business," said Hindman, who now works as a commercial loan officer.

Hindman started his 17 year banking career in the personal loan department.

"Commercial loans and consumer loans are different animals, but it all boils down to the individual's credit worthiness. Their credit report is a key instrument whether it is commercial or consumer, so a lot of times it's the first thing we look for. That's where we start in the approval process," said Hindman.

Hindman said the higher a person's credit score is, the more likely they are to obtain a loan or get a lower interest rate.

"I'd say number one is to keep in mind that your credit report in simply a history of how you pay your credit obligations. So by simply paying those on time each and every month, you're building your credit each and every month. You're improving your credit each and every month with timely payments," said Hindman.

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"The credit report is basically a history of how one pays their bills, pays their credit obligations. The longer the history, the more useful the credit report is because you have more information there to go on," said Hindman.

Hindman said it's important individuals check their credit reports regularly. He said many times credit reporting agencies will make mistakes when adjusting scores.

"One of the simplest things to do is to get a credit report, check your own credit report. You can contact the credit agencies themselves to get a copy of that and check for any errors. Maybe there is something on there that is bringing down your score and it's inaccurate. It should not be there," said Hindman. "Let's say one of the credit card companies are reporting a 30 day past due where you have your records to show that it wasn't passed due. It wasn't 30 days past due in particular. Maybe it's a collection item that's been paid, say a medical bill that's been paid. At one time it was a collection item, but now it's no longer. Although that item won't be removed, simply showing it as a paid collection item will improve your score. You went back and taken care of that debt."

"599 is a pretty low score. There is more to that than just missing a payment here, missing a payment there," said Hindman. "To repair that credit score is pretty simple actually. You just need to simply make your payments on time going forward, because every month that credit card company or the bank they are reporting to the credit bureaus every single month. So if you missed a payment a couple of months ago, but the two months since you've made it on time, you're already rebuilding your score."

Hindman said he was surprised 25% of consumers had a credit score of 599 or below. He doesn't believe scores are that low across Region 8.

"Our economy is thriving even though we've seen a slight downturn in the last few years with the national economy being in a downturn. I do not think it's affected Jonesboro as nearly as much," said Hindman. "I think here in Jonesboro we have seen building. Home construction has increased. We're seeing home sales start to rebound, so I think we're starting to see an upward trend into our economy here."

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"One thing we look for, you may have a good score but the bank officer is going to look at little more in detail to not only your score, but your debt load in relation to your income. The bank officer may also look at how much credit card debt you have compared to those credit card limits. in other words, if you're maxing out your credit cards, even if you are paying them on time, that is going to lower your credit score. A good rule of thumb to use you should not use any more than 50-percent of your available credit card limits as the balances. In other words the balances shouldn't be any more than 50% of your limit," said Hindman.

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