The I.I.I. Suggests Ways that Consumers Can Improve their Credit Histories

(The sources for more information and reports quoted in this article refer to Americans in the USA. There are equivalent or similar organizations and sources in Canada.)

NEW YORK, September 28, 2007 � Having a solid credit history can affect consumers in a surprising number of ways. Credit histories influence everything from renting an apartment and getting a mortgage to applying for a job or qualifying for a lower rate on auto or home insurance, according to the Insurance Information Institute (I.I.I.).

�The importance of good money management can�t be stressed enough,� says Jeanne Salvatore, senior vice president and consumer spokesperson for the I.I.I. �Building and maintaining a solid credit history is one of the most crucial things you can do to ensure your financial well-being.�

Your credit history can work for you or against you in the following situations:

  • Applying for a Job
    Potential employers routinely check credit histories as part of the hiring process. A person with good credit might appear to be more responsible and less likely to be distracted by financial worries. In addition, a good credit record is viewed as a measure of maturity and stability.
  • Renting an Apartment
    Landlords often look at applicants� credit records before renting apartments to see whether they manage their finances responsibly and are therefore likely to pay their rent on time. Those with good credit histories can often avoid large security deposits when the lease is signed.
  • Starting a Business
    If you�re planning to start your own business, you will be better able to qualify for trade and credit lines from suppliers if you have good credit.
  • Signing up for Utilities
    Telephone, cable, electric and gas companies will waive cash deposits for those with a solid, established credit history.
  • Securing Loans and Mortgages
    Banks and other lenders look closely at credit records. By analyzing the financial resources and debt-paying history of applicants, lenders can determine whether they are likely to reliably repay the loan or mortgage.
  • Purchasing Auto and Homeowners Insurance
    Most insurers use credit-based insurance scores when reviewing new applications for auto and homeowners insurance. All things being equal, a person with a good insurance score will pay less for insurance than someone with a poor score. Actuarial studies show that how a person manages his or her financial affairs, which is what an insurance score indicates, is a good predictor of insurance claims.

The I.I.I. recommends the following steps to improve your credit:

  • Pay Bills on Time
    Pay all of your bills on time. Late payments and delinquent accounts can have a major negative impact on credit scores, as well as giving creditors the right to increase your interest rates. Your goal should be to build a long history of reliable bill paying behavior.
  • Maintain Only a Few Credit Cards
    Limit yourself a maximum of three or four cards and keep your balances low. Use no more than 30 percent of your available credit at any given time and try to pay off your balance in full whenever possible.
    If you decide to crack down on your credit card use by cutting up a credit card, go ahead and do it. However, don�t close the account as this will raise your balance-to-credit-limit ratio and can have a negative impact on your credit score.
    In fact, rather than closing unused credit card accounts don�t open them in the first place. Resist the temptation to accept pre-approved card offers in the mail as this can have an adverse affect on your credit rating�a large number of new inquiries on your report will make lenders think you are planning to run up a lot of debt and can affect your score.
  • Don�t Have Too Many Outstanding Loans
    Maintain good credit by paying off outstanding loans as soon as possible.
  • Check Your Credit Report Annually
    Look for errors and correct them as soon as possible. By law, you are entitled to one free credit report from each of the three reporting agencies once a year. You can request your free annual credit report from the only online authorized Web site, or by calling the toll free number 1-877-322-8228. Also, if you apply for credit and are turned down, you have a right to request a free credit report from the agency used by the creditor. If you would like additional information regarding credit scores, or would like to purchase your own FICO® credit score used by most lenders, visit
  • Deal with Financial Problems Quickly
    If you find you are unable to meet your financial obligations, contact your creditors to see if you can negotiate a more manageable payment schedule. By contacting your creditors as soon as problems arise, you might avoid a �Bad Debt� report to the credit bureau. Also consider working with an accredited credit counselor. The sooner you can begin to manage your credit and make payments on time the better your credit report will be over time. Information is available from the National Foundation for Credit Counseling or the American Center for Credit Education.

For more information on insurance and financial planning for different stages of your life, see the Life Stages tool at