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The importance of credit history for a good financial future

A good credit score is a gateway to obtain better financial opportunities. Unfortunately, today more than 100 million Americans do not have access to quality credit, either because their credit scores are too low or because they do not have enough credit history.

The topic of credit is important for the Hispanic community. According to Chase Bank research, Hispanics are more concerned about their credit health than Americans nationwide, but 81 percent have taken steps to fix it, compared to 72 percent of Americans.

A key step for everyone in achieving a successful financial future is to learn about how credit scores work and the role of credit reports in the process of obtaining loans. A credit score can affect many parts of your life; it is taken into consideration to grant credit cards, a car and home loan, and sometimes insurance.

Understanding the credit landscape

A credit report is a historical record of how and when you pay your bills, how much debt you have and how long you have been managing credit accounts.

Your credit report lists things like accounts that you have not paid and that have sent to a collection company, if you filed for bankruptcy, or if you had a car repossessed. Companies use information in credit reports to make decisions about lending credit, to verify identities and other purposes defined by federal law.

The information in your credit report is provided to credit reporting agencies like Experian from financial institutions and other companies with whom you do business. Courts, collection agencies and state and local governments also contribute information.

With this in mind, the following are three key factors to calculate a credit score:

1. Your payment history: This counts for approximately one third of your credit score and paying your bills on time is crucial. Too many late payments can lower your credit score.

2. How much you are using your card: You never want your credit card balance to be more than 30 percent of your credit limit, on a single credit card or on all of them. Keep your balances low to keep your score high.

3. The duration of your credit history: Credit accounts that have been open and active for long periods of time reflect your score positively, as well as a healthy combination of accounts, such as having a mortgage, some credit cards and loans for cars.

How to better manage your credit

Here are some common steps you can take to increase your credit score:

1. Pay your bills on time. Because payment history is the most important factor in calculating your credit score, paying all your bills on time every month is critical to improving your credit.

2. Pay the debt. Reducing your credit card balances is a great way to reduce the utilization rate of your credit and may be one of the fastest ways to see an increase in your credit score.

3. Make pending payments. If you have missed a payment, paying it as soon as possible can prevent your credit score from having an even greater impact. Information about late payments in your credit file includes the due date of the payment (30, 60 or 90 days of expiration) and the longer it has elapsed, the greater the impact on your scores. So even though you are late, make the payment as soon as you can.

How can Experian Boost help?

A new innovative solution that can help millions of consumers get the credit they deserve is Experian Boost. If consumers have been making their utility and telecommunications bill payments on time, Experian Boost will allow them to add those payments to their credit histories and possibly increase their credit scores instantly. For the first time, consumers have a direct power to affect their credit score through adding information to their report with Experian.

It is very beneficial to take an active role in managing your credit and take advantage of tools like Experian Boost. According to Credit Builders Alliance, a good credit score can save you approximately $200,000 throughout your life thanks to better interest rates and terms. Be sure to check your credit score and credit report frequently, and visit (in English only) for more information about this new tool.

Story by: Sandra Bernardo, Public Education Manager at Experian