Delaware residents are worried about credit scores, study shows. How to raise your score.
If you live in Delaware, chances are you more concerned about improving your credit score than residents in most other states, according to a recent study.
A study from Credit Building Tips compiled search data from all 50 states to determine which state residents want to improve their credit score the most.
Delaware was ranked fourth highest on the list, with 148 searches per 100,000 residents, behind New York, New Jersey and Georgia.
Your credit score relies on your debts, employment, marital status and several other factors.
Luckily, there are ways to improve credit scores to ensure solid financial standing.
Credit scores explained
Credit scores are used by lenders to determine whether or not an individual is likely to pay back a loan. The factors that go into determining one’s credit score are complicated but mainly include how far behind an individual is on a bill payment.
Credit scores typically range from 300 to 850, and a healthy credit score is usually within the range between 670 and 739.
A low credit score can hinder your ability to take out a loan, secure a good interest rate or increase the spending limit on your credit card. Lower scores can also hinder your ability to take out a loan, find adequate housing and can even impact one's hire-ability.
Algorithms used by credit tracking agencies such as Equifax, Experian or TransUnion are largely undisclosed, and each agency evaluates credit scores differently.
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Delaware's credit at a glance
Equifax reports that the average credit score in the United States in February 2021 is 698. Delaware's average score from the same time is estimated to be just below this average, at 696. While this is not an unhealthy score, there are other factors that could lead Delawareans to accumulate bad credit.
InCharge Debt Solutions compiled data from 2020-2021 about the state of Delaware's debt:
Credit card debt: The average Delaware resident owes $5,462 on credit cards, the 12th highest in the country.
Mortgage debt: Delawareans owed an average of $190,846 on their mortgages in 2019, the 18th highest in the country.
Auto loan debt: The average car debt in Delaware is $18,800, the 31st highest in the country.
Student loan debt: The average student loan debt for Delaware residents is $37,447, the fourth highest in the country.
Foreclosure rate: One in every 5,348 homes goes into foreclosure in Delaware, the fourth highest rate in the country.
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How to boost your score
Keep credit utilization low
Credit utilization is the amount of your total credit that you use in a given month, and it can account for as much as a third of your credit score. Keeping utilization low, preferably around 30% of your total limit, is one of the best ways to improve your score.
Increase your credit limits
Asking your financial institutions for a higher monthly credit limit is a way to lower the amount of credit utilized per month, keep your interest rates lower and boost your credit score, as long as bills are paid on time.
Avoid closing old accounts
The age of your credit history is another factor that goes into calculating a credit score. The longer history an individual has of maintaining good credit (that is, paying your bills on time), the more favorably they will be looked upon by lenders.
Keep any old accounts relatively active, even if that means paying just one bill.
Check and challenge credit errors
Under federal law, reporting bureaus are required to send a full credit report to everyone once a year. This is the chance to check the reports for any errors and challenge them immediately.
Examples of errors on credit reports can include incorrect late payments, wrong personal information or old debt that has been paid off. If errors are found, keep track of them and gather any evidence possible that refutes the errors. With this, a Credit Challenge Letter can be written to the credit bureau.
Get credit for uncredited payments
Typically, credit scores keep track of only payments on credit cards or loans. Many everyday transactions are not accounted for, including monthly payments to streaming services or rent. There are ways in which these payments can be reported to boost your score, but not always for free.
Rent Reporting Services will report data about paying rent on time, but the services generally cost between $50 and $100 to set up, as well as an additional monthly fee to continue reporting the information. Various vendors such as Credit.com and Experian Boost also add regular payments to your credit score.
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Delaware services
There are federal and statewide services to assist residents in boosting their financial standing. While they may not impact credit scores directly, they're built to set people up for success.
General Assistance is a state-funded program designed to provide cash assistance to lower-income people who do not qualify for federally funded programs such as Temporary Assistance for Needy Families or Social Security Benefits.
Temporary Assistance for Needy Families is Delaware’s main cash assistance program that provides temporary relief (around 36 months) until the user gets a job.
Community Resource and Assistance Services provide emergency financial assistance for rent, utilities, emergency shelter and other critical needs for lower-income people by bringing together resources from faith-based and nonprofit organizations.
Low Income Home Energy Assistance Program is a federally funded program for lower-income families that need help in meeting their costs of home energy. This includes fuel assistance, crisis assistance and a summer cooling assistance program.
WIC - Women, Infants and Children provides help to infants, children under age 5, and women who are pregnant, breastfeeding, or who have recently delivered their babies and are not breastfeeding.
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Contact Molly McVety at mmcvety@delawareonline.com. Follow her on Twitter @mollymcvety.
This article originally appeared on Delaware News Journal: Study finds Delaware residents want better credit, here's how
