A low credit score can hurt your ability to take out a loan, secure a good interest rate, or increase the spending limit on your credit card.
Some reasons for a low score are out of your control — such as unexpected medical debt or a lack of credit history.
"I do see that efforts are being made in order to equalize the credit score," said Rosalyn Glenn, a financial adviser at Prudential who focuses on expanding financial access. "For instance, adding rental payments to credit reports, because there is a segment of the population that rents and does not own. That's exciting — because the score can give them an opportunity for better rates on things like insurance and loans. I do believe progress is being made there.
When Jonnathan Alvarado, 25, was in a car accident this past year, he knew health expenses wouldn't be the only hit to his finances. A landscaping contractor in Plainfield, New Jersey, who prides himself on careful financial behavior, Alvarado faced knee surgery at the beginning of his busiest work season, which hurt his productivity.
"A difference of almost a hundred points," Alvarado said. "I would have paid it off sooner, if I had known." Experian, for example, has an option for consumers to opt into a service, "Experian Boost," that counts these kinds of payments without charging a fee. (In some other cases, companies may charge the renter or landlord for the trouble of filing the additional information in credit reports, since it isn't automatically included as a matter of course. Those who use the program often see an increase in their scores.
To use the tool, you give Experian permission to capture your monthly payment history and bank information — whether that's a cellphone plan, water bill, streaming service subscription, or rent.
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