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Slow and steady financial choices build a credit score

Driving back from the grocery store the other day, I spotted one of those clear-up-your-credit-score-quick signs that dot the corners of major roads.

As eye catching as the brightly colored signs are, of course, grabbing financial advice off the street is one way to pay high fees for something you can find for free. Or you might pay outlandish sums for services that you can do yourself.

The good news for consumers is that extra help regarding credit scores and credit reports is now available from a variety of sources. Unfortunately, many consumers still aren't sure where to look or they don't want to be bothered.

More than half of consumers surveyed — 58 percent — didn't even know their credit score, according to a report the American Bankers Association released last fall.

Many times, consumers start caring about a score when a lender tells us that we don't qualify for a low rate on a major loan because of a low score. Unlike what signs on the road imply, there isn't a quick fix for boosting a credit score. But educational information can offer a realistic plan of attack.

"Everybody wants the 'What Next?' button," said Ian Cohen, CEO of Credit.com.

So Credit.com has new "personalized action plans" to help consumers figure out what they can do to raise their credit scores. One strategy? Start paying more than the minimum required payment on credit cards to lead to lower balances and possibly raise the score.

Detroit-based Quizzle.com, a provider of free credit reports and scores, offers free tools that used to be part of a premium package. No purchase or credit card is required.

"We provide credit comparison, credit trending, a score analysis and a credit timeline that shows how your personal credit was built over time," said Todd Albery, CEO of Quizzle.

In January, Quizzle started a partnership with Equifax, Vantage Score and ReasonCode.org. Now, Quizzle offers a completely free credit report from Equifax and a Vantage 3.0 Credit Score.

"A score alone does not give consumers a full understanding of their credit health," Albery said. And that's where online advice can help.

Albery compares seeing one's credit score to being in high school and finding out you got a 76 percent on a geometry test. But what if you never saw what questions you got wrong on the actual test? How would you find ways to improve?

Finding out your credit score wasn't always as easy or simply as free as seeing a grade on a test. Now, though, some consumers are finding access to free credit scores via their credit card statements and online accounts, too.

Discover rolled out free, three-digit FICO scores on monthly statements for its card members after a test run last year. Barclays is offering free FICO scores to its cardholders, too, via their online accounts.

The Consumer Financial Protection Bureau is turning up the heat on card issuers to release more credit score information.

The push for free credit scores is leading some online outfits to boost their offerings, as well.

Cohen, of Credit.com, said the goal of the personal action plan is to help consumers solve real problems by learning strategies in as few clicks as possible.

Cohen walked me through the new program online and showed how a consumer can easily slide gadgets on the computer screen to figure out what's driving down their score. Is it their payment history? High debt? Mix of accounts?

"It's enough to get people to act," Cohen said.

Sometimes, the strategy could involve taking steps to pay down more credit card debt and other debt to drive up the score.

Take a consumer who owes $2,562 on their credit card bills. It might not seem like a horrible amount of credit card debt. But if the total credit limit on those cards is around $6,000, all that debt is driving down the score. The consumer in this example is using nearly 43 percent of their available credit — when a better score could be reached if one used only 10 percent of available credit.

Paying an extra $175 to $300 a month toward that credit card balance could drive up some scores 20 points to 35 points soon.

Other consumers could end up being warned that they don't want to apply for more credit right now. They might want an on-the-spot discount in a store but they could be driving up the cost of their overall borrowing on other loans because they've applied for too much credit lately.

Driving a credit score higher, of course, can lead to lower interest rates when one does take out a loan and then push down the cost of borrowing over the long run.