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On The Money –
A Financial Wellness Series
On The Money –
A Financial Wellness Series
Your credit score is used by lenders to decide if they’ll approve you for a credit card or loan and is an indicator of how likely you are to repay debt. Credit scores are generated using information from your credit report (we’ll get to your credit report later).
Credit scores generally range from 300 to 850 and may vary. Typically, anything above 670 is considered “good”. Because scores are used as an indicator of creditworthiness, if you get a variablerate loan the higher the score is the better your rate will be. Likewise, a lower score will cause you to have a higher interest rate. Credit scores aren’t just used for loans but can also play a role in renting an apartment, lowering your insurance rate, or even determining if you’re eligible for financing when making large-dollar purchases.
FICO is a credit score model used by most top lenders. If you are enrolled in online banking with Redstone, your FICO score is available for free. You can check it an unlimited number of times without it impacting your score.
Having a good credit score determines whether you can borrow money and what your loan rate will be like. Factors that affect FICO credit scores include:
Your debt payment history is the most important credit score factor. Payment history includes on-time, late and missed payments. Always making payments on time – even just the minimum – can go the furthest to helping you build or improve credit.
How much you owe and the percentage of available credit you're using on revolving accounts such as credit cards—is a big factor. If you have one or more high credit card balances, make paying them off a priority.
The length of your credit history is heavily influenced by the age of your oldest account and the average age of all your accounts. Even if you no longer use your oldest credit card, consider using it every few months or putting a small recurring bill on the card to keep it active.
A good credit mix involves managing different types of credit and can help take a good credit score to the next level. For example, someone with two credit cards, an auto loan and a mortgage loan will have a stronger credit mix than someone with just one credit card.
Almost every time you apply for credit, the lender will run an inquiry on one or more of your credit reports. Multiple inquiries in a short period of time, especially when applying for credit cards, could have a negative effect.
To establish and maintain a good credit score: use credit accounts responsibly; pay your bills on time; keep your credit card balances low; and avoid late payments. But alternative ways to build credit also include:
can help you build or rebuild credit. The more you practice good credit habits, the more your credit history will improve – helping prepare you for the future financing you may need.
on someone’s credit card account that has good credit and manages it well. Once added, the card issuer will typically report the full history of the account to the credit bureaus within a few months. It’s important to note that you don’t even have to use, or even possess, the credit card to benefit from this.
can help through the use of products like Experian Boost ®.
There are three big nationwide providers of consumer credit reports: Equifax, TransUnion, and Experian. Their reports have a detailed record of your credit history, current financial situation, and even include personal details like employment and residential history.
Lenders use your credit report to help them decide if they will loan you money and what interest rate they will offer. Other businesses might use your credit reports to:
Your credit score comes from the information on your credit report. It’s important to note that your score can vary slightly from each of the credit reporting bureaus based on their scoring model, reported data, or when updates are made, among other reasons. There is no “best” credit bureau—all three can offer helpful information and tools to help you make financial decisions.
It is important to review your credit report at least once a year for any errors and to spot potential identity theft. Inaccurate information could have a significant negative impact on your credit score. If you're a victim of identity theft, you may have multiple derogatory marks on your credit reports in the form of fraudulent accounts. Request your free credit report and review it for any information you're a victim of identity theft, you may have multiple derogatory marks on your credit reports in the form of fraudulent accounts. Request your free credit report and review it for any information you don't recognize.
Next month in our Financial Wellness Series: Buy or Rent? The Pros and Cons
Return to our Financial Wellness webpage to learn and discover more on your own through our partnerships with Zogo and BALANCE.
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Experian Boost® is a product provided by Experian. RFCU does not warrant, guarantee, or insure any product or service offered by Experian.
RFCU does not warrant, guarantee, or insure any product or service offered by Zogo.
Any information provided by BALANCE is the property of the BALANCE Financial Fitness Program. The BALANCE Financial Fitness Program is offered to RFCU members through a partnership between RFCU and BALANCE. RFCU does not warrant, guarantee, or insure any information, products, or services offered by or through BALANCE or any third party.
Zogo, BALANCE and RFCU are not affiliated and are separate entities.
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