Your credit is important! Your credit score determines the types of loans you qualify for, the rates of those loans and it can be a deciding factor when applying for jobs or rentals. However, many of us end up making decisions that influence our credit score before we fully understand how a credit score’s calculated or the value in a good score.
To help educate about the topic of credit, the American Bankers Association has created an initiative entitled “Get Smart About Credit” day, occurring on Thursday, October 17, 2013. The initiative encourages making smart financial choices regarding credit. Although this day’s dedicated to educating students, we’re thinking the information provides a good reminder about credit to consumers of all ages.
What is a credit score?
Your credit score is calculated in this way: 35% is based on payment history; 30% is outstanding debt and how much credit is already available, even if you haven’t used it; 15% is based on the length of time a consumer has had credit; 10% is based on the amount of inquiries into a report; and 10% is based on current types of credit. Your credit score will be a number between 300 and 850, depending on the criteria used to calculate. A credit score of 720 or above is good, and will enable you to be approved for a loan more easily and at a better interest rate.
Checking your score.
There are 3 credit reporting agencies: Experian, Trans Union and Equifax. All three agencies are required to give you one free copy per year, if you ask for it.
Building a good credit history.
Opening a checking or savings account is a great way to start building a good credit history. Our Basic Checking or Savings accounts are both simple, straightforward accounts to help you manage your funds efficiently. Applying for a credit card can also be a good way to learn the basics of credit and work towards building your score. Co-signing on a small loan, like an auto or student loan, can also be an option for individuals without a lot of credit history.
How do I raise my credit score?
The best way to raise your credit score is simply by paying your bills in full and on time. Next, take the time to check your credit report once a year! Review for errors or inaccuracies and address any you find. Lastly, be sure to stick to a spending plan. It may be difficult when you’re first getting started, but a budget is the first step to financial freedom. Start by writing down what you spend for a month or two, you’ll be surprised how much you spend and where, and hopefully find ways to save. Our exclusive and complimentary financial management tool, MoneySync!, is a great way to create and keep track of your budget. MoneySync integrates all of your accounts into one login, regardless of which institution they’re at.
Need more info?
The Consumer Finance Protection Bureau (CFPB) provides helpful info on building your credit score, repaying debt and paying for college. Annual Credit Report provides information about credit fraud as well as links to the 3 credit reporting agencies.