Go Ahead, Give Yourself Credit!

You are trying to buy a car, a house, or even a farm and the lender has you fill out a credit application to help calculate your credit score.  You know you have one, but like most others, you are still confused over what it is, why it exists, who controls it, and how you can affect it.

 

Over the last decade, consumer and commercial lending decisions have relied heavily on the confusing variable known as a credit score.  Here’s what it is – a numerical value representing your likelihood of paying the loan back as agreed.

Here are five factors that are considered in your credit score and their approximate weight:

Payment history (35%)

• Amounts owed and the amount of credit limits utilized (30%)
• The length of your credit history (15%)
• The types of credit you are utilizing (10%)
• Amount of new credit, and changes to your credit report (10%) 

It's important to know that the higher your credit score, the better.  So how can you improve your score? Here are a few tips: 

• Pay your bills on time, every time
• Don’t use every dollar of available credit on your line or card
• Limit the number of new accounts and credit inquiries
• Credit history length is measured by the age of your oldest card (so keep that one!)
• Be patient – it takes time

Now that you have a better understanding of what makes up your credit score and how to continuously improve it…go ahead and give yourself some credit!

Nine Tips to Improve Your Credit Score

When you apply for a car loan, mortgage, or other financing, the loan officer tells you that they must pull your credit score. What does that mean? How is it figured? Let us explain a bit more about credit scoring and how it affects your ability to receive credit in today’s market.

There are three consumer bureaus that collect and analyze credit information on consumers: TransUnion, Experian, and Equifax. The three agencies compile information on your open, closed and cancelled accounts. They also use public record to figure your credit score, including judgments, liens, and other public record items. Your score is considered a FICO® score. Each reporting agency may have a different name for the score. Scores vary from a range of 300-850. Typically the higher the score, the more likely you are to get the loan or financing request approved. Each lending institution has different cutoff scores.

Here are nine tips from FICO® to improve your credit score:

• Pay your bills on time.

• If you have missed payments, get current and stay current.

• Be aware that paying off a collection account, or closing an account on which you previously missed a payment, will not remove it from your credit report.

• If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor.

• Keep balances low on credit cards and other revolving credit.

• Pay off debt rather than moving it around.

• Don’t close unused credit cards as a short-term strategy to raise your score.

• Don’t open a number of new credit cards that you don’t need, just to increase your available credit.

• Avoid credit repair agencies that charge a fee to improve your score.

Are you now curious about your credit? Visit www.annualcreditreport.com for your free report today! To receive a free “Understanding Your FICO Score” guide, drop us an email at info@mafc.com.