Most people know their credit score (also called FICO score) is extremely important – we all hear about it enough on commercials! However, many aren’t sure exactly why it’s so im-portant, or the factors that go into determining the score.
A higher credit score means simply you are a better “credit risk” – more likely to make timely payments and pay off your debt. Many financial institutions – including Members 1st – rewards higher credit scores with lower interest rates.
But what about if you have a lower credit score? You’d be surprised how many people find out their score is lower than they thought, which means it can be harder to obtain credit to buy a new house or car, for example.
However, by following the helpful tips below, you might be able to not only improve your cred-it score, but also increase your odds when applying for credit:
Check Your Credit Report Every Year
Did you know you can get a free copy of your credit report from all three major reporting agen-cies every year by visiting AnnualCreditReport.com This symbol indicates an external website, or a resource not hosted on the Members 1st website., which is operated jointly by those agencies? Sites that just give you a credit score number are often inaccurate. To get the full picture, you need to see all the information on the report, not just the score. If incorrect information is reported, you might not know it’s affecting your credit until it’s too late and your credit application has been denied.
Make Sure Your Report Is Correct
If you see information on your credit report that is inaccurate or potentially fraudulent – even an old error you thought was corrected – be sure to start a dispute immediately. Complete the online disputes the three main reporting agencies offer, or send a letter with supporting docu-ments to both the credit reporting agency and the organization or company that provided the erroneous information.
Pay Bills on Time
Your history of on-time payments is hands down one of the most important things that deter-mines your credit score. Setting up automatic online bill payments can help you avoid missing payments and ensures your credit remains intact.
Don’t Use Too Much of Your Credit Limit
Another big factor of your score is the percentage of your credit you are using compared to the limits. This is referred to as debt-to-limit ratio or credit utilization. If you are using 30 percent or lower of your total available credit, this is considered good. Anything higher, especially if it is consistently high, might paint the picture you will have trouble making payments on new debts to a potential lender.
Don’t Open and Close Too Many Credit Accounts
Having a variety of credit types on your credit report over the years, such as credit cards, per-sonal loans, home equity loans, etc. shows that you can handle credit. But if you close every old account, you may lose some of your older credit history. This could in turn lower your score. On the flip side, if you have too many accounts you might have trouble keeping up with them, and inadvertently fall behind on payments, which can quickly lower your score. Make sure you have both covered.
Here at Members 1st, we’re always here to help you pave the way to a brighter financial future. Whether you’ve had credit for years or are just starting out, following these tips will ensure your credit will remain clean and give you an advantage when applying for most anything in life. And it will allow you to help control the financial future you both want and deserve.