About Credit Scores

What you don’t know can hurt you.

For sure you’ve noticed that loan rates are often listed with “as low as” in front of the actual rate shown. Your ability to apply for and receive this “as low as” rate is dependent on your credit score, which is determined by information that is on your credit report. Your credit report lists your borrowing and credit payment history, as reported by creditors to the three major reporting agencies: Equifax, Experian and TransUnion.

  • There are a number of factors that go into your credit score, including:

    • Your ability to pay on time

    • How close you are to maxing out all of your available credit lines

    • How long you’ve had a credit history

    • Your overall amount of outstanding debt

    • Having a good mix of different types of credit (such as “closed-end” loans like a mortgage or car loan in addition to “open-end” loans, like credit cards)

Unfortunately, sometimes information that is not accurate can find its way to your credit report. Clerical errors, inaccurate reporting and identity theft are just a few ways that this can happen. So it pays to check your credit reports regularly to make sure that all information is completely correct.

Of course, we always want you to enjoy the benefits of having a great credit score, and we’re happy to work with you to find ways to improve your credit score over time. But we also recommend checking your credit report regularly. One way to do that is by visiting AnnualCreditReport.com. It’s a free way to order all three credit bureau reports each year so you can make sure what is being recorded is 100% accurate.

Your credit score is absolutely critical to so many aspects of your life. If you have any questions about your credit report or your credit score, give us a call or stop by and see us.


5 Tips to Improve Your Credit Score

1. KNOWLEDGE IS POWER.

Monitoring your credit score is essential for maintaining financial health. You can’t fix problems that you don’t know about. With our FREE SavvyMoney credit tool, you can access your credit score, full credit report, credit monitoring, financial tips, and education. Once you have your report, go over the details and make sure everything is correct before you apply for a loan. Are there debts that you’ve paid off still listed? Are all of your credit card limits correct? Contact each credit reporting agency to erase any errors from your report.

2. IT’S ALL IN THE MIX.

If you have just one credit card, or one type of credit, try opening a different kind of account for a modest bump in your FICO score. For example, you could finance a small purchase, such as a new refrigerator or a new couch. Be sure that you have enough money to completely pay for the item within the “same as cash” timeframe, though. These financing deals are not beneficial if you have to start paying interest.

3. UNDERSTAND LIMITS.

The best way to make a big impact on your credit score in a hurry is to decrease your credit utilization ratio, or the amount of available credit you’re using. You can do this by paying down your credit card balances and by increasing your credit card limits, either by opening a new card, asking for higher limits on the cards you already own, or both. Don’t open up several new cards at once, as this makes you look like a credit risk. Opening one new card, though, is likely to raise your score. If you keep your credit utilization ratio below 30%, you’ll see an appreciable increase in your credit score. Get your ratio down to 10% or less to max out this portion of your credit score.

4. KEEP ‘GOOD DEBT’ AROUND.

Many borrowers mistakenly believe that they should remove old debts and close old credit cards as soon as they get them paid off. If you have a paid off credit card, keep the account open. Closing old credit accounts damages your score in two ways, by decreasing your overall credit limit and making your credit history look younger than it is.

5. THINK BALANCE, NOT BALANCES.

Let’s say you’re carrying $1500 of credit card debt, split up into a couple of hundred dollars on four or five cards. One final quick tip to improve your credit is to transfer all of your small credit card balances to one card before applying for a loan. Even though the amount of money you owe remains the same, carrying it all on one card looks better on your credit report. In addition to your credit utilization ratio, lending institutions look at the number of credit cards you own that carry balances. If you opened up one new card with a low introductory APR to increase your available credit, transfer to this card to save on interest as well.

Financial Calculators

The information provided is not intended to constitute legal advice and is intended for general informational purposes only.