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Know Your Credit

In the current tumultuous financial market, it is more important than ever to not only know your credit score, but also understand why it is important and what you can do to improve your credit.

How do I know what my credit score is?

Obtain a free credit report every 12 months from each of the 3 major reporting agencies at www.annualcreditreport.com. This report does not include a credit score. Each reporting agency will charge a fee to obtain your credit score.

  • Always review this report for accuracy.
       
  • Understand what your score means and the range of possible scores.
       
    • Excellent: Over 750 
       
    • Very Good: 720 or more 
       
    • Acceptable: 660 to 720
       
    • Uncertain: 620 to 660
       
    • Risky: less than 620
       
  • Understand how your score is calculated.
     
    • 35% on your payment history
       
    • 30% on the amount you currently owe lenders
       
    • 15% on the length of your credit history
       
    • 10% on the number of new credit accounts you've opened or applied for (fewer is better)
       
    • 10% on the mix of credit accounts you have (mortgages, credit cards, installment loans, etc.)

Why is credit important?

  • A good credit score will make it easier for you to get financing and lower interest rates on mortgages, car loans, and student loans.
     
  • Good credit scores can assist with getting approval to rent an apartment or house.
     
  • Many employers check credit history when conducting background checks for potential employees.

How do you improve your credit score?

  • Create and stick to a budget.
     
  • Always track your spending.
     
  • Pay all bills on-time and avoid skipping payments.
     
  • For credit card bills, pay AT LEAST the minimum payment (it is always better to pay more).
     
  • Avoid exceeding your credit limit. Actively manage credit accounts and keep a cushion to avoid this dilemma.
     
  • Ask for help when you need it. There are many organizations that offer low-cost or free credit counseling services. You can check with your bank or consumer protection office for a list of these organizations.
     
  • Avoid credit repair scams that charge you a fee to repair your credit.