WEOKIE Federal Credit Union By WEOKIE Federal Credit Union • September 11, 2020

Everything You Need to Know About Credit!

What is a credit score and why does it matter?

Your credit score is generally tracked by companies called “credit bureaus.” The three major credit bureaus are Experian, TransUnion, and Equifax.

Credit scores range from 300 to 850 and provide an overall measure of your track record for managing and paying off debts. A strong credit score, typically anything 700 or over, shows that you pay your bills on time each month, and that you’re unlikely to default on your payments.

A good credit score will get you a better rate on any loan you apply for, saving you thousands over the life of your loan. Meanwhile, a lower credit score will result in a higher loan rate, which unfortunately, means you’ll pay more over the life of your loan.

It is best to know your credit score before you apply for loans instead of assuming if it’s good or bad. Even if you have no credit, you score will be lower due to not having a proven track record with managing credit. Building credit can be almost as difficult as repairing it.

How to check your credit report for free

Start with getting a copy of your credit report and look for any mistakes. To review your credit reports you can start by visiting Annual Credit Reporta government-run site. This is the only website that’s federally authorized to provide free credit reports from Experian, TransUnion, and Equifax..

Once you have your credit reports, look through each report for mistakes such as incorrect names, addresses, credit lines that don’t belong to you, duplicate entries, incorrect status, and other errors that could lead to a lower credit score. If you see an error on your report, you should dispute it as soon as possible.

Why should you check your credit score regularly?

GoodFinancialCents states that you need to check your report regularly for reasons like, accuracy, fraud detection, and to research ways on how to improve your credit score.

Your credit report is not always correct, errors can happen, and some are just honest mistakes however others may indicate fraud. Common credit report errors include:

  • Incorrect personal information
  • Incorrect/outdated account information
  • Incorrect delinquencies or missed payments
  • Missing Accounts
  • Duplicate Accounts
  • Phantom Accounts (When someone opens an account in your name.)
  • Negative issues over 7 years old.

How do I improve my credit score?

Improving your credit score doesn’t happen magically overnight, however with these strategies, your credit score is sure to improve with time.

  1. Correct any errors you might find on your credit report. Read the entire report and report any errors to the credit agency right away.
  2. Improve your payment history. (Get current on all bills!) Your payment history comprises of 35% of your credit score! It is always safe to make your payments on time, in full, every time.
  3. Pay down balances to improve your credit utilization! (Amounts owed vs. available credit) The amount of money you owe makes up 30% of your credit score. Having a large amount of credit card debt relative to your available credit limit pulls down your credit score. Pay down your debt and keep your revolving credit balance low.
  4. Do NOT open too many credit accounts right away! New credit makes up 10% of your credit score. Having many credit inquiries in a short time can have a negative effect on your credit score.
  5. Open different types of credit accounts. There are several types of credit and 10% of your credit score is determined by the types of credit you have. It is best to maintain a mix of installment loans, such as an auto loan, and revolving credit, such as a credit card.
  6. A good score too shoot for is a range from 670 and higher.

Why is good credit so important?

In today’s world, we have become increasingly dependent on credit scores. It is important to have good credit because credit can affect where you live, auto loans require good credit, credit checks for employment, business loans require good credit, renting or home purchases require good credit, and good insurance rates require good credit.

When it comes to borrowing money, financing anything essential, or setting up services, your credit can be checked.

Federally Insured by NCUA