Credit scores are important for a number of reasons; loan qualification, interest rates, insurance premium rates, and employment are among some of what can be effected by your three numbers. Credit scores help lenders determine a borrower’s credit worthiness and your score is calculated from the data from your payment history. Late credit card payments? Your score will go down. Low balances on existing credit cards and a history or paying off your balances? Your score will go up.
There are three credit main credit bureaus: Experian, Equifax and TransUnion. A credit bureau is simply an agency that gathers information about your credit usage and history, then presents it to a lender when you apply for credit. When you apply for credit, the lender typically reviews your credit history from one of the credit bureaus. You don’t have to pay to check your score; you may be able to get a FICO or VantageScore for free from your credit card issuer or your bank. Financial sites such as NerdWallet also offer a free credit score, typically VantageScore 3.0, which measures the same behaviors that a FICO does.
The most important factor in improving your credit score is paying your bills on time.
- Payment history (35%)
- Credit usage (30%)
- Age of credit accounts (15%)
- Credit mix (10%)
- New credit inquiries (10%)
Other ways to improve your score:
1. Aim for 30% Credit Utilization or Less – In general, aim to use no more than 30% of your total available credit limit.
2. Limit Your Requests for New Credit—and ‘Hard’ Inquiries – Hard inquiries can include applications for a new credit card, a mortgage, an auto loan, or some other form of new credit.
3. Keep your accounts open: A longer credit history can lead to a higher score when compared to closing accounts and re-applying for credit later down the line.
Improving your credit score is a good goal to have, especially if you’re planning to apply for a loan. It can take several weeks, and sometimes several months, to see a noticeable impact on your score when you start taking steps to turn it around. If you don’t have a credit score, this means that you may not have enough of a recorded financial history to produce a score, or you may not have a financial payment history at all. Without a credit score, you might have a harder time finding low-interest personal credit or securing other financial agreements, such as an apartment lease, without additional help like a cosigner and/or additional fee(s).
At Greenback Capital we require a FICO score of 500. Contact us to learn more.
