|
Your
Credit Score
When we lend money, we
have to be reasonably sure the loan will be repaid. After
all, losses to the credit union affect all members.
One of the things we consider
when making a loan decision is your FICO score, named after
Fair, Isaac and Company, the financial firm that developed
it.
The score calculates your
credit report and other factors into one three-digit figure
that measures creditworthiness. Scores range from 300 up
to 850; the higher your score, the better your credit.
How
your credit score is determined
There are five components:
- Payment History
Do you pay your bills on time, or have you been late or
missed payments? Have you failed to repay any loans?
- Current Debts
How
much you owe right now, to how many creditors, and the
ratio of your debt to your available credit limits.
- Length Of Credit
Usage
The longer you’ve used credit responsibly, the better
your score.
- New Credit Applications
Applying for a lot of credit can be a negative indicator.
That’s something to think about when the department
store offers you a 10% discount for opening an account
with them.
- Types Of Credit
Unsecured debt, such as personal loans and credit cards,
can be more damaging than secured debt such as mortgages
and auto loans.
Repairing Your Credit
Score
If
you have been denied credit because of a poor credit score,
here are some things you can do to improve your rating:
1
|
Make
On-Time Payments
A year or two of on-time payments demonstrates that
you’re a responsible borrower. |
2
|
Keep
Your Debt Ratio Low
Try to use no more than about 40% of your available
credit. It’s better to have moderate debt on several
credit cards than to be maxed out on one card. |
3
|
Keep
Your Oldest Accounts Open
Close unused accounts, but since your score is partly
based on longevity, close your newest accounts first.
They don’t do much to improve your score. |
|
