Take a Look at Your Credit Impacts: It’s Time to be in Control

Take a look at how your credit impacts your credit score; it’s time to be in control. The fact is that most folks have a vague idea of what their credit score is. What people find confusing is how it’s calculated and how to improve it. This article reviews what credit is and how to improve it so that you can keep more money in your bank account.

When you look at your credit score you are actually looking at an average of three numbers filed by different reporting systems. This average score is used by lenders to determine the likelihood of you being able to pay them back for any loans they provide. The more loans you request and have open (yet to be paid), the higher your interest rates are, typically.

You can think of your credit score as a snapshot of your overall financial management skills at any given moment. Your goal, or a goal you may want to adopt, is to maintain the highest possible credit score 850. While very few people have an “excellent” score, it is possible with strict practices.  

Those who are married are responsible for their own credit scores and if you have joint-ownership for a financed item, you both are in charge of maintaining its payments. Risky credit scores are below a score of 650. This means the terms lenders give you will not be as favorable as a score of 750 would. Should you fear higher interest rates, ask for a cosigner with better credit to reduce your interest rates and improve your lending terms.

Better Credit recommends you check your credit annually. Credit scores range from 300 to 850 find out where you stand today. Every year the federal government allows one (1) free credit check. Use this link to get started: https://www.ftc.gov

How Your Credit Score Affects You

If you want to borrow $400,000 for a traditional 30-year mortgage and your credit score is between 750-850, a lender might charge only 3.02% interest, while a score between 610-639 could put you at 4.87% annually. The different between these two rates, while slight changes how much one will pay each month for the same home.

What Hurts and Helps Your Credit Score

Below is an explanation of how your credit score is determined:

  • Length of Credit History refers to how many years you have used and have had credit. They look for on time and consistent payments. The longer your credit history with responsible financial management, the higher your score.
  • Payment History A history of timely payments of at least the minimum amount due helps your score. Missed or late lower your score.
  • New Credit (Inquiries) indicate your willingness to take on additional debt. This behavior is risky and reduces your credit score. On the other hand, “Soft” inquiries, including your personal request for your credit report, from lenders for “pre-approval” credit offers and those coming from employers do not affect your score.
  • Credit Type involves the “mix” of credit you access, retail accounts, including credit cards, installment loans, finance company accounts and mortgage loans. This section considers your range of credit and whether you use it responsibly. appropriately. For instance, using a credit card to purchase jet-ski could hurt your score.
  • Credit Utilization reveals if your credit card balances exceed 30% of the available credit limit. Paying down an installment loan is looked upon with favor. For example, if you borrowed $30,000 to buy a boat and have paid back $6,000 of it on time, even though you still owe a considerable amount on the original loan, your payment pattern to date demonstrates responsible debt management, which favorably affects your credit score.

Great Credit Keeps Money in Your Pocket

Great financial and credit management offers higher credit scores and lower interest rates. That combined with paying all of your bills on time and living below your means,  helps reduce the amount you pay on the money you borrow.

If you’re in need of increasing your credit score, contact Better Credit today and speak with one of our credit repair experts.