Credit Score Basics

What is a good credit score?

Each credit bureau has their own scoring range, however, using the FICO score range of 300-850, a credit score of 700 or above is considered good. A score of 800 is considered to be excellent.

How does information get on my credit report?

A credit score is a model used to determine the risk to a lender by balancing the good and bad factors on your credit report. The main factors used to calculate a credit score are the number of accounts you have, the types of accounts you have, your open credit compated to the amount in credit you have used, the length of your credit history and your payment history. The breakdown of the factors used in a credit scoring model are payment history, 35%, used credit vs. available credit, 30%, type of credit used, 15%, new credit, 10%, length of credit history, 5-7%.

What is a hard inquiry and what is a soft inquiry?

A hard inquiry is when a potential lender reviews your credit report in order to make a determination of your credit worthiness. Hard inquiries can affect your credit score by 2 to 5 points, depending on factors such as how may inquiries you have had within a certain amount of time.

Checking your own credit does not lower your credit score

A consumer can access and review their credit report at any time and it will not affect your credit score. When a consumer accesses their credit report it is a “soft” inquiry, meaning it will not lower your credit score.

Bad credit history and rating

Your credit history reflects your credit behaviors. Your history can add up to a bad or good credit rating. Lenders may look at your report to see the following:

Do you pay your bills on time
How long is your credit history
Have you opened several credit cards in a short amount of time
How much debt do you have compared to your available credit

Improving your credit score

The first step to improve your credit is to know what is on your credit report. If you have debt, pay it down. You have to establish solid revolving and installment credit accounts. It can take some time to build a solid credit history, but each month moves you closer to your credit goals.

What is credit utilization?

Credit card utilization is the amount of available credit you have versus the amount of debt. For example you have multiple credit cards totaling $10,000.00 in available credit. You have a combined balance on your credit cards of $5,000.00. Your credit utilization is at 50%. You owe half the amount of the total credit you have available.

Credit Monitoring

Your credit reports affect many areas of your life. It is important to always monitor your credit reports for accuracy, as well as any identity theft or fraud. Staying actively involved in your credit by monitoring it on a regular basis will protect your credit and financial future.

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