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Your Credit

Checking Your Credit

It’s important to check your credit regularly to ensure there is no incorrect information or unusual/unauthorized activity in your name.

 

Did you know you are entitled to one free credit report per year?

Click here to go to AnnualCreditReport.com, the official site to help consumers obtain their free credit report with privacy guaranteed.

You may request a credit report annually from each of the nationwide consumer credit reporting agencies: Equifax, Experian and TransUnion.

Other than checking your credit report for fraud, it’s helpful to understand how your credit works…

 

What is a Credit Score?

In short, a credit score determines your creditworthiness as a borrower. Your score may affect your monthly payment on a loan.  If you have a high credit score, you may qualify for a low interest rate on your loan.

 

What Makes up my Score?

35% = Based on payment history (i.e. on-time pays or delinquencies).  More weight is put on current payment history rather than past.

30% = Capacity.  Your credit capacity is your revolving loan balances divided by your total revolving limits (i.e. credit cards). The less credit card debt you have, the better your score will be.

15% = Length of credit. (Or, how long have you had credit.)

10% = Accumulation of debt in the last 12-18 months.

10% = Mix of credit. (Things considered in this category are the amount of installment loans vs. revolving and the number of finance company loans – the more, the lower the score).

 

What Actions will Hurt my Credit Score?

• Missing payments (regardless of dollar amounts…it will take 24 months to restore credit with one late pay).

 

• Credit cards at capacity (i.e. maxing out credit cards).

 

• Closing credit cards (this lowers available capacity).

 

• Shopping for credit excessively.

 

• Opening up numerous trades in a short period of time.

 

• Having more revolving loans in relation to installment loans.

 

• Borrowing from finance companies.

 

What Doesn’t Affect my Score?

• Debt ratio

 

• Income

 

• Length of residence

 

• Length of employment

Please remember these are the factors that don’t affect the credit score.  These factors are usually considered as part of the loan approval/denial process.

How Can I Improve my Score?

• Pay down credit cards.

 

• Do not close credit cards (because your capacity will decrease).

 

• Continue to make payments on time (older late pays will become less significant with time).

 

• Slow down on opening new accounts.

 

• Acquire a solid credit history with years of experience.

 

• Move revolving debt to installment debt (i.e. consolidate credit card bills into one installment loan.)

For questions about your credit score and more information, please call us at 925-825-0900 and ask for a Loan Officer.

 

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