Summary
Where cash is king, credit is queen! Your credit score is more than just a number—it’s the key to unlocking financial opportunities. Let’s hop on the path to improvement and get your score right!
Whether you're applying for a car loan or buying a home, your credit score can have a major impact on your life. While crucial for financial health, your credit’s influence extends further than you might think. For example, some employers check a modified credit report as a part of their evaluation for employment, which includes details like your debt and payment history without disclosing the exact score.
Here are some tips to help you improve your score, followed by a breakdown of the categories your score is calculated from. This will help you not only understand your score, but also boost your financial well-being!
Steps to Improve Your Credit Score
Check Your Credit Report Regularly
Start by getting a free annual credit report from AnnualCreditReport.com. This gives you a clear picture of where your credit stands and helps spot any errors.
This website is the only source authorized to fill orders for free annual credit reports you are entitled to by law. The three nationwide credit bureaus (Experian, Equifax, TransUnion) have permanently committed to a weekly credit check program, effectively ensuring better public access. Be sure to take advantage of these resources and keep track of your score!
Pay Bills on Time, Every Time
Your payment history accounts for 35% of your credit score, and making timely payments is the single most impactful thing you can do to improve it. Even paying the minimum amount due, on time, will help you maintain good credit standing. Late payments, especially those over 60 days, can severely damage your score.
Set up automatic payments for all your bills on the OneUnited mobile banking app, so you don’t miss important due dates!
Use a Secured Credit Card
If you’re rebuilding credit, our UNITY Visa®, a secured credit card, can help you get back in the game of good standing. Unlike prepaid cards, secured cards report to the credit bureaus, making it easier to establish or improve your credit history.
Just starting your credit journey? Consider a secured credit card as a tool to help you build credit history while minimizing risk. Since it requires a security deposit, it’s easier to get approved, and it reports to the credit bureaus, which helps you establish a positive payment record.
Keep Your Credit Utilization Low
Don’t max out your credit limit—aim to use less than 30% of your available credit at any time. The ratio of your credit balance to your credit limit plays a crucial role in calculating your score.
Limit Hard Inquiries
Each time you open a new line of credit, a hard inquiry is made, which can lower your score. Applying for multiple credit cards in a short span can also hurt your score.
Zero in and focus on building a strong history with your existing accounts to improve your score!
Understanding How Your Credit Score Is Calculated
With all of this in mind, how exactly is your credit score calculated? You can focus on the right actions to take by learning about the most common model, FICO.
It uses these key factors to evaluate your creditworthiness:
- Payment History – 35%: Consistently paying bills on time boosts this part of your score.
- Credit Utilization – 30%: How much debt you carry compared to how much credit you have available.
- Length of Credit History – 15%: The longer your credit accounts have been open, the better!
- Credit Mix – 10%: A healthy variety of credit types can include loans or credit cards.
- New Credit – 10%: Too many recent credit applications can hurt your score.
Why Good Credit Matters
Think of your credit score as a number that reflects your financial responsibility. With a high credit score, you can save thousands of dollars in interest over the life of a loan, making it easier to rent an apartment, or even start your own business. On the other hand, a low credit score signals higher risk, leading to higher costs or denial of loans and other financial services.
Start improving your credit today by following these steps, and remember, your credit score is not definite – it can be improved!
By staying informed and taking proactive steps, you too can make your credit comeback. #BankWhereYouWantToBe
