Understanding Your Credit
From getting approved for a loan to lower interest rates, there are many benefits to improving your credit.
Use this tip sheet to learn about the factors that affect your credit score and how you can improve your score (and overall financial health!)
How is my score calculated?
The higher your credit score, the better. The score range is as follows:
- 800+ Exceptional
- 740-799 Very Good
- 670-739 Good
- 580-669 Fair
- >580 Poor
A high score indicates lower perceived risk to lenders.Your score is developed using credit data that is grouped into five categories:
Credit Mix (10%)
It’s beneficial to have different types of credit (credit cards, installment loans, auto loans, mortgage loans etc.).
New Credit (10%)
Avoid opening several credit accounts in a short period of time; this can represent a greater risk to the lender (especially for those without a long credit history).
Length of Credit History (15%)
In general, a longer credit history will increase your score.
Amount Owed 30%
Avoid using a lot of your available credit; this may signal to banks that you are at a higher risk for defaulting.
Payment History (35%)
Pay your debts on time. This is the single most important factor of your credit score.
Steps to Improve your Credit Score
Looking to improve your credit? Building stronger credit takes time. But with patience and a commitment to managing your credit over time, it can be done:
1. Get Your Current Credit Report
If you haven’t already, get your free credit report at annualcreditreport.com to see where you currently stand.
2. Reduce the Amount of Debt that you Owe
Stop using your credit cards and contact a GreenPath counselor to develop a personalized plan to pay off your highest-interest debt first.
3. Start Practicing New Healthy Credit Habits
Things like opening new accounts sparingly, managing credit card use responsibly and keeping credit card balances low are all important factors in improving and maintaining your credit score.
Ready to Take the Next Step in Building Your Credit?
Prepare for life’s financial ups and downs without paying up. 121 Financial Credit Union offers members free financial counseling in the privacy of your own home through GreenPath Financial Wellness, giving you at-home access to expert guidance to help you get your finances on track. We strongly encourage members to take advantage of this service, whether or not they are in financial distress. LEARN MORE ABOUT FREE FINANCIAL COUNSELING
