Your Credit Score
When we lend money, we have to be reasonably sure the loan will be repaid. After all, losses to the credit union affect all members.
One of the things we consider when making a loan decision is your FICO score, named after Fair, Isaac Company, the financial firm that developed it.
The score calculates your credit report and other factors into one three-digit figure that measures creditworthiness. Scores range from 300 up to 850; the higher your score, the better your credit.
How Your Credit Score Is Determined
There are five components:
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Payment History
Do you pay your bills on time, or have you been late or missed payments? Have you failed to repay any loans? -
Current Debts
How much you owe right now, to how many creditors, and the ratio of your debt to your available credit limits. -
Length Of Credit Usage
The longer you’ve used credit responsibly, the better your score. -
New Credit Applications
Applying for a lot of credit can be a negative indicator. That’s something to think about when the department store offers you a 10% discount for opening an account with them. -
Types Of Credit
Unsecured debt, such as personal loans and credit cards, can be more damaging than secured debt such as mortgages and auto loans.
Repairing Your Credit Score
If you have been denied credit because of a poor credit score, here are some things you can do to improve your rating:
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Make On-Time Payments
A year or two of on-time payments demonstrates that you’re a responsible borrower.
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Keep Your Debt Ratio Low
Try to use no more than about 40% of your available credit. It’s better to have moderate debt on several credit cards than to be maxed out on one card.
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Keep Your Oldest Accounts Open
Close unused accounts, but since your score is partly based on longevity, close your newest accounts first. They don’t do much to improve your score.
