When you borrow and make your payments on time, you’ll be improving your credit history, which is the track record of your ability to borrow and repay. Your credit score is a number that indicates your credit history. The higher your credit score, the better your credit history. Also, keep in mind late payments could hurt your credit score or damage your overall credit health.
We want you to build a better credit history. Here are a few helpful tips: In addition to making timely payments on your loan with us, if you have other loans or credit card bills, pay them on time. Don’t apply for credit cards you don’t really need, especially if they’re cards that carry extra fees. Every time you apply for a credit card, it shows up as an inquiry on your credit report, and too many inquiries indicates you may be applying for too many sources of credit at the same time. Don’t overextend yourself. Take on only as much debt as you can repay on time.
What is a credit score?
Your credit score is a number, typically between 300 and 850, that lenders use to predict how likely you are to repay money you’ve borrowed. The higher your credit score, the more likely you are to pay your debts on time and the more likely you’ll be approved when you apply for a loan, a credit card, mortgage or other forms of credit. Credit bureaus, also known as credit reporting agencies, assign every consumer a credit score using a statistical model knows as FICO (for Fair Isaac Corporation). For this reason, a credit score is sometimes called a FICO score. At Balance Credit, we primarily work with two major credit bureaus, Experian and TransUnion.
What is a good credit score?
A credit score of 720 or higher is considered excellent. If you have an excellent score, you’re likely to be approved for loans and receive a favorable interest rate. If you have a score of 660 to 719, you’ll be considered a good credit customer. A score of 620 to 659 is considered fair, which means you may have more difficulty getting a loan and a good rate. A score of 619 or lower is poor or bad. If your score is in this range, your options in borrowing may be more limited, and you will need to find ways to rebuild your credit score.
What are the components of a credit score?
The Fair Isaac Corporation model is based on five factors of your credit behavior:
- Payment History is your record of paying your bills on time.
- Balances Carried and Debt Ratio are measured by how much you are borrowing compared to the amount you are currently allowed to borrow.
- Credit History is how long you’ve been borrowing money and paying it back, including your history with credit cards.
- Mix of Accounts is the variety of loan types you’ve used. This can include credit cards, car loans, home equity lines of credit, and mortgages.
- Inquiries are recent requests of your credit report. Credit and loan applications generate inquiries.
How can I improve my credit score?
The FICO components of your credit score offer good hints on how to improve your score:
- Improve your payment history by paying all your bills on time – REALLY on time. For example, if your mortgage lender has a due date of the 16th of the month but allows you until the 30th to pay without penalty, you should still pay on or before the 16th to have a clean record of on-time payments.
- Maintain your balances carried and debt ratio by managing the amount borrowed in each account. For example, if you have more than one credit card, don’t use just one card. It’s better to spread your charges across several cards, allowing ample headroom between your balance and the credit limit for each card.
- Credit history takes time. Keep your oldest credit card accounts open, even if you don’t currently use them.
- When you need to borrow, look for new types of accounts, such as installment loans or home equity lines of credit. You don’t need to put all your debt on credit cards.
- Don’t apply for too many types of credit too often. A large number of loan and credit card applications in a short period generates inquiries and signals there may be something wrong with your financial situation, and this can lower your credit score.
What if I have a problem getting a loan or line of credit?
A lender who turns you down must give you written notice of why you were denied credit, and this notice must be given within 30 days of the date you are denied. You then have 60 days to request a free credit report from one of the major credit bureaus. You may contact the credit bureaus by phone or online: Experian (888) 397-3742 or www.experian.com TransUnion (800) 888-4213 or www.transunion.com Note that a credit report will not contain your credit score. A credit report will show your personal information, how much you currently owe the companies that are lending you money, how well you’ve paid your bills on time, and recent inquiries generated by credit applications. To obtain your credit score, see www.myfico.com.