IMPROVE YOUR CREDIT

Did you know

Every time you apply for a credit card, mortgage, car loan, or insurance, your application is judged in part by your credit score. Lenders use your credit score to determine whether to grant credit, and at what cost. The higher the score, the more likely you are perceived to repay the credit. Consumers with scores in the 600s and lower usually are seen as higher risk and may pay a higher interest rate or are denied credit.

Fortunately, you can take steps to boost your credit score. These tips can maximize your score and influence your credit-worthiness.

Man trying to push the needle of a credit score meter.

Check your credit report regularly

Don't let inaccurate information ruin your credit score. Consumers are entitled to one free credit report per year from each of the three major credit bureaus (Equifax, Experian, TransUnion), which you can get online at annualcreditreport.com. Even though the credit report is free, getting your credit score will cost extra. You can obtain your credit score at myFICO.com, or from the individual bureau's websites, experian.com, equifax.com and transunion.com.

When shopping for a loan, submit your applications within a limited time

If done in a short period of time, say 2-3 weeks, multiple inquiries on a credit report will count as one inquiry to a potential lender looking at your report. Excess inquiries strung out over a longer period, however, could negatively affect your credit.

Keep accounts open

Time is another significant factor that can improve your credit score. Closing old accounts—especially ones with a good payment history—shortens your credit history and lowers your score. Lenders take into account the average age of your accounts, so an older account can help balance newer credit.

Be punctual

Late or missed payments, foreclosures, and bankruptcies have the greatest negative effect on your credit score.

Keep debt in check

Try to keep your account balances below 25% of your credit limit. For instance, if your credit card has a limit of $2,000, keep the balance less than $500.

Keep a healthy mix of credit

This includes things like a mortgage, a credit card or two, a car loan, and perhaps a retail card. Southwest Heritage Credit Union can help you acquire the mix you need.

How Your Credit Score
Is Determined

Your credit score is calculated using five major components, with varying levels of importance. These categories, with their relative weights, are:

Pie chart showing the major components that determine your credit score.

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