Understanding Your Credit Score Building and Protecting Your Financial Reputation

What is a Credit Score? Quite simply: A credit score is a number between 300 and 850. The score indicates to lenders how responsible you are financially. Credit scores a used to: Determine if you get a loan (home, auto, etc) Determine the rate of your loan (higher credit score gets a better rate). Credit scores are now being used by insurance companies, landlords, and prospective employers

How your FICO Credit Score is Calculated 35% Payment History 30% Amounts Owed 15% Length of Credit History 10% Credit Mix 10% New Credit

How Credit Scores are Calculated (cont’d) 35% Payment History The most important factor in determining your score. Simply a record of whether or not you’ve paid your bills on time. 30% Amounts Owed A little more complicated. Looks at how much you are currently using out of the of the total credit you have available This is also known as your “utilization ratio.” Lenders believe that borrowers who are close to maxing out their credit are more likely to miss payments. 15% Length of Credit History Determined by the average age of your accounts Also how long it’s been since those accounts were used. 10% New Credit How often you’ve opened new accounts Opening a bunch at once will hurt your score 10% Credit Mix whether you’ve got a mix of different types of credit (such as a mortgage, student loan and car loan). Lenders like to know that you can manage different kinds of accounts responsibly.

How to improve your credit score Make sure you pay all bills on time Keep your credit balances at 30% or less of their account limits. Keep all credit cards open Don’t get store credit cards…ever! Don’t open any new credit accounts.