What is Credit?

Credit is a term used when a lender gives something of value such as money, a home, or vehicle is given in exchange for the promise of a future payment.

What is a Credit Score?

Your credit score is essentially a numerical credit rating in range from 300-850; this score is based off of your credit report. This score ultimately determines your financial reputation to lenders, landlords, employers and many more.

Do Not Let Bad Credit Hold You Back

Your credit score determines the amount it costs you to borrow money. Did you know an extra 1% APR on a 30 year mortgage can cost you 10’s of thousands of dollars? You also might not know that bad credit scores can affect your premiums on car insurance. With bad credit, getting approved for a credit card is a challenge in itself; if you do get approved, your interest rates will likely be higher than average costing you more money.

What Your Credit Score Consists Of:

  1. Payment History: Your Payment History is simply determined by whether or not you are making your payments on time. This accounts for 35% of your credit score.
  2. Amounts Owed/Credit Utilization: Accounting for 30% of your credit score, Credit Utilization refers to the amount of credit you are using in relation to the total limits on the credit accounts. It is best to keep your credit utilization below 30% of your total limits.
  3. Length of Credit History: The length of credit history refers to age of your credit accounts. Accounts that are older than 7 years AND in good standing should increase your credit score. This accounts for 15% of your credit rating.
  4. Inquiries or New Credit: Inquiries are when you apply for new credit accounts; credit bureaus track your inquiries. Too many hard inquiries within a short period of time will negatively affect your credit score. This category accounts for 10% of your credit score.
  5. Types of Credit: Types of Credit generally refers to the mix of credit accounts you have and reflects 10% of your credit score. Having a diverse mix of credit accounts reflects your ability to successfully manage your credit.

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