Do You Actually Understand Your Credit Report?

 
 
Understand Your Credit Score
 

Editor’s note: This blog was originally published on March 15, 2021, and has been updated for accuracy and relevance.

There’s a three-digit number connected to you that holds a significant amount of power in your life, your credit score. Your credit report, a breakdown of your credit score, is a blueprint of your finances and is primarily used to determine whether you’ll qualify for loans and at what interest rate. Building up a good score takes discipline and commitment, but the rewards are tangible with a smart financial plan.

What Does Your Credit Score Mean?

When you need to borrow money, your credit score is considered the most influential factor in a lender’s decision to grant you credit and at what interest rate. Borrowers with low scores may be rejected for financing or will end up paying a higher interest rate than borrowers with high scores. Your credit score indicates your trustworthiness in paying debt and gives a glimpse into your spending habits. Every time you apply for a new credit card, mortgage, insurance policy, and sometimes a job, your application is judged in part on your credit score.

FICO (Fair Isaac & Co.) created the widely-used credit score model used to describe that magical three-digit number.

What makes up your credit score - Pie Chart

You can monitor your credit history by requesting a free credit report every 12 months! Reports are also available from these three credit reporting agencies: 

  1. TransUnion

  2. Experian

  3. Equifax

How To Improve Your Credit Score:

You know a credit score is important in determining how much you’ll pay for credit. But what’s considered a good score?

Most credit scores fall between 600 and 750. Of course, the higher your score, the better rates you can secure from lenders. A range of credit accounts with a record of timely payments (car loans, credit cards, mortgages, etc.) generally benefits people. A high debt-to-available-credit ratio (meaning your credit is close to maxing out) on credit cards and installment loans usually works against an individual.

Four Strategies For Achieving A Higher Credit Score:

  1. Make timely payments. It’s the best way to improve your score because payment history accounts for 35 percent of your FICO credit score.

  2. Only seek new credit when you need it. Numerous inquiries on your credit file for new credit could make you appear risky to lenders.

  3. Elect automated payments to ensure timely payments. Credit reports track every payment that is 30 days or more past due.

  4. Ignore advertisements promising to remove bad credit. These services charge a fee for something only you can do yourself – commit to a personal debt payment plan.

Your credit score is key to everything, from renting an apartment to buying a home, car, or even getting that great job. Take advantage of Unity Catholic’s mobile app and let Credit Sense work for you. With Credit Sense, monitor your credit score, learn how it’s calculated, and get tips on how to improve it quickly. 

 
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