Notice: Due to renovations at our Saco Main Street branch, our customer parking lot and the buildings' rear and side entrances will be closed daily from 6:00 a.m. to 12:00 p.m. Starting September 18th, the Drive-thru will be closed, and is scheduled to reopen on Friday, September 22nd. To learn more Click Here.
Improve Your Credit Score for Better Financial Standing
Sep 8, 2023Financial Literacy
With all of the misleading and incorrect information about credit floating around, it’s no wonder some of us feel lost or confused. Improving your credit opens the door to better interest rates, rewards credit cards or even a mortgage.
Your credit score is based on 5 key factors Most lenders make their decisions using FICO credit scores, which are based on five key factors. That means that when you apply for a new credit card or loan, these are the primary influences on whether you’ll end up getting approved.
FICO'S 5 Components of a Credit Score: A FICO score is a three-digit number, typically in the 300-850 range, that tells lenders how likely a consumer is to repay borrowed money based on their credit history. Your score is determined by the following:
10% Credit Mix: Having different types of active credit lines you've been paying on time and in-full can boost your credit score!
10% New Credit: Opening up too many credit lines in a short period of time can be detrimental to your score.
15% Length of Credit History: A longer history of good credit means a better credit score.
30% Credit Amount Owed: Your credit utilization — the percentage of available credit you've borrowed — is crucial to your overall score.
35% Payment History: The most important factor is your history of debt.
What's not factored into your credit score?
Your salary or occupation, employment history, home address or age.
Interest rate charged on your credit cards or other accounts
Any information that's not included in your credit report
Any data that won't affect your credit's future performance
Any credit counseling you might be receiving
Note: Credit scores aren’t as mysterious as they seem! You have control over all of the factors that determine your score
Credit reports vs. credit scores Although they are related, a credit report and a credit score are different.
Also, it’s a bit misleading to talk about a single credit report or a single credit score, because the reality is that you have several different credit reports, and your credit score can be calculated in many different ways.
A credit report is a collection of information about your credit behaviors, like the accounts you have and when you make payments. Three main bureaus— Experian, Equifax and TransUnion — each publish a separate credit report about you.
A credit score uses the information in your credit report to create a numerical representation of your creditworthiness. In other words, all of the information in your report is simplified into a single number that gives lenders an idea of how likely you are to repay a debt.
Note: Become familiar with your credit reports and your credit scores. They each play a role in helping you obtain new credit.
Negative items on your credit report can cause damage to your credit score. Negative items include:
Foreclosures and repossessions
Although these items can lead to significant drops in your credit score, their effect is not permanent. As long as your credit behaviors improve, those negative items will have a smaller impact on your score. Note: Negative items can cause a decrease in your credit score, but they aren’t permanent. Start building new credit behaviors and your score can recover over time.
Did you know:
Negative items can cause a decrease in your credit score, but they aren’t permanent. Start building new credit behaviors and your score can recover over time.
You can check your own credit report and credit score without any negative effect. It's good to stay on top of your credit health!
Information about your credit is freely available, so take advantage of those resources to stay on top of your credit report and score.
Your credit report could have inaccurate information that’s hurting your score unfairly. Fortunately, there is a credit dispute process that can help you clean up your report and ensure all of the information on it is correct