Understanding Your Credit Score

Your credit score is as important to your financial well-being as your pulse rate is to your physical well-being. If you’re like most people, you probably don’t check up on your financial health as often as you visit your doctor’s office. However, understanding how to check your credit report and keep your credit in good standing is an important part of financial wellness.

Why is your credit score so important?

The easy answer is having a good credit score means you can get credit when you need it. But your credit score affects many more aspects of your life than you would think. Insurance companies and utility companies may use your credit score to help determine whether you’re responsible and what level of risk you may carry as their customer. Many times, employers will require a credit check when you’re applying for a new job and use it as a factor in assessing your character, dependability and trustworthiness.

What is a good credit score?

There are three credit bureaus, Experian, TransUnion and Equifax, that all use a complex algorithm to determine your score. Credit scores range from 300 to 850. Generally, a good score is considered to be anything above 700 and anything below 650 is considered poor credit score.

What are some ways to build credit?

Your past payment history and whether you’ve made late payments has a very substantial effect. Your ratio of credit card balances to the credit limit is also an important factor. Make sure you have the credit card sized to your credit needs and work to keep your balance to 20-30% of your credit limit. If you have credit cards, aside from staying in good standing, it’s also important to have a long credit history. Jumping from company to company and not having that long credit history with one, consistent bank or provider is a bad move. Remember, poor payment decisions and late payments will stay on your credit report for seven years.

How do you improve a credit score?

In order to build that good, solid credit report and raise your credit score, apply for and use a credit card, keep the balances in check and submit your payments on time, preferably paying the balance in full each month. A bank credit card is a positive for your record. Applying for store cards or gas cards can have a negative effect on your score. Be careful - many times their offers are enticing with low introductory interest rates, but these types of accounts tend to have a negative effect on your score and they typically carry a higher interest rate once the introductory offer expires.

What are the best ways to check and monitor your credit?

C&N's SavvyMoney is a great tool that lets you track your credit and see what factors are influencing your score without having your score adversely affected. It includes a full credit report and analysis, credit monitoring and personalized offers in one, easy to use dashboard. It's free to use and is housed inside your C&N mobile app and Digital Banking. We highly recommend all C&N customers take advantage of this incredible tool. 

You can also check your credit report at visiting www.annualcreditreport.com, which you are allowed to access your credit report from each credit bureau for free every twelve months.

Monitoring your credit is becoming extremely important as cybercrime activity is quickly on the rise and identity theft can go undetected for years if you’re not diligent about checking your credit report on at least an annual basis.

What are the best ways to build my credit?

If you follow the suggestions laid out above, your score will be in a great range. If you do experience setbacks and find it challenging to follow these suggestions, don’t be embarrassed and let the problem build. Contact your local bank right away. The advantage of working with a local bank is that you can sit down, face-to-face and talk with an expert who will guide you and coach you back to a healthy credit position.

Remember, it takes a long time to build a strong credit history and good credit score, but you can tear it down with poor decisions overnight. By following these tips and monitoring you credit report regularly, you can be sure your financial well-being stays healthy year after year.

Video courtesy of The Wellsboro Home Page