Your credit score is important, but that doesn’t mean it has to be complicated.
In today’s blog post, we’re giving you the inside scoop on credit scores, including what they are, why they’re important, and three easy ways to increase yours.
What is a Credit Score & Why is it Important
A credit score is a number, ranging from 300-850, that lenders use to determine your creditworthiness.
Simply put, it’s how banks, mortgage lenders, and other financial institutions decide whether or not to provide you with financial credit.
Your credit score is determined by a number of factors, including:
- Payment history (including late or missed payments)
- The amount of debt you owe
- The length of your credit history
A good credit score can not only help you buy a home or a car, it can also help you:
- Qualify for lower credit card interest rates
- Get a better rate on car insurance
- Get utility services more easily
- Save on other types of insurance
- Get a cell phone without prepaying or making a security deposit
- Get approved for higher credit limits
Generally, anything over 800 is considered excellent; a score between 740-799 is considered very good; and scores between 670-739 are considered good.
3 Ways to Increase Your Credit Score
Now that you know how important your credit score is, you should know there are a few ways you can easily increase it. Let’s dig in.
Know Your Credit Score
The first step to improving your credit score is knowing what it is!
There are three credit reporting agencies: TransUnion, Equifax, and Experian.
Each agency uses different reporting methods. (That’s why, when you apply for a loan, a best practice is to bring all three reports to the table so that your lender gets a complete picture of your credit.)
Checking your credit score is easy, and you can do it for free once per year through annualcreditreport.com.
Note: An inquiry into your credit is always noted on your report and could affect your score, but personal inquiries are considered “soft,” and will not impact you negatively.
When you know your credit score, you can check it for errors and identify what steps you need to take to improve it.
Avoid Late and Missed Payments Through Online Bill Pay
Setting up online bill pay is an easy and convenient way to avoid late payments.
And this is important, because a payment history has the greatest impact on your credit score.
In fact, according to nerdwallet.com, a late payment (more than 30 days past due) can take as many as 100 points off your credit score.
Did you know that Persons Banking Company offers online bill pay? Bill Pay, available with online banking, allows you to pay your bill in just a few clicks.
You can …
- Pay any company or person
- View bill payment history for easy recordkeeping, and
- Schedule same-amount recurring payments to occur automatically.
Pay More Than Your Minimum Payment Each Month
According to experian.com, your credit utilization rate is, “how much you owe divided by your credit limit.”
Generally speaking, it’s a good idea to keep your credit utilization rate under 30 percent.
And one way to do this is by paying more than the minimum payments due, because chipping away at your revolving credit helps keep your credit utilization rate low.
To Sum It Up
- A credit score is a number, ranging from 300-850, that lenders use to determine your creditworthiness.
- Your credit score is how mortgage lenders and other financial institutions decide whether or not to provide you with financial credit.
- You can increase your credit score by checking your report for errors and identifying what’s decreasing your score; signing up for online bill pay; and paying more than the minimum payment due each month.
Did you know that Persons Banking Company offers personal credit cards?
Call us or stop by one of our branches today to learn more!