Building a Good Credit Score

Why do you want a good credit score?

You want a high credit score because it can save you thousands of dollars on interest and allow you to have lower monthly payments.  When you apply for a credit card or loan, your financial institution looks at your credit score to determine your interest rate.  The lower your score, the higher your interest rate.  Your score tells lenders if you are a risk to make payments on the money you borrow.

What impacts your credit score?

Your credit score is broken down into 5 parts:

  1. Payment history 35%
  2. Amounts owed 30%
  3. Length of credit history 15%
  4. New credit 10%
  5. Types of credit 10%.

How do you raise your credit score?

Develop a plan and stick to it.  One of the simplest ways of raising or maintaining your credit score is by making your payments on time.  Keeping your balances on credit cards below 25% of your available limits can also boost your score.  Keep inquires and new accounts to a minimum also.  It can raise a red flag to the credit bureau if you open several new accounts within a short period of time.  Conventional  wisdom is that you are going to use those new accounts to borrow  a lot of money which makes you a statistically higher risk.

Other reasons my score could be low

Not everyone has poor credit because of missed payments.  You might just be starting out and new to credit.  College students, recent grads and young professionals for example.  Tri-Lakes Federal Credit Union has options for you.  Secured credit cards or secured loans are a good option for someone looking to rebuild or establish credit.