Credit plays a critical role in your financial health and will impact just about every aspect of your life! Did you know that using 50% of your available credit limit may impact your credit score and that single act could play a significant role in the interest rate on your mortgage and/or auto loan? Did you know that a single late payment could show up for seven years on your credit report? Seven is often referred to as a lucky number, but not in this case. Understanding credit and your credit score will empower you to make sound financial decisions.
There are several credit scoring models used to calculate your score. It isn’t guaranteed that all of your accounts will appear on every credit report. Therefore, you should pull your credit reports using the three major credit reporting bureaus at least annually: Equifax, Transunion and Experian.
According to the Fair Isaac Corporation, 90% of top lenders use FICO scores. Your score represents your level of credit risk. Generally, the higher the score, the lower the credit risk. Some benefits of a high credit score include, but is not limited to quicker loan approvals, higher credit limits, lower interest rates, and flexible lending options.
As we observe National Credit Education Month, here a few ways to maximize your score to help reduce the cost of credit.
- Pay your accounts on time – avoid late payments
- Keep your overall credit utilization at 30% or less
- Research lending products before applying
- Eliminate your debt by paying it off
- Avoid excessive inquires (max 2 is ideal)
- Strategically open and close accounts
- Protect personal identifiable information (PII)
- Check your credit report quarterly and report inaccuracies immediately
Embrace these tips and you can have a healthy credit score.
LaToya D. Cheek
Senior Accountant