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All About Credit Scores

Credit Score All About Credit Scores
There can be a lot of confusion around credit scores… what they are, what they mean, how to check them… Let's cover some credit score basics together! 
 
What is a credit score?
A credit score is a number assigned to a person that indicates to lenders their capacity to repay a loan. Your score is created based on a number of variables including: 
  • credit payment history
  • amount owing on loans and credit cards
  • length of credit history accounts
  • types of credit accounts 
  • recent credit activity
What does your credit score mean?
Your score indicates the likelihood that you will repay a loan if one is granted to you. It can also help you assess you credit health. The higher the score on a scale of 300-850, the better credit you have. Each creditor has their own scale for what they consider good, but click here for an example of a credit score chart.
 
Why are credit scores important? 
Credit scores are important because they are a way to measure your likelihood to repay a loan which influences whether or not a lending institution will give you a loan, the size of that loan, interest rates, etc. Having a good credit score helps set you up for getting what you need when it comes to financing, whether that be a big loan for a home or a smaller revolving loan like a new credit card. 
 
How to check your credit score
There are three primary credit reporting agencies that collect your credit history: Equifax, Experian and TransUnion. These consumer reporting companies provide the information in your report to creditors, insurers, employers and other businesses that use it to evaluate your applications for credit, insurance, employment or renting a home. Each company will give you a free copy of your credit report, at your request, once every 12 months. You can request yours here.
 
How to raise a credit score
There are so many moving parts that can effect your credit score. Here are a few tips that may help you increase your score over time:
  • Review your score - make sure that your loan records are accurate and that accidental records due to misspellings or other errors aren’t being included on yours.
  • Set up automatic payments - by ensuring you never miss a payment, your credit will not take hits and decrease due to late payments. 
  • Apply for new credit sparingly - opening a new credit card or loan heavily impacts your credit. So be sure if you open an account, it’s something you will use long-term.  
  • Consolidate debt - refinance higher rate, revolving credit to lower, fixed rate financing. This will also help you pay down debt faster, a great way to improve your credit score. 
Still have questions?  Check out the Building Financial Capability playlist on our Finances And Budgets page. 
Written By
Global Credit Union
Member Financial Education and Engagement


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