Understanding Credit Scores

9/26/2018 |

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Understanding Credit Scores

We all aspire to have good credit scores. But did you know that nearly half of Americans don't? The monthly struggle of paying bills and maintaining a healthy balance may leave you in a seemingly never ending financial burden.

When facing poor credit scores and credit card debt, it's beneficial to fully understand the basic functions of credit scores, as well as the steps you can take to ultimately improve your credit score.

What Are Credit Scores?

Credit scores are a three-digit number related to how likely you are to repay your debt. These scores are based on how often payments are made on time and how many accounts you have in good credit standing. There are three main credit bureaus: Equifax, Experian, and TransUnion. These credit bureaus create credit card reports to come up with a score, typically ranging from 300-850. The higher the credit score, the better.

How Do They Affect Your Banking?

Credit scores play an important role when it comes to borrowing money and getting a low rate. A borrower with a higher credit score is more likely to get approved, while one with a lower score may be charged with a higher interest rate. Additionally, consumers with higher credit scores tend to get the best interest rates, as well as the best credit cards. To determine whether or not you are approved for a credit card or loan, banks and lenders will look at your credit score. Every lender is different in how they determine what a good credit score is. Components may vary from lender to lender, so it's important to understand them and their significance for your specific lender. Overall, late payments, low balance, too many credit inquiries, and many other factors will hinder your credit score.

How To Improve Your Score

To improve your credit score, it's best to focus on one credit score at a time. Monitor your payment history and credit utilization, make all of your loan payments on time, and aim to keep the debt you owe below 30%. By sticking to a payment schedule and being mindful of your credit card usage, you will notice an improvement in your credit score as well as your financial habits.

Get a free credit report brought to you by TransUnion, Equifax, and Experian.

To learn more about maintaining a healthy credit score or managing your credit finances, stop in either one of our East Longmeadow or Springfield branches, or call our toll free number at 1-800-551-3556!

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