Your credit score and credit report play a crucial role in your financial life. They affect everything from loan approvals to interest rates and even job opportunities. Lenders use your credit score, based on your credit report, to evaluate how likely you are to repay borrowed money.
What is a Credit Report?
Your credit report is a full list of all your current debt accounts, including how much you owe, who you owe it to, and the monthly payments you’ve made. It also includes any accounts in collections, and whether you’ve filed for bankruptcy.
What is a Credit Score?
A credit score is a three-digit number, ranging from 300 to 850, that is a numeric rating of your credit report. This number tells lenders how responsible you are with debt. The higher your score, the better your chances of getting approved for loans, credit cards, mortgages, and rental applications.
Why Are They Important?
Many companies, not just financial institutions, run your credit score. Having a good credit score can:
- Avoid security deposits on utilities and cell phones.
- Secure rental housing.
- Open job opportunities.
- Lead to better terms, lower interest rates, and lower payments on mortgages, loans, and credit cards.
What Affects Your Score?
According to Experian, these are the five key factors affecting your credit score:
- Payment History – Paying bills on time is the largest contributing factor in your credit score.
- Credit Utilization – Using too much of your available credit can hurt your score. Aim to keep your credit usage below 30% of your credit limit.
- Length of Credit History – The longer your credit accounts have been open, the better. Keeping old credit accounts can boost your credit score.
- Credit Mix – Having different types of credit (mortgages, loans, credit cards) can up your score.
- New Credit Inquiries – Too many hard credit inquiries (when you apply for a new loan or a new credit card) in a short amount of time can lower your score.
How To Improve Your Score
- Pay your bills on time. Setting up Bill Pay in Online Banking is a great way to avoid missing due dates.
- Keep credit balances low. Use less than 30% of your available credit.
- Avoid opening too many new credit accounts.
- Check your credit report regularly.
Your credit score isn’t set in stone. With smart financial habits, you can improve it.
About 1st Summit Bank –
A true community bank for the past century, 1st Summit Bank primarily focuses on relationship banking for both consumers and businesses within our region. 1st Summit Bank provides banking, financial, and investment services through 17 full-service community offices and a loan production office within Cambria, Westmoreland, Blair, Somerset, and Indiana counties.
