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Time to dust off your credit report
March 24, 2017
Many of us are in spring cleaning mode but as we tidy up the rest of our lives, don't let your finances go untouched. It's time to dust off your credit report and take a fresh look on how it matches up to your yearly goals.
Your credit report contains vital elements that can make or break your financial . The following are major factors to contribute to your overall score:
• Payment history - Arguably the biggest factor in your credit history / score. Current and historical delinquencies come into play including late payments and outstanding unpaid items
• Amounts owed - outstanding debt balances, both in terms of dollars owed and percent of available credit
• Length of credit history - The amount of time you have had your open credit lines weighs heavily into your score.
• Pursuit of new credit - generally these are called inquiries and affect your score, but not nearly as much as other categories
• Types of credit in use, such as a mortgage, car loan, credit cards, and unsecured loans
The most common model for credit scoring is the FICO score. FICO scores range from 300 to 850 with the higher the score, the lower the risk of default. A “good” score is a number that matches the level of risk a lender is willing to accept for a particular loan or credit card. For example, a score of 750 may qualify you for a gold credit card, whereas a score of 675 may indicate you’re a better match for a standard card. What’s considered a good score will vary from lender to lender.
While you can improve your credit score, it is unlikely that any single action you take will have a large impact on your score immediately. That’s because your score reflects your credit pattern over time.
With this in mind, there are things you can do now that will improve your score in the future:
• Most importantly, pay your bills on time. Delinquent payments and collections can have a major negative impact on your score. As delinquencies get older and you pay all other obligations on time, the delinquent information has less impact.
• Pay down your balances. High outstanding debt can affect your score.
• Apply for new credit sparingly. “Shopping” for credit can have an adverse effect on your score. Support good credit habits like paying bills on time, using revolving debt responsibly, and avoiding a large and quick build-up of new credit.
For additional information, you can talk with a certified financial expert that can review your credit report and help you carve a path towards your financial goals - and at no cost to you! Central Sunbelt offers free financial counseling for all members by phone and online chat so don't hesitate to get started today!