Understanding Your Credit Score

Today a great deal of attention is placed on credit scoring. At most credit unions, including TFCU, your credit score is a very important factor for approving loan requests and establishing lending rates. Understanding how your personal credit score is calculated can help you make sure you have the best credit rating possible!

Everyone has a unique credit history that affects their credit score. You have a direct effect on yours by your repayment history, use of credit lines, and credit inquiries. Public records, collections, and bankruptcy are all a part of that history. This information below can help you understand what makes up that score and how you can help to improve your personal rating. At the end of this article is information on how you can obtain a free copy of your credit report!

What Makes Up Your Credit Score?

Your credit score is made up of 5 major areas:

35% - How well you pay your current debts
30% - Your credit capacity (how much credit is available for use?)
15% - The length of time credit has been established
10% - The amount of debt you have outstanding, including opening dates and the number of inquiries
10% - The type of debt you have - installment debt can raise your score, revolving debt (credit card) can lower your score

Your score can be hurt by:

• Missing payments - irregardless of the $$ amount it can take up to 24 months to restore credit when there is 1 late payment!
• Credit cards at capacity - if your credit cards are "maxed out" you have no capacity.
• Closing credit cards out - this lowers available capacity.
• Shopping for credit excessively - when creditors access your report an "inquiry" is reported. Excessive "inquiries" can hurt!
• Opening up numerous accounts in a short period of time.
• Having more revolving loans (credit cards) in relation to installment loans (i.e. car loan).
• Borrowing from finance companies.

What doesn't affect the score?

• Debt ratio
• Income
• Length of residence
• Length of employment

How to improve your score!

• Pay down those credit cards!
• Don't close the cards, however, because your "capacity" will decrease. You don't have to use credit cards to establish good credit!
• Continue to make payments on time - even if you have one or two late payments. Older late payments will become less significant with time.
• Slow down on opening new accounts. Do not respond to offers for more credit cards when you receive them in the mail.
• Acquire a solid credit history with years of good repayment experience.
• Move revolving debt (credit cards) into installment debt (home equity loan).

Tropicana Federal has several ways to help you raise your score! Our "Fresh Start" loan can help establish your good repayment history and using the equity in your home or car to pay off revolving debt are just two. Visit one of our Financial Service Representatives for more information! When you apply for a loan at TFCU, our associates, upon application, will be happy to pull a copy of your credit report and review it with you.

You can also contact the credit bureaus directly! Most companies that have extended you credit will provide information to three major credit reporting agencies. It is recommended that you review your credit file regularly and check it for accuracy. The three major credit bureaus will provide a copy of your credit file annually at no charge. The free report will not show your credit score, however it will allow you to review your payment history and open accounts records. Click on the link below to access your free reports!