Understanding Your Credit Score

What is a credit score?

Credit Scores are a number given to express your creditworthiness and how you’ve managed credit and debt. Understanding how they work can help you improve your credit history, qualify for lower interest rates and more. To better understand your credit score here are a few things you need to know. Your score is a crucial indicator of the health of your credit history. Most popular scoring models use a range of 300 to 850.

The three bureaus.

· Experian – website: www.experian.com

· Equifax – website: www.equifax.com

· Transunion – website: www.transunion.com

You may be able to obtain free full credit report from each bureau per their terms and conditions. Credit Karma offers Equifax and Transunion Vantage scores for free with monthly updates.


Factors affecting your score:

Good pay history makes up 35% of your FICO score. One missed payment may result in a drop of 10% to 35% on your score and may have a negative impact for up to seven years.

Amounts owed (capacity) is the total amount of debt you have, and it makes up 30% of your FICO score.

Length of credit history makes up 15% of your FICO score and is the average age of all your account.

New credit makes up 10% of your FICO score. New credit is considered the amount of new credit opened recently and any hard inquiries in the last two years.

Credit mix or types of credit you have makes up 10% of your FICO score.

Credit mix considers how well you can manage a diverse credit file meaning a healthy mix of revolving and installment loans. It is always a good idea to regularly track and monitor your credit report, not only to track your progress but identify any potential issues that may arise.

FICO vs Vantage score:

The two most used scoring models are FICO and Vantage. FICO is used by 90% of top lenders and creates specialized versions of its scoring models for auto lender and credit card companies. Vantage Score is found on Credit Karma and does not show your Experian report only Equifax and Transunion. Credit scores can vary depending on the scoring model used by FICO, Vantage score, and what information is being reported to each bureau.

Wayne Westland Federal Credit Union offers free credit reports on the last Friday of every month, identity theft protection, credit monitoring and financial counseling to help you better understand your credit score and credit report. Please contact us today to help take the first step towards your financial well being.


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