1. How your credit score is calculated. There are three national credit bureaus; TransUnion, Equifax and Experian that calculate your credit score, and your score can differ depending on the agency, as they may have differing information about your credit history. There are five major components to your credit score. Each of them is weighted differently.
- Payment history (35%) — The most important component of your credit score is your payment history. Do you pay your bills on time? Do you have history of late payments? If so, how late? Have you ever been turned over to collections? You can expect that late payments will deduct points from your score.
- Amounts owed (30%) — What's your overall debt load? If you've taken on too much debt, then your score could suffer.
- Length of credit history (15%) — How long is your record when it comes to managing credit? If you're brand new to the scene, then lenders will view you as a risky borrower when compared against someone who's been paying off debts for decades.
- New Credit (10%) — If you've just taken out a bunch of new loans and/or opened credit card accounts recently, your score is going to take a hit.
- Types of credit (10%) — A healthy mix of debt (a mortgage, a credit card, and a car loan) is viewed a little more favorably than debt consisting entiretly of credit cards. However, you don't want to open a new credit card account just have a "balance." Instead, focus on the other components of your score.
2. Request your credit report and score from the three national credit bureaus. The contact information for TransUnion, Equifax and Experian can be obtained online at their websites or from the Credit Info Center. The first thing you need to do is know where you are now, in order to fix any errors and determine where you need to improve. The information on the credit report is the data used to develop the credit score, so ensuring the information is correct is critical.
- You can obtain one free credit report per year from each of the three agencies. Therefore you should request one report every four months so you can continually monitor your reports
Let Savannah Postal Credit Union help you get on the right track. See one of our loans specialist's for more information on how to improve your credit score.