Understanding Credit Scores

Your Credit Score and You

Credit is an important part of our lives. Your credit score is a snapshot of your credit use at a particular point in time, stated as a number. This number predicts how likely an individual is to pay bills and make payments on time.

Cumberland County FCU is here to help you:

  • understand how a good credit score helps you
  • demystify the world of credit and the FICO® credit score
  • create a plan to improve your score
  • maintain your already good score

CCFCU Members looking to improve their credit scores or struggling with repayment can schedule free financial counseling sessions with one of our Credit Union Certified Financial Counselors. Learn More

Our financial counselors can go over best practices to help members maintain good credit. Good Credit Tips

What You Should Know About Credit Scores

Your credit score is a number that reflects the information in your credit report. Your credit report is a record of your credit history. It includes information about whether you pay bills on time and how much you owe to creditors. Your credit score can change, depending on how your credit history changes.

Your credit score can affect whether you can get a loan and how much you will have to pay for that loan.

Scores range from a low of 320 to a high of 844. Generally, the higher your score, the more likely you are to be offered better credit terms.

score-range

How your score compares to the scores of other consumers

 

 

 

Five Main Categories Compiling a FICO® Score

Payment History (35%)The good news: Paying bills on time is good. The bad news: Missing payments can really sting. If you tend to miss payments, you may want to consider signing up for automatic bill pay to ensure payments are made in a timely fashion.
Amounts Owed (30%)An assessment of how much you owe (on mortgages, equity loans, credit cards, car loans, etc.) and how much credit you have available. For example, if you have 5 credit cards and each has a $20,000 limit, you have $100,000 in available credit. The bureaus are looking for responsible use of credit.
Length of Credit History (15%)The longer you’ve had credit, the better your score will be. If you’ve had credit with the same issuers for lengthy periods, even better. Jumping around from card to card is not good for your score.
New Credit (10%)The credit bureaus look at the number of accounts you’ve opened recently, the number of credit inquiries made about you by creditors and the time that has elapsed since those inquiries.
Types of Credit In Use (10%)This is the mix of the types of credit you have. Typically, a mix of revolving credit (credit cards) and installment loans (mortgages, car loans) indicates that you know how to manage your financial affairs.

 

Checking Your Credit Report

You have a right to dispute any inaccurate information in your credit report. If you find mistakes on your credit report, contact the consumer reporting agency. It is a good idea to check your credit report to make sure the information it contains is accurate.

Under Federal Law, you have the right to obtain a free copy of your credit report from each of the nationwide consumer reporting agencies once a year. To order your free annual credit report call toll-free: 1-877-322-8228; visit: www.annualcreditreport.com; or mail your completed Annual Credit Report Request Form (which you can obtain from the Federal Trade Commission’s website at www.ftc.gov/bcp/conline/include/requestformfinal.pdf) to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

How Your Credit Score is Compiled

The FICO® score is the most widely used credit score model in the country. It is named after the Fair Isaac Corporation, the company that devised this statistical model to help inform lenders. It compares the information in your credit report to what’s on the credit reports of thousands of other customers. Generally, the higher the score, the lower the credit risk.

The three credit bureaus (Equifax, Experian, and TransUnion) each have their own version of credit scoring, which means that you actually have not one, but three FICO® scores. While your score will vary based on how the bureaus compile their data, the five major components that make up your score are consistent.

 

Source: “What Is a Credit Score?” My Credit Score: Understanding All 3 FICO Credit Scores. MyFICO, n.d. Web. 29 June 2015. <http://www.myfico.com/CreditEducation/CreditScores.aspx>.