Do You Know Your Credit Score?
Let's start with the basics. What is a credit score?
A credit score helps lenders, like Pyramid, predict how likely you are to pay back a loan on time. A combination of factors go into how your credit score is calculated, including how long you have had credit (credit history), how much debt you owe, whether you pay your bills on time (payment history), and if you've ever defaulted on a loan (didn't pay it back). There are a number of sources for credit scores, like the popular FICO score, created by the Fair Isaac Corporation. Scores can range from 300 to 850. The higher the score, the better rates and terms a borrower can get.
So why is it important for you to know your credit score?
Companies use credit scores to decide whether to offer you an auto loan, credit card, home mortgage, or even approving you for an apartment or rental home. Not knowing could cost you in the form of higher interest rates and higher payments. It might even prevent you from being able to open those accounts at all! "The most important thing you can do is to know what you owe," said Dustin Powell, Vice President of Lending at Pyramid. "Setting up balance alerts, regularly checking what's adding to those balances, and paying attention to the amount of interest you're paying can be a real eye opener," he added.
"We have a tendency to under estimate what we owe. We think we don't owe too much or we're not paying that much in interest. But if we're not careful, we eventually find ourselves overwhelmed by the amount of debt we actually have. Paying attention to balances and how you're using credit will go a long way to changing how you look at debt, and ultimately help build strong credit," according to Powell.
Here are a few steps you can take to improve your score:
- Pay your bills on time.
- Manage your debt. That means don't max out your credit cards!
- Don't open too many accounts too quickly.
- Don't close established accounts. It helps show your credit history.
It takes time to build a strong credit score. Once you’ve done it, you'll reap the rewards of your efforts in the form of good rates and terms on your next loan.
We're happy to meet with members to review your credit report and provide some insights and tips to help you improve your financial life. Call us at (520) 795-7950, or visit us at any of our five Tucson area branch locations.