Val's Voice

Everyone knows credit scores play an important role in our financial lives, but not many people understand why or how it all works. Further, it is really important to have a good credit score. Your credit score is based on how well you manage (or don’t) your credit usage and debt. Having a good credit score increases lenders’ willingness, like banks and credit unions, to lend you money with lower interest rates. Most of us will need a loan at one time or another in our life, which is why understanding and having a decent score is so important. I have outlined some frequently asked questions about credit scores below to help provide some clarity on credit scores and why they are important.  

1.       What is a credit score? Your credit score is basically your trustworthiness rating, and is based on your history of reliably paying down debt on time. If you have a higher credit score it is generally easier to get a loan and typically get a lower interest rate. It is important to monitor your credit score as it changes monthly. Credit Karma is a free site that allows you to monitor your credit standing. Additionally, you can request a free credit report once a year from AnnualCreditReport.com for the three major credit reporting agencies, Transunion, Equifax and Experian, .

2.       How does my credit score impact me? You might be surprised to find out how your credit score can impact you. Most everyone knows credit scores are used to obtain loans and credit cards from financial institutions, but they affect so much more. Rental agencies and landlords will look into (or pull) your credit score before allowing you to move into an apartment or home. Cell phone companies will pull your credit score before granting you a service plan, and utility companies such as cable and electricity providers will review your credit as well. You can see a more detailed breakdown of what your credit impacts here.

3.       How do I know if I have a good score? A good credit score is typically a 690 or above. There are a lot of factors that can determine your score. Making payments on time, the number of loans you have, the number of credit cards you have, the balances on your credit cards and the different types of loan you have all determine your score. Confusing right? Don’t worry; I am going to have a blog post soon from an expert on reading credit reports.

4.       What if I have a bad credit score? Bad credit doesn’t mean you are a bad person. Financial institutions will still lend to those with lower credit scores, but they may charge higher interest rates or put additional stipulations in place before approving the loan. The good news is you can improve your credit score, but it is going to take a lot of time and work. I will have a blog post soon on ways to improve your credit score from my friend who advises people on this very subject every day.

Stay tuned for more answers and tips regarding credit and credit scores! Meanwhile, if you have a particular question, feel free to email me at Val@rivervalleycu.org.