5 tips to manage your credit

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OCCU  -  03.21.2016

Among the many meaningful numbers in your life is one that has a huge impact in your financial affairs: your credit score. A higher score signifies good credit risk, potentially making you eligible for more borrowing opportunities, lower interest rates, and fewer fees. Managing your credit and improving your score are important financial goals. The tips below can help you maintain or improve your credit score.

  1. Check your credit report
    The first step on your journey to maintain or improve your credit is finding out your credit score and reviewing your credit report. The FICO score is the most frequently used type of credit score. It's a measure of risk that calculates the odds of you repaying lenders based on your financial history and the terms of the loan. To do this, it uses the information in your credit report. FICO scores can range from 300 to 850. The higher your credit score, the more likely you will be approved for loans and possibly lower interest rates. You can check your credit report once a year for free through the Equifax, Experian, and TransUnion at AnnualCreditReport.com. Once you view your report, look for any discrepancies or delinquencies and be sure to resolve them right away.
  2. Understanding different credit score inquiries 
    There are two types of credit score inquiries: hard or soft, depending on who is pulling your credit. When a lender or business obtains a copy of your credit report in response to an application for credit, it results in a hard inquiry. Hard inquiries can take a few points off your credit score. Soft inquiries occur when a person or company (a prospective employer, for example) checks your credit report as part of a background check. Soft inquiries have no effect on your credit score. Checking your own credit counts as a soft inquiry. That means you can check your own score as many times as you like without any risk of hurting your score. It makes sense to check your credit report and score regularly, particularly if you’re concerned about identity theft or reporting errors.
  3. Make payments on time 
    This one may seem obvious, but paying your bills on time is one of the simplest ways to earn and keep good credit. Potential lenders want to know if you typically pay your bills on time. This doesn't just include installment loans and credit cards, it also applies to things like your cell phone and utility bills. Consider utilizing bill pay or automatic payments to ensure your bills are paid on time.
  4. Length of credit 
    Generally, your credit score will increase the longer you have credit established. However, length of credit history doesn't overshadow the rest of the report. Negative marks on a credit report can bring down your score. Length of credit history is determined by how long your accounts have been open, with consideration given to your oldest account and your newest account, and how often you use those accounts. You should consider length of established credit before transferring balances from an old account to a new account. While a credit card company may offer a 0% Annual Percentage Rate (APR) on balance transfers when opening a new account, you should consider if trading old debt for new debt is worth the impact to your credit. Ultimately, if you're able to pay off the balance of your credit card with the 0% promotion, it will benefit you it the long run.
  5. Mix of credit accounts 
    Potential lenders want to know how you manage your debts. Having a mix of active credit accounts, such as credit cards, retail accounts, auto loans, and mortgages, allows potential lenders to see that you're able to manage debt responsibly. While having different types of credit accounts plays a role in your credit scores, you shouldn't open up credit accounts you don't intend to use.