Four Ways Use Your Credit Cards to Improve Your Score
Establishing and maintaining good credit is an extremely important component to helping you reach your financial goals. Why? Because access to credit (a loan, credit card etc.) can be used to help facilitate the purchase of goods and services that otherwise may not be possible. Take purchasing an automobile, or home, for example. These are large ticket items that many people don’t have the cash to pay for outright. As a result, a loan is often needed in order to make these items more attainable. To get a loan, you need good credit. Generally speaking, the better your credit score, the lower the interest rate or APR on your loan, which makes borrowing money more affordable.
Your credit score is a three digit number that tells a lender how likely you are to pay your credit obligations as agreed. There are three main credit bureaus that create your credit score – Equifax, Experian and TransUnion. These agencies receive information from creditors, usually monthly, about whether you are making loan and credit card payments on time. They also collect information about bankruptcy filings, court-ordered judgements, tax liens, and other public information from courthouse records. They then create credit reports with the help of scoring models like VantageScore and FICO.
The scores usually range from 300 to 850. Each lender has their own guidelines as to what good credit means but generally speaking, a credit score of 300 is considered poor credit and 850 considered excellent credit. However, any score above 690 is considered good credit. Having a score below 690 could indicate that improvements may be needed in how you manage your credit.
Your credit score is dependent on a variety of factors including your payment history, your total debt balance, new credit, length of credit history, and credit mix. Whether you need to build your credit history or improve your credit score, using a credit card to make your everyday purchases can help you do both. That’s because using credit cards wisely can help improve many of the factors that make up your credit score. Here’s how:
Managing or improving your credit starts with knowing where you stand. Therefore, it’s important to view your credit report at least once per year. Doing so also helps protect yourself against identity theft by providing you with the opportunity to potentially catch fraudulent or suspicious activity that may affect your score such as new and/or unpaid credit accounts that you didn’t open. Per the Fair Credit Reporting Act (FCRA), you may order one free copy of your report from each of the credit reporting companies (Equifax, Experian and TransUnion), at least once every 12 months. You can request these copies of your credit report each year by visiting annualcreditreport.com.
Managing and improving your score is a journey, not a destination. It requires good financial habits and ongoing discipline to achieve and maintain a good credit score. Fortunately, something as simple as using one or two credit cards and managing them responsibly can help you get there. FNBO has a variety of credit cards available to help meet your spending needs. Whether you want rewards, cash back or a great rate, we’ve got your back.
The articles in this blog are for informational purposes only and not intended to provide specific advice or recommendations. When making decisions about your financial situation, consult a financial professional for advice. Articles are not regularly updated, and information may become outdated.