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Financial Advice

Understand Your Credit

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Get a Better Credit Score

A credit score is a snapshot of your credit risk picture at a particular point in time stated as a number. Credit scores can range from 300 to 830. The higher the score, the better. It changes as information is added, changed or removed from a credit report. There are many scores and score models available to lenders. UFCU uses the Fair, Isaac & Co. (FICO) score. A credit score is calculated by a mathematical equation that evaluates many types of information from a credit report. By comparing this information to the patterns in hundreds of thousands of past credit reports, the score predicts the future level of credit risk.

5 factors that determine your credit score:

  1. Payment history: What is the track record? This represents 35% of the score.
  2. Amounts owed: How much is too much? This accounts for the next 30%.
  3. Length of credit history: How established is the history? This represents 15%.
  4. New credit: Is more debt being taken on? This is 10% of the total.
  5. Types of credit in use: Is it a healthy mix? This is the final 10% of your score.

Here are some tips to improve your score:

  1. Pay bills on time. Delinquent payments, collections, legal judgments, and bankruptcy all have a negative impact on a score.
  2. Keep balances low on credit cards and other “revolving credit”. High outstanding debt can affect a score.
  3. Apply for and open new credit accounts only as needed. Don’t open accounts just to have a better credit mix. It probably won’t raise a score and may actually lower it.
  4. Pay off debt rather than moving it around. Also don’t close unused cards as a short-term strategy to raise a score. Owing the same amount by having fewer open accounts may lower a score.
  5. Make sure credit report information is correct. It doesn’t affect a score to request and check a credit report. If errors are found, contact, the credit reporting agency and the lender.