Worth Its Weight In Gold

By Misty W.

You’ve probably heard a lot about credit and how important it is. But what’s the big deal? There’s so much in your everyday financial situation to keep up with. If you continue to pay the minimum  on your credit card, you should be good, right? Unfortunately, it’s not that simple.

Sooner or later in life, you’ll most likely need to get a loan. Need help with your tuition payments? Time to buy a new car? Ready to get your own home? Time to apply for a loan! When you apply, lenders will look for credit experience, which tells them how responsible and how consistent you are with your payments. The better credit score you have, the more likely it is you’ll receive a better rate. Now, many will focus on their monthly payment being manageable – but the lower rate you have, the less you’ll pay overall!

You build credit worthiness by making consistent payments on bills and loans; the longer the better. Lenders base the limit of what you can borrow on your credit experience.  Maybe you’re the kind of person who likes to pay cash for everything and doesn’t want credit cards or loans, because you don’t want to deal with any debt. While this is understandable, it’s incredibly important that you to have some kind of credit established. It helps lenders to see how much they can trust you to maintain a loan.

To build your credit, don’t overextend yourself with several different credit cards. Many businesses offer a variety of deals to encourage you to sign up for their particular card, we know! But this can cause a “high debt-to-income ratio”, meaning you have too much debt. The ratio is calculated by taking the amount of debt you have versus the income you’re getting.

Remember, it is perfectly okay to have a few credit cards, but try to only use them in emergencies. We understand that life happens and sometimes your credit line is the best option, but try not to use more than half of the available credit. It’s important not to max them out because using the entire allowable balance can have a negative impact on your credit score. Plus, once they are at maximum, it can be more difficult to pay them off; especially as high as some of the credit card rates are. Keep in mind, negative credit can remain in your credit history for 7 years and bankruptcies can remain for 10 years. Why risk that kind of stress?

So when making payments on your credit card or loan, try to pay more than the minimum and stay consistent. If they have a 0% interest rate, you definitely want to take advantage of that. Not having to pay any more than you already spent is the way to go! To pay off your balance during that promotional period, set up your own payment plan for the length of the offer period to make sure it will be paid off by that expiration date. That will save you a lot of money in the long run, a goal we always encourage!

If you have any questions related to your credit, send them to us via social media or the comments down below!

 

Get to Know Your Credit Score

Have you ever been uncertain about what the point of a credit score is? And how do you improve it? A credit score is a number that represents your creditworthiness. Basically, lenders use it to decide whether or not they want to offer you credit, like in a loan or credit card, and what kind of offer they’ll give you. The better credit score you have, the better deal you get, like a lower interest rate or down payment.

There are multiple credit scores you might get, because there are multiple credit-scoring companies, such as FICO or VantageScore. Depending on the loan you’re getting, you could have yet another score. Don’t worry about checking your score through credit-monitoring tools, such as through your bank account’s extra tools online. Only hard inquiries, like you would get when applying for a credit card or loans, will cause a dip in your score – but even that’s temporary.

Some people believe closing your unused card accounts can improve your score, but the average age of your accounts is a big part of it. So keeping your oldest card accounts can still help. Along those lines, only apply for new lines of credit as needed – you don’t want too many hard inquiries, or any more temptation to overspend. Lastly, paying your bills in full and on time might not build your credit much, but it’s still important, because if you don’t then your score will be hurt by it.

Credit unions like SunWest have “credit builder loans” to help you establish credit or improve your current score. The payments you make on the loan go into a certificate, and once you pay off the loan the funds are all returned to you. It’s a simple way to add to your payment history that’s being reported to the credit bureau.

Now that you know what a credit score is, check out your own. Generally, a good credit score is above 700, and if you’re above 760 it could be considered excellent. The higher the credit score, the better rates you’ll get when making big purchases, like buying a home or a car. If you need to improve your score, start working on some of our suggestions now so you can benefit sooner rather than later!