Your Credit Score

When we lend money, we have to be reasonably sure the loan will be repaid.  If it isn’t, it affects all members as their savings are used to fund member loans.

One of the things we consider when making a loan decision is your score from Transunion FICO FClassic 04 Scoring System.  This system is similar to a FICO score.

The score distills your credit report and other factors into one three-digit figure which measures creditworthiness.  Scores range from 300 up to 850, the higher your score, the better your credit.

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How your credit score is determined

Your credit score has five components:

  • Payment history
    Do you pay your bills on time, or have you been late or missed payments?  Have you failed to repay any loans?
  • Current debts
    How much do you owe right now, to how many creditors, and the ratio of your debt to your available credit limits.
  • How long you have been using credit
    The longer you’ve used credit responsibly, the better your score.
  • How much new credit you’re applying for
    Applying for a lot of credit can be a negative indicator.  That’s something to think about when the department store offers you a 10% discount for opening an account with them.
  • Types of credit
    Having a lot of unsecured debt, such as personal loans and credit cards, can be more damaging than secured debt such as mortgages and auto loans.

Repairing your credit score

If you have been denied credit because of a poor credit score, here are some things you can do to improve your rating.

  • Make on-time payments
    A year or two of on-time payments demonstrates that you’re a responsible borrower.
  • Keep your debt ratio low
    Try to use no more than about 40% of your available credit.  It’s better to have moderate debt on several cards than to be maxed out on one card.
  • Keep your oldest accounts open
    You should close unused accounts, but since your score is partly based on longevity, close your newest accounts first.  They don’t do much to improve your score.

Free Credit Report

Be an informed consumer and review your report annually. Start now by clicking here.