Give Credit Where Credit Is Due
Your credit score is based on your credit report.
You've heard of taking credit. Giving credit where credit is due. You probably wouldn't make it through high school without a little extra credit. Do you know there's another kind of credit, the kind that lets you borrow money for big purchases such as a car?
If you can get it, and what you will pay, depends on a special kind of grade. It's called a "credit score."
What's a credit score?
Your credit score is a lot like the A, B, and Cs on your school report card. Just like your grades show what kind of student you are, your credit score is a personalized report that shows what kind of money manager you are.
Your credit score is a three-digit number that helps lenders decide whether to lend you money or not. It's based on a mathematical formula—but mostly, it's based on your habits and the past use of credit.
More About the ScoreA high score (800 or higher) shows that you have the ability to pay back your debts on time.
Sometimes, your credit score is referred to as a "FICO score." That's because the company that developed the computer software that determines one kind of credit score is Fair Isaac and Company.
Credit union lenders don't have to use FICO scores. They can use hundreds of different scores or create their own scoring models.
CloseHere's an illustration:
Your friend Steve always asks you for money to get a soda during study hall. No matter what day it is, he's always hitting you up for an extra dollar. And he never pays you back. Steve just asked you for $10. Should you give it to him?
Before you decide, consider his track record:
- He asks you for money all the time.
- He's never paid you back.
- And then he always asks for more.
Even if he intends to pay you back, he doesn't even have any money to do so. He doesn't have a part-time job or an allowance!
Get a free copy of your credit report
Get a Free Copy of Your Credit ReportYou can request a free copy of your credit report:
You also can mail a standardized form. Find the instructions on how to download, print, and mail it on the Equifax website.
CloseFrom that information, you know you'd never see that $10 again and he'll end up asking for more anyway.
Congratulations! You've just used an informal credit score. You've decided not to lend Steve the money based on his credit habits, which in this case aren't such good ones.
This is the same way that credit agencies decide whether to let you use credit. They use a credit score based on your credit report.
You and Your Credit Report Your credit score is part of your credit report. Your credit report shows:
- How many credit accounts you are using: credit cards, car loans, or even student loans. Your credit report shows how much you owe, how much you've paid, and how long you've had the account.
- How many inquiries have been made on your credit: your own, and those of companies that want to pre-approve you for offers they extend. A lot of inquiries on your credit report aren't a good thing.
- Important legal information: whether you've had to declare bankruptcy, or whether your belongings have been reclaimed because of failure to pay.
Close Your credit score shows how much money you've borrowed, how much you owe, and how well you've done at paying it back. It follows you wherever you go and can change over time.
What does it do?
A credit score is a big deal because as you get older, it can affect many things about your life, like:
- Getting a job
- Get Hired!
Your odds of being hired for the job you want are better with a good credit score.
It's true! Credit is a big deal these days. Many employers run credit checks on new employees before even offering them the job.
Close Renting an apartmentGet That Apartment!
With a good credit score, you can rent that apartment you really want.
Even landlords can look at your credit score before they decide to rent you that bachelor pad.
In many cases, bad credit = no apartment for you. And let's face it; no one wants to live in the parents' basement forever!Close - Buying a house or carGet That Car!
With a good credit score, you have a better shot at getting the car&mdashand other things you really want—when you really want them.
You'll also be able to pay for emergencies even if you don't have the cash, such as if your computer crashes and you need to replace it immediately.
Close - Getting phone service or car insurance
Unpaid speeding tickets? Big Deal
Unpaid Speeding Tickets? Big Deal! Many cities are starting to use collection agencies to chase down small debts that are more than 30 days old, like:
- Unpaid speeding tickets
- Library past-due fines
It may sound trivial, but the unpaid fines amount to millions of dollars for cities. What does this mean to you?
The credit bureaus can include the information on their credit reports. This can damage your credit score—and it can stay on your report for seven years.
It's in your best interest to make arrangements to pay fines before they go to a collection agency.
Collection activity can stay on a credit file even after you pay the bill. Then you have to battle a collection agency; that can be an ordeal.
Close That's because your credit score helps lenders, employers and landlords determine how likely you are to pay your bills on time, every time.
The better your score, the more options you will have. With a good credit score you'll earn a better interest rate on your loans too...
| Westerra Credit Union | What makes credit unions so great? Members like you.
Every dollar you invest in your credit union earns you money while other members borrow it.
When you're ready for a loan, other members' savings will be there to help you out at the lowest possible cost. |
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