Tag Archives: Credit

Person holding tablet displaying a credit score of 810 on the screen

Understanding Credit Scores: How to Improve and Maintain Yours

A good credit score is essential for securing loans, getting favorable interest rates, and even renting an apartment. Understanding how credit scores work and how to improve and maintain them can significantly impact your financial health. Here’s a comprehensive guide to help you navigate the world of credit scores.

What is a Credit Score?

A credit score is a numerical representation of your creditworthiness, based on your credit history. Lenders use this score to assess the risk of lending you money. Scores typically range from 300 to 850, with higher scores indicating better creditworthiness.

Factors That Affect Your Credit Score

Several factors contribute to your credit score:

  • Payment History: Your track record of paying bills on time.
  • Credit Utilization: The amount of credit you’re using compared to your credit limit.
  • Length of Credit History: How long you’ve had credit accounts.
  • New Credit: Recent applications for new credit.
  • Credit Mix: The variety of credit accounts you have, such as credit cards, mortgages, and loans.

Checking Your Credit Report

Regularly checking your credit report is crucial for maintaining a good credit score. You can obtain a free copy of your credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) once a year. Review your reports for any errors or discrepancies and report them immediately.

Improving Your Score

Improving your credit score takes time and effort, but it’s achievable with these steps:

  • Pay Bills on Time: Consistently paying your bills on time is one of the most significant factors in improving your score.
  • Reduce Debt: Aim to pay down existing debt, especially high-interest credit card balances.
  • Avoid New Credit Inquiries: Limit the number of new credit applications, as each inquiry can temporarily lower your score.
  • Increase Credit Limits: If possible, request a credit limit increase to improve your credit utilization ratio.

Maintaining a Good Score

Once you’ve improved your credit score, it’s essential to maintain it:

  • Monitor Your Credit: Keep an eye on your credit reports and scores regularly.
  • Use Credit Responsibly: Continue to pay bills on time and keep credit card balances low.
  • Stay Informed: Educate yourself about credit and financial management to make informed decisions.

Common Credit Myths

There are many misconceptions about credit scores. For example, closing old accounts can hurt your score, and checking your own credit report does not affect your score. Understanding these myths can help you make better financial decisions.

  1. Myth: Checking your own credit report will lower your score.
    1. Fact: Checking your own credit report is considered a “soft inquiry” and does not affect your credit score. It’s a good practice to review your credit report regularly to ensure accuracy.
  2. Myth: Closing old credit accounts will improve your credit score.
    1. Fact: Closing old accounts can actually hurt your credit score because it reduces your overall available credit and can shorten your credit history, both of which are factors in your credit score.
  3. Myth: You only have one credit score.
    1. Fact: You have multiple credit scores, as different credit bureaus (Experian, Equifax, and TransUnion) and scoring models (FICO, VantageScore) may calculate your score differently based on the information they have.
  4. Myth: Carrying a balance on your credit card improves your credit score.
    1. Fact: Carrying a balance and paying interest does not improve your credit score. It’s better to pay off your balance in full each month to avoid interest charges and maintain a good credit score.
  5. Myth: Your income affects your credit score.
    1. Fact: Your income is not a factor in your credit score. Credit scores are based on your credit history, including payment history, amounts owed, length of credit history, new credit, and types of credit used.
  6. Myth: Paying off a debt will remove it from your credit report.
    1. Fact: Paying off a debt does not remove it from your credit report. The account will be marked as paid, but it will remain on your report for up to seven years from the date of last activity.
  7. Myth: Using a debit card will help build your credit score.
    1. Fact: Debit card usage does not impact your credit score because it is not reported to credit bureaus. Only credit accounts, such as credit cards and loans, are reported and affect your credit score.

Resources and Tools

Take advantage of tools and resources available to help manage and improve your credit scores. Many banks offer credit monitoring services and financial education resources to support your credit health.

By understanding and managing your credit score, you can unlock better financial opportunities and achieve your financial goals. Stay proactive and informed to maintain a healthy credit profile. Visit Peoples Bank & Trust today to learn more about how we can assist you in achieving your financial goals and securing a brighter financial future.

What is a Credit Score and Why is it So Important

What is a Credit Score and Why is it So Important?

We have all heard we need to have a good credit score, but many people do not know what a credit score is – this is ok, we are here to help! Having a good credit score is a lifeline for your future, so it is very important to know what a credit score is, how it can be positively and negatively impacted, and why it is so important to everyone. Take a few minutes to brush up on your knowledge of credit and how you can have a good credit score. 

What is a Credit Score? 

Credit scores have the ability to affect a lot in your life, so it is crucial to know what a credit score means and what yours is. Credit scores are a financial tool that determines each individual’s creditworthiness. A credit score is a number between 300 – 850 that is determined by your credit history. A high credit score means you are a responsible person who will repay your debts. 

Your credit score moves as you use and repay debts you have incurred. A bad credit score could result in a higher payment due to a higher interest rate or missing out on a purchase you’d like – such as leasing an apartment, obtaining a loan or credit card, purchasing insurance or a vehicle, etc. You may be asking – What if I do not have a credit score? Not having a credit score means you have not tied anything to your credit profile. This can often be a bad thing as you have no history of good credit or debt payment to a lender. 

What Does Your Credit Score Impact? 

Your credit score essentially affects your financial life. There are many good and bad ways to affect your credit. Your credit score plays a huge part in a lender’s choice to offer you any sort of credit. A credit score may also impact the amount of the deposit you have to pay for utilities, phone services, rental properties, and more. Your credit score impacts your interest rate or credit limit. 

What Impacts Your Credit Score?

Your credit score is impacted by five main factors that are evaluated when you take out credit. Your credit score is reported and updated by credit reporting agencies in the United States. The five factors that affect your credit score are: payment history, the total amount owed, the length of credit history, the types of credit, and new credit you use. 

How to Improve Your Credit Score

There are many ways to improve your credit, so if your score is on the low end, do not worry! Here are 4 ways to increase and improve your credit score:

1. Pay your bills on time – on-time payments for six months will positively affect your score. 

2. Use a credit card – contact Peoples Bank & Trust to open a credit card today!

3. Don’t close your credit card account – stop using the card rather than closing it as this could negatively impact your score. 

4. Take out a line of credit and make consistent payments on time. 

Why is Your Credit Score Important?

As you can see, your credit score is very important to be able to do the things you wish financially. Having a good score can affect you in many ways, so if it is low, it is important to work on growing the number. An excellent score ranges from 800 to 850 while a poor score is between 300 and 579. The middle range can be considered very good to fair and can affect the terms of the credit you are offered quite a bit, even if you are a few numbers off from the next range. 

As we have you thinking about your credit score, please reach out to Peoples Bank & Trust to discuss where you are at and how our services can positively impact you.

Peoples Bank & Trust Co.

Member FDIC

Equal Housing Lender

How to Get Smart with Your Credit

Today, practicing the simple credit concept of “living within your means” can be extremely difficult due to medical and housing costs growing more rapidly than income in many American households. However, this doesn’t mean you can’t manage your credit and debt responsibly.  Here are a few tips to help you get your credit on track, even when times are tough.

  1. Understand what credit is.  According to Finance Solutions Credit 101, credit is your “promise to pay in the future for purchases made today.”  You may be aware that when applying for credit with a lender, your credit report will be pulled to determine your payment history, amounts owed, credit history, new credit and types of credit, which is all taken into consideration when determining your credit limit.  Understanding the terms and fees associated with your credit will help you make more educated decisions in terms of lenders, especially if you were to become overextended.

 

  1. Maintain healthy debt.  Maintaining healthy debt is all about making good choices when it comes to debt.  This means developing a happy medium in terms of credit history, exercising timely bill payments and managing a variety of credit accounts.

A good example of this is the attractive additional 25% off at your favorite store in exchange for signing up for their store credit card at the moment of purchase.  Doing this once or twice is harmless enough, but if you are maintaining credit cards for a variety of stores, this can negatively affect your credit score by repeated hard inquiries and hidden terms not discussed in the rushed sign up process.  Overall, the potential damage to your credit may not be worth the immediate savings.

 

  1. Stay out of the credit danger zone.  Similar to points made in the previous two tips, you need to make good choices when it comes to purchasing on credit.  Watch your accounts carefully to avoid overextending yourself, keep your balances low and always pay your bills on time.

If you are in a position where you can’t pay your bill on time, communicate with your lender to make them aware of the situation and determine an alternate rate of payment.  And we get it, emergency expenses come up, but the best way to handle these is to do your best to prepare for them.  If you don’t have an emergency savings fund built up, start one today and prepare yourself for the unexpected to avoid unplanned credit charges.

Managing your credit responsibly can be extremely difficult, and due to unforeseen circumstances you may already be in over your head.  Reach out to us to discuss your financial management needs today.  We are here to help you get on track!