Tips for Building Your Credit Score

If your credit score could use a boost, read these foolproof tips

There’s a certain three-digitCreditScore_Featured number that can make all the difference between being denied or approved for credit, and whether you’ll receive a low or high interest rate. That number is called a credit score, and it’s derived from your payment history, accounts owed, length of credit history, types of credit used and other factors.

Many of the credit-related decisions you make can have an impact on your credit score. For example, skipping a payment on a credit card bill can have a negative impact on your score. Your credit score defines you financially, and if you do something to negatively impact it, you could face a risky financial future with poor credit.

“A low score warns lenders that you might be an unreliable borrower, which can thwart you from getting the credit you need,” writes Credit Karma contributor Jenna Lee. “A high credit score can save you tens of thousands of dollars in interest over the life of your loans.”

So how can you build up your score in the unfortunate event it’s not where you’d hoped? Read on for expert advice on improving your credit score.

Get rid of small balances on several cards. “A good way to improve your score is to eliminate nuisance balances,” says John Ulzheimer, president of consumer education at Credit Sesame. “That way, you’re not polluting your credit report with a lot of balances.”

Since your credit score takes into account how many of your cards have balances, charging a few dollars on one card and then a few on another, instead of using the same card to make multiple purchases, can negatively impact your credit score. To build your score up again, pay off all the small balances you have on your cards, and then use just one or two cards for the majority of your everyday purchases.

Pay bills on time. If you’re skipping payments or paying them late, your credit will suffer. If you’re struggling to pay bills by their deadlines, try setting reminders on your smartphone or leaving sticky notes on your desk with the payment information and deadline for all your bills. Or hire a financial planner to help you get organized, which will help with paying bills on time.

“It isn’t necessarily hard — it just takes discipline,” says Hitha Prabhakar, a retail and consumer analyst and spokesperson for Mint.com.

Keep old debt. It sounds counterintuitive, but it’s actually better for your credit score if you leave old debt on your report. Some of that debt is good for your score, and trying to get older accounts off your credit score simply due to the fact that they’re paid off isn’t wise either.

Why? The longer your history of good debt, the better it is for your credit score. When you attempt to eliminate old good debt, it’s like getting great grades throughout school and trying to get your records erased down the line. You want to keep it around.

Get rid of student loans. If feasible, try to pay off those pesky student loans in a timely manner.

“If you pay your student loans in full and on time each month, the credit bureaus will make a record of that on a continuing 30-day basis,” writes contributor for NerdWallet Divya Raghavan. “And that will demonstrate to future lenders that you can be trusted to handle money responsibly.”

Keep new accounts to a minimum. Every time you open a regular or retail credit card, or even just apply for one, your report is looked at to determine whether or not you’ll receive the credit.

“Since a lot of hard inquiries may make it look like you’re desperate or aren’t getting approved for credit, it’s best to minimize how often you apply for more credit,” says Lee.

“You just don’t want to do anything that would indicate risk,” explains Dave Jones, retired president of the Association of Independent Consumer Credit Counseling Agencies.

Your credit score is an important part of your financial success. As an AOFCU member, you are entitled to a FREE Credit Score Analysis. We can offer a comprehensive list of actions you can do based on your credit report to help you raise your credit score.
Ask for your FREE CSA today!

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.

Credit Scores and Loans

The relationship between your credit score and the loan you need

If you’re interested in applying for a loan in the near future, you may be wondering about the relationship between credit scores and loans. Not only does your credit score impact the type of loan you can receive, loans also affect your credit score. The following information will help you understand more about the ways that loans and credit scores impact each other.

Credit score affects loan interest rates
When you need funds for a large purchase, such as tuition, a new vehicle or a home, it’s important to understand all of the factors that will be important during the loan application process. Your credit score is one of the most important of these factors. If you already know your credit score, you’re one step ahead of many people, but you still have to know exactly what it means.

“Today’s economy runs on credit,” states Erin Peterson from Bankrate. “Good credit can be the make-or-break detail that determines whether you’ll get a mortgage, car loan or student loan.”

Your credit score represents your financial history and paints a picture of how responsibly you have used your credit. Lenders use this information to assess how likely you are to repay a loan. If you have a low credit score, lenders fear that you may not be able to pay off your loan, which will cost them money. In order to balance this risk, lenders offer people with lower credit scores loans with higher interest rates.

“If you have a higher mortgage rate because of a low credit score, it means you’ll be paying that much more in interest in the end,” according to Elizabeth Rosen, Banks.com contributor. “Thus, a strong credit rating can help secure a low mortgage rate, which gives you lower monthly mortgage payments overall.” This is why it’s important to pay attention to your credit if you need to secure a loan.

Loans also affect your credit score
Your credit score has a big impact on your ability to get a loan, but loans also affect your credit score. The application process itself can have an impact on your credit score because each time a lender checks your credit, your score goes down a few points.

“That’s because 10% of your credit score comes from the number of credit-based applications you make,” according to About.com guide LaToya Irby.

Fortunately, this won’t hurt your ability to shop around to find the best loan because there is a grace period during which multiple lenders can check your credit without your score going down. This means that the second lender you speak with will see the same credit score as the first, so you have the opportunity to receive competitive offers.

“Even after you’re done rate shopping, the loan inquiries are treated as a single application rather than several,” explains Irby. “That window of time is between 14 and 45 days depending on which credit score the lender checking your score is using.”

Any loans that you have now can also impact your credit score. You can improve your credit score and prospects for future loans by making payments for any current debt on time. Irby notes that “payment history is 35% of your credit score. That’s more than any other credit score factor.” This also means that paying late or defaulting can seriously harm your credit, so be sure to take your current financial responsibilities seriously.

The balance of your current loans also affects your credit; you gain credit points as you pay back the balance.

“The larger the gap between your original loan amount and your current loan balance, the better your credit score will be,” states Irby.

Your credit score and loans go hand-in-hand. Good credit can help you receive a good loan, and good loan repayment patterns can help you achieve good credit. The steps you take today to repay your loans responsibly and take care of your credit will boost your ability to get a great loan in the future.


Used with Permission. Published by IMN Bank Adviser
Includes copyrighted material of IMakeNews, Inc. and its suppliers.

Six Myths About Credit Cards

Credit cards can be an incredibly valuableshutterstock_64945411 part of your financial toolbox. With the amount of credit card advice offered on the Internet or by friends and family, it can be difficult to separate fact from reality. Suggestions about the best way to cook eggs so that the shells peel off easily or chop an onion without crying may contain more fiction than fact, but these innocent pieces of misinformation aren’t especially harmful. Credit card myths, on the other hand, can be damaging. Here are six credit card myths that you may have heard before and maybe even repeated. The corresponding facts will clear up the confusion:

1) Credit or Debit? It Doesn’t Matter
Unless you have a personal assistant who does all of your shopping, you are probably asked “Credit or debit?” several times a day. If you answer, “It doesn’t matter,” then you are perpetuating this first myth. Even if your credit card has the same logo as your debit card and you monitor them on the same site, they don’t do the same thing for your finances. Only purchases made on your credit card affect your credit score. If you use your credit card reliably and pay your bill responsibly each month, you will build credit, so stop to consider this next time you swipe your card. Your credit score can also be harmed if you do not use any credit at all.

2) You Need to Pay Only the Minimum Balance
A credit card statement lists several figures in summary of the previous month’s activity. These include the balance of the previous statement period, minimum amount due, APR and total available credit. Checking your statement online gives even more information, including current balance, current available credit and activity since the previous statement. With all these numbers to consider, you may zero in on the phrase “amount due” when you write your check or pay online. The minimum amount due is not the most important figure, however, because it is only the amount of money that you need to pay to avoid a late fee or other penalties. The total balance of the previous statement period is actually the complete amount owed. If you pay only the minimum balance, you will be charged interest on the remainder. This is how credit cards make money and why they typically suggest such low minimum balances.

Furthermore, if you avoid paying your full balance because you’ve heard that having a balance is better for your credit score, you are paying interest for no reason. MSN Money contributor Liz Weston clears up the confusion, stating that “your credit reports and scores don’t ‘know’ whether you’re carrying a balance or paying it off in full every month.”

3) You Should Always Pay Your Current Total Balance
If you have focused on the total balance of your online statement, you are in better shape than are those who pay only the minimum but don’t fully understand how much they owe. Paying off the full balance is important, but it is the full balance from the previous statement period that matters. The total balance includes both the previous statement balance and all activity since that statement. You will not be expected to repay those new charges, however, until they appear on your next statement. Paying just the previous statement balance and not the total balance will not hurt your credit or accrue interest.

4) There Is No Minimum Credit Card Purchase
If your desk drawers are full of packets of gum that you’ve grabbed in check-out aisles to bolster your bill to a minimum credit card purchase amount, you may be interested to know that this practice is not technically legal. Although not usually enforced by credit companies, there is no true minimum purchase necessary to use your credit card. Stores enforce this to offset the fee they pay on each purchase made with a credit card. If you are uncomfortable with this practice, you can seek out local businesses that do not enforce minimums or that charge a small fee for credit card transactions on small purchases, which is a more transparent policy.

5) Your Fixed Interest Rate Will Stay Fixed
If you have a fixed interest rate, you may think that the case is closed, but that is not so. In fact, you may find that your rate increases if you miss a monthly payment, fail to pay the full amount, transfer your balance to a new card or take a cash advance. Make sure to find out how much you will be penalized for these activities in order to decide if they are worth the price.

6) You Should Use All of Your Credit
Even though you are allowed a certain amount of credit, you do not have to use all of it. Yes, using little or no credit can negatively affect your credit score, but so can using all of your credit. Paul Sisolak of the website GoBankingRates.com says that “creditors also make use of a term called ‘low utilization,’ which means that using a smaller amount of credit in your account looks better to the credit bureaus, and subsequently, your credit score.” Monitoring your credit score can help you determine if you are using an appropriate amount of your credit.


Used with Permission. Published by IMN Bank Adviser
Includes copyrighted material of IMakeNews, Inc. and its suppliers.

Traveling with Cards

The last thing you think about doing as you’re getting ready to leave for a trip is calling the credit union. It may seem like an odd thing to do, but it really is something that should go on your to do list before you leave for any trip. The reason is that it can help ensure that your debit and credit Cardscards will work when you reach your destination.

The geographic area where your card is active is something that is tracked. When card purchases suddenly show up across the country, or in areas that are far away from where you usually make purchases, it can appear as if your card has been compromised. When atypical card usage is noted, an alert is generated, and many times a hold will be placed on the card. Then we have to get in contact with you to confirm that you were the one making the purchases before regular usage of the card can resume. Obviously that can be a major inconvenience for you, which is the last thing you, or we, want to have happen, especially while your on a trip.

Fortunately, this whole situation is easily avoided by a making a quick phone call. Simply let us know when you plan on using your card far from home and we’ll note it. That lets us protect your account and makes sure that you can use your card when and where you wish without any annoying interruptions.

This leads into one other important habit that you should get into with everyone that you have a card from. That habit is to make sure that your contact information is accurate. In the event that we do receive an alert and put a hold on your card, we need to know how to get in touch with you. So, the next time you’re in one of our lobbies, simply ask to have the teller review the contact information on file. Or give one of our friendly call center reps a call. Any of them are happy to update your information so that we can get in touch with you in case of emergency.

Finally, it’s also always a good idea to have at least a bit of cash, or traveler’s checks, on hand in addition to any cards you may plan on using. That way, if something does happen, whether it’s a disabled or broken card or simply non-functioning ATMs at your destination, you’re covered. Following these simple tips can make traveling a lot less stressful and ensure that you have a good trip.

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