Understanding Your Credit: A Key to Financial Well-Being

Having good credit is more than just a number; it’s a reflection of your financial health and can significantly impact your ability to secure loans, get lower interest rates, and even rent an apartment. This article dives into what your credit score is, why a good credit score is essential for your financial well-being and how you can leverage tools, like SavvyMoney through US Eagle’s Digital Banking, to stay on top of your credit game.

What is a Credit Score?

Your credit score, also called a FICO score, is an actual number, between 300 and 850. The higher the number, the better: a score higher than 760 will typically get you the lowest interest rates, though the average is closer to 700. FICO is an acronym for Fair Isaac & Co., the company that is responsible for tabulating your credit score.

Each of the three main credit agencies – Experian, Equifax, and TransUnion - have a score for you based on your credit report at that individual agency. The agencies tend to have different information on the people they track, which means your credit report and score will vary from agency to agency.

Those scores are what potential creditors, landlords, employers, and insurers look at for an instant summarization on your creditworthiness, so higher credit scores can make it easier, and cheaper, to borrow, rent an apartment, get insurance, or even find a job.

How is My Credit Score Determined?

Credit scores are calculated using several sources of data that are available in your credit report. That data falls into five distinct categories, which are listed in order of how much weight they usually have in informing your score:

Payment history – 35%

Making on-time payments is the biggest contributor to a good credit score.

Credit Utilization– 30%

Keeping utilization low (under 30% is ideal) shows creditors you aren't overextended.

Length of credit history – 15%

Having a longer credit history will help, but it is not essential to having a good score.

Credit Mix – 10%

A diverse variety of accounts (revolving credit, loans, mortgages) can help lenders see that you can manage different types of financial obligations.

New Credit – 10%

Too many new inquiries or opened accounts can bring down your credit score since it may indicate you are overextended.

Why Does My Credit Score Matter?

A good credit score opens doors to numerous financial opportunities. Here are a few key reasons why maintaining a healthy credit score is crucial:

1. Loan Approvals and Interest Rates: Lenders use your credit score to assess your creditworthiness. A higher score can lead to quicker loan approvals and lower interest rates, saving you money in the long run.
2. Credit Card Offers: With a good credit score, you’re more likely to receive attractive credit card offers with better rewards and lower interest rates.
3. Housing Opportunities: Landlords often check credit scores as part of the rental application process. A strong score can make it easier to secure a rental property.
4. Insurance Premiums: Some insurance companies use credit scores to determine premiums. A higher score could mean lower insurance costs.
5. Employment Opportunities: Certain employers may check your credit as part of the hiring process, especially for roles that involve financial responsibility.

How Can I Improve My Credit Score?

Improving your credit score takes time and effort, but it’s definitely achievable. Here are some tips to get you started:

1. Pay Bills on Time: Your payment history is a significant factor in your credit score. Set up reminders or automatic payments to ensure you never miss a due date.
2. Reduce Debt: Aim to pay down existing debt, especially high-interest credit card balances. This not only improves your credit utilization ratio but also saves you money on interest.
3. Limit New Credit Inquiries: Each time you apply for credit, it results in a hard inquiry on your report, which can temporarily lower your score. Be selective about applying for new credit.
4. Keep Old Accounts Open: The length of your credit history matters. Keeping older accounts open can positively impact your score.
5. Monitor Your Credit Report: Regularly review your credit report for errors or inaccuracies. Dispute any incorrect information to ensure your report accurately reflects your financial behavior.

What is SavvyMoney?

US Eagle Federal Credit Union offers a fantastic tool called SavvyMoney, integrated into their digital banking platform. This tool provides a comprehensive way to monitor and improve your credit score. Here’s how you can make the most of it:

1. Check Your Score Regularly: SavvyMoney allows you to access your TransUnion VantageScore 3.0. Regularly checking your score helps you stay informed about your financial health.
2. Run ‘What If’ Scenarios: Curious about how paying off a credit card or taking out a new loan might affect your score? SavvyMoney lets you run various scenarios to see potential impacts on your credit score.
3. Stay Alert: Opt-in for alerts to get notified about changes to your credit score or new inquiries. This proactive approach helps you address potential issues promptly.
4. Get Personalized Tips: SavvyMoney provides tailored recommendations to help you improve or maintain your credit score. Whether it’s advice on reducing debt or tips for managing credit inquiries, you’ll get actionable insights.
5. Set Goals and Track Progress: You can set a target credit score and receive a personalized timeline with steps to achieve it. This feature helps you stay motivated and on track.

By understanding your credit score and using tools like SavvyMoney through US Eagle’s digital banking, you can take control of your financial future. Remember, a good credit score is not just a number—it’s a key to unlocking financial opportunities and achieving your goals. Learn more about financial well-being at findyourbalance.org.

Learn more about SavvyMoney, get enrolled in digital banking, or download the mobile app here.