Monday, September 19, 2011

What to Know about Your Credit

By: Michelle Richards, Education Partnership Coordinator II

Michelle Richards of Community Financial
Whether you are applying for an auto loan or signing up for cell phone service, your credit score is an important factor in many areas of your financial life. That’s why it’s important to understand what your credit score says about you and how your score is determined.

Your credit score is a number between 850-300 that rates your ability to handle debt.  Credit scores can be rated on a scale similar to this example: 850-730 (A+), 729-680 (A), 679-640 (B), 639-600 (C), and below. But what does this mean to you?  You’ll pay considerable more for a “C” rated car loan than an “A+” rating.  And if you fall too low, you‘ll be shut out of borrowing altogether.

To examine your credit, get a free credit report from Annualcreditreport.com.  While the report is free, please note that there is a $7.95 charge to get your credit score.  When viewing your report, you should always check to make sure it is accurate. An estimated 48% of credit reports have errors in them. If you find any evidence of fraud you should immediately contact the credit bureau.  More information about this is available in our previous post, What to do if you are a Victim of ID Theft.

It’s also helpful to know that the majority of your credit score, over 35%, is based on payment history. Therefore, it’s very important to make payments on time. The rest of your score is based on factors such as your credit capacity, the length and type of credit, and the total amount of your debts.

Building a good credit score requires first establishing credit. One easy way to establish credit is a secured Visa credit card.  If you have a $500 credit limit on your secured Visa, Community Financial will put a hold on the $500 in your savings account. Then after you show you can handle the card responsibly, Community Financial will release the hold and convert your account to a traditional Visa.  Making payments on time and not maxing out your credit limit will help to Build Good Credit.

Building a strong relationship with your financial institution is another important way to improve your financial strength. Having a checking and savings account and using direct deposit with Community Financial will help you get the best rates for loans and credit.  

Join me as I lead a seminar this week on “Understanding and Improving Credit,” on Tuesday, September 20th at our Novi Office.  Community Financial’s seminars focus on financial education and assistance. Call our Novi location for more information.


Posted by: Community Financial
Community Financial Members Federal Credit Union is a not-for-profit, full-service financial institution owned and governed by its membership.

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