Feel Like A Number?

Do you ever have the feeling something is following you? Well, listen to that Little Voice, you have a number that follows you around no matter where you go. While you can’t shake it, you can change it. It can go up (a good thing), or it can go down (a not-so-good thing), depending on your financial behavior. It’s your credit score, and the role it plays in the quality of your life can be considerable.

Don’t make the mistake of confusing your credit score with your credit report; the two are entirely different things. Your credit score is born of your credit report. Let’s take a look at the two.

Credit Report—This is a detailed history of how you’ve used credit. It gives potential lenders a snapshot of your credit worthiness. Are you responsible with things like credit cards, mortgages, and car loans? In this report you’ll find:

• Identifying information—Name, address, Social Security number, birth date, etc.
   
• Credit accounts—Lenders report on accounts you have with them, including car loans, mortgages, school loans and credit cards.
   
• Credit inquiries—This section lists everyone who has accessed your credit report in the past two years. Every time you apply for a loan, you give that lender permission to look at your credit report.
   
• Public Record/Collection Items—This information includes bankruptcies, foreclosures, suits, wage attachments, etc. Credit reporting agencies collect this info from state and county courts as well as collection agencies.

Credit Score—This is a number assigned to you based on the info available in your credit report. It ranges from 300-850 (higher is better), with the most commonly used score created by Fair Isaac Corporation, also known as FICO. There are three credit reporting agencies (Equifax, Experian, TransUnion) that may have their own credit score versions, but the FICO score is the industry standard, and there’s one FICO score for each of the reporting agencies.

Your credit score is determined by:

• Payment history: 35%
• Amount owed: 30%
• Length of credit history: 15%
• New credit: 10%
• Types of credit used: 10%

Many lenders like to use your credit score as a shortcut to assessing your lending risk, preferring to save time over pouring through your entire credit report. As a side note, at Vantage, we embrace your report and find the score to be only part of the story. Reviewing your report as a whole provides us with the whole story. And that’s what we’re looking for, the story behind the number, because everyone has a different story to tell.



Other users of your credit
Checking out your credit was originally used for lending decisions by lending institutions, but these days it goes beyond that. In addition to lending decisions, credit is sometimes used for insurance and employment approvals. 

Potential employers may look at your credit report to not only verify your basic information (name, Social Security number, employment record, address history, etc.), but also to see how responsible you are with your personal finance. An employer might consider a low credit score to be a sign of poor decision-making or an inability to meet deadlines. Please note, reporting agencies must have your permission to release your credit report, but failing to authorize this could send up a red flag to possible employers.

As for insurers, they view a person with a good credit track record as a more responsible person. That’s why a good credit report can earn you better rates. It may sound a bit off, but the practice does have merit. Insurance companies figure that those who have trouble paying bills will likely have problems paying their premiums as well. These same customers are often strapped for cash and more likely to file claims, which cost the insurance companies money.

So how can you ensure that your credit history is helping you rather than hurting you? According to the credit reporting agency, TransUnion, there are seven core credit habits that can promote a healthier credit score:

1. Pay all bills on time
2. Keep balances low
3. Apply for new credit in moderation
4. Maintain a healthy mix of credit
5. Think twice before closing existing credit cards
6. Monitor co-signed/joint accounts monthly
7. Review your three credit reports frequently

Regarding number seven, you’re entitled to receive one free credit report every 12 months from each of the three nationwide consumer credit reporting companies – Equifax, Experian and TransUnion. This free credit report can be requested through annualcreditreport.com. Experts recommend that you check out one free report every four months from each different reporting agency. This means you’ll be reviewing your credit report on a regular basis over the course of a year (at no cost to you). 

For many lenders, your credit score can be the end-all for assessing your worthiness as a borrower. That’s not how we look at things here at Vantage. While we do take your credit score into account, it’s far from our only consideration. How’s your history with Vantage? Do you have a car loan you pay on faithfully each month? Is your checking account free of numerous overdrafts? What type of claims do you have against you in your report? Perhaps it was a medical issue that really has little to do with how well you pay off your more traditional debts. Yes, we take this all into consideration when you apply for a loan at Vantage. Like we said before, everyone has a story to tell. Let’s talk!


And don’t forget, Vantage offers additional financial counseling for all members free of charge through Accel. This service can help you with such things as personal and family budgeting, money management, debt repayment and more. If you need advice about your finances, give them call!