Feet with scale showing FICO score

By Jocelyn Wood, RCB Bank

Do you know your credit score? A good score matters if you want to want to qualify for lower loan interest rates. It may also improve your chances for lower fees on insurance premiums, like home and auto for example.

It’s important to understand a credit report and a credit score are two different things.

Your credit report is a compilation of credit-related information.

  • Identifying information like name, address, birthdate, Social Security Number.
  • Credit accounts, payment history, current and past loans, etc.
  • Credit inquiries – who has accessed your report within the last couple years.
  • Public records & collections – overdue debt from collection agencies, wage garnishment, liens, foreclosures, etc.

The information in your report provides a story of how well you manage your credit and debt and influences a lender’s decision to loan you money?

Your credit score is a matrix of your credit report – a 3-digit number, ranging from 300-850.

FICO® Scores are most widely used.

I asked Lender Jake Dwyer, AVP at RCB Bank, what is the easiest way to maintain a good financial footprint?

“The biggest influence on your credit score is payment history,” Dwyer said. “A record of ongoing, on-time payments will help your credit. Basically, pay your bills on time and keep your credit card balances low.”

Your credit score is generally calculated based on five factors, revealed in your credit report:

  • Payment history
  • Amounts owed on credit and debt
  • Length of credit history
  • New credit
  • Types of credit used

“Lenders want to know you can afford to make your monthly payments,” Dwyer said. “Owing too much debt, carrying high balances on your credit cards and having too many credit accounts opened at one time are high risk factors. We want to see a long history of you responsibly managing a variety of credit, like student loan, credit card and mortgage.”

He also mentioned your credit score reflects your risk at the time it was pulled. It can change depending on your credit behavior.

“The best way to repair your credit is to pay off your debts,” said Dwyer. “Pay your credit card bill in full each month. Don’t spend what you can’t pay. Lenders want to see responsible money management and self-control.”

The first step to improving your credit is to know what is in your credit report.

Request a copy of your credit report at annualcreditreport.com. Federal law allows you one free report annually from each credit reporting agency: Equifax, Experian and TransUnion.

Ask your lender for tips on how to improve your score, or give Jake Dwyer a call at 918.259.1342.

Source: Fair Isaac Corporation (FICO), myfico.com. FICO® Score does not factor in income, length of employment, alimony or child support payment and other things that lenders may consider when determining loan qualification. Having little payment history or only new credit can result in a lower FICO® Score. It is not always from missed payments or maxed-out credit cards. Talk to your lender for details. Learn more about FICO® Score at myfico.com
Opinions expressed above are the personal opinions of Jake Dwyer, AVP, Loans, NMLS #1413664, and meant for generic illustration purposes only. RCB Bank NMLS #798151. Member FDIC and Equal Housing Lender.