The Quick Guide to Managing your Credit

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Your credit score is like your report card in school: you’re graded on your financial aptitude as it relates to borrowing and repaying money, and is a fundamental part of your money management skills. Credit scores are numerical scores that indicate how safe or risky it would be for a lender (bank, credit union, or credit card company) to loan you money.

Credit scores evaluate all lending and repayment aspects of your credit history, including:

  • Do you pay your monthly payments on time?
  • How much have you borrowed against your worth?
  • What percentage of your available credit do you take advantage of, and how often?
  • Have you ever missed payments?

Payment history, credit utilization, average credit age, and account type mix are all factors when determining how likely a person is to pay their bills responsibly. The more likely you are, the better your credit score and the more willing credit lenders are to give you credit and better rates.

What is a FICO Score?

A FICO score is a type of credit score administered by the Fair Isaac Co that considers the same factors as many other major credit bureaus, plus a potential borrower’s credit report to arrive at a numerical evaluation of their “creditworthiness,” or likelihood that they’ll be a low-risk borrower for the lender. FICO scores are administered on a scale between 300 and 850, and anything above 700 is considered “good” credit.

How Do I Check My Credit Score?

According to the Federal Trade Commission (FTC), you are entitled to access your credit report for free once every 12 months. This credit report will include scores from the three major credit bureaus in the United States — Equifax, TransUnion, and Experian. There are also websites like Credit Karma where you can access it more frequently for free, though you won’t receive scores from all three bureaus. Visit the FTC’s website to order your credit report.

How Can I Improve My Score?

If you’re not happy with your current score or the rates you’re being offered on credit cards and loans, don’t worry! There are plenty of easy steps you can take to improve your credit score.

  • Pay bills on time – Not only does this help you avoid late fees, paying your bills on time every month will help improve your trustworthiness as a borrower.
  • Improve your debt ratioTry to keep your credit utilization — the amount of money you borrow against your limit — to around 30%. This helps demonstrate to banks that you’re a responsible, stable borrower.
  • Establish a patternThis one might take more time, but it’s worth it. The longer you’ve had credit, and managed it responsibly, the more attractive you’ll appear to lenders.

Managing your credit is just as important as managing your savings and your spending habits. If you need help finding the right sources to manage your finances effectively, check out our Money Management Tools, or chat with a Dime representative at 1-800-321-DIME (3463).

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