Written by: Chelsea Spears, Farmers National Bank
We hear a lot about Credit Scores. But what is it? And how does your score impact you?
Put simply, a credit score tells lenders how likely you are to pay back a loan. Scores can range anywhere from 300 to 850, and where you fall on that scale can mean a lot for your bottom line.
As Juan Santiago, Vice President and Community Development Officer at Farmers National Bank explains, your score may determine whether banks can approve a loan request – but that’s not all.
“The higher your credit score, the better chance you have at getting the best rates available,” Santiago explained. “So if you’re buying a home, purchasing a car or looking to secure a personal loan, you want a better Credit Score so that you can get the best rates possible. It means you’ll pay less money in the long run.”
That all sounds great. Who wouldn’t want to pay less money on a loan? But how do you go about raising your credit score in order to make that happen?
Santiago laid out four simple steps you can start taking to get your Credit Score up!
- On-Time Payments.
“This is key and most critical,” Santiago says. “Always pay your credit card balances, loans, or any other kind of credit payment on time. When you receive your monthly billing statement make sure you pay it on time, or even early! You just don’t want to be late.” - Credit History.
The longer you have your credit accounts open – the better! You want to show that you have paid your credit cards on time on a consistent basis. Consistency is key to raising your score. - Low Credit Utilization.
This is how much you spend on a credit card versus the limit that has been extended to you. Say you have a credit card limit of $10,000. That doesn’t mean you should spend $10,000. Ideally, Santiago says, you should be spending 30 percent or less of the amount that’s been extended to you to maximize your credit score. - Credit Mix.
Try to have a mix of credit accounts when appropriate. Your credit score will rise if you have a diverse credit portfolio (i.e. Line of Credit, auto or even a home mortgage). Santiago’s biggest advice though is not to overburden yourself. Focus first on paying off your statements, then add in other credit accounts once you feel confident in being able to manage and pay them all – again, on time.