Credit Counseling Tips

Understanding Your Score How to Improve Your Credit Score Credit scoring is a system creditors use Credit scoring models usually consider to help determine whether to give you the following types of information in your credit. It also may be used to help decide credit report to help compute your credit the terms you are offered or the rate you score: will pay for the . Information about you and your credit experiences, like your Have you paid your bills on time? -payment history, the number and You can count on payment history to be type of accounts you have, whether you a significant factor. If your credit report make your payments by the date they’re indicates that you have paid bills late, due, collection actions, outstanding had an account referred to collections, or debt, and the age of your accounts, is declared , it is likely to affect collected from your credit report. Using a your score negatively. statistical program, creditors compare this Are you maxed out? Many scoring information to the loan repayment history systems evaluate the amount of debt you of consumers with similar profiles. have compared to your credit limits. If the For example, a credit scoring system amount you owe is close to your credit awards points for each factor that helps limit, it’s likely to have a negative effect on predict who is most likely to repay a debt. your score. A total number of points — a credit score How long have you had credit? Many — helps predict how creditworthy you are: scoring systems consider whether you how likely it is that you will repay a loan have applied for credit recently by looking and make the payments when they’re due. at “inquiries” on your credit report. If you Your credit report is a key part of many have applied for too many new accounts credit scoring systems. That’s why it is recently, it could have a negative effect critical to make sure your credit report is on your score. Every inquiry isn’t counted: accurate. Federal law gives you the right to for example, inquiries by creditors who get a free copy of your credit reports from are monitoring your account or looking at each of the three national credit reporting credit reports to make “prescreened” credit companies once every 12 months. To offers are not considered liabilities. order your free annual credit report from Have you applied for new credit one or all of the national credit reporting lately? Many scoring systems consider companies, visit www.annualcreditreport. whether you have applied for credit com, or call toll-free 877-322-8228. recently by looking at “inquiries” on your

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09/01/20 credit report. If you have applied for too Plans many new accounts recently, it could If you are having trouble making payments have a negative effect on your score. on your , a credit counselor may Every inquiry isn’t counted: for example, be able to help you with advice or by inquiries by creditors who are monitoring organizing a debt consolidation or “debt your account or looking at credit reports management plan” for all your debts. to make “prescreened” credit offers are not Typically, under a considered liabilities. you make a single payment to the credit counseling organization each month or How many credit accounts do you have pay period and the credit counseling and what kinds of accounts are they? organization makes monthly payments Although it is generally considered a plus to each of your creditors. Under debt to have established credit accounts, too management plans, credit counselors many accounts may have a usually do not negotiate any reduction negative effect on your score. In addition, in the amounts you owe–instead, they many scoring systems consider the type can lower your overall monthly payment. of credit accounts you have. For example, They do so by negotiating extensions of under some scoring models, from the periods over which you can repay a finance companies may have a negative loan and by asking creditors to lower the effect on your credit score. rates and waive certain fees.

Typical Credit Score Ranges:

Credit Score Rating % of People

580-669 Fair 17%

670-739 Good 21%

740-799 Very Good 25%

800-850 Exceptional 21% Borrowers with scores above 740 generally receive better interest rates and access to higher borrowing limits, depending on the lender. For more info see: https://www.consumerfinance.gov/ask-cfpb/what-is-credit-counseling-en-1451/ https://www.consumer.ftc.gov/articles/0152-credit-scores

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