Understanding Your Credit Report and Credit Score

In the Consumer Loan Department at WESTconsin Credit Union we have a unique blend of employees who, along with completing loan applications, also focus on sharing information to help our members achieve financial success. It is a great privilege to assist in the process of applying for loans. Whether it be for a needed vehicle, fun recreational item, cash for home improvement or vacation, we look to keep the application process as quick and easy as possible. One of the more frequent questions our members ask during this process is “what is my credit score and what is impacting it either in a positive or negative way?” 

Credit scores are intended to help financials determine how likely it is that they will be repaid on a loan or credit card. Understanding what makes up a credit score is essential for the ability to borrow money. Your score is typically made up of 35% pay history, 30% total debt, 15% length of credit history, 10% newer credit and 10% overall credit mix. Scores can range from 300 to 850 depending on the bureau and information provided to each. There are multiple scoring models that are used based on what information a business or financial is looking for. Each tradeline can report at different times of the month causing the score to vary slightly even within a single month. Your score can also be affected by how often you have your credit looked at or how often new loans/credit cards are taken out. The biggest negative impacts are late pays, collections and bankruptcies.

Beyond ensuring payments are made on time, earning and keeping a good credit score can happen several ways. You may not need to borrow often but having an active credit card with a small or even $0 balance can be enough to report good credit information and maintain a credit score. A loan or credit card with longer pay history will keep credit scores higher. Being careful to not have too much credit extended at one time is an important key in keeping a strong score. Multiple new loans or credit cards with high balances does not help your credit score. In fact, keeping higher balances may lower your score. For credit cards, the credit bureau looks at the limit verses the balance each month on each card. This is known as capacity. It is essential to always keep balances below 50% of the limit to have a positive verses negative effect on your score. The lower the balances, the better. Also, credit pulled more than once every 6-months can have a negative effect on your score.

Usually, a late payment will report to the credit report after it is 30 days past due and it can take a few months for negative information to be updated. No matter what the reason for a late payment or a collection, eventually working out a monthly payment or paying a collection in full is the best way to help your credit score recover. How much a credit score is impacted from negative information depends on many factors including how much credit history you have, how many other collections or late pays have occurred and how recently they have happened. For example, it can take at least 6 months of on-time pay history for a credit score to begin recovering from even one late payment. Your best plan for a good credit score is to always keep your budget in mind. Knowing how each payment will work within your budget should help you keep even one collection or late pay from occurring. You are entitled to one free credit report per year from annualcreditreport.com. This will give you a report from all three credit bureaus. You do not receive a score, but you can verify the information reporting is accurate. If you feel something is reporting incorrectly, you may request for the credit bureau to have the creditor provide proof of the information they are reporting. They will ask the company for verification or status of that information. This is known as a dispute and is completed directly through the credit reporting agency. 

WESTconsin Credit Union encourages our lenders to provide you with information to help make positive financial decisions and improve your financial future. The more you know about credit, the better chance of having the best credit score possible.

Cari Jo Morgan
Consumer Loan Specialist
Menomonie—East Office
WESTconsin Credit Union

For more information on personal loans or to apply, visit WESTconsincu.org/loans/personal-loans/apply-for-a-loan.
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