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Free Credit Reports

There is a lot of talk today about having a good credit score. To understand what that means, you need to first start by getting familiar with the terms:

  • Credit Report – a record of an individual’s past borrowing and repayment history, including information about late payments and bankruptcy.
  • Credit Score – All historical factors from your credit report are compiled into a composite credit score. The scores are broken down into ranges that help categorize your pay history.
  • Credit Bureau – is a company that collects information from various sources and provides consumer credit information on individuals. In the US there are 3 credit bureaus: TransUnion, Experian, & Equifax

Credit reports can impact your life in many ways. Credit scores are used for things like:

  • To determine if you are able to open a savings or checking account
  • Employers use them for some job applicants or promotional considerations
  • Insurance companies may determine rates or eligibility based upon credit scores
  • Financials use it for approvals, down payment requirements and the rate you will pay on your loan, credit card & mortgage
What is important to know

  • The higher the score, the better.
  • Each credit bureau has their own scoring model so scores can vary slightly but all 3 are very similar.
  • To effectively evaluate your credit score you’ll need to know the range. Just as you would if you were taking a test in school, without a range, a score is meaningless. The “credit score range” for the TransUnion FICO score is 300 to 850, though other credit bureau scores may range from 501 to as high as 990.

Factors in the Score

Although the exact calculation of a credit score is proprietary information. In general terms, here are the 5 factors that impact your credit score:

  • 35 percent of the score is based on your payment history. It helps potential lenders to find out if (and how promptly) you pay your bills. The score is affected by how many bills have been paid late, how many were sent out for collection and any bankruptcies. When these things happened also comes into play. The more recent, the worse it will be for your overall score.
  • 30 percent of the score is based on outstanding debt or capacity. How much do you owe on car or home loans? How many credit cards do you have that are at their credit limits? The more cards you have at their limits, the lower your score will be. The good rule of thumb is to keep your card balances at 25 percent or less of their limits.
  • 15 percent of the score is based on the length of time you’ve had credit. The longer you’ve had established credit, the better it is for your overall credit score. The theory is that the more information about your past payment history gives a more accurate prediction of your future actions.
  • 10 percent of the score is based on new credit in the last 12-18 months. Opening new credit accounts will negatively affect your score for a short time. This category also penalizes hard inquiries on your credit in the past year. Hard inquiries are those you’ve given lenders permission for, as opposed to soft inquiries, which include looking at your own score and have no effect on the score. However, the score interprets several hard inquiries within a short amount of time as only 1 account since people often shop around for the best deals on a loan.
  • 10 percent of the score is based on the types or mix of credit you currently have. It will help your score to show that you have had experience with several different kinds of credit accounts, such as revolving credit accounts and auto loans, or mortgage loans.

How can BHCCU help

Our credit union staff is trained in understanding your credit and can help guide you through the steps to improve your credit score. Stop in at any of our branch locations to ask questions or review your credit score.

Protecting your credit

Periodically checking your credit is a good practice. Understanding the factors that contribute to your credit score not only helps you make the right financial choices, it can also help by letting you know when something is wrong. If a creditor reported information incorrectly on your credit bureau or someone has stolen your identity, you’ll know about it. Consider monitoring your credit history annually at Annual Credit Report.