Tag Archives: Credit score

Things That Surprisingly Don’t Hurt Your Credit Score

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When it comes to credit scores, there’s a lot of misinformation floating around. It’s common to worry that one wrong financial move will instantly damage your credit, but the reality is that not every action affects your score the way you might think.

Understanding what does and does not impact your credit score can help you make more informed financial decisions and avoid unnecessary stress. Here are some things that surprisingly do not hurt your credit score.

Checking Your Own Credit Score

One of the biggest credit myths is that checking your own score will lower it. Fortunately, that is not true. When you check your own credit, it’s considered a soft inquiry – which does not affect your score. In fact, regularly monitoring your credit can be a smart financial habit because it allows you to catch potential errors or signs of identity theft early.

You can access your free annual credit report at AnnualCreditReport.com.

Paying a Bill a Few Days Late

Life gets busy, and occasionally paying a bill a few days late may not hurt your credit score as much as people fear. In most cases, lenders do not report late payments to credit bureaus until they are at least 30 days past due.

That said, even if your credit score is not immediately affected – you could still face late fees or penalties depending on the lender. Setting up automatic payments or payment reminders can help you stay on track and avoid both fees and potential credit damage in the future.

Getting Denied for a Loan or Credit Card

Being denied for a loan or credit card can feel discouraging, but the denial itself does not hurt your credit score. In reality, lenders do not report denied applications as negative marks on your credit report. What may cause a small temporary dip is the hard inquiry that occurs when a lender reviews your credit application. However, a single hard inquiry usually has only a minor impact on most consumers.

If you are denied, it may simply mean the lender’s requirements did not align with your current financial situation. Reviewing the reason for the denial can actually help you better understand your finances and identify areas to improve before applying again in the future. Check out our recent article on this topic to learn more.

Paying Off a Loan

Paying off a loan is generally a positive financial accomplishment, even if your credit score temporarily changes afterward. In some cases, you may notice a small dip in your score after fully paying off a car or personal loan. This usually happens because your credit mix or average account age changes, and does not mean paying off debt is bad for your credit. Over time, responsible borrowing and on-time payments continue to support strong credit health.

Having Student Loans

Simply having student loans does not automatically hurt your credit score. In fact, installment loans such as student loans can help diversify your credit mix. The key factor is how the loans are managed. Making payments on time and keeping accounts in good standing can positively impact your credit over time. Missed payments, however, may negatively affect your score.

Closing a Checking or Savings Account

Closing a checking or savings account generally does not affect your credit score because deposit accounts are not typically included in standard credit reports. However, if an account is closed with unpaid fees or a negative balance, that situation could potentially impact your credit. Before closing any account, make sure all transactions and balances are fully resolved.

Shopping Around for Certain Loans

Many people avoid comparing lenders because they worry that multiple applications will damage their credit score. Fortunately, credit scoring models often recognize that consumers shop around for major loans such as mortgages, auto and student loans.

Multiple inquiries for the same type of loan within a short period are often grouped together and treated as a single inquiry for scoring purposes. This allows consumers to compare rates without significant long-term credit damage.

What Actually Impacts Your Credit

While the previously mentioned financial actions may not hurt your credit score, there are still several poor money management habits that can negatively affect your credit health over time, including:

  • Missing payments
  • Maxing out credit cards
  • Defaulting on loans
  • Frequently opening multiple new credit accounts
  • Ignoring accounts sent to collections

At First Financial, we believe financial education is an important part of long-term financial wellness. Whether you’re working on building credit, improving your budget, or planning for future financial goals – our team is here to help support you along the way.

If you have questions about credit management, lending, or financial planning, contact us today or schedule an appointment at your local branch.

A First Financial membership is available to anyone who lives, works, worships, volunteers, or attends school in Monmouth or Ocean Counties.  A $5 deposit in a base savings account is required for credit union membership prior to opening any other account. Contact the Credit Union for more information.

Common Reasons for Drops in Your Credit Score

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When it comes to personal finance, one of the most pivotal benchmarks is your credit score. This three-digit number is the barometer lenders use to gauge your creditworthiness. It’s a quantified assessment of your ability to repay debts, and it can fluctuate for a variety of reasons. Understanding these fluctuations, especially what causes a drop in credit score – is essential for financial stability and agility.

Late or Missed Payments

One of the most significant contributors to a drop in credit score is late or missed payments on your credit card. Your payment history carries considerable weight in credit score calculations, and even a single missed payment can negatively affect your score. It’s imperative to stay on top of your payments. If you’ve missed a payment, don’t panic. Instead, set up automatic payments to prevent future lapses and regularly review your credit report to ensure all payment information is accurate and up to date.

High Credit Utilization

Another reason for a drop in your credit score can be high credit utilization. Experts recommend keeping your credit utilization—the percentage of your credit limit that you use, below 30%. High utilization can signal to creditors that you’re over-reliant on credit, and reducing your balances can help mitigate the impact on your score. Remember, the goal is to demonstrate that you can manage credit responsibly.

Decreased Credit Limits

Sometimes, a drop in credit score is due to a lower credit limit. This can unexpectedly increase your credit utilization ratio. If you find your limit reduced, contact your credit issuer to discuss why it happened and whether it can be restored – especially if you haven’t changed your spending habits.

New Credit Applications

Applying for new credit can also result in a drop in your credit score due to inquiries from lenders. While one application might not cause a significant change, multiple applications within a short timeframe can be problematic. Be strategic about when and how often you apply for new credit to minimize the impact on your score.

Closing Credit Accounts

Closing credit accounts might seem like a positive step, but it can actually lead to a drop in your credit score. This can shorten your average credit history and potentially increase your credit utilization ratio. Sometimes the long-term benefits of closing an account outweigh the short-term impact on your score. Ultimately, you’ll need to decide which is right for your particular financial scenario. It’s often best to pay off these credit accounts, and just stop using them – rather than closing them out completely.

Major Financial Events

Major negative financial events such as bankruptcy or foreclosure, have profound effects on your credit score. These incidents can stay on your credit report for years, so it’s important to manage debt wisely and seek assistance before such events occur.

Inaccurate Information

At times, a drop in credit score could be due to errors on your credit report. Regular checks of your credit report can help you spot and address inaccuracies quickly. Whether it’s a misreported payment or incorrect personal information, it’s within your rights to dispute these errors and have them corrected.

Identity Theft

Lastly, identity theft can cause a significant and unexpected drop in your credit score. Monitoring your credit can alert you to potential fraud, and if you suspect identity theft – immediately placing a fraud alert or credit freeze can prevent further damage to your score. Brush up on what to do in this situation ahead of time so you’re prepared if this ever happens to you.

Maintaining a robust credit score is an ongoing process. By understanding the common causes that can trigger a drop in credit score, you’ll be better prepared to protect and improve your credit standing. Always remember that each aspect of your credit history is a piece of a larger financial puzzle.

For more information on managing your credit and to set-up an appointment at one of our branches, contact us at 732-312-1500. Stay on top of your financial health by subscribing to First Financial’s monthly newsletter or check out our handy guide on credit management.

Steps to Improving Your Credit Score

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Maintaining a good credit score is an important part of building your financial future. Not only does your credit score help lenders determine your credit risk, but it also affects the interest rates and fees you pay. Without a good credit score, you’ll have difficulty securing a loan or mortgage down the line. But don’t stress! If you take action to improve your credit score now, it will start increasing in no time.

What makes up your credit score?

Understanding your credit score is a crucial piece of planning your financial success. The bulk of your credit score is made up of your payment history (such as on time or late payments) and the amount owed. Additional factors include the length of credit, new credit (or the accumulation of debt in the last 12-18 months), and the type of credit.

What will hurt your credit score?

Maintaining a good credit score means being cautious with how your handle your money. Your credit score can be negatively impacted by:

  • Missing or late payments
  • Maxing out credit cards and shopping for credit excessively
  • Opening up numerous loans and credit cards in a short time frame
  • Closing credit cards out (as this could lower your available capacity)
  • Borrowing from finance companies

How to improve your credit score

Poor credit won’t haunt you forever, and it’s still completely possible to turn your credit score around! While there is no quick fix, there are long-term improvements you can make to help boost your score over time.

Here’s what you can do to better your credit:

  • Pay your bills on time – You may have to set a reminder on your phone so you don’t forget, but this is very important!
  • Pay off or pay down your credit cards. Come up with a payment plan that focuses on paying down the highest interest cards first, even if that means maintaining minimum payments on your other accounts in the meantime. The goal is to keep credit card balances low and pay them off when possible.
  • Don’t close credit cards – This may decrease your capacity, thus negatively impacting your score.
  • Slow down on opening new accounts as this approach could backfire and actually lower your credit score.
  • Contact a financial advisor or creditor if you’re having trouble making ends meet. They will help you better manage your credit and pay on time.

Don’t let your credit score stop you from bettering your financial future! Use our guide to managing your credit and getting out of debt for additional tips and resources, or stop into your local branch to speak with a representative!

4 Hacks to Raise Your Credit Score

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Your credit score. Chances are you either love it or hate it. It’s either the greatest thing in the world or a total hindrance. Or, maybe you don’t really know enough about your credit score for it to make an impact on your life.

As a whole, Americans’ credit scores are beginning to increase but our knowledge of credit and how it works is declining. A recent survey from credit scoring company Vantage Score and the Consumer Federation of America, found that 32% of the people surveyed didn’t know they had more than one credit score.

Let’s forget about how many credit scores we have for a second and answer a very basic question: What is your credit score? 

Your credit score is a three digit number ranging from 300 (the lowest possible score) to 850 (the highest score). Lenders use your credit score to make decisions about whether or not to offer you credit – such as a credit card, car loan or mortgage. Your credit score is also used to determine the terms of the offer – such as what your interest rate will be.

Your credit score is calculated by looking at these categories:

  • Payment history
  • Your debt-to-income ratio
  • Total debt
  • Length of credit history
  • Types of open credit
  • Public records (such as bankruptcy)
  • Number of inquiries on your credit report
  • New credit

So, what is considered a good credit score? 

The average credit score in the United States ranges between 670 and 710. According to Experian, a “good” credit score is anything that falls between 661 and 780, which is about 38% of the population. Usually, if an applicant falls in that “good” credit range, they’re likely to be approved for credit at competitive rates.

Now that we know what a credit score is and what classifies as a good one, the next question to look at is: Why does your credit score matter? 

Think of your credit score like a report card you used to get while you were in school. Your report card measured your progress during the school year, and your credit activity puts you into a scoring range. But, unlike grades – credit scores aren’t stored as part of your credit history. Instead, your score is generated each time you apply for credit. Fact: It actually negatively impacts your credit score if you have multiple inquiries in a short period of time.

What are your major financial goals? Buying a home? Buying a car? Chances are, your credit is likely going to be a factor in framing that financing picture. Your score will actually tell a lender whether or not you qualify for a loan and how good the terms of the loan will be. For instance, the lower your credit score is, the higher your interest rate on a loan will be.

If you’ve looked at your credit report and you’re surprised to see it’s lower than you thought, there are simple ways to fix that:

  • Pay your bills on time. That goes for ALL your bills – not just credit cards and loans. Fact: Payment history is the most heavily weighted factor of your credit score. It makes up 35% of your total score.
  • Keep your credit card balances low. Credit history accounts for 15% of your credit score, so keep those old accounts open even if you don’t use them.
  • Space out your credit applications. Each time you apply for a line of credit, the inquiry is noted on your credit report. One or two inquiries aren’t a huge deal, but when you have a bunch within a two year period, it can cause your score to fall.
  • Mix up your credit. Your credit mix, or the types of credit accounts you have, makes up 10% of your credit score. Basically, lenders want to see that you can use different types of credit responsibly.

Credit doesn’t have to be scary or overwhelming. There are many responsible ways to start out slowly and build worthwhile credit for the future. First Financial can help! Are you looking to build or establish credit? We have a number of ways to start you on the right path. Stop by one of our branches today or give us a call. You can also check out our credit management guidebook on our website, for some additional tips.

3 Bad Choices that Could Damage Your Credit Score

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Your credit score is a big deal. That number decides what kind of loan you’ll be able to get and what interest rate you’ll have to pay. If your credit score is low, you’ll need to find ways to raise and improve it. If your score is good, here are three things you may want to avoid in order to maintain your high credit rating.

Cosigning a loan: You’re a nice person and you do nice things for people you care about. In reality, you should really never cosign someone else’s loan. If the borrower starts missing payments, your credit score will take a big hit. The last thing you want to do is be on the hook for someone else’s car payments, personal loans, or credit cards.

Closing a credit card account: Maybe you have a credit card that was just used to build credit or have in case of emergencies. You may have paid if off and decided to stop using it, but be sure you don’t close that account. That card’s credit history is good for your credit score. Also, closing the account will lower your amount of available credit which could negatively affect your debt utilization ratio. Closing a credit card account is one action that can damage your credit score in two different ways.

Not looking for errors: Always keep a close eye on your credit score. If you haven’t looked at yours recently, check out annualcreditreport.com. If you don’t keep an eye on your credit report, you could have your identity stolen and not even know it. Even if isn’t the case, there could still be inaccuracies. The day you find an error on your credit report that is negatively impacting your score, is the day you’ll be extremely happy you checked.

If you’d like more insight into your credit score and managing your credit – view our credit and debt management guide here.

Article Source: John Pettit for CUInsight.com

Don’t Let These Mistakes Ruin Your Credit Score

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When it comes to your finances, your credit score can be a big deal. A good credit score can mean big savings (or costs) if you take out a loan. Good credit can also mean lower costs when you get car insurance in some states.

If you have good credit, you’ve worked hard to manage your finances and your loans in a way that shows you are responsible. You are proving that you are a solid risk. But what happens if you slip up? How much could that ruin your score?

According to the major credit bureaus, the damage affects different people differently. One late payment will affect a person with a lower score, but it’ll have a much bigger impact on someone with a really high score. That’s right: if you have great credit now, a mistake could mean a bigger hit to your credit score. Someone with mediocre credit won’t see the same impact as the result of a mistake.

Do you have an excellent credit history and want to keep it that way? Here are some things to avoid if you want to keep that credit score in the good to excellent range:

Missed Payments

The biggest factor in your credit score is your payment history. One missed payment can tank your credit score, if you have excellent credit – by as much as 100 points, according to Equifax.

The longer you wait to pay your bill, the worse the impact. If you are just a couple days late, you might not see a huge change. However, once you reach that 30-day late mark, it’s a big problem.

Do your best to plan your finances so you make your payments on time and in full. Easier said than done, but it’s much easier to stay on track if you have a budget. If you don’t, get working on one. Check out our free budgeting guide.

High Credit Utilization

If you have excellent credit, there’s a good chance you carry small balances on your cards — if you carry them at all. Best results come when you use 30% or less of your available credit each month.

But when you start charging, and that credit utilization number starts to climb, you can see changes to your credit score without realizing it. The closer you are to your limit on the credit cards, the more it impacts your score.

If you end up over the limit on your cards, then your score will suffer. Try to continue keeping balances low. Better yet, pay off your cards each month if you can and avoid paying the interest.

Cosigning on a Loan

One day you may want to help your child or sibling by cosigning on a loan. It might seem like a good idea to cosign on a loan to give them a boost, but think twice before you commit.

Your credit is on the line as soon as you sign on the dotted line, because you accepted responsibility for all payments as a cosigner. Plus, it will look like you have that debt — even if you don’t, and that can affect how much you can borrow if you were to, say apply for a mortgage on a dream home. If the borrower misses a payment, that’s on you as well. You can see your credit score fall.

And if you do cosign, make sure the borrower keeps you up to speed. It may not be ideal to make their loan payments, but at least it can save your credit if you do.

Article Source: Miranda Marquit for Moneyning.com