What is a credit score?
Your credit score is a number that helps lenders predict how likely you are to pay back the money they lend—whether it’s a big loan to buy a car, to pay for school, or even a small credit card.
How is my score calculated?
Most credit bureaus rely on an algorithm developed by Fair Isaac Corp., commonly referred to as FICO. It uses information from your credit report such as your current credit card limits or loan amounts, when you opened your credit accounts, account balances, and payment history. Things that hurt your score include making late payments, having an account that’s sent to a debt collector, not making any payments on a loan (also known as defaulting) or maxing out your credit cards.
Why should I care about my credit score?
Since lenders use your score to help decide if they’re willing to loan you money (and what interest rate you’ll be charged!), a good score can greatly improve your chances of approval AND save you money by getting you a lower rate. In contrast, a lower score can make lending to you look risky, decreasing your likelihood of approval and raising the interest rate you’ll pay if you are. A low score might also make a lender require a co-signer, meaning someone who will be responsible for the loan if you don’t repay it.
So, what exactly is a “good” credit score?
FICO scores usually range from 300 to 850. Here’s how our friends at FICO describe the risk associated with various scores:
| Score | Risk Rating |
|---|---|
| 800+ | Exceptional |
| 740-799 | Very Good |
| 670-739 | Good |
| 580-669 | Fair (below average) |
| 579 and lower | Poor |
How does your credit score affect your student loans? If you’re looking to borrow money for college, most federal student loans won’t look at your credit—in fact, Federal Direct PLUS loans don’t require you to share things like bankruptcy, but private loans usually will. If you or your parents are applying for a loan like those offered by your credit union and Credit Union Student Choice, your credit score will help determine whether you’re approved and the interest rate you’ll pay.
How can you find out what your credit score is? There are three services that calculate and report your score: Experience, Equifax, and TransUnion. Although you’ll find PLENTY of ads promising a free credit report, watch out: many services charge a fee, and some might even sign you up for an ongoing plan (which is expensive!). Always remember you are legally entitled to one free copy of your credit report from each of the three services per year. A good place to go for your free reports and other information is AnnualCreditReport.com.
Sun Federal also offers our “Your Credit Score” tool within our Online Banking. Your Credit Score is a handy tool that allows you instant access to your credit score, credit report, personalized money-saving offers, and helpful financial education and tips on how to improve or maintain your score!
Is there any way to improve a bad score? Absolutely! Pop over to FICo for a few of their tips on tips on repairing and improving your score. Our "Your Credit Score" tool also has personalized suggestions and calculators that can help you see what will grow your score—and we’re always available to help you in your local Sun Federal branch!
Can you get credit if you don’t have a credit score? If you’ve never borrowed money before, getting credit can sometimes be tricky—but we’re here to help make it a little easier! Give us a call to speak with one of Sun Federal’s loan officers to get some ideas or to make a plan on how to begin establishing your credit.
