A credit report is very much like a resume. It is something a lender reviews to assess your creditworthiness. Your credit rating or score is a quick barometer to help lenders understand how good you are at paying your loans and bills.

The type of credit you may be eligible for – as well as the interest rate you’ll pay for that credit – is significantly influenced by your credit score. Credit scores generally range from 300-850 and fluctuate depending on your financial habits. The higher the credit score, the more likely you’ll get better loan rates and terms.

There are several factors that contribute to your credit score:

• Payment History – Are you paying your bills on time? Are you only paying the minimum amount? Even just one late payment can negatively affect your score.
• Credit Utilization Rate – This considers how much credit you are using in relation to the amount of credit you have available. If you have a balance of $2,500 on a credit card with a $5,000 credit limit, your credit utilization ratio is 50%. If your percentage is high, lenders may assume you are having trouble paying your bills. The lower the percentage, the better your credit score.
• Credit History – Having a long history of credit is better for your credit score.
• Credit Type – Diverse types of credit can actually improve your score, too. Different types of credit, such as mortgage loans, student loans, and credit cards, can show lenders how well you manage your money.

If your credit rating is low, there are a few things you can do to help improve it. The easiest thing you can do is pay your bills on time. Multiple late payments can stay on your report for years. Monitor your credit utilization rate. If you have a credit card that you rarely use, don’t close it. Showing you have a paid credit card account is a good thing! We also recommend you avoid taking advantage of all those tempting credit card offers you get in the mail. Opening a number of new credit card accounts in a short period of time can lower your credit score, even if you have no late payments. It can be interpreted as a red flag to lenders that you might be getting into financial challenges, making you appear less creditworthy.

At Waypoint, we are happy to use our expertise to help you learn how to use credit wisely. If you need guidance regarding your credit rating, please give us a call at 1-833-541-0854.