10 ways to clean up your credit

If cleaning up your credit is a topic on your radar, we’d like to offer you these tips to help you get the highest score!

But first — What is a credit (aka FICO) score? A credit score is a number calculated for an individual that indicates to lenders their capacity to repay a loan. This score is a result of findings from a person’s credit history. (Please note the percentages in bold below that will make up the score.)

Credit scoring makes it easier for a lender to make an objective decision based solely on credit report data. Because credit scoring does not take into account race, color, national origin, religion, or marital status, it removes the likelihood of personal judgment and unfair influence.

Scores range from 300-850 and credit can certainly be obtained with a variety of scores from low to high. Usually, a score of over 800 is considered excellent and should not have any trouble obtaining credit, whereas a lower score may require higher interest rates, longer terms, fees, or other arrangements. Most consumers range from 600-750.

Now for the tips

1. Check your credit report annually. While there are many apps and sites that claim to help here, we do not recommend using any site except https://www.annualcreditreport.com. This site works with all three major bureaus. Other applications may not reflect full or accurate account data.
2. Report Errors within 30 days. If you find that there is an error in your report, please dispute it within 30 days to the bureau reporting the error. Credit Bureaus will investigate and report their findings to you within 45 days.
3. Pay your bills by or before the due date. This reflects 35% of your total credit score. If the account goes 30 days or more, it will be reported.
4. Communicate with your lender. If you are short funds one month, let them know. Sometimes certain accounts allow for adjustments or they may waive fees as long as delays are communicated in advance.
5. Be conservative with your spending. Don’t spend more on credit cards than you can pay back within one month. 30% of your score is calculated by “amounts owed”. Sometimes you can’t avoid this so whenever possible try not to use more than half of your available balance.
6. Keep accounts open. Even if you are no longer using an account, it actually helps your score to have an account that is open but not used. It also reflects the length of your credit history. 15% of the score.
7. Consider a secure card. If you want to establish credit but don’t know where to start, companies like Orchard Bank, or Capital One offer secured credit cards. This means that you provide a security deposit to their company in exchange for a credit card with a reduced limit. You can make regular payments to show your responsibility, which they will report to a credit agency. *Please use caution if considering any other institution.
8. Have diversity in your credit accounts. According to myFico.com “FICO Scores will consider your mix of credit cards, retail accounts, installment loans, finance company accounts, and mortgage loans. It's not necessary to have one of each, and it's not a good idea to open credit accounts you don’t intend to use.” But having a variety of information can provide a broader basis for your score. * Please note that 10% of your score is based on the time frame that you open accounts. Inquiries can stay on your account for up to two years. The remaining 10% of your score comes from a healthy balance of your active accounts.
9. Enroll in ID Theft protection. Did you know that in 2016 alone, “$16 billion was stolen from 15.4 million U.S. Consumers?” (According to Javelin Strategy & Research in an Identity Fraud Study.) ID theft is indeed a serious matter and that is why we protect all of our personal checking account customers every second with free, basic, ID Theft Protection. Depending on a customer’s interest, higher levels of the program are also available.

Anytime you choose to start credit or correct it, it will only help you. Don’t forget that we have loan officers in most of our offices and we’re here to help. If we can answer questions, review products, or terms, we’d love to talk with you.

For more information check out this flier from Freddie Mac or these Frequently Asked Questions from Consumer Information.