• Understanding Credit Score
  • Building Credit History
  • Buying with credit these days is not only a reality, it’s also a necessity for most people when it comes to big purchases like buying a car or a house. The truth is, the difference between good credit and bad credit can mean hundreds or even thousands of dollars difference in the rates you’re charged when the time comes to apply for a loan. And lending institutions may not be willing to take a chance on you if you have no credit history at all.


    Good Credit & Real Savings


    The difference between good credit and bad can cost you more than just money—it can even mean losing out on getting the car, apartment, or in some industries even the job opportunity you might want. Landlords and employers as well as lenders tend to evaluate a lower credit score or bad credit as higher risk, making them less willing to lend money or, in some instances, even rent an apartment. The sooner you are able to build your credit rating, the better.


    Borrowers with high credit scores—the top tier is 760 and above—will often receive loan terms with lower interest rates, with more loan options available to them. FICO® Scores (the credit-risk scoring system lenders use) of 620 or lower will usually place you in the "subprime" category where you may receive loans quoted with significantly higher interest rates and may be offered fewer varieties of loans. In some instances, a too low FICO score can disqualify you from getting a home loan or an auto loan.


    Building good credit and increasing your credit score can help you save money in terms of interest payments as well as provide you access to additional loan resources.


    To see how a credit score impacts average interest rates, check out the Loan Savings Calculator from myFICO.com.


    Credit-building Actions


    In general, three things build good credit:


    • • A history of using credit

    • • A history of responsible payments

    • • Using only a fraction of the amount of credit available to you (credit to debt ratio)


    When you open a credit card with us, we begin reporting your payments every month to the three nationwide consumer credit bureaus(see "Annual Free Credit Report" in the Understanding a Credit Score section). Regular use of your credit card, taking the actions necessary to build good credit, combined with our regular reporting, works to build your credit history quickly.


    Credit bureaus score your credit history. In the case of credit cards they take into account how you use your card, considering items such as what percentage of your available credit you use each month, if your payments are made on time. Credit scores are used to determine if you can get loans or credit and how high or low your interest rates will be. The higher your score, the more likely it is that you would qualify for more credit and lower interest payments—saving you money.


    What actions can you take with your credit card?

    • • Pay bills on time, every time

    • • Pay your credit card balance in full regularly

    • • Don't charge all the way up to your credit limit—with revolving credit, such as a store card or other credit card, try and keep what you owe to 1/3 or less of your line of credit

    • • Review your credit reports at least once a year for accuracy, and report any mistakes immediately to the responsible credit bureau


    Strategies To Improve Your Score


    Now that you know how your score is calculated, you can focus on what you can do to improve it. Since your payment history and credit capacity are the most important factors, you should tackle those first.


    • • Make all your payments on time

    • • Don't apply for credit you don't need—every time you apply it affects your score negatively, up to five points per inquiry

    • • Start paying down your high balances on revolving credit (aim to owe no more than one-third of your total credit limit on any single credit card or store charge card)


    You can easily get an idea of what your credit score might be by researching "credit score calculators". There are several online resources available. You should be aware, however, that these calculators are intended as educational resources to help you get an idea of your potential credit score range, based on information you provide. They do not predict the actual information contained in your credit report, nor do they guarantee credit approval or rejection by any financial institution.


  • Considering Joint Credit
  • Debt Management
  • Managing Your Finances