How can I ensure that I always get
the best rates and deals possible?
A few tips to maintain good credit or
improve your score:
1. Always make on-time payments
to current loans and credit card
balances. Consider setting up
automatic payments using Bill
Pay, or by providing your credit
card or debit card number to
service providers who bill you on
an ongoing basis.
Confused? Overwhelmed?
Don’t be! Stop by any ServUs Center location or call us at (602) 683-1000
to make an appointment for a complimentary credit consultation.
A Financial Expert will review your credit report and score with you
and help identify actions you can take to improve your score.
Have you set up your protection?
Identity protection comes with your membership. While at any ServUs Center
location, ask a Financial Expert to help you set up and use IDProtect™. Or,
call us at (602) 683-1000 and we’ll be happy to walk you through it over the
phone or set up an appointment for you at one of our locations. IDProtect™
is just one of the many services included in your membership.
2. Reduce the amount of debt you owe.
You can pay your debt down more quickly
if it is at the lowest interest rates available.
If you already have a strong score, determine
whether or not there are any opportunities for you to refinance
some debt at a lower interest rate.
3. Try to maintain a good ratio of the amount borrowed versus
the limit on revolving credit lines. When the percentage of
amount owed is 70% or higher, lenders may see you as using your
revolving lines as an extension of your income or not living within
your means.
4. Do not apply for credit too often. Several inquiries in a short
period of time can lower your credit score. Be aware of soft pulls
and hard pulls on your credit and do not be afraid to ask the person
conducting the credit review how this will affect you.
5. Have a variety of credit included in your profile.
Understanding
Your Credit Score
How often should I check my credit score or credit report?
To maintain an ongoing knowledge of your credit report and score, you should
review both on at least an annual basis, and as often as quarterly. And once you
understand how the score works, you should not be surprised by yours. If you
are, take a closer look at your credit report to ensure that it’s accurate and that
it doesn’t include erroneous information. According to a recent study completed
by the Federal Trade Commission, as many as 5% of us have an error on our
credit reports that is significant enough to be of financial impact.
As an Arizona Federal member, you can access your credit report and score
online anytime with IDProtect™, a comprehensive identity theft protection
service that’s included (at no additional charge) as a benefit of membership.
ArizonaFederal.org • (602) 683-1000
Whether or not you’re aware of it, your credit score (or lack thereof)
plays a significant role in your financial well being. Build a great score
and you’ll enjoy the rewards that come with it. But let it slip, and
you may be punished by it for years. Despite their significance, credit
scores remain a mystery to most, but they don’t have to be.
What’s a credit score?
Simply put, a credit score is a numeric measure of how well you’ve managed your
credit obligations (debt) over time. It was designed for use in loan decisions, but it
now has implications in many areas, including:
Insurance (Auto, Home, Life, etc.)
Your credit score may be a factor in the calculation of your insurance premium.
Utilities (Gas, Water, Electricity, Cellular, etc.)
Without a good credit score, you may be subject to a higher security deposit,
which will need to be paid prior to getting your utilities connected.
Employment
Many employers now incorporate your credit score or profile to determine your
eligibility for employment.
Special Financing Offers
Without a good credit score, you will not likely be able to qualify for special
offers such as “no interest/no payments until…” that you see advertised on
television.
There are hundreds of variations or types of credit scores, which doesn’t make
understanding them any easier. But all credit score calculations award points for
good behavior, and subtract points for bad behavior – so the higher
the score, the better.
For the sake of example, we’ll examine the most widely used
credit score type in the United States – the FICO score.
What’s a FICO score?
Although the exact formula for calculating the FICO score
is secret, Fair Isaac (the developer of the FICO score) has
disclosed the following components and the weight of their
impact to the score:
Payment History – 35%
Late payments on bills, such as a mortgage, credit card or automobile
loan, will cause your FICO score to drop. The more late payments, and the
longer they are past due (30, 60, 90 days), the more your score will suffer.
Conversely, bills paid on time will improve your FICO score.
Length of Credit – 15%
How a FICO Score breaks down
35% Payment History
30% Amounts Owed vs.
Credit Available
15% Length of Credit
10% New Credit
10% Types of Credit Used
30%
AMOUNTS OWED VS
CREDIT AVAILABLE
35%
PAYMENT HISTORY
15%
10%
LENGTH OF
CREDIT
10%
TYPES OF
CREDIT USED
NEW CREDIT
Different Types of Credit:
Non-Revolving Credit - This is also known as an
installment agreement. This type of account requires
you to pay a fixed monthly amount (or more), until
the principal is paid off in full at which point the
account is closed. Mortgage, auto and student loans
are examples of non-revolving credit lines.
Revolving Credit - Monthly payments on revolving
lines of credit, such as credit and department store
cards. Payments fluctuate based on how much credit
you have used and how much you choose to pay off
each month.
Secured Credit - Refers to loans
secured by an asset, such as
your home or car.
Unsecured Credit - Unsecured
credit does not involve collateral.
This type of debt typically refers
to credit and retail cards.
Amounts Owed vs. Credit Available – 30%
Keeping a low ratio of current revolving debt (such as credit card balances) to your
total available revolving credit or credit limit will increase your score.
For example, if you have a combined credit card limit of $10,000 and you have only
$2,000 in balances – that’s a credit utilization ratio of 20%, and would be considered
a good and reasonable ratio.
By contrast, if you have a combined credit card limit of $10,000 and you have
$9,500 in balances – that’s a credit utilization ratio of 95%, and your score would
be negatively impacted by it.
The most obvious way to improve this aspect of your FICO score is by paying off
debt and lowering your credit utilization ratio. Alternatively, receiving a credit limit
increase may also drive down your utilization ratio (in the example shown above, if
your limit was raised to $15,000 your utilization ratio would drop in both scenarios,
demonstrating that you use revolving credit reasonably). Many experts believe a
20-30% credit utilization ratio is best. While opening new lines of credit may have a
positive overall effect, opening too many have a negative impact.
The closing of existing revolving accounts will typically adversely affect this ratio
and therefore have a negative impact on a FICO score. This is a common mistake that
many people who are trying to improve their score make. Even worse, if it is an old
account being closed, you will be reducing your length of credit.
As your credit history ages it can have a positive impact on your FICO score.
A credit card that you have used reasonably for many years, or a car loan that
you’ve demonstrated on-time payments with for several years will make a
positive impact. If all of your credit is newer, it is not seasoned enough to make
a positive impact – since you haven’t yet demonstrated a history of on-time
payments and/or reasonable utilization. Your FICO score will likely increase as
the average age of your credit increases.
New Credit – 10%
Hard credit inquiries, which occur when you apply for a credit card or loan
(revolving or otherwise), can hurt your score, especially if done in great
numbers; often three to five points per inquiry. If you’re “rate shopping” for
a mortgage or auto loan over a short period you’ll not likely experience a
large decrease in your score as a result of these types of inquiries. Automated
computer algorithms attempt to detect when you’re rate shopping (and not
attempting to receive many new lines of credit), and they treat all of those hard
inquiries as one. While all credit inquiries are recorded and displayed on your
personal credit reports for two years, their impact decreases at the six-month
and one-year mark, rendering them insignificant after a year.
Credit inquiries originated by you (such as pulling a credit report for personal
use), an employer (for employee verification) or by companies initiating prescreened offers of credit or insurance do not have any impact on a credit score.
These are called “soft inquiries” or “soft pulls”, and do not appear on a credit
report used by lenders.
Types of Credit Used – 10%
You can benefit from having a history of managing different types of credit installment, revolving, consumer finance, mortgage, etc. A diverse credit
history (with on-time payments) shows that you can manage different types of
obligations responsibly.
What does my score tell someone about me?
Simply put, your score tells a lender or other service provider what kind of a risk
they are taking by lending money or extending services to you.
When your score is high, it can be assumed by a lender that you are a low-risk
borrower. You have paid your loans satisfactorily in the past and your current loans
and lines of credit are being managed responsibly; there is no reason to think that
the trend will not continue. As a result, you can expect higher dollar loans at lower
interest rates.
When your score is low, a lender may see you as a higher risk because you
maintain higher balances on your credit lines, you have made late payments in
the past, or you have failed to adhere to contractual guidelines on previous loans.
As a result, you can expect to be offered a lower amount at a higher interest rate.
And, you will not likely qualify for the best rates or terms you see advertised.
Whether or not you’re aware of it, your credit score (or lack thereof)
plays a significant role in your financial well being. Build a great score
and you’ll enjoy the rewards that come with it. But let it slip, and
you may be punished by it for years. Despite their significance, credit
scores remain a mystery to most, but they don’t have to be.
What’s a credit score?
Simply put, a credit score is a numeric measure of how well you’ve managed your
credit obligations (debt) over time. It was designed for use in loan decisions, but it
now has implications in many areas, including:
Insurance (Auto, Home, Life, etc.)
Your credit score may be a factor in the calculation of your insurance premium.
Utilities (Gas, Water, Electricity, Cellular, etc.)
Without a good credit score, you may be subject to a higher security deposit,
which will need to be paid prior to getting your utilities connected.
Employment
Many employers now incorporate your credit score or profile to determine your
eligibility for employment.
Special Financing Offers
Without a good credit score, you will not likely be able to qualify for special
offers such as “no interest/no payments until…” that you see advertised on
television.
There are hundreds of variations or types of credit scores, which doesn’t make
understanding them any easier. But all credit score calculations award points for
good behavior, and subtract points for bad behavior – so the higher
the score, the better.
For the sake of example, we’ll examine the most widely used
credit score type in the United States – the FICO score.
What’s a FICO score?
Although the exact formula for calculating the FICO score
is secret, Fair Isaac (the developer of the FICO score) has
disclosed the following components and the weight of their
impact to the score:
Payment History – 35%
Late payments on bills, such as a mortgage, credit card or automobile
loan, will cause your FICO score to drop. The more late payments, and the
longer they are past due (30, 60, 90 days), the more your score will suffer.
Conversely, bills paid on time will improve your FICO score.
Length of Credit – 15%
How a FICO Score breaks down
35% Payment History
30% Amounts Owed vs.
Credit Available
15% Length of Credit
10% New Credit
10% Types of Credit Used
30%
AMOUNTS OWED VS
CREDIT AVAILABLE
35%
PAYMENT HISTORY
15%
10%
LENGTH OF
CREDIT
10%
TYPES OF
CREDIT USED
NEW CREDIT
Different Types of Credit:
Non-Revolving Credit - This is also known as an
installment agreement. This type of account requires
you to pay a fixed monthly amount (or more), until
the principal is paid off in full at which point the
account is closed. Mortgage, auto and student loans
are examples of non-revolving credit lines.
Revolving Credit - Monthly payments on revolving
lines of credit, such as credit and department store
cards. Payments fluctuate based on how much credit
you have used and how much you choose to pay off
each month.
Secured Credit - Refers to loans
secured by an asset, such as
your home or car.
Unsecured Credit - Unsecured
credit does not involve collateral.
This type of debt typically refers
to credit and retail cards.
Amounts Owed vs. Credit Available – 30%
Keeping a low ratio of current revolving debt (such as credit card balances) to your
total available revolving credit or credit limit will increase your score.
For example, if you have a combined credit card limit of $10,000 and you have only
$2,000 in balances – that’s a credit utilization ratio of 20%, and would be considered
a good and reasonable ratio.
By contrast, if you have a combined credit card limit of $10,000 and you have
$9,500 in balances – that’s a credit utilization ratio of 95%, and your score would
be negatively impacted by it.
The most obvious way to improve this aspect of your FICO score is by paying off
debt and lowering your credit utilization ratio. Alternatively, receiving a credit limit
increase may also drive down your utilization ratio (in the example shown above, if
your limit was raised to $15,000 your utilization ratio would drop in both scenarios,
demonstrating that you use revolving credit reasonably). Many experts believe a
20-30% credit utilization ratio is best. While opening new lines of credit may have a
positive overall effect, opening too many have a negative impact.
The closing of existing revolving accounts will typically adversely affect this ratio
and therefore have a negative impact on a FICO score. This is a common mistake that
many people who are trying to improve their score make. Even worse, if it is an old
account being closed, you will be reducing your length of credit.
As your credit history ages it can have a positive impact on your FICO score.
A credit card that you have used reasonably for many years, or a car loan that
you’ve demonstrated on-time payments with for several years will make a
positive impact. If all of your credit is newer, it is not seasoned enough to make
a positive impact – since you haven’t yet demonstrated a history of on-time
payments and/or reasonable utilization. Your FICO score will likely increase as
the average age of your credit increases.
New Credit – 10%
Hard credit inquiries, which occur when you apply for a credit card or loan
(revolving or otherwise), can hurt your score, especially if done in great
numbers; often three to five points per inquiry. If you’re “rate shopping” for
a mortgage or auto loan over a short period you’ll not likely experience a
large decrease in your score as a result of these types of inquiries. Automated
computer algorithms attempt to detect when you’re rate shopping (and not
attempting to receive many new lines of credit), and they treat all of those hard
inquiries as one. While all credit inquiries are recorded and displayed on your
personal credit reports for two years, their impact decreases at the six-month
and one-year mark, rendering them insignificant after a year.
Credit inquiries originated by you (such as pulling a credit report for personal
use), an employer (for employee verification) or by companies initiating prescreened offers of credit or insurance do not have any impact on a credit score.
These are called “soft inquiries” or “soft pulls”, and do not appear on a credit
report used by lenders.
Types of Credit Used – 10%
You can benefit from having a history of managing different types of credit installment, revolving, consumer finance, mortgage, etc. A diverse credit
history (with on-time payments) shows that you can manage different types of
obligations responsibly.
What does my score tell someone about me?
Simply put, your score tells a lender or other service provider what kind of a risk
they are taking by lending money or extending services to you.
When your score is high, it can be assumed by a lender that you are a low-risk
borrower. You have paid your loans satisfactorily in the past and your current loans
and lines of credit are being managed responsibly; there is no reason to think that
the trend will not continue. As a result, you can expect higher dollar loans at lower
interest rates.
When your score is low, a lender may see you as a higher risk because you
maintain higher balances on your credit lines, you have made late payments in
the past, or you have failed to adhere to contractual guidelines on previous loans.
As a result, you can expect to be offered a lower amount at a higher interest rate.
And, you will not likely qualify for the best rates or terms you see advertised.
Whether or not you’re aware of it, your credit score (or lack thereof)
plays a significant role in your financial well being. Build a great score
and you’ll enjoy the rewards that come with it. But let it slip, and
you may be punished by it for years. Despite their significance, credit
scores remain a mystery to most, but they don’t have to be.
What’s a credit score?
Simply put, a credit score is a numeric measure of how well you’ve managed your
credit obligations (debt) over time. It was designed for use in loan decisions, but it
now has implications in many areas, including:
Insurance (Auto, Home, Life, etc.)
Your credit score may be a factor in the calculation of your insurance premium.
Utilities (Gas, Water, Electricity, Cellular, etc.)
Without a good credit score, you may be subject to a higher security deposit,
which will need to be paid prior to getting your utilities connected.
Employment
Many employers now incorporate your credit score or profile to determine your
eligibility for employment.
Special Financing Offers
Without a good credit score, you will not likely be able to qualify for special
offers such as “no interest/no payments until…” that you see advertised on
television.
There are hundreds of variations or types of credit scores, which doesn’t make
understanding them any easier. But all credit score calculations award points for
good behavior, and subtract points for bad behavior – so the higher
the score, the better.
For the sake of example, we’ll examine the most widely used
credit score type in the United States – the FICO score.
What’s a FICO score?
Although the exact formula for calculating the FICO score
is secret, Fair Isaac (the developer of the FICO score) has
disclosed the following components and the weight of their
impact to the score:
Payment History – 35%
Late payments on bills, such as a mortgage, credit card or automobile
loan, will cause your FICO score to drop. The more late payments, and the
longer they are past due (30, 60, 90 days), the more your score will suffer.
Conversely, bills paid on time will improve your FICO score.
Length of Credit – 15%
How a FICO Score breaks down
35% Payment History
30% Amounts Owed vs.
Credit Available
15% Length of Credit
10% New Credit
10% Types of Credit Used
30%
AMOUNTS OWED VS
CREDIT AVAILABLE
35%
PAYMENT HISTORY
15%
10%
LENGTH OF
CREDIT
10%
TYPES OF
CREDIT USED
NEW CREDIT
Different Types of Credit:
Non-Revolving Credit - This is also known as an
installment agreement. This type of account requires
you to pay a fixed monthly amount (or more), until
the principal is paid off in full at which point the
account is closed. Mortgage, auto and student loans
are examples of non-revolving credit lines.
Revolving Credit - Monthly payments on revolving
lines of credit, such as credit and department store
cards. Payments fluctuate based on how much credit
you have used and how much you choose to pay off
each month.
Secured Credit - Refers to loans
secured by an asset, such as
your home or car.
Unsecured Credit - Unsecured
credit does not involve collateral.
This type of debt typically refers
to credit and retail cards.
Amounts Owed vs. Credit Available – 30%
Keeping a low ratio of current revolving debt (such as credit card balances) to your
total available revolving credit or credit limit will increase your score.
For example, if you have a combined credit card limit of $10,000 and you have only
$2,000 in balances – that’s a credit utilization ratio of 20%, and would be considered
a good and reasonable ratio.
By contrast, if you have a combined credit card limit of $10,000 and you have
$9,500 in balances – that’s a credit utilization ratio of 95%, and your score would
be negatively impacted by it.
The most obvious way to improve this aspect of your FICO score is by paying off
debt and lowering your credit utilization ratio. Alternatively, receiving a credit limit
increase may also drive down your utilization ratio (in the example shown above, if
your limit was raised to $15,000 your utilization ratio would drop in both scenarios,
demonstrating that you use revolving credit reasonably). Many experts believe a
20-30% credit utilization ratio is best. While opening new lines of credit may have a
positive overall effect, opening too many have a negative impact.
The closing of existing revolving accounts will typically adversely affect this ratio
and therefore have a negative impact on a FICO score. This is a common mistake that
many people who are trying to improve their score make. Even worse, if it is an old
account being closed, you will be reducing your length of credit.
As your credit history ages it can have a positive impact on your FICO score.
A credit card that you have used reasonably for many years, or a car loan that
you’ve demonstrated on-time payments with for several years will make a
positive impact. If all of your credit is newer, it is not seasoned enough to make
a positive impact – since you haven’t yet demonstrated a history of on-time
payments and/or reasonable utilization. Your FICO score will likely increase as
the average age of your credit increases.
New Credit – 10%
Hard credit inquiries, which occur when you apply for a credit card or loan
(revolving or otherwise), can hurt your score, especially if done in great
numbers; often three to five points per inquiry. If you’re “rate shopping” for
a mortgage or auto loan over a short period you’ll not likely experience a
large decrease in your score as a result of these types of inquiries. Automated
computer algorithms attempt to detect when you’re rate shopping (and not
attempting to receive many new lines of credit), and they treat all of those hard
inquiries as one. While all credit inquiries are recorded and displayed on your
personal credit reports for two years, their impact decreases at the six-month
and one-year mark, rendering them insignificant after a year.
Credit inquiries originated by you (such as pulling a credit report for personal
use), an employer (for employee verification) or by companies initiating prescreened offers of credit or insurance do not have any impact on a credit score.
These are called “soft inquiries” or “soft pulls”, and do not appear on a credit
report used by lenders.
Types of Credit Used – 10%
You can benefit from having a history of managing different types of credit installment, revolving, consumer finance, mortgage, etc. A diverse credit
history (with on-time payments) shows that you can manage different types of
obligations responsibly.
What does my score tell someone about me?
Simply put, your score tells a lender or other service provider what kind of a risk
they are taking by lending money or extending services to you.
When your score is high, it can be assumed by a lender that you are a low-risk
borrower. You have paid your loans satisfactorily in the past and your current loans
and lines of credit are being managed responsibly; there is no reason to think that
the trend will not continue. As a result, you can expect higher dollar loans at lower
interest rates.
When your score is low, a lender may see you as a higher risk because you
maintain higher balances on your credit lines, you have made late payments in
the past, or you have failed to adhere to contractual guidelines on previous loans.
As a result, you can expect to be offered a lower amount at a higher interest rate.
And, you will not likely qualify for the best rates or terms you see advertised.
How can I ensure that I always get
the best rates and deals possible?
A few tips to maintain good credit or
improve your score:
1. Always make on-time payments
to current loans and credit card
balances. Consider setting up
automatic payments using Bill
Pay, or by providing your credit
card or debit card number to
service providers who bill you on
an ongoing basis.
Confused? Overwhelmed?
Don’t be! Stop by any ServUs Center location or call us at (602) 683-1000
to make an appointment for a complimentary credit consultation.
A Financial Expert will review your credit report and score with you
and help identify actions you can take to improve your score.
Have you set up your protection?
Identity protection comes with your membership. While at any ServUs Center
location, ask a Financial Expert to help you set up and use IDProtect™. Or,
call us at (602) 683-1000 and we’ll be happy to walk you through it over the
phone or set up an appointment for you at one of our locations. IDProtect™
is just one of the many services included in your membership.
2. Reduce the amount of debt you owe.
You can pay your debt down more quickly
if it is at the lowest interest rates available.
If you already have a strong score, determine
whether or not there are any opportunities for you to refinance
some debt at a lower interest rate.
3. Try to maintain a good ratio of the amount borrowed versus
the limit on revolving credit lines. When the percentage of
amount owed is 70% or higher, lenders may see you as using your
revolving lines as an extension of your income or not living within
your means.
4. Do not apply for credit too often. Several inquiries in a short
period of time can lower your credit score. Be aware of soft pulls
and hard pulls on your credit and do not be afraid to ask the person
conducting the credit review how this will affect you.
5. Have a variety of credit included in your profile.
Understanding
Your Credit Score
How often should I check my credit score or credit report?
To maintain an ongoing knowledge of your credit report and score, you should
review both on at least an annual basis, and as often as quarterly. And once you
understand how the score works, you should not be surprised by yours. If you
are, take a closer look at your credit report to ensure that it’s accurate and that
it doesn’t include erroneous information. According to a recent study completed
by the Federal Trade Commission, as many as 5% of us have an error on our
credit reports that is significant enough to be of financial impact.
As an Arizona Federal member, you can access your credit report and score
online anytime with IDProtect™, a comprehensive identity theft protection
service that’s included (at no additional charge) as a benefit of membership.
ArizonaFederal.org • (602) 683-1000
How can I ensure that I always get
the best rates and deals possible?
A few tips to maintain good credit or
improve your score:
1. Always make on-time payments
to current loans and credit card
balances. Consider setting up
automatic payments using Bill
Pay, or by providing your credit
card or debit card number to
service providers who bill you on
an ongoing basis.
Confused? Overwhelmed?
Don’t be! Stop by any ServUs Center location or call us at (602) 683-1000
to make an appointment for a complimentary credit consultation.
A Financial Expert will review your credit report and score with you
and help identify actions you can take to improve your score.
Have you set up your protection?
Identity protection comes with your membership. While at any ServUs Center
location, ask a Financial Expert to help you set up and use IDProtect™. Or,
call us at (602) 683-1000 and we’ll be happy to walk you through it over the
phone or set up an appointment for you at one of our locations. IDProtect™
is just one of the many services included in your membership.
2. Reduce the amount of debt you owe.
You can pay your debt down more quickly
if it is at the lowest interest rates available.
If you already have a strong score, determine
whether or not there are any opportunities for you to refinance
some debt at a lower interest rate.
3. Try to maintain a good ratio of the amount borrowed versus
the limit on revolving credit lines. When the percentage of
amount owed is 70% or higher, lenders may see you as using your
revolving lines as an extension of your income or not living within
your means.
4. Do not apply for credit too often. Several inquiries in a short
period of time can lower your credit score. Be aware of soft pulls
and hard pulls on your credit and do not be afraid to ask the person
conducting the credit review how this will affect you.
5. Have a variety of credit included in your profile.
Understanding
Your Credit Score
How often should I check my credit score or credit report?
To maintain an ongoing knowledge of your credit report and score, you should
review both on at least an annual basis, and as often as quarterly. And once you
understand how the score works, you should not be surprised by yours. If you
are, take a closer look at your credit report to ensure that it’s accurate and that
it doesn’t include erroneous information. According to a recent study completed
by the Federal Trade Commission, as many as 5% of us have an error on our
credit reports that is significant enough to be of financial impact.
As an Arizona Federal member, you can access your credit report and score
online anytime with IDProtect™, a comprehensive identity theft protection
service that’s included (at no additional charge) as a benefit of membership.
ArizonaFederal.org • (602) 683-1000