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Making Sense of Your Credit Score

January 12, 2018

You may be aware of your credit score, but do you know what it represents and what it really means for your finances — and how it can impact your life? Your credit score can affect your ability to purchase a home, rent an apartment, obtain a new credit card and more. Learn what your credit score means and how you can improve it.

What your credit score means

Your credit score determines your ability to qualify for loans, such as a mortgage, and to get better interest rates when borrowing. That’s because your credit score represents credit risk, or how likely you are to pay your debts on time. All of the major consumer credit scoring agencies use a credit score scale of 300 to 850. The higher your score, the less of a risk you are to lenders and the more likely you are to qualify for a lower interest rate. So, if you’re in the market for a new home or want to refinance your current home mortgage, there’s good reason to raise your credit score as much as possible. While there are no hard-set rules for what makes a “good” or “bad” score, in general, a score of 670–739 is considered good; a score of 740–799 is very good and a score of more than 799 is excellent.

Request a credit report

You can request a free credit report by visiting Your credit report will contain information on your credit accounts, including the date you opened the accounts, the account balances, your credit limit or loan amount and your payment history.

By law, you’re entitled to one free copy of your credit report once a year. Your credit score is based on this information so be sure to check it for errors. Inform your creditor of any inaccuracies in writing. If the creditor agrees with your findings, they must report and correct the error with the credit bureau.

How to improve your credit score

In order to improve your credit score, you should first understand how it’s calculated. Your credit score is derived from looking at five factors: your payment history, the amounts you owe, the length of your credit history, your mix of credit in use and the number of new accounts you’ve opened. Here’s how you can improve your score:

  • Pay your bills on time. Consistently making timely payments can help improve your score over time.
  • Only apply for new credit when you need it. Unless you have no credit history at all, be careful about opening new accounts.
  • Avoid closing old accounts. It diminishes your total credit available, raises your credit utilization ratio and shortens your credit history.
  • Settle all fines and tickets. An outstanding library fine or parking ticket can reduce your score if a collection agency gets involved.

Learn about your mortgage options

Not sure if your credit score qualifies you for a mortgage? PeoplesBank can help with a wide array of mortgage options that make it easy to build or purchase a new home or refinance your existing home mortgage. The experienced loan officers at PeoplesBank can help you learn more about the loan process – contact them today!

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