The Power of Credit

Why You Need CreditYour credit score can help or hurt you in a number of life situations.

– Obtaining new credit cards

– Securing a mortgage

– Financing an automobile

– Renting an apartment

– Finding a job

Those reviewing your credit do so not only to see how credit-worthy

you are, but also how responsible you are to make good decisions.

What Determines Your Credit Score?Your credit score is a number that is based off an analysis of your credit

through a number of different elements. This information is reported by

the three major credit bureaus. Your score can range from 300-850,

and the higher score you have, the better. Your credit score is

determined by:

– Payment History

– Credit Utilization Ratio

– Length of Credit History/New Credit

– Types of Accounts

Payment HistoryPayment history accounts for 35% of your FICO. There are a number of

different red flags that lenders will be looking for:

– Are bills constantly being paid on time?

– Are you paying more than the minimum?

– If payments are late, how late are they?

– Have any accounts gone into collections?

– Are there any bankruptcies, foreclosures,

charge-offs, etc.

Credit Utilization RatioIf you're maxed out on most of your credit cards, this will have a

negative effect on your credit. It accounts for 30% of your FICO score,

making it the second most important criteria.

Questions to ask yourself:

– Do you have most of your credit available?

The more you have the better.

– Do you have a little bit of debt that you carry and pay off each

month, so the lender knows you can take debt on and pay it back

responsibly?

– Do you owe less than the original amount

on installment accounts?

– How much do you owe total?

Length of Credit History/New CreditA longer history will work to your advantage as long as your accounts

are in good standing and you don't owe too much. Lenders will take a

look and see how long your longest accounts are as well as the

average age of all of your accounts.

While it might be tempting to apply for new credit to bolster your credit

utilization ratio, several new inquiries in a short amount of time may be

a red flag to a lender. It could mean to them that you're experiencing

financial issues and are looking for a quick fix.

Your credit history length and new credit inquiries will make up 25% of

your credit score.

Type of Accounts10% of your score will be determined by the types of accounts you have as well as the total amount of accounts you have.

Different types of accounts could include:

• Credit Cards

• Auto Loans

• Store Accounts

• Mortgages

• Installment Accounts

Learn how to make sound personal

finance decisions with OneUnited Bank

877-663-8648100 Franklin Street. Boston, MA 02110