Do you know your score? National get smart about credit day.

It’s National Get Smart About Credit Day, Do You Know Your Score?

Your credit score can be one of the most important tools to have when you are in the market for a loan. Most, if not all, lenders use your Fair Isaac Corporation (FICO) score to gauge your creditworthiness. However as social media and online use are on the rise, many lenders are also factoring in your online presence. Lenders look for online profiles that are complete, and the number, and quality, of connections. They also check for offensive posts, profanity, or extreme political statements.

What is a FICO score?

Your FICO score is a combination of 5 key components, listed in order of importance below:

  1. Payment History = 35%. Credit bureaus don’t record a late payment a payment until it is 30 days past due. It is still best to pay on-time because the creditor may penalize you with hefty fees or an interest rate increase.
  2. Credit Utilization = 30%. This amount is the total credit used compared to the limits. You should only use 30% of your available credit and pay it off in-full each month.
  3. Credit History = 15%. The length of time that you have a line of credit, credit card, or mortgage, which is important as it shows a strong payment history.  
  4. Credit Lines = 10%. Ideally you should have three revolving debt (credit card or a line of credit) and two installment loans (car loan, student loan, or mortgage).
  5. New Credit = 10%. It is a red flag to lenders if you apply for several lines of credit in a short period of time.

What does a FICO score consist of? Magilla's chart breaks it down.

Understanding Your FICO score:

Your FICO score ranges from 300, begin the lowest, and 850, which is the highest. The ranges indicate the level of risk you are to a lender. On the consumer side, your score indicates the interest rate and loan terms you are eligible for. See the FICO credit score range below:

800+ = Exceptional. Delinquency rate is approximately 1%.

740 to 799 = Very Good. Delinquency rate is approximately 2%.

670 to 739 = Good. Delinquency rate is approximately 8%.

580 to 669 = Fair. Delinquency rate is approximately 28%.

579 and lower = Poor. Delinquency rate is approximately 61%.

Be Sure to Monitor Your Credit Score

It is recommended you check and monitor your credit score frequently. Oftentimes, consumers discover erroneous information that has a negative impact on their score. Magilla has partnered with Credit Sesame, which offers a free credit check. Or if you wish to monitor your credit and identity, then we recommend signing up for Experian’s IDnotify monitoring plan. The plans offer various levels of monitoring and you will receive alerts if your private information is used or is compromised.

Improving Your Credit Score

Lastly, to get the best rates available, you may want to improve your credit score. You can start by paying down revolving debt. You can also pay down installment debt, this will show good faith and strengthen your payment history. Be sure to make all of your payments on-time. If you are late due to unforeseen circumstances, you may rebuild your credit by paying on-time again. The older the blemishes on a credit report are not as important as the current information. Additionally, any banks offer payment notifications, it is a good idea to set this up for all of your accounts. Even better, if you set up monthly payments to all of your creditors. This way you won’t need to manage the various payment due dates.