 Many lenders rely on scores from the Fair Isaac and Company (FICO) to determine whether or not you can get a loan and at what interest rate. Everyone wants a good credit score, but what is the credit score really comprised of? Your credit score actually consist of five different types of information. According to the Fair Isaac/Informa Research Services, 35% of your score is based on payment history, 30% on amounts owed, 15% from length of credit history, 10% from types of credit used, and 10% from new credit. Credit scores range from 300 to 850 and the higher the score the better. A higher score increases the chance of obtaining a loan and getting a good interest rate. Remember that credit scores and history also affect the possibility of getting a certain job because some employers check your credit history before offering you a job.
The chart below demonstrates how a poor credit score can affect you. The table below is from Fair Isaac/Informa Research Services shows the possible impact that a credit score can have on a $100,000, 30 year fixed-rate mortgage loan.
FICO SCORE |
APR |
MONTHLY PAYMENT |
TOTAL INTEREST PAID |
720-850 |
5.720% |
$582 |
$109,401 |
700-719 |
5.845% |
$590 |
$112,264 |
675-699 |
6.383% |
$624 |
$124,782 |
620-674 |
7.533% |
$701 |
$152,531 |
560-619 |
8.531% |
$771 |
$177,600 |
500-559 |
9.289% |
$826 |
$197,181 |
How do you know if you have a good credit history and score? There are three credit bureaus from which you can obtain your credit scores:
There is a fee to obtain the actually credit score; however, you are able to get a credit history for free. The Fair and Accurate Credit Transactions Act (FACT Act) guarantees you a free credit report from Equifax, Experian, and TransUnion every year. You are able to go to www.annualcreditreport.com and get a free report from all three of these companies. It is highly recommended that you take advantage of the free reports. It is suggested that you request one report at a time and spread them out over the course of the year.
When you get a credit report, you will want to check it thoroughly. Check and make certain that the report accurately reflects when you pay bills. For example there may be an error if you always pay your bills on time, but your credit report shows late payments. Also, check all of the accounts to make sure that they are your accounts. If there are accounts on the report that are not yours, there may be an error or you may be a victim of identity theft. Lastly, if there are dormant accounts, you may want to close those accounts.
If your credit score is low, you will want to try to repair it as quickly and efficiently as possible. Credit Repair (PDF) is an outline that guides you through the steps to improved credit. If you have any questions about credit, please contact the bank at (574) 722-6261.
If you are a victim of identity theft, you are able to place a security freeze on your credit report. This will prevent an identity thieve from opening any additional accounts or obtaining any additional credit in your name. This will also prevent any new creditors from accessing your score without your permission. To find out more information on how to protect yourself from identity theft and what to do if you are a victim, click here for more information on Security Federal Savings Bank’s website or you may also find more information at www.consumer.gov/idtheft or www.ftc.gov/credit. |
CREDIT INFORMATION