Understanding your credit score

If you need or want to borrow money, your credit score can make a difference when it comes to whether you’re approved and the interest rates you’ll pay.

What is credit?

Credit is your ability to buy something now, with a guarantee to pay it back later with interest. Good credit is critical to your financial wellness, and building a good credit score is easier than you think.

What is a credit score?

A credit score is a prediction of your credit behavior, such as how likely you are to pay a loan back on time, based on information from your credit reports. The higher the number, the better the score, which indicates a strong credit history.

Credit scores are dictated by actions like your payment history, open lines of credit, and the number of recent inquiries made about your credit history. Every time you apply for, use, make, or miss a loan or credit card payment, you create another entry on your credit report – and raise or lower your credit score. The higher your score, the better you’ll be viewed by potential lenders because you’ve demonstrated your ability to pay back borrowed money in the past.

Banks and other financial institutions use credit scores to make decisions on whether to offer you a mortgage, credit card, auto loan, or other credit products. Maintaining a higher credit score may help you qualify for a lower interest rate as lenders routinely use credit scores in offering rates and terms for loans.

Did you know there are multiple credit bureaus? The three major are Experian, TransUnion, and Equifax. A lender may choose one or all of the credit bureaus when reporting or obtaining your credit information.

To check that all three credit bureaus are reporting correct information based on your individual credit history and to protect against potential fraud or identity theft, you should periodically check your credit reports. Once a year, you may receive a free copy of your credit report from each credit bureau at www.annualcreditreport.com. It is a good practice to review your personally identifiable information such as your name, address, social security number, and any accounts or loans you have had or currently have.

If you’re looking for a loan or a credit card, Norry Bank is here to help. To learn more, call us at 888-877-6623 or visit www.norrybank.com/locations to find a lender near you. 

The information provided should not be considered legal advice and is intended for informational purposes only.