The Power of Credit

1. The Power of Credit

2. Why You Need Credit
Your 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.

3. 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

4. Payment History
Payment 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.

5. Credit Utilization Ratio
If 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?

6. Length of Credit History/New Credit
A 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.

7. Type of Accounts
10% 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

8. Learn how to make sound personal
finance decisions with OneUnited Bank
877-663-8648
100 Franklin Street. Boston, MA 02110