Understanding Your Credit Score

​​When it comes to your credit score, knowledge is power! It’s important to understand what does and doesn’t affect your credit, and what you can do to improve your score over time.

Are you ready to take steps to build and improve your credit score? Read on to find out how your borrowing habits can impact your overall credit picture and opportunities.

What actions could lower your credit score?
First, understand what actions could potentially harm your credit score. Here are some things to avoid:

• Late or missing payments. Recovering from a missing payment can take up to 24 months!
• Credit cards at capacity. It’s recommended to keep your credit card balances at no more than 30% of your total credit limit.
• Closing credit cards. This will reduce your overall credit capacity.
• Applying for too many credit cards or loans at a time. Try to limit the number of pulls on your credit report within a short period of time.

What actions can help improve your score?
Now that you know what not to do, how can you proactively improve your score? Stick to these good credit habits:

• Make payments on time, every time. Set reminders or schedule automatic bill payments to help prevent missed or late payments.
• Pay down credit card balances. Use credit cards mindfully. Having a low balance or paying off your balance in full each month will help you avoid high credit capacity and build a positive credit picture.
• Review your credit report for any mistakes. Your credit score is based on the information on your credit report. Check your report at least once a year to make sure errors aren’t affecting your score.
  

What doesn’t affect your score?
The following factors are not considered when determining your credit score:

• Your debt-to-income ratio
• Your income
• Your length of employment
• Your length of residence
• Demographics (Example: Age, race, gender, etc.)

Good credit habits will go a long way!
Building or improving your credit score won’t happen overnight. It typically takes at least three to six months of positive credit behavior to see major changes in your score, so stick with good credit habits and monitor your score regularly. Soon, you’ll be well on your way to building a healthy credit picture!

WPCU is here to help you borrow smarter, no matter where you are in your financial journey. Check out WPCU’s tools for reaching Financial Flexibility and Freedom​ for more helpful resources or visit your local Member Center to talk with a Financial Coach about your credit goals​.​