Mission: Credit Confidence®

[MUSIC PLAYING][Words appear: Making Cents, Calculating Your Credit Score] How exactly is your credit score calculated? Well, a lot of factors go into it. To determine your score, different categories of information are reviewed and compiled The first thing lenders want to know is whether you've paid your loan and other bills on time. This is very important, and according to myFICO.com, it makes up 35% of your credit score. A strong payment history will likely increase your score. When a high percentage of a person's available credit has been used, this can indicate that they're overextended and more likely to miss a payment or pay late. Your credit score takes into account the amount owed on all your accounts, the amount owed on different types of accounts, whether you have low credit use, how many accounts have balances, whether you're maxing out your credit sources, how much of an installment loan, like a car loan, is still owed compared to the original loan amount. A longer credit history will increase your score taking into account how long you've had credit accounts, including the age of your oldest account, the age of your newest account, and the average age of all of your accounts; how long specific credit accounts have been established; how long it's been since you've used certain accounts. Credit scores consider the types of credit you use-- your credit cards, retail accounts, installment loans, finance company accounts, and mortgage loans. Having a wide variety of accounts demonstrates you can handle all types of payment obligations. Opening several credit accounts in a short timespan often shows greater risk, especially if your credit history is short. Finally, even though creditors and credit bureaus are careful about the information they share, mistakes do happen. If you keep track of your credit reports, you can correct any mistakes before they could affect a lender's decision. For reference, Equifax suggests a good credit score is 700 or higher. Now that you understand how your score is graded, you're in good shape to make the financial decisions that lead to better credit scores and lower interest rates. [MUSIC PLAYING] [Words appear: Logo, Navy Federal Credit Union. Source: myFICO.com. Credit score rating according to Equifax. This video is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax, financial or other advisor for specific information about your individual financial situation. Member NCUA.]