Get Smart About Credit

Get Smart About Credit

October 16, 2020

Even in the most difficult times, maintaining good credit health is critical. At Bank of the Valley, we care about your credit health, and are here to assist you in reaching your goal of a solid financial future.  Below are some important Credit Health Factors, as well as useful information and tips.

PLEASE NOTE: This serves as a guide to help monitor and improve your credit score.  It is important to use sound judgement when making decisions to your credit and determining if those changes are appropriate for you. 

Credit Health Factors

  • Payment History (High Impact on your Credit Score)
    • Below 97% - red end of the spectrum (needs improvement)
    • 97% - orange end of the spectrum (needs improvement)
    • 98% - yellow end of the spectrum (fair)
    • 99% - green end of the spectrum (good)
    • 100% - green end of the spectrum (excellent)
    • THE BASICS: One missed payment can negatively hurt your credit score.
    • OUR TIP: Set up automatic bill pay to ease the stress of remember when payments are due.
  • Credit Card Utilization (High Impact on your Credit Score)
    • 75%+ of your total credit card limit -  red end of the spectrum (needs improvement)
    • 50-74% of your total credit card limit  - orange end of the spectrum (needs improvement)
    • 30-49% of your total credit card limit - yellow end of the spectrum (fair)
    • 10-29% of your total credit card limit - green end of the spectrum (good)
    • 0-9% of your total credit card limit - green end of the spectrum (excellent)
    • THE BASICS: Try and maintain your credit card balance below 30% of your total credit card limit.  Exceeding 30% can hurt your credit score; however, paying down on your credit cards can improve your score relatively quickly.
    • OUR TIP: If you are in good standing, consider requesting a credit limit increase on one credit card.  An increase in your total limit could help lower your utilization rate.
  • Derogatory Marks (High Impact on your Credit Score)
    • 4+ Marks - red end of the spectrum (needs improvement)     
    • 2-3 Marks - orange end of the spectrum (needs improvement)
    • 1 Mark - yellow end of the spectrum (fair)                      
    • 0 - green end of the spectrum (excellent)
    • THE BASICS: Derogatory marks include Collections and Public Records and hurt your credit score: the lower the number the better.  Marks can stay on your credit report for 7-10 years. 
    • OUR TIP: If derogatory marks are outstanding/active on you report, contact the necessary company to make an inquiry of the purpose.  Try to find ways to satisfy [need a better word] the mark, so that it is no longer active. 
    • OUR TIP:  Automatic bill pay can help prevent accounts from becoming past due and possibly going into collections.
  • Average Age of Credit History (Medium Impact on your Credit Score)
    • <2years - red end of the spectrum (needs improvement)
    • 2-4yrs - orange end of the spectrum (needs improvement)
    • 5-6yrs - yellow end of the spectrum (fair)
    • 7-8yrs - green end of the spectrum (good)
    • 9+yrs - green end of the spectrum (excellent)
    • THE BASICS: A higher average age of credit history displays you have experience using credit responsibly, given you have positive reports on Payment History, Credit Card Utilization, and Derogatory Marks.
    • OUR TIP: Improve the age of credit history over time by keeping your accounts open and in good standing.  If closing credit cards, consider keeping the oldest account open as it helps maintain a higher average age of open accounts.
  • Total Accounts (Low Impact on your Credit Score)
    • 0-5 Accounts - red end of the spectrum (needs improvement)           
    • 6-10 Accounts - orange end of the spectrum (needs improvement)
    • 11-20 Accounts - green end of the spectrum (good)
    • 21+ - green end of the spectrum (excellent)
    • THE BASICS: The total number of accounts on your report help display the use of a variety of account responsibly.
    • OUR TIP: The focus is NOT to open unnecessary accounts to increase the number on your report.  Be responsible and open accounts when necessary.  Building a strong credit file on your report takes time and commitment.  Always focus on keeping your accounts in good standing.
  • Hard Inquiries (Low Impact on your Credit Score)
    • 9+ Inquiries - red end of the spectrum (needs improvement)
    • 5-8 Inquiries - orange end of the spectrum (needs improvement)
    • 3-4 Inquiries - yellow end of the spectrum (fair)
    • 1-2 Inquiries - green end of the spectrum (good)                      
    • 0 Inquiries - green end of the spectrum (excellent)
    • THE BASICS: Hard inquiries, such as credit applications, can stay on your report for up to 2 years, but their effects tend to fade over time.
    • OUR TIP – When applying for credit, consider both what is needed now AND what may be needed in the future.  This can help you plan accordingly for your application and potentially avoid apply for additional credit in the near future, ultimately reducing the number of hard inquiries on your report.

 

*Credit Karma was utilized in preparation of the data above as a resource, not to be affiliated as a preferred application with Bank of the Valley.  Multiple free credit report sites are available such as Credit Karma, Creditwise, FreeScore360, Credit Sesame, and IdentityIQ, etc.  For additional resources on requesting a credit report, please visit https://www.consumerfinance.gov/ask-cfpb/how-do-i-get-a-copy-of-my-credit-reports-en-5/.  For additional information on credit scores and reports, please visit https://www.usa.gov/credit-reports.