Lenders will be looking at your credit score to determine your eligibility for a loan. Your credit score also determines interest rate and terms you may get. You need to build credit so your reliability shows up just as well on paper as it does in your bank account.

It’s good to know what factors go into making up your score.  Your credit score is broken up into five parts. 35% of your score comes from payment history—whether you paid on time or were delinquent, and for how long. About 30% is determined by the amounts currently owed and debt carried over each month. Another 15% takes into account how old and active your accounts are. 10% evaluates how well you handle different types of credit such as revolving or installment debts, and the final 10% weighs recent attempts to accrue additional credit, such as opening new accounts and inquiries.

Establishing a good credit history takes time and there are no shortcuts or tricks.  Scores range from 300 to 850. Once established, you will need to make payments for at least six months.  You can establish a credit history through credit builder loans.  These are for individuals either just starting to build credit or working to improve their scores.  Make sure all payments are made on time and are applied to your credit report.

While it may take at least six months to begin seeing improvements, restoring credit can be a truly worthwhile process. If you are unable to pay balances in full, try to keep a maximum of 30% of your credit balance out at a time.  Also, since some of your score comes from how long you have had accounts open, try not to open many new ones at once. Always review your credit reports—check for any errors and follow up on any questions that arise. Don’t be afraid to dispute a score if something isn’t right.

With a little effort, establishing and maintaining good credit will have many rewards for your future.

This article was published in the Venango Area Chamber of Commerce’s June 2019 VenangoWorks! Newsletter.