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Cal Coast Credit Union in collaboration with Filene & HerMoney
Jan 2, 2025
Your Credit Score is Like a Bonsai Tree
It requires careful tending and thoughtful behavior over time to produce the best results. Take good care with your credit — pay your bills on time and be a responsible borrower — and your credit score will help you qualify for the best terms on credit cards and loans.
Although lenders are prohibited from making decisions based on a customer’s gender or marital status, it wasn’t always that way. Before the Equal Credit Opportunity Act of 1974, women were required to have a male cosigner on loans. Banks were also free to charge us higher interest rates or require us to put down larger down payments than men to get a loan.
There are still some disparities in the world of credit, mostly due to salary inequality, which makes it more difficult for women to get approved for the best loan terms. That said, when it comes to the actual scoring, all that matters is how you handle debt. Knowing the factors that determine your credit score will help you optimize this all-important three-digit number.
Your credit score helps credit unions, banks and other businesses decide how much of a financial risk you are. It’s based on your history as a borrower, along with several other patterns of financial behavior. A credit score is a three digit number that typically ranges from 300 to 850. If you have a low score, it can indicate to a lender that you could be more likely to pay late or default on a loan. Conversely, the better your score, the better the rates you’ll qualify for with mortgages, auto loans, credit cards, and other types of loans.
Your credit score is based on information in your credit reports, or your credit file. Three main credit reporting bureaus — Experian, Equifax and TransUnion — are in the business of gathering information for your credit file. They get that information from financial institutions and public records.
The credit reporting bureaus provide the information that they’ve gathered for your credit file to the credit scoring agencies. These companies then calculate your credit scores … yup, you have multiple credit scores.
You’ve probably heard of FICO scores. FICO scores are based on a scoring model developed by one company — the Fair Isaac Corp. (now known as FICO). But they’re not the only game in town. There’s also VantageScore, which the credit reporting bureaus started to compete with FICO.
To make things even more complex, FICO and VantageScore also generate multiple versions of your credit score depending on what data is most relevant to its customers (read: lenders who pay them for access to consumer scores). For example, auto lenders have an industry-specific score, credit card companies have theirs, insurers, mortgage lenders and so on.
Thankfully, all of your credit scores are based on your behavior as a borrower. So knowing one of your credit scores gives you a good idea of how you rate when other scoring models are used.
Your credit file contains a history of your credit use, including how much money you’ve borrowed, from who, going back how long, whether you pay your bills on time and if you’ve recently applied for more credit. All of this information is used to calculate your credit score.
Here is what determines your score in order of most-to-least impactful:
The credit reporting industry knows a lot about you. But there are certain things that are not included in your consumer credit file and therefore do not factor into your credit score, including:
A score of 670 or higher is considered a good credit score by most lenders. A score of 800 or higher is considered exceptional. According to Experian, 67% of Americans have a FICO score of good or better.
It’s important to know that whatever your score may be, it’s up to the individual lender to say if your particular score meets their criteria for a loan and at what rate. As an example, a score of 670 might qualify you for a loan at a favorable rate with one lender, but another lender could tell you they require a loan of, say, 700 or higher.
One interesting thing to note: Women and men have nearly identical credit scores, on average — 704 and 705, respectively, according to Experian’s recent analysis of credit and debt data.
It takes time and patience to build a solid credit history. A few rules of thumb to follow that can help you on the path to getting or maintaining a good credit score:
Stay Informed. Stay Empowered.
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