Learning about your credit and how to manage it can be overwhelming, but we are here to help! Toggle through the FAQs below to answer your basic questions about credit. If you need further assistance, we have several Certified Credit Union Financial Counselors on staff. Click the “Schedule an Appointment” link in the top right of the page or contact any CCU branch to meet with a Financial Counselor today!

A credit score is a calculation that shows lenders the likelihood that you will repay a loan in full and on time. It’s like a “grade” for your “creditworthiness.”

Your credit score can affect the amount a lender is willing to give you and the interest rate on that amount. Ex. lower credit scores tend to receive higher interest rates, which means you’ll pay more in interest charges over the life of the loan.

Lenders get your credit score from one of the three credit bureaus:

  • Equifax
  • TransUnion
  • Experian

Every lender will have their own criteria to follow for extending credit to people. A good credit score for someone between the ages of 18-24 is above 630.

  • Payment History: 35%. Paying your bills on time is the best way to get and maintain a good credit score. Late and missed payments will knock points off your score.
  • Credit Utilization Ratio: 30%. If you use a large amount of your available credit and seem to rely on the borrowed funds, lenders tend to back away.
  • Credit Age: 15%. The longer you have credit, the better. Avoid closing old accounts unless necessary to keep your credit history long.
  • Credit Mix: 10%. Lenders like to see a good mix of different revolving and installment accounts.
  • New Credit: 10%. Applying for too many lines of credit in a short amount of time can reduce your credit score.
  • Ask a trusted adult for help. If they feel comfortable, they can cosign a small loan for you, or allow you to be an authorized user on their credit card.
  • Get a job. This will help you grow your savings and get a loan in the future as lenders need “proof of income”.
  • Pay your bills. Lenders regularly report on time and late payments.
  • Establish regular savings. This proves you have the capacity to repay debt and the discipline to set aside money regularly.
  • Maintain your accounts without overdrafts. Unpaid overdrafts can be reported to Credit Reporting Agencies (CRAs) and can decrease your credit.
  • Check your credit report. Everyone is entitled to one free credit report per calendar year. You can get one by visiting www.annualcreditreport.com.

Soft Inquiry:

  • Any request about an individual’s credit that does not impact your credit score. Examples include
    requesting a copy of your own credit report, requests from prospective employers, or creditors
    reviewing contact information.
  • Preapproved credit card offers are considered “soft” unless you accept the offer.

Hard Inquiry:

  • Any request for new credit that does impact your credit score. Hits linked to shopping for vehicles,
    mortgages or student loans are typically listed on the report as a single hit if they occur within 14 days.
  • Increases your length of credit history. Remember that credit age accounts for 15% of your credit score. The sooner you start, no matter how small a loan is, the longer your history will be.
  • Helps you get a place to live. Some renters and apartment complexes require a credit check for your application.
  • Plays a role in job applications. Some employers perform a “soft” credit pull on you when you apply for a job with them. Starting young is a great way to show a potential employer you’re responsible.
  • Saves you money on insurance. Most insurance agencies offer lower car insurance rates for people with good credit scores.
  • Buying a car. You may not need to buy a car right now, but when you do, make sure all your ducks are in a row. A good credit score will affect how much a lender will give you for a car and the interest rate too.
  • Open a secured credit card. Your approved credit line is equal to an initial security deposit you make to be approved for the card.
  • Open an unsecured credit card or line of credit. No funds are required as a security deposit and is usually approved based on your creditworthiness. A lender may offer you their basic card with a higher interest rate and lower balance if you don’t have a credit score.
  • Consider a “credit builder” loan. Generally, these loans are from $1,000 – $2,000. The funds are placed in an interest bearing account where you cannot access them. You make payments on the loan for 1-2 years. When it’s paid off, the funds and interest paid are released to you.
  • Use collateral. This is an item that can be taken and sold by a lender if you fail to pay for your loan as agreed. Ex. car, house, cash.

There are many ways to start building credit, and it can get overwhelming. You can discuss options with a trusted individual. Most credit unions offer financial wellness and counseling services to help put you on a path specific to your needs.

Visit www.calcitecu.com/schedule-an-appointmet/ to begin working with one of ours!

  • Practice managing credit with a prepaid or debit card first: While a prepaid card doesn’t impact your credit score, but can be a good way for younger kids or those just starting out to get used to paying with a card and learn how to budget.
  • Become an authorized user on your parent/guardian’s card: Some card issuers require that an authorized cardholder be from 13 to 15 years old. Others have no age limitations. The primary account holder, and not authorized cardholders, is always responsible for repayment. So, any reckless spending will be up to your parent/guardian to pay and could hurt their credit score if you can’t repay them on time. Always be responsible and considerate of the opportunity they’ve allowed you in
    order to build your own credit.
  • Get a cosigner for your first card: Even when you turn 18, your credit history may not be robust enough to get a credit card of your own. If you feel that you’re responsible, consider asking a parent/guardian to cosign for your first card. Just like being an authorized user, any debts on a card
    they cosign on can impact their credit score, so be considerate.
  • Apply for a secured credit card: Another option for establishing a credit history from scratch is getting a secured credit card with the help of your parent/guardian. Secured credit cards require a security deposit that amounts to your line of credit. For example, a security deposit of $500 gives the card holder a $500 credit limit. It’s much easier to qualify for a secured credit card, and responsibly using one will help you build credit.
  • Look for credit cards for students: Most major credit card issuers offer credit cards for students. These cards allow you to use your time in college to build credit. Many offer rewards tied to textbook or entertainment purchases.
  • Application fee. These should be avoided at all costs. If you’re required to call a 900 number to apply for the card, it may generate a fee.
  • Processing fee. These can be charged in addition to application fees. This fee occurs if a member does not qualify for an initial card offer and is offered a less appealing one.
  • Interest rate increase. Read the fine print to see if the rates on unpaid balances increase if payments are late or you exceed your credit limit.
  • Grace period. Find out how long it is. Does it work well with when you get paid?
  • Balance transfers. Some cards waive fees for the initial balance transfer
    and treat all others as cash advances. This means they can be subject to fees and immediately accumulate interest.
  • Low rate. Do you qualify for the advertised lowest rate? This is usually based on your credit score.
  • Obtain your free credit report once per year: www.annualcreditreport.com.
  • Report discrepancies in your credit report by clicking on the credit bureau names below:

Get a full downloadable PDF of this credit information by clicking here!

For more financial education training that offers you rewards, check out the ZOGO app! You can learn more about the app by clicking here.