Bay Cities Credit Union has a one-of-a-kind program called ScoreBuilder™ that can help you increase your FICO and even help you lower the interest rates on your loans with us. If you are facing financial problems, call your Credit Union for help.
Member Chris Orrey wrote to us about her experience with ScoreBuilder™:
I've been a member of Bay Cities for many years. I don't even know how long! But I just wanted to share with you how glad I am to be a member. From the "Cheers" feeling I get when people know my name to the recent ScoreBuilder™ workshop with Lucille to my new experience in paying bills online and using home banking...everything and everyone is just great! Thank you and please keep up the great work!!!
Whenever you apply for a loan today, your “credit score” plays an important part in whether you will be approved for credit and the terms of the loan, including your interest rate. The higher your credit score, the more likely you’ll be approved for the loan you want and, more importantly, the more likely you’ll get a lower interest rate. In other words, having a good credit score can save you thousands of dollars in interest costs.
What Is a Credit Score?
There are a lot of different credit scores, but the one we are talking about is the one most widely used: the FICO score. FICOs appear on almost everyone’s credit report. They are developed by the Fair Isaac Company for all three major credit bureaus: Experian, Equifax and Trans Union.
The FICO score is an empirically derived, statistically proven system. That means the score is fairly accurate in predicting repayment or possible default on a loan. Experian calls their FICO Experian/Fair, Isaac Risk Model; Equifax calls their FICO Beacon; and Trans Union calls theirs Empirica. FICOs range from 300 to 850, with the higher the score the better as far as being approved for loans and for obtaining a lower interest rate on a loan.
What Goes Into a FICO?
Your FICO consists of five characteristics: payment history, capacity, length of your history, accumulation of new credit and mix of credit. All of them are considered in setting your score.
- Your Payment History is how you pay your current obligations and how you’ve paid your past loans. It counts for 35% of your total score. Your recent payment history carries more weight than past problems.
- Capacity is how much you have available on your assigned credit limits, and it counts for 30% of your score. If you’ve maxed out your credit cards, your score is likely to be low.
- Length means how long you have had a credit report, that is, the oldest trade on your report and the overall age of all your accounts. This counts for 15% of your score. For scoring purposes, it is important for you to keep your oldest account open if you can and refrain from opening too many new accounts in a short period of time.
- Accumulation means how much recent credit you’ve opened. This counts for 10% of your score. You can increase your score in this area by reducing the number of accounts you are opening or stopping opening accounts altogether.
- Mix is the relationship between “revolving” and “installment” debt. It is better to have more installment debt than revolving debt. Installment debt is cars, most mortgages and any personal loans that are not categorized as revolving. Revolving is bank credit cards, store credit cards and signature lines of credit. Mix counts for 10% of your score.
What Lowers a Score?
Making late payments on your accounts, having judgments against you, maxing out your credit cards, opening too many accounts in a short period of time – all of these contribute to lowering your score.
Can I Increase My Score?
Yes. You can increase your score by making payments on time, keeping some availability on your revolving credit, reducing or stopping the opening of new accounts, and not closing your oldest account.
Still have questions about FICO? We may already have the answers in our FICO FAQ.
For more information on ScoreBuilder™, call the Loan Department at (510) 690-6166, and ask about the ScoreBuilder™ program. Or fill out our online form to schedule an appointment.
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