The concept of credit can be one that is shrouded in mystery, and often, we’re left to learn about it on an individual level, which can lead to confusion and even misunderstandings about how credit truly works. In some instances, this confusion can even be detrimental to an individual’s credit.
In celebration of Credit Education Month and to combat the mystery surrounding credit and help you build healthy credit, we’ve gathered a few frequently asked questions to help you better understand credit and its potential impact in your life...
How is credit determined anyway?
There are five main factors that determine your credit, some of which are more important than others. They are – from most impactful to least impactful – your payment history, credit utilization, the average age of your accounts, the mix of your types of credit accounts, and total number of hard credit inquiries.
Is a credit score the same thing as a credit report?
This is a common question among credit newbies and the answer is no, a credit score and credit report are not the same thing. However, the two are related, as a credit score is a number determined by factors (see above) that are included in your credit report.
Is having a low credit score really going to hurt me that much?
In short, yes. Maintaining a low credit score can actually mean you pay more in interest over the course of your life. If your score is low, it’s always a smart idea to try and improve it as much as possible.
How much do credit scores matter in the lending process?
Your credit score definitely matters in the lending process, but lenders tend to look at the bigger picture during the loan approval process. However, a high credit score alerts lenders to the fact that you are a financially responsible individual and can certainly work to your advantage when applying for a loan.
If you have more questions about credit, head to your local branch to chat with one of our credit experts.