Understanding Your Credit Score: A Fresh Start for the New Year

If you’re gearing up for a year of excellent financial health, then it’s time to check your credit score and consider taking steps to improve it. For more information about what a credit score is, why it matters and how to boost your score, read on.  

What Is a Credit Score? 

A credit score summarizes your credit risk, to help lenders evaluate how likely you are to pay back a loan in full and on time. Your credit score is calculated based on a number of data points, including your payment history, outstanding debt, how many lines of credit are currently open, your pursuit of new credit lines, and the length of your credit history. People with a long credit history and limited debt typically have a higher credit score than people who are newer to the world of credit, are in significant debt, or have already utilized a large proportion of their available credit. 

How Do I Check My Credit Score? 

Members with Harvard FCU now get free access to their credit score on monthly states and via online banking. To view your score, simply log into online banking or visit the Harvard FCU website for more information. You can also check your score while banking via the Harvard FCU mobile app. If you want to additionally view a full copy of your credit report, you can request this at AnnualCreditReport.com. 

Will Checking My Score Affect My Credit? 

While your credit score is affected by a hard inquiry—i.e., if a lender checks your score during the credit application process—performing a personal credit check won’t affect your score. Indeed, it’s a smart idea to regularly check your score so that you understand your credit position and can make financial decisions accordingly. And, if anything looks irregular with your score, that could be an early warning sign of fraud or identity theft. 

What’s a Good Score? 

Credit scores at or above 670 are generally considered good, while scores above 740 are considered very good and scores above 800 are considered excellent. Borrowers with a credit score below 670 may find it more difficult to secure the best loan terms and interest rates, and may have more trouble getting a home mortgage or even renting an apartment, as landlords sometimes check a prospective tenant’s score. People with lower credit scores may additionally not qualify for premium credit cards, which usually offer the best rates and rewards. 

 How Can I Boost My Score? 

Paying off debt is one of the best strategies to improve your credit score. You can find plenty of debt management tips online, but a good place to start is by developing a plan to pay off high-interest debt as soon as possible, avoiding any more spending on credit, and creating a monthly household budget to get a firmer grasp on how to balance income and expenses without taking on more debt. On the other hand, people with limited debt but a shorter credit history may want to open a credit card account—just be sure to pay your balance in full each month. 

What If I Need Credit Now? 

People who are gradually building or re-building their credit score may still find themselves in need of credit. Be cautious about credit cards or lenders who advertise directly to people with low credit scores—these may be predatory lenders, who will tack on hidden fees or use empty promises to distract borrowers from sky-high interest rates and bad terms. Instead, work with a reputable lender to understand your options. Harvard FCU, for example, offers a variety of loans with straightforward terms and competitive rates. 

Where Can I Learn More? 

Members of the Credit Union get free access to workshops, live webinars and personal finance worksheets, to help members understand more about financial topics such as credit scores. Harvard FCU members also have access to free debt counselling through GreenPath Financial Wellness—an excellent option for anyone who is concerned about boosting their credit score or who is managing debt while still needing to access credit.