Will Thompson is the President of Synovus East Alabama. He has been in the banking industry for more than 20 years.
Q: What is a credit score?
A: credit score is an indicator of a consumer’s creditworthiness. It is based on credit history: number of open accounts, total levels of debt and repayment history. Credit scores can range from 300-850.
Q: How does a credit score work?
A: credit score plays a huge part in your financial life. It can help you get lower interest rates, better terms and lower down payments on consumer loans with a score over 700. Conversely, a low score, below 700 will cause higher interest rates, shorter terms and additional down payments to minimize credit risk. In some cases, you will not be extended credit based on your score. Your credit score can affect your ability to get loans as well as the size of a initial deposit to obtain a smartphone, cable services/utilities, or to rent an apartment.
Q: How is your credit score calculated?
A: There are three major reporting agencies in the US (Experian, Equifax, and TransUnion). They based their scores on five major factors: Payment history, Total amount owed, Length of credit history, types of credit, and new credit. Payment history accounts for 35 percent and total amount owed for 30 percent.
Q: How do I improve my credit score?
A: Pay your bills on time (six months of on-time payments will increase your scores noticeably), up your credit lines if your account is in good standing (it is important to note that you should not spend the full amount to maintain a lower credit utilization rate) and don’t close credit card accounts, especially older accounts.
Q: How do I establish credit?
A: Open checking accounts at your local financial institution, apply for credit cards and merchant credit at local retailers and pay your bills on time.