Your credit score is a snapshot of your financial picture at a particular point in time. The higher the score, the more likely lenders, landlords, employers and others see you as a good credit risk.
Scores are generated by statistical credit scoring models using elements from your credit history and sometimes from other activity, such as a hard inquiry in response to your credit application. However, scores are not stored as part of your credit history. Rather, scores are generated at the time a lender requests your credit report from a credit reporting agency.
How a credit score model could be determined
There are many variables that could be considered when determining a credit score. Different reporting agencies may then give different weights to the factors they consider. Five areas often considered in the calculation of your credit score are:
- Payment History: Details regarding payments made on credit cards, retail charge cards, installment loans and mortgages play a part here.
- Amount Owed: Owing on many accounts won’t necessarily hurt your score. However, if you’re at or near your credit limit on your credit cards or other “revolving credit” accounts, your score can start to drop.
- Credit History: In general, a credit report containing a list of accounts that have been open for a long time will help your credit score.
- New Credit: Opening several new credit accounts in a short period of time can lower your credit score. Also, multiple credit report inquiries can represent a greater risk. To compensate for rate shopping with multiple lenders for a new car or house, the multiple inquiries are generally counted as one inquiry for a given period of time. That period of time may vary depending on the credit scoring model, but it’s typically from 14 to 45 days.
- Types of Credit in Use: Your mix of credit cards, retail accounts, installment loans, and mortgage loans is considered here. Having different types is generally better for your overall score. Lenders and creditors like to see that you’re able to manage multiple accounts of different types.
What you can do to improve your credit score
Bellco offers a number of different tools to help you learn more about your credit score and ways to start improving yours if it’s not where you would like it to be.
Branch Financial Check-up: Visit a Bellco branch near you and sit down with a Member Service Advisor to review the content of your credit report in-person.
Bellco MoneySmarts Online Tutorials: Bellco has teamed up with EVERFI, an online leader in financial education to bring you MoneySmarts, a free user-friendly program that provides short online tutorials to help you along your financial journey.
Financial Counseling: Bellco has teamed up with GreenPath Financial Wellness, a nonprofit organization that provides financial resources and tips to help you understand your credit score and manage your credit. Take control of your finances today.
AnnualCreditReport.com: Under the Fair and Accurate Credit Transactions Act of 2003 (FACT Act), you can annually obtain one free credit report from each main credit reporting agency (Equifax, Experian, and TransUnion). Simply visit AnnualCreditReport.com or call 1-877-322-8228 for more details.