How Can You Keep Good Credit Health?

Here are some facts you need to know about your credit score and how you can keep good credit health.

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How is your credit score determined? How can you keep yours healthy?

There are three different agencies that keep track of your credit score: Experian, Equifax, and TransUnion. Your credit score can vary between 300 and 850, which is a big difference in terms of minimum and maximum because each agency has a different minimum and maximum.

There are five different factors these agencies examine in determining your credit:

Your payment history (if you’re paying on time, how often you pay, etc.).
Your debt amount.
The length of your credit history.
The different types of credit you have.
Your recent credit application history.

There are two different types of credit pulls you can have done on your credit report: a “hard” pull and a “soft” pull. A hard pull is when you apply for a loan and you have to give agencies permission for the pull. A soft pull is when they don’t need your permission. This leads to you getting solicitations in the mail about credit cards—the agencies do soft pulls to see what your risk factor is.

With a hard pull, if you apply for a car loan or a home mortgage and within a 45-day period have five or six different people pull that credit report on a hard loan, that doesn’t necessarily lower your score. If it does, it’s very minimal because they realize you’re shopping the rate around.

Your score can be different with the three core reporting agencies because not everyone reports to all three different agencies. They also have different algorithms they keep to determine and track your score. To keep good credit health, pay down your debt as much as possible, don’t use more than a third of your revolving credit on your credit cards, and pay on time.

You should pull your credit report at least once a year.

It’s always a good idea to pull your credit report at least once a year. It has no detrimental effect on your credit score and it allows you to see if there are any discrepancies on it and dispute them if so. If you elect to dispute any discrepancies, you’ll want to do so not only with the reporting agency but also the person or entity that reported the discrepancy.

If you have any questions about your credit score or have a topic in mind you’d like to see me discuss in a future video, please feel free to give us a call or shoot us an email. We’d be happy to speak with you!