March Into Better Credit Habits

Whether you’re new to credit or looking to raise your score, understanding how credit scores work and how to manage them responsibly can make a lasting impact on your financial future. We believe that financial wellness starts with knowledge. From major purchases to everyday peace of mind, your credit score is a key tool for unlocking opportunity.

Credit 101: What Is a Credit Score & Why Does It Matter?

Your credit score reflects your creditworthiness – it tells lenders how likely you are to repay a loan. A good score can impact everything from securing a mortgage to getting favorable interest rates and even affect things like housing and insurance premiums. 

Simply put, your credit score can influence the opportunities available to you. That’s why understanding how it works is crucial for making informed financial decisions.

Good Credit Habits: How to Strengthen Your Score

Improving your credit score doesn’t happen overnight, but the good news is that small steps can lead to significant improvements over time. Here are a few tips to help you on your way:

• Make on-time Payments: Paying bills on time is one of the most important factors in your credit score.
• Reduce Your Credit Utilization: Aim to use no more than 30% of your available credit.
• Check Your Credit Report: Regularly review your credit report for errors and dispute any inaccuracies you find.
• Keep Old Accounts: Length of credit history matters, so keep those old accounts open to show a longer track record.

Debunking Credit Myths: Fact vs. Fiction

There are many misconceptions about credit that can keep you from making the best decisions for your financial future. For example, did you know that checking your credit score doesn’t lower it? Here are some other debunked myths to help navigate your credit journey with confidence:

• All Debt is Bad for Your Credit Score
  • Fact: Not all debt negatively affects your credit score. What matters is how you manage it. Responsible borrowing, like maintaining low credit card balances and making timely payments, can improve your score.
• My Credit Score is Just Based on My Income
  • Fact: Your credit score is not based on your income. It’s based on factors such as your payment history, credit utilization, length of credit history and types of credit accounts you have.
• It’s Impossible to Improve My Credit Score Once It’s Low
  • Fact: While it may take time, you can improve your credit score. By making on-time payments, reducing your credit card balances and disputing any errors on your credit report, you can increase your score over time.
• If I Pay Off My Debt, My Credit Score Will Automatically Improve
  • Fact: Paying off debt is great, but your credit score is influenced by more than just your outstanding balances. You need to ensure your credit utilization stays low and your payment history remains positive for your score to improve.
• Student Loan Debt Will Destroy My Credit Score
  • Fact: Student loans won’t automatically hurt your credit score. What matters is how you manage them – making on-time payments will help build your credit, even if the amount is high.
• You Can Fix Your Credit Quickly
  • Fact: Repairing your credit takes time. While there are steps you can take to improve your score, it’s a gradual process. Be patient and stay consistent with responsible credit habits.

Why Credit Health Matters for Your Future

Your credit score isn’t just important for today – it’s a long-term asset that can significantly impact your financial future. Whether you’re looking to buy a home, secure a loan or even start a business, a good credit score can provide the foundation for better opportunities and financial freedom. A strong credit history not only sets you up for financial success but gives you the tools to manage life’s big milestones with ease.

At Formation Credit Union, we believe in supporting our members through every stage of their financial journey. With 75 years of experience, we’re here to help you improve your credit score and achieve your financial goals. 

Ready to take control of your credit score? Contact Formation Credit Union today, where your financial health is our top priority.