What is a Credit Score?

A credit score is a crucial number that measures your creditworthiness and reflects your financial responsibility. In the past, lenders primarily used it to set loan amounts and interest rates, but today, it's more versatile than ever! Businesses across various sectors—from electric companies to landlords—now use credit scores to determine fees, down payments, and even insurance premiums. And guess what? Employers might look at your credit score too! So, it’s essential to grasp what affects this pivotal number.

Breakdown of Your Credit Score: What Matters Most

Payment History (35%)

Your payment history holds the most weight in your credit score. Paying your bills on time is crucial! Late payments or missed ones can seriously tank your score. Lenders will examine your payment habits to ensure you’re reliably repaying your debts.

Account Balance (30%)

How much you owe and your available credit can significantly impact your score. Strive to keep your usage below 30% of your credit limit. For example, maintain a balance of around $300.00 on a $1,000.00 credit card limit. Maxing out your cards? That’s a red flag for lenders!

Length of Credit History (15%)

A longer credit history can work to your advantage. Lenders prefer to see a well-established history with your accounts. Generally, they like to see at least six months of activity on a credit account.

Credit Mix in Use (10%)

Having a diverse mix of credit—like credit cards, installment loans, and mortgage loans—can boost your score. It shows lenders you can manage different types of credit responsibly. It’s not about having one of each; it’s about maintaining a strong track record!

New Credit (10%)

Be cautious about opening multiple new lines of credit in a short timeframe. Doing so can signal financial distress and can adversely affect your credit score.

Why a Great Credit Score Matters

A high credit score can open doors to favorable loan terms and lower interest rates. Scores range from 300 to 850, with anything over 720 considered good. But don’t panic if your score isn’t where you’d like it to be! Knoxville TVA Employees Credit Union offers valuable resources, like Share Secure Loans ¹ and credit cards ² , to help you improve your score.

Tips to Build and Maintain a Healthy Credit Score:

Always pay your bills on time!
Keep your credit utilization below 30%.
Diversify your credit mix.
Limit new credit applications.

Need Help Understanding Your Credit Score?

For more insights and guidance on boosting your credit score, check out GreenPath Financial Wellness ³ for FREE financial advice!

Your credit score is a powerful tool—use it wisely to achieve your financial goals! Share this article with someone who might benefit from knowing more about their credit score or leave a comment with your thoughts!

Disclosures

¹ APR = Annual Percentage Rate. The APR may increase or decrease during the term of this loan based on the changes in an interest rate index. The index is the dividend rate or current earnings rate paid on the account on the date of the advance plus 2.00%, up to the maximum APR of 18.00% or the maximum rate allowed by the law. Any increase in APR will result in more payments. Rate subject to change. Rate can change after consummation. Payment per $1,000.00 is for example purposes.

² APR = Annual Percentage Rate. Rate subject to change without notice and based on creditworthiness. Available to qualifying Members. Some restrictions may apply. Ask for details. View credit card disclosure at tvacreditunion.com/credit-card-disclosure.

³ GreenPath Financial Wellness is a third-party partner to Knoxville TVA Employees Credit Union. Must be a Member in order to receive free assistance. These services are optional and are not an obligation or guarantee by Knoxville TVA Employees Credit Union or its affiliates. GreenPath Financial Wellness is a trademark of GreenPath, Inc.

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