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Top 10 questions about your credit score

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When it comes to your credit score, it’s beneficial to learn what it is, does and what effects it. What happens if you miss a payment? How can you raise your score? Why are there different scores?

Consumers’ @Work Manager Scott Dobson addresses your most common questions to help you along your credit journey and give you financial confidence.

 

Q: Why do the different bureaus give different scores?

A: There are three different major companies that all gather credit info and provide credit scores. They use their own systems and calculations resulting in different scores.

 

Q: Why does it go down so easily and take so long to build up?

A: Scores are calculated using a mathematical formula that is weighted toward recent activity. If you miss a mortgage payment, the next month your score will lower drastically because you have not paid a bill, and the more recent, the more it counts. On the flip side, if you’ve been making on-time payments for five years straight and last month you again made an on-time payment, you look about the same as last month, as does the math used to calculate your score.

 

Q: Does it go down if you check it?

A: No! If you are looking at your own score, it does not go down. Only if you apply for credit does it negatively affect your score.

 

Q: Can you get a home loan or any loan if you have never borrowed money? Some people pay for everything with cash, but feel like they have to get a credit card to establish a score to get a mortgage loan later.

A: It is much easier to get approved for a mortgage with an established credit history and score. Paying cash for everything does not establish a history of making on-time scheduled payments, and the lender is looking for a history of exactly that.

 

Q: Why does it take seven years for things to fall off your report?

A: Actually, it could take 10 years, but bankruptcy does get removed after 7. The credit bureaus want to have a relatively long history to review when calculating your score so they keep info for many years.

 

Q: Is it really that important, or do lending institutions look at the history more?

A: For Consumers, we have humans that look at every loan application that comes in. If you have a very high score, it makes it fast and easy for us to get you the very best loan. If your score is not high, we take a deeper dive to understand your history behind the score before making a lending decision. However, there are a ton of places that only look at score and do not look at the actual history.

 

Q: Why do inquiries lower your score?

A: Inquiries mean you are asking someone to extend credit to you. If you are constantly applying for credit cards or seeking other debt, you may look riskier than someone who inquires about borrowing money very infrequently.

 

Q: How much does it impact a score once a mortgage is paid off?

A: Having the history of a paid off mortgage will help keep a high score for some time. However, since your mortgage company will no longer be reporting on-time monthly payments, it’s important to remember that positive history won’t be there anymore, possibly lowering your score a bit.

 

Q: What is the biggest negative impact on a credit score?

A: Being 30 days or more late on a mortgage payment.

 

Q: How can I increase my score?

A: Make on-time payments. Keep credit card debt low. Apply for new credit sparingly.

Get your credit score

Did you know you can check your credit score for free within Online Banking?

Learn more

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