Daily Dupaco

Wednesday, May 15, 2013

What's your number: A credit refresher

These days, many of us are seeing first-hand just how important our credit score is.

Whether we're searching for a loan, better insurance rates or perhaps even a job, that three-digit number can make or break the experience.

Our credit score, calculated by credit bureaus, takes into account five key factors: our payment history (35 percent of the total credit score), capacity (30 percent), length of credit history (15 percent), new credit (10 percent) and credit mix (10 percent).

The number can range from the 300s to the 800s.

Recognizing the importance of being a credit-savvy consumer, Dupaco got involved with a community-wide endeavor to promote personal financial education during Money Smart Week, held the fourth week in April.

Dupaco offered free Credit History Lessons to help educate members about their credit score. Participants learned how they can improve their score and, as a result, save money on interest and insurance.

Brad Kemp, a consumer loan officer at Dupaco, has served as a financial coach during the event. Here are a few mistakes Kemp says some consumers make when it comes to credit:

  • Using a pay day lender. "Those will lower your score," Kemp says. "And when you start getting involved with them, it's almost impossible to get out of them."
  • Taking out too many new lines of credit in a short period of time. As a rule of thumb, you can open two new accounts during a 12- to 18-month time frame. "But don't be opening a new account every other month, because the credit bureaus will think you're shopping around for credit," Kemp says. "And that will hurt your score."
  • Taking out too many total lines of credit. "We can see every loan you've taken out," Kemp says. "The total number of trade lines should be a maximum of 40 percent of your age." For example: If you're 30 years old, the maximum trade lines reporting in your credit report should be 12.
  • Buying too much house. The maximum loan amount should be 2½ times your annual gross income. "People lose jobs, and they're stuck with a house that's eight times their income and they can't make the payments anymore," Kemp says.
  • Not turning to the right lender. At Dupaco, borrowers are more than just a credit score. Dupaco will look at your job history, length of membership, income, equity in your home and more when making a decision. "Sometimes a member will come in, and the first thing they say is, 'My score is low. I don't know if you can help,'" Kemp says. "Your score is not going to make us say yes or no. It gives us a guideline on what a fair rate and term would be. We're a credit union, and we're people helping people."

By Emily Kittle


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