Credit Education Month

At Grand Savings Bank, we believe that a vital component to living grand is having your credit under control––and understanding the factors that impact your credit score. To celebrate Credit Education Month, we’ve compiled the top contributors to your credit score and how to keep them in order: 

Revolving Debt

Building credit by borrowing and making timely, consistent payments is important, but so is keeping your debt in check. Before borrowing, ask yourself when you’ll have the funds to fully pay off your balance. If the answer is more than a month, consider whether the loan is truly necessary. Sometimes, it is—like when your hot water heater takes an early retirement. Being mindful before borrowing sets you up for success in paying off balances and helps prevent accumulating more debt than you can reasonably repay.

Age of Credit History

If you’ve never had a credit card, taken out a student loan, or financed a car, you may not have an established credit history. This can make securing a loan challenging, as financial institutions use your credit report to determine your eligibility and borrowing limits. The sooner you start building credit—by borrowing responsibly and making timely payments above the minimum due—the better your chances of being approved for future loans.

Reports to Collection Agencies

Unpaid debts sent to collection agencies can negatively impact your credit score, signaling that you haven’t met the terms of a loan agreement. If a lender doesn’t receive full or timely payments, they may “write off” the balance and report it to a collection agency. While this allows the lender to cut their losses, it doesn’t absolve you of the debt. If you fail to settle the balance, the collection agency will report it to credit bureaus—such as Equifax, TransUnion, and Experian—leading to a drop in your credit score.

Late Payments

One of the biggest mistakes you can make with your credit score is not taking it seriously. Your credit score is like a financial résumé—it needs to stand out for the right reasons. Late payments are among the top factors that lower credit scores. It’s crucial to make regular, on-time payments on all your balances, whether it’s a $100 charge on a sporting goods credit card or a $200K mortgage. Treat every payment with equal priority. To avoid missed payments, set calendar reminders, and designate two days each month to submit your debt payments—one in the first half of the month and one in the second. Staying proactive can prevent late payments from damaging your credit.

Credit Utilization Summary

Both the total amount you owe and the portion of available credit you’re using affect your credit score. Your credit utilization ratio plays a key role in determining your score. To calculate it, divide your outstanding balance by your credit limit and multiply by 100. For example, if you have a $5,000 balance on a card with a $10,000 limit, your utilization is 50% ((5,000 ÷ 10,000) × 100 = 50%). Individuals with the highest credit scores typically keep their utilization below 10%, while rates of 30% or higher can negatively impact scores.

We’re Here to Help!

Managing credit can feel overwhelming, but Grand Savings Bank is here to help. Whether you’re establishing credit or optimizing your financial strategy, we’re ready to guide you. Connect with us today!