It seemed like growing up in New Castle, you had an A Plus or a 7-11 or a Sheetz (of course they weren’t all called that), every few blocks. For me, the main mini-store was Tic Toc on East Washington Street.
Why do I bring this up?
Because of candy, of course!
Look, I know there were better places in New Castle (and even the county) to get better chocolate and candy like Jameson’s Candy and the Candy Shoppe downtown (it ALWAYS made downtown smell like roasted nuts and chocolate).
But, going to Tic Toc allowed me to just hop over and grab a candy bar, or some Milk Duds, or Hubba Bubba.
Unfortunately, every now and again, I became a loan officer to a friend. I also became a bank. My terms were simple – pay me back next week, and without any interest. Done!
However, for a few of my friends, that never happened. Next week came and went, and instead of paying me back, they asked for another loan of free candy bar.
Well, that lasted until I finally said ‘nope’.
Everyone is a bit of a bank
You likely have experienced something similar. Two friends come to you and both want to borrow something like money, a power washer, a chainsaw, I don’t know. You literally evaluate the likelihood of receiving back what you are about to lend out.
The above is an example of how credit history and credit scores work, and why they are important.
Today, we are going to be looking at how to raise your credit score. This metric will also allow you to see a much better credit report – less bad debt, more good, revolving debt.
Basically, today, we are going to show you, my New Castle friends, how to get a ‘sweeter’ credit score!
Your credit score is “needy” for attention!
Your credit score is not a “set it and forget it” part of your life. In fact, for many, your credit score (and more widely your credit history) can affect a lot of things including employment, housing, utilities and more.
Your credit score, my friends, is “needy”.
Your credit score requires, and likely demands, your attention.
Because of this, we are going to look at specific ways that you can improve your credit score in 2020. We’ll look at the general statistics for those living in New Castle and Pennsylvania, and how your credit score stacks up to others in the area. We’ll look at how a credit score is calculated, and how you can grow your score over time.
The TL;DR to this article is simple: pay your bills on time while strategically opening lines of credit for the best results.
The above is true, but there is a TON more that you need to know.
Let’s start with the easy part: what a credit score actually is, and what it means to you!
What is a credit score?
Your credit score, usually called a FICO score, is a general number first introduced in 1989, that is used for many purposes concerning someone’s credit history. This number gives potential lenders, and others (more on these later), the ability to see a metric of your creditworthiness.
Is having a single number for everyone fair?
Not all of the time. However, because this number is calculated for everyone, the general forecast for a person having good credit is good and bad credit is risk. Credit scores do not account for location, age, sex, race or other possible factors that could skew the numbers.
The FICO score comes from the company that invented the scoring calculation. This company, Fair Isaac Corporation was founded in 1952 in San Jose California.
Scoring models can take a few different names, depending on the credit agency involved.
- Experian: FICO Advanced Risk Score
- Equifax: Pinnacle
- TransUnion: FICO Risk Score NextGen ( formerly Precision )
What does your credit score impact?
Can I simply say ‘everything’, and leave it at that?
Well, let’s break this up into obvious and then ‘not-so-obvious’ parts of your life that a healthy (or poor) credit score will affect.
Obviously it’s obvious
First, getting a loan is a fairly obvious reason to have a healthy credit score. Most lenders will be able to get a basic idea of your ability to repay a loan simply by seeing your score. While this isn’t the only decision, there are some programs and services that require certain credit scores to be present at a bare minimum.
As well, most lenders look to credit scores to determine that actual look and use of the loan. For instance, poor credit scores could make your loan rates double (as an example), could require a much larger down payment or more collateral, or you may qualify for a specific ‘bad credit’ program.
The healthier your credit score, the better your rates, the better the loan and the more money you will have at the end of the day.
“I never knew”
The first major way that your credit score can impact you that is not obvious is during the hiring process.
Now, I should tell you, employers do not receive your credit score – they receive a modified credit report on you. However, this information, the same used to calculate your FICO score, is nearly the same that your future employer will see in their report.
When you start a new job, you don’t only get hired based upon your previous work history and training. Very likely, you can be dismissed based on a poor credit history.
Having a good credit score (and credit history) can save you on insurance. Pennsylvania is a state where credit-based insurance scores to determine risk is allowed. So, the better your credit history and higher your credit score, the cheaper your premiums will likely be.
Another area to consider is housing. Potential landlords use more than down payments and currently household income to determine whether or not you are likely a good tenant. Landlords will also use your credit report and credit history to make that determination.
A final part of your life that is affected by your credit are the utilities that you use. Not only can your down payment on a new utility drop with better credit, but you also need to be away of dropping credit scores during utility use.
Here’s what I mean…
Paying your utility bill on time will never increase your credit score. However, if you miss payments, the utilities will report to credit agencies and your credit score will drop. While this information sucks to hear (utility bills only can drop your credit score), having a higher credit score can still make things cheaper to start an account.
How is your credit score calculated?
What if I told you after years of investigation, millions in resources spent and tens of thousands of man-hours spent, we’ve broken the code! We now know how to calculate FICO credit scores.
Here’s the punchline…
We didn’t do any of that. Yes, we know how FICO scores are calculated, but they also make this information fairly public and available.
The most important part of your FICO score is payment history. No doubts about this one – lenders ALWAYS look at how you have performed in the past. This is why your payment history is weighed so much for your FICO score.
The very next most weighed FICO score element are the amounts you owe on credit accounts. Simply put – the less you owe, the better. When you show that you owed someone on a line of credit and paid it off in full, over and over, shows a history of successful payments.
Length of credit history is a middle ground for what is most important in FICO scores. This one is interesting because it is likely the most simple to detect, but takes the longest to build.
Be warned with this credit scoring item: if you started closing accounts, you could negatively impact your credit score. Long-term credit is good.
The next thing that you should consider in the credit scoring formules is a credit mixture on different platforms. What does this mean? This means opening credit lines of various types, amounts and using different lenders. In other words, instead of having 7 Visa credit card account, it is stronger having one Visa, one Mastercard, a Discover card and a personal loan.
Finally new credit accounts (and timing) are the final piece of the scoring formula for FICO scores. IF every few years you have another new line of credit, you theoretically are opening, paying off and then in good standing. This repeats over and over and over, which would display a history of non-risk.
Your credit score says a lot about you (but not everything)
If you were to see someone’s credit score, would you be able to see them?
You would see if they are healthy in their accounts. You would see if they have overhead. You would see if they even have a credit history (no score).
If there is no score, I know when someone has never had credit.
If the credit score is 300 to 500, I know if the person credit but hasn’t maintained its health. They likely have received credit, but have let payments lapse. Or their credit history is so adolescent but late or overdue.
With a score of 725 or more, I know if a person has multiple accounts while paying on time. I know the person likely has a credit history of 3 years, minimum. As well, I can assume that this person has credit on multiple platforms – credit cards, loans, etc.
What does a credit score not show me? A credit score does not show me that you have rebuilt your credit from 20 year of ‘bad habits’, and have 3 years of extremely good habits. A credit score will not show me that you are in the middle of an incredibly bad streak of recent credit destroying habits.
Credit scores can be skewed.
With that said, for the most part, they are accurate windows of how our credit health is doing. Credit reports are the best methods of determining this, along with monthly household budgets and live interviews and statements.
Since your credit score is the initial method of hearing a ‘yes’ or ‘no’ to a new line of credit, it makes a lot of sense for us to focus on this. What is a good score? How do you stack up versus others in the area and the country?
What is a good credit score?
“Good” is a tough word. I mean, ‘good’ is an opinion, ‘good’ is a thought or a feeling. In a rational world, an opinionated word doesn’t carry a lot of respect, right?
In the context of your credit score, ‘good’ actually does have weight. We can define what a good credit score is, as well as a poor one.
|Bad||600 and below|
As you can see, while a credit score can be from 300-800, poor credit scores start at 600.
This all begs another question…
What is the average credit score for New Castle, PA, my age, etc.?
Above, we discussed what ‘good’ credit scores were. For a good credit score, you need 700 or above.
But, how does that stack up to other Pennsylvania residents?
In 2018, Pennsylvania residents’ average credit score was 711. In 2019, this average had grown to 713. Both numbers, as you can see, were in the good credit score range.
For Lawrence County, the average resident is around 700. And in New Castle, the average credit score as of 2017 was 687. For more information, check out this list of average rankings of credit scores in Pennsylvania by town or city.
Age also shows a variation. Let me show you the table, and then we’ll discuss the ‘why’ behind it all.
Credit scores by ages
Notice anything here?
The simple reason for this age group increase in average FICO score might be the age of the person equates to the growing ages of credit. After all, the older a credit account is, the higher your credit score.
Instead, there may be another reason why. As a person gets older, their wages grow. As time goes on, they also need purchases that require more money to buy. At 16 you want a car but don’t particularly ‘need’ one. However, at 28, married, with two kids, you ‘need’ a vehicle to get back and forth to and from work. As well, you will likely move from an apartment into a home – meaning being granted a home loan.
Think about this…
If home loans are paid off on average of 25-30 years, and you receive the loan in your 20s, you are in the sweet spot of 50-55 when the note is paid. Included in this mix of credit history are car loans, credit cards, etc.
Time grows your credit score. But, so do the events that you take part in while that time goes on.
Raising your credit score in New Castle (and beyond)
So far we talked about the credit score scoring process. We talked about what the averages are for national scores and for Pennsylvania and New Castle residents. You also hopefully have a good understanding of what makes or breaks your credit score getting better and better over time.
Now, we’re going to talk about the meat of what you need – what it takes to make your credit score zoom up. What we should talk about, specifically, is how you can increase your credit score starting today. We’re not saying by this weekend you are going to have a 750 credit score, but we can guarantee that what you do will start down that road.
1 – Make your payments on-time
Whether you have good credit or bad, whether you are increasing your credit score or trying to rebuild your credit after a bankruptcy, paying your bills on-time is a necessity. Do no skip one month, do not get late enough for shut-off notices, late fees or rolling interest payments.
Your credit skip can experience a simple dip on a single instance of late payments, as well as experiencing a 15%+ drop in your credit score if this continues.
2 – Pay all credit cards “in full” each month
Similar to “make your payments on-time”, paying all of your credit cards, in full, each month is super important. Keeping your credit card balances low and keeping them paid off to zero will show you use your credit line as well as never are late in paying it off.
3 – Don’t continuously open lines of credit just to open more lines of credit
Having open, healthy lines of credit is a good thing. After all, it shows that you are less and less of a risk of paying those monies back, right?
However, an issue arises when, as time goes on, you are continuously opening new lines of credit. In many cases, the main reason for opening a new card on good terms (a larger available balance) can be accomplished by contacting your financial institutions, and asking for your balance to be reviewed for more.
4 – Strategically open credit accounts (loans, credit cards, lines of credit, etc)
“Hey, you should open a Mastercard account. Have one already? Then open a Visa? Hove one already, how about a secured loan account? Maybe try to get a personal loan?”
Does the above sound like I’m setting you up for failure?
I hope not!
What I am trying to show you is that you need to strategically open new credit accounts that will help your credit score. Remember, having different types of credit lines will raise your score.
Which ones should you choose?
Personally, if you are rebuilding your credit, try for secure lines of credit (secure credit cards and secure loans). If you are building positive, healthy credit, I recommend credit cards that will be constantly paid off each month.
5 – Pay off all of your bad credit
There are two people I know personally that have gone from the mid-500s and 600s to the mid-600s and into 700 credit score just by paying off their credit card debt (around $1500 for each, respectively). These were ongoing lines of credit that had been dormant or in bad standing for years. The minimum monthly payments were consistent, but the interest rates kept going up – now they had bad debt and monthly fees that were ever-increasing to remind them.
So what happens?
Late fees become a possibility, maxed credit limits are a definite, and soon, a falling credit score is on the horizon.
Instead, pay extra on the minimum – or just pay those cards off as soon as possible.
What should you do next to help raise your credit score?
The best thing that we could tell you to do is to start by planning. Plan on how you are going to get started in fixing your credit score, and then, start doing each step. Paying down and off all of your old debts will give you a fast leap. Constantly keeping your payments on-time and as low as possible will be an ongoing task.
Quite literally, gaining a better credit score means:
PLAN – Pay Down – Pay Off – EXTEND
The ‘extend’ part of the above will be key in growing your credit and creating a better credit score. And, we can help that. We offer products like First Choice Board Special loans, credit cards and other lower loan and lower line of credit products that will assist you.
To find out more, stop by or give us a call at (724)652-8393 today. You can also visit the First Choice FCU website to see our products and rates.