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How to Build Credit with a Credit Card While Avoiding Mistakes

Make no mistake about it: a credit card can be an extremely useful tool. From making purchases to working to build or <a href="https://merrickbank.com/learn/credit-scores-and-reports/everything-you-need-to-know-about-building-and-rebuilding-credit/" target="_self">rebuild your credit</a>, a credit card can help you reach your financial goals. But be sure to avoid these common credit card mistakes so you can get the most out of your card.
<h2>
 How Does a Credit Card Work?
</h2>
When you first start looking into the world of credit cards, it can feel daunting. There’s a lot of information, and it can feel impossible to learn it all. So, what is a credit card? It’s a financial tool that allows you to make different types of purchases, like shopping online or buying something without cash. Your credit card issuer will front the costs, but you’ll need to pay that money back over time. At the end of the <a href="https://merrickbank.com/learn/credit-scores-and-reports/what-is-a-billing-cycle/" target="_self">billing cycle</a>, typically one month, you’ll receive a statement that will list all of your credit card transactions and let you know how much you owe. You can choose to make a minimum payment or pay it off in full. If you choose to let some of the balance carry over to the next cycle, your issuer will charge you <a href="https://www.investopedia.com/terms/i/interest.asp">interest</a>. That interest is based on your <a href="https://www.investopedia.com/terms/a/apr.asp">Annual Percentage Rate (APR)</a>. You may also have other fees each month, like an annual fee, that’s added to the rest of your balance.
<h2>What Building Credit Means</h2>
<a href="https://merrickbank.com/learn/credit-scores-and-reports/everything-you-need-to-know-about-building-and-rebuilding-credit/" target="_self">Building your credit</a>&nbsp;is about more than a score. It touches nearly every part of your life. Your credit score is used as a determining factor by many different companies. Here are some of the key ways your score can impact your life:
<ul>
 <li>Utilities:&nbsp;Like a credit card issuer, utility companies are expecting you to make payments to them over time. They often use your credit score as an indicator of whether or not you’re likely to pay on time. If you have a low credit score, you may have extra fees, deposits, or have to have a co-signer.</li>
 <li>Insurance:&nbsp;Insurance is a recurring payment that has a variety of rates and terms you’re eligible for. Where your credit score lands can impact what kind of coverage you can get and how much it will cost.</li>
 <li>Employment:&nbsp;Many people view credit scores as a way to gauge how reliable someone is. You may be the perfect candidate for a job, but your credit report may deter them from hiring you. You may be an amazing employee, but a low credit score can give people the wrong impression.</li>
 <li>Housing:&nbsp;Similar to employment, a lower credit score can result in less trust with your landlord. There may be higher fees or certain requirements, like a co-signer, that are dependent on your credit score.</li>
 <li>Bank Accounts:&nbsp;Banks and credit unions run a credit check before approving new accounts. How you manage your money now can affect what options you have in the future.</li>
 <li>Relationships:&nbsp;As you can see, credit affects many areas of your life. A big one it can affect is your relationships. Poor credit can put a strain on some relationships. Your ability to handle finances doesn’t just affect you, but those around you.</li>
</ul>
<h2>Make On-Time Payments</h2>
<a href="https://www.myfico.com/credit-education/whats-in-your-credit-score">According to FICO®</a>, payment history is the single most important part of your credit score. Not only do late or missing payments result in late fees and penalties, but they can also significantly affect your FICO® score. So when should you pay off your credit card? The answer is before the due date. Preferably about a week in advance and be sure to make the minimum payment, or more if you can. Because making anything less than the minimum payment also counts as a missed payment.Missing credit card payments can leave lasting effects on your financial life. That includes everything from getting new cards, taking out loans and even renting an apartment. All of that means missing payments can be one of the worst mistakes you make with your credit card.
<h2>Know Your Credit Card Due Date</h2>
You need to know when your payment is due so you can always make the minimum payment on time. Set a reminder on your calendar each month, about a week before your due date, to sit down, go over your bills, and pay them. If you have a card that’s due at a different time than your other cards, you can call the company and see if they would be willing to adjust your payment due date. Keeping everything in one place helps you keep track of items, and having one date to focus on bills can help you keep your financials on track and organized.
<h2>What is Credit Utilization?</h2>
Your&nbsp;credit utilization ratio, usually expressed as a percentage, represents the total amount of credit you’re actively using and is another factor affecting your credit score. The utilization ratio is the amount of credit you’re using divided by your total available credit. This ratio is used to help determine how well you’re currently managing your debt.Most financial experts recommend&nbsp;<a href="https://www.experian.com/blogs/ask-experian/credit-education/score-basics/credit-utilization-rate/">keeping your total credit utilization rate below 30%</a>. Lenders generally view lower credit utilization more favorably because it can be an indicator that you’re managing your credit well and not overspending. A higher rate may suggest that you’re overextending yourself financially.
<h2>Look Into Secured Credit Cards</h2>
A secured card is one of the easiest credit cards to be approved for, especially if you’re new to credit. It has all of the same basic functions and benefits of a credit card, but requires a security deposit to open the account. That deposit is held by the credit card issuer for as long as the account is open and typically equals your credit limit. Over time, your credit limit can expanded past your deposit if you continue to demonstrate good financial habits. If you’re looking to get a secured card, do your research to see which one would be the&nbsp;<a href="https://merrickbank.com/products/secured-card">best option for you</a>.
<h2>Credit Card Mistakes to Avoid</h2>
<ul>
 <li>Ignoring Card Benefits:&nbsp;Failing to learn about the benefits your card might offer – like discounts with retailers, a free credit score, account alerts, and a mobile app – can lead to you losing out on savings.</li>
 <li>Opening Too Many Cards Too Quickly:&nbsp;Too many credit cards can make you look stretched thin financially. Applying for too many credit cards in a short amount of time can lower your credit score for the same reason.</li>
 <li>Maintaining High Balances:&nbsp;Maxing out your credit card or carrying a long-term high balance can raise your credit utilization ratio and hurt your credit score. Remember, keep that ratio low to get the best score!</li>
 <li>Making Less Than The Minimum Payment:&nbsp;If you make less than your minimum monthly payment, it can still be considered as a missing payment by your card issuer. You should always make at least the minimum payment – or more if you can.</li>
 <li>Missing Your Billing Statement:&nbsp;Reviewing your monthly billing statement is a great way to track your expenses, create a budget and keep an eye out for any charges that you didn’t make so you can report them to your issuer.</li>
</ul>

Who doesn’t love online shopping? In today’s world, it’s never been easier to search for something you want, compare prices between retailers and get it delivered right to your door. But it’s always important to make sure you’re keeping your payment and bank information safe and secure while you shop around the internet. We’ve broken down a few things you can do to stay safe and still enjoy that online shopping experience we all love so much.<h3>TIP #1: USE YOUR CREDIT CARD</h3>You should avoid using a debit card when shopping online. When you use your debit card, you’re giving direct access to your checking account. But when you use a credit card, you have the backing of fraud protection that comes standard on most cards. So if someone does get your card number and makes purchases, you can work with your credit card issuer to make sure you’re not liable for the charges.<h3>TIP #2: KEEP YOUR PASSWORDS STRONG</h3>If you have accounts with online retailers that store your address and payment information, you’ll want to make sure those accounts are secure. The best way to do this is to make sure you have strong passwords for all your accounts. This can include using two-factor authentication when possible, using passphrases instead of passwords, and not using the same passwords for multiple online accounts. You can learn more about those best practices&nbsp;<a href="https://www.cisomag.com/6-practices-to-strengthen-your-password-hygiene-in-2020/">here.</a><h3>TIP #3: USE A SECURE INTERNET CONNECTION</h3>Your Wi-Fi can actually play an important role in keeping your information safe while you shop online. Your home Wi-Fi that’s password protected is going to&nbsp;<a href="https://www.digitaltrends.com/mobile/how-dangerous-is-public-wi-fi/">be a lot safer</a>&nbsp;for you to use than using public Wi-Fi while you’re out and about. If a secure connection isn't possible, try to use your phone’s hotspot signal or a <a href="https://www.pcmag.com/news/what-is-a-vpn-and-why-you-need-one">Virtual Private Network (VPN).</a><h3>TIP #4: ALWAYS GO DIRECTLY TO A RETAILER’S SITE</h3>It’s always so tempting to click on those website ads that show you all the great deals, right? But it’s best to always go directly to a retailer’s site when possible. If you see an ad for a great deal at your favorite clothing store, just go right to their site on your own. If the deal was really from the retailer, you’ll easily be able to find the deal directly on their website.<h3>TIP #5: MONITOR YOUR BANK ACCOUNT</h3>The quickest way to catch a fraud charge on your credit card is to keep a close eye on your account. Many banks offer mobile apps that let you monitor your charges wherever you are. And so if there is a charge that comes up that you didn’t make, you’ll be able to take action right away. If you do see a charge on your account that wasn’t yours, make sure to contact your credit card issuer right away and visit&nbsp;<a href="https://www.identitytheft.gov/">https://www.identitytheft.gov/ </a>to learn more.Next time you’re shopping online, remember that there are little things you can do to keep your money secure and safely where it belongs. It makes all those hot deals online just that much sweeter when you know your bank account information is safe and sound.&nbsp;

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Our Tips for a More Secure Online Shopping Experience

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What is a Grace Period?

If you pay off your credit card in full each month, you may be able to avoid paying interest thanks to&nbsp; your credit card's grace period.

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What is a Minimum Payment?

Your credit card's minimum payment is the lowest amount of money that you have promised to pay each billing cycle.

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What is a Late Payment?

A credit card payment is considered late if it's received by your credit card issuer after your payment due date.

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What is the Prime Rate?

You've probably heard of the Prime Rate before, but what is it? And what does it do?

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What is an Annual Fee?

An annual fee is charged by many credit card issuers to use their services.

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What is a Billing Cycle?

Knowing how your account's billing cycle works can help you avoid missing payments and incurring unnecessary fees.

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What is a Cash Advance on a Credit Card?

<h2>What is a Cash Advance?</h2>The world of shopping happens mostly online nowadays. But sometimes you need cash. It might be at a farmers’ market, and you want those delicious-looking apples. Or your car breaks down and you need cash for a ride. In those moments, you may consider getting a cash advance. But before you do, there are a few things you need to know. So, what is a cash advance on a credit card? A cash advance involves using your credit card to withdraw money. But unlike a cash withdrawal, you have to pay that money back. There are some fees that come with a cash advance on a credit card that you don’t have when withdrawing from a debit card or savings. Take the time to read your terms and conditions to know exactly how a cash advance works at your bank.<h2>How Does a Cash Advance Work?</h2>Cash advances are so handy because they’re very easily accessible. Here are the main ways to get a cash advance:<ul><li>ATM:&nbsp;Any of your bank-approved ATMs will allow you to pull money for a cash advance. All you’ll need is your card and your PIN. Remember, you’ll have the standard cash advance fee alongside the typical ATM fee.</li><li>In-Person: You can go into a brick-and-mortar location that uses the same type of credit card network (like Visa® or Mastercard®) to request an advance. This has the advantage of in-person help, so you can have your questions answered and make the process go smoothly. Keep in mind that you’ll need proper identification, and there may be processing fees on top of the standard cash advance fee.</li></ul>No matter how you get your cash advances, there are typically withdrawal restrictions, like a daily limit or transaction limit. Many issuers will also give you a total cash advance limit, which will either be a percentage or a set amount.To give a broad example, say your credit limit is $1,000 and your limit for cash advance withdrawals is 30% of your credit line. If you don’t have a daily limit, then you can get multiple advances that add up to $300 or one cash advance for $300. However, if the amount is based on your available credit, and not your overall credit, that number changes. Taking the example of $1,000, if you’ve already used $500 of your credit limit, that means you can only pull from the remaining $500, so your withdrawal limit is $150. Other issuers use a set amount instead of a percentage. So, if your credit limit is $300, you’d be able to withdraw $300 no matter how much of your credit limit you’re using, as long as you’re not carrying a balance. These numbers are bound to change, depending on your provider and your circumstances. Know what a cash advance looks like with your credit card before making any decisions.<h2>What are the Costs Associated with a Cash Advance?</h2>Unlike simply buying something with your credit card, a cash advance comes with additional costs. There are two main costs associated with a cash advance: the fees and the Cash Advance&nbsp;<a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/What-is-an-APR-Video">Annual Percentage Rate (APR)</a>. Cash advance fees can come in one of two forms: a flat fee or a total percentage. The higher of these two fees is what typically gets applied. So, if you use a cash advance to withdraw $300 and the fee is $10 or 4% (whichever is higher), then the fee would be $12 (which is higher), so you'll be charged $12. The other cost, APR, is the cost of borrowing money on a credit card. What makes the APR for a cash advance unique is that it’s usually higher than your credit card APR. Your exact APR for a cash advance may be found by looking at the&nbsp;<a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/What-is-a-Schumer-Box">Schumer Box</a>&nbsp;when first applying for a credit card, or on your monthly&nbsp;<a href="https://merrickbank.com/statement">credit card statement</a>. If you’re unable to find the information you need, you can call your credit card issuer.<h2>Does a Cash Advance Hurt Your Credit Score?</h2>Getting a cash advance won’t hurt your credit score, just like using your credit card doesn’t hurt your score. But you need to be responsible with the advance and take all of the same precautions you would with a&nbsp;<a href="https://www.myfico.com/credit-education/whats-in-your-credit-score#:~:text=What's%20in%20my%20FICO%C2%AE,and%20credit%20mix%20(10%25)">credit card</a>.<a href="https://www.myfico.com/credit-education/credit-scores/payment-history">&nbsp;Payment history is the single biggest factor</a>&nbsp;when it comes to calculating a credit score, so make sure to make each month’s payment on time. Also, keep in mind that a cash advance counts toward your&nbsp;<a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/What-is-Credit-Utilization-Video">credit utilization</a>. A higher ratio can impact your credit score, so aim to&nbsp;<a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/What-is-a-Credit-Utilization-Ratio">keep your utilization ratio below the recommended 30%</a>.<h2>When Do You Pay Off a Cash Advance?</h2>A cash advance appears in the same monthly statement as your other credit card charges. You’ll pay off your cash advance by making your regular monthly credit card payment. You can choose to pay the advance off in monthly intervals or all at once. It just depends on what’s best for you. Keep in mind that there’s usually no&nbsp;<a href="https://www.consumerfinance.gov/ask-cfpb/what-is-a-grace-period-for-a-credit-card-en-47/">grace period</a>&nbsp;and a higher APR for cash advances. The good news is that your credit card issuer is typically going to direct your payments toward the highest APR balance first, in this case, your Cash Advance APR. That means that your credit card payment will go toward your cash advance first before it goes toward the other purchases you made with the lower Purchase APR.<h2>Are Cash Advances a Good Option?</h2>Cash advances can be a convenient and helpful option when you’re in a bind and need cash. But remember to take the time to weigh the additional costs against other options. Every financial decision comes with its own pros and cons, and only you can know what’s best for your situation.<h2>Alternatives to a Cash Advance</h2>If you’d like to avoid paying the fees and higher APRs that typically come with cash advances, you might want to look into other options. Keep in mind that if you need cash immediately, some of these options may not be as quick as simply using the nearest ATM.<ul><li>Borrowing Money:&nbsp;Most people like to keep business and family separate, but sometimes you must turn to the people around you. Ask those you trust that are in good financial standing if they can help you and you’ll pay them back later. It could be as simple as a gentlemen’s agreement, or you can have something drawn up to ensure both sides are protected.</li><li>Shop Around:&nbsp;It may not be the answer you want to hear, but you might have to take your business elsewhere. If you’re looking for a cash advance because a vendor only takes cash, and an advance isn’t a good option for you, moving on could be the right choice. You can always try to come back later with cash or look online for something similar.</li></ul><h2>Is a Cash Advance for You?</h2>A credit card cash advance can be a saving grace to you in a time of need but be sure to understand the costs beforehand. Closely look over your card issuer’s terms and conditions to learn the exact details and what it will cost you. Once you’re sure of all the facts and have compared a cash advance on a credit card to other options, you can decide if a cash advance is right for you.

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What is a Credit Bureau? Video

A credit bureau, also known as a consumer reporting agency or consumer reporting company, collects your financial information and history and uses it to create your credit report.

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What is a Payment History?

Among all the factors that affect your credit score, payment history carries the most weight.

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What is a Schumer Box?

Understanding every detail of your credit card can be difficult. The Schumer Box can save you time and help you find the credit card that's right for you.

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What is an APR? Video

Annual percentage rate, or APR for short, is a number your credit card company uses to calculate interest on your outstanding balances.

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What is an Authorized User?

As a primary cardholder, you can allow someone you know and trust to access and make charges on your account.

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What is an Unsecured Credit Card?

An unsecured credit card is the most common type of credit card.

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What is Available Credit?

Knowing your credit card's available credit can help you stay within your credit limit and be responsible for your spending.

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What is Credit Age?

You might have heard that credit age, also known as length of credit history, is one of the factors that can affect your credit score.

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What is Credit Utilization?

Your credit utilization ratio is a calculation based on your&nbsp;revolving credit, or credit that automatically renews as you pay off your balance.&nbsp;

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What is Revolving Credit?

Revolving credit is a great way to build or rebuild credit.&nbsp;

You make important financial decisions every day, and many of those decisions are linked to your credit score. At Merrick Bank, we’re committed to giving you the tools you need to monitor your credit score.Learn more about why your FICO®&nbsp;Score is so important and what it means to really understand your credit score.<h3>WHY IS YOUR FICO®&nbsp;SCORE SO IMPORTANT?</h3>FICO®&nbsp;is now the leading credit score on the market in the U.S., used by 90 percent of lenders,&nbsp;so it’s important to understand all of the decisions that may be affected. Whether you’re getting a loan for a car or a home or starting a new business, the better your credit score, the lower the interest rate you’ll pay. In short, a high FICO®&nbsp;Score usually means money saved, because applicants with higher FICO®&nbsp;Scores will generally receive more favorable rates that can translate into thousands of dollars in savings over the life of a loan.<h3>UNDERSTANDING YOUR CREDIT SCORE.</h3>Understanding what your credit score means and what affects it is the best way to get on track toward improving it. And that’s important, because establishing good credit can save you thousands of dollars a year, and even more with big purchases. It’s important to note, not all banks or lenders use the same version of FICO®&nbsp;Score. For example, some FICO versions are used for auto lending, while other versions are used for when lenders make decisions about whether to extend you a credit card offer.The good news is that the average score has been rising; yours might be one of them. In April 2017, the national average FICO®&nbsp;Score hit 700.&nbsp;To see your FICO®&nbsp;Score take advantage of Merrick Bank’s goScore by simply logging into the&nbsp;<a href="https://login.merrickbank.com/?iid=gblpost1017A">Cardholder Center</a>&nbsp;and accessing your up-to-date FICO®&nbsp;Score for free. If you aren’t enrolled in the Cardholder Center yet, you can&nbsp;<a href="https://logon.merrickbank.com/core/Enroll/Enroll?iid=%20gblpost1017B">enroll</a>&nbsp;today. It’s free for all Merrick Bank customers. Plus, you can enroll in email alerts that can help you manage your account.&nbsp;For even more information on credit scores, be sure to check out the new video series from FICO available at&nbsp;<div><a href="http://goscore.merrickbank.com/goScoreLearn.aspx?iid=%20gblpost1017C">MerrickBank.com/goScore.</a>The power to make the best credit choices starts with your FICO®&nbsp;Score. Find out what yours is today at&nbsp;<a href="https://login.merrickbank.com/?iid=%20gblpost1017D">Merrick Bank.com</a>.<div></div></div>

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Knowing your Credit Score Lets You Reach Higher

Your credit score represents a lifetime of financial decisions and has the power to impact your loan approvals, interest rates, employment, housing, and more. Even though it’s just a 3-digit number, your credit score can be surprisingly difficult to understand. These tips can help you better understand your credit score.<h2>What is a Credit Score?</h2>Here’s a quick credit score 101 – a credit score is used by lenders to measure your ability to repay your loans. But how is your score calculated? Every time you use credit, like with a credit card or a loan, you’re borrowing money. How you pay back that borrowed money is reported to the credit bureaus and recorded on your credit report. Your 3-digit credit score is calculated based on that information on your report. If you’re responsible with your credit, you could have a higher score. If you make missteps, you could have a lower score. Your credit score can have a long-reaching impact on your life.&nbsp;<a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/How-Credit-Unexpectedly-Affects-Your-Life">Companies and industries of all kinds</a> use that number to decide if you’re a financial risk. Having a score below a certain point can lead to you being turned down for credit cards, loans, and even apartments. Because of the massive impact credit scores have on your life, it’s recommended that you <a href="https://www.annualcreditreport.com/index.action">check your credit report at least once a year </a>and understand what factors impact your score.<h2>Credit Score vs. Credit Report</h2>Your <a href="file:///C:/Users/rwheatley/AppData/Local/Microsoft/Windows/INetCache/Content.Outlook/CJITJZIH/-https:/www.thebalance.com/what-is-a-credit-report-and-why-is-it-important-960448">credit report</a> is a summary of your complete credit history, which is stored at the credit bureaus. It includes things like payment history, what type of accounts you have, how many accounts you have, and how much credit you’re utilizing. Each of these factors can have an impact on your credit score. Checking your credit report regularly will help you stay on top of what’s happening to your credit score and verify that the information is correct. Your credit score is calculated based on the information in your credit report. It’s important to monitor your score over time. If there’s a dramatic change in your score, you can check your credit report to learn why. Maybe there was a mistake or error that can then be corrected. You may think a small piece of information won’t make a big impact, but everything on your credit report has the potential to impact your credit score.<h2>FICO® Score vs. VantageScore®</h2>The FICO® Score is the most common credit scoring model and will give you a score between 250 and 900. FICO® is the oldest scoring method and is generally seen as the industry standard. VantageScore® was developed later by the three major credit bureaus (<a href="https://www.equifax.com/equifax-complete/Equifax/?utm_source=google&utm_medium=cpc&utm_campaign=tin-g-evr-br&utm_content=US_EN_G_PRSP_BR_Paid_Core_EXM&gclid=EAIaIQobChMI9sjZgabc_QIVajCtBh1bmwdcEAAYASAAEgJfN_D_BwE&gclsrc=aw.ds">Equifax</a>, <a href="https://www.experian.com/lpt/credit-score-tmpl.html?conf=frsc_b&pc=sem_exp_google&cc=sem_exp_google_ad_27946959_915476739_409682830209_kwd-12618301_e___k_EAIaIQobChMI_fXBjqbc_QIVqSmtBh1TkgUiEAAYASAAEgKc-_D_BwE_k_&ref=brand&awsearchcpc=1&gclid=EAIaIQobChMI_fXBjqbc_QIVqSmtBh1TkgUiEAAYASAAEgKc-_D_BwE">Experian</a>, and <a href="https://www.google.com/search?gs_ssp=eJzj4tTP1TcwLsktMlJgNGB0YPDiKilKzCsuzcvMzwMAZAkH_g&q=transunion&rlz=1C1GCEB_enUS1040US1040&oq=tran&aqs=chrome.1.0i67i131i355i433j46i67i131i199i433i465j0i131i433i512j69i57j0i67i131i433j0i67l2j5.7647j0j4&sourceid=chrome&ie=UTF-8">TransUnion</a>) to compete with the traditional FICO® Score. VantageScore® functions very similarly to FICO® and provides a number between 250 and 900. Check both scores regularly because they may be slightly different. Since they both have their own scoring model, you may find you have a different score depending on which one you check. The difference between the two credit scores should be small, but if it’s not, you may need to investigate what’s impacting one score and not the other. For example, your specific VantageScore® could only be using information from two of the three credit bureaus, while your FICO® Score is using information from all three.<h2>What are the Factors that Influence Your Credit Score?</h2>Equally as important as knowing how to check your credit score and your credit report is knowing how to get and maintain a good score.&nbsp;<a href="https://www.myfico.com/credit-education/whats-in-your-credit-score">According to FICO®</a>, five main factors go into the credit score equation, and each factor is weighted differently:<ul><li>Payment History:&nbsp;Your track record for repaying loans on time accounts for 35% of your credit score calculation, according to FICO®.</li><li>Amounts Owed:&nbsp;Owing money on your accounts doesn’t necessarily mean you’re a high-risk borrower with a low FICO® Score. However, if you’re using a lot of your available credit, this may indicate that you can’t afford your lifestyle and are relying too heavily on credit. How well you utilize your credit makes up 30% of your credit score calculation, according to FICO®.</li><li>Length of Credit History:&nbsp;The age of your oldest and newest credit accounts is averaged to determine your overall credit age (the older your credit age, the better). This accounts for 15% of your credit score, according to FICO®.</li><li>Credit Mix:&nbsp;The number of different types of credit that you have, including car loans, student loans, credit cards, home loans, and more, accounts for 10% of your credit score, according to FICO®. A diverse mix of credit types is usually good for your credit score.</li><li>New Credit:&nbsp;The number of hard inquiries and credit accounts you have recently opened accounts for 10% of your credit score, according to FICO®.</li></ul><h2>What are Credit Score Ranges?</h2>Your credit score will range somewhere between 250 and 900, and the higher the score, the better. According to FICO®, credit scores can be viewed on a numerical scale from poor to excellent:<ul><li>Poor: 250-579</li><li>Fair: 580-669</li><li>Good: 670-739</li><li>Very good: 740-799</li><li>Exceptional: 800-900</li></ul><img src="https://images.contentstack.io/v3/assets/blt6c40640a229ed552/bltf19ace8117238a4d/65c119c1087222911b494f8d/MER20-0049_Your-Credit-Score_Infographic_V5.png" alt="MER20-0049_Your-Credit-Score_Infographic_V5.png" height="auto"/><h2>What is a Good Credit Score?</h2>As shown above, you enter the “good” range around 670-739, and anything above that’s even better. Lenders generally agree that&nbsp;<a href="https://www.myfico.com/credit-education/credit-scores">the higher the score, the lower the risk</a>, and will reward you accordingly.<h2>How to Check and Monitor Your Credit</h2>Because your credit score plays such a big role in so many aspects of your life, it’s important to track it over time to ensure that you’re reaching your credit goals. It’s also important to review your credit score and credit report for errors, which might negatively impact your overall score through no fault of your own.You can check your credit score and receive a free credit report once a year through each of the three major credit bureaus — <a href="https://www.equifax.com/equifax-complete/Equifax/?utm_source=google&utm_medium=cpc&utm_campaign=tin-g-evr-br&utm_content=US_EN_G_RLSA_BR_Paid_Core_EXM&gad=1&gclid=EAIaIQobChMIyJuo0rXe_gIVehDnCh3vZwj3EAAYASAAEgLOmvD_BwE&gclsrc=aw.ds">Equifax</a>, <a href="https://www.experian.com/lpt/credit-score-tmpl.html?conf=frsc_b&pc=sem_exp_google&cc=sem_exp_google_ad_27946959_915476739_409682830209_kwd-12618301_e___k_EAIaIQobChMIybGC4LXe_gIV4Rx9Ch0RggS6EAAYASAAEgLgKfD_BwE_k_&ref=brand&awsearchcpc=1&gclid=EAIaIQobChMIybGC4LXe_gIV4Rx9Ch0RggS6EAAYASAAEgLgKfD_BwE">Experian</a>, and <a href="https://www.transunion.com/">TransUnion</a>. You may also be able to check your credit score more consistently through your financial institution.<ul><li>Free FICO® Score: There are a lot of places to check your FICO® Score for free. That list includes, but is not limited to, websites like&nbsp;<a href="https://www.thebalance.com/best-free-credit-reports-4174784">annualcreditreport.com</a>,&nbsp;<a href="https://www.myfico.com/products/fico-blp?utm_medium=cpc&utm_source=google&utm_campaign=10334010674&utm_content=629176260144&utm_adgroup=142238896683&utm_term=fico&utm_type=e&utm_target=kwd-13335336&utm_device=c&gad=1&gclid=EAIaIQobChMI7eqzpPDh_wIVzCCtBh3q8gkxEAAYASAAEgLKx_D_BwE">FICO.com</a>,&nbsp;<a href="https://www.myscoreiq.com/msiq/myscore/myscoreiq-google-nb/?utm_source=google&utm_medium=cpc&utm_campaign=MyScoreIQ+%7C+Non-Branded+%7C+Credit&aff_id=6&aff_sub=competitors_-_free_credit_score_-_2022&gad=1&gclid=EAIaIQobChMImN_Xq_Dh_wIVxgCtBh02uwzcEAAYASAAEgIRBvD_BwE">myScoreIQ.com</a>, and the three credit bureaus.</li><li>Free VantageScore®: If you’re interested in getting your VantageScore, go to<a href="https://vantagescore.com/consumers/tools/free-credit-scores/">&nbsp;vantagescore.com</a>,&nbsp;<a href="https://www.nerdwallet.com/l/free-credit-report">Nerd Wallet</a>, or head over to Intuit&nbsp;<a href="https://www.creditkarma.com/">Credit Karma</a>&nbsp;and review your different options.</li></ul><h2>How to Improve Your Credit Score</h2>Your credit score is constantly changing, based on your financial decisions and changes to the factors that affect your credit score. Here are a few things to do, and a few things to not do!<ul><li>Pay your bills on time:&nbsp;With payment history making up 35% of your credit score, it should come as no surprise that missing a payment can cause a significant change to your score. At the same time, a history of on-time payments can improve your credit score. So, it’s very important that you always make at least your minimum payment on time each month.</li><li>Keep your credit utilization low:&nbsp;When you use all your available credit, it can signify to lenders that you’re financially overextended and at risk of defaulting on your loan obligations. Keeping your&nbsp;<a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/What-is-a-Credit-Utilization-Ratio">credit utilization</a>&nbsp;lower can often help your score.</li><li>Start using credit early: A longer credit history can often be beneficial to you. Not only do you need&nbsp;<a href="https://www.experian.com/blogs/ask-experian/how-long-does-it-take-to-build-credit/#:~:text=If%20you're%20just%20starting,generate%20a%20FICO%20credit%20score.">a minimum of 6 months’</a>&nbsp;worth of credit to generate a FICO® Score, but a long history of good credit can come in handy if you hit a road bump. A longer history showcases your experiences with credit and, in theory,&nbsp;<a href="https://www.creditkarma.com/advice/i/age-credit-history-affect-credit-scores#:~:text=A%20longer%20history%20shows%20you,on%20when%20lending%20to%20you.">a longer credit history results in a more accurate score</a>.</li><li>Diversify your credit:&nbsp;Having multiple types of credit, like a credit card and a student loan, can be a good thing because it shows that you can handle paying back different kinds of loans or multiple loans at once. Just be careful about how to approach adding those new lines of credit.</li><li>Slow down on new accounts:&nbsp;Every time you apply for a loan, your lender will make a hard inquiry on your credit report. Too many of these inquiries within a short period don’t reflect well on your financial situation and can impact your credit score.</li></ul><h2>Summary: Everything to Know About Credit Scores</h2>A credit score is a 3-digit number that has a big impact on your finances and will range somewhere between 250 and 900. Your score is based on the information gathered by credit bureaus and then run through a model, like FICO® Score or VantageScore. There are five main factors that go into the credit score equation, and each factor is weighted differently. It’s widely agreed that the higher the score, the better. Check and monitor your credit score often. And at least once a year, review your credit report. Credit scores are constantly changing, so you can raise your score by developing good financial habits. Don’t be intimidated by the complexity of your credit score. Take simple steps to understand your score as you work to build or rebuild credit and stay on track with your overall financial goals.

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Everything You Need to Know About Credit Scores

There are two ways to share a credit card: via a joint account (owner) or as an authorized user. Both options have risks and advantages that fluctuate depending on each user’s unique situation, so it’s important to understand each before choosing one.<h3>HOW THEY’RE SIMILAR</h3>In either scenario, both users are authorized to use the account for purchases. In most cases the payment history is reported on both of your credit reports, regardless of who actually uses the account.1 They’re both effective ways to build your credit history or help someone else build theirs—as long as each of you use that credit wisely.<h3>HOW THEY’RE DIFFERENT</h3>The most significant difference between sharing a joint account and being/having an authorized user is the person responsible for making payments and repaying the debt.On a joint account, both parties are held equally responsible for making payments on time and keeping credit usage to a manageable level. If payments are made on time, both parties benefit from having positive payment history reported to the credit bureaus. If payments are late or skipped, it could negatively affect both credit reports. Joint accounts are normally recommended for couples that already share expenses, and in general are initially opened as joint accounts rather than adding someone to an existing account.&nbsp; Please keep in mind, however, not all issuers are the same.&nbsp; Merrick Bank, for example, does not offer joint accounts.Authorized users, on the other hand, are in general not legally responsible for making payments, even though their credit profile may be directly affected by the payment history on the account. Before becoming an authorized user on someone’s card, consider what you know about their habits, and whether you believe the account will be managed responsibly.On the flip side, adding someone as an authorized user to your credit card account—usually a spouse or child over 16 years old—may be a great way to help someone begin using credit and establish a credit history. Just be certain that they will be responsible and follow your parameters for usage. Authorized users can usually be removed from the account with a simple phone call.&nbsp;Please keep in mind, however, not all issuers are the same.&nbsp; Merrick Bank, for example, will add anyone as an authorized user, but account history will only be reported to a spouse’s credit bureau.<h3>CONSIDER CAREFULLY BEFORE CHOOSING EITHER</h3>With a joint account or an authorized user, you’re counting on the behavior of another person, so the choice is not to be taken lightly. It’s best to keep it in the family and not share credit with friends, roommates or others unless you have a strong, trusting relationship.<img src="https://merrickbank.com/-/media/Merrick/Images/Blog/joint-account-800x800.png?h=800&w=800&la=en&hash=F5129F3455C0F601129374A315EF35682FDEB1A3" width="100"/><h3>SOURCES</h3>1 http://credit.about.com/od/creditcardbasics/f/authorizedjoint.htm2 https://www.nerdwallet.com/blog/credit-cards/difference-between-authorized-users-and-joint-cardholders/

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Joint Account? Authorized User? Which is Best for Credit Sharing?

The financial world talks about credit scores in ways that might lead you to believe you only have one. With common industry phrases like, “What’s your credit score?” and “Based on your credit score,” it’s easy to see why so many people believe in the one-score-per-person paradox. In reality, most people have multiple credit scores. And those scores can differ depending on type of score, the information a particular score contains, who’s reporting, and which scoring model is being used, among other factors.&nbsp;<h3>THE PURPOSE OF A CONSUMER REPORTING COMPANY (ALSO KNOWN AS A CREDIT BUREAU)</h3>Nationwide consumer reporting companies (also known as credit reporting agencies or credit bureaus) collect and store consumer credit information—the three major companies are Equifax, Experian, and TransUnion. These companies provide individual borrowers’ credit information to lenders so they can make lending decisions and manage risk.&nbsp;These companies compile credit data into credit reports,&nbsp;<a href="https://files.consumerfinance.gov/f/documents/cfpb_consumer-reporting-companies-list.pdf">detailed breakdowns of a person’s credit history</a>, including bill-paying habits, open lines of credit, a list of other companies that have requested to see the report, and the credit history. Consumer reporting companies and lenders use this information to build credit scoring models (a credit score). This helps lenders and others quickly evaluate consumers’ qualification for credit and insurance products.When you apply for a loan, for example, your lender may request to see your credit report from one or more of the major companies. The lender will look at your credit profile to determine your creditworthiness. If your credit profile favorably reflects your ability to repay a loan, you’re more likely to be approved for that loan and receive a better interest rate.<h3>DIFFERENCES IN REPORTING AND INFORMATION</h3>Although all three major consumer reporting companies receive similar information about your credit accounts from lenders, each company might give you a different credit score depending on the exact information they have on file. These differences are sometimes the result of incomplete data, timing, and even your personally identifiable information, such as variances between the companies for your name, social security number, date of birth and address.<h4>Reporting</h4>You now know that consumer reporting companies collect information about your financial history, but how exactly do they collect it? The answer reveals the cause of one potential difference in credit scores between companies.&nbsp;Each company relies on lenders, collection agencies, courts, and other reporting entities to supply information to them. Some of these reporting entities might give their information to only one or two of the three major companies. As you might guess, the differences in information can lead to differences in credit reports and credit scores between companies.<h4>Recording</h4>Once account information has been reported, each consumer reporting company may have slight differences in the way they record and display credit information. In other words, even if all three companies have the same exact information, they may show it in different ways, resulting in slight variations between scores.<h4>Timing</h4>Related to differences in recording, consumer reporting companies may receive and record consumer credit information at different times. Because these companies rely on data furnishers, they can’t always control when they will receive consumer information. Also, once received, one company may keep that information on its credit files for a longer (or shorter) period of time than another company.<h4>Personal Information</h4>Minor differences in names can lead to fragmented credit files and inaccuracies in reporting between companies. These errors are often the result of having&nbsp;<a href="https://www.thebalance.com/credit-bureau-facts-960693">another person’s information erroneously applied to their report</a>, based on simple cases of mistaken identity.&nbsp;Even though individual credit scores can vary between companies, all three companies collect similar information about consumers. This means that as long as you are viewing the same type of score and score version (more on these later) at the same time, your scores should be similar. Put another way, if you have a high or low credit score with one company, you’re likely to have a similarly high or low credit score with the other companies, even if the numbers aren’t exactly the same.&nbsp;<h3>DIFFERENCES IN SCORING MODELS</h3>As if there weren’t already enough variables to consider when evaluating your credit report and determining your credit score, differences in credit scoring models—the&nbsp;<a href="https://www.debt.org/credit/report/scoring-models/#:~:text=Credit%252520scoring%252520models%252520are%252520statistical,up%252520with%252520a%252520credit%252520score.">statistical analyses used to calculate your score</a>—can also lead to different credit scores.&nbsp;Although lenders build custom credit scores for their purposes, FICO® Score and VantageScore are the two most widely used models. FICO® Score is the industry standard for scoring credit worthiness, and has been for the past 30-plus years. VantageScore is a more recent model created by the three major credit companies. Although they differ in a few key ways, both of these models measure your repayment history with borrowed money.&nbsp;First, the similarities: Both FICO® Score and VantageScore calculate your credit score&nbsp;<a href="https://www.usatoday.com/story/money/personalfinance/2017/12/21/fico-vs-vantagescore-5-differences-you-should-understand/964591001/">using the similar basic factors</a>: payment history, length of credit, types of credit, credit usage, and credit inquires. These factors, however, are weighted differently by each model, resulting in slight variations between scores.&nbsp;Now for the differences: Both FICO® Score and VantageScore vary in how they calculate credit scores based on length of credit history, late payments, accounts sent to collection agencies, and multiple credit account inquires.&nbsp;<h4>Length of Credit History&nbsp;</h4><ul><li>FICO® Score assesses credit accounts that have been open for at least 6 months.</li><li>VantageScore assesses credit accounts with just one month of history.</li></ul><h4>Late Payments</h4><ul><li>FICO® Score treats all late payments the same.</li><li>VantageScore gives&nbsp;<a href="https://www.usatoday.com/story/money/personalfinance/2017/12/21/fico-vs-vantagescore-5-differences-you-should-understand/964591001/">more weight to late mortgage payments</a>.&nbsp;</li></ul><h4>Collection Accounts</h4><ul><li>FICO® Score doesn’t consider collection accounts below $100.</li><li>VantageScore considers all unpaid accounts sent to collection agencies.</li></ul><img src="https://merrickbank.com/-/media/Merrick/Images/Blog/MER20-0058_VP_Oct-Dec_Scores_v1.jpg?h=800&w=800&la=en&hash=44DC67B291A3AA307FC95C5A23801252E79082CE" width="100"/><h4>Multiple Credit Inquires&nbsp;</h4><ul><li>FICO® Score</li><li>VantageScore de-duplicates multiple credit inquires within 14 days, but includes credit inquires of all types, including credit card applications.</li></ul><h3>DIFFERENCES IN SCORING MODEL VERSIONS&nbsp;</h3>Like your credit score itself, the algorithm used to calculate credit scores is constantly changing and evolving. That’s true for both main credit models—FICO® Score and VantageScore. Both models have different versions, just like the operating system on your computer or phone. And each model version weighs calculation inputs slightly differently, resulting in a different credit score for each algorithmic variation.&nbsp;Currently,&nbsp;<a href="https://www.valuepenguin.com/fico-models-explained">FICO 8 is the most common</a>&nbsp;FICO® Score, although it’s not the newest version (that’s FICO 10). In fact, some lenders (especially mortgage lenders) still use older FICO models like FICO 2, 4, and 5.&nbsp;The current VantageScore version is VantageScore 4.0. And again, depending on which VantageScore version is being used by your lender, you may see slightly different scores.<h3>DIFFERENCES IN SCORE TYPE&nbsp;</h3>Everything you’ve learned about credit scores so far applies only to consumer credit scores, but there are other types of credit scores, including insurance scores, bankcard scores, auto loan scores, and mortgage scores. These scores are specific to the type of loan you’re applying for and can vary depending on which scoring model a lender uses.&nbsp;<h4>Bankcard Scores&nbsp;</h4>Specific to credit card loans,&nbsp;<a href="https://www.myfico.com/credit-education/credit-scores/fico-score-versions">FICO®</a>&nbsp;and&nbsp;<a href="https://www.vantagescore.com/industry/bankcard">VantageScore</a>&nbsp;both have a scoring model lenders can use to make decisions about approving credit card loans with information that’s specific to that lending type. Bankcard scores follow the same basic scoring principles as other credit scores, but they’re just optimized to help lenders predict a borrower’s ability to repay credit card debt.&nbsp;<div></div>When applying for a credit card, your lender may decide to review your consumer credit score, or opt to assess risk in more detail by viewing your Bankcard score from either FICO® or VantageScore. Your Bankcard scores may differ, depending on which scoring model your lender chooses to look at.&nbsp;<h4>Auto Scores</h4>Similar to how Bankcard scores are specific to the credit card lending industry, Auto Scores are specific to the auto lending industry. Both&nbsp;<a href="https://www.myfico.com/credit-education/credit-scores/fico-score-versions">FICO®</a>&nbsp;and&nbsp;<a href="https://vantagescore.com/lenders/why-vantagescore/industries/auto/">VantageScore</a>&nbsp;have models available to lenders, so your Auto Score may vary between these two models. These scores help lenders make informed decisions about approving auto loans and predict a borrower’s likelihood of repaying an auto loan on time. Auto Scores calculated based on your consumer credit score, while weighing credit history specific to repaying auto loans more heavily. In other words, your consumer credit score and your Auto Score can differ depending on how well you have repaid past auto loans on time, compared to other types of loans.<h4>Mortgage Scores</h4>Mortgage loans usually involve high dollar amounts and greater financial risk than most other loans, which means lenders often take extra precautions before approving a loan. That means a careful review of an applicant’s current income and debt, as well as their mortgage score.&nbsp;&nbsp;Specialized residential mortgage credit reports give mortgage companies a close look at all three scores and reports from each of the three main consumer reporting companies, and summarize this information succinctly with&nbsp;<a href="https://www.quickenloans.com/blog/difference-between-consumer-credit-score-one-mortgage">emphasis placed on information mortgage lenders pay special attention to</a>. Other information that goes into determining your mortgage score includes trending credit—whether you’re paying most of your loan balances off or just making minimum payments each month.&nbsp;<h4>Insurance Scores&nbsp;</h4>Your credit history doesn’t just affect your ability to qualify for a loan. It can also impact your ability to receive insurance and your insurance rates. Insurance companies evaluate your credit score, along with other information, like your driving record and insurance claims history, to determine a credit-based insurance score—sometimes just called an insurance score.&nbsp;Like your consumer credit score, your insurance score is used to evaluate risk. Insurance companies use your insurance score during the underwriting process to predict how likely you are to make claims that might result in financial loss for the insurance company. The higher your insurance score, the less risk you represent. The less risk you represent, the more likely you are to be approved for insurance and receive a better rate.&nbsp;Each insurer uses their own model to determine your insurance score, so they may vary between insurance companies.&nbsp;<a href="https://www.progressive.com/shop/car-insurance-credit-scores/">Progressive</a>,&nbsp;<a href="https://www.statefarm.com/simple-insights/auto-and-vehicles/what-affects-car-insurance-premiums">State Farm</a>,&nbsp;<a href="https://www.nationwide.com/lc/resources/auto-insurance/articles/car-insurance-credit-score">Nationwide</a>,&nbsp;<a href="https://www.allstate.com/tr/car-insurance/does-credit-score-affect-car-insurance.aspx">Allstate</a>, and&nbsp;<a href="https://www.geico.com/information/credit-use-faq/#:~:text=According%20to%20a%20survey%20by,lower%20the%20cost%20of%20insurance.">Geico</a>&nbsp;have provided some insight into how they calculate their insurance scores. You can contact your insurance company or look on their website to see if they have any information on how they calculate insurance scores.&nbsp;<h3>CONCLUSION&nbsp;</h3>It might seem confusing to have so many different scores combine to form your credit profile, but don’t get discouraged. Having different scores is a natural (and perhaps unavoidable) reality of the current credit reporting process. But when you understand the differences between score types, models, model versions, and the reasoning behind it all, you can be prepared to evaluate whatever credit score comes your way.

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Why Do I Have So Many Different Credit Scores?

You’ve probably seen the term Annual Percentage Rate (or APR) used in ads, offers in the mail or your credit card statements. But what exactly is an APR? And how does it affect you?<h3>WHAT IS AN ANNUAL PERCENTAGE RATE?</h3>The Annual Percentage Rate (or APR for short) is a number that credit card companies use to calculate interest on your outstanding balances. You can think of it as&nbsp;<a href="https://www.consumerfinance.gov/ask-cfpb/what-is-a-credit-card-interest-rate-what-does-apr-mean-en-44/">the price you pay for borrowing money on your credit card</a>.<div></div><h3>HOW DOES APR WORK?</h3>Some credit cards have grace periods for new purchases. Those credit card companies will not charge you any interest on purchases if you pay your entire new balance off by your payment due date each month. The grace period is simply an interest-free window within the billing cycle. If you decide to wait until after the grace period to pay off some or all of your credit card balance, you will pay the agreed-upon interest rate (APR) on that outstanding balance. Remember that not all credit cards have grace periods, so check with your credit card issuer to see if you qualify.<h3>HOW IS APR SET?</h3>Credit cards with variable interest rates typically use an index, such as the Prime Rate. With the Prime Rate as a benchmark, a percentage margin is added to get a credit card’s APR. If the Prime Rate index changes, a credit card with a variable rate will change with it. This means that if the Prime Rate goes up, your credit card interest rate goes up. If the Prime Rate goes down, your interest rate goes down until you hit the minimum APR in your credit card terms.You can&nbsp;<a href="http://www.fedprimerate.com/wall_street_journal_prime_rate_history.htm#primeratealltimehigh">see the current Prime Rate</a>&nbsp;and track changes in the Prime Rate over the last several years to get a better idea of how variable interest rates may be changing.<div></div><h3>HOW IS APR USED TO CALCULATE INTEREST?</h3>Most banks calculate interest using a&nbsp;<a href="https://www.khanacademy.org/college-careers-more/personal-finance/pf-interest-and-debt/pf-credit-card-interest/a/what-is-an-apr">formula to determine a daily or monthly periodic rate</a>. To find a daily periodic rate, APR is divided by 365 days in a year. That figure is then multiplied by an outstanding balance to determine interest owed on a given day.<div></div><h3>HOW CAN YOU FIND YOUR APR?</h3>You can find your credit card’s APR on your monthly credit card statements. You can also get it by requesting a copy of your APR information through your credit card issuer.<img src="https://merrickbank.com/-/media/Merrick/Images/Blog/MER18-0014_Blog-Image_APR_800x800.jpg?h=800&w=800&la=en&hash=0E0EE01E5C83B6F848E4A2FC1C87627BB5D38C22" width="100"/><h3>HOW CAN KNOWING YOUR APR HELP YOU?</h3>Your credit card is a tool. And understanding your APR can help you use that tool to make more informed purchase decisions, better manage your balances, and ultimately build a better financial future.

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What is an APR?

Your credit score represents a lifetime of financial decisions and has the power to impact your employment, housing, loan approvals, and more. Even though it’s just a 3-digit number, your credit score can be surprisingly difficult to understand. Here are 5 tips to help you better comprehend your credit score.<h4>1. Know Where Your Score Ranks</h4>For lenders, a credit score is a measure of your ability to repay your loans. Your credit score will range somewhere between 250 and 900, and the higher the score, the better. <a href="https://www.myfico.com/credit-education/credit-scores">According to FICO®,</a> credit scores can be viewed on a numerical scale from poor to excellent:<ul style="list-style-type: square;"><li>Poor: 250-580</li><li>Fair: 580-669</li><li>Good: 670-739</li><li>Very Good: 740-799</li><li>Excellent: 800-900</li></ul><h4>2. Know How a Credit Score is Calculated</h4>There are many different types of credit scores, but the most common is the FICO® Score. <a href="https://www.myfico.com/credit-education/whats-in-your-credit-score">According to FICO®,</a>&nbsp;there are five main factors that go into the credit score equation, and each factor is weighted differently:<ol><li>Payment History: Your track record for repaying loans on time accounts for 35% of your credit score calculation, according to FICO®.</li><li>Credit Usage: The amount of used credit compared to available credit, sometimes called a credit utilization ratio, makes up 30% of your credit score, according to FICO®. A lower credit utilization ratio is better for your credit score.</li><li>Credit Length: The age of your oldest and newest credit accounts are averaged to determine your overall credit age (the older your credit age, the better). This accounts for 15% of your credit score, according to FICO®.</li><li>Credit Mix: The number of different types of credit that you have, including car loans, student loans, credit cards, home loans, and more, accounts for 10% of your credit score, according to FICO®. A diverse mix of credit types is usually good for your credit score.</li><li>New Credit: The number of hard inquires and credit accounts you have opened recently accounts for 10% of your credit score, according to FICO®.</li></ol><h4>3. Know the Factors that Influence Credit Score Fluctuations</h4>Your credit score is constantly changing, based on your financial decisions and changes to the factors that affect your credit score calculation. In general, there are four factors that can cause your credit score to fluctuate:<ul><li>Missed Payments: With payment history making up 35% of your credit score, it should come as no surprise that missing a payment can cause significant change to your score. At the same time, a history of on-time payments can improve your credit score. So it’s always very important that you make at least your minimum payment.</li><li>Maxing Out Credit Accounts: When you use all your available credit, it can signify to lenders that you are financially overextended and at risk for defaulting on your loan obligations. Keeping your credit utilization lower can often help your score.</li></ul>Opening Multiple Credit Accounts in a Short Amount of Time:&nbsp;Every time you apply for a loan, your lender will make a hard inquiry on your credit account. Too many of these inquiries within a short period doesn’t reflect well on your financial situation and can impact your credit score.<ul><li>Defaulting:&nbsp;When you fail to repay a loan, or miss too many payments, your lender may foreclose, repossess, charge-off, or settle your account, depending on the type of loan. Defaulting on a loan can negatively impact your credit score for up to a decade.&nbsp;</li></ul><h4>4. Know How Your Credit Score Impacts Real Life</h4>Credit scores can feel theoretical, at times, but they have the potential to impact your everyday life in a number of ways. Every time you apply for a loan, your lender will check your credit score to predict how responsible you will be at repaying your obligations. Similarly, some landlords, utility companies, and employers will check your credit score as a way of making assumptions about your character and dependability. If you’re good at repaying your loan obligations, you may be more likely to pay your rent and utility payments on time and be a dependable employer.<h4>5. Know How to Check Your Credit Score</h4>Because your credit score plays such a big role in so many aspects of life, it’s important to track it over time to ensure that you’re reaching your credit goals. It’s also important to review your credit score and credit report for errors, which may negatively impact your overall score, through no fault of your own. You can check your credit score and receive a free credit report once a year through each of the three main credit bureaus—Equifax, Experian, and TransUnion. You may also be able to <a href="https://merrickbank.com/Account-Services/goScore">check your credit score more consistently</a> through your financial institution.&nbsp;Don’t be intimidated by the complexity of your credit score. Take simple steps to understand your score as you work to build or rebuild credit and stay on track with your overall financial goals.&nbsp;

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Tips for Understanding Your Credit Score

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How Do Credit Reports Work?

Credit cards have been around for a long time. In fact, the first model for the modern day credit card took place in the <a href="https://www.nerdwallet.com/article/credit-cards/history-credit-card">1920s, when department stores and oil companies</a> started offering metal charge plates and courtesy cards. In today’s world of online shopping and contactless payments, it’s no surprise that the credit card is still one of the most prominent payment methods in the United States.In this in-depth look at credit cards, we’ll take a deep dive into what a credit card is, how it works, and how this payment method compares to other popular payment methods out there.So let’s dive in!<h3>What is a Credit Card?</h3>Just like an auto loan, personal loan, or mortgage loan, a credit card is another way of borrowing money. You apply for the loan, you’ll be approved if you meet the criteria for that loan, and then you’ll agree to repay the borrowed money based on the terms and conditions of your agreement.The difference between credit cards and many other kinds of loans is that credit cards are a type of <a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/What-is-Revolving-Credit">revolving credit</a>. This form of credit can be used again and again, as you make purchases and pay them off. In addition to making purchases at a store, online, or for monthly recurring payments you can also use your credit card to get a <a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/What-is-a-Cash-Advance">cash advance</a> at a bank or ATM.What might just look like a piece of plastic at first glance is actually a very powerful way for you to make purchases, build credit, earn rewards, and so much more! But, as the saying goes, with great purchasing power comes great repayment responsibility.When you use your card to make a purchase by swiping, inserting, tapping or entering your credit card number online, your credit card issuer agrees to pay for the purchase and you agree to repay the loan. At the end of each <a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/What-is-a-Billing-Cycle">billing cycle,</a> your credit card issuer will send you a statement of charges, along with instructions for repaying the borrowed money. You can choose to repay your purchases in full, or in part, and your credit card issuer may charge you interest for any balance you carry on your card.You’ll always be required to make at least a&nbsp;<a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/What-is-a-Billing-Cycle">minimum payment</a> on time for each billing cycle. This is one of the most important things you should do when you have a credit card. In fact, <a href="https://www.myfico.com/credit-education/whats-in-your-credit-score">according to FICO®,</a> payment history (otherwise known as your record for making your payments on time) is the most significant factor affecting your FICO® Score – making up 35% of your total score.&nbsp;<h3>Making Credit Card Payments</h3>As we stated above, making your credit card payments on time is the most important thing you can do with your credit card. Your <a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/What-is-a-Payment-History">payment history</a> is a <a href="https://www.experian.com/blogs/ask-experian/credit-education/score-basics/what-affects-your-credit-scores/">critical component of your credit score calculation.</a> And your credit score can impact your future ability to borrow money from other lenders.As mentioned, your credit card issuer will send you a statement at the end of every billing cycle — the period of time between one month’s billing statement and the next month’s billing statement. This billing statement will notify you of your current total credit balance and the minimum amount of money that you need to pay. If you fail to make at least the minimum payment each billing cycle, you may be charged late fees, suffer credit score consequences, and/or be subject to collections or other legal actions. Your missed payment will also be reported to one or more of the credit bureaus, which can affect your credit score.Your credit card issuer may give you a <a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/What-is-a-Grace-Period">grace period</a> to repay your loans — the time between the end of your billing cycle and the minimum payment due date. This amount of time will vary, depending on your lender, but it gives you a chance to organize your finances, evaluate your credit card statement, and arrange to make a payment.<h3>Credit Card APRs</h3>Your credit card’s <a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/What-is-an-APR-Video">annual percentage rate (APR)</a> &nbsp;- also known as the interest rate - is the rate used by your credit card issuer to calculate interest on outstanding balances. You can think of APR as <a href="https://www.consumerfinance.gov/ask-cfpb/what-is-a-credit-card-interest-rate-what-does-apr-mean-en-44/">the price you pay for borrowing money on your credit card</a>. You get to make purchases on credit. And your credit card company charges interest based on your APR.You can find your credit card’s APR in the <a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/Anatomy-of-a-Schumer-Box">Schumer Box</a> when you’re opening a new credit card and the APR for cards you have right now can usually be found on your card’s billing statement each month.<h4>How is Your APR calculated?</h4>Credit cards usually have <a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/What-is-a-Variable-Interest-Rate">variable interest rates</a>. This means that they can change over time. Credit card issuers typically use an index, such as the U.S. <a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/What-is-the-Prime-Rate">Prime Rate</a>, as a benchmark. This benchmark is the variable part of your variable interest rate because it goes up and down based on the current economic market. You can <a href="http://www.fedprimerate.com/wall_street_journal_prime_rate_history.htm#primeratealltimehigh">see the current Prime Rate</a> and track changes in the Prime Rate over the last several years to get a good idea of how variable interest rates can change over time.Your credit card will have a set margin percentage. Your credit card issuer will calculate your current APR by adding the margin (which stays the same) to the benchmark (which fluctuates) to get your variable interest rate. This <a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/What-is-a-Variable-Interest-Rate">video</a> can help break down the variable interest rate process for you.Once your APR is set, your credit card issuer calculates your interest for each billing cycle using a <a href="https://www.khanacademy.org/college-careers-more/personal-finance/pf-interest-and-debt/pf-credit-card-interest/a/what-is-an-apr">formula to determine a daily or monthly periodic rate</a>. To find a daily periodic rate, your credit card’s APR is divided by 365 days in a year (or 366 in a leap year) and multiplied by an outstanding balance to determine interest owed on a given day. To calculate a monthly periodic rate, the daily rate is multiplied by the number of days in the billing period. That figure is then multiplied by an average balance to determine interest owed in a given billing cycle.<h3>Credit Limits, Available Credit and Credit Utilization</h3>Credit cards typically have a credit limit (also known as credit line), which is the maximum amount of money you can charge to your card. Your credit limit is determined by your credit card issuer and will depend on your credit profile, which the issuer will typically pull from your credit report from one or more of the <a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/What-is-a-Credit-Bureau">three major credit bureaus.</a>Your credit limit can change over time. You may receive credit line increases as you prove yourself to be a responsible cardholder. But keep in mind that each credit card issuer provides credit line increases based on different criteria and at different lengths of time. Some credit card issuers, like Merrick Bank, will offer regular account reviews to see if you qualify for a credit line increase. Some issuers may require you to apply for a line increase.The difference between your credit limit and your current credit card balance is called your <a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/What-is-Available-Credit">available credit</a>. Available credit is the amount you have left to make new purchases. So, if you have a credit limit of $500 and you’ve already used it to make $100 worth of purchases, your current available credit it $400. If you make a payment of $50, your new available credit will be $450.Knowing your available credit can help you stay within your credit limit and determine your current <a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/What-is-a-Credit-Utilization-Ratio">credit utilization ratio</a> — the percentage of used to available credit.To calculate your credit utilization ratio, you add up all of your credit limits on all of your credit cards and then divide that by the balances on all of your credit cards. So, if you have a credit card with a limit of $500 and another credit card with a limit of $1000, your total credit limit is $1500. If you’ve made $50 worth of charges on the first card and $200 of charges on the second card, your total amount you owe is $250. To find your credit utilization, you’d divide $250 by $1500 (1.667) and then multiply it by 100 to get a percentage (16.67%).Credit utilization is also a factor that can affect your credit score, so it’s a good idea to keep it as low as possible.<h3>Credit Card Issuers and Networks</h3>If you look closely at your credit card, you will probably see the names of two separate companies — one belonging to your credit card issuer and one belonging to your credit card network. Your credit card issuer is the bank or credit union that gave you your credit card. You deal directly with your credit card issuer to pay bills, report suspicious activity, and determine the terms of your loan.&nbsp;<h3>Building and Rebuilding Credit</h3>As you use your credit card to make purchases and pay at least your minimum balance each billing cycle, your credit card issuer will report that activity to one or more of the three major credit bureaus (or credit reporting companies).When you use your credit card wisely by making your minimum payment (or more) each month, keeping your credit utilization low and continuing these habits over time, you can build or rebuild your credit history.In fact, revolving credit can be one of the&nbsp;<a href="https://www.nerdwallet.com/article/finance/ways-to-rebuild-credit">fastest ways for you to build or rebuild your credit.</a>&nbsp;So, if you’re working on your credit score, using your credit card responsibly is going to help you on your journey. One of the best ways to know&nbsp;<a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/Quick-Tips-for-Rebuilding-Credit">how to build or rebuild your credit</a>&nbsp;is by learning what&nbsp;<a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/Your-Credit-Score-by-the-Numbers">factors play a role in calculating your score</a>.&nbsp;&nbsp;If you’re interested in learning more about credit scores and credit bureaus, you can get a full explanation in&nbsp;<a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/Why-Do-I-Have-So-Many-Different-Credit-Scores">this article.</a><h3>Unsecured vs. Secured Credit Cards</h3>Under the category of credit cards, there are unsecured and secured credit cards. Learning the differences can help you determine <a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/Secured-vs-Unsecured-Credit-Cards">which type of credit card is right for you</a>.<a href="https://vimeo.com/458720825">Secured credit</a> cards require a cash deposit as collateral, usually equal to your credit limit. With most secured credit cards, you’ll need to pay the cash deposit as part of the application process to receive the card. A secured card is best suited for people who are looking to build or establish their credit for the first time. It’s typically easier to be approved for a secured card than an unsecured credit card, since you have to put down the collateral.<a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/What-is-an-Unsecured-Credit-Card">Unsecured credit cards</a> are the most common type of credit cards out there. Unlike a secured credit card, you don’t have to put down a cash deposit to be approved for the card. Instead, you will be approved based on your credit profile.<h3>Comparing Credit Cards to Other Forms of Payment</h3><h4>Credit Cards vs. Debit Cards</h4>While credit cards allow you to borrow money to cover purchases, debit cards withdraw funds directly from your bank account at the time of purchase. Credit cards require you to keep track of balances, make on-time payments (including interest), and be responsible for paying down your debts, but they also give you the added benefit of building credit and the convenience of carrying a balance when needed. Perhaps most importantly, <a href="https://www.experian.com/blogs/ask-experian/are-credit-cards-safer-than-debit-cards/">credit cards protect your personal money</a>, allowing you to review all charges for mistaken or fraudulent activity before you pay for them with your personal funds. With a debit card, you may be without your stolen funds while you work with your bank to prove that you’ve been a victim of fraud. This can be difficult if you need that money for other living expenses.<h4>Credit Cards vs. Prepaid Cards</h4>Even though prepaid cards often carry the same network names as credit cards (Visa, Mastercard, etc.), they are completely different in how they work. Again, your credit card lets you borrow and repay money on credit. A prepaid card, on the other hand, lets you load money onto a card before spending it at the store—it’s extremely similar to using cash. While they offer similar convenience in how and when you can use them, prepaid cards have no impact on your credit and don’t offer the protections of reviewing and approving charges before paying for them with your own money.<h4>Credit Cards vs. Cash</h4>Cash is accepted everywhere. In that sense, it’s still king. But credit cards aren’t far behind (remember the nearly 11 million accepted Visa locations across the country). When it comes to convenience, credit cards allow you to make purchases online, over the phone, or from just about anywhere. Plus, once you hand over your hard-earned cash, it’s gone for good. Cash simply can’t offer you the protection and reassurance of reviewing and approving purchases before paying for them with your own money. With a credit card, you do have the added responsibility of managing your spending and making on-time payments, but you can also build better credit in the process.<h3>Conclusion</h3>We firmly believe that the first step in mastering something is to learn as much as you can about it, starting with the basics. We hope this article helps you further understand your credit cards and how you can use them to increase your financial knowledge, build or rebuild your credit, and get you on your well to a healthier financial life.

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Everything You Need to Know About Credit Cards

Credit is rarely constant. In fact, the only constant about your credit is that it’s constantly changing each month, depending on your daily credit decisions. For those trying to build credit, change can be good. With the right credit practices (more on that later) you can build credit over time. And, if your credit score has recently declined, in ways you didn’t expect or want, there are things you can do to rebuild your credit too.The good news is that the rules of credit are mostly consistent. As long as you know a few simple facts and financial guidelines, building and rebuilding credit becomes much easier to understand.<h3>EXPLAINING CREDIT CHANGES</h3>Your credit score gets updated every month. And, fluctuations in scores from month to month are completely normal. As you go about your life and make decisions that impact your credit, your activity is reported by your lenders to&nbsp;<a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/What-is-a-Credit-Bureau-Video">credit reporting agencies</a>, commonly called credit bureaus. These agencies collect your information and compile it into a credit report, complete with a credit score to summarize your overall financial picture. And, every month each of the three main credit reporting agencies—Equifax, Experian, and TransUnion—update your credit report and credit score, based on the past month’s activity.The easiest way to understand these changes is to take a look back at the credit decisions you made in the last month. Maybe you made some purchases on your credit card, applied for a loan, made on-time payments to your loans, etc. Or, maybe you accidentally forgot to make a payment or you have a past-due balance on one of your credit accounts. All of these factors are taken into consideration and updated every month to adjust your credit report and score. Of course, it stands to reason that if credit scores can change for the worse, they can also change for the better.<h3>UNDERSTANDING THE FACTORS THAT AFFECT CREDIT</h3>Even though each of the three main credit reporting agencies has&nbsp;<a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/Why-Do-I-Have-So-Many-Different-Credit-Scores">differences in the way they collect, calculate, and report your credit</a>, each bureau relies on the same basic financial factors, even if they’re all weighted slightly differently. Those factors include:<ul><li>Payment History:&nbsp;The most important factor impacting your credit, payment history takes into account your on-time, late, and missed payments.</li><li>Utilized Amount: Also known as <a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/What-is-Credit-Utilization-Video">credit utilization ratio</a>, this is the amount of credit you have used, compared to your total available credit. &nbsp;</li><li>Length of Credit History:&nbsp;The length of your credit history, from your oldest to your most recently opened account. A longer credit history is usually better for your credit score.</li><li>Credit Mix:&nbsp;The variety of credit accounts you have open, including credit cards, car loans, home loans, student loans, and more. Usually, a more diverse mix is better for your credit score.</li></ul><ul><li>New Credit Accounts:&nbsp;Several newly opened credit accounts and multiple hard credit inquires within a short span can negatively impact your score.</li></ul>As long as you understand these five credit-affecting factors, you can work to build your credit, no matter what your current score may be. Similarly, if you’re trying to rebuild your credit, keeping these factors in mind as you make future financial decisions can help you make and keep good credit habits.<h3>KNOWING THE DIFFERENCE BETWEEN GOOD AND BAD CREDIT SCORES</h3>There are many ways to calculate credit scores, but the two most widely used models are FICO® Score and VantageScore. Both scores&nbsp;range from 250 to 900, with 670 and above being considered a good credit score and 800 and above being considered exceptional.<h4><div><a href="https://www.myfico.com/credit-education/credit-scores">Credit</a><a href="https://www.myfico.com/credit-education/credit-scores">&nbsp;Score Ranges</a></div></h4><ul><li>Poor: 250-579</li><li>Fair: 580-669</li><li>Good: 670-739</li><li>Very Good: 740-799</li><li>Exceptional: 800-900</li></ul>If you have a poor credit score (or no credit score at all), it may be difficult to get approved for a loan. If you have a very good or exceptional score, you may receive better interest rates and may be more likely to be approved for larger loan amounts.<h3>BUILDING CREDIT</h3>The irony of the financial industry is that you have to have credit to get more credit. It’s one of the unfortunate facts of finances that sometimes gets lost on new credit consumers. But there are ways to build credit, no matter where you’re starting from.If you’re starting at ground zero with constructing your credit, there may be no better building block than a&nbsp;<a href="https://merrickbank.com/Products/Secured-Card">secured credit card</a>. A secured credit card lets you build a credit foundation by including a cash deposit with your approved application. Your secured credit card limit will likely be the same as your collateral, which all but eliminates the risk your lender takes on by extending credit.A secured credit card allows you to make purchases on credit while simultaneously building a credit and payment history, just like you would with any other credit card. As you look for a secured credit card, try to find a lender that will report to all three of the major credit bureaus, so you can&nbsp;<div><a href="https://www.nerdwallet.com/article/finance/how-to-build-credit">build a more comprehensive credit history</a>.</div>Of course, any credit account will allow you to build credit, but a secured credit card may be easier to qualify for than a car loan, personal loan, or unsecured credit card, for example. No matter where you start building credit, once you have one or multiple credit accounts, there are a few things you can do to keep building on your financial foundation.If you don’t feel that a secured credit card is the right fit, there are other options for new credit builders, like&nbsp;<a href="https://www.forbes.com/advisor/credit-cards/whats-the-difference-between-a-store-card-and-a-credit-card/">store branded credit cards</a>.&nbsp;<h3>BUILDING CREDIT BEST PRACTICES</h3><ul><li>Use a credit card responsibly: Whether you opt for a secured card or you have an unsecured credit card, using it responsibly is one of the very best ways to build credit. That means keeping your credit card usage as low as possible. It also means making at least your minimum payment on time every month, no exceptions.</li><li>Make on-time payments: Probably the most important credit building rule you can remember is to make your payments on time, every time, on every credit account. As already mentioned, it’s important to keep on top of your credit card payments (a principle so imperative it’s worth mentioning twice), but this also extends to car payments, home payments, personal loans payments, and more.</li><li>Keep track of your credit: As with any goal, checking in with your credit often can help you keep it moving in the right direction. You can <a href="https://www.annualcreditreport.com/index.action">check your credit report for free</a> once per year through each of the three main credit bureaus. You may also be able to monitor changes to your credit score for free through your financial institution every month. Doing so can alert you to changes in your credit score and help you spot the warning signs of fraudulent activity, identity theft, or help you correct course on your credit. You can also correct any negative entries or mistakes on your credit report when you know what it contains.</li><li>Keep track of your credit accounts: On a similar note, keeping track of your actual credit accounts can help you stay on top of your payments, keep your credit utilization low, and spot suspicious activity (ensuring that every charge posted to your credit card is yours and not someone else’s, for example). Find an easy way to keep track of your accounts—like using a <a href="https://www.thebalance.com/balance-your-bank-account-templates-forms-and-tips-315464">spreadsheet</a> <a href="https://www.banks.com/articles/investing/personal-finance/apps-manage-bank-account/">app</a>, or <a href="https://www.thebalance.com/best-personal-finance-software-4171938">software</a>—so you can know every change and take ownership of building your credit.</li></ul><h3>REBUILDING CREDIT BEST PRACTICES</h3><ul><li>Take a long look at your credit report: Especially if it’s been a while, pull your credit report from each of the three main credit bureaus and go over them with a fine-tooth comb. Look for reasons your credit may have taken a hit and highlight each of the negative entries. If you see any entries that appear incorrect or fraudulent in any way, report them to the credit bureau. Otherwise, look for outstanding payments and try to bring your account back into good standing with your lender by making past-due payments.</li><li>Make a financial plan: After you’ve brought all your accounts current, make a plan for your money so that you don’t make the same credit mistakes twice. Set up a budget, complete with your income in one column and your total expected expenses in the other. Make sure that you have enough money to cover each expense, and try to find room to save for emergencies and miscellaneous expenses that pop up. Include your credit card as part of your financial plan. Set a monthly limit for how much you will charge to your card. Similarly, ensure that your budget accounts for making payments on all your credit accounts.&nbsp;</li><li>Start saving: Closely related to your financial plan, having a strategy in place to save money to ensure that you have a cushion to fall back on, in case your original plan gets derailed by the realities of life. When you have savings, you can avoid overloading your credit card, taking out new loans, and missing payments on your accounts—all of which can set you back in your credit rebuilding goals.</li><li>Follow the best practices for building credit: You guessed it. Every item listed above in the section for building credit can help you rebuild your credit too. Use your credit card responsibly, make on-time payments, keep track of your credit accounts over time, and you can rebuild your credit and avoid any setbacks along the way.</li></ul><h3>CONCLUSION</h3>Whether your credit has seen better days or you’ve never seen your credit at all, learn and review these ideas and implement the above best practices in your life to build or rebuild your credit and accomplish your financial goals.

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Everything You Need to Know About Building and Rebuilding Credit

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What is a FICO® Score?

You’ve been working hard to manage your money, stick to your budget and pay your credit card bills on time. As you prepare your budget for the upcoming month, you receive a notification from your credit card issuer that your credit line has been increased. So what is a credit line increase and what does it mean for you?<h3>WHAT IS A CREDIT LINE INCREASE?</h3>Nearly all credit cards come with a preset limit, also known as a credit line. The credit line is the maximum balance you can use on your credit card. Once you’ve reached that limit, you won’t be able to use your credit card until you pay down your balance.When a credit card issuer accepts your application for a credit card, they will provide you with an initial line of credit. Every credit card company uses their own policies to determine what your limit will be, but they generally look at a&nbsp;<a href="https://creditcards.usnews.com/articles/how-is-your-credit-limit-determined">variety of factors</a> related to your creditworthiness and your ability-to-pay the amount of the credit.When your bank or credit card company increases your credit limit, it simply means they’ve upped the amount of money you can borrow from your credit card.<h3>WHAT ARE THE BENEFITS OF A CREDIT LINE INCREASE?</h3>Getting a credit line increase can actually benefit your credit utilization ratio. The credit utilization ratio is how much you currently owe on all of your credit cards divided by your total credit limit.So if you have one credit card with a $1,000 limit and you carry a balance of $400, your credit utilization rate is 40%. If your credit limit increases to $2,000 and you carry that same $400 balance, your credit utilization ratio drops to 20%, which can positively affect your credit score.Another benefit of getting a credit line increase is that it allows you to have more credit available.<h3>A WORD OF CAUTION</h3>If you’ve recently received a credit line increase, you should feel good about yourself and your credit practices. But it also comes with a word of caution. That is, a credit line increase is not a pay raise. And you will still need to pay off whatever money you charge to your credit card. So, regardless of your credit limit, it’s always a good idea to stick to a budget and make sure you’re spending less than you earn.

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What is a Credit Line Increase?

As with many other questions related to credit, the question above doesn't have a "yes" or "no" answer. Intuition might say that closing a credit card account is a good way to curtail spending and improve your credit score, and in some cases that might be true. But everyone's situation is different, and it's important to look at the five key elements of a consumer credit score and evaluate what the effects might be in your particular case.Payment history&nbsp;makes up the largest single portion of your credit score - 35 percent - and its effects will remain on your credit report for years after an account is closed. For this reason, it is important to consider your payment history on an account before closing it. In the long run, the way to mend a negative payment history is to make timely payments for a couple of years.Credit utilization&nbsp;is the ratio between your total available credit and the amount of credit used. For example, if you have two credit cards, each with a $1,000 credit limit, your total available credit is $2,000. If the balance on Card 1 is $400 and the balance on Card 2 is $100, the amount of credit used is $500, or 25 percent of $2000. Your plan might be to pay off the balance on Card 2 and then cancel the account. Take into consideration though, that this would raise your total utilization to 40 percent ($400 of a $1,000 credit limit), a dramatic increase that could actually lower your credit score. Credit utilization accounts for 30 percent of your credit score, making this an important aspect in the decision to close an account.&nbsp;Length of credit history&nbsp;represents 15 percent of your credit score. An account that you opened 10 years ago and have always paid on time will show a longer, stronger credit history than a newer account, and perhaps should be kept open and active.New credit&nbsp;determines 10 percent of your credit score, and refers to the number of new credit accounts you have opened in the past year. If this number is high, it may negatively affect your credit score because it could send a signal to a lender that you're in financial trouble. This aspect of your credit score isn't greatly affected by closing a credit account, unless it means that your only remaining credit accounts are new.Credit mix&nbsp;shows the number of different credit cards, retail accounts, installment loans, finance company accounts and mortgage loans that are open in your name.1 It’s not necessary to have one of each, and it’s not a good idea to open credit accounts you don’t intend to use. Credit cards are considered revolving accounts and auto and student loans are examples of installment loans2 If you close an account that leaves you lacking in one credit type, the account will still appear on your credit report, but it will be labeled as closed. Credit mix represents 10 percent of your credit score. In the end, only you can evaluate the wisdom of closing a credit account. Before you close an account it’s worth some careful consideration before you take the scissors to your plastic card.<h3>SOURCES</h3><ol><li>http://www.myfico.com/CreditEducation/Types-of-Credit.aspx</li><li>https://www.credit.com/credit-reports/tips-for-improving-your-credit-types-of-accounts/</li></ol>

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If I Close a Credit Account, Will It Hurt or Help My Credit Score

Building or rebuilding credit can seem like a daunting task, but it’s very important and even necessary for your financial future. Having good credit will help you qualify for loans, as well as determine what the interest rate will be.Whether you are just starting your credit journey or trying to rebuild, we at Merrick Bank are here to help keep you on the road to healthy credit. Here are a few things to keep in mind.<h3>YOUR CREDIT HISTORY</h3>In order to build credit for the first time or rebuild credit from past financial problems, you have to establish a positive credit history. This can be done in many ways. One option is to get a secured credit card (which is simply a credit card that requires a cash deposit that then becomes the credit line for the account).With a secured card you can often set your limit with the amount you’re able to put as a deposit and then show your ability to use and repay this amount.&nbsp;1Another way to help establish or rebuild your credit is by getting a co-signed credit card or loan. A cosigner is someone who shares equal responsibility for the debt. Having a cosigner can help you qualify for the loan. It can also be helpful to have “authorized user” status on another person’s credit card. This means that you have someone else’s card in your name, which allows you to make purchases, but prevents you from being the primary card owner. Please keep in mind, however, not all lenders report authorized users to the consumer reporting agencies.One great option is to get a credit-builder loan. This is a small loan designed to help consumers establish or boost credit. There are two main types of credit-building loans, including:Standard secured loan – somewhat like a secured credit card, the borrowers use money they already have in a savings account or CD to secure the loan.<ol><li>Standard secured loan – somewhat like a secured credit card, the borrowers use money they already have in a savings account or CD to secure the loan.</li><li>Unsecured loan – works well for someone who needs cash upfront; however, these loans can have a higher interest rate.</li></ol>Your lender can help you determine which option is best for you. Once the loan account is created and you begin making payments, you will start establishing/reestablishing your credit history. If you’re trying to rebuild credit, a credit-builder loan should increase your score as long as no other credit problems persist.&nbsp;2<h3>PRACTICE GOOD MONEY HABITS</h3>Practice good habits to demonstrate you’re creditworthy. This includes making all of your payments on time and keeping your credit utilization low. Credit utilization compares how much your credit card balance is compared to your credit limit. So, if you have a credit limit of $500 and use $250 in purchases, your credit utilization is 50 percent.&nbsp; A good rule of thumb is to not exceed a 30 percent credit utilization ratio at any point in a billing cycle on any one of your cards.&nbsp;3By keeping this ratio low, you show that you’re likely not spending much of your monthly income on debt payments. Credit lenders like to see this, because it means you’re more likely able to pay back the money you borrow from them.Avoid opening too many credit accounts, as doing so in a short period of time can have a negative impact on your credit score.&nbsp;4&nbsp;Instead, stick with as few accounts as you can. Your credit score improves with a longer credit history. So, be sure to keep the accounts you do have open for as long as possible.Another way to practice good money habits is to set up reminders to ensure you never miss a payment. Paying your bills on time will not only demonstrate that you’re creditworthy, but it will also help boost your credit score.Sometimes people struggle with knowing where to start when it comes to building or rebuilding their credit. The key is to start now and be patient, since this process takes time. Before long, you’ll be on your way to a great credit score.&nbsp;[1] Tate, Ashley. (2017, March 8).&nbsp;How Long Does It Take to Build a Good Credit Score?&nbsp;Retrieved from&nbsp;<a href="https://www.creditsesame.com/blog/credit/how-long-does-it-take-to-build-a-good-credit-score/">https://www.creditsesame.com/blog/credit/how-long-does-it-take-to-build-a-good-credit-score/</a>2 Johnson, Allie. (2015, April 23).&nbsp;Create, restore credit with a credit-builder loan. Retrieved from&nbsp;<a href="http://www.creditcards.com/credit-card-news/create-restore-credit-builder-loan-1270.php">http://www.creditcards.com/credit-card-news/create-restore-credit-builder-loan-1270.php</a>3&nbsp;Konsko, Lindsay. (2017, August 31). 5 Tips for Winning the Credit Utilization Game. Retrieved from&nbsp;<a href="https://www.nerdwallet.com/blog/finance/credit-utilization-improving-winning/">https://www.nerdwallet.com/blog/finance/credit-utilization-improving-winning/</a>4 How to Quickly Improve Your Credit Score. (2017, February 17). Retrieved from&nbsp;<a href="https://www.preventloanscams.org/credit-repair/improve-score-quickly/">https://www.preventloanscams.org/credit-repair/improve-score-quickly/</a>

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How to Start Building or Rebuilding Credit

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How to Rebuild Your Credit

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How Do Credit Cards Work?

Having your own credit card is an empowering feeling. With the swipe of a strip or the dip of a chip, you can purchase just about anything. But, with great purchasing power comes great consumer responsibility. Because, whether you realize it or not, the way you use your credit card can have a significant impact on your credit score, for better and for worse. So, let’s get back to credit card basics. Here are three ways you can use your credit card to help your credit score.<h3>1. YOUR OLD CREDIT CARD MAY BE HELPING YOUR CREDIT SCORE</h3>As a responsible credit card owner, you like to keep your financial house in order. So, it probably appears a little untidy to keep old credit card accounts open, especially if they’re not being used. But, did you know that closing your old credit card accounts could actually have a negative impact on your credit score? That’s because when you close a credit card account, in addition to decreasing the length of your “credit age” (a longer credit history is always a good thing), you effectively reduce your overall available credit. And, if your existing debt remains the same, closing the account will increase your overall debt to available credit ratio. This is called credit card utilization rate, and the Fair Isaac Corporation (FICO) lists it as an important factor in determining your credit score. So, resist the urge to do a little spring cleaning when it comes to your credit card accounts, because out with the old can sometimes introduce brand new credit problems. This often means making sure to use the card periodically to keep it active, even if it is just for a small purchase.<h3>2. BE CAREFUL ABOUT OPENING NEW CREDIT CARD ACCOUNTS</h3>If closing a credit card can have a negative impact on your credit card utilization rate, it stands to reason that opening a new one will have the opposite effect, right? Not so fast. Every new credit card you open has the potential to reduce the average age of your credit history, and depending on how much you charge, it can increase your credit card utilization percentage, as well. That doesn’t mean you should never open another credit card again. It just means that you should be prudent about applying for a new credit card. Think through the process and pick a card that best suits your needs over the long term.<h3>3. WATCH YOUR BALANCE</h3>One common credit misconception is that carrying a balance on your card is a good way to improve your credit score. And, while there are many intricacies to the credit reporting process, carrying a balance on your account after the payment due date won’t do you any favors. Your payment history accounts for approximately 35% of your credit score, according to the Fair Isaac Corporation, which means that paying your bills on time is a big deal. In fact, paying a bill more than 30 days after its due date will likely show up as a negative entry in your payment history. Plus, carrying a balance also influences your credit utilization rate, and has the potential to make you appear overextended and less credit worthy in the long run.<h3>CONCLUSION</h3>There’s more to your credit card than meets the eye. It has the power to expand your purchasing options, and it can have huge influence on your overall credit score, as well. So, use your credit card in ways that won’t hurt your credit age and utilization rate, pay your bills on time, and rest easy knowing that your powerful little credit card has your back when it comes to credit.

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Getting Back to Credit Card Basics:3 Ways Your Credit Card Helps Your Credit Score

Your credit score says a lot about you. It paints a picture of your financial practices that can affect your ability to borrow money, buy a home&nbsp;and even land a job. Yet, despite its importance, many people are surprised to learn that credit can&nbsp;<a href="https://www.nerdwallet.com/blog/finance/credit-scores-change/">go from good to bad</a>&nbsp;in no time at all. And, most often a few bad borrowing practices are to blame. Here are four of the best ways to ruin your credit.&nbsp;<h3>1. MAKING LATE PAYMENTS</h3>Everyone forgets to make a payment at least once in a loan life cycle, but multiple mistakes can add up fast on your credit score. If you have a habit of paying your loans late, your practices are reported to the credit agencies, which can have a detrimental effect on your overall score. In fact, past payment history is one of the&nbsp;<a href="https://www.creditcards.com/credit-card-news/help/5-parts-components-fico-credit-score-6000.php">main factors affecting your credit score</a>.&nbsp;<h3>2. MAXING OUT ALL YOUR CARDS</h3>Credit agencies calculate something called&nbsp;<a href="https://www.nerdwallet.com/blog/finance/how-is-credit-utilization-ratio-calculated/">credit utilization ratio</a>, which takes into account your available credit and how much of that credit has already been used. So, for example, if you have three credit cards all with a max limit of $5,000, and you carry a balance close to that limit on every card, you look like a borrower that has overextended. This is bad for your credit score. Instead of maxing out your cards, try to keep your debts between&nbsp;<a href="https://www.nerdwallet.com/blog/finance/30-percent-credit-utilization-ratio-rule/">10% and 30% of your limit</a>.&nbsp;<h3>3. FAILING TO CHECK YOUR CREDIT REPORT&nbsp;</h3>Credit reports are there for a reason, but many people fail to take advantage of the opportunity to ensure that they’re accurate. Think about it. This is your time to check the work of those giving you the scores. If you see an error, don’t let it go. Report inaccuracies before they become part of your permanent record. Because, left alone, certain errors can wreak havoc on your overall score.&nbsp;<h3>4. HAVING AN ACCOUNT CHARGED OFF</h3>When you don’t pay your bills for several months at a time, you run the risk of having your account&nbsp;<a href="https://www.debt.org/credit/cards/charge-offs/">charged off</a>. This means you will no longer be able to make purchases using the account. While you still owe the remaining balance, the charge off is reported to the credit bureaus at an extreme cost. A charge off will remain on your credit report for up to seven years and your score will drop significantly. So, avoid charge offs at all costs. Even if you can only make minimum payments on your accounts, that’s much better than running the risk of your score taking a big time hit.&nbsp;<h3>CONCLUSION</h3>The decisions that affect your credit can follow you throughout your life. So, put your best credit foot forward and avoid the bad borrowing practices that can cause your score to take a dive. Your present and future finances will thank you for it.&nbsp;

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Four Ways to Ruin Your Credit

<div class="blog-post-column left">For a simple 3-digit number, your credit score says a lot about you. Your credit score gives those who look at it a glimpse into your financial past and possible financial future. It can affect your ability to get a loan, land a job, secure housing, and more. Since it is so important to your financial future, it’s a good idea to become familiar with your score and what it means.<h3>What is a credit score?</h3>A credit score is a number that lenders use to evaluate your worthiness to borrow money and your ability to pay it back. Your credit score is based on your credit history, which includes information on your payment history, credit utilization rate, length of credit history, types of credit and recent credit inquiries.<h3>How do you find your credit score?</h3>One of the best things you can do is know your credit score. If you regularly check your credit reports, you can be aware of and report any errors or inconsistencies that are affecting your credit score.Credit reports are generated by the three major credit bureaus – Transunion, Experian and Equifax. You can request a free copy of your credit report from each of the 3 bureaus each year. Many credit issuers also offer services that allow you to view your credit scores for free. You can check with your bank or credit card issuer to see if they offer these services to you.<h3>How does your score affect your life?</h3><h4>1. Interest Rates</h4>Anytime you apply for a loan, a lender is likely going to review your credit history and credit score. Lenders use your credit score to determine the likelihood that you will repay your loan as outlined in your loan terms. Lenders may also use your credit score to determine your interest rate and down payment requirement. This applies to home loans, car loans, personal loans, credit cards and more.<h4>2. Insurance Rates</h4>Insurance companies may also review your credit history before determining your rates. They use the information in your credit report to determine your <a href="https://www.thebalance.com/what-is-insurance-credit-scoring-4156729">insurance score</a>. This insurance score is then used to determine your overall insurability, which can affect your monthly premiums and your ability to qualify for discounts off of normal insurance rates.<h4>3. Employment</h4>Some employers check the credit reports of prospective employees before extending job offers. They do this to <a href="https://www.thebalance.com/the-importance-of-your-credit-score-1289630">predict your level of responsibility at work</a> by looking at how financially responsible you’ve been in the past.<h4>4. Housing</h4>Some landlords insist on seeing your credit report as part of your lease application. You have to give your&nbsp;<a href="https://blog.credit.com/2018/07/what-happens-when-a-landlord-checks-your-credit-93811/">permission in writing</a>, but with a quick credit check, your landlord or property manager can make assumptions about your ability to pay rent on time.</div><div class="blog-post-column right"><h4>5. Utilities</h4>Many&nbsp;<a href="https://blog.equifax.com/credit/the-top-four-reasons-your-credit-score-is-important/">internet, TV, and cell providers will also check your credit</a>&nbsp;before giving you service. By viewing your credit report, these companies make predictions about your ability to pay your utilities.<h3>How can you improve your score?</h3>There are things you can do to<a href="https://www.bankrate.com/finance/debt/7-simple-ways-improve-credit-score-1.aspx"> improve your score</a>, including paying your credit card statements on time, making more than your minimum monthly payment, using less of your total amount of credit, and keeping your oldest lines of credit open.If you don’t have any credit, you can always start building credit with a <a href="https://securedcard.merrickbank.com/">secured credit card</a>. A secured credit card requires a deposit upfront, but it can be a great way to build or rebuild credit.For a 3-digit number, your credit score can affect you in a surprising number of ways. Become familiar with your score and how it impacts your life, and it can help you on your way to a better financial future.</div>

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Credit Score Basics: What You Should Know About Your Score

<div style="padding: 56.25% 0 0 0;position: relative;"><iframe src="https://player.vimeo.com/video/830320977?h=86d554c04d&badge=0&autopause=0&player_id=0&app_id=58479" frameborder="0" allow="autoplay; fullscreen; picture-in-picture" style="position: absolute;top: 0;left: 0;width: 100%;height: 100%;" title="6 Tips for Making On-Time Credit Card Payments"></iframe></div><h2>Best Ways to Get the Most Out of Your Credit Card without Making Mistakes</h2>There’s more to your credit card than mere purchasing convenience. Yes, your credit card offers a great way to make purchases, but it can also be key in helping you build or rebuild credit and unlocking a more fulfilling financial future. But with great purchasing power comes great repayment responsibility. Below are some basics on how to use a credit card wisely and a few best practices to help you get the most out of your card.&nbsp;&nbsp;<h2>How Credit Cards Work</h2>Every time you make a purchase on credit, <a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/How-Does-Credit-Work">you agree to pay back the purchase price</a> (plus interest, if applicable), and your credit card provider agrees to front the cost. At the end of every <a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/What-is-a-Billing-Cycle">billing cycle</a>, your credit card issuer will send you a statement that includes a <a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/What-is-a-Minimum-Payment">minimum payment due</a> and any interest charges that may have accrued.You can <a href="https://merrickbank.com/statement">study this statement</a> to learn lots of important information, including your credit limit — the maximum amount you can put on your credit card at any time — and your <a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/What-is-Available-Credit">available credit</a> — the difference between your credit limit and your current credit card balance. You can also check your <a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/What-is-an-APR-Video">APR</a>, which is the Annual Percentage Rate your credit card issuer uses to <a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/What-is-a-Variable-Interest-Rate">calculate interest</a>.As long as you pay at least the minimum payment due on each statement, you can avoid late fees and having a late payment show up on your credit report. If you owe more than the minimum amount due, you have a choice to make. You can either pay your balance in full, or you can pay at least the minimum payment due and carry the rest of the balance. If you do decide to carry a balance on your card, your credit card issuer will charge interest— essentially the price you pay for borrowing money on credit.<h2>How to Use a Credit Card</h2>You know how to use a credit card — you can swipe, insert, tap, or input your credit card number to purchase just about anything. But do you know how to use a credit card to get the most bang for your buck? Here are our best tips:<ul><li>Check Your Balance Regularly: It’s easy to get carried away with a credit card. Because making purchases on credit is so easy, it’s also easy to lose track of your balance. To avoid putting too many purchases on your credit card all at once and making it more difficult to stay on top of your repayment plan, check your balance regularly.</li><li>Always Pay Your Bill On Time: Making your credit card payment on time each month is the single most important thing you can do with your credit card. Missing a payment not only results in late fees, but it can also negatively impact your credit score, which will make it more difficult to borrow money in the future.</li><li>Know How Your Interest Is Calculated: Most credit cards come with a variable interest rate. That means your rate is subject to change based on a benchmark, like the <a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/What-is-the-Prime-Rate">Prime Rate.</a> Check your monthly statement to find your current credit card APR. You can use this percentage rate to calculate exactly how much you’ll owe.</li><li>Watch For Credit Card Fees: In addition to interest, your credit card issuer may charge annual fees or other fees associated with maintaining your card. Be aware of when and how much you have to pay so you can plan to add these expenses to your existing balance.</li><li>Stay Below Your Credit Limit: While you can technically spend up to your credit limit, it’s a good idea to keep your balance as low as you can. This can help you make sure you’re not spending more than you can afford to pay off. Plus, a lower <a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/What-is-Credit-Utilization-Video">credit utilization</a> is generally better for your <a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/Everything-You-Need-to-Know-About-Credit-Scores">credit score</a>.</li><li>Report a Stolen or Lost Card Immediately: If you’ve misplaced your card or you see a fraudulent purchase on your account, contact your credit card company immediately. They’ll work with you to freeze future purchases and issue you a new card.</li><li>Monitor Your Credit: As you make purchases and payments on credit, <a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/5-Reasons-to-Check-Your-Credit-Report">check your credit report and credit score often</a>. Doing so can help you spot mistakes and any possible instances of fraud that may impact your score. Plus, keeping track of your score can help you make changes to stay on track with your credit goals.</li></ul><h2>How to Make Your Payments On-Time</h2>As we mentioned above, making on-time payments is the single most important thing you can do with your credit card. In fact, according to FICO®, payment history accounts for <a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/Your-Credit-Score-by-the-Numbers">35% of your overall credit score</a>. Even one late payment has the potential to derail a history of on-time payments. Consider the following practices to keep up with your payment deadlines.<ul><li>Set A Reminder to Pay: Add a payment reminder to whatever device you use to stay on top of your to-dos — a smartphone, calendar, or planner. There are so many ways to set reminders these days. Find the best method for you so that you never forget when a payment is coming due.</li><li>Set Up Autopay: If you’re prone to procrastinating (who isn’t?) or you just have a million things going on in your life, autopay can make credit card payments practically painless. Set up an automatic payment from your financial institution to your credit card issuer every month.&nbsp;&nbsp;</li><li>Pay Early: Instead of waiting until the last minute to make a payment, it’s a good practice to always make your payments a little early. Set up an automatic payment to be processed a few days before your due date, or schedule a reminder to pay a week or so ahead of time.</li><li>Change Your Payment Date: You might consider changing your credit card payment due date to better align with your other bills and/or incoming paychecks. You can call your credit card issuer to ask if you can bump up the due date in your billing cycle. If it makes it easier for you to pay your credit card on time, it’s probably worth it.</li><li>Budget Your Money: Maybe the best financial advice you’ll ever get is to live within your means and learn how to use a credit card wisely. Make a budget to help you save and spend your money wisely, and stick to it. Include your credit card payment in your monthly budgeted amount and you’ll be on your way to wiser money management and more considered credit card spending.</li></ul><h2>Conclusion</h2>Your credit card is an amazing financial tool. You can use it to make convenient in-store and online purchases, and build and rebuild your credit. The best part: as long as you’re consistent with your on-time payments and you use it responsibly, your credit card will continue to provide financial benefits for a lifetime. Now that you know how to use a credit card to your advantage, you can <a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/Avoid-These-Common-Credit-Card-Mistakes">avoid common mistakes and missteps</a>, and get the most out of your card to build a better, brighter financial future.&nbsp;

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Best Tips on How to Use a Credit Card

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Anatomy of a Credit Card

If you’ve ever had a loan or a credit card, you also have a credit report—a document detailing <a href="https://www.thebalancemoney.com/what-is-a-credit-report-and-why-is-it-important-960448" target="_blank">how you use credit and pay your debts</a>. But many people have no idea what’s on their credit report, either because they don’t know how to access it or they’re unsure how checking it can help them financially. If it’s been a while since you’ve reviewed your credit history, here are 5 reasons you should check your credit report.1. CHECKING YOUR CREDIT REPORT IS FREEMost <a href="https://www.thebalancemoney.com/best-free-credit-reports-4174784" target="_blank">financial experts recommend checking your credit report at least once per year</a>. And the best part is that you can check your credit report for free. Many banks and credit card issuers provide free monthly credit score updates. There are also several places where you can access a free annual credit report, including<a href="https://www.annualcreditreport.com/index.action" target="_blank"> annualcreditreport.com</a>,<a href="https://www.nerdwallet.com/article/finance/3-credit-bureaus" target="_blank"> the three credit bureaus</a>, <a href="https://www.creditkarma.com/" target="_blank">Credit Karma</a>, and <a href="https://www.nerdwallet.com/lp/free-credit-report" target="_blank">Nerd Wallet</a>.2. CHECKING FOR ACCURACYOne of the best reasons to check your credit report is to <a href="https://www.experian.com/blogs/news/2012/12/14/check-credit-reports/" target="_blank">verify that everything appears correct</a>. Credit reports list your credit and payment history. And each entry can impact your overall credit score. For example, if your credit report lists a missed payment that you actually made, you can take steps to correct the information.3. STOPPING IDENTITY THEFTA quick review of your credit report can help tell you if you’ve been a victim of fraud. If you see names, accounts, and social security numbers on your credit report that aren’t yours, it’s a good indication that something is wrong. This may negatively impact your credit score and cause problems when you apply for a loan. If you see something suspicious on your credit report, <a href="https://www.experian.com/blogs/news/2012/12/14/check-credit-reports/" target="_blank">you can take steps to stop the fraud</a> and prevent future identity theft.4. AVOID UNPLEASANT CREDIT SURPRISESThere are few things in life you can ignore without suffering consequence. And your credit profile is no exception. By being vigilant and keeping up to date with your credit profile, you can take steps to improve your credit score. And you can avoid unpleasant surprises when you apply for a credit card or loan. Again, consider <a href="https://merrickbank.com/Account-Services/goScore" target="_blank">checking your credit score periodically</a> and review your credit report every year. This simple practice can help you know when to take action to keep your credit profile in good shape.5. UNDERSTANDING WHAT HELPS AND HURTS CREDITRegularly checking your credit report can give you a better idea about what makes your credit score go up and down. If you see your credit score fall, you can check your credit report to see what actions may have caused it. Then, you can apply that lesson in your financial life, knowing <a href="https://www.thebalancemoney.com/why-you-should-check-your-credit-score-regularly-4083165" target="_blank">what to avoid and what to do to improve your credit score</a>.Now that you know how to access your credit report and how it can help you, take charge of your credit and stay on top of your finances by checking your credit report regularly.

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5 Reasons to Check Your Credit Report

A credit card is a great way to build credit. By using a credit card regularly and making your payments on-time, you can work toward building a positive credit history each month. But the key to this credit building strategy is to avoid late payments at all costs. In fact,&nbsp;<a href="https://www.myfico.com/credit-education/whats-in-your-credit-score">payment history is the single most important factor affecting your score.</a>&nbsp;To help you on your way to building credit, here are four simple ways you can avoid making a late credit card payment.<h3>1. SET UP AUTOPAY</h3>By authorizing your credit card issuer to process a payment every statement period, the responsibility of remembering to pay your bill is taken care of every month. Of course, you still need to make sure there are sufficient funds in the bank account to cover your payments. But automatic payments are a great way to avoid a late payment simply because they require no action from you at the time of payment.&nbsp;<h3>2. SET UP PAYMENT REMINDERS</h3>When life gets busy, it’s easy to forget that your payment is due on a particular date. Unfortunately, even innocent mistakes like forgetting to make a payment on time can result in late fees and can get in the way of building good credit. To avoid these all-too-common scenarios, give yourself a reminder. Some credit card issuers offer ways to set up reminder alerts. But even if your bank doesn’t have an automatic reminder feature, you can set up payment reminders in your smart phone, computer, or planner.<h3>3. MAKE MORE FREQUENT PAYMENTS</h3>Another good way to avoid forgetting a payment is to get in the habit of making regularly scheduled weekly payments. Most credit card issuers require a monthly payment, but most also allow multiple payments. That means you can pay off a little bit of your credit card balance every week. Maybe you make a payment during a commercial break of your favorite weekly TV show, for example. When you get in the habit of making a payment every week, you can avoid late payments. Just make sure the total amount of your weekly payments adds up to at least as much as the minimum payment due for the statement period.<h3>4. PAY YOUR ISSUER DIRECTLY</h3>Mailing a check to your credit card issuer takes time. It involves lots of other steps and requires relying on other people to deliver your payment. Likewise, setting up bill pay through a third-party payer, like a separate bank account, can lead to processing problems too. The best way to ensure that your payment gets processed on time is to pay the credit card issuer directly. You can do this online at the credit card issuer’s website, via their mobile banking app, or by telephone. But as long as you are making your payment directly to your issuer, you can be comfortable that it will be credited promptly.

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4 Ways to Avoid a Late Credit Card Payment

This infographic was created by the FICO® Score Open Access team. It has been published on our website with their permission.<img src="https://images.contentstack.io/v3/assets/blt6c40640a229ed552/blt179a2fed41a843f7/65a0115ca0eb300de64fff2e/image.png" height="auto"/>

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5 Myths About Your FICO® Score

Credit bureaus play an important role in business and finance. But what are they? And what exactly do they do? Knowing just a little about credit bureaus can help you understand a lot about how they can impact your personal financial well-being.<h3>WHAT IS A CREDIT BUREAU?</h3>A consumer credit bureau is the more common name for a consumer reporting agency (“CRA”) or company. Consumer reporting companies collect information and provide reports to banks, credit unions and other companies about you. There are also business credit bureaus that do the same for businesses.These companies use the reports to inform decisions about providing you with credit, employment, residential rental housing, insurance, and in other decision making situations.Every time you apply for a loan, make a credit payment, or miss a payment, the financial institution furnishes the information to one or more credit bureau.Aside from providing credit reports and credit scores, credit bureaus also offer fraud security alert services to help consumers be aware of identity theft. You can check with each credit bureau to see which services are available to you.<h3>ARE CREDIT BUREAUS REGULATED?</h3>Yes, they are strictly regulated by the Consumer Finance Protection Bureau (CFPB). They are also subject to the requirements detailed in the&nbsp;<a href="https://www.thebalance.com/what-you-should-know-about-the-fcra-960639">Fair Credit Reporting Act</a>&nbsp;(FCRA).<h3>HOW MANY CREDIT BUREAUS ARE THERE?</h3>There are many different types of credit bureaus, specialty types, regional and national in scope. However, there are three national consumer credit bureaus – Equifax, Experian, and TransUnion. These three companies are often grouped together when people speak about credit bureaus or credit agencies. But they are all separate businesses with separate information files about you. Some of your information may not be reported to all three bureaus every time, which means your reports may vary from bureau to bureau.<h3>WHAT INFORMATION DO CREDIT BUREAUS COLLECT?</h3>Credit bureaus begin collecting&nbsp;<a href="https://www.thebalance.com/credit-bureau-facts-960693">information about your borrowing and payment habits</a>&nbsp;from the time you first open a credit account such as a credit card or a loan. They collect information about your repayment history, the amount of credit you are currently using, and the amount of credit you have available. Credit bureaus also collect details about outstanding debts and public records like bankruptcies, foreclosures, and repossessions.<h3>WHY DO CREDIT BUREAUS TRACK YOUR FINANCIAL HISTORY?</h3>Companies that lend money to consumers check with the credit bureaus before making decisions about extending credit. By looking at your credit, a lender can make an&nbsp;<a href="https://www.investopedia.com/terms/c/creditbureau.asp">informed prediction about your ability to make future loan payments</a>&nbsp;based on your history of paying off other loans. Your credit history is also useful to utility companies and prospective employers. In other words, credit bureaus are a resource for a variety of organizations to help them make better, more informed business decisions.<img src="https://images.contentstack.io/v3/assets/blt6c40640a229ed552/blt38fd5c61746be10d/65a1520ae1b99e20dd9c0d71/MER18-0014_Blog-Image_Credit-Bureau_800x800.jpg" alt="MER18-0014_Blog-Image_Credit-Bureau_800x800.jpg" height="auto"/><h3>HOW DO CREDIT BUREAUS COLLECT INFORMATION?</h3>Credit bureaus get information about your financial history through financial institutions, businesses, and public records. There is&nbsp;<a href="https://www.federalreserve.gov/creditreports/pdf/credit_reports_scores_2.pdf">no requirement for lenders to report information</a>, but many volunteer to do so because they depend on credit bureaus to help them make lending and identity verification decisions. Credit bureaus may also obtain information about your salary, date of birth, current and prior addresses, and employers from your credit applications. This information isn’t used to calculate your credit score, but may be used to verify your identify and your ability to afford payments on new loans.<h3>CAN YOU CHECK YOUR CREDIT REPORT AND SCORE WITH THE CREDIT BUREAUS?</h3>By law, you have&nbsp;<a href="https://www.federalreserve.gov/creditreports/pdf/credit_reports_scores_2.pdf">the right to one free credit report every year</a>&nbsp;from each of the three major credit bureaus. You have to request a copy of your report, but reviewing your report often can help you identify inaccuracies and incomplete information that may affect your score. In addition, some financial institutions provide services that allow you to&nbsp;<a href="https://merrickbank.com/Account-Services/goScore">track your FICO® Score for free</a>&nbsp;each month when it’s updated from the credit bureaus. This service can help you stay on top of your credit more frequently as you work toward a better overall credit score.Credit bureaus are an essential part of making the world of finance go ‘round. Without them, lending money would be much riskier for banks and businesses, and even more expensive for consumers. Understanding the purpose of credit bureaus, including how they gather and share information, can help you to make informed decisions about your personal finances as you work toward a better financial future.

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What is a Credit Bureau?

This article was written by the&nbsp;FICO® Score Open Access team. It has been published on our website with their permission.&nbsp;In 2008, my life took a turn for the worst. Like many, the impacts of the Great Recession had hit home. I got laid off and began running through my savings to keep the home and lifestyle I had worked hard to provide for my family. It would take two years before I’d find something you’d refer to as employment. And during that period, under the strain of financial difficulties and an unexpected third child, my marriage had crumbled. My life had hit rock bottom, and my FICO® Score went right along with it.&nbsp;I knew my three boys and I would recover from the divorce, but I was much less confident about the prospects of my FICO® Score and ability to ever qualify for a decent loan. I felt doomed, stuck at the bottom. Some months I even stopped opening mail and answering unknown telephone calls, but thankfully, never gave up.&nbsp;In 2011, I followed a calling to be an entrepreneur and started a small business. With a lot of perseverance and hard work, I slowly began to see a tiny light at the end of the tunnel. With somewhat of a renewed energy, I pulled together all my debts, started making calls, and developing a plan to restore our financial position. There was no magic strategy, no credit repair fix, or bankruptcy. There was, persistence, a commitment to pay my bills each month, only use credit when necessary, and time.&nbsp;Thankfully, things only got better. In 2016, I joined FICO and learned even more about financial wellness. Working for FICO didn’t lead me to the secret formula or insider tricks, only sound education and information. There is so much misinformation about what it means to have a healthy credit score, access to FICO® Score education was really all I needed.&nbsp;I’m excited to share that in 2017, I bought a home. My family has come full circle, along with my FICO® Score. A rough patch in life, is just that, a patch. Financial literacy and empowerment have always been important to me but sharing my story and encouraging others has now become a passion. Life happens, and there may be times when your FICO® Score reflects that you’re going through a patch. But remember, it’s only a patch and not forever.<img src="https://merrickbank.com/-/media/Merrick/Images/Blog/MER19-0031_VP_Apr-Jun_Blog-Post_FICO_800x800-04.jpg?h=800&w=800&la=en&hash=4D11B87AF128BABF00A3C74E574E769830DEE9B3" width="100"/>By FICO® Score Open Access team FICO is a registered trademark of Fair Isaac Corporation in the United States and other countries.

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Down But Not Out - A Story of Financial and FICO® Score Recovery

This article was written by the FICO® Score Open Access team. It has been published on our website with their permission.&nbsp;Your FICO® Score seems to be everywhere these days, which is great.&nbsp;&nbsp;“Knowledge is power”, so it’s nice to know where you stand.&nbsp;&nbsp;If you’re someone that sees your FICO® Score and thinks, “yep – that accurately reflects my credit behavior,” there probably won’t be much for you here.&nbsp;&nbsp;For the rest of us, that are more like, “what?!??”, let’s soldier on.&nbsp;First, you’re here. You’re reading a blog in hopes of better understanding your credit/finances/FICO® Score?! …or maybe you don’t know why you’re here.&nbsp;&nbsp;But you are, and that my friends, is the first step.Step Two, knowing things - Vol.1 The Basics:Credit Account&nbsp;– Includes Credit Card, Auto Loan/Lease, Mortgage, Student/Personal Loan, Checking/Savings Accounts w/Overdraft Protection but doesn’t include Debit accounts for example.Credit Bureau&nbsp;(Equifax, Experian, TransUnion) – They collect information about your payment history from companies to include on your credit report.Credit Report&nbsp;– Includes:- Identifying information like - Name, Address &amp; SSN- Credit Accounts aka Trade Lines – And all their Deets!<ul><li>Credit Limit/Loan Amount</li><li>Account Balance</li><li>Payments</li><li>Late Payments</li><li>Missed Payments</li><li>Opened/Closed Date(s)</li></ul>- Inquiries – If you apply for a new credit account, it’s reported as an “Inquiry”.If you just look at your score – that doesn’t count against you.- Other Late or Missed Payments, Collections, and Bankruptcies – Your typical bills (think - utility, cable, mobile, rent), don’t report account information to the credit bureaus unless there has been a payment issue.**Not Included - Income, race, gender, age – it’s none of their business.&nbsp;&nbsp;FICO® Scores&nbsp;– Are used to help assess how likely you are to repay your debts, on the basis of data from your credit report.&nbsp;&nbsp;The data is grouped into 5 categories and weighted by relative importance. Spoiler alert: paying your bills and not maxing out cards are key to healthy credit.&nbsp;1. 35% - Payment history: Have all you payments been made on time?2. 30% - Amounts owed: How much of your credit are you using?<img src="https://merrickbank.com/-/media/Merrick/Images/Blog/MER19-0031_VP_Apr-Jun_Blog-Post_FICO_800x800-02.jpg?h=800&w=800&la=en&hash=C80138BAB4A4EA4DB9B2B5EAD8914B8C14D740C7" width="100"/>3. 15% - Length of credit history: How long have you had credit for?4. 10% - New credit: How many credit inquiries do you have? How many new accounts have you opened recently?5. 10% - Credit mix: What types of credit accounts do you have? Installment? Mortgage?FICO® Scores are used by over 90% of lenders to make credit decisions.&nbsp;&nbsp;Since your credit card companies are most likely judging your FICO® Score, you should keep an eye on it too.Step Three, go check your FICO® Score! Then check it again whenever your bank or credit card company updates it.&nbsp;&nbsp;It’s your information and it’s important, so you should know it.&nbsp;Until next time!&nbsp;&nbsp;By FICO® Score Open Access team FICO is a registered trademark of Fair Isaac Corporation in the United States and other countries.

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Creditsplaining 123s

Are you trying to pay down your debt? The good news is that you’re not alone.&nbsp;<a href="https://www.creditkarma.com/advice/i/us-household-debt-climbs-over-13-trillion/">Household debt in America now exceeds $13 trillion</a>. That’s a lot of money owed to a lot of people. Whether you feel you’re drowning in debt or you’re just trying to find firmer financial ground, here are 4 steps you can take to pay off your debt.<h3>1. UNDERSTAND DEBT</h3><div><a href="https://www.daveramsey.com/blog/how-to-pay-off-debt">When you borrow money and agree to repay it, that’s debt</a>. Debt includes things like student loans, car loans, medical debt, credit card debt, payday loans, mortgages, and home equity loans. These types of obligations are different than variable monthly expenses like utilities, insurance, taxes, groceries, etc. Unless you use your credit card to pay for these expenses or you fail to pay them altogether, these aren’t considered debt. Unlike variable expenses, outstanding debt usually accrues interest and payments can compound quickly</div><h3>2. KNOW WHAT YOU OWE</h3>Take inventory of your outstanding debt by adding up the total amount you owe for each obligation. This will give you an idea of what you’re dealing with and how you can take action to reduce your debt. Use an&nbsp;<a href="https://www.daveramsey.com/fpu/debt-calculator">online debt calculator</a>&nbsp;to help you with the math. And look into the current interest rates you have on each of your loans. Once you have the total amount you owe and an understanding of the interest on each loan, you can make a specific plan of attack to start reducing your debt.<h3>3. MAKE A BUDGET</h3>The best debt reduction strategies are those that help you change the way you save and spend your money. And that means making and sticking to a budget that will help you reduce your debt.&nbsp;<a href="https://www.daveramsey.com/blog/how-to-pay-off-debt">Make a plan for every dollar you take home</a>.&nbsp;Follow the 50/30/20 rule to dedicate 50 percent of your income to needs, 30 percent to wants, and 20 percent to savings/debt reduction. Many <a href="https://www.bankrate.com/finance/debt/ways-to-get-out-of-debt-1.aspx">financial experts advise</a> including minimum payments on your credit card, car payments, and other debt payments in your “needs” category. Then you can use the 20 percent to save for emergencies, retirement, and to make extra debt payments.<h3>4. FIND A DEBT REDUCTION STRATEGY</h3>There are a lot of debt reduction strategies out there.&nbsp;<a href="https://www.bankrate.com/finance/debt/ways-to-get-out-of-debt-1.aspx">Some suggest paying off your largest debt first or the one with the highest interest rate</a>.&nbsp;But one of the more interesting debt reduction approaches is called the <a href="https://www.daveramsey.com/blog/how-to-pay-off-debt">snowball method</a>.&nbsp;Start by listing all your non-mortgage debts from smallest to largest. Make minimum payments on all your debts, but focus as much money as possible to pay off the smallest debt first.&nbsp;<img src="https://merrickbank.com/-/media/Merrick/Images/Blog/MER19-0031_VP_Apr-Jun_Steps-to-Pay-Off-Debt_800x800.jpg?h=800&w=800&la=en&hash=65D22BA3010E314B864A765D84E8ED5CF4767064" width="100"/>When you have it paid off, use the money you were dedicating to your smallest debt and roll it into your next largest one. Repeat this method until you have all your debt paid in full. Other smart ways to pay down your debt include&nbsp;<a href="https://www.aarp.org/money/credit-loans-debt/info-07-2013/10-steps-to-becoming-debtfree-in-less-than-a-year.html">dedicating extra money</a>&nbsp;like work bonuses and tax refunds to pay off your loans. Or, get in the habit of&nbsp;<a href="https://money.usnews.com/money/personal-finance/articles/2017-05-10/10-easy-ways-to-pay-off-debt">paying more than the minimum balance</a>&nbsp;on all your debts each billing cycle.Whether you’re up to your eyeballs in debt or just tired of wading through more minor money obligations, follow these steps to get grounded in good spending and saving habits and eliminate debt in your life.

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4 Steps to Pay Off Debt

There’s a reason the word “balance” is associated with borrowing money on your credit card. Yes, your balance is the amount of money you owe on your credit card. But taking a slightly more poetic approach, “balance” also refers to keeping things in proper proportions. Or, as it relates to your credit card, keeping your available credit high and the amount you owe relatively low. Here are 5 steps you can take to strike a proper balance with your credit card usage.<h3>1. TRACK YOUR CREDIT BALANCE ONLINE</h3>The first rule of owning a credit card is to keep track of how much you charge.&nbsp;<a href="https://merrickbank.com/Account-Services/goMobile">Sign up with your credit card issuer</a>&nbsp;to receive credit card statements and balance information online. That way, you can&nbsp;<a href="https://www.nerdwallet.com/blog/finance/credit-utilization-improving-winning/">patrol your spending</a>&nbsp;from the convenience of your computer or phone to keep your balance in check. Many financial experts advise keeping your&nbsp;<a href="https://merrickbank.com/Learn/Maintaining-Good-Credit/What-is-a-Credit-Utilization-Ratio">credit utilization ratio</a>&nbsp;below 30%.<h3>2. KNOW YOUR SPENDING WEAKNESSES</h3>As you track your credit card usage, take the opportunity to learn more about your spending habits. Look at your past purchases to&nbsp;<a href="http://www.youngadultmoney.com/2014/12/10/7-reasons-why-you-should-track-your-spending/">find your spending weaknesses</a>—areas where you tend to spend a little too much discretionary money. Knowing that you spend too much on food, for example, can help you steer clear of using your credit card to grab a quick bite to eat. And it will help you keep your spending and credit card balance in check.<h3>3. PLAN YOUR CREDIT CARD USE</h3><div><a href="https://www.money-rates.com/advancedstrategies/creditcards/5-tips-for-keeping-credit-card-balances-low.htm">Make spending goals each month</a> and plan out exactly how much you want to put on your credit card. This will force you to prioritize your purchases and avoid spending money mindlessly on your credit card. A lot of people use their credit cards for specific budgeted categories like gas, groceries, and/or utility payments. Whatever you decide, stick with your credit card spending plan, which should include a way to pay down your balance before the end of your billing cycle.</div><h3>4. CHANGE TACTICS FOR UNPLANNED EXPENSES</h3>There are times when you may spend more money on your credit card than you normally do. Think about holidays or vacations as an example. While it’s always best to budget for these expenses, you should adjust your tactics for paying down your credit card balance if you run into unexpectedly large expenses. When you know that your credit card spending is higher than your usual monthly spending, it may be a good idea to make a higher monthly payment. If making a higher payment isn’t an option for you, it may be a good idea to make more than one payment during your payment cycle.<img src="https://merrickbank.com/-/media/Merrick/Images/Blog/MER19-0022_VP_Jan-Mar_Blog-Image_Credit-Card-Balance_800x800.jpg?h=800&w=800&la=en&hash=C524C05AA930C835F033CE2C842E886399171CCE" width="100"/><h3>5. ADJUST YOUR SPENDING</h3>If you find yourself putting more money on your credit card than you’re comfortable with, don’t be afraid to&nbsp;<a href="https://www.creditkarma.com/advice/i/how-to-lower-your-credit-card-utilization/">adjust your spending</a> appropriately. Especially if you’re trying to pay down a credit card balance, lower your monthly credit card expenditures as you plan out your monthly budget. Remember to use the 30% utilization rate rule as your guide. If you’re comfortably keeping your credit card utilization ratio under 30% every month, you’re probably in a good spot with your credit card spending.When it comes to your finances, finding balance is key. Follow these 5 steps to keep your spending in check and strike a healthy balance between your credit card usage and available limit.

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5 Steps to Keeping Your Credit Card Balances in Check

This article was written by the FICO® Score Open Access team. It has been published on our website with their permission.I get a variety of reactions when I tell people I work at FICO.&nbsp;&nbsp;“I don’t need to know my FICO® Score” is a relatively common one.&nbsp;&nbsp;That’s exactly what my mother said when I joined the FICO team a few years ago – not exactly the vote of confidence one is looking for from their parents, but OK!&nbsp;&nbsp;She had a bank that offered her FICO® Score, but her rationale was that she wasn’t planning to buy a house again so she didn’t need to know where her credit stood.&nbsp;&nbsp;She also assumed her score was high.&nbsp;&nbsp;That’s like not checking your blood pressure because you did a few years ago and you feel fine!&nbsp;Knowing your FICO® Score, and checking it often, is a really easy activity that can have positive benefits.&nbsp;&nbsp;On the defensive side, it’s a great way to keep a pulse on if any unusual activity on your credit report pops up that you weren’t expecting.&nbsp;&nbsp;Whether it’s a new account that you know you didn’t open, or a missed payment on a department store card that you forgot about using and didn’t pay.&nbsp;&nbsp;The sooner you know the better and you can take action to correct mistakes.&nbsp;Even if you’re not buying a home, you may need a new car, financing for unexpected expenses or the ability to help out another family member to gain access to funds.&nbsp;&nbsp;Making sure your FICO® Score is where it should be is something that you can keep track of by checking it regularly so you avoid surprises.&nbsp;&nbsp;You may also find great offers and reminders on your bank’s online banking site – banks are always adding services, so going on regularly keeps you informed of your options.&nbsp;With length of credit history as approximately 15% of a FICO® Score, it’s no surprise that the average score increases by age bracket.&nbsp;&nbsp;But it’s not safe to assume that every individual’s score is high.&nbsp;&nbsp;I hope I’ve convinced readers (and my mother) to check their FICO® Score regularly!&nbsp;<img src="https://merrickbank.com/-/media/Merrick/Images/Blog/MER19-0031_VP_Apr-Jun_Blog-Post_FICO_800x800-03.jpg?h=800&w=800&la=en&hash=E67367460FF8AE5EED332E641CB1FA8CC59F88BD" width="100"/>By FICO® Score Open Access team FICO is a registered trademark of Fair Isaac Corporation in the United States and other countries.

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Why Won't My Mother Check Her FICO® Score?

Your credit utilization ratio is one of the factors in determining your credit score. So it’s important to understand what it is, how it can change, and how it can impact your score.<h3>WHAT IS A CREDIT UTILIZATION RATIO?</h3>Your credit utilization ratio is your used credit divided by your total credit. It’s a calculation based on your&nbsp;<a href="https://www.thebalance.com/the-difference-between-revolving-and-non-revolving-credit-960706">revolving credit</a>&nbsp;– credit that is automatically renewed as you pay off your debts, like a credit card.<h3>HOW IS CREDIT UTILIZATION RATIO CALCULATED?</h3>If you have one credit card with a credit limit of $500 and you use that credit card to buy something for $100, your current credit utilization ratio would be 20%. The calculation looks like this:<ul><li>Your used credit ($100) divided by your credit limit ($500) equals .20 ($100/$500=.20). And .20 converted into a percentage is a 20% credit utilization ratio.</li></ul>Your credit utilization ratio fluctuates depending on your current balance. If you made $500 worth of purchases on the credit card in the above example, your credit utilization ratio would climb to 100%, meaning you would have used all of your available credit. You would need to pay down that balance to lower your utilization ratio.<h3>WHAT IS A RECOMMENDED CREDIT UTILIZATION RATIO?</h3>Most financial experts recommend&nbsp;<a href="https://www.experian.com/blogs/ask-experian/credit-education/score-basics/credit-utilization-rate/">keeping your total credit utilization rate below 30%</a>.Lenders generally view lower credit utilization more favorably because it can be an indicator that you’re managing your credit well and not overspending. A higher rate may suggest that you’re overextending yourself financially. Credit utilization is just one factor that goes into determining your credit score. But it makes up <a href="https://www.creditcards.com/credit-card-news/help/5-parts-components-fico-credit-score-6000.php">30 percent of your score calculation</a>, making it the second biggest factor influencing your score.<h3>WHAT ELSE IMPACTS CREDIT UTILIZATION?</h3><div><a href="https://www.investopedia.com/terms/c/credit-utilization-rate.asp">Opening new credit cards and closing old ones may impact your credit utilization ratio</a>. Opening a new card will give you more available, unused credit, which may cause your credit utilization ratio to go down. On the other hand, if you close a card with a zero balance, you lose some of your available credit, which may cause your utilization rate to go up.</div>Similarly, if your bank or credit card company increases your credit card limit, your amount of total credit will go up. And as long as that credit remains unused, your utilization ratio should go down.<img src="https://merrickbank.com/-/media/Merrick/Images/Blog/MER18-0014_Blog-Image_credit-utilization_800x800.jpg?h=800&w=800&la=en&hash=36B9E7D948631BC48E015E7A166E362E62C0339E" width="100"/><h3>WHAT’S THE BEST WAY TO KEEP CREDIT UTILIZATION LOW?</h3>The best way to keep credit utilization rate low is to have a plan for using and paying off your credit card. By using your card wisely and making payments on time every month (even paying more than the minimum payment), you can keep your credit utilization ratio below 30%. If your credit utilization ratio consistently creeps above 30%, prioritize extra payments and do your best to bring it back down. A budget can be a useful tool for keeping track of your income, expenses, and your credit utilization.Using your credit card is a great way to build credit. And paying attention to your credit utilization can help you work toward a better credit score. Be aware of your credit limit and current balances. Always have a plan to pay off your purchases. And you can manage your credit utilization rate to your advantage.

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