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QuickTips: Credit 101

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SELCO QuickTips

March 5, 2017

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Credit: What is it? How does it work? And how can you manage yours?

Simply put, credit is a tool that allows you to buy something now and pay for it later, over time, rather than having to save up the money first.

Your credit score (also known as a FICO score) is a number based on how well you manage debt—basically, how risky it is to lend you money. Credit scores range from 300 to 850 and the higher the number, the better. Your score affects not only your ability to get a loan, but also what it'll cost you to borrow that money and how much you'll pay in interest and monthly payments.

How your score is calculated

Your payment history and outstanding debt have the biggest impact. The single most important thing you can do to achieve and maintain a great score is pay your loans on time. If you have just one payment that's thirty days late, it can take two to three years for your credit score to recover.

Another smart move is to reduce your total debt by paying a little more than your minimum monthly payments. For results-driven people, it might be best to start with the card with the lowest balance first. Once you pay off that card, move that payment on to the second card and keep chipping away at it. As your total balances go down, your credit score goes up.

The single most important thing you can do is pay your loans on time.

It's also a good idea to review your credit report from time to time to make sure it's accurate. If something doesn't look right, dispute it right away. You can download a free copy of your credit report every year.

If you can't make a payment in time

So what happens if you run into trouble, and think you might not be able to make a payment on time? Whether it's a bill or a loan payment that's at risk, talk to your creditor right away. They may have options to help protect your credit, such as offering lowered payments or other arrangements.

Another way to protect your credit it through a debt management plan. If you're a SELCO member, you have access to free credit counseling and debt management services through Money Management International, a nonprofit credit counseling organization.


While credit can be complicated, it doesn't have to be mysterious. If you have any more questions about credit, or what you can do to improve your score, just give us a call.

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