Key Takeaways

• • • • • • • • • • Your credit score impacts loan approvals, rental applications and more.
                    
                  • Your credit history and payment history are major factors in your score.
                    
                  • You can build credit and improve your credit score with consistent habits.

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  Learning how to build credit and your credit score matters even if you’re not applying for a loan or credit card. For example, your credit history may be reviewed by employers, landlords and utility companies before your application is accepted.

  What is a Credit Score?

  Your credit score reflects how likely you are to repay a loan. Lenders use it to decide how much credit to offer you and the interest rate you may be offered.

  While several agencies create credit scores, FICO® scores are the most common. FICO scores range from 300 to 850; the higher the better. For reference, 718 is considered an average score. You’ll need a score of 760 or greater to get the best loan rates.

  Your score is based on five factors that FICO weights as follows:

  • Payment history (35%) – Your record of on-time payments.
  • Amounts owed (30%) – How much credit you use compared to your available limits.
  • Length of credit history (15%) – How long your accounts have been open.
  • New credit and credit applications (10%) – Recent applications and hard inquiries.
  • Credit mix (10%) – The types of accounts you manage, such as a credit card or installment loan.

  Get Your Credit Score

  You can check your credit score for free through many credit card companies and lenders, which often include it on statements or online banking portals.

  While you are entitled to a free annual credit report from each of the three major credit bureaus (Experian, Equifax, and TransUnion), these reports do not automatically include your credit score. Reviewing your credit report is important to verify your credit history and spot any errors that could affect your score.

  Improve Your Score

  If your credit score is lower than you’d like, you can take practical steps to improve it. Building credit requires time and consistency, but small changes can make a meaningful impact.

  Follow these tips for an improved credit score:

  • Make your payments on time. If you forget, set up automatic payments through tools like Bill Pay in Lake City Bank Digital.
  • Pay down your balances. If you have a lot of debt, consider consolidating it with a loan or transferring it to a low- or no-interest credit card.
  • Keep old accounts open. They help show a longer history of responsible credit use.
  • Limit new credit applications. When you apply for a new credit card, lenders make a hard inquiry into your credit history. Too many hard inquiries can reduce your score.
  • Mix credit types. A variety of credit types—like student loans, auto loans and mortgages—in addition to credit cards, will likely help your score.

  Go from no Credit to Good Credit

  You may have noticed that getting credit can be difficult if you don’t already have credit.

  You can build credit using these methods:

  • Use a secured credit card. A secured credit card is backed by money in your savings account. You can charge up to a certain percentage of your savings with the card. Your monthly card payments are reported to the credit bureaus.
  • Use a co-signer. Someone with established credit can co-sign a loan application. Your payments are reported to the credit bureaus and affect both you and your co-signer.
  • Become an authorized user. You can be added as a user to a responsible user’s credit card. Their payment history helps you get started.

  Start Building Credit with Smart Habits

  Learning how to build credit and manage your credit score empowers you to make informed financial decisions. By monitoring your credit report, limiting unnecessary credit applications and prioritizing strong payment history, you can steadily build credit and strengthen your financial foundation.

  Need guidance on improving your credit? Lake City Bank is ready to help. Drop in to one of our branch offices or explore the financial tools available in Lake City Bank Digital.