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Janice France-Pettit: Establishing and maintaining your credit

Union Bank

Posted: November 28, 2012 2:00 a.m.
Updated: November 28, 2012 2:00 a.m.

Having a favorable credit score can be a useful financial tool. When you apply for a credit card, a mortgage or other loan, the lender will check your credit rating.

Consumers with favorable credit scores are often offered lower interest rates, while those with unfavorable credit scores may have to pay higher interest rates on outstanding balances, or may even be denied credit. Credit scores are also used by lenders, insurance companies and even potential employers and landlords, to help them determine whether you are financially responsible.

Credit score

When you apply for a credit card, a car loan, a mortgage or other forms of credit, lenders want to know how likely you are to pay back the loan in a timely manner, and a credit score gives them an objective measurement of your credit risk.

A credit score is a three-digit number ranging from 300 to 850. A higher credit score often means that you are less of a financial risk, and lenders may be more likely to extend a loan or credit to you with favorable terms.

Credit scores are based on information obtained by reporting agencies, such as Equifax, Experian and Transunion. These agencies collect information from various sources and provide consumer credit information to lenders and other authorized users about individuals’ borrowing and bill paying habits in a credit report.

What affects score

Both positive and negative information in your credit report influences your credit score. A credit score takes into consideration your bill paying history, the amount of available credit you are utilizing, the length of your credit history, if you have opened new accounts recently and the types of credit being used.

Late payments can lower your score, while a track record of making payments on time can help raise your score. Maintaining a low debt-to-credit ratio will have a more favorable influence on your score than if you maintain high balances on your accounts. The length of time you’ve maintained credit accounts is also factored into your score.

Establishing credit

To start establishing a favorable credit score, you will need to build your credit history. One of the simplest ways to begin building your history is to apply for a credit card with a low limit, such as a department store credit card. Make one or two purchases each month of items that are already part of your monthly budget, and pay the outstanding balance in full each month.

If you are younger than 21 or are re-establishing your credit, you may need to apply for a secured credit card. A secured credit card requires you to put up a deposit in exchange for credit, until you demonstrate your creditworthiness. If you do not pay your bill, they use your deposit to pay off your debt.

Once you have begun building a positive credit history, you should aim to diversify your credit accounts. Apply for a small installment loan, such as a car loan or a personal loan from the bank, and make your payments on time.

Maintaining a rating

The most important thing you can do is to continue to pay your bills on time every month and to make an effort not to exceed your lines of credit.

It is also important to check for errors on your credit reports that might have a negative effect on your credit score. Obtain a copy of your credit report at least annually and clear up any discrepancies. Consumers are entitled to a free credit report each year from each of the three major credit-reporting bureaus, and they can be requested at

Corrections to errors can be made by sending a letter to the credit bureau describing the mistake and requesting an investigation.

The column is co-authored by Janice France-Pettit and Curtis Flannigan. France-Pettit is a senior vice president and regional manager for Union Bank, overseeing the Simi Valley, San Fernando Valley and Antelope Valley regions.

Her column reflects her own opinion and not necessarily that of The Signal.

The foregoing article is intended to provide general information about maintaining credit and is not considered financial or tax advice from Union Bank. Please consult your financial or tax adviser. Visit for more information.


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