Managing Your Credit

Young Adults Manage Their CreditCOSTEP can help you manage your credit, free of charge. We are a non-profit organization based in McAllen that provides financial literacy assistance.

Feel free to contact us here to get a free credit health check. In the meantime, here is some useful information that will help you understand your credit report.

How Credit Works

Let’s start with credit reports. Credit reports your credit history. There are three major credit bureaus and you are allowed under the law to get a FREE credit report once a year only from these credit bureaus.

  • Experian
  • Equifax
  • TransUnion

These bureaus collect information from public records and companies you do business with to create a record. Here’s the information they keep:

  • Your name, current and previous addresses, social security number
  • A list of your credit accounts, including reports from creditors
  • The amount of credit you currently have
  • Your payment history
  • Public record information and information from collection agencies such as delinquent accounts, bankruptcies, foreclosures, lawsuits, etc.
  • Credit inquiries (a list of everyone who has asked to see your report in the past 2 years)

Based on your credit report information, the credit scoring companies use five key items to calculate your credit score.

  1. Payment history (35%)
  2. Total amount you owe (30%)
  3. Length of credit history (15%)
  4. New credit accounts and inquiries (10%)
  5. Types of credit in use (10%)

So, What Is a Credit Score?

A credit score is a number assigned by credit scoring companies based on information available on your credit report. BTW—the three bureaus may have different scores based on their information. Your credit score and history is what determines if a financial company is going to lend you money. Currently there are over one hundred credit-scoring models, but over 90% of financial decisions are made using a FICO score. FICO is an acronym for Fair Isaac Company.

The higher the score, the better your credit:


A= 901-990 (very low-risk)
B= 801-900 (low-risk)
C= 701-800 (medium-risk)
D= 601-700 (high-risk)
F= 501-600 (very high-risk)

Visit the following websites to obtain a credit report.

Visit the following website to obtain your FICO score.

Now that you’ve gotten your free credit report and know your score, you might want some tips of what you can do to improve your score.

Click Here
For Your Free Credit Analysis

Having Good Credit

Good credit makes it easier for you to get what you need, when you need it. Whether it be a new car or a house, most lenders will check your credit score before deciding to accept your application. Here’s a list of advantages that will make you consider taking care of your credit:

  • Increased credit card limits and/or excellent credit card deals.
  • Attractive mortgage and refinancing rates.
  • Lower financing rates on a car lease or car insurance rates.
  • Improve chances of renting your dream apartment.
  • More negotiating power.

How to Rebuild Your Credit?

managing-creditDon’t worry if your score is lower than you think it ought to be. There are some ways that you can improve your score and have a better chance of getting that loan or credit line that you need.

  1. Pay bills on time
  2. Get current on missed payments and stay current
  3. Keep balances low on credit cards by less than 30%
  4. Pay off debt rather than moving it around
  5. Do not open too many new lines of credit (Credit bureaus average the length you’ve had your credit cards and new cards bring down the average)
  6. Open new credit only as needed
  7. Remember that closing accounts may hurt your score
  8. Limit amount of inquiries to your credit file

How fast can you raise your credit score? Well, that’s really up to you. It might take a few months or even years. It all depends on you and how hard you work towards improving your score. Make a strong effort to rebuild your credit and you will eventually see positive results.

Reasons for Credit Denial

Do you wonder why your credit card application got denied? Well, usually a lender will send you a letter explaining the reason within 7-10 business days. While you wait for it, here are some possible reasons you were denied.

  • Your loan or credit card balances are too high. If you haven’t been paying off your loans (including student loans) or credit cards to lower the balance, other companies might think you will do the same with them. Before you apply, make sure you stay caught up on all your payments. This is where your spending plan will help you get your credit balances in line
  • There are too many inquiries on your credit report. Lenders can see if you have applied for too many credit cards or loans within a short period of time. Try to reduce inquiries to improve your chances of getting your application approved.
  • You don’t make enough money. Sorry to burst your bubble, but you simply can’t afford to pay that extra credit card you are applying for. Credit card companies look at how much money you make and how much credit you already have, helping them determine whether or not you will be able to pay it.
  • You have too many credit cards. If you have too many, chances are you won’t get approved. There is not a key number of credit cards you need to have; it just varies by credit car issuer.
  • You have recent collections or delinquent accounts. When these items are recent on credit report, potential issuers will think twice before lending you money because they will probably think you don’t have enough money to meet your financial obligations.
  • You have limited credit history. Having no experience could result in denial. Start by applying for department store credit cards, pay them on time and start creating credit your history.

Credit Is Not Free. How to Figure Out How Much It Is Costing You

Debt is one of those issues that keeps people from achieving their financial goals. The first way to measure how much credit is actually costing you is to look at it in terms of dollars and cents. Financing expensive items like a home or a car is forcing you to pay much more than what it actually costs. You want to determine how much your debt it is actually costing? You need to look at the total dollar amount of interest that you have to repay over the term of the loan. Here’s an example of the total cost of your credit card debt if you only make minimum payments per month.

Total Credit Card Debt Monthly Payment Years to Pay Off Total Cost
$3,364 (at 14.96% Interest) $67.28 (min. payment) 19 Years 5 Months $7,618.63
$3,364 (at 14.96% Interest) $87.28 (min. payment + $20) 4 Years 4 Months $4,533.67
$3,364 (at 14.96% Interest) $107.28 (2 Month payment + $20) 3 years 4 Months $4,225.11
$3,364 (at 14.96% Interest) $167.28 (2.5 Month payment + $20) 1 Year 1 Month $3,841.40

As you can see, it is important for you to pay MORE than the minimum monthly payment required by your credit card company in order for you to pay less interest in the long run.

As a rule:

  1. Never pay the minimum payment on any thing you buy with credit. Your making money for the lender and not keeping it for yourself.
  2. Always try to put money down unless it’s 0% interest and you can afford the 0% interest terms.

Use our calculator to compare the costs associated to two credit cards here:

This is just a simple interest estimate.

Cost of Credit Cards Calculator

  • Credit Card Data