Empower Yourself and Your Future with Financial Wellness

The third Thursday of October is also known as National Get Smart About Credit Day. Knowing how credit works and how your score is calculated is a great way to live this year’s theme and empower your financial future.

How Credit Unions Empower Members

Credit unions have a long history of community-oriented financial service. Credit unions have their roots in the mid-nineteenth century, with the first credit union in the United States forming in 1909. American Heritage Credit Union has been around since 1948, where it was first founded as the Budd Workers Federal Credit Union. From a small group of employees, one office, and just under $13,000 in assets, American Heritage has grown alongside its communities into the credit union we know today.

The credit union philosophy of “People Helping People” is the driving force of that success. Credit unions serve specific areas or groups, meaning that they have a deeper understanding of the individual financial needs of their communities. There are plenty of volunteer opportunities or ways to get involved by joining or working at a local credit union!

Credit unions are also member-owned, meaning that every person who has an account at the credit union is represented in how the credit union is run and given a democratic vote. As a credit union member, you have a say in who will be elected to the Board of Directors, who volunteer their time to make the credit union its best.

Why should you choose American Heritage? Learn more here.

Financial Wellness is the Key to Empowerment

Many credit unions focus on financial wellness, and American Heritage is no different. Through our online Learning Center, we provide on-demand access to hundreds of pieces of educational content, including blog articles, webinars, videos, calculators, frequently asked questions, podcasts, and more.

According a Gallup Poll, 41% of U.S. adults feel more optimistic about their financial situation than they did a year ago, but an identical 41% feel they are worse off in the same timeframe. One way to combat financial anxiety is to be properly educated on which tools or services can best serve your needs.

The key is understanding exactly how interest is calculated, how more complex products like Home Equity loans work, or what saving and investing options you have. Awareness about your own situation and the potential fixes that exist can help you become empowered to take control of your own financial journey and, as a result, experience less anxiety or uncertainty in financial matters.

Start With the Basics: Smart Credit Skills

Credit is the cornerstone of many Americans’ financial lives. Credit is the ability to make purchases much greater than an amount of cash many of us may ever have on hand at one time. Think mortgages, car loans, weddings, education – the list goes on for the types of life milestones that many people achieve using credit.

To be able to borrow larger amounts of money and for lower interest rates, lenders look at your credit score. Your credit score is comprised of multiple factors, some of which are measured by behavior, and others by time. Knowing what these factors are, how they can be influenced, and how much they impact your score can go a long way.

• Payment history (35%) – the formal record of payments you’ve made on all loans and lines of credit. Loans like credit cards, which are called “revolving,” tend to weigh more heavily and are considered both as a category and individually. Making consistent, on-time payments is one of the best ways to improve your credit score. For missed or late payments, severity and frequency is measured. Good payment habits are the easiest way to boost your credit score.
• Credit utilization (30%) – the percentage of your available credit used versus unused. For example, if your credit card limit is $5,000 and your current balance is $1,250, your utilization is 25% of your available credit on that card. Experts recommend staying below 30% total credit utilization, but the lower your utilization percentage is, the better your score. Maxing out your credit is considered irresponsible usage, and your utilization may go up when closing inactive accounts. Your available credit will go down with fewer lines.
• Length of history (15%) – the amount of time each account has been open and the most recent activity. Start building credit as early as possible to get a head start on this factor. For long-term credit users, maintaining activity on older accounts will help maintain or improve your score.
• New credit (10%) – the amount of new lines added in the past six to 12 months. Avoid opening multiple accounts in a short period of time, as this can hurt your score, since the borrower may appear to be in financial trouble. However, if you have a lower score, the small decrease from opening a new line can lead to a better score in the future by lowering credit utilization and creating a history of on-time payments.
• Credit mix (10%) – the range of credit products in your portfolio. As a borrower, this is proof that you have experience with and can pay back various types of credit. You are most likely to have multiple credit cards than any other type of debt, which can be considered a good thing in this category. Individuals without credit cards are considered to be higher risk than those who have shown good credit card management skills – see our note about “revolving” credit above.