Your credit score is made up of three numbers, serving as an indicator of your financial history, wellness and responsibility. These three little numbers can spell the difference between approval and rejection for a mortgage, a job, a rental unit and so much more.

We have outlined how your credit score is calculated, why it matters and steps you can take to improve your score.

How is my credit score calculated?

There are three major credit bureaus in the U.S.: Experian, TransUnion and Equifax. Each one collects and shares information about your credit usage with potential lenders and financial institutions. Most lenders use this information along with the FICO scoring model to calculate your credit worthiness. Some lenders use the VantageScore model instead of FICO.

While there are several slight differences between the FICO and the VantageScore formulas, both scoring models look at the following factors when calculating your score:

• The age of your credit. How long have you had your oldest credit card? When was your first loan? An older credit history generally boosts your score.
  The timeliness of your bill payments. Are you paying all of your monthly bills on time? Chronic late payments, particularly loan and credit card payments, can drastically reduce your score.
• The ratio of your outstanding debt to available credit. The VantageScore formula views consumers with a lot of available credit as a liability, while the FICO formula considers this a point in your favor.
• The diversity of your credit. Lenders want to see that you have and have had several kinds of open credit. For example, you may be paying down an auto loan, a student loan and using three credit cards.
• The trajectory of your debt. Are you accumulating new debt each month, or slowly working toward paying down every dollar you owe?
• Your credit card usage. Financial experts recommend having several open credit cards to help boost your credit score, but this only works if you actually use the cards and pay off your bills each month. It doesn’t help much to have the cards sitting in your wallet.

How does my credit score affect my life? 

Your credit score serves as a gauge for your financial wellness to anybody who is looking to get a better idea of how responsible you are with your financial commitments.

Here are just some ways your credit score can affect your day-to-day life:

• Loan eligibility. This is easily the most common use for your credit score. Lenders check your score to determine whether you will be eligible for a loan.
• The larger the loan, the stricter the requirements. A poor credit score can hold you back from buying a house, a car, or getting a personal loan at Mutual Credit Union.
• Interest rates on loans. Here too, your credit score plays a large role in your financial reality. A higher score can get you a lower interest rate on your loan, and a poor score can mean paying thousands of extra dollars in interest over the life of the loan.
• Employment. A study by the Society for Human Resources Management found that 47 percent of employers look at the credit scores of potential employees as part of the hiring process.
• Renting. Many landlords run credit checks on new tenants before signing a lease agreement. A poor credit score can prevent you from landing that dream apartment or it can prompt your landlord to demand you make a higher deposit before moving in.
• Insurance coverage. Most insurers will check your credit before agreeing to provide you with coverage. Consumer Reports writes that a lower score can mean paying hundreds of dollars more for auto coverage each year.

How to improve your credit score

If you’re planning on taking out a large loan in the near future, applying for a new job, renting a new unit or you just want to improve your score, follow these steps:

• Pay your bills on time. If you have the income to cover it but find getting things paid on time to be a challenge, consider using automatic payments.
• Pay more than the minimum payment on your credit cards. Your credit score takes the trajectory of your debt into account. By paying more than just the minimum payment on your credit cards, you can show you’re working on paying down your debt and help improve your score.
• Pay your credit card bills before they’re due. If you can, it’s best to pay your credit card bills early. This way, more of your money will go toward paying down your outstanding balance instead of interest.
• Find out if you have any outstanding medical bills. You may have an unpaid medical bill you’ve forgotten about. These can significantly drag down your credit score, so be sure to settle any outstanding medical bills as quickly as possible.
• Consider debt consolidation. If you’re paying interest on multiple outstanding debts each month, you may benefit from paying off your debt through a new credit card that offers an introductory interest-free period, or from taking out a [personal/unsecured] loan at Mutual Credit Union. This way, you’ll only have one low-interest or interest-free payment to make each month. (Note: If you’ll be applying for a large loan within the next few months, it’s better not to open any new cards.)

It’s crucial that you make the effort to improve and maintain your credit score. It’s more than just a number; it will impact your financial wellness for years to come.

Your Turn: How do you keep your credit score high? Share your best tips with us in the comments.

The stimulus checks promised in the Coronavirus Aid, Relief and Economic Security (CARES) Act are starting to land in checking accounts and mailboxes around the country. The $1,200 granted to most middle class adults is a welcome relief during these financially trying times.

Many recipients may be wondering: What is the best way to use this money?

To help you determine the most financially responsible course of action to take with your stimulus check, Mutual Credit Union has compiled a list of advice and tips from financial experts and advisers on how to use this money.

Cover your basic life expenses

First and foremost, make sure you can afford to cover your basic necessities. With millions of Americans out of work and lots of them still waiting for their unemployment insurance to kick in, many people are struggling to put food on their tables. Most financial experts agree that it’s best not to make any long-term plans for stimulus money until you can comfortably cover everyday expenses.

Charlie Bolognino, CFP and owner of Side-by-Side Financial Planning in Plymouth, Minn., says this step may necessitate creating a new budget that fits the times. With unique spending priorities in place, an absent or diminished income and many expenses, like subscriptions and entertainment costs, not being relevant any longer, it can be helpful to reconfigure an existing budget to better suit present needs. As always, basic necessities, such as food and critical bills, should be prioritized.

Build up your emergency fund

If you’ve already got your basic needs covered, start looking at long-term targets for your stimulus money.

“I would immediately place this money in my emergency fund account,” says Jovan Johnson, CEO of Piece of Wealth Planning in Atlanta.

Emergency funds should ideally be robust enough to cover 3-6 months’ worth of living expenses. If you already have an emergency fund, it may have been depleted during the pandemic and need some replenishing. If you don’t yet have an emergency fund, or your fund isn’t large enough to cover several months without a steady income, you may want to use some of the stimulus money to build it up so you have a cushion to fall back on during lean times that are likely to come in the months ahead.

Pay down high-interest debts

According to the Federal Reserve Bank, Americans owed a collective $930 billion in credit card debt during the fourth quarter of 2019. Using some of your stimulus check to pay off high-interest debt would be a great way to get a guaranteed return on the money, says Chris Chen, of Insight Financial Strategists in Newton, Mass.

This advice only applies to credit cards and other private, high-interest loans. The federal government put a 6-month freeze on most student loan debts, so they should not be as high a priority right now.

Boost your savings

If your emergency fund is already full and you’ve made headway on your debt, it can be a good idea to use some of the stimulus money to add to your Mutual Credit Union savings account. The money in your savings can be used to cover long-term financial goals, such as funding a dream vacation or covering the down payment on a new home.

Consider all your options before choosing how to spend your stimulus money. In all likelihood, this will be a one-time payment received during the pandemic. If you need further assistance, feel free to reach out to us at or . We’ll be happy to help you maintain financial stability during these uncertain times.

Your Turn: How are you spending your stimulus check? Tell us about it in the comments.

After days of negotiations and last-minute changes, the Senate and the White House have signed a historic $2 trillion stimulus plan to help mitigate the economic fallout of COVID-19. The Coronavirus Aid, Relief and Economic Security Act (CARES) will put cash directly into people’s pockets, provide desperately needed funding for hospitals and help struggling businesses remain afloat in these financially fragile times.

Here’s all you need to know about the CARES Act.

Stimulus checks

One of the most crucial elements of the bill is the plan to distribute stimulus checks to Americans in the middle class and lower income levels. Officials hoped to deposit the one-time payments as soon as early April, though Americans likely won’t see the funds until a few weeks later.

Aid amounts will be based on household income reported in 2018 taxes (or 2019 taxes if they’ve already been filed), and will average $1,200 for each adult earning up to $75K a year and married couples earning up to $150K a year. Check amounts will begin to phase out for individuals whose income exceeds the $75K threshold, and for couples who earn more than $150K. Individuals earning more than $99K, and couples with no dependents earning more than $198K, won’t receive stimulus checks. Each household will also receive an additional $500 for every child under the age of 17 living at home. You can look up your anticipated check amount on this calculator.

The feds are hoping the stimulus checks will help the floundering economy and be a welcome relief to the millions of Americans struggling with a job loss or decreased hours due to COVID-19. The checks will provide benefits quicker than a tax credit and offer more spending freedom for recipients.

Increased unemployment benefits 

The enhanced unemployment insurance includes four months of unemployment pay for laid-off workers; expanded coverage for employees who were furloughed; the inclusion of workers who generally do not qualify for unemployment, like gig workers and freelancers; and increased unemployment benefits for all eligible workers by $600 a week for four months in addition to each state’s predetermined unemployment compensation.

Funding for the health care system

The stimulus plan will pump $150 billion in the country’s overtaxed health care system to help it

meet the overwhelming demands of the pandemic. Of this funding, $130 billion will go directly to hospitals struggling to deal with a shortage of masks, ventilators, beds and protective gear; and $1 billion will go to the Indian Health Service. The rest of the money will be used to fund research and treatment and to help the Strategic National Stockpile raise supplies of ventilators, masks and other equipment for hospitals across the country.

Small business bailouts

Small businesses are among the hardest hit by the pandemic and national shutdown to help “flatten the curve.” The stimulus plan will offer $350 billion worth of funds to these corporations to help them remain solvent during these economically lean times. These funds take the form of loans, some of which may ultimately be forgiven.

Funding for state and local governments

State governments are especially active and vocal at this time, as they are the sole elected officials authorized to enact and enforce lockdowns on their jurisdictions. State treasuries are also straining to meet the surge in requests for funding from hospitals and individuals seeking unemployment benefits. Local governments are similarly mobilized during the pandemic, with law enforcement authorities in heavily infected areas putting in long, hard hours daily ensuring the safety and health of citizens.

The CARES Act will distribute $150 billion directly to state and local governments to enable them to address their spending shortages and to fund their increased labor at this time.

Retirement Plans

The act calls for waiving the 10% early withdrawal penalty for distributions up to $100,000 for purposes relating to COVID-19, retroactive to Jan. 1. Withdrawals still will be taxed; however, taxes are spread over three years, or taxpayers have the three years to roll it back over.

In addition, the loan limit for 401(k) loans has increased from $50,000 to $100,000 and required minimum distributions (RMDs) from IRAs and 401(k) plans (at age 72) are suspended.

Student Loans 

Federal student loan borrowers will be allowed to pause payments on their loans. Loans will be put into forbearance for at least 60 days starting March 13, 2020. No payments should be due until after Sept. 30, 2020.

Federal student loan interest rates will automatically be set to 0% for a minimum period of 60 days until Sept. 30, 2020. If borrowers continue making payments, the full amount will be applied to the principal.

Borrowers do not need to take action to suspend loan payments. In addition, collection efforts, including the garnishment of wages and the seizure of tax refunds, will be suspended on federal student loans that are in default.

Mortgages

Some homeowners could be able to pause payments for at least six months with the possibility of an additional six months of forbearance, according to the act. Homeowners become eligible if they have one of the following types of mortgage loans:

• An FHA Loan
• A VA Loan
• A USDA Loan
• An 184/184A Mortgage
• Any mortgage backed by Fannie Mae
• Any mortgage backed by Freddie Mac
• Missed payments would be required to be paid back; however, homeowners can work with their lenders at the end of the forbearance period to come up with a manageable payment plan. A moratorium on foreclosures for borrowers with any of the above types of government-backed loans began March 18.

Additional provisions and addenda

There are several other components of the CARES Act, including the following:

• Establishment of a Treasury Department special inspector general for pandemic recovery and a Pandemic Response Accountability Committee to oversee loans to businesses
• Prohibition for all businesses controlled by the president, vice president, members of Congress and heads of executive departments from participating in the loan or investment programs. Their children, spouses and other relatives are also banned from receiving benefits.
• Provisions to ban stock buybacks during the period of government assistance. There is an additional ban of a year for all companies receiving a federal loan from the CARES Act
• Establishment of worker protections for businesses receiving the federal loans
• Prohibition for airlines from using the federal loans for CEO bonuses

The country is going through historically challenging times, but with the combined effort of the federal government, the cooperation and compliance of the public and generosity of each individual, we can all get through this together. Wishing all of our members and their families continued health and safety at this time.

Your Turn: How do you plan to use your stimulus check? Tell us about it in the comments.

Our vibrant, animated country has been put on pause. Busy thoroughfares are now empty of pedestrians and previously crowded malls are eerily vacant, as millions of Americans shelter in place to slow the spread of the coronavirus. Forced leave of work has left many wondering if and when they’ll receive their next paycheck.

If you are one of the millions of Americans on furlough, you may be panicking about incoming bills and wondering where you’ll find the money to pay for them all. Let’s take a look at what financial experts are advising now so you can make a responsible, informed decision about your finances going forward.

Triage your bills

Financial expert Clark Howard urges cash-strapped Americans to look at their bills the way medical personnel view incoming patients during an emergency.

“In medicine it’s called triage,” Howard says. “It’s exactly what’s happening in the hospitals right now as they decide who to treat when or who not to treat. You have to look at your bills the same way. You’ve got to think about what you must have.”

Times of emergency call for unconventional prioritizing. Clark recommends putting your most basic needs, including food and shelter, before any other bills. It’s best to make sure you can feed your family before using your limited resources for loan payments or credit card bills. Similarly, your family needs a place to live; mortgage or rent payments should be next on your list.

Housing costs

It’s one thing to resolve to put your housing needs first and another to actually put that into practice when you’re working with a smaller or no paycheck this month. The good news is that some rules have changed in light of the financial fallout of the pandemic.

On March 18, President Donald Trump announced he’s instructing the Department of Housing and Urban Development (HUD) to immediately halt “all foreclosures and evictions” for 60 days. This means you’ll have a roof over your head for the next two months, no matter what.

Also, in early March, the Federal Housing Finance Agency offered payment forbearance to homeowners affected by COVID-19, allowing them to suspend mortgage payments for up to 12 months. These loans, provided by Freddie Mac and Fannie Mae, account for approximately 66 percent of all home loans in America. The payments will eventually need to be covered. Some lenders allow delayed payments to be tacked onto the end of the home loan’s term, while others collect the sum total of the missed payments when the period of forbearance ends.

Speak to your lender about your options before making a decision. A free pass on your mortgage during the economic shutdown can be a lifesaver for your finances and help free up some of your money for essentials.

If you’re a renter, be open with your landlord.

“Consumers who are the most proactive and say, ‘Here’s where I stand,’ will get a lot better response than those who do nothing,” says Lynnette Khalfani-Cox, CEO of AsktheMoneyCoach.com and author of “Zero Debt.”

Your landlord may be willing to work with you. That’s true whether it means paying partial rent this month and the remainder when you’re back at work, spreading this month’s payment throughout the year, or just paying April’s rent a few weeks late, after the relief funds and unemployment payments from the government begin.

Paying for transportation

When normal life resumes, many employees will need a way to get to work. Missing out on an auto loan payment can mean risking repossession of your vehicle. This should put car payments next on your list of financial priorities. If meeting that monthly payment is impossible right now, communicate with your lender and come up with a plan that is mutually agreeable to both parties.

Household bills

Utility and service bills should be paid on time each month, but for workers on furlough due to the coronavirus pandemic, these expenses may not even make it to their list of priorities.

First, don’t worry about shutoffs. Most states have outlawed utility shutoffs for now.

Second, many providers are willing to work with their clients. Visit the websites of your providers and check to see what kind of relief and financial considerations they’re offering their consumers at this time.

It’s important to note that lots of households receive water service directly from their city or county, and not through a private provider. Many local governments have suspended shutoffs, but be sure to verify if yours has done so before assuming it to be true.

Finally, as with every other bill, it’s best to reach out to your provider and be honest about what you can and cannot pay for at this time.

Unsecured debt

Unsecured debt includes credit cards, personal loans and any other loan that is not tied to a large asset, like a house or vehicle. Howard urges financially struggling Americans to place these loans at the bottom of their list of financial priorities during the pandemic. At the same time, he reminds borrowers that missing out on a monthly loan payment can have a long-term negative impact on a credit score.

Here, too, consumers are advised to communicate with their lenders about their current financial realities. Credit card companies and lenders are often willing to extend payment deadlines, lower the APR on a line of credit or a loan, waive a late fee or occasionally allow consumers to skip a payment without penalty.

[Are you making payments toward an unsecured loan at Mutual Credit Union? We understand that you may not be able to meet your monthly payments at this time and we are willing to work with you. Please feel free to reach out to us at to learn about your options.]

Your Turn: How are you prioritizing your bills during the pandemic? Share your tips with us in the comments.