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Credit Score Basics to Share With Your Dependents

By Jesse Bell SVP, Chief Member Relationship Officer at Point Breeze Credit Union

Building credit takes time. By helping your dependents get a head start, you can set them up for a strong credit score that will help them secure better rates and more options down the line when they need to make big purchases.

Credit scores are a standard part of our financial health, but they can also be a source of confusion. Understanding their purpose and discussing these credit score basics with your dependents can demystify the process and set them up for a healthy financial future. 
 

The Basics

How do credit scores work?

Credit scores estimate the likelihood that you will repay borrowed money on time. Scores are determined by a variety of factors, such as payment history, money owed, on-time payments, length of your credit history, and more. 

Credit scores can change over time depending on your credit activity, but one of the best ways to achieve a healthy score is to start off strong with your first foray into borrowing. 
 
What is a healthy credit score?
The following ranges are considered industry standards for assessing credit score quality:

Poor = Less than 580
Fair = 580-669 
Good = 670-739 
Very Good = 740-799 
Excellent = Over 800 

    
How can you keep a healthy credit score?
The easiest way to keep a healthy score is consistently paying off credit on time. This demonstrates that you are a trustworthy loanee, and therefore at lower risk of default. Other best practices include:
 
  • Using a lower percentage of your available credit allowance. This way, you pose minimal risk of maxing out.
  • Apply for reasonable credit amounts, meeting your financial goals without exceeding them. Seeking high volumes of credit in a short window of time is a warning sign for creditors.
  • Don’t let debt pile up! Maintaining a high balance of unpaid debt shows poor financial management to creditors, and inability to meet payment obligations.

    

        
When should I start building credit?
We recommend members (and non-members) to begin building credit as soon as possible. The sooner the process begins, the more time you have to build a positive credit record. During this period, when payments are likely lower, you can establish a strong score and financial foundation in the eyes of creditors.

Are you starting your career with student loans on file? Be sure to stick to a structured repayment schedule, making monthly payments in a timely fashion. Looking for a good starting point? Consider opening a secure beginner credit card, and build credit responsibly with a lower credit limit. Perhaps most importantly, only borrow funds that you can consistently repay each month. This forms healthy financial habits early on, and keeps your savings grounded. 
 
Teaching your kids about credit scores
Keep things simple enough to understand, but convey why credit scores matter for financial health. Consider real world examples, like buying a car or home, and how credit scores can impact those purchases. If your child is old enough to earn money, help them get started with a credit card, and see how the process works in practice. 

Early conversations about credit scores will reinforce the importance of sensible borrowing, timely payments, and building a solid foundation for financial health. 
 

Point Breeze Picks

Credit Score from Point Breeze Credit Union
To keep a healthy score, it’s important to know your score. With Credit Score from Point Breeze Credit Union, users can access their score in real time, and see what factors have led to any changes. Scores are updated every seven days.

Free Credit Simulations
We also offer a Credit Simulator, allowing you to gauge your standing and see how potential changes will impact it. This tool is free and easy to use!

Checking won't hurt you!
Checking your credit score through the Point Breeze website, or the website of other financial institutions, will not impact your score. These are considered “soft inquiries,” and have no bearing on the number. “Hard inquiries” are a different process used by lenders to assess your credit worthiness.

Point Breeze Credit Union is a full-service financial institution with locations throughout Maryland.