Understanding Credit: Your Path to Financial Empowerment

Credit is one of the most important aspects of your financial life, yet it’s often misunderstood. Whether you're planning to buy a car, rent an apartment, or achieve other financial milestones, your credit plays a pivotal role. Let’s break it down and explore how you can build and maintain great credit in 2025 with tools like Alliance Credit Union’s Secure Credit Card. 

What Is Credit?

At its core, credit is your ability to borrow money with the promise of paying it back later. Lenders, landlords, and even some employers look at your credit to gauge how financially reliable you are. This financial trustworthiness is quantified in a credit score, which serves as a snapshot of your credit health.

Why Is Credit Important?

Your credit score influences:
  • Loan Approvals: A strong credit score increases your chances of being approved for loans and credit cards.
  • Interest Rates: Good credit can save you money by qualifying you for lower interest rates on loans.
  • Housing Opportunities: Many landlords review credit scores during the rental application process.
  • Financial Flexibility: Great credit opens doors to better financial options, giving you more control over your money.

What Determines Your Credit Score?

Understanding the factors that impact your credit score can help you manage it effectively:
  1. Payment History (35%): Paying bills on time is the most significant factor in maintaining a good score.
  2. Credit Utilization (30%): This is the percentage of available credit you’re using. Experts recommend keeping it below 30%.
  3. Credit History Length (15%): The longer your credit history, the better.
  4. Credit Mix (10%): A diverse mix of credit accounts, like auto, home, personal loans and credit cards can positively impact your score.
  5. New Credit Inquiries (10%): Too many hard inquiries in a short period can lower your score temporarily.

Tips for Maintaining a Good Credit Score

Building and keeping a strong credit score requires consistent effort. Here are some practical tips:
  • Pay Bills on Time: Set up reminders or automate payments to ensure you never miss due dates.
  • Keep Credit Card Balances Low: Aim to use less than 30% of your available credit limit.
  • Don’t Cancel Old Credit Cards: Instead of closing unused accounts, cut up the cards if you don’t want to use them. Keeping the account open helps maintain your credit history length and utilization ratio.
  • Monitor Your Credit Report: Regularly review your credit report for errors or signs of fraud.
  • Limit Hard Inquiries: Only apply for new credit when necessary to avoid too many inquiries on your report.

What Can Great Credit Do for You?

Building and maintaining great credit can help you:
  • Secure Better Rates: Save money on loans and mortgages with lower interest rates.
  • Access Higher Credit Limits: Increased limits give you more financial flexibility and can boost your credit utilization ratio.
  • Achieve Long-Term Goals: Whether it’s buying a home or starting a business, great credit is a valuable asset.

Start 2025 with a Great Financial Goal

If building or improving your credit feels daunting, Alliance Credit Union has tools to help you start strong:
  • Secure Credit Card: Perfect for building or rebuilding credit, this card allows you to establish a positive payment history and control your spending.
  • Revive Checking Account: Designed to help you avoid overdrawing your account while working toward better financial health.
With these tools, you can set yourself up for success in 2025 by taking control of your credit and working toward your financial goals. Great credit isn’t just about numbers—it’s about unlocking possibilities and building the life you want.

Ready to start your journey? Visit ALLIANCE Credit Union today to learn how our Secure Credit Card and Revive Checking account can help you achieve financial empowerment in the new year.