Credit can be a scary topic for some. However, it doesn’t have to be.

The Local Home Loan Experts at UnitedOne Credit Union clear up any confusion about credit and its role in applying for a loan on the latest edition of their podcast, At Home on the Lakeshore.



By definition, credit is the ability of a person to obtain goods or services before payment, based on the trust that payment will be made in the future.

But when it comes time to take out a loan, your credit is best defined by five other words that start with a ‘C’ – character, capacity, capital, conditions, and collateral.

“I don’t know if people understand what the 5 C’s of credit are, which is kind of an overall picture of a loan versus just the credit report,” said UnitedOne Mortgage Specialist Julie Peot, NMLS #441412.

• Character: Credit history and repayment reliability.
   
• Capacity: Ability to repay debts based on income and financial obligations.
   
• Capital: Financial reserves and assets for debt repayment.
   
• Conditions: Economic and industry factors affecting repayment ability.
   
• Collateral: Assets pledged to secure the loan.

While the 5 C’s of credit provide indicators of creditworthiness during the loan process, credit scores offer a numerical representation of a borrower’s credit risk. Credit scores typically range from 300 to 850 and are generated by credit bureaus based on the information in your credit report.

“We generally like to see your credit score in that good range, so 670 to 739, but that doesn’t mean that we cannot lend to someone who has a (lower) credit score,” said UnitedOne Mortgage Specialist Linda Serrano, NMLS # 441416.

“Exceptional is between 800 and 850. We see some of those, but they’ve probably had their credit for a longer period of time and they’ve established themselves. So, if you’re just establishing your first credit history, like first car or first credit card, you might have a lower score. We’re here, and we’re going to help you out to raise your scores.”

Paying the full monthly balance on a credit card instead of just making the minimum payment and only utilizing some of your credit limit will help improve your credit score. Ultimately, those habits will reap benefits down the road when taking out a loan.

“Your (credit) score usually gets you a better rate in loans,” said UnitedOne Mortgage Specialist Kari Johnsrud, NMLS # 441414. “Not only home loans, but car loans and your car insurance. There’s so many things that working on your credit to build a good credit score can help you with.”

The three nationwide credit bureaus UnitedOne Credit Union uses to pull credit scores from are TransUnion®, Equifax®, and Experian®.

“UnitedOne reports to all three, so you’re gaining credit in all three of those companies,” Peot said. “There are financials out there that don’t report to all three. They may only choose one or two to report, so sometimes you'll see those credit scores vary. … When we pull all three, we use the middle score, so we kind of average out those three scores and use the middle one for qualifying.”

Your credit score doesn’t have to remain a mystery until you’re ready to apply for a loan. You can access a free report at www.annualcreditreport.com or by calling 1-877-322-8228.

“It lists all of the information in a way that is that you’re going to be able to understand it,” Serrano said. “You don’t have to work in banking or anything like that to be able to understand what the credit report is showing you, but if still feel like, ‘I want that extra person to help me out,’ we definitely are here. You can call us, and we can set up an appointment.”

Whether you’re in the market now to buy a home or want to learn more about improving your credit score so you’ll be ready to house shop in the future, UnitedOne’s team of Local Home Loan Experts are your trusted source in Manitowoc and Sheboygan for all your home loan needs.

Local Home Loans Local Experts
10 Year Fixed - Home Equity Loan 
Apply for Home Loan  Make Appointment Mortgage Center Log In Email Mortgage Team  

Listen to more episodes of At Home on the Lakeshore