Credit scores can feel like a mystery, but they don't have to. Whether you are trying to buy a home, get approved for a credit card, or trying to build a better financial future, your credit score plays a major role. Let's break down what your credit score means, how it's calculated, and what steps you can take to raise it, without stress or shame!
What is a credit score?
Your credit score is a 3-digit number that shows lenders how likely you are to repay borrowed money. It typically ranges between 300-850, and it's based on your credit history, not your income, savings, or net worth (more on this below).
Score Examples:
800-850 Excellent
740-799 Very good
670-739 Good
580-669. Fair
300-579 Poor
Why does your credit score matter?
A higher credit score can help you:
- Qualify for loans and credit cards
- Get lower interest rates
- Reduce security deposits for housing or utilities
- Access better insurance rates
A good credit score saves you money and opens up financial options!
What factors impact your credit score?
Most scores (including FICO® and VantageScore) are based on five main areas:
- Payment History (35%) Have you paid bills on time? Even one missed payment can lower your score.
- Credit Utilization (30%) How much of your available credit are you using? (Aim for under 30%)
- Length of credit history (15%) How long have you had your credit account? Older accounts help raise your score.
- Credit Mix (10%) Do you have a mix of credit types (i.e., credit cards, loans, etc.)?
- New Credit/Inquires (10%) Have you opened many accounts recently? Too many at once can hurt your credit score.
How to check your credit score for free:
You are entitled to one free credit report every year from each of the three major credit bureaus (i.e., Experian, Equifax, and TransUnion) at:
www.annualcreditreport.com
Tip: Checking your credit score doesn't hurt your score.
7 Easy ways to improve your credit score:
1. Pay all bills on-time
- Even one missed payment can stay on your credit report for years
- Tip: set reminders or automate payments
2. Keep credit card balances low
- Aim to use less than 30% of your available credit
3. Don't close old accounts (unless you need to)
- Older accounts help your credit age. If there is no fee, keep them open.
4. Avoid opening too many new accounts
- Each new application causes a "hard inquiry" which can temporarily lower your score
5. Ask for higher credit limits (but don't use it)
- This can lower your utilization rate if you don't spend more of your available credit
6. Dispute errors on your credit report
- Mistakes happen! If you see something wrong, file a dispute with the credit bureau.
- Tip: Check with each bureau. They may not have the same information listed.
7. Consider a secured credit card
- This is great for building or rebuilding credit. You deposit money as collateral, then use the card.
Credit is a tool, not a reflection on who you are
Your credit score is a tool to help you access opportunities, not a reflection of your worth! If you have struggled with credit in the past, you are not alone. It's never too late to build, or rebuild, credit!
At Walters Financial Wellness, LLC, I can help you:
- Understand your credit without judgement
- Make a step-by-step plan to improve your score
- Feel more confident navigating credit cards, loans, and lenders
You don't need to figure it out alone! Make an appointment today