Your credit score can feel like a mysterious number that decides your financial fate, but it doesn't have to be that way. Whether you are trying to rebuild after a setback, planning to buy a home, or just want to feel more confident with your money, understanding how your credit score works is the first step to taking control. 

 

Let's break down what the credit bureaus look at, how scores are calculated, and what you can do to boost your score, without being overwhelmed.

 

What is a credit bureau?

There are three major credit bureaus in the U.S.: Equifax, Experian, and TransUnion. These companies collect and track your credit history. They look at loans, credit cards, payment patterns, and more. Lenders then use these reports to decide:

•  Whether to approve you for credit
• What interest rate to offer
• How much credit you qualify for

Each credit bureau may have slightly different information, which is why your credit score can vary depending on which is being used.

 

What makes up your credit score?

Most lenders use the FICO score, which ranges from 300-850. Here is how it breaks down:

1. Payment history (35%)

2. Amounts owed (30%)

3. Length of credit history (15%) 

4. Credit mix (10%)

5. New credit inquiries (10%)

You can find out more information about credit scores from my Previous article, "Understanding Your Credit Score."

 

Common myths about credit scores (and the truth)

1. The myth: "Checking your score hurts it"

     The truth: Checking on your own credit scores is a "soft inquiry." It won't affect your score at all.

2. The myth: "You need debt to build credit"

     The truth: you need credit, not debt. Using credit wisely ( and paying it off) builds your score.

3. The myth: Paying off collections erases the record"

     The truth: Paid collections may still appear on your credit report, but you can improve your score over time.

 

Simple ways to improve your credit score

• Always pay at least the minimum by the due date
• Try to keep your balances low
• Don't close old accounts in good standing 
• Only apply for new credit when necessary
• Check your credit reports for free at www.annualcreditreport.com and dispute any errors

 

Walters Financial Wellness

Your credit score is not a judgement of your worth. It's just one tool in your financial toolbox. Just like any other tool, you can learn how to use it with skill, even when you have had past setbacks. I help people understand their credit without shame or stress. Whether you are starting out, rebuilding after a hardship, or just want to make smarter moves, I'm here to support you. Make an appointment today!