What Is My Credit Score and How Can I Improve It

Posted on April 12, 2025 by Contest SEO Developer - Credit Score

Your credit score is like a financial report card—it tells lenders, landlords, and even employers how responsible you are with money. But what exactly does that three-digit number mean, and why does it feel like it’s following you everywhere? Let’s break it down in plain language, minus the jargon.

What Is My Credit Score? The Basics Explained

Your credit score is a three-digit number, typically between 300 and 850, that summarizes your creditworthiness. Think of it as a snapshot of your financial habits: Do you pay bills on time? How much debt do you carry? Have you applied for five credit cards this month? All of this information is fed into a formula that calculates your credit score. Lenders use this score to decide whether to approve you for loans, credit cards, or even rental agreements—and at what interest rate.

Scores are calculated using data from your credit reports, which are maintained by three major credit bureaus: Equifax, Experian, and TransUnion. These reports track your borrowing history, including credit cards, mortgages, and student loans. The most common scoring models are FICO® and VantageScore®, both of which weigh factors like payment history and credit utilization.

Here’s how the ranges generally stack up:

• Excellent (720+): You’re a lender’s dream. Low-risk borrowers get the best rates.
• Good (670–720): You’ll qualify for most loans, but might not snag the lowest rates.
• Fair (580–669): Approval isn’t guaranteed, and interest rates will be higher.
• Poor (300–579): Rebuilding is key—you’ll face limited options and high costs.

Keep in mind: You don’t have just one credit score. It can vary slightly depending on which bureau or scoring model is used.

Evergreen Financial Counseling enrolls all of its debtor-education clients into 7 Steps to a 720 Credit Score for free. This simple credit-education course will help you rebuild your score to 720 in just 12 to 24 months. 

How Is My Credit Score Calculated? The Recipe Behind the Number

Your credit score isn’t plucked out of thin air—it’s based on specific ingredients from your financial history. Here’s how the “recipe” breaks down for FICO® scores (the most widely used model):

1. Payment History (35%): The biggest slice of the pie. Lenders want proof you pay bills on time. Even one late payment can dent your score.
2. Credit Utilization (30%): This measures how much of your available credit you’re using. Aim to keep balances below 30% of your limit. (Example: If your credit card limit is $10,000, try to owe less than $3,000.
3. Length of Credit History (15%): Older accounts show stability. Closing your first credit card could shorten your history and hurt your score.
4. Credit Mix (10%): A blend of credit types (e.g., credit cards, mortgages, auto loans) signals you can handle diverse debt.
5. New Credit (10%): Applying for multiple loans or cards in a short period raises red flags. Each “hard inquiry” can knock off a few points.

VantageScore® uses similar factors but tweaks the weights. For instance, it prioritizes payment history and credit utilization even more heavily.

Pro Tip: Your income, savings, or job title don’t directly affect your score—but they can influence a lender’s overall decision.

Want to boost your score quickly? Check out the Credit Rebuilder Program, which will help you improve your score in just six months. 

Why Does My Credit Score Matter? It’s More Than Just Loans

A strong credit score isn’t just about qualifying for a mortgage. It impacts everyday life in surprising ways:

• Lower Interest Rates: A 100-point difference could save you $40,000 in interest on a 30-year mortgage.
• Renting an Apartment: Landlords often check credit to gauge if you’ll pay rent reliably. A poor score might mean a higher security deposit—or rejection.
• Insurance Premiums: Some insurers charge higher rates for low scores, linking them to “riskier” behavior. That said, it’s worth noting that not all states allow this practice. For example, California, Massachusetts, and Hawaii restrict or ban the use of credit-based insurance scores in setting auto insurance rates. As well, your actual credit score isn’t used—insurers use their own formula based on credit behaviors (like payment history, debt levels, etc.).Job Opportunities: Employers in finance, government, or roles with expense accounts may review credit during hiring.
• Utilities and Cell Phones: Companies might require deposits if your score is low.

Even small wins matter. For example, improving from a “fair” to “good” score could drop your auto loan APR from 9% to 6%, saving $1,500 on a $20,000 loan.

How Can I Improve My Credit Score? Actionable Steps

Building or repairing credit takes time, but these strategies deliver results:

1. Pay Bills Like Clockwork
   Set up autopay for minimum payments to avoid late fees. If you miss a payment, catch up ASAP—most lenders only report late payments after 30 days.
2. Tackle High Credit Card Balances
   Focus on paying down cards with balances above 30% utilization first. Not sure where to start? Try the “debt snowball” (pay smallest debts first) or “debt avalanche” (target high-interest debt).
3. Check Your Credit Reports for Errors
   If you’ve been through a financial crisis, there’s about a 40% chance your credit report contains an error. Visit AnnualCreditReport.com to access your free credit report. Look for and dispute any inaccuracies, such as accounts you didn’t open, incorrect late payments, or outdated balances.

In 7 Steps to a 720 Credit Score, we teach people how to: 1) identify high-priority errors; and 2) dispute these errors. As well, if you have been through a bankruptcy, we will introduce you to a law firm who will review your credit report for errors and represent you for free if any of your credit-related rights have been violated. 

4. Be Selective About Opening New Accounts Unless Necessary
   Each time you apply for new credit, it may trigger a hard inquiry on your report, which can cause a small dip in your score—typically around 5 to 10 points. The good news? These effects are usually temporary and drop off after about six months. And if you’re rate-shopping for a mortgage or auto loan within a short window (usually 14–45 days), multiple inquiries are often grouped as one.
5. Keep Old Accounts Open (Even If You Don’t Use Them)
   Closing a credit card lowers your total available credit, which can spike your utilization ratio. Instead, use it occasionally for small purchases to keep it active.
6. Consider Credit-Building Tools

Consider credit-building tools like secured credit cards, where you deposit cash (e.g., $500) as your credit limit, use it responsibly, and (eventually) get the deposit back. You can find a list of credit cards, including secured credit cards, that are likely to pre-approve people with poor credit here.  Another option is a credit-builder loan, where your payments are reported to the credit bureaus, which helps your score improve. Check out the Credit Rebuilder Program here. 

Patience Pays Off: Negative marks (like late payments) fade from your report after 7 years. Focus on consistent habits, and you’ll see gradual progress. When you join 7 Steps to a 720 Credit Score, you’ll learn strategies to improve your score in just 12 to 24 months, even while those negative items are still on your report.

The Bottom Line

Your credit score isn’t just a number—it’s a tool that opens (or closes) doors to financial opportunities. By understanding how it works and taking small, consistent steps to improve it, you’ll save money, reduce stress, and gain control over your financial future. Start by checking your score (many banks offer free access), then tackle one habit at a time. Remember: Even “good” credit can always get better!