One of the most important factors when it comes to your personal financial well-being is your credit score. Most people have a general knowledge of what their score is, but very few actually know how their score affects them on an individual basis. We’re here to change that.

From how your score is calculated to how a 100-point difference in score can lead to a $70,000 difference in interest payments, we believe it’s vital for every person to know as much as they can about the topic. This article aims help simplify all aspects of the credit score game so that you can take the necessary steps towards improving your overall financial health. 

How Important is Your Score?

The main thing every single person should know is that your score can, quite literally, save you thousands or even tens of thousands of dollars over the course of your lifetime. Yes, you read that correctly, TENS OF THOUSANDS of dollars! Are you awake now? Good, let’s dive in.

Low or bad credit? Get approved for this card!

The first thing to understand is where your score fits within the overall credit score range. It will be anywhere from 300 to 850 and the higher your number, the better your credit report is.


Credit Bureaus

Credit scores are managed by three main credit bureaus; Experian, TransUnion, and Equifax. These three entities track and keep a log of your entire financial history. They compile all of this data, analyze it, and give you a personal credit score (often called your FICO score). The score you receive is highly important to your financial life so you should be monitoring it on a regular basis.

When you go to make any of life’s major purchases and need to get financing from a bank in order to pay for it, lenders use your credit score to determine 1-if they can trust you to pay the loan back and 2-the extent of said trust and how much of a risk you are.

Simply put, the lower your credit score, the higher your interest rate will be when borrowing money from a bank or private lender.

When we talk about something as major as buying a house, a 1% reduction in your interest rate is a BIG DEAL. We’re talking Ron Burgundy BIG! To help you see this, we’ve put together the chart below which illustrates the total amount you would pay on a $200k fixed-rate 30-year mortgage to purchase your house based on different interest rates.

Credit Score
*Graph created by the author and uses rough interest rates based on scores. Actual interest rates may vary

The difference between having a ‘good’ versus ‘fair’ credit score in this scenario is almost $70,000! And this is based on a $200,000 mortgage only…if your home is even more expensive, your credit score could truly be costing you hundreds of thousands of dollars without you even realizing it!

Feel free to play around with this interest rate calculator to do some rough calculations based on your personal situation.

Calculating Your Score

If each person’s credit score is such an important piece of financial information, how do we take a peek behind the curtain to see and understand how our score is being calculated? (The first step in getting your score higher is understanding WHAT affects it in the first place)

There are a number of factors that go into generating your credit score. Here are some of the main things you’ll want to understand and track.

  • On-time payments: The percentage of time you are paying your bills on time. Monthly credit card payments and loan repayments are the main items tracked for your on-time payment history. Things like rent and utilities can massively impact your score if you become delinquent and a collection agency is contacted to collect amounts due.
  • Credit history: This is simply how long your credit history goes back. The longer your credit history, the more it will positively impact your credit score. This category is the one you have the least control over. You can’t go back in time and begin your credit history earlier than you did, but you can start today if you haven’t already!
    • Types of credit: Bank credit cards, furniture store credit cards, gas station credit cards, car loans, home mortgages, student loans, and business loans are all different types of credit. A wider variety can help boost your credit score.
  • Debt: The amount you owe on any credit cards or open loans. Debt is a necessary evil when it comes to your credit score. Learn more about personal debt here.
  • Credit utilization rate: How much you owe (debt) divided by how much credit you have available. You need to keep this percentage low, which is why our credit card article advises that you ask your bank to increase your credit limit regularly.
    • Example: Imagine that your current credit card balance is $3,750 and you have a total credit limit of $4,000. This would mean your current credit utilization rate would be 93.75%. This is bad for your credit score!
      • There are 2 options to improve this percentage; either stop carrying so much debt (by paying it off) or get your credit limit increased. If you get your credit limit increased to $10,000, the same scenario would then have a much improved 37.5% utilization.

While these are generally regarded as the most prominent pieces of information used when determining your credit score, there’s no exact universal formula that weights the importance of each category. However, most believe your score is generally weighted in the following manner: 35% payment history, 30% amount owed, 15% length of history, 10% new credit, and 10% types of credit used.

If you are trying to repair a damaged credit score, keep these values in mind and focus on the biggest ones first.

How to Keep Your Credit Score Strong

Now that you have a good understanding of what your credit score it, how it is calculated, and how lenders use this information; it’s time to take a look at some specific factors that can quickly damage your score.

  • Missing a payment entirely
  • Not paying in full
  • Applying for more credit
  • Canceling zero-balance credit cards
  • Co-signing for credit
  • Ignoring your credit
  • Too many hard inquiries

We’ve examined each of these factors in depth, please click on them to learn more.

Credit Score Tracking

Regularly tracking your credit score is a must. Checking monthly is ideal, but at a minimum you should check your credit score quarterly. Things can pop up unexpectedly, especially if someone gets a hold of your information fraudulently and successfully opens a line of credit in your name.

Addressing any red flags on your report early will go a long way in minimizing the damage done to your credit score. There are a number of services out there that will help you track and manage your score. Mint, Credit Karma, and LifeLock are a few of the most comonly used sources. As you’ve probably seen via television commercials, big banks will now also provide you with real-time score tracking.

These services will also recommend ways to improve your score, or provide credit card recommendations to optimize your finances based on your personal spending habits. Additionally, you can request your full credit report once per year from the credit bureau without it impacting your score.


We cannot stress enough how important your credit score is for your financial well-being. If you know your score and regularly review it, that’s fantastic! If you read this article only to realize that either you don’t know your score or don’t understand how much of an impact it has on your financial life, don’t worry, we’re here to help!

Take the initiative immediately to get your credit score through one of the avenues outlined above, develop a monitoring system that works for you, and stick with it. You’ll be on your way to a better financial life in no time! If you need any assistance at all, give us a call today!





  2. Angella Trevillion Reply

    I would like to have this credit card ,and approve for it, would money come on it

    • Nancy Manary Reply

      I am in debt 2400 in c.c. i owe 4800 for my car. 800 for medical. I have a credit score of 675 on esquerian score. I am 77 years old i get 1300 a month S.S. and have paid all my bills every month on time and also pd extra each month. I owe like 7025 all together. I would like to get enough to help me bring down debt and pd off drs. They wont see me unless i pay them so am trying to make payments. Please help. I have tried so many places with no results . Please concider me and let me know

  3. Hello and good evening. I have read eveything you have here and makes total since i agree with it all. That was also 7 years ago and now i am older and wiser and want to fix my credit and my future and be able to buy the nicer things and really see the impack it all had on me leading up to today. Cant even get a 50 doller loan when i really need the funds and have a full time job as a lead maintenace tech and the company gives me free housing with utilities included. I am blessed to have that because here is the other part. I got a dui 1 and 1/2 years ago which of course was the worst mistake ever and definitly paying for it now. Classes are 100 a month iid in car is 110 a month, sherriff work project is 92 a month and thats a $92 a payment to work for them every weekend for 57 weeks. Plus lets not for get 250 to courts each month. So even thogh it helps with free rent i would like to get those payments out of the way and ask for someone to please put there trust in me by offering a $3000 doller loan to pay that all off and have a 1 month stead ontime paid back fee to whomever will put there faith in me as i do. I have a great steady job thats a keeper
    Its right up my alley as far doing what you love and my job loves me have been there going on a years and a half and tell me all the time i better not be moving properties. I could easily pay a $300 payment each month and would help me out in a huge way to getting my score back. I have been scammed before out of an online loan person on the other end of the phone pretending to be a supervisor from cashNetUsa and had me pay 400 down as to show good standing i guess since my score was low and ran off with my $400 and look at me on here. I am a good person and help anybody that crosses my path and needs help whatever the problem is. Well if you made it this far thanks for hearing me out and maybthe road bring you to happiness. Thank you

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