9 Facts You Should Know About Your Credit Score

Today we have an awesome guest post about credit from LaToya Irby.  Make sure you check out her bio at the end of the post. 

Your credit score isn’t something you use every day, but when you do need to use it, you need it to be in good shape.  Building and maintaining a good credit score is much easier when you understand how it works and what does and doesn’t affect it.  There is a lot of misinformation floating around the internet about what a credit score really is, what counts as good credit, and how people can improve their credit scores.  Here are 9 things every responsible adult should know about their credit score.

9 Facts You Should Know About Your Credit Score

1. Credit scores and credit reports are two separate things.

It’s easy to get these credit scores and credit reports confused because they’re so closely related.  However, they are totally separate pieces of your credit.

Your credit report is a record of your credit history that’s compiled and maintained by companies called credit bureaus.  Credit bureaus receive periodic account updates from companies you have credit accounts with.  They keep track of this information then sell it to you and other businesses who have a legal reason to check your credit.  Credit card issuers, lenders, and debt collectors are examples of companies that routinely report to credit bureaus.

Your credit score is a three-digit number that summarizes and measures the information on your credit report at a particular point in time.  Credit scores give lenders a non-biased way to evaluate your credit history and quickly judge the likelihood that you’ll default on a new credit or loan obligation.

2. Your credit score is calculated based on a few different factors.

Your credit report includes some pieces of information that doesn’t affect the score.  It includes your personal information, employment status, age, and sex aren’t used to calculate your credit score.

Your credit score looks at the following information:

  • Payment history
  • Level of debt
  • Ratio of credit card balances to credit limits
  • Amount of time you’ve had credit
  • Types of credit you have
  • Recent applications for credit

Controlling these pieces of information will give you a better credit score.

Related: Crash Course in your Credit Report

3. You have multiple credit scores.

You don’t have just one credit score.  In fact, you actually have dozens of credit scores.  FICO, the most well-known credit scoring company, has several credit scoring models for various industries – mortgage lenders, auto lenders, credit card companies, and insurance companies.  Each of the major credit bureaus – Equifax, Experian, and TransUnion – has a credit scoring model.  The major credit bureaus also have a credit score they developed together – the VantageScore.  And banks may have their own in-house credit score.

The credit scores you check on the internet are generic educational credit scores.  Meaning they are not slanted for any particular industry and are only provided to give you a general idea of where your credit stands.  The credit score you check with almost will never match the credit score lenders pull when they evaluate your application.

4. What counts as a good credit score varies.

Every credit scoring model has a range that credit scores can fall between. Credit scores sold to consumers commonly fall within a 300 to 850 range.  There are other credit scoring models with ranges from 150 to 950; 250 to 925; 280 to 850.  Higher credit scores are always better, but what counts as “excellent” or “good” credit will often vary depending on the credit scoring model and the business checking your credit score.  One lender may classify credit scores 740 and above to be excellent, while another may require a minimum 760 to be considered an excellent credit score.

Related: Do you have a good credit score?

9 Facts You Should Know About Your Credit Score

5. Checking your credit score doesn’t hurt.

Don’t be afraid that checking your credit score too often will cost you credit score points.  As long as you use a consumer credit scoring service (not a lender) to check your credit score, your credit will not be affected.  It does, however, hurt your credit score when businesses check your credit report or credit score to approve you for applications you’ve made.  Only the applications you make in the past 12 months will affect your credit score.

6. Your score can change daily.

The credit score you see on any particular day is just a snapshot of your credit at that point in time.  You can check your credit score the very next day and see that you’ve gained or lost credit score points.  That’s because your credit report – the basis for your credit score – is constantly changing as your creditors send updates to the credit bureaus.  Old information falls off your credit report can also account for changes to your credit score

7.  Your credit score isn’t all that matters.

Your credit score is an important piece of your financial wellness, but it’s not the only thing that counts.  When creditors and lenders evaluate your applications, they may also check your income, expenses, bank balances, employment status, and the amount of debt.  Having a good credit score improves your chances of having credit applications approved, but it everything doesn’t line up you could be denied,

8. Bad things hurt your credit for a while, but not forever.

Your credit score is damaged by things like late payments, maxing out your credit cards, allowing balances to be charged off, defaulting on loans, or having repossession or foreclosure on your credit record.

The good news is that negative information can only remain on your credit report for 7 to 10 years.  After that, the negative information will fall off.  As negative information gets older, it affects your credit score less. If you are suffering from bad credit now, there’s hope that your credit score will improve as the negative information ages and falls off your credit report.  Adding positive information to your credit score will offset the negative and help you bring up your credit score.

9. Your credit score has a major impact on your life.

Many companies use credit scores to decide whether or not to do business with you.  Your credit score affects things the following situations:

  • whether you’ll get approved for a mortgage or car loan
  • your ability to get a credit card
  • your insurance rate
  • whether you get approved for an apartment

No only does your credit score affect approval decisions, it also affects the cost of borrowing money.  Having a lower credit score indicates a higher risk of late payments, so banks charge a higher interest rate to compensate for this risk.  This higher interest rate results in a higher monthly payment and higher overall cost of borrowing money.  You will save money and benefit in the long run by building and maintaining a good credit score, especially before you apply for a major loan like a mortgage or car loan.

Knowing that there are so many things affects your credit score is more incentive to manage it well.  Paying all your bills on time and keeping your credit card balances low are two of the best things you can do for your credit score.

Related: How I Raised My Credit Score 150+ points


Author Bio: LaToya Irby is a credit educator and the founder of CreditRodeo.com, where she helps people understand how credit really works. Download her free guide to raising your credit score and get your credit in the best shape ever.


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  1. Love this! Many of my millennials friends don’t realize how important a credit score is until they are denied something due to having poor credit. In the long-term, having good credit will save you a ton of headache and money.

    1. Thanks! That was definitely me in my early 20s. The first time I realized credit scores existed it was because I was denied for something. It’s crazy how much our lives depend on this number, but many people don’t realize it until it’s too late.

  2. Lots of good information! I think a lot of people forget that it matters where you check your score. Also matters whether it is a ‘soft pull’ or ‘hard pull’.

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