Why should you care about your credit score?

 Man and woman reviewing paperwork.

How important is your credit score? You might not be aware, but your credit score can impact many opportunities in your daily life, from getting a credit card to renting an apartment to signing up for a cell phone plan.

In this article, we look at what your credit score means, how it’s calculated and some tips to help improve your score.  

What does your credit score mean?

Your credit score is a number that predicts how likely you are to pay your debts and make other payments on time. A higher credit score means higher confidence in your ability to handle payments, which can lead to lenders and other creditors viewing you more favorably. Among other benefits, a good credit score can result in easier access to credit, lower interest rates and insurance premiums, getting services (such as utilities or a phone) without a security deposit and even looking better to prospective employers.

You might not know you have multiple credit scores. First, there are different scoring models that are fine-tuned for different uses. For example, credit scores used for vehicle loans are different from credit scores used by mortgage lenders. Second, credit scores vary depending on which of the three credit bureaus is providing them. These slight variations typically won’t impact your loan approval chances. 

One of the most well-known credit scores is the FICO® (Fair Isaac Corporation) score. It uses a range of 300 to 850:





Very Good 







Below 580 

Source: myfico.com.

What factors are used to calculate credit scores? 

While each scoring model has its own idiosyncrasies, they are all based on your past behavior with credit and tend to use similar factors and weightings for each factor. As an example, the FICO score considers the following factors and weights:

Payment history (35%): The factor that has the most impact on your score is your payment history. This could include credit card payments, student loan payments, auto loan payments, etc. Late or partial payments can have a negative impact on your score, while on-time and full payments tend to have a positive impact on your score.

Credit utilization (30%): The second biggest factor is how much you owe compared to the amount of credit available to you. For example, if you tend to have a $1,000 balance on your credit card, but your credit limit is $2,000, that means your credit utilization is 50%. Try to aim for a credit utilization rate of 30% or lower.

Length of credit (15%): This refers to how long you’ve had a line of credit. Generally, the longer your credit history, the better.

New credit (10%): Opening new lines of credit (like a new credit card or loan) will tend to have a negative impact on your credit score.

Credit mix (10%): Typically, having a mix of different types of credit (student loans, credit cards, car payments, etc.) will have a positive impact on your credit score.

How do I find out what my credit score is?

The three credit reporting companies — TransUnion, Equifax and Experian — are required to give you a free copy of your credit report every 12 months, but you must request it. To learn more, visit annualcreditreport.com. If you find inaccuracies, contact the credit bureaus and make sure to correct this information.

There are also alternatives if you want to regularly monitor your credit score. Your bank might offer credit monitoring for free, and many free credit monitoring agencies also provide this service. Important: Make sure you use a reputable credit monitoring agency to protect your personal and financial information.

How can you improve your credit score? 

If you don’t have a good credit score, or if you simply want to improve it, the good news is that credit scores can change over time. 

Some tips to improve your current score include: 

  • Pay your bills on time. Setting up payment reminders or autopay can help.
  • Keep your credit utilization low (below 30%). For example, pay your credit cards more frequently or pay off the balance in full (not just the minimum amount). 
  • If it’s an option for you, request a credit limit increase from your credit card company but don’t use the extra credit, which will lower your utilization.
  • Limit how often you apply for credit.

If you are new to credit, you might be wondering how to build your score when you don’t have access to credit to start with. Some tips to build your score if you are new to credit include: 

  • Apply for a secured credit card.
  • Become an authorized user on someone else’s account before opening your own account. 
  • Take advantage of services that report nonfinancial payments (such as utility bills and rent) to credit bureaus.

Understanding what your credit score means, and how you can improve it if necessary, is an important step to strengthening your financial fitness. Talk with your Edward Jones financial advisor to learn more about improving your credit score plus other tools to help you reach your financial goals.