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Understanding Your Credit Score

In order for lenders to assess the level of risk involved with borrowers, they typically use borrowers’ credit scores. Some employers, landlords, and insurance companies use credit scores as well when making decisions about job applicants, prospective tenants, or policyholders. When it comes to applying for a mortgage, car loan, credit card, or any other loan, a high credit score could save you money and a low score could cost you money. The first step to improving or maintaining a healthy credit score is understanding your score.

What a Credit Score Means

Credit scores range from 300 to 850. The higher your score, the better your credit is. Generally, credit scores fall within the following ranges:

  • Above 750: excellent

  • 700-750: good

  • 650-700: fair

  • 600-650: bad

  • Below 600: very bad

High credit scores mainly reflect a history of paying bills on time and using available credit sensibly while avoiding major credit mistakes. Borrowers with the highest scores are offered the best rates and most perks from lenders because they are low-risk. If approved, borrowers with lower scores will usually have higher interest rates because they carry more risk for lenders.

Having a history of missed payments and carrying high credit card balances will impact your credit score negatively. Defaulting on loans can cause your credit score to drop hundreds of points and lenders will be unlikely to approve your application. Your credit score can also be negatively impacted if you have too many inquiries on your report.

Using Credit Cards

Those with good credit who are approved for a credit card are generally offered lower interest rates and perks in the form of cash back or discounts on certain types of purchases. Using credit cards irresponsibly is a quick way to damage your credit. Almost one-third of your credit score is based on credit use, which calculates how much of your available credit you actually use. Having a balance of more than 30% of your available credit is seen as poor utilization of your available credit. Keeping your balances below 30% is viewed as responsible use of your credit. Paying down your credit card balances and keeping them at an acceptable level is one of the quickest ways to improve your credit score.

Responsible Credit Card Tips

  • No interest: To avoid paying interest charges, pay off your balances in full every month.

  • No borrowing: Only use your cards for purchases you’d be able to afford with cash. Do not think of your credit cards as a source for an easy loan.

  • Emergencies only: Having maxed out credit cards eliminates one of the main benefits of having them: the ability to pay for sudden car repairs, medical bills, necessary travel, and many more.

Getting Your Credit Score

There are a variety of sources from which you can order your credit score. The first option is to check for free credit reports using services like,,,, and You could also see if your bank, credit union, or credit card issuer makes your credit score available either on your billing statement or online. The last option is to purchase your full credit report from one of the major credit bureaus – Equifax, Experian, and TransUnion. Once you receive your credit score, many companies will include a gauge that helps you read read and better understand your score.

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