The Importance of One Simple Number

Some of the links in this post are from our sponsors. Read our disclosure to see how we make money.

The importance of your credit score can't be underestimated. Here are tips to improve your credit score and what bills it impacts.

What’s that simple number, and why is it so important? We’re talking about your credit score (surprise, it’s not your net worth!), how it can save you thousands of dollars, why it matters, what a good credit score is, and how you can use your credit history to safeguard yourself against identity fraud.

It’s a mistake to think your credit score doesn’t matter. A majority of people will need it to obtain financing, and it can also be a factor in job searches, apartment hunts and more. Most people will be affected by their credit score one way or another at some point in their lives, and it’s a basic tenet of financial literacy.

What’s the Purpose of a Credit Score?


A lot of people don’t realize what their credit score can do for them. It affects so many more things than whether or not you’re approved for a loan. Let’s go back to basics for a second.

Simply put, your credit score is an indication of how well you manage your money and use your credit. If you have a lower credit score, lenders might assume you’re not responsible with credit and deem you too risky to lend to. If you have a higher score, lenders might assume you’re less of a risk because you have a good track record with how you handle credit.

Of course, it’s not that black and white, but for the sake of simplicity, we’ll go with that. Most lenders use your FICO score to determine whether or not to lend to you, but landlords, employers, banks and others use it to assess how good you are with money. That’s right – your credit score can get between you and an apartment, a job or a new bank account.

You have more than just one credit score, too; each credit bureau has a different “grading” system. Along with that, there are different FICO scores for different loan purposes. For example, the score auto lenders look at isn’t the same score a mortgage broker looks at. Don’t worry, it’s not as overwhelming as it seems!

What’s a “Good” Credit Score and How Does it Help Me?


Now that you know what a credit score is useful for, what is a good score? Each lender has different criteria, but here’s a general rule of thumb from

  • Excellent credit: 750+
  • Good credit: 700-749
  • Fair credit: 650-699
  • Poor credit: 600-649
  • Bad credit: Below 600

Ideally, you want to stay above 700 to receive the best rates and have the best chance of approval. In case you weren’t aware, your credit score also influences the interest rate you receive on loans. Being eligible for a lower interest rate could save you thousands of dollars in interest over the life of your loan. It really pays to keep your credit score polished!

Does your score need a little work? Perhaps you’ve had a bumpy credit history. That’s okay! Your credit score is just one piece of the puzzle lenders use; it’s typically not the end-all-be-all. It’s also based off of one specific point in time. Your score today could be different from your score 30 days ago. Plus, there are plenty of organizations out there to help you repair your credit score and get it headed in the right direction. Just make sure to do your homework and select a reputable one. and others offer tools and advice that can help you build your credit score up.

Regardless, you can improve your credit score on your own by knowing the factors that affect your score. Here they are, courtesy of

  • Payment history (35%): Do you always pay your bills on time? (Make timely payments!)
  • Amounts owed (30%): What’s your debt-to-income ratio? Are you maxing out your lines? (Lower balances are better.)
  • Length of credit history (15%): How long have you been borrowing money? (Longer is generally better.)
  • New Credit (10%): Have you applied for any new lines of credit recently? (More inquiries can represent greater risk.)
  • Credit Mix (10%): Are the types of credit you have diverse? (As always, diversity is a good thing.)

The importance will vary from person to person, and it’s unlikely any of these will “make or break” a lender’s decision, but it’s worth honing in on an area you’re having difficulty with to improve your score.

Also, in some cases, you may not have a credit score because your history isn’t established enough for one to be calculated. A secured credit card may be a good solution to fix that.

How to Find Your Credit Score


All right, enough about credit scores, you’re probably itching to find out what yours is if you haven’t checked it!

You can use free tools to find your score, but be aware of a few things:

  • These companies earn revenue through advertisements. They’ll make recommendations for certain products as a result. Do your own research as to whether or not these products are a good fit for you. There’s no reason to apply for a new credit card if you weren’t planning on it!
  • These companies don’t use the standard FICO score most lenders look at, which means it’s a rough estimate of your score. Some use what’s called a VantageScore, and others use scores from one of the three bureaus. In most cases, the discrepancy isn’t enormous, but a select few have found their score varies by 30-50 points. Use this as a starting point.

Okay, here’s a list of places to check for a free score (you don’t need a credit card to sign up, and it won’t affect your credit score):

  1. Credit Karma
  2. Credit Sesame
  3. Quizzle

As a bonus, if you have a credit card with a major lender, it may provide you with your score as a perk. For example, my Barclay card updates my FICO score monthly, and I can view it alongside my monthly statement online. Convenient!

The importance of your credit score can't be underestimated. Here are tips to improve your credit score and what bills it impacts.

Don’t Forget to Check Your Credit History


Knowing your credit score is great, but monitoring your credit history is also a must. Just like online financial tools like Personal Capital and others help you monitor your net worth, your credit history is something worth keeping close tabs on and checking often. While your score simply tells you how well you’re doing, your credit history shows you why.

Some people may get the two confused, but they’re not the same thing. Your credit history shows all of your accounts, their standing (good, past due, default, etc.), balances and more. If you’ve lost track of how many open accounts you have, or want to check to see if a balance has been satisfied, your credit history will tell you.

You can use the information on your credit history to work toward improving your credit score, too. If you see that an account is past due, then that’s negatively impacting your score!

The biggest reason to check your credit history is to ensure there are no false reports on it. Creditors aren’t perfect. Many report erroneous information to the bureaus, and it’s up to you to correct it. If you want to dispute information on your credit history, follow the steps provided by the FTC here.

Reviewing your history is also great way to safeguard yourself against identity fraud. There could be accounts open in your name that you’re unfamiliar with – that’s not a good sign!

How can you obtain a copy of your credit history? You can order a report from each of the three major bureaus once per year from for free. Many people order one report per quarter to check up on things throughout the year. Don’t be fooled into thinking you have to pay! Everyone is entitled to this benefit.

Updating yourself on your score and history is an important piece of the financial puzzle. Don’t leave it unsolved!


Have you checked your credit score or history recently? Did you find anything surprising? Were you aware of the factors that influence your credit score? 

The following two tabs change content below.
Erin M. is a personal finance freelance writer passionate about helping others take control over their financial situation. She shares her thoughts on money on her blog Journey to Saving.


  • Emily @ JohnJaneDoe says:

    When i was in my 20s I got into credit card debt and had to struggle to get my score back up. One way I did that was to get a Target store card. Every month I would make one trip and buy my toiletries for the month, then pay off the card.

    I know a lot of people get down on store cards, because they can have some pretty outrageous interest rates. they can also be easier to get. If you are going to make purchases anyway (like in my case, shampoo and body wash) it can make sense to use them as a way of proving you pay your obligations.

    • Erin says:

      Agreed, Emily! They are much easier to get. You just have to stay on top of your bill and make sure you’re only charging what you were planning on buying (and hopefully have the money for). As you said, they do tend to have higher interest rates, but if used responsibly, it could be a good option.

  • Michael @ So You Think You Can Save says:

    I have two credit cards that have started offering free access to my credit score. You’re absolutely right in that this is a fantastic perk!

  • Abigail @ipickuppennies says:

    I need to check mine more frequently. When we did a refi a couple of years ago, we found out that our old apartment complex had sent us to collections without notifying us. I guess we didn’t give them our new address, and they didn’t think to try sending it to our old one that’d get forwarded. Grumble grumble.

    Even with that, though, we were right around the 750 and 760 mark respectively, so I guess we’re doing pretty well over all.

    • Erin says:

      Oh wow! It definitely pays to look. You just never know. I wish it were easier to get notified when things like that happen, but unfortunately, it’s mostly up to us to check. I’d say you’re definitely doing well!

  • Dane Hinson says:

    Checking our credit history and score has been something my wife and I have seriously neglected since we went through the home buying process 7 years ago. Since then, I’ve set a reminder to check at least annually, at least for identity protection at a minimum.

    • Erin says:

      Nice! Setting a reminder is a great way to keep on top of it. It’s one of those housekeeping tasks that’s easy to let slip by.

  • John says:

    You touched on some good points. As I have gotten older, I have gotten in the habit of monitoring my credit score monthly. Very important to pay attention to. You never know the next time you will need to make a big purchase with financing (always good to have favorable rate)

    • Erin says:

      True! A lot of people don’t think they’ll need to finance anything (or want to stay away from it) but we never know what life is going to throw at us.

Leave a Reply

Your email address will not be published. Required fields are marked *