What is my credit score and how can I improve it?

Range Certified Financial Planner
Range Certified Financial Planner
June 16, 2022


Your credit matters. A lot. Achieving a stellar credit score and maintaining a clean credit report doesn’t have to be shrouded in mystery!

  • Strong credit can score you the best deals on loans, credit cards, insurance premiums, apartments, and even cell phone plans.
  • Weak credit can cause you to be denied jobs, apartments, and mortgage loans. At the very least, you’ll almost always be paying more in interest for the same loan as a borrower with better credit.
  • Your credit score is impacted by major factors including debt-to-limit ratio, age and mix of credit, payment history, hard credit pulls, and derogatory remarks.\

Credit 101

Your credit score is a 3-digit number that indicates your creditworthiness in a nutshell. Those 3 numbers can have a big impact!

For most general lending decisions, such as personal loans and credit cards, lenders use your FICO score. Your FICO score is calculated by the data analytics company Fair Isaac Corporation, and it’s based on data from your credit reports. A bank will typically use all 3 bureaus (TransUnion, Equifax, and Experian) when determining which FICO score to use for the loan underwriting, known as a “tri-merge”. If you are applying for a mortgage with another person, such as your spouse or partner, each applicant’s FICO score is pulled from multiple credit bureaus. The bank identifies the median score for both parties, then uses the lowest of the final two.

In general, best practices suggest trying to reach (and maintain) a credit score of 750 at all times. The average credit score in the U.S. is 716, and Americans ages 23 to 29 have an average score of 660.

23.3% of Americans have excellent credit, which is a score in the 800 to 850 range.

Debt Consolidation

Consolidating at the right time can help you avoid debt problems that can lead to financial hardship! Debt consolidation takes multiple debts of the same type and rolls them into one monthly payment at a lower interest rate. Finding a consolidation loan or balance transfer with a much lower interest rate can be extremely useful if you have multiple balances that you need to pay off, such as multiple revolving credit cards with annual interest rates of 20% or more.

Be sure to research options first so you can compare interest rates and understand when to utilize a balance transfer or consolidation loan.


As you improve your credit habits and overall profile, your score will usually update once every month. For other weak credit marks and hard inquiries, those can take up to 7 years to roll off your credit report - so don’t get discouraged!

Pay all monthly obligations on time, but especially credit & loan minimums. Don’t be late, ever! Keep your credit score at 750+ at all times.

Continuously monitor credit for each partner using online tools and obtain free credit reports through the 3 main credit bureaus as needed.

Avoid hard credit pulls, as they hurt your credit score. Aim for a good mix of credit and a longer average age of credit. A good mix of Credit means having installment loans (mortgage, auto, student) and revolving (credit cards).

Building strong credit takes time and discipline, but can lead to great outcomes for you and your finances!

GLOSSARY: Credit Factors

Payment History
Percentage of credit payments you’ve made on time. This includes rent payments! One or two 30-day or 60-day late payments are easier to recover from but can hurt your score significantly.
A 90-day missed payment is more damaging and could disqualify you from certain loans. After 90 days, missed payments can become “charge-offs” and be sent to a collection agency.

Credit Card Usage
Also known as the “debt-to-limit” ratio. Try to stay under 30% (under 10% is even better - 0% is best!) — and remember, you don't need to carry any credit card debt to build your credit.
Debt-to-Limit = Sum of all outstanding card balances ➗ Sum of all card spending limits

Derogatory Marks
Derogatory marks can affect your credit score, your ability to be approved for credit, and the interest rates a lender offers you.
The different types of derogatory marks include late payments (30, 60, and 90 days), charge-offs, collections, foreclosures, repossessions, judgments, liens, and bankruptcies. Derogatory marks are best to avoid at all costs — they can stay on your report for 7-10 years.

Age of Credit
The average age of all open credit accounts - including home loans, auto loans, student loans, credit cards, etc. If you're paring down your accounts, don't close your oldest credit card - it's what helps give you a longer credit history! Improve your age of credit history over time by keeping your accounts open and in good standing.

Number of Accounts & Mix of Credit
Having different account types (like credit cards and loans) can also help your credit. Don't fret about an exact number or mix, since you'll build these over time. The important thing is that you're using accounts responsibly. Credit scoring formulas don’t punish you for having too many credit accounts, but you can have too few. Credit bureaus suggest that five or more accounts — which can be a mix of cards and loans — is a reasonable number to build toward over time.

Hard Credit Inquiries
This is equal to the number of hard credit checks on your credit report, which happens when you apply for credit cards, mortgages, or apartment rentals. The credit bureaus are notified when you do this, and too many of these over the span of a few years can be perceived negatively. These inquiries can stay on your report for up to 2 years, but their effects fade over time. Good news! It's a temporary ding and scores usually bounce back in 3 months. Plan ahead and minimize your hard inquiries at least 9-12 months before trying to get a mortgage or big loan.



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