Credit Repair

Here’s What Your Credit Score Really Means

When it comes to your financial health, there’s one number that’s vital: your credit score. This three-digit number can affect everything from the interest rate you pay on loans and credit cards to your ability to get that house or job of your dreams. Basically, your score determines some pretty major wins and losses in your life.

What’s the score?

For the most part, when we’re talking about your credit score, we’re talking about your FICO Score. This score is issued by Fair Isaac Corp. (FICO) based on information from reports issued by the three major credit reporting agencies — Equifax, Experian and TransUnion. Your score hinges on five different factors of varying weight: payment history (35%), how much you owe (30%), length of credit history (15%), new credit (10%) and credit mix (10%).

Scores typically range between 300 and 850, and the higher, the better. Anything over 800 is considered “exceptional,” while 670 and above is considered “good.” If you dip below 670 into the “fair” (580-669) or “very poor” (300-579) range, you could be in for a rough ride financially.

It’s important that you know what your score is, too. Just like ignoring your blood pressure can put your physical health at risk, ignoring your credit score can damage your financial health. Finding your credit score is simple and, in most cases, free. For example, you can sign up for My LendingTree to find yours fast along with information on how to improve it. You can also find it through many financial institutions such as banks and credit unions, and it may also appear on your credit statement.

Why your score matters

Your score is how financial institutions and other companies decide how big a risk they’re taking by lending you money. It can determine not only if they say yea or nay when you apply, but also the terms of your agreement if they do decide to do business with you.

Is your credit score everything? No, many lenders will also look at your income, how much money you have in the bank and other facets of your financial profile. But there’s no denying that your credit score will be a big — if not the biggest — determining factor.

What a good credit score gets you

A good credit score can, quite literally, pay off for you in several ways. Not only will you be more likely to get approved for loans, credit cards and rental applications, but the interest you pay on them will likely be less than it would be for someone with poor credit.

Even if your credit score is already good enough to get a loan, raising it higher can save you a lot when it comes to interest. A recent LendingTree study found that boosting your credit score from “fair” (580-669) to “very good” (740-799) can save more than $45,000 over the life of five common loans (mortgage, student loan, auto loan, personal loan and credit card). That’s no small change!

Beyond that, you may pay less for things like car and home insurance and even initial deposits for cellphone agreements.

What a bad credit score means

There’s no sugarcoating it — a poor credit score can hit you hard financially. The lower your score, the more likely you’re going to have to pay more for things like a home or car than people with good credit.

For example, let’s look at a $250,000 mortgage. Someone with poor credit (620-639) may get a 30-year fixed-rate mortgage with an interest rate of 5.109%, while someone with excellent credit (760) could get a rate of 3.52%. How much does that difference matter? A lot.

Over the life of the loan, the person with poor credit will pay $489,240, while the person with excellent credit will pay just $405,00. That’s a difference of more than $84,000.

Also, if your score is very poor, you may not qualify for traditional loans at all. For example, it takes a score of at least 620 to obtain a conventional mortgage, and some lenders require an even higher score. Also, people with poor credit scores who find themselves in need of cash often must resort to other less-than-preferable options. Things like payday loans, title loans and credit card advances come with high interest rates and hefty fees that can drag you into a spiral of debt from which it can be hard to recover.

As dismal as that all seems, the good news is that a poor credit score isn’t forever.

How to protect and repair your credit score

While repairing your credit may feel overwhelming, it’s simpler than it may seem. It just takes dedication and some discipline. If your credit is already in tip-top shape, then you want to keep it there. Either way, here are things that will positively affect your score.

Pay your bills

Your payment history is the biggest determining factor in calculating your credit score, so paying your bills on time, every time is the best way to start moving the needle in the right direction. Also, make every effort to pay more than the monthly minimum and reduce or pay off those balances in full. The less you’re using of the credit available to you, the better your score will be.

Correct errors

In some cases, a low score may not be your fault. All too often, credit reports contain errors, so you want to make sure you know what yours contains and dispute any mistakes.

Consider consolidating

If you’re juggling multiple loans with high interest rates, you may want to consider a debt consolidation loan. This allows you to pay off all your various debts in exchange for one lower-interest loan with a fixed monthly payment.


Even if you do nothing else, time can help repair your credit score, assuming you don’t further damage it. Late payments and bills that are sent to collections agencies are removed from your report after seven years, and their impact lessens over time, particularly if you’re taking positive financial steps as you go.

Get help

If you feel overwhelmed by repairing your credit, there are credit repair companies that can help. They won’t be able to raise your credit score overnight (beware of companies that promise they can), but they can help you navigate the process and advocate on your behalf.

The bottom line

No matter where your credit score stands now, the worst thing you can do is ignore it. Putting your head in the proverbial sand will just end up sinking you further financially. Like it or not, lenders are keeping score, and you will end up paying for a poor credit score if you don’t keep yours as high as possible.


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