Understanding Your Credit Score: What Impacts It and How to Improve It

• Admin |
• March 27, 2025 |
• Business And Finance |

Why Your Credit Score Matters More Than You Think

"The more you learn, the more you earn." — Warren Buffett

Have you ever wondered why some people easily get loans while others struggle, even with decent jobs? It all boils down to one thing—your credit score.

Think of your credit score as a financial report card. It's a three-digit number that shows how well you manage borrowed money. Lenders, banks, even some landlords and employers use it to decide if they can trust you financially. A higher score means you're seen as reliable. A lower one? It could hold you back.

If you're planning to buy a car, rent an apartment, apply for a student loan, or even get a credit card, your credit score plays a key role.

What Is a Credit Score?

Credit scores usually range from 300 to 850. The higher the number, the better your chances of getting approved for loans, credit cards, and even better interest rates.

Here’s a simple breakdown of how scores are typically viewed by lenders:

Score Range

Category

What It Means

800–850

Excellent

You’ll likely get the best loan terms and lowest interest rates.

740–799

Very Good

You’re seen as a reliable borrower with good chances for approval.

670–739

Good

You qualify for most credit options with decent rates.

580–669

Fair

You might face higher interest rates and fewer loan options.

300–579

Poor

It’s tough to get approved for credit, and rates will be high.

Most lenders consider a score above 670 to be “good,” but having a higher score gives you more financial freedom.

So in simple words—your credit score shows your money behavior. It helps banks decide whether to say “yes” or “no” to your loan or credit request.

How Can I Check My Credit Score?

One of the most important steps toward improving your credit is knowing where you currently stand. Fortunately, checking your credit score has never been easier—and doing so does not harm your score.

Here are reliable ways to check your credit score:

1. Through Your Bank or Credit Card Company
Many financial institutions now offer free credit score access to their customers. If you use online banking, your score might already be available in your account dashboard. This is a convenient option that updates regularly.

2. Through the Major Credit Bureaus
You are entitled to one free credit report every year from each of the three major credit bureaus—Experian, Equifax, and TransUnion—through AnnualCreditReport.com. While this report includes your credit history, it may not include your score unless you choose to purchase it.

3. Using Reputable Credit Monitoring Services
Platforms like Credit Karma and Credit Sesame provide free access to your credit scores along with helpful tools to monitor changes and detect suspicious activity. While these scores may differ slightly from what a lender sees, they are useful for tracking your credit trends.

Important Note:
When you check your own credit score, it’s considered a soft inquiry. This means it has no impact on your score. Only hard inquiries—usually made by lenders when you apply for new credit—can cause a temporary dip.

At Credit Boost Solutions, we encourage checking your score regularly. It’s a small habit that makes a big difference in taking control of your financial future.

Key Factors That Affect Your Credit Score

Your credit score isn't just a random number. It’s carefully calculated based on your financial behavior. Understanding the key factors that influence it gives you the power to improve it over time.

Here’s what credit scoring models typically consider:

1. Payment History (35%)
This is the most important factor. Lenders want to see if you pay your bills on time. Late or missed payments can seriously damage your score, especially if they happen often or go unpaid for a long time.

2. Amounts Owed (30%)
This refers to how much debt you’re carrying compared to your credit limits—also known as your credit utilization ratio. Using too much of your available credit can hurt your score, even if you’re making payments on time. Keeping your usage below 30% is a smart goal.

3. Length of Credit History (15%)
The longer you’ve had credit accounts open, the better. Lenders like to see a history of responsible credit use. This includes how long your oldest account has been open and the average age of all your accounts.

4. Credit Mix (10%)
Having a variety of credit types—like credit cards, auto loans, and student loans—can help your score. It shows that you can manage different types of debt responsibly.

5. New Credit (10%)
Every time you apply for credit, a lender performs a hard inquiry on your report. Too many of these in a short time can be a red flag and may lower your score temporarily.

Each of these factors plays a role, but not all are equally weighted. Focus first on paying bills on time and keeping your balances low—those two alone make up nearly two-thirds of your score.

Steps to Build or Improve Your Credit Score

Improving your credit score doesn’t happen overnight—but small, consistent actions can make a big difference. Whether you’re starting from scratch or trying to recover from past mistakes, these steps will guide you in the right direction.

1. Pay All Bills On Time
This is the number one rule. Payment history makes up the largest part of your credit score. A single missed payment can stay on your report for up to seven years. Set reminders, automate payments, or use budgeting tools to help you stay on track.

2. Keep Your Credit Utilization Low
Try not to use more than 30% of your available credit at any time. For example, if your credit card has a $1,000 limit, keeping your balance under $300 shows lenders you manage credit wisely.

3. Limit Applications for New Credit
Every time you apply for a new credit card or loan, a hard inquiry appears on your report. Too many applications in a short time can hurt your score. Only apply for credit when you really need it.

4. Keep Older Accounts Open
The age of your credit accounts affects your score. Even if you no longer use a card, keeping it open (especially if it has no annual fee) helps maintain a longer credit history and increases your total available credit.

5. Mix Up Your Credit Types
Lenders like to see that you can handle different forms of credit—such as a credit card and a car loan. If you only have one type of credit, consider responsibly adding another over time.

6. Check Your Credit Reports for Mistakes
Errors on your credit report can drag down your score. Review your reports regularly and dispute any incorrect information.

Understanding Credit Reports and Disputing Errors

Your credit report is like your financial resume. It tells lenders where you've been, how you’ve handled money, and whether you’re a responsible borrower. But sometimes, these reports contain mistakes—and those errors can cost you.

Here's what you need to know:

What’s in a Credit Report?
A credit report includes your personal information, a list of your credit accounts, your payment history, credit inquiries, and any negative records like late payments or collections. Each of the three major credit bureaus—Experian, Equifax, and TransUnion—maintains its own version of your report.

Why Mistakes Happen
Errors can happen for many reasons:

• A lender reported wrong information
• A payment you made didn’t get recorded
• Someone else’s data was mixed with yours

Identity theft or fraud

Even a small error—like a late payment that wasn’t actually late—can lower your score.

How to Check Your Reports
You can get one free credit report every year from each bureau at AnnualCreditReport.com. It's a good idea to check all three, since they may not contain the same information.

How to Dispute an Error

Gather Documentation – Collect any statements or records that prove the error.

Contact the Credit Bureau – File a dispute online or by mail. Clearly explain what’s wrong and include copies of your proof.

Wait for the Investigation – The bureau typically has 30 days to investigate and respond.

Follow Up – If the item is corrected, your score could improve. If not, you can request that a note be added to your report explaining the situation.

Fixing errors isn’t just about improving your credit score—it’s about protecting your financial reputation. At Credit Boost Solutions, we’re here to help you understand your report and take action when needed.

Impact of Closing Old Credit Accounts

Closing a credit card or loan account might seem like a smart way to simplify your finances—but it can actually do more harm than good when it comes to your credit score.

Here’s what you need to consider before shutting down an old account:

1. It Reduces Your Available Credit
When you close a credit card, your total available credit decreases. If your balances stay the same, this raises your credit utilization ratio—how much of your credit you’re using. A higher ratio can lower your credit score.

Example:
You have two credit cards, each with a $5,000 limit, for a total of $10,000. If you’re using $2,500, your utilization rate is 25%.
But if you close one card, your total available credit drops to $5,000—now that same $2,500 is 50% of your limit, which can negatively impact your score.

2. It Can Shorten Your Credit History
Length of credit history makes up about 15% of your score. Older accounts help establish a longer average account age. When you close a long-standing account, you may shorten your overall credit history, which can work against you.

3. It Might Affect Your Credit Mix
If the account you’re closing is your only credit card, you may lose the benefit of having different types of credit. A healthy credit mix—credit cards, loans, etc.—is part of a strong credit profile.

So, When Should You Close an Account?
If the account has a high annual fee and you don’t use it, or it’s linked to negative spending habits, closing it may make sense. But in most cases, it’s better to keep older, fee-free accounts open—even if you rarely use them.

Does Checking My Credit Score Affect It?

A common myth is that checking your credit score can lower it. Let’s clear that up: checking your own credit score has no impact on your credit.

Here’s why.

Soft Inquiries vs. Hard Inquiries

Type of Inquiry

What Triggers It

Impact on Credit Score

Soft Inquiry

- You check your own credit score

- Pre-approved credit offers

No impact on your credit score

Hard Inquiry

- Applying for a credit card

- Applying for a loan or mortgage

May cause a small, temporary drop in score

Why It’s Safe—and Smart—to Check Your Score

Monitoring your credit score regularly is actually a smart habit. It helps you:

Stay aware of your financial standing

Catch potential identity theft early

Track the impact of your credit-building efforts

You can check your score for free through your bank, credit card provider, or trusted credit monitoring services. It’s a tool—use it.

At Credit Boost Solutions, we encourage everyone to check their score regularly. It’s your credit. Knowing where you stand puts you in control.

How Long Does Negative Information Stay on My Credit Report?

Bad credit history doesn’t last forever—but it can stick around longer than you might think. Understanding how long negative marks stay on your report can help you plan your path to better credit.

Here’s a breakdown of common negative items and how long they typically remain on your credit report:

Type of Negative Item

How Long It Stays on Report

Late Payments

Up to 7 years from the missed date

Collections Accounts

Up to 7 years, even if paid

Bankruptcies (Chapter 7)

Up to 10 years

Bankruptcies (Chapter 13)

Up to 7 years

Hard Inquiries

About 2 years

Foreclosures or Repossessions

Up to 7 years

Charged-Off Accounts

Up to 7 years from the charge-off

These items don’t necessarily affect your score the same way the whole time they’re on your report. For example, a missed payment from six years ago has much less impact than one from last month.

What You Can Do:

Keep making on-time payments going forward

Reduce your debt balances

Avoid new negative marks

Dispute any outdated or incorrect information

Taking Control of Your Credit Future

Your credit score is more than just a number—it’s a reflection of how you manage your financial responsibilities. Whether you’re starting to build credit, trying to repair it, or simply maintaining a strong score, understanding how credit works gives you a real advantage.

By checking your credit regularly, paying your bills on time, keeping your balances low, and avoiding unnecessary credit inquiries, you’re already taking steps that lead to better financial opportunities.

Mistakes from the past don’t have to define your future. With consistent effort and the right information, improvement is always within reach.