Finances & Debt

What Your Credit Score Means — And Why It Matters

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Your credit score is the most important number tied to your financial well-being. It impacts everything from buying a house to getting a credit card.

The score tells anyone considering a financial transaction with you – whether the bank doing your home mortgage or a landlord renting you an apartment – what your financial risk is.

A credit score can range from 300 to 850. Each of the three major credit bureaus has slightly different criteria for what makes excellent credit. But here are average ranges you can use as a guide. A score above 700 tells creditors you’re less of a risk and may mean you’ll get better interest rates on loans.

This number is calculated based on five different categories:

  1. Your payment history. Have you missed bill payments? Are you consistently late?
  2. What’s your current amount of debt compared to your credit limits? You want to keep the ratio of what you owe compared to what you can borrow at less than 30 percent.
  3. How long you’ve had credit cards and other accounts – the longer the better.
  4. How often you apply for new credit – if you’re constantly applying for cards and loans, this will negatively impact your score.
  5. The types of credit you have – certain types of credit (a card vs a mortgage) are less risky.

One of the biggest ways your credit score can impact you is if you want to buy a home. Let’s say you’re wanting to get a 30-year fixed $300,000 mortgage. Look at how your credit score could affect your interest rate – and how the interest rate affects your monthly payment and overall cost of the loan.

Interested in checking your score? You can get a free credit report with your score once a year from each of the major credit bureaus –Equifax, Experian and TransUnion by visiting

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