Understanding Credit Scores: What It Is and How to Improve Yours

Understanding Credit Scores: What It Is and How to Improve Yours
Point Editorial

A credit score is a three-digit number calculated from personal financial information such as credit card reports, your debts, and your credit history. Credit scores range from 300 to 850, with higher scores indicating responsible behavior and lower scores suggesting unpredictable behavior. The highest possible score is 850.

Credit scores are important because they can influence whether a bank or a lender will enter a relationship with you and, by extension, whether they will approve you for loans or new lines of credit

Credit scores are not stagnant. They are dynamic and will rise and fall in relation to your financial endeavors. To learn more about credit scores and how to improve yours, read on.

Factors that make up credit scores 

One: Your bill-paying history accounts for 35 percent of your overall score. 

Two: The second most important factor, your credit usage makes up 30 percent of your score. 

Three: The length of your credit history comes in at 15 percent. 

Four: Types of credit or credit mixes make up 10 percent

Five: Applications for new lines of credit also make up 10 percent. 

It is important to remember that the percentage for each aspect mentioned above may vary slightly depending on the scoring algorithm a bank or lender uses to determine your credit score.  

Understanding how credit scores work 

A credit score is a mathematical representation of how careful you are with handling money. Banks, credit card companies, car dealerships, and landlords all consider your credit score before approving any applications you submit. 

Credit information comes from the three major credit bureaus – Equifax, Experian, and TransUnion – to produce accurate numbers, each of which falls somewhere between 300 and 850. 

"Subprime borrowers" are those with scores below 640. Subsequently, "subprime mortgages" are mortgage loans given to subprime borrowers. These loans come with a higher interest rate to compensate for the bank's risk when they approve you. Further conditions can include needing a co-signer on the application and a quicker turnaround time for paying your loan installments. 

Credit score ranges

The five classifications of credit scores are poor, fair, good, very good, and excellent. FICO is one of the most common credit-scoring calculation models, and scores range from 300 to 850.

Classification FICO range
Excellent 800-850
Very Good
Fair 580-669
Poor 300-579
Very Poor  anything below 579

Equifax, one of the three credit reporting agencies, uses the FICO model. A good Equifax score is anywhere between 670 and 739, which is on par with FICO. 

Experian typically uses both FICO and VantageScore models to generate credit scores. The latter model also uses the 300 to 850 scale, but unlike FICO, a good VantageScore score falls between 661 and 780. 

You can request a copy of your credit scores from Equifax and Experian for free once every year. There are also other computation platforms online that you can consult as well. 

How to improve your credit score

Tip 1: Pay your bills on time. To see a real difference, making timely payments over a minimum period of six months is needed.

Tip 2: Don’t close your credit card accounts. It’s better to stop using a particular card than to close the account officially. How long you’ve had possession of a credit account plays a role in your credit score, and shutting down the account will reduce that value. 

That said, a tool to keep in mind is Point Card. The Point Card is designed for those who want to take control and spend their own money while earning benefits at the same time. In addition to offering fraud protection and no interest rates, the perks of being a Point cardholder include cash-back on all purchases, as well as bonus cash-back on subscriptions, food delivery, rideshare services, plus car and phone insurance. Maintaining a credit account at a zero balance will help improve your credit score, and while you do that you can take advantage of all of Point Card’s benefits.

Tip 3: Recruit an authorized user. Adding your spouse or another family member with a good credit score as a second user on your credit card will boost your responsibility level in the eyes of lenders. 

Tip 4: Pay your debts: mortgages, car loans, and student loans. Again, this is a significant factor in calculating your score, so the sooner you settle your debt payments, the better your score.  

Tip 5: Reduce your credit utilization. A good rule of thumb is to try and keep your credit card limit to less than 30 percent. You can achieve this by cutting back on unnecessary purchases.  

Tip 6: Identify and address errors quickly. Staying on top of your receipts and your tax reports is a proactive strategy that enables you to correct any possible mistakes as soon as possible.


Why do I have different credit scores? 

Everyone has multiple credit scores, depending on the selected model and data used. Though their credit ranges are identical, FICO and VantageScore pull slightly different statistics from the bureaus, which results in slight variations in your score. 

Does checking my credit scores affect my credit? 

Checking your credit score is a “soft inquiry,” and no, it does not affect your score. Keeping track of how your score rises and falls can only benefit you in the long run. 

What credit score do I need to get approved for a credit card?

There is no minimum number to obtain approval. Every credit card company has its specific requirements, though any score below good will make the process more difficult.

Which credit score is more important?

Again, no one score type is better than the other. 

Point contributions

Building your credit history is a worthwhile endeavor but one that requires patience. Making purchases responsibly and refraining from overspending can help you generate a desirable score as well as  clean up an existing score as well. You must be able to handle your money confidently and wisely.

Point Card is a perfect way to navigate the financial world. A quick and simple instrument to use, Point Card is a tool that works hard for you and empowers you to use your own money how you want while earning rewards at the same time. 

Point Card perks include unlimited cash-back on all purchases, plus bonus cash-back on subscriptions, food delivery, rideshare services, as well as car and phone insurance. 

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