By Elliot Pepper, CFP®, CPA | Northbrook Financial
Credit scores feel like financial report cards—but most people don’t really understand how they work. One late payment? Drop. Too many accounts? Drop. Check your score? Drop again?!
Let’s clear up the confusion.
In this post, we break down what actually matters when it comes to your credit score, what’s just noise, and how you can improve your score without obsessing over every little detail.
💡 What Is a Credit Score?
Your credit score is a three-digit number that lenders use to assess your creditworthiness i.e., how likely you are to repay a loan.
The most common model, FICO®, ranges from 300 to 850. Higher = better. But contrary to what many believe, you don’t need an 850 to qualify for great rates. Most top-tier lending offers are available to people with scores above 740.
📊 The Five Key Credit Score Factors
1. Payment History (35%)
Do you pay your bills on time? This is the biggest piece. Even one missed payment can ding your score.
2. Amounts Owed / Credit Utilization (30%)
How much of your available credit are you using? Keeping your balances under 30% of your limit is ideal—under 10% is even better.
3. Length of Credit History (15%)
The longer your credit history, the better. That’s why it’s smart to keep your oldest cards open, even if you don’t use them much.
4. Credit Mix (10%)
A healthy credit profile includes both revolving credit (like credit cards) and installment loans (like a mortgage or auto loan).
5. New Credit Inquiries (10%)
Applying for too many new accounts at once can hurt your score. Hard inquiries typically stay on your report for about 2 years.
❌ Common Credit Score Myths
Checking your own score lowers it
False! Soft inquiries (like checking your own score) do NOT affect your credit.
You need to carry a balance to build credit
Wrong again. Paying your card in full each month shows responsible usage—and avoids interest.
You need a perfect score
Not true. A score above 740 generally qualifies you for the best interest rates.
✅ How to Improve Your Score
Want a better score? Start here:
- Pay every bill on time—set auto-pay or reminders.
- Keep credit utilization under 30%, ideally under 10%.
- Avoid closing old cards unless there’s a good reason.
- Limit new credit applications unless truly necessary.
- Check your credit reports for errors (AnnualCreditReport.com).
🔧 Your Common Cents Action Plan
– Check your credit score and reports for free at Credit Karma or AnnualCreditReport.com.
– Make a list of open credit lines and their balances.
– Set calendar reminders for all payment due dates.
– Aim to lower utilization by paying down balances or increasing available credit.
– Don’t sweat perfection. Aim for progress.
At Northbrook Financial, we help you understand and improve your entire financial profile—not just your score. Because credit is just one piece of your bigger financial story.
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