Everything you wanted to know about credit scores



April 12, 2023

Are you in the market for a new credit card, but not sure how to evaluate your credit score?

With so much information out there, it can be difficult to know where to start on the journey toward understanding your own financial fitness. We've got you covered! In this blog post, we put together all the pieces of the puzzle and explain what exactly goes into a credit score – from hard inquiries and payment history, to balance and usage.

Read on for everything you need to know about making sense of your credit report and improving your score!

What are credit scores, how are they calculated, and how do they affect me?

  • Credit scores are an integral part of any credit-based financial system. They are a measure of a person's creditworthiness, calculated based on their past credit-related activities.
  • Credit scores range from 300 to 850, with a higher score indicating a lower credit risk.
  • Several factors are taken into account when calculating a credit score, including payment history, outstanding debts, length of credit history, and recent credit inquiries.
  • These scores can significantly impact an individual's financial wellbeing, affecting their ability to secure loans, obtain credit cards, and even rent an apartment
  • Understanding credit scores and maintaining a good credit rating is crucial for financial stability in today's credit-driven society.

When did credit scores start?

  • Credit scores were first introduced in the 1950s by the Fair Isaac Corporation (now known as FICO). However, the use of credit scores to evaluate creditworthiness became more widespread in the 1980s and 1990s when credit bureaus began using computer algorithms to analyze credit data and generate credit scores.
  • Today, credit scores are an integral part of the credit industry and are used by lenders, landlords, and other entities to assess creditworthiness and risk. [1]

How do I check my credit score?

  • You can check your credit score by obtaining a free credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) once a year at
  • You can also check your credit score for free through some credit card companies, banks, and credit monitoring services.

The importance of having a good credit score

  • Your credit score is one of the most important numbers in your life. Your credit score tells lenders how well you manage your financial responsibilities. The higher the number, the more likely lenders are to see you as a responsible borrower.
  • A good credit score can lead to lower interest rates, which can save you thousands of dollars over the life of a loan.
  • Without a good credit score, you may not be able to qualify for loans or credit cards, and if you do, you may be stuck with high-interest rates, making it more difficult to pay back debt. So, it's essential to keep your credit score in good standing by paying bills on time and using credit responsibly. Your financial future depends on it.

How to read and interpret your credit report

  • Your credit report may seem like a daunting document, but understanding it is crucial to maintaining good financial health.
  • The report is essentially a snapshot of your credit history, including your payment history, outstanding balances, and any missed payments. It can affect everything from getting approved for a car loan to renting an apartment. But fear not, decoding your credit report is generally not as complicated as it seems.
  • You can start by checking for errors, such as incorrect personal information or accounts that don't belong to you. Then, focus on understanding the factors that determine your credit score, such as credit utilization and payment history.
  • With a bit of patience and attention to detail, you'll be well on your way to mastering the art of interpreting your credit report.

What determines my credit score?

  • Factors that affect your credit score include:
    • Payment history, credit utilization, length of credit history, types of credit, and recent credit inquiries.[2]

Common mistakes that could hurt your credit score

Having a healthy credit score is important for your financial well-being, and cultivating good credit habits is essential for building and maintaining a positive credit history. Equally important is being aware of and steering clear of common credit blunders that can obstruct your progress and potentially harm your credit score for years. Understanding the various factors that influence your credit score and the potential pitfalls will prepare you to better achieve your credit objectives.

1. Failing to Regularly Monitor Your Credit

It's vital to check your credit report and score regularly to keep track of your progress and identify potential issues needing attention before they cause substantial damage. You can obtain your credit reports from the three major credit bureaus for free once every 12 months through Furthermore, various sources, including Experian, provide free access to your credit scores and update them regularly. By keeping an eye on your credit health, you can address any concerns promptly and minimize their impact on your credit score.

2. Not Paying Bills Promptly

Your payment history significantly affects your credit scores, meaning even a missed payment can impact your credit. To guarantee timely bill payments, set up payment reminders from your lenders or, ideally, establish autopay through your lender or bank account. Ensure you have enough funds in your account each month to cover your bills.

3. Only Making Minimum Payments on Credit Cards

Paying merely the minimum amount due on your interest-bearing credit cards will cost you more in the long run and can damage your credit if you end up with a high balance. High credit card balances increase your credit utilization ratio, adversely affecting your credit score. Strive to pay off your balances to maintain a credit utilization ratio below 30%, as this will help safeguard your credit score. Relatedly, asking for and receiving a credit limit increase on your card, in combination with the items outlined here, can benefit your credit score

4. Applying for Several Credit Cards at Once

Submitting applications for multiple credit cards within a short time frame can result in separate hard inquiries on your credit report, which can collectively harm your credit score. To prevent this, research credit cards and your approval chances before applying, then choose the one that best fits your needs.

5. Accumulating Unnecessary Debt

Taking on debt for non-essential purposes, such as using student loans for unrelated expenses or obtaining a personal loan for a vacation, can strain your finances and increase the likelihood of missed payments. Consider limiting borrowing to necessary situations to avoid excessive interest charges and financial strain.

6. Closing Credit Card Accounts

Closing a credit card account can temporarily damage your credit score, as you lose its available credit and potentially increase your overall credit utilization rate. However, if you can maintain low balances on your other cards or if the closed account presents a risk for overspending or has an annual fee, closing the account may be a sensible decision.

7. Opting for Extended Auto Loan Terms

While longer auto loan terms can result in lower monthly payments, they can also lead to higher total interest costs and a greater risk of owing more than the vehicle's value. Whenever possible, choose shorter loan terms and consider strategies such as increasing your down payment, removing add-ons, and selecting a less expensive vehicle to decrease the amount you need to borrow.

Steps to take if you find an error in your report

  • No one wants to find an error in their report, but it can happen to the best of us. So, what should you do if you discover a mistake?
  • First and foremost, remain calm. There is a possibility of fixing the issue.
  • Next, identify the mistake and document it. This will help provide clarity when communicating the issue to the appropriate person.
  • Then, reach out to the person responsible for the report and inform them of the error. Be sure to provide evidence and explain your concerns.
  • Lastly, work together to find a solution and implement the necessary corrections. Remember, it's important to address mistakes in a timely and professional manner to ensure that the report is as accurate as possible.

Tips for improving your credit score

Your credit score can make a big difference in your financial life. It can affect everything from getting approved for a loan to securing a rental agreement. If you're looking to improve your credit score, there are a few tips you can follow. 

  • Pay your bills on time, as this is a major factor in your credit score.
  • Reduce your credit utilization, which means using less credit than you have available.
  • Check your credit report regularly for errors and to dispute any inaccuracies.

 Improving your credit score may take time, but it's worth the effort in the long run.


Having a good credit score today is essential in order to buy a home, take out a loan, or get approved for major purchases. It's important to stay on top of your payments and establish good financial habits from an early age. Developing a healthy relationship with managing credit is almost like having another job these days. Investing your time and keeping up on monitoring your credit report is the best route for achieving the highest possible scores. By understanding the elements that comprise your credit score and how credit companies calculate them, you can be sure you're taking the correct steps towards improving it.  Stay aware of common mistakes that could otherwise damage your score and seek help from professionals if circumstances arise leading you to find errors on your report. 




Disclaimer: Yendo is not a provider of financial advice. The material presented on this page constitutes general consumer information and should not be regarded as legal, financial, or regulatory guidance. While this content may contain references to third-party resources or materials, Yendo does not guarantee the accuracy or endorse these external sources.