Boosting and Building Your Credit Score 

Written By: Camile Carlson

Reviewed By: Bradley White from Savvy Money

Managing your credit is crucial for overall financial health. Let’s look at essential tips on boosting and building your credit score, highlighting healthy habits, potential pitfalls, and strategic steps to strengthen your credit. 

• What is a credit score and what does it mean? 
• Does your credit score actually matter?  
• What is a typical credit score range?  
• How are credit scores calculated? 
• What can I do to boost my credit score? 
• Are their responsible choices that affect my credit score negatively? 
• How can I build my credit? 

What Is a Credit Score and What Does It Mean? 

A credit score is a three-digit score that shows how likely you are to repay debt, like car loans and mortgages. There are many things that affect your credit score, like how well you have paid your debts in the past, how much debt you currently have, how many accounts you have open, and how long you have had a credit history.  

You can get a copy of your credit score from one of the three major credit reporting agencies: Equifax, Experian, and TransUnion. These agencies, or credit bureaus, keep reports of how often you make payments on debts. From that information, they generate your credit score. 

At WeStreet, you can access your credit score by logging into Online & Mobile Banking and using the Savvy Money feature. 

Does Your Credit Score Actually Matter? 

In most instances, yes! Your credit score matters. That score will determine what interest rates and fees you qualify for when applying for any sort of new debt, whether that be a loan or line of credit. Normally, the higher your credit score is, the lower your fees and interest rates will be. An excellent or very good credit score can get you lower rates.  

What Is a Typical Credit Score Range? 

Credit scores are often grouped into ranges based on the amount of risk that would be involved if the lender were to lend you money. These ranges can differ based on the scoring model, but most credit score ranges are similar to the ranges we have listed below. For example, if you have a credit score of 689, then you would be in the “Good” range. Creditors may not give you the lowest interest rates, and there may be a limit on adding more debt to your plate. Here are the different ranges and groups your credit score could be classified as: 

• 800 to 850 – Excellent  
• 740 to 799 – Very Good  
• 670 to 739 – Good  
• 580 to 669 – Fair  
• 300 to 579 – Poor  

How are Credit Scores Calculated?  

Your credit score is calculated based on the information found on your credit report. Your credit score can differ based on the scoring model and the credit bureau that calculates it. As previously mentioned, there are three major credit bureaus (Equifax, Experian, and TransUnion) that may calculate slightly different credit scores. There are also two scoring model companies that are used, FICO and VantageScore, that determine credit scores. Each scoring model may weigh credit factors differently, and not all lenders and creditors report information to these three credit bureaus. Essentially, your credit score will vary depending on how it was calculated because each model weighs factors differently. Despite each bureau’s differences, these are the common factors that affect your credit score:  

• Payment History  
• Credit Utilization  
• Credit History  
• Account Mix  
• Recent Activity 

What Can I Do to Boost My Credit Score? 

If you want to move into a different grouping so that you can get better rates, then you can do things to boost your credit score. With these tactics, you can improve your credit score over time.  

• Pay Bills on Time: Timely payments are a significant factor in credit scoring. Always pay your bills, including loans, credit cards, and utilities, on or before the due date to build a positive payment history. 
• Manage Credit Utilization: Credit utilization, the ratio of your credit card balances to credit limits, should ideally be below 30%. High utilization indicates higher risk to lenders, so keeping balances low is beneficial. For example, if you have a $10,000 credit limit, ideally you should only have a balance of $3,000 dollars or less.  
• Diversify Credit Types: A mix of credit types—such as credit cards, retail accounts, installment loans, and mortgage loans—can positively impact your credit score. Lenders like to see that you can manage various forms of credit responsibly. 
• Monitor Credit Reports: Regularly review your credit reports from the three major credit bureaus (Equifax, Experian, and TransUnion) to ensure accuracy. Dispute any errors promptly to prevent them from hurting your score. 

Are There Responsible Choices That Affect My Credit Score Negatively? 

Sometimes, even responsible choices can end up hurting your credit score. While it may be a great financial choice to never acquire debt, it makes it hard for credit bureaus to track how well you pay debt. Other seemingly smart choices can also negatively affect your credit score, like these: 

• Closing Old Accounts: Closing old credit accounts can shorten your credit history, which negatively affects your score. Even if you don’t use an old credit card, keeping it open can help maintain a longer average credit history. 
• Avoiding All Debt: While it might seem responsible to avoid debt entirely, having no credit history can be as damaging as having bad credit. Lenders need a track record to evaluate your creditworthiness, so responsibly using and paying off credit is important. 
• Frequent Credit Checks: Multiple hard inquiries from frequent credit applications can lower your score. Each hard inquiry can take a few points off your score, so apply for new credit sparingly. 

How Can I Build My Credit? 

When you have low credit, it can be hard to get your credit built back up, but try implementing these tips in order to raise your credit score over time. 

• Create and Stick to a Budget: Budgeting helps manage expenses and ensures timely bill payments. Consistent, on-time payments are crucial for a good credit score. 
• Seek Credit Counseling: If overwhelmed by debt, seek professional credit counseling. Credit counselors can help you develop a plan to manage and pay down debt, which can improve your credit over time. 
• Use Personal Loans for Debt Consolidation: Consolidating high-interest debt with a personal loan can reduce your credit utilization ratio and potentially improve your credit score if you manage the loan responsibly. 
• Report Rent Payments: Ensure that your rent payments are reported to credit bureaus. This can build credit history if you don’t have traditional credit accounts. 
• Limit New Credit Applications: Avoid frequently opening new credit accounts, as this can lower your average account age and increase hard inquiries on your credit report. 

Building and maintaining a strong credit score requires a mix of responsible financial habits and a strategic use of credit. By following these tips, you can enhance your credit profile and secure better financial opportunities in the future. 

For more detailed information, refer to the following articles: 

• Money Habits That Can Boost Your Credit Score 
• How Responsible Choices Can Hurt Your Credit Score 
• Five Ways to Build Credit Now