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Understanding credit scores: how they work and how to improve yours

As we go through life, we often find ourselves needing to borrow money. Whether it's to buy a car, a house, or to start a business, most people will need to take out a loan at some point in their lives. That's where credit scores come in. In this guide, we'll go over everything you need to know about credit scores, from what they are to how you can raise yours.

What is a Credit Score?

A credit score is a three-digit number that represents your creditworthiness. Creditors use your credit score to determine how likely you are to pay back the money they lend you. Credit scores range from 300 to 850, with a higher score indicating a better credit history.

What is a Good Credit Score?

A credit score is a three-digit number that ranges from 300 to 850 and represents an individual's creditworthiness. The higher the credit score, the better the creditworthiness. A good credit score typically falls within the range of 670 to 739. A score above 740 is considered excellent, while a score below 580 is considered poor.

What is a Perfect Credit Score?

A perfect credit score is 850. While it's technically possible to achieve a perfect score, it's extremely rare. Most people with excellent credit have scores in the 800s. It's worth noting, however, that having a perfect credit score doesn't necessarily mean you'll be approved for every loan or credit card. Other factors, such as income and debt-to-income ratio, also come into play.

What are the Three Credit Bureaus and How are They Different from One Another?

The three major credit bureaus are Equifax, Experian, and TransUnion. While all three bureaus collect and maintain credit data, they each have unique methods of collecting and calculating credit scores. For example, one bureau may report a late payment that the other two bureaus don't have on record. They can be tricky like that.

  • Equifax: This bureau is known for providing a comprehensive view of an individual's credit history, including credit reports, credit monitoring, and identity theft protection services.

  • Experian: This bureau offers a credit monitoring service that provides alerts when there are changes to an individual's credit report. They also offer identity theft protection and dispute resolution services.

  • TransUnion: This bureau offers credit reports, credit monitoring, and identity theft protection services. They also provide credit score simulators to help individuals see how certain actions may impact their credit score.

How Can I Get My Credit Score for Free?

There are a number of ways to get your credit score for free. Many credit card companies now offer free credit scores as a perk for their customers (mine does, and so does my bank).

You can also get a free credit score from websites like Credit Karma and Credit Sesame. It's important to note that the score you receive may not be your FICO score, which is the score most lenders use. However, it should give you a good idea of where you stand. will provide you with an extremely thorough credit report once a year. This is the best report I've seen and can help you raise your credit score fairly quickly.

How Do I Raise My Credit Score?

Your credit score normally breaks down into the 5 sections you see in the above image. Impacting one of these areas in a positive way can increase your credit score. Raising a credit score takes time and effort, but it's possible with the following steps:

  • Pay Bills on Time: Late payments can significantly lower a credit score, so paying bills on time is crucial to maintaining a good credit score.

  • Reduce Credit Utilization: Using too much of the available credit limit can negatively impact a credit score. It's recommended to keep credit utilization below 30% of the credit limit.

  • Review Credit Reports: Reviewing credit reports regularly can help identify any errors or fraudulent activity that may be negatively impacting a credit score. Disputing errors and addressing fraudulent activity can help improve a credit score.

  • Establish Credit: Having a diverse credit history can help improve a credit score. Establishing credit through a secured credit card or a credit-builder loan can help improve a credit score over time.

  • Make a call. If you see something on your credit report that doesn't look right, call the credit bureau or call the company you believe to be in error reporting this. A simple call could get something removed from your credit report and very quickly improve it (trust me I've been through this and it helped within 30 days).


In conclusion, your credit score is a crucial part of your financial life. It can affect your ability to borrow money, get a job, or even rent an apartment. By understanding what goes into your credit score and taking steps to improve it, you can set yourself up for financial success.

If you have questions about how to improve your score, hit me up at

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