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Understanding Your Credit Score: Here’s What to Know

credit score

Your credit score is a factor when you apply for a mortgage or car loan. It can be pulled when you apply to lease a new apartment. Even insurance companies typically check your credit score to help determine how much they might charge you for your premium.

But what is your credit score? How does it help determine whether you’re a good credit risk?

There are three credit reporting companies that tabulate credit scores: Experian, TransUnion, and Equifax. Each company produces an individual’s credit score based on specific criteria, but the most common credit score is FICO. Using FICO as an example: a score of 300- 579 is poor; 580-669 is fair; 670-739 is good; 740-799 is very good; 800+ is exceptional. If your score is lower than 650, you may want to consider options to improve it. To do so, you should understand what contributes to your credit score. Factors may include:

  • Payment History
  • The Amount of Debt You Owe
  • How Long You’ve Been Using Credit
  • New or Recent Credit
  • Types of Credit Used

Each of these five factors is weighed differently when calculating your credit score.

Payment History

Typically, your payment history is considered by credit reporting companies as the most important factor because it indicates to lenders how you might repay a loan. Your history includes how consistently you make on-time payments, if you’re late, how many days late you’ve been, and whether any of your accounts have gone into default. These records stay on your credit report for seven years, and bankruptcy filings can stay on your credit report for up to ten years.

Amounts You Owe

Your outstanding debts include items such as student loans, car loans, credit card balances, and mortgages. Credit reporting agencies use this information to determine your credit utilization ratio, which is calculated by adding the balances you owe and dividing by your available credit. A lower ratio may suggest to potential lenders that you are able to manage your finances well. Note: As of July 1, 2002, cleared medical debts will be removed from consumer credit reports.

Length of Credit History

Having little to no credit history can impede your ability to borrow, much the way a poor credit history can. On the other hand, a long history of using credit accounts responsibly in your name can help to increase your score.

New or Recent Credit Applications

Your credit score may drop slightly when you apply for a new credit card and a lender makes a hard inquiry. However, if you are looking for a new mortgage or auto loan, for example, the credit agencies only count it as one inquiry if you are just comparing lenders in a 14-to-45-day period. These credit applications and hard inquiries can negatively impact your credit score, though.

Types of Credit You Use

Retail credit cards may also negatively impact  your credit score versus a traditional credit card such as MasterCard or Visa because the interest rates on retail store or gas cards are usually higher with lower credit limits. These differences mean that a retail credit card might affect your credit utilization rate if you don’t pay off the balance each month.

To find out what your credit score is, inquire at You’re entitled to a free report from each of the credit agencies once per year. Take advantage and spread your inquiries out over the year. Be sure to examine them closely and attempt to correct any errors you find.

Are you looking for a lender who considers more than just your credit score? Contact Mariner Finance today.’

The information provided in this article does not constitute financial advice and is provided for educational purposes only without any express or implied warranty of any kind. This article is not intended as legal, tax, investment, or any other advice, and Mariner Finance does not offer credit repair services. Consider talking with an appropriate qualified professional for specific advice. Blog posts are for informational purposes only.