Understanding Your Credit Score and How to Improve It
posted
July 23, 2025
in
Credit & Debt
Your credit score plays a powerful role in your financial life. It can influence everything from whether you’re approved for a loan or credit card to the interest rates you’re offered, and even your eligibility for certain jobs or security clearances.
If your score needs a boost, you're not alone and there are steps you can take to get back on track. But first, let's review the basics.
What Is a Credit Score?
A credit score is a three-digit number, typically ranging from 300 to 850, that reflects your creditworthiness—your ability to repay borrowed money. It’s calculated using several key factors:
Payment history
Amounts owed (credit utilization)
Length of credit history
Credit mix (types of credit used)
Recent credit inquiries
In general:
- A score above 660 can qualify you for credit with competitive interest rates.
- A score below 600 may limit your options and result in higher interest rates.
Average Credit Scores in the U.S. (as of 2024)
Overall average: 715
By generation:
Gen Z (18–25): 681
Millennials (26–41): 691
Gen X (42–57): 709
Baby Boomers (58–76): 746
Silent Generation (77+): 760
Why Credit Scores Matter
1. Loan and Credit Card Approvals:
A higher score improves your chances of approval and access to better terms. For example, someone with a score of 750 might qualify for a mortgage at 3.5%, while a score of 620 could mean a 5% rate, this results in higher monthly payments.
2. Interest Rates:
Credit scores directly affect the cost of borrowing. A car loan with a score of 700 might come with a 4% rate, while a score of 580 could mean a 9% rate.
3. Renting and Utilities:
Good credit can help you secure an apartment or set up utilities with lower deposits.
4. Employment:
Some employers, especially those in financial or security-sensitive industries, may check your credit report during the hiring process.
5 Ways to Improve Your Credit Score
1. Pay Your Bills on Time
Your payment history is the most important factor in your credit score. Even one missed payment can negatively impact your score, so consistency is key. If you're juggling multiple bills, consider setting up automatic payments. If you’re at risk of missing a due date, call your lender, many offer flexible payment options.
2. Reduce Your Debt
Carrying high balances, especially on credit cards, can hurt your score. Prioritize paying down your existing debt, starting with high-interest accounts. Take a look at your spending habits to see where you can cut back and redirect those funds toward debt repayment. If you’re struggling, a certified credit counselor can help you create a plan.
3. Keep Your Credit Utilization Low
Credit utilization is the amount of credit you’re using relative to your limits, this should ideally stay below 30–40%. If possible, request a credit limit increase to help lower your utilization. Avoid maxing out your cards, and remember: consistent, responsible use (even small amounts) builds a strong credit history.
4. Build Good Credit Habits
Long-term, responsible credit use leads to stronger scores. That means:
Keeping old accounts open (unless they have high fees)
Avoiding frequent new credit applications
Making on-time payments consistently
Negative events like foreclosures or bankruptcies can significantly damage your score and remain on your report for years. If you're facing these situations, speak with a legal or financial advisor to explore all your options.
5. Talk to a Credit Counselor
While speaking with a credit counselor won’t directly change your score, it can help you create a clear, personalized path toward improvement. A counselor can:
- Help you review and understand your credit report
- Identify and dispute inaccuracies
- Work with you to pay off high-interest debt
- Support you in building long-term financial stability
Credit counselors are there to help. A free session with a certified expert could be the first step toward better financial health.