Here’s what you need to know about managing your credit score (2024)

Understanding your credit score is one of the first steps to getting your finances under control.

Interest rates have risen to generational highs. That means the cost of borrowing money is going way up. This puts much more emphasis on having higher credit scores, but there is much bout the credit scoring and reporting process that many people don’t know.

Cred scores are often called FICO scores, which stands for Fair Isaac Corporation, which started the credit scoring industry. There are now three main credit bureaus: Experian, Trans Union and Equifax.

They monitor the amount of debt you have. That includes your mortgage, car notes and credit cards. They also watch the way you pay your bills, whether you pay on time and how much you pay down each month. They also watch how much credit you use against how much credit you have available.

They give you a score based on how well you manage it all. Scores range from 300 to 850. The best scores are between 800 to 850. Good scores are between 670-739. The worst go from 300-579. To get the lowest interest rates, the number you need to top is 740.

Dollar Stretcher Editor and top savings expert Andrea Norris-McKnight said most people don’t even know their score.

“I think a lot of people don’t realize how much your credit score can either cost you or save you,” Andrea Norris-McKnight said.

Read: Why you need to be familiar with your own credit score before making any big purchases

How to boost your credit score

The best thing you can do to help boost your credit score is to pay your bills on time.

U.S. News Credit Expert Beverly Harzog said if you have money available you should make two payments in one month.

“Call your issuer and ask them when they report your payment history to the major credit bureaus. And they’ll tell you when they do and you can make an extra payment before they report. So this way a lower balance is reported the major credit bureaus and that makes your ratio go down and make your credit score go up,” Harzog said.

Payment history and credit utilization compared to total credit available are the two biggest factors in determining your credit score. The next factors that affect your credit score are the length of your credit history, new credit inquiries and diversifying your credit with a mix of credit cards and loans. Too much new credit at one time can affect your credit score negatively by adding hard inquiries to your credit report. Each new inquiry can drop your credit score by 15 points.

Credit scores are just the beginning. The bureaus keep a report of your credit history, what’s reported and by which company. Kahler Financial Group CEO and Certified Financial Planner Richard Kahler said you should watch those carefully.

“You get a free credit report every year and you can have a free one from each of the big three,” Kahler said. “It’s important that you check it because things can happen. And I got into my credit report once and there were some Kahlers in a foreign distant state that I didn’t know but they were on my credit report and it showed that I once lived in a house that I never lived in. And it’s important to just keep it clean”

Mistakes can get fixed, but you will likely have to call the credit bureaus personally.

Read: Everything you need to know about credit scores

How can you check your credit score?

You can check your credit score through Credit Karma, Credit Sesame, and Credit.com or other sites.

The Consumer Financial Protection Bureau also has some information available regarding credit scores. You can get an annual credit report here. If you have a problem with credit reporting, you can submit a complaint with the CFPB online or by calling (855) 411-CFPB (2372).

Check out these resources

• Investopedia: Top 3 credit bureaus

• The Balance: How long does it take to build good credit from scratch?

• CNBC: How to build credit and achieve a good credit score

• Forbes: How to build credit fast: 7 simple strategies

• U.S. News: How to build credit fast

• LetsMakeAPlan.org: Building credit 101

• ConsumerReports.org: Best way to help your kid build credit

• Learn more about credit reports and scores from usa.gov

• What is a credit report?

• What is a credit score?

  See Also

  Mortgage Dictionary | My Mortgage Insider

• How long does negative information remain on my credit report?

• How do I get a copy of my credit reports?