What Is a Credit Score and Why Does It Matter?
Credit impacts nearly every aspect of your financial life — from getting approved for loans to qualifying for lower interest rates. But understanding how credit works can feel confusing. What goes into a credit score? Why do you have more than one? And how can you improve it?
Let’s break it down.
How Lenders View Your Credit
If someone asked to borrow money from you, you’d want to know:
- How likely are they to repay me?
- How much debt do they already have?
- Do they have the ability to repay what they borrow?
Lenders ask the same questions. Your credit score helps them understand how you’ve managed credit in the past, and how risky it may be to lend to you now.
The Two Biggest Factors Lenders Look at
While there are several elements that shape your score, two matter most:
Payment History
This is the largest piece of your credit score. Lenders want to see that you consistently pay what you owe, on time. Late or missed payments can negatively impact your score — especially if they happen more than once.
Credit Utilization
This reflects how much of your available credit you’re using. As a general rule of thumb, using more than 30% of your credit limit can signal that your budget may be stretched too thin. Keeping your balances lower shows lenders you’re using credit in a manageable, sustainable way.
Together, these factors provide a snapshot of your borrowing habits and reliability.
Many Scores, One Goal
If you’ve checked your credit in more than one place and noticed different numbers, that’s completely normal.
You have multiple credit scores because there are numerous scoring models — most commonly FICO and VantageScore — and each has multiple versions. Scores can also vary depending on which credit bureau’s information is being used.
While the exact number may vary, the goal is to provide lenders with a standardized way to evaluate your creditworthiness.
Credit Report vs. Credit Score
These terms are often used interchangeably, but they’re not the same, and knowing the difference can help you improve your credit more effectively.
Your Credit Report
Think of it as your financial report card. It includes:
- Open and closed accounts
- Payment history
- Credit limits and balances
- Collections, charge-offs, and public records
- Hard inquiries
This report is the information that scoring models use to calculate your score.
Your Credit Score
Your score is the “grade” calculated from your credit report data. Different scoring models weigh factors differently, but they consistently reward:
- On-time payments
- Responsible credit usage (typically under 30% of your limit)
When you know what’s driving your report and score, it’s easier to focus on changes that actually move the needle.
Repairing and Rebuilding Your Credit
Unlike a grade on your report card, your credit score isn’t permanent. If your score needs work, it can improve over time, and the path forward doesn’t have to be complicated.
Repair Your Credit
Review your credit reports from the three major bureaus: Equifax, Experian and Transunion. They can be accessed for free at: annualcreditreport.com.
As you review, look for:
- Collections and charge-offs
- Negative or inaccurate items
You can’t undo missed payments, but settling collections is a smart first step. It helps stop further damage, reduces your outstanding debt, and prevents additional fees or escalation.
Then Build Forward
As you resolve past debts, or if your report is already in good shape, focus on the habits that move your score upward:
- Pay bills on time
- Keep balances low
- Avoid unnecessary new accounts
Credit improves the same way most things do: with consistency. One steady step at a time.
Moving Forward with Confidence
Improving your credit doesn’t happen overnight — it’s a step-by-step process. The key is understanding what’s affecting your score and building healthy habits you can stick with over time. Personal Bankers can help you take that first step with products designed to support credit growth, including the ScoreMore loan.
From there, our Financial Well-Being Coaches can help you understand the factors influencing your score, determine your best next steps, and build momentum toward the goals that matter most to you.
