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The Magic Behind the Number: Breaking Down Your Credit Score

I’m ready to make a bet. At some point in your recent history, you and your credit score collided. Whether in applying for a credit card, seeking a federal student loan, purchasing a home, buying a car, or leasing an apartment, you’ve most likely had that sneaky little number influence your next step.

Anytime you seek out financing, someone will run what is referred to as a “hard check” on your credit score. It is well worth your time and effort to research your score, correct any discrepancies, and work towards building a better score. A good credit score can be that last hurdle in securing financing to reserve your spot at a high-quality bootcamp and jump-starting your professional future.

What is a Credit Score?

Very generally speaking, your credit score is a number that evaluates how likely you are to repay your financial commitments. The higher your score, the higher the chance that you will repay your borrowed funds. The most commonly used FICO credit score has a scale of 350-850 with the average credit score falling just below 700.

How is Your Credit Score Calculated?

Several factors are used to determine your credit score. These include your amount of on-time versus late payments, your total number of open accounts, the average age of your accounts, how you manage your credit card use (this includes the amount of credit available to you and the amount you utilize on average), and the number of inquiries on your credit report.

Financiers will often also look at the number of hard inquiries on your report. A hard inquiry occurs when you apply for new financing such as a credit card or loan. A number of hard inquires in a short amount of time can negatively impact your score.

Any derogatory mark on your credit report will also negatively impact your score. A derogatory mark includes things like collections, tax liens, and bankruptcy filings.

So, You Checked and Found Multiple Credit Scores!

So you checked your credit score and uncovered more than one number. Because these types of things are never entirely easy (!), there is no one single credit score. The FICO credit score is based on a software scoring model developed by Fair Isaac. Isaac licensed the software to all three of the national credit bureaus, and each bureau then tailored the model. The different scoring factors result in different credit scores for each individual.

How to Get Your Credit Score Skinny

You can receive your credit score for a nominal fee, which generally costs around $8. This allows you to see the actual numerical score you receive.

But - great news - you can request a free copy of your credit report from each of three credit bureaus - Equifax, Experian, and TransUnion - annually by visiting AnnualCreditReport.com.

This allows you to view all information that is used to determine your credit score. If you notice an error on the report, make sure to request a dispute form from the issuing agency.

How to Get That Credit Score Up!

The first step to improving your credit score is monitoring your credit report and disputing any errors. Another big help is to pay your bills on time. Even if you are only able to make minimum payments, it's important to not fall behind (think utility, medical, and outstanding bills!).

Pay your rent on time? Ask your landlord to report your payments. This can help increase your number.

For your credit cards, try to keep your balances low and try not to use all available credit. Avoid opening multiple new credit accounts or applying for multiple accounts. Multiple applications can negatively impact your report - especially if they occur when you are trying to make a major purchase such as an auto or home.

Finally, carefully weigh any options to consolidate balances. Consolidating multiple lines of credit into one payment may be convenient, but closing older established accounts can lower your credit score.

Raising your credit score takes time, but it can be done with a few extra steps. There’s always a light at the end of every tunnel!

Questions? Reach out anytime at info@skills.fund.