Free Credit Score Guide: Understanding your score and what you can do to improve it

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Your credit score is a number that represents how well you’ve managed all of your financial obligations (your bills, accounts and debts) over time. The number is determined by the three main credit agencies, based on the information in your credit reports.

Think of it as your credit scorecard — and the higher the better.

When you apply for a loan (credit card, car loan, mortgage etc.), lenders wants to know what kind of risk they’re taking by giving you the money — how likely is it that you’ll pay them back?

If you have a good credit score, they assume they can trust you, and they’ll give you a better deal. If you have a bad score, getting a loan will cost you a lot more money or you may not even be able to get one.

And here’s the key: To get a good credit score, you have to constantly keep tabs on everything so you can take steps to manipulate your credit in your favor.

And the way you do that is by understanding what factors make up your score, what damages it and how you can improve it.

Understanding your credit score

First, get your free credit reports

Each year, you are entitled to one free copy of your credit report from the three major credit reporting agencies: Equifax, Experian and TransUnion. Review these reports for any potential errors, such as late payments you actually paid on time or incorrectly listed credit limits.

It’s crucial to make sure that this information is accurate — not only to avoid any potential long-term damage, but also to ensure that you get the best deal possible from a bank or credit union that’s considering you for a new credit card or loan.

Read more: Understanding your credit reports

How to get your free credit score

Your free credit reports do not include your credit score. To obtain that number, most banks and credit card issuers will now provide it to you for free. And while there are several different scoring models out there, your FICO score is considered your true credit score. So that’s the one you really need to pay attention to.


Knowing your score gives you an idea of your creditworthiness — the likelihood that you can get a loan and how much it’ll cost you to borrow that money. And knowing what factors impact your score can help you figure out what steps you need to take to improve it.

Before getting your official FICO score, you can get your non-FICO score for free to get an idea of where you stand. Here’s more on how to do that. is a great tool that allows you to see your non-FICO credit score for free. CreditKarma is a totally free service that makes money by recommending credit cards and loans that they believe would be suitable for you.

Understanding codes on credit scores and reports

When you get your credit score disclosure, it may include some codes that you need to understand. is a site that lets you enter a two-digit and/or text-based reason code from a credit score report or disclosure notice you’ve received. Then you get a simple explanation of what it means.

So this site basically decodes what lenders actually say about you. Of course, very few people will pay attention to this stuff. But those who do get better deals on interest rates on loans and better rates on auto and home insurance.

Read more: How to fix errors on a credit report

How to improve your credit score

If your credit isn’t quite where you want it, there are several steps you can take to start improving your score.

Know what factors impact your credit score

Every person’s credit score depends on the particular risks they pose to a lender. One borrower might have a maxed-out card, but a history of timely and large payments. Another borrower might have a small balance, but also a brief credit history and a glaring error that complicates the borrower’s trustworthiness to a bank. As the credit reporting agency Experian puts it, “One change actually affects many items on the credit report. It is impossible to provide a completely accurate assessment of how one specific action will affect a person’s credit score.”


It is possible, however, to know pretty much exactly what goes into your credit score. The factors listed below comprise the total number of your FICO score, which generally ranges from 300 to 850 (the higher, the better) — and the percentages represent how much each factor influences it.

35%: Your payment history
30%: Amounts owed (how much of your total available credit you’re using at any one time)
15%: The length of your credit history
10%: New credit
10%: Mix of credit

As you can see, your payment history and how much debt you owe are the strongest influences on your score. It’s vital to base a credit-building strategy on these two factors.

What causes your score to drop?

Based on the main factors that affect your credit score, here are a few common things that cause it to drop — things you want to be aware of and avoid if you can (and these numbers are estimates, but they’ll give you an idea of how important it is to avoid these things):

  • Late and missed payments: If you’re late on all of your bills in one month ‘ your score could drop by 75 ‘ 125 points.
  • Maxed out credit cards: Reached the limit? That will take somewhere between 20 and 70 points off your credit score.
  • When you apply for a new credit card, your credit score will temporarily drop around 10 to 12 points.
  • Having no or very little credit history: If you’ve never had any type of credit in your name, or you’ve only had a couple of bills or maybe one credit card — you will likely have a low credit score.

Steps to take to improve your credit score

Based on the factors that impact your score, here are some of the best ways to improve it and maintain good credit!

  • Check for errors and fix them immediately
    • When you get your credit reports, if you see any mistakes, you need to take steps to fix them immediately.
    • If you see any old unpaid bills that are yours, pay them off as quickly as you can.
  • Pay off small debts
  • If you have any small debts you owe, get them paid off as soon as you can. The less you owe, the better — and it’ll help you keep tabs on the bigger stuff.
  • Make multiple payments each month
  • Your credit reports and score aren’t calculated on a specific day each month — they’re a “snapshot” of your overall financial health at any given time.
  • If you make multiple payments on your debt each month, not only will that help you pay it off faster, but it will also show a lower balance each time your credit reports pull in new information.
  • Pay attention to your balances and don’t let them linger
  • 30% of your score is based on how much of your available credit you’re using — so you have to pay attention to your account balances.
  • Even if you have a high credit card limit, don’t use it (it hurts your score). The higher the balance gets, the harder it is to control it and get it paid off.
  • If you realize you’re using more than 30 percent of your total available credit, don’t charge anything else on the card until you start paying the balances down — and try to do that as quickly as you can.
  • If you’ve got a long way to go, stick your cards in the freezer and use cash.
  • Pay every bill on time
  • This is SO important ‘ in fact, it’s the most important factor to keep in mind when it comes to your credit score and improving it.
  • You never want to miss a payment on any bill, credit card, store card — nothing.
  • Building a history of on-time payments will really help improve your score — so don’t let a dumb late bill mess you up.
  • If you’re forgetful, set a reminder for each bill every month and when it pops up, pay it right then.
  • 3 late payments I didn’t know about followed me around for years — so I have reminders and sticky notes for EVERYTHING.
  • Make it a priority!
  • Pay more than the minimums
  • Ideally, you want to pay your credit card bill in full every month before the due date — which is why you should only charge what you can actually afford to pay off.
  • If you already have debt that you can’t pay off in full quite yet, try to at least pay more than the minimum.
  • The required monthly minimums on credit cards are really low because it’s good for the bank (not you)  since only paying the low minimum each month would take you longer to pay off the balance thanks to the high interest rates on credit cards.
  • So pay as much as you can each month to get balance down — it looks better to lenders and you’ll pay less in interest.

*One other note on minimum monthly payments: If you pay the minimum amount on time, you avoid paying other fees, like late payment fees — but you still get charged interest, as long as there is a balance.

  • Get a credit card
  • If you have very little to no credit history, or want to improve your score, a credit card can help.
  • Charging small amounts on a credit card and paying off the balance in full each month will help increase your score.
  • The key though is paying off the total balance on time each month — I know I’m beating a dead horse on this, but it’s THAT important.
  • So if you don’t have a credit card, get one — and use it responsibly!
  • If you only have one or two cards, getting a third one can also help your score — just don’t open a new card too close to when you want to get a bigger loan, like a mortgage — because your score will temporarily drop ‘ and then improve as you use it responsibly

MyFICO has even more tips here. The one you should follow closest? Fixing a credit score is more about fixing errors in your credit history than anything else. Take stock of what you’re good at, and keep doing it! If there are areas where you need to improve, address them — and be patient.

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