What is a credit score, anyway?
You’ve probably heard the term, but do you know what it means? Maybe you’re afraid to ask or worse, maybe you’re afraid to learn the answer: What is a credit score, anyway? And why should you care?
First, a credit score is nothing to be afraid of. Everyone has one. Most people have more than one. You probably do, too. A credit score is just a way of measuring how you use and manage debt, on a scale between 300 (the absolute lowest) and 850 (the absolute highest).
There are three major credit bureaus in the United States—Equifax, Experian, and TransUnion—and they each have slightly different methods of calculating credit scores. But they all issue scores as three-digit numbers between 300 and 850.
Your credit score is based on information provided by lenders, credit card companies, and other financial institutions. Those companies report things like the number of loans and credit cards you have, your payment history, and how much you have borrowed. Even though the various credit bureaus use different criteria from your credit report to determine your score, they all use similar information in their calculations. So, your scores from the individual bureaus are probably similar—even if you have scores from all three.
You can find your credit score online for no cost. Some reputable websites will even show your scores from multiple agencies. But before you search for them, you may be wondering: what’s a good credit score? Higher numbers are better, of course. In general, a score of 670 or higher is considered good. If one or more of your scores are below this number, don’t worry! Credit scores change often—as much as once every seven days—so you can improve your score if you need to.
As Christians, we know God has called us to be faithful and manage our finances according to His Word. Follow these principles whenever you borrow money, and you will not only honor the Lord, but you will also almost certainly improve your credit score.
Pay your bills on time. This includes your utilities like electricity and other monthly expenses, not just loan payments. Late payments of any kind can damage your credit scores.
Honor your commitments. Don’t dishonor those who lend to you by failing to repay.
Exercise wisdom and judgment. Don’t rush into borrowing money—for large purchases or small, everyday items. Take your time, be patient, and pray about your financial decisions. Seek the Lord’s guidance before you borrow.
Remember and practice these principles and your credit scores will not be a source of fear. If you have more questions about credit reports or credit scores, our team at Orchard Alliance is always here to serve you.