Your Credit Score Demystified

At one time or another most of us have heard how important a credit score is for our financial well-being. Unfortunately, how your credit score is calculated remains a mystery for many people. If you know your credit score, and it’s above 690, you’ll want to keep it that way. If you don’t know your credit score, or if it’s below 630, you’ll want to raise it. Either way, keep reading.

Credit Score Ranges

  • < 630: “Bad” credit
  • 630 – 689: “Average” credit
  • 690 – 719: “Good” credit
  • 720 – 850: “Excellent” credit

I’d like to note that having “bad” credit does not make anyone a bad person. It’s simply a number that our financial markets rely upon as a measure of risk. This system has its advantages and disadvantages – more than enough for me to write another post.

Components Of Your Score

Finding Your Score

The first step in managing your score is finding out what it is and keeping a close eye on it. There are many sites which offer this service but only a handful come at no cost.

  • Federal law entitles you to one free report every 12 months. Go to to get yours.
  • is a free site that allows you to see your credit score, track your credit history, view all your credit cards, and attain credit education and management suggestions.

Taking Control Of Your Score

Once you know your score, it’s time to take control of your credit by setting up payment reminders and automating monthly payments. This is absolutely critical to helping you make payments on time. Remember, timely payments are the most heavily weighted component of your credit score.
In addition to making timely payments, here are three things you can do to boost your credit score:

  • Always use less than 1/3 of the available credit per card
  • Do not open multiple credit cards too quickly because your score will temporarily decrease
  • Do not close more than one account per year because closing an account decreases your total available credit, which lowers your credit score

All of the aforementioned tips will help raise your score, but that Visa you opened when you were 18 is probably your most valuable tool. Keeping old cards open and making timely payments will increase your credit score over time.

Listening / Reading / Watching

Here's what's got my attention this week:

  • Outliers: The Story of Success by Malcolm Gladwell. So far, this has been a great book that asks "what makes high-achievers different?"
  • I Always Loved You: A Novel by Robin Oliveira. This audiobook came highly recommended by a client. The story follows the relationship between artists Mary Cassatt and Edgar Degas.