The Savvy Brokers Club

Your credit score affects almost every major financial decision you make. From securing a mortgage to getting approved for a credit card with the best rewards, this three-digit number determines how lenders see you. Understanding what goes into your score and how to improve it can save you thousands of dollars over time.

Credit scores are calculated using several factors. Payment history is the most significant, accounting for about 35% of your score. Paying bills on time shows lenders you’re reliable. Even one late payment can cause a noticeable drop, so setting reminders or automating payments helps maintain a strong score.

Credit utilization measures how much of your available credit you’re using. Keeping balances below 30% of your total limit shows that you manage credit responsibly. For example, if your limit is $10,000, aim to keep your balance under $3,000. Paying down debt and avoiding maxed-out cards improve this part of your score quickly.

The length of your credit history also matters. Lenders prefer borrowers with longer histories because it provides more data on how you handle debt. This factor makes it essential to keep older accounts open, even if you no longer use them. Closing old credit cards can shorten your credit history and lower your score.

Your credit mix reflects the different types of credit you have, like credit cards, student loans, and mortgages. A healthy mix shows that you can manage various types of debt. However, you shouldn’t take on new debt just to improve your mix. Only borrow when necessary and manageable.

New credit inquiries can also impact your score. Each time you apply for a loan or credit card, the lender checks your credit, causing a small, temporary drop. Opening several accounts in a short period can signal risk to lenders, so spacing out applications protects your score.

Improving your credit score takes time and effort. Start by reviewing your credit report for errors. Even small mistakes, like incorrect balances or late payments that never happened, can hurt your score. Disputing these errors with the credit bureau can lead to quick improvements.

Paying off debt is one of the fastest ways to boost your score. Focus on high-interest accounts first while making minimum payments on others. This strategy reduces your overall debt and frees up more credit, lowering your utilization ratio.

Keeping old accounts open, as long as they don’t have annual fees, helps maintain your credit history. If you’re considering closing an account, weigh the impact on your score first. Sometimes, keeping an account open is worth it for the sake of your credit.

Monitoring your credit regularly helps you stay on top of any changes. Free services like Credit Karma or annualcreditreport.com give you access to your reports and scores. Regular checks help catch identity theft early and track your progress as you improve your credit.

Your credit score doesn’t just affect your ability to borrow money. It influences the interest rates you’re offered, the credit limits you receive, and even your ability to rent an apartment. Building and maintaining a strong credit score gives you more financial freedom and better opportunities.

Abby Torres

Abby Torres is a passionate mortgage lender with a knack for helping clients and real estate partners bring renovation dreams to life. As Vice President of Mortgage Lending at Guaranteed Rate, she specializes in home renovation loans. Originally from Los Angeles and raised in Kansas City, Abby now calls Chicago home, where she’s built a career rooted in education, mentorship, and building genuine connections.