Understanding Your Credit Score—And Why It Matters

If you’ve ever applied for a credit card, car loan, or mortgage, you’ve probably heard the phrase “we’ll need to check your credit score.” But what exactly is a credit score, and why does it matter so much? As a financial coach, I’ve seen how understanding this simple three-digit number can empower people to make smarter money decisions and open doors to financial opportunities.

What Is a Credit Score?

A credit score is essentially a snapshot of your financial trustworthiness. It’s based on the information in your credit reports from the three major credit bureaus: Equifax, TransUnion, and Experian. Lenders use your score to predict how likely you are to repay borrowed money.

The most common scoring models are FICO® Scores and VantageScore®. Both use a range from 300–850, with higher numbers signaling stronger credit. Generally, a score of 670 or higher is considered good. While lenders may use different versions of these scores, the underlying factors remain similar.

Credit Report Terminology Made Simple

When reviewing your credit report, you’ll encounter terms that might feel like another language. Here are a few worth knowing:

• Account Age: How long your accounts have been open.

• Balance: What you owe as of the last update—this may differ from your real-time balance.

• Charge-Off: A debt a lender has written off as a loss, often sold to a collector.

• Collection Account: When unpaid debts are turned over to a collection agency.

• Good Standing: Accounts you’ve paid as agreed, either current or paid off.

• Revolving Account: Credit cards or lines of credit where balances carry month to month.

• Installment Account: Fixed payments until a loan is repaid, like an auto or student loan.

Understanding these terms can help you read your report with confidence instead of confusion.

Why Does It Matter?

Your credit score impacts more than just loan approvals. A stronger score can mean:

• Lower interest rates (saving you thousands over time)

• Better terms on car loans or mortgages

• Increased likelihood of credit card approval

• Even potential effects on renting an apartment or setting up utilities

In other words, your credit score is a powerful financial tool - especially when you plan to borrow for a large purchase.

What Does Dionna Do?

While I’ve decided only to borrow money for home purchases and, therefore, don’t need to rely on credit often, I do a couple things to manage my credit so that it’s a tool I can use when I want it:

• I check my credit at least once a year to ensure that everything on the report is accurate and my personal information hasn’t been stolen and used fraudulently

• I take advantage of a credit monitoring service to inform me of when my data has been included in a data breach

• I use my credit card for purchases I’ve already budgeted and saved for - for example: If I’ve been saving for a trip that requires a flight, I’ll purchase the flight using my credit card and immediately pay the card using the money I’ve saved up

Final Thoughts

Ultimately, your credit score doesn’t define your worth—but it does influence many of the financial options available to you. The encouraging news is that credit scores are not fixed; they change based on the choices you make over time. With knowledge, intentional habits, and a clear plan, you can take steps to strengthen your score and create more flexibility in your financial life.

As Christians, we’re called to steward what we’ve been given wisely and without fear. Progress may be slow at times, but every faithful step forward matters—and you don’t have to navigate it alone. Reach out to me to schedule a coaching call if you need a guide for your financial journey!