Why Your Credit Score is so Important

Good Credit, Credit Factors and Why It All Matters

Has anyone ever told you your credit score is more valuable than your G.P.A.? Laugh all you want, but it’s true. In a world where the majority of people are regularly purchasing material items on credit, your credit score is the transcript that will follow you for life.
San Diego credit score
Your credit score determines many things, but most importantly:

  • What type of loan you will qualify for
  • How high your interest rate will be on your loan


What’s a Good Credit Score?

A credit score is an easy way for San Diego lenders and insurance agents to determine how to price the products they want to sell you. Your credit score will guide their judgement on how large of a loan they want to qualify you for and gauge your responsibility on paying back your debts. It is a lenders way to determine what risk you pose to them.

Your GPA won’t pay you, but your credit score will.

Often referred to as your FICO score, your credit score is named after the Fair Isaacs Corporation, which created the software to calculate credit scores. Scores range from 350-850 – a perfect score. There are credit ranges that people talk about as well. For example, good credit is somewhere between the high 600’s and the low 700’s. Fair credit is the low-to-mid 600s. The lower your score is the higher your interest rate will generally be.

Nowadays, Equifax, Experian and TransUnion are the three major credit bureaus in the US that calculate this number.


The 5 Major Credit Factors

There are five major factors that determine your credit score, however they are not given equal weight.

  1. Previous credit performance – 35%
  2. Current level of indebtedness – 30%
  3. Time credit has been in use – 15%
  4. Types of credit available – 15%
  5. Pursuit of new credit – 5%


How can I maintain a good credit score?

  • Create a long history of paying things offs quickly.
  • Pay bill on time – no late payments.
  • Increase your credit limits without increasing your spending.
  • Limit your number of credit applications. They are often times viewed negatively.


How can I increase my credit score?

  • Get Credit Counseling.
  • Don’t carry large balances on credit cards.
  • Increase your credit limits without increasing your spending.
  • Don’t open more credit cards.


Remember to check your credit regularly. The Fair and Accurate Credit Transaction Act (FACT Act) passed by Congress, entitles you to view your credit report from all three credit bureaus for free annually. There are also independent companies such as creditkarma.com.