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By Carol Church

In a world where credit scores have a lot of power over our financial future, it pays both to know your score and to know how to boost a score that needs a leg up. While the average American’s score is decent (in the high 600s), many of us do face the problem of a not-so-great credit score at one point or another in our lives.

This little number can have big consequences. Having a lower score can make it tough to secure loans at reasonable rates…or even get credit at all. Meanwhile, having a high score can grant access to favorable terms on car loans, mortgages, and credit cards, exempt consumers from paying deposits, decrease car insurance rates, and more. As the years pass, a high score can actually save people thousands of dollars, such as when having excellent credit vs. poor credit means the difference between paying 3% and 10-20% on a loan.

Implications for Service Members

For service members, credit scores can even affect career opportunities. The military typically runs a credit check on members who need security clearance–and if they find problems, that’s not good. (One study found that over 80% of security clearance denials in the Navy were due to credit problems.) A poor credit score may give the impression that a member is not responsible, trustworthy, or able to self-manage. It may even raise concerns that he or she could be prone to making dangerously poor financial decisions while on the job, or to consider stealing money to pay off debt.

What’s A Good Score?

In general, a credit score in the 300s-500s is very poor, 600 through mid-600s is okay, high 600s through mid-700s is good, mid 700s through 800 is great, and above 800 is fantastic. Different sites have different opinions on these cut-offs, though. Many experts consider the “magic number” (when rates fall significantly) to be somewhere around 760-780. (Did you know that military PFMs can get service members access to a free credit score? Check out this page to learn more.)

It’s also important to know that though we talk about a credit “score” as if each person has only one, there are several different models in use. However, these individual scores are not likely to be too different from each other; lenders will tend to look at the average.

The Basics

So, what can people with lower credit scores do to bring this important number up—and what shouldn’t they do? The main elements that contribute to a credit score are bill payment history (whether you pay our bills on time every month), credit utilization (how much you owe compared to the total amount of credit you have been extended), length of credit history (how long you have held your credit accounts), credit mix (the various types of credit you hold), and amount of new credit (how many new requests for credit you’ve recently made). Of these, bill payment history and credit utilization are most important.

Dr. Barbara O’Neill and Rod Griffin from Experian presented a 90-minute webinar on credit scores in 2016. Watch a recording of the event above, and find copies of the slides and more materials from this event.

However, there is certainly a bit more to the story than this. In part 2 of this series, we’ll go over some more in-depth “do’s and don’ts” for those who are looking to increase their credit scores. Stay tuned.