At Red Rocks Credit Union, we believe knowledge is power. When you know what goes into your credit score, why it matters, and what small steps you can take to improve it, you’ll feel more in control of your financial future. And the best part? You don’t have to figure it out on your own. We’re here to help every step of the way.
What Is a Credit Score?
Think of your credit score as a financial snapshot. It’s a three-digit number, usually between 300 and 850, that tells lenders how confident they can be that you’ll pay back borrowed money. The higher your score, the more trustworthy you look in the eyes of lenders, which often means better loan approvals, lower interest rates, and more financial flexibility.
Here’s a quick breakdown of what those numbers mean:
— 300–579: Poor. Lenders see this as risky, making approvals harder.
— 580–669: Fair. Some approvals are possible, but interest rates may be higher.
— 670–739: Good. Generally considered reliable by lenders.
— 740–799: Very Good. Often qualifies for better-than-average rates.
— 800–850: Excellent. You’re likely to get the best loan terms available.
The important part is that your credit score isn’t permanent. It can go up or down depending on your financial habits, which means you always have the power to improve it.
Pro tip from RRCU: "Think of your credit score like a report card. It doesn’t define your future. It simply shows where you are today. With the right steps, it can improve faster than you think."
Why Your Credit Score Matters
Your credit score isn’t just a number. It’s a key that can open (or close) financial doors. A strong score makes life easier, while a low score can make even everyday goals feel out of reach.
Here are a few real-life ways your score comes into play.
Loans and Mortgages
A higher score can mean faster approvals and lower interest rates when you’re buying a car, home, or even applying for student loans.
Credit Cards
Good credit helps you qualify for better cards with lower rates and higher limits.
Renting or Leasing
Many landlords check credit before approving rental applications. A good score shows you’re a reliable tenant.
Insurance Rates
Some insurance companies use credit scores as part of determining your premiums.
The takeaway: a higher credit score reduces stress and expands your options. And remember, your credit score is within your control. With a few intentional steps, you can strengthen it and put yourself in a better financial position.
How Credit Scores Are Calculated
Credit scores might seem mysterious, but they’re really just the result of a formula based on your financial habits. Five main factors go into your score, each carrying a different weight:
1. Payment History (35%)
This is the single biggest factor. Lenders want to see that you’ve paid your bills on time, every time. Even one late payment can make a dent in your score.
2. Credit Utilization (30%)
This is how much of your available credit you’re using. For example, if your card limit is $1,000 and you’re carrying a $500 balance, your utilization is 50%—too high. Aim to keep it under 30%.
3. Length of Credit History (15%)
The longer you’ve had accounts open, the better. That’s why keeping older accounts active, even if you don’t use them often, can be helpful.
4. Credit Mix (10%)
Lenders like to see that you can handle different types of credit responsibly, such as credit cards, student loans, car loans, or a mortgage.
5. New Credit (10%)
Opening too many new accounts in a short period can lower your score. Each application creates a “hard inquiry,” which lenders see as potential risk.
Pro tip from RRCU: "Focus on the big levers first. Paying on time and keeping balances low make up nearly two-thirds of your score. Get those right, and you’ll see real progress."
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Practical Steps to Improve Your Credit
Improving your credit score doesn’t happen overnight, but the good news is it’s absolutely possible (and often faster than people think!). By focusing on a few key habits, you can start seeing positive changes within months.
Here are some steps you can take right away.
Pay your bills on time.
Even small bills, like utilities or store cards, matter. Set up automatic payments or calendar reminders to avoid late fees and protect your score.
Lower your balances.
Aim to keep your credit card balances under 30% of your total limit. Paying down high balances is one of the quickest ways to boost your score.
Keep older accounts open.
Length of history matters. Unless a card has a high annual fee, consider leaving older accounts open to show stability.
Be thoughtful with new credit.
Every new application creates a hard inquiry. Open new accounts only when necessary and space them out.
Check your credit reports regularly.
You’re entitled to one free report per year from each bureau at annualcreditreport.com. Review them for errors, as mistakes happen, and fixing them can give your score a boost.
Start early, even for teens.
It’s never too soon to think about credit. Parents can help teens build healthy habits by adding them as an authorized user on a credit card, introducing the concept of secured or student cards when they’re ready, and modeling good habits like paying bills on time. Early exposure makes credit less intimidating and sets them up for financial confidence later.
Pro tip from RRCU: Make credit education part of everyday life. Try reviewing a statement together once a month or letting your teen pay off a small charge they made. These hands-on experiences teach responsibility and show teens how credit works in practice.
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Common Credit Myths
When it comes to credit, misinformation is everywhere. Let’s clear up a few of the most common myths so you can focus on what really matters.
Myth: Checking your own credit score will hurt it.
Fact: Looking at your own score is considered a “soft inquiry” and has no impact. In fact, reviewing your score regularly is one of the best ways to stay on top of your financial health.
Myth: You need to carry a balance on your credit card to build credit.
Fact: Paying off your balance in full each month is actually better for your score and your wallet. Carrying a balance only means you’re paying interest you don’t need to.
Myth: Only credit cards affect your credit score.
Fact: Loans, mortgages, and payment history on other accounts all play a role. A healthy mix of credit types shows lenders you can handle different responsibilities.
Myth: Once your score drops, it’s impossible to fix.
Fact: Your score is always changing. With consistent positive habits, like paying on time and keeping balances low, you can improve it over time.
How Red Rocks Credit Union Can Help
Understanding your credit score is the first step, but sometimes, knowing where to start improving it can still feel overwhelming. That’s where we come in.
At Red Rocks Credit Union, our team is here to guide you, not judge you. Whether your score is excellent, average, or in need of some attention, we’ll sit down with you one-on-one to:
— Review your current credit report and explain it in plain language.
— Identify quick wins that could boost your score.
— Create a simple, personalized action plan to help you feel more confident about your next steps.
Ready to take control of your credit? Reach out to us today to get started!