Your Credit Score: What It Is and Why It Matters

Find out what affects your credit score. These four areas can help you understand how to keep good credit or improve poor credit.

Money & Credit

Your Credit Score: What It Is and Why It Matters

Most of us know we have a credit score because we've seen the commercials with the catchy tunes and people standing and holding cards with “their number” ranging from 650 – 850.  The actual range is 300 to 850 with the median credit score in the United States estimated to be 723. But, do you really understand your credit score?


Your credit score is broken down into the following categories from your credit report:

  • Payment history (35%). This is just what you would expect – are you paying your bills on time.
  • Amount owed (30%).  Again, this is straightforward in the sense that everything you owe and is reported to the credit bureaus figures into your score.
  • Length of credit history (15%). 
  • New credit (10%).  Opening several accounts in a short period of time is generally a red flag to lenders. It may suggest you are over extending your repayment ability.
  • Types of credit used (10%). In addition to looking at how many of the loans are paid back in set installments, consideration is also given to how much is revolving credit (line of credit or credit card). It’s not a bad thing to borrow money because that’s how you build a strong credit history. However, most lenders will look closely to ensure you are not overextended, which means looking at how much credit you owe in total, the diversity of types of credit you have or have had, and the relation of credit card balances to availability.  Typically numerous credit cards with balances particularly those with little room available will lower your credit score.

It goes without saying that liens, collections, judgments and a previous bankruptcy can also significantly impact your credit score and your ability to obtain new credit.

That’s it. It’s pretty simple really because all these areas are totally under your control, and with a disciplined approach, you should be able to maintain a high credit score, or improve your score over time. 

Why do we talk about your credit score? If you are interested in one of our financing products, we will look at your credit score as part of our decision-making process. Understanding your credit score and how your can manage it will help ensure your success in obtaining credit at the most favorable terms.


The information in the NCMIC Learning Center is offered solely for general information and educational purposes. It is not offered as, nor does it represent, legal or professional advice. Neither does this information constitute a guideline, practice parameter or standard of care. You should not act or rely upon this information without seeking the advice of an attorney familiar with the specific legal requirements of the state(s) in which you practice. If there is a discrepancy between the site and an insurance policy you have with NCMIC, the policy will prevail.