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Credit Score Basics: What You Need to Know

Understanding your credit score is key to managing your financial health. Here’s a straightforward guide to credit score ranges, what affects your score, common misconceptions, and practical tips to improve and protect it.


Credit Score Ranges and What They Mean

  • Poor (300-579): May face difficulty qualifying for loans or credit cards and often receive higher interest rates.
  • Fair (580-669): Average range; credit approval is possible, but interest rates tend to be higher.
  • Good (670-739): Seen as lower-risk; more likely to get approved with favorable loan terms.
  • Very Good (740-799): Strong credit history, qualifying for some of the best rates and terms.
  • Excellent (800-850): Exceptional credit; easiest approval and the best interest rates available.


Key Factors That Influence Your Credit Score

Scott Leo, Chief Credit Officer at Coulee Bank, says, “Payment history is by far the largest portion of a credit score. It generally determines about 35% of the score.” Credit utilization plays a significant role, too. It refers to the amount of credit you’re using relative to your total available credit. Maintaining your credit card usage at around 30% of your overall credit limits is advisable. A high utilization rate can negatively affect your credit score.


“Keep your credit cards for the long haul,” he says. Frequently opening or closing cards can hurt your score. Building a consistent history with one card is best, and make sure you have a variety of credit types. For example, Leo says you should have car loans, a mortgage, and credit cards, which can show you manage different debts responsibly if you are making regular payments. Your credit score affects loan approval chances, interest rates, and terms for mortgages, car loans, and credit cards. Higher scores mean better borrowing conditions.


Another point to remember is that when you open multiple new accounts in a short period of time, it can temporarily lower your score. Once you have a history established with a new credit card, your score can bounce back.


Common Credit Score Myths

“While having a credit card and making payments on time is crucial for building credit, carrying a balance does not inherently build credit,” says Leo. In fact, it can hurt your credit score due to high credit utilization and the potential for accumulating interest and late payments.


Applying for a new credit card can cause a small, temporary drop in your credit score due to a hard inquiry, but the impact is usually minor unless you apply for several cards at once. Having multiple credit cards isn’t inherently bad for your credit; what matters is how you manage timely payments, and keeping balances low can help your score. On the other hand, closing unused credit cards can hurt your score by reducing your total available credit and increasing your credit utilization ratio, especially if the closed account has a long, positive history.


Impact of Late Payments

Late payments are reported after 30 days past due and can drop your score by up to 100 points. Most creditors don’t report a late payment to credit bureaus until it’s at least 30 days past due. Once it reaches that point, it can significantly impact your credit score. To protect your credit, it’s crucial to stay current on all payments.


Checking Your Credit Score

Checking your own credit score does not hurt it. Hard inquiries only happen when lenders check your credit during loan or credit applications for cars, homes, and credit cards. Leo states, “Generally, the 'free' score check will provide you with the score and the credit lines being rated.  It won’t have histories or show how the score is being impacted.” You can improve your credit score by following these steps:


  • Always pay bills on time.
  • Keep credit utilization low.
  • Maintain older credit accounts.
  • Improvements usually show in 45-60 days; major gains may take 1-2 years.


Paying Off Debt: Full vs. Minimum Payments

Paying off debt in full is better than making minimum payments if you can afford it. For revolving debt like credit cards, paying in full lowers your credit utilization and shows responsible financial behavior, which helps build your credit. It also saves you money by avoiding interest charges. “Still, consistently making on-time payments, whether minimum or full, is the most important factor in maintaining good credit” explains Leo.


Expert Advice

“It’s best to open credit accounts you need, pay on time, and avoid maxing out your limits. Responsible credit use builds strong credit over time,” says Leo.


Recently, a new rule was finalized to remove most medical debt from credit reports, potentially benefiting 15 million Americans, though there have been delays due to legal challenges. Additionally, a new credit scoring model launching in late 2025 will consider account balances over the past 24 months, which may cause scores to shift by up to 20 points depending on your payment habits.


Protecting Your Credit

If you’re a victim of identity theft or fraud, contact at least one credit reporting agency to place a fraud alert on your account, which notifies all three agencies and warns lenders to verify your identity for one year. You can also freeze your credit to prevent access, but you’ll need to temporarily lift the freeze when applying for credit. This is a good time to check your credit report and score to review all reported accounts and quickly address any unauthorized activity.


If you suspect identity theft, place a fraud alert or freeze your credit report. Check your credit reports regularly for errors or unfamiliar accounts. The three major credit bureaus are:



Managing your credit wisely takes time and attention, but understanding these basics can help you build a stronger financial future. If you have questions or need help, reach out to your financial advisor or a representative at Coulee Bank. They’re here to support you!