Conquering Your Credit Score

Fair or not, your credit score is one of the fundamental aspects of financial well-being. Understanding and managing your credit score can open doors to financial opportunities and stability. In this guide, we’ll break down the five components that make up your FICO credit score, offering tips and insights to help you boost your credit score.


Components of a FICO Credit Score

Credit scores are less of a mystery than you may think. Although the exact ‘recipe’ is unknown, we know there are five major components impacting your credit score. We even know how important each of these components is when calculating your score. Let’s take a look!

35% Payment History: Your payment history shows how you’ve handled your bills and accounts over time. It’s a major factor, making up a whopping 35% of your credit score. But why is it such a big deal? Well, research shows that how you’ve previously paid debts is a strong indicator of how you’ll handle future debts. So for lenders, your track record of meeting (or not meeting) your financial obligations will help them determine the risk level they’re taking when extending credit.

30% Amounts Owed (Utilization): Another large portion of your credit score looks at the total amount of debt you carry. But here’s the key: it’s not just about total debt. It’s more about how much of your available credit you’re using, known as credit utilization. When you use a significant chunk of your available credit, it can signal that you might be stretched thin financially. For banks and other lenders, this could mean you are more likely to have late or missed payments.

15% Length of Credit History: Think of your credit history like your favorite pair of blue jeans or a fine wine – it tends to improve over time. A longer credit history will always have a positive impact on your FICO score. And while it only contributes 15% to your score, it can still influence your ability to secure loans. When it comes to the length of your credit history, your FICO score considers three main things:

  1. How long your credit accounts have been around, including the age of your oldest account, the newest one, and the average age of all your accounts.
  2. How long specific credit accounts have been established.
  3. The time since you last used certain accounts.

10% Credit Mix: Your credit mix is all about the different types of credit you have. When lenders decide whether to give you a loan, they consider various factors, including how well you handle different kinds of credit. The idea is simple: the better you manage various loans and lines of credit, the less risky you appear. Your credit mix can include a variety of accounts, like credit cards, retail accounts, installment loans, finance company loans, and mortgage loans. But don’t worry, you don’t need to have one of each! It’s more important to manage what you do have wisely.

10% New Credit: When you apply for new credit, those inquiries stay on your credit report for two years. However, FICO scores only factor in inquiries made in the last 12 months. Always be mindful about opening too many credit accounts in a short time. This is especially important if you’re still building your credit history. Research shows that this can pose a higher risk, so it’s a good idea to pace yourself when it comes to new credit ventures.

Now that you have the components down we can start talking about strategies on how to build your credit.

Tips for Boosting Your Score

Pay on time: As outlined in the Payment History section above, paying your bills on time has a significant impact on your credit score. Timely payments demonstrate your reliability and responsibility as a borrower. This, in turn, can lead to a higher credit score. So one of the first, and best, steps you can take to improve your credit score is to get your payments back on track. It may take some time to see the benefits of rebuilding a positive payment history, so be patient!

Consider a credit-building product: Whether you’re building credit from scratch or trying to increase your credit score, a credit-building product might be a great choice. However, it’s a good idea to consult a professional when deciding if one of these products is best for you (see the ‘ask for help’ section below).

  • A secured credit card is one of these products. Typically, you’ll deposit around $200 as collateral with a credit card company. They will then issue a card with that dollar amount as the credit limit. With this card, you’ll want to make small purchases and pay them off in full and on time each month. This builds a positive payment history. The best part? After you demonstrate positive behavior for several months, most companies will offer you the chance to upgrade to a traditional, unsecured credit card.
  • Credit builder loans are another option. You will be given a small loan, usually around $600. Unlike traditional loans, the money from a credit builder loan isn’t given to you upfront. Instead, it’s held in a savings account. You make regular payments on the loan, and these payments are reported to credit bureaus, helping you build a positive credit history over time. Once the loan is paid off, you get access to the savings, and you’ve also built a better credit profile. It’s a win-win!

Keep your credit utilization low: At a minimum, aim to keep credit card balances below 30% of the limit. For example, on a $500 limit card, stay under $150. If at all possible, it would be even better to keep your balance below 20% of the limit. So on that same credit card, you wouldn’t want to charge more than $100.

Monitor your credit report: Regularly monitor your credit report to catch errors or fraud that can hurt your score. One way to do this is to get a copy of your report from AnnualCreditReport.com. Ordering your own credit report will not impact your credit score and it’s free!

Ask for help: Asking for help can be hard, especially when it comes to personal finances. But that’s exactly what we’re here for! We know credit can be tricky and confusing, and things seem to change all the time. So, Prosperity Connection offers several services to help you build your confidence, knowledge, and skills. We have classes on credit, we offer 30-minute credit report reviews, and we provide 1-on-1 financial coaching for more in-depth assistance!

Give yourself grace: Remember, conquering your credit score is a journey, and just like any journey, there may be bumps along the way. Don’t be too hard on yourself – nobody’s perfect, and personal finances can be tricky. Give yourself the grace to learn and grow, and remember that every step you take toward improving your financial well-being is a step in the right direction.


By following these strategies and staying proactive in managing your credit, you can boost your score, access better financial opportunities, secure favorable loans, and enjoy the benefits of a strong credit history. Your financial well-being is in your hands, and with the right approach, you can build a brighter financial future.