How credit score works: using it in a smart way

Posted on Jan. 31 2022 By: Oneblinc 6 min. read

The expression “credit score” is well known by a lot of people. Yet, only a small portion of these people know exactly how credit score works. But why is it important to understand this concept and how it affects your life?

The answer is simple: the most significant purchases that a person will make in her life are completely conditioned to having a good credit score. When buying your first house, your first car, or even applying to a college loan, your credit score will be checked. 

Moreover, part of the decision of approving or declining the loan is going to be dependent on your credit score. For this reason, in this post, we’ll help you understand what credit score is and how to use it in a smart way. 

Also, keep reading to know how to improve your credit score and what credit score is good

What is credit score

A credit score is a number that represents the degree of trustworthiness of a consumer. It’s measured with values between 300 and 850. In simple terms, higher values means that you’re a good buyer, i.e, a consumer that pays her debts in due time.

Every credit score is based on the credit history of the consumer. It considers the number of open accounts, the total amount of debt, repayment history, among other factors. Credit companies and institutions make use of credit score as a way to determine the probability of a person to pay that debt.

Therefore, the credit score is a key factor for lender’s to decide when to allow credit for a certain person. The amount of credit available to you, as well as the payment conditions, are both determined by your credit score.


The credit score model was created by a software company called Fair Isaac Corporation (FICO). Nowadays, it’s largely used by many financial institutions, from banks to credit card companies. 


The credit score range establishes different levels of trustiness for each consumer. People with higher scores are usually offered better conditions, such as lower interest rates and better payment conditions.

It’s of great importance that you understand which level you currently are. This will help you with evaluating your own finances and better knowing how a credit score works.

These are the levels of the credit score range:

  • Excellent: from 800 to 850;
  • Very Good: from 740 to 799;
  • Good: from 670 to 739;
  • Fair: from 580 to 669;
  • Poor: from 300 to 579.

Each level requires different conditions and offers different benefits. For example, consumers with a credit score higher than 700 are usually offered with lower interest rates at different types of loans.

Conversely, consumers with credit scores below 640 are usually considered “riskier borrowers” and hence are offered higher interest rates together with more conditions for credit approval.

As we’ve mentioned before, understanding how credit score works in USA is relatively easy: if you’ve a good credit history, then you get better scores. In addition, it’s important to mention that different institutions may use different numbers of each score level.

According to FICO, each credit score is evaluated based on the following factors:

  • Payment history: whether consumers pay their obligations in due time;
  • Total amount: how much of the available credit is being used;
  • Length of credit history: how long you’re registered at the credit score system;
  • Types of credit: how many different loans the consumer has;
  • New credit: how many different accounts the consumer has applied for.

By considering these factors, you can understand better how credit score works and be more conscious about your current score. If you’re still having doubts on how to improve your current score, follow our tips in the next section!

How to improve your credit score

There is an important fact about how credit score works: it’s often used in very different situations, from renting an apartment to buying electronics or hiring specialized services. So, one must know what to do in order to improve her credit score:

  1. Always pay your bills in due time. If possible, pay some of them earlier;
  2. Ask for better credit lines. If you already have a credit card account, call and ask for a credit increase;
  3. Avoid using multiple credit card accounts;
  4. Avoid closing existing credit card accounts. If you already applied, then stop using it, but don’t close it.
  5. Use multiple types of credits and loans (only when necessary). 

person checking their credit score on the phone.

How to use it in a smart way

Now that you’ve learned how credit score works, it’s necessary to stress an important piece of advice: having a good credit score is no excuse for using your credit card unwisely.

You must be very cautious with using your credit card or any kind of credit whatsoever. Before using any kind of credit, be sure that you’re taking a conscious and responsible decision.

However, you don’t need to believe the financial myth according to which credit is something evil that should never be touched by anyone. Credit can be used in a smart way and for this very reason you should take care of your credit score.

These are some of the smart ways one can use credit:

  1. To fund investment opportunities for which there is not enough available cash;
  2. To get through emergencies and other crisis;
  3. To invest in job opportunities;
  4. To invest into courses or equipment that will increase your net salary.

Knowing what is credit score and how it works is a powerful tool to help you handle a number of financial situations. 

Check your financial health!

Learning about how credit score works is a great way of taking care of your finances. After all, financial health does not mean worrying about your spendings only, but also paying attention to other aspects, such as credit history.

If you’re worried about your finances, check your financial health with OneBlinc! We’re a leading company in the finance market, with a great history of helping people from different financial backgrounds.

An important concern of our team is to help our clients to empower themselves in the face of adversities and financial difficulties. Besides, diversity and inclusion are key components of our company.

About us

Unexpected things happen more often than we would like them to. That’s why OneBlinc is here to help, whether you have an emergency or just need that extra cash to go through the end of the month. We believe in people, and we understand that everyone might need money someday, somehow.