For years, I have educated employees of companies on personal finance. I have found there is one common gray area that most people inquire. “What is a credit score?”. Many are confused and curious why they should care.

In simplest form, a credit score is a number assigned to you that indicates to a money lender how likely you are to pay back the money they lend you. A number between 0-850 is assigned to determine your credit worthiness. Your credit score is based on a variety of factors and can be used to determine whether you will qualify to borrow money as well as the terms, including the interest rate of the loan. Consistently paying your bills on time and in full will help prevent damage to your credit score in the future. These scores are created based on amount of current credit, type of current credit, payment history of current credit. These items are recorded and saved for up to 7 years to provide solid history for the creation of your score.

The higher your credit score, the better your loan terms will be. Life is cheaper the higher your score. Be aware of the tier it falls into to continually work on improving the score:

Exceptional Credit Score   800-850

Very Good Credit Score    740-799

Good Credit Score              670-739

Fair Credit Score                 580-669

Poor Credit Score               300-579

No Credit                              under 350

The better your score, the better your opportunities for low interest credit cards, home loans, car loans, and lower insurance rates. The common forms of your credit score can be found as a FICO score which is a well-known measure created by the Fair Isaac Corporation and used by credit agencies to indicate a borrower’s risk. Another credit score is the VantageScore, which was developed via a partnership between three credit reporting agencies: Equifax, Transunion, and Experian. Each consumer has the legal right to one free credit report provided by each of these credit reporting agencies annually.

Being aware of your credit score and history is extremely important. Understanding how it all works and where you stand is instrumental in developing a strong fiscal foundation. Check your credit report, confirm everything is correct on it, and build the best score you can achieve.

This article was written by Helen Hartman. She is a Wealth Advisor at Redwood Financial Network and she can be reached at 440-287-5020 or