The Basics of a Credit Score

Understand how credit scores work, what impacts them and how to improve yours with tips from your trusted financial source.

Understanding the Basics of a Credit Score: What Every Customer Should Know

At Mid Penn Bank, we believe that financial empowerment starts with knowledge. Whether you’re applying for your first credit card, shopping for a new car or planning to buy a home, your credit score is a key factor in nearly every major financial decision.

But what exactly is a credit score, and why does it matter so much?

Let’s break it down.

What Is a Credit Score?

A credit score is a three-digit number that reflects your creditworthiness, or how likely you are to repay borrowed money. Lenders, landlords and even some employers may use this score to evaluate your financial responsibility.

Most credit scores range from 300 to 850, with higher scores indicating better credit health.

Who Calculates Your Credit Score?

Your credit score is calculated by credit bureaus, primarily Experian, Equifax and TransUnion, using scoring models like FICO® and VantageScore®.

These models analyze your credit report, which includes your credit accounts, payment history and other financial behaviors.

Key Factors That Affect Your Credit Score

Understanding what impacts your credit score can make it easier to build and maintain strong credit. Here are the main factors:

1. Payment History (35%)
   Do you pay your bills on time? Late payments can significantly lower your score.
2. Credit Utilization (30%)
   This is the amount of credit you’re using compared to your total available credit. Try to keep usage below 30 percent.
3. Length of Credit History (15%)
   The longer your credit accounts have been open, the better.
4. New Credit Inquiries (10%)
   Applying for new credit results in a hard inquiry, which can slightly reduce your score.
5. Credit Mix (10%)
   A variety of credit types, such as credit cards, auto loans and mortgages, can help your score.

Why Your Credit Score Matters

Your credit score can influence:

• Loan approvals
• Credit card eligibility
• Interest rates
• Security deposits
• Even job applications in some cases

A higher score often means better financial opportunities and lower borrowing costs.

How to Improve Your Credit Score

Improving your score takes time and consistency. Here are a few tips from our team:

• Pay all bills on time
• Reduce credit card balances
• Avoid opening too many accounts at once
• Review your credit report for errors
• Keep old accounts open (if in good standing)

We’re Here to Help

At Mid Penn Bank, we’re committed to helping you build a strong financial future. Whether you’re looking to establish credit or improve your current score, our team is here to support you every step of the way.

 

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