What you need to know about Credit Scores

Have you heard about credit scores? It was only recently that I learned about credit scores and its importance in one’s financial standing. But, just like some Pinoys I know, I have had a bad experience with credit cards which is why I am allergic to it (haha! yes, literally).

My Trauma with Credit Cards

I have owned two credit cards before and both I had bad experiences. My first one, I got from opening a passbook for my savings. The credit card came in the mail, and since I was still single during that time, I felt really proud of myself. I would only use it for emergency purposes but since it had annual fees I discontinued it. My mistake was not calling the bank to discontinue my account. I thought that if I just stop using it, and not pay the annual fees they’ll just block the account. To my dismay, I had to pay a large amount just to close the account because of the interests in annual fees.

The second time I owned a credit card was when I was given a pre-approved card in  a bazaar I went to. I told myself it’ll be my redeeming moment to use my credit card properly. But just like my first credit card, I had bigger problems with this credit card.

The Lesson

I realized during those times that I wasn’t really prepared to own a credit card. I was still very naive with credit card policies and rates which made me ignorant on the consequences of my actions. But as I educate myself with financial literacy I learned how important it is to own a credit card with a GOOD standing to increase my credit score.


Credit score is a snapshot of your credit history. It is a gauge for lenders to gauge how much to lend you or to even lend you in the first place. It is a number between 300 – 850 that depicts a consumer’s creditworthiness. The higher the score, the better a borrower looks to potential lenders (Kagan, 2021). It is based on credit history, the amount of debt, and the time it took for repayment, and other factors as well.

So why is it so important?

Because it will matter when you want to avail of huge loans such as car and housing loans. Your lenders will look into your background and see whether you have a good standing with financial institutions. A good standing means better chances of getting approved of loans you want to avail.

How to increase your credit score?

If you are like me that dreams to have your own house and lot or car that requires loaning, then increasing our credit score means higher chance of getting approved by lenders. So here are some ways to increase credit score:

Pay on time.

Paying on time means you are a good payer. And financial institutions or lenders would lend to people who are responsible with paying. If it is possible, pay more than the minimum amount every month.

Up your Credit Line.

A higher credit line means you are in good standing with the bank, which increases your credit worthiness. But make sure not to max up this credit line so you’ll have a lower credit utilization rate.

Don’t close old credit cards.

Your credit score is based on your credit history so a longstanding credit card account means you are able to maintain an account.

Manage your finances carefully.

Your credit score is dependent on how you manage your finances. So it is important to be careful about how you spend your money and how you pay for it. Having a good financial literacy and intelligence will help you take care of your credit scores as well.

What if you have an outstanding debt that puts you in a low credit score? How do you repair it? Read more on my next blog! 🙂

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