Your credit score can have an enormous impact on your life, determining everything from your ability to get a bank account, the interest paid on your credit cards, and even your eligibility to rent a home. But where does this mysterious number come from, how is it calculated, and what can you do to bring up your score? Knowing the answers to these questions can help boost your rating and get your finances on the right track.

What Are Credit Scores?

A credit score is essentially a number that tells lenders how likely you are to repay a debt, based on past behavior. Credit scores typically range from 300 to 850, with higher numbers tying to lower interest rates, easier approval for loans, and other benefits. Lenders usually consider anything over 670 to be “good,” while ratings higher than 800 are categorized as excellent.

How Credit Scores Are Calculated

The three major credit reporting agencies, Experian®, TransUnion®, and Equifax®, each collect reams of data, which they use to calculate credit scores. Your history of on-time payments for credit cards, car payments, and other accounts are major factors, along with the amount of credit you have available. They also take into account how long you’ve had your credit and bank accounts, and whether any debts have been reported to a collection agency.

How to Increase Credit Scores

Even if you’ve made a mistake in the past or have never used credit at all, there are a few steps you can take to increase your rating. For instance, paying all bills on time every month and decreasing the amount you owe may bring the score up within a few months. You should also think carefully before applying for new credit, since inquiries can also negatively affect ratings.

As one of the only local banks in Arkansas’s River Valley, First State Bank offers home-town service, combined with the high-tech tools you’d expect from a big national chain. They pride themselves on offering a comprehensive range of financial services, from checking and savings accounts to mortgages and auto loans. Visit their website to find your nearest location, get more tips and updates on Twitter, or call (479) 498-2400 to reach their main office in Russellville.