There are three little numbers that loom large over a person’s ability to get a credit card or qualify for a car loan or mortgage with a favorable interest rate.

It’s a credit score, the number used to predict how likely a person is to pay back a debt on time. It can sometimes be called a FICO score for the Fair Isaac Corp. which was a pioneer in developing a method for calculating credit scores.

A credit score can range from 300 to 850. Anything above 670 is considered good; 800 and above is considered excellent. As of January 2024, the average credit score in the United States was 701.

David Domenick, managing partner of Capital A Wealth Management, a financial planning business specializing in retirement planning at 8050 Rowan Road, Cranberry Township, said a credit score is a numerical expression of how credit worthy you are.

“It comes down to simple terms: how likely you are to make your payments on time,” said Domenick.

According to Amber Jamison, manager of the Butler Township branch of Top Tier Federal Credit Union, 170 New Castle Road, a person’s creditworthiness affects most aspects of life.

“For example, if you want to get a loan for a car or a home, your credit score is assessed. Your credit score affects your loan term and your loan rate which in turn affects your payment,” she said.

And it’s not just credit card availability and loan rates that can be determined by a person’s credit score, said Julie Louttit, Butler County Community College’s director of financial aid.

Louttit, who also teaches financial literacy courses at area high schools, as well as a financial literacy course for would-be entrepreneurs at the community college, said a credit score can be used by landlords in deciding to rent someone an apartment.

“Employers can look at an applicant’s credit score. Someone with no credit score or a low credit score might not be a good candidate for a financial position,” Louttit said.

Domenick said a person’s credit score is made up of factors such as payment history, how much is owed, how long credit has been used, the number of new credit applications and the types of credit used.

Louttit said the formula that goes into calculating a credit score is: payment history, 35%; how much debt a person carries, 30%; credit history, 15%; new credit, 10%; and a person’s credit mix (loans, utility payments, department store payments, etc.), 10%.

She also said there are some misconceptions about credit scores. For one, a person doesn’t need a large income to have a credit score. Additionally, checking on a credit score will not lower the score. And a poor credit score is not permanent.

Top Tier’s Jamison said there are ways to improve a credit score.

“You can improve your credit by making your payments on time, by paying more than the minimum payment and utilizing the credit you have responsibly,” she said.

“To improve your credit score,” said Capital A’s Domenick, “You should pay your bills on time, and the balances on your credit card should be around 30% of your credit limit. For example, with a credit limit of $10,000, you should only have $3,000 in charges. Don’t go more than that.”

He also said using a credit card to make everyday purchases such as groceries and then paying the balance off in full when the bill comes due is as a good way to improve a credit score.

A way to damage a credit score, he added, is to fill out applications for multiple new credit cards. “Many cards offer rewards and discounts to get you to sign up. But that can be a negative. You don’t want to have 10 credit cards.”

Jamison added not paying your bills on time or at all, having a significant amount of debt compared to your income, and using all the credit that you have, also known as “maxing out” your credit, can all hurt a person’s credit score.

Mark Stallsmith, senior adviser at Financial Essentials, a financial services firm at 455 Pittsburgh Road, takes a contrarian view of credit scores.

“You asked why a credit score is so important?” Stallsmith said. “The premise is that it is important, and the world of debt wants you to believe it is always critical. Those three digits are designed to make you feel as if your life depends on it.

“The score does not measure how good you are with money. Nor does it measure how wealthy or successful. All it does is state you are good at making payments to banks and lenders,” Stallsmith said.

“If you are applying for a credit card or a car loan, yes you would need a credit score. If you do not wish to receive any more debt, then don’t worry about your score,” he said.

Stallsmith said it’s better to save up and buy without using debt.

“Why spend your life managing and stressing over paying bills and interest rate to a debt? The goal is to be debt free someday, then act like you want to be debt free much earlier in life,” he said.

But since most people have a credit score, it’s important to keep an eye on it.

Top Tier’s Jamison said there are three credit reporting agencies in the United States: Equifax, Experian and TransUnion.

“You can get a free annual credit report from these agencies. They are each a little different,” said Jamison. The web addresses are usa.experian.com, Transunion.com and Equifax.com.

Domenick recommends constantly monitoring your credit score by requesting an annual free report from the three agencies or by signing up with an identity-theft protection company, such as LifeLock, that will compile all three credit scores and send them to a client.