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Medical Bills • 3 minute read

Why Your Credit Score Matters

Why Your Credit Score Matters
By Mason Frenzel
Published by Ruby

Ruby's online tools and app helps you organize your medical bills and save money.

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Credit scores are a common topic in today’s world. You hear actors mention them in insurance commercials, and articles about credit reporting agencies pop up in your news feed. We know that this three-digit number affects our financial outlook, but how much do we really know about how our credit is scored and the areas of our lives it can impact? Keep reading to learn more about how your credit score can affect your future, and ways you can protect it.

Why it matters.

Your credit score can affect your life and goals in many ways. Whenever you apply for a loan, your credit score will be a deciding factor in whether or not you are approved. And if you are approved, a lower credit score can result in a higher interest rate, which means you will pay more money over the lifetime of the loan, often to the tune of thousands of dollars depending on the type of loan. Whether you are a new parent who is shopping for a family-sized home, or your car breaks down and you need to purchase a replacement, loans are an important part of the process. Make sure your credit score qualifies you for a loan that is beneficial to you.

Credit scores can also show up in unexpected ways: You may decide to pursue another degree and need a loan to help with tuition costs. Or, you might be up for a new job and a potential employer reviews your credit score. In this scenario, employers use your credit score to get a feel for your reliability and, depending on your industry, if they can trust you to manage their finances.

Your score also plays a role in your living situation, beyond qualifying for a loan. When considering apartment tenants, almost half of landlords┬ácheck applicants’ credit. Your credit even comes into play when purchasing services such as gas, water, electricity, and cell phone service. Companies providing these services often check your credit score to predict if you will pay them. A low credit score can result in a required upfront deposit or even denial of service. Needless to say, your credit score is used in some of life’s biggest moments so it is crucial to maintain a healthy one.

How your score is determined.

Many people know that having a good credit score is crucial when applying for a loan or a mortgage, but few actually realize exactly how their score is calculated. According to Experion, the quality of your credit score is determined by the following:


Bill Payment History


  • Your ability to pay bills on time is the largest factor in determining your credit score, making up 35% of the final score.


  • A late payment takes a major swipe at your score. Make sure to pay your bills on time in order to maintain your ideal score, or to keep it from lowering further if you are working to better it.




  • Utilization is the balance-to-limit ratio on your credit card. After payment history, utilization is the most important component in determining your credit score.


  • The lower your balance, the better your score. A good rule-of-thumb is to keep your percentage below 30%.


  • You can calculate your utilization by adding up your balances, as well as your credit limits. Then you divide your total balance by your total credit limit.



Credit history length


  • Creditors look at your credit history length in order to gage how long your accounts have been open.


  • They also study your credit mix, which shows your various forms of credit, such as auto loans or a mortgage. Having a diverse credit mix raises your score.



Recent Activity


  • Your recent activity lets creditors know if you have recently applied for new forms of credit.


  • Applying for multiple lines of credit in close succession raises a red flag to creditors, lowering your score.



Overall capacity


  • Your overall capacity, determined by your debt-to-income ratio, allows creditors to predict your ability to pay off a line of credit, like a loan. Investopedia explains that creditors compare your recurring debt payments to the amount of your income. The logic is that the lower your debt-to-income ratio, the more capable you are of taking on a new loan.
Next steps.

You may be thinking: Okay, I realize that I need a good credit score, but how do I go about that? Or, even: My credit score is not where it could be. What can I do to raise it? According to myFICO, these steps can help you protect your credit or improve damaged credit:


Be thoughtful about how you use your accounts.


  • Only charge something on your credit card if you know you can pay it off at the end of the month.



Only open new accounts as needed.


  • Rather than shift your debt onto a new credit card, focus on paying it off instead.


  • Medical bills frequently send people into debt because the cost of care is extremely high and it is difficult to predict when you will require medical treatment. As a result, people often struggle to pay off this debt and it harms their credit. To learn more about how debt affects your finances over time, read The Long Term Effects of Medical Debt.


  • Applying to various new lines of credit can actually lower your score.



Check credit score and history regularly


  • By frequently checking your credit score and history, you will know sooner rather than later if something is off. This may be a sign of fraud, or even an error on the creditors’ side, and it helps to take care of these issues before they get out of hand.


  • If your credit or credit history is compromised by an error or fraud, you could face higher interest rates on loans or even be denied a line of credit.
Ruby as a resource.

Maintaining a healthy credit score, or raising a lower-than-desired one, can seem like a daunting task. If unpaid medical bills are holding you back, Ruby can help. Our Medical Bill Manager app will help you get on a plan to pay off your medical debt, check medical bills for errors, and negotiate with healthcare providers to lower the amount you owe.

Click here for early access!

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