Your credit score makes a big difference in your life: It can help you qualify for credit cards or car loans, let you skip deposits on utilities and even make car insurance more affordable.
But that three-digit number is not who you are.
While it’s easy to feel discouraged about a low score, it’s important to remember that you can change it.
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Why a low score feels so bad
“In our culture, credit is king, and if you don’t have it or don’t have access to it … that taps into one of our greatest fears — that we don’t have a place,” explains Ted Klontz, an associate professor at Creighton University of the practice of financial psychology and behavioral finance. No one likes feeling excluded or unworthy.
But a credit score is simply the result of an impersonal algorithm applied to information in your credit reports.
Your score doesn’t tell the backstory: It could mean you’re disorganized — or it could mean you had a baby and charged diapers and other necessities to your credit cards. It could mean that you lost your job and simply couldn’t pay all your bills — or that you borrowed money and made no effort to pay it.
My score, myself?
Just as a good score doesn’t mean you are trustworthy and ethical, a low score doesn’t mean you aren’t. If your score is lower than you’d like, keep it in perspective.
The first thing Chicago certified financial planner Kelley Long of Financial Finesse recommends has nothing to do with money: “Give yourself some grace.” Everyone makes mistakes, and rumination and regret won’t help you move ahead.
“The past is the past,” she says.
Figure out why your score is low
Two common causes for score damage are missing payments and charging up credit cards. You can check to see if these issues are on your credit reports by using AnnualCreditReport.com.
Also, learning about how credit scores are calculated can help you know what to avoid and set realistic expectations for how quickly your score is likely to increase. A late payment, for example, casts a long shadow on your credit score — up to seven years. But a high balance on a credit card stops hurting your score as soon as you pay it down and the lower balance is reported to the credit bureaus.
Know how your habits contribute
Long says she’s seen disorganization shred the scores of high-income clients. You may always be the sort who misplaces your keys or phone, but you need to figure out how to pay bills on time, she says. If you see missed payments on your reports, try automating payments or using account alerts and calendar reminders.
If you are using a significant portion of your credit limits, try making more than one payment per month to keep the balance lower. If you’re routinely spending more than you bring in, you may need to redo your budget or find an additional source of income.
Know why you want a better score
Klontz says goals you can see, smell or touch tend to be more motivating. If you want a better score so you can buy a cabin in the woods or qualify for a rewards card that will allow you to travel more, imagining those is much more motivating than just wanting to see a higher number.
Long says it’s the difference between wanting to run a marathon because your partner wishes you would exercise more and training for a marathon because you want to run one.
Celebrate milestones
As you work to build your score, give yourself rewards at intervals of 10 to 20 points, Klontz suggests. There’s no reason to wait until your score hits the level you ultimately want to achieve. It’s unlikely to get there overnight.
Long agrees that monitoring your score can help to connect choices and behaviors with scores. Many personal finance websites and credit card issuers offer free access to credit scores; pick either a free FICO or VantageScore and stick with the same score version as you check your progress. Even when consulting the same score source, expect fluctuations, because the data on your credit reports varies from month to month.
And when you finally achieve that hoped-for credit score? Try to tack on a few more points so that a fluctuation down doesn’t move you to a lower credit band.
After that, Long suggests switching your focus. “Reaching a great credit score may feel great for a little while,” she explains. “But attaining a positive net worth and watching it grow means you're getting closer to financial freedom, which means you can start making life decisions based on your values and not because of money.”
And nobody’s going to judge you harshly for that.
Bev O’Shea is a staff writer at NerdWallet, a personal finance website. Email: boshea@nerdwallet.com. Twitter: @BeverlyOShea.
NerdWallet is a USA TODAY content partner providing general news, commentary and coverage from around the web. Its content is produced independently of USA TODAY.
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