Overhead shot of a person checking their credit score on a mobile app while drinking coffee.

What Family Caregivers Need to Know About Credit Scores

Building good credit is an important part of developing financial resilience – especially when your care recipient’s unpredictable healthcare costs might make securing a favorable loan necessary.

Reviewed by
Kate Grayson

As a family caregiver, credit scores might be top of mind. It can feel like you need good credit for everything, from loan applications to apartment rentals to securing medical payment plans. Building good credit is an important part of developing financial resilience – especially when your care recipient’s unpredictable healthcare costs might make securing a favorable loan necessary. In this article, we’re going to demystify credit, and share how you can improve your credit score.

What is a Credit Score?

Financial institutions use credit scores to estimate how safe it is to lend money to an individual – otherwise known as a person’s “creditworthiness.” It is a reflection of their credit history and how likely they are to repay their debt. 

A good credit score can help individuals obtain better interest rates on loans, credit cards, and mortgages, while a poor credit score can result in higher interest rates, denied loan applications, and difficulty obtaining credit. A credit score usually ranges from 300 to 850, with higher scores indicating lower risk. 

What is a Credit Report?

Credit scores are created by pulling information from an individual’s more detailed “credit report,” and using an equation to turn it into an easier-to-digest number. The three credit bureaus – Equifax, Experian, and TransUnion – track very detailed information about an individual’s credit history, such as:

  • All accounts tied to their name, including closed accounts and ones where the individual is/was an authorized user
  • If there have been any late payments, and how late those payments were
  • “Hard pull” credit inquiries, when a lender gets an individual’s permission to access their full credit history as part of a loan application
  • “Soft pull” credit inquiries, often used by financial institutions to prequalify you for offers
  • Accounts that have been or are currently in collections
  • Unpaid child support or alimony payments
  • Identifying information, such as known names and addresses

Credit activity generally stays on your credit report for seven years. So if you’ve struggled with your credit in the past, know that the end is in sight and that the late payments or items in collections will eventually drop off your credit report.

Know that the three credit bureaus all track slightly different information, so some variances on your credit reports are to be expected.

Components of Your Credit Score

Your credit report is then used to create the more common credit score, which is what’s used by lenders to evaluate loan applications. Your credit score is determined by the following criteria:

Payment History

Whether or not you have paid your bills and debt on time accounts for approximately 35% of your credit score, making it the most important component. Late payments, delinquencies, and defaults can have a significant negative impact on your score.

Credit Utilization

How much of your available credit you’re using accounts for aprproximately 30% of your credit score. High utilization – meaning that you are using a high percentage of available credit – can signal that you are overextended and therefore a higher risk to lend to. For optimal credit, you should aim to keep your utilization below 30%.

Length of Credit History

It shows How long you have had your various credit accounts makes up 15% of your score. The longer your credit history the better, as it shows that you are reliable over time.

Credit Mix

This factor accounts for 10% of your score. It shows the different types of credit accounts you have, including credit cards, installment loans, mortgages, and other debts. Having a mix of credit types can signal that you are capable of managing different types of debt and will have a positive impact on your score.

Credit Inquiries

How often you have applied for new credit accounts over recent years accounts for 10% of your credit score. Opening too many new accounts in a short period of time can signal that you are taking on too much debt and pose a risk to lenders.

How to Improve Your Credit Score

Improving your credit score can feel like an uphill battle, but with some small steps you can be on your way to increasing your credit score in no time. 

  • Always make the minimum payment. Even if you can’t pay a bill in full each month, prioritize making the minimum payment. This will prevent you from having late payments on your credit report.
  • Pay overdue bills. If you have any bills overdue or items in collections, paying them off can increase your score.
  • Make more frequent payments. Paying your bill more frequently keeps your account balance looking low, important for your credit utilization.
  • Get a secured credit card. If you are trying to build your credit history and don’t quality for a traditional credit card, speak with your bank about getting a secured credit card.
  • Become an authorized user. If you have a loved one with better credit history, becoming an authorized user on one of their cards can be an instant boost.

Resources for You

Credit Report

All individuals are entitled to access their own credit report for free annually, via AnnualCreditReport.com. This safe website is a US government-mandated way for individuals to download their credit reports from all three credit bureaus. You can typically access each credit report for free annually, however since the pandemic the credit bureaus have been allowing individuals weekly access to their credit reports.

Credit Score

You can track your credit score for free over time with Credit Karma. Your bank may also offer a similar credit score monitoring service, which is useful to take advantage of. Remember, your score will vary from day to day and depending on which service you use; small variances in your score are nothing to worry about.

Aidaly is Here for You

At Aidaly, we’re on a mission to help every family caregiver get paid, and your financial health is our priority. 

  • We offer a regular events and workshops on your personal finance as a family caregiver
  • Join our free community to connect with other family caregivers
  • Community members are can access 1:1 financial coaching, offered to help you create a customized game plan targeted to your individual needs

See if you’re eligible to receive compensation for your caregiving work.

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