Rebecca Safier, CCC, is a personal finance writer. Her work has been published in U.S. News & World Report, MarketWatch, NextAdvisor, Yahoo Finance, and other publications, and she has contributed expert commentary to Entrepreneur, Money.com, NBC, and more. When she's not covering all things personal finance, Rebecca teaches blogging strategies on her website, Remote Bliss.
Key takeaways
A credit score is a three-digit number, typically from 300 to 850, that tells lenders how likely you are to repay a loan on time.
Your score is determined by five key factors: payment history makes up 35%, amounts owed is 30%, length of credit history is 15%, credit mix is 10%, and new credit is 10%.1
It's normal to have multiple credit scores, since you'll have different scores from different credit bureaus and scoring models.
Building or improving your credit score requires consistent, responsible credit habits over several months.
Understanding how credit scores work is one of the most important steps toward mastering your finances. Your credit score affects everything from getting approved for loans and credit cards to the interest rates you'll pay.
In this guide, we'll cover how credit scores work, what factors influence them, and how you can start building or improving yours today.
What is a credit score?
A credit score is a three-digit number, typically from 300 to 850, that represents your history with credit and debt. Think of it like a grade on a financial report card that lenders use to assess the risk of lending you money.
When you apply for a credit card, loan, or mortgage, lenders review your credit score to gauge the likelihood that you'll repay them as agreed. A higher credit score shows responsible financial behavior, making you more attractive to lenders.
This means better interest rates and more approval chances, which saves you money over time. Lower credit scores often lead to higher interest rates or outright rejections when applying for credit.
Note: Every person has multiple credit scores issued by different credit bureaus and scoring models. Credit scores vary by scoring model, but most use data from the three major credit reporting agencies, Equifax®, Experian®, and TransUnion®.
What are the credit score ranges?
Credit score ranges will vary by scoring model, but the FICO® model is one of the most common. It uses a range between 300 and 850, where higher numbers indicate less credit risk.
Here's a breakdown of the FICO scoring model2:
FICO credit score ranges
Rating
800-850
Excellent
740-799
Very good
670-739
Good
580-669
Fair
300-579
Poor
VantageScore® is another popular credit scoring model that also ranges from 300 to 850, but its ranges are somewhat different3:
VantageScore credit score ranges
Rating
781-850
Superprime
661-780
Prime
601-660
Near prime
300-600
Subprime
How credit scores work
Credit scores are based on the information in your credit reports. In general, five main factors influence your credit score, as seen in the FICO categories below1:
Payment history (35%): This is your track record of making payments on time and includes any missed payments.
Credit utilization (30%): This is the amount of credit you use compared to your total available credit limit. Lenders like to see low credit utilization ratios – if you max out all your credit cards, they probably won't want to offer you more credit.
Length of credit history (15%): This is how long you've had certain accounts open. Closing your oldest credit card could ding your credit score in some cases because it reduces your average age of accounts.
Types of credit used (10%): This is the mix of credit accounts you have, including credit cards, loans, and mortgages.
New credit applications (10%): This includes new credit applications, which can temporarily lower your score. Lenders might assume you're financially unpredictable if you've just opened a lot of new accounts at once.
Why is credit important?
Your credit score plays a big role in your financial life.
It helps lenders understand how likely you are to repay borrowed money and can help you qualify for lower interest rates, better credit cards, and higher borrowing limits. This can save you hundreds or even thousands of dollars over time.
Good credit can also make everyday milestones easier. Landlords often check credit when you apply for an apartment, and some employers or utility companies may review it as part of their screening process.
How to check your credit score
There are a few different ways to check your credit score:
Go through the three major credit bureaus: You can get your credit score directly from the websites of the three major credit bureaus.
Check your credit card or loan statement: You may be able to find your credit score on your statement or by logging in online or on your mobile device if you have an open credit card account.
Use a credit monitoring service: Various credit monitoring services are available. These services give you access to your credit score and provide ongoing updates to your credit activity.
Track your FICO score4 for free in the Chime app: If you're a Chime member, you can see your latest FICO Score right in the Chime app once you complete Experian enrollment. You'll also get access to personalized tips to build credit and factors influencing your score.
You can go to AnnualCreditReport.com for one free copy of your credit reports from all three main credit bureaus. While these reports won't contain your credit score, they can still provide a comprehensive overview of your current credit and financial standing.
Why you may have different credit scores
Various scoring models, like FICO and VantageScore, have unique algorithms, credit score categories, and factor weightings. As a result, you may get a different evaluation from each model, leading to variations in your credit score.
There are a few other reasons you may have different credit scores:
Timing: Creditors report data to the bureaus at different times, so your credit report may sometimes reflect different information.
Industry-specific scores: Lenders may use industry-specific credit scores tailored to their type of lending, like auto or mortgage scores.
Only reporting to one or two credit bureaus: Not all lenders or credit issuers have to report your activity to all three credit bureaus. The score you get from one bureau could be missing information that could impact your score.
How to improve your credit score
Your credit habits can make or break your credit score. While you can't always control how quickly you build or improve your credit score, following the tips below will help improve your score over time:
Pay bills on time: Consistently making on-time payments is one of the most significant factors in improving your credit score.
Keep credit utilization low: Aim to reduce your credit card balances to below 30% of your credit limits.5 A lower credit utilization can positively impact your score.
Keep old credit card accounts open: The length of your credit history matters. Keep older, well-managed accounts open to demonstrate a longer credit history.
Diversify your credit mix: A mix of credit types, like credit cards, loans, and mortgages, can positively influence your score. That said, don't take on unnecessary debt just to improve your score.
Avoid opening too many new accounts: Several credit inquiries at once can lower your score. Avoid applying for multiple new credit lines within a short period.
Regularly check credit reports for errors: Monitor your credit reports for inaccuracies or errors and call the credit bureaus to correct them if you find any.
In addition to the healthy credit habits above, remember to be patient – improving your credit score takes time. With dedication and consistency, your credit score should gradually improve.
Take control of your credit journey
Your credit score isn't just a number – it's your gateway to better financial opportunities. Working to improve your credit can help you land better rates and terms in the future.
Keep in mind that building good credit is a long-term process. Start with one positive habit, like paying bills on time, and build from there. Your future self will thank you for taking action today.
For additional insights on when your progress will show up, see our guide on how often scores update.
Frequently asked questions about credit scores
What credit score does an 18-year-old start with?
You don't start with any credit score at 18 – you begin with no credit history at all. Think of it as a blank slate waiting for you to build positive credit history.
How do I get a credit score if I don't have one?
Start by opening a line of credit that reports to credit bureaus, such as a secured credit card. You could also become an authorized user on someone else's credit card. After about six months of activity, you'll have a credit score.6
Can checking my own credit score hurt it?
No, checking your own credit score is a soft inquiry that doesn't affect your credit. Only hard inquiries from lenders when you apply for new credit can temporarily lower your score.
How long does it take to build a credit score?
A scoring model can typically calculate your score after about six months of credit activity.6 Make on-time payments from day one to establish good credit habits.
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