Understanding Your Credit Score: What It Is and How to Improve It
Learn how credit scores are calculated, what factors matter most, and actionable steps to raise your score regardless of where you're starting
Your credit score is a three-digit number that has an outsized impact on your financial life. It determines whether you get approved for loans, what interest rates you pay, and sometimes even whether you get an apartment or a job. Yet most people don't understand how it works.
What Is a Credit Score?
A credit score is a numerical summary of your credit history. It predicts how likely you are to repay borrowed money. The most common scoring model is FICO, which ranges from 300 to 850.
| Score Range | Rating | What It Means |
|-------------|--------|---------------|
| 800 – 850 | Exceptional | Best rates available. Top 21% of consumers. |
| 740 – 799 | Very Good | Better than average. Qualifies for most products. |
| 670 – 739 | Good | Near or slightly above average. Generally approved. |
| 580 – 669 | Fair | Below average. May face higher rates or deposits. |
| 300 – 579 | Poor | Well below average. Difficulty getting approved. |
How Your Score Is Calculated
FICO scores are built from five factors, each weighted differently:
1. Payment History (35%)
This is the single biggest factor. Every on-time payment helps. Every late payment hurts — and recent late payments hurt more than old ones. A single 30-day late payment can drop your score by 60 to 110 points.
2. Credit Utilization (30%)
This is how much of your available credit you're using. If you have a $10,000 credit limit and a $3,000 balance, your utilization is 30%.
The general guideline is to keep utilization below 30%, but below 10% is ideal. Our Credit Utilization Calculator can help you figure out where you stand.
3. Length of Credit History (15%)
Longer is better. This includes the age of your oldest account, the age of your newest account, and the average age of all accounts. This is why closing old credit cards can sometimes hurt your score.
4. Credit Mix (10%)
Having different types of credit — credit cards, installment loans, a mortgage — shows you can handle various types of debt responsibly.
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