What is a credit score?
Three credit bureaus, Equifax, Experian and TransUnion, keep a credit report on you: your cards, loans and whether you’ve paid on time. A credit score turns that report into a number. Most lenders use a FICO score; some use VantageScore. Both run from 300 to 850.
A better score saves real money. On a mortgage, the difference between a fair and an excellent score can be a full percentage point or more on your rate. Here’s what a point either way means on a typical loan:
- 6.24% $364,273 interest in all
- $1,845/mo
- 7.24% (average) $436,022 interest in all
- $2,044/mo
- 8.24% $510,610 interest in all
- $2,252/mo
Principal and interest only. Lenders set your rate partly from your credit score.
What goes into a FICO score
| Factor | Share | What it means |
|---|---|---|
| Payment history | 35% | Paying every bill on time |
| Amounts owed | 30% | Mainly how much of your card limits you use |
| Length of credit history | 15% | How long you’ve had accounts |
| New credit | 10% | Recent applications and new accounts |
| Credit mix | 10% | Having different kinds of credit |
What’s a good score?
| FICO score | Rating |
|---|---|
| 800–850 | Exceptional |
| 740–799 | Very good |
| 670–739 | Good |
| 580–669 | Fair |
| Below 580 | Poor |
Credit utilization
The amount you owe on cards, as a share of your total limits, is the quickest thing to change. Try it:
30%
Good
Under about a third is fine for most scores.
A rule of thumb: scoring models differ, and paying on time matters most.
How to raise your score
- Never miss a payment. Set up autopay for at least the minimum.
- Pay cards down before the statement date, because that’s the balance reported to the bureaus.
- Keep old cards open, even if you rarely use them: they add to your history and your available credit.
- Apply for new credit only when you need it.
- Check your reports for mistakes and dispute any you find with the bureau.
How long problems last
Negative items fade over time and then drop off: hard inquiries after two years, late payments and collections after seven, and bankruptcies after up to ten. A recent late payment hurts far more than an old one, so the best fix for a damaged score is a long run of on-time payments. See does checking your credit score lower it? for the full list.
Starting from nothing
With no credit history you have no score. A secured credit card, a credit-builder loan from a credit union, or being added as an authorized user on a family member’s card can get you started. Use it a little and pay it off in full every month.
For a step-by-step plan, see how to build credit from scratch. If card debt is holding your score down, the credit card payoff calculator shows how fast you can clear it.