Your credit score affects the rates you’re offered on loans and cards. It’s built from a few factors you can understand and influence.
Key takeaways
- Credit scores are calculated from the information in your credit reports.
- Payment history and amounts owed are among the most important factors.
- Keeping card balances low relative to your limits can help your score.
- Checking your own credit doesn’t hurt your score.
A credit score is a three-digit number that helps lenders estimate how likely you are to repay borrowed money. It can affect your chances of approval and the interest rate you’re offered. Understanding what goes into it makes it far less mysterious.
Where scores come from
- Credit reports are kept by the three nationwide credit bureaus: Equifax, Experian and TransUnion.
- Scoring models, such as FICO and VantageScore, analyze that information to produce a score.
- Several scores exist. Because reports and models differ, you can have different scores at the same time.
The main factors
FICO, one of the most widely used scoring companies, describes the general weight of each factor like this:
| Factor | Approximate weight | What it means |
|---|---|---|
| Payment history | 35% | Whether you pay on time |
| Amounts owed | 30% | How much of your available credit you use |
| Length of credit history | 15% | How long your accounts have been open |
| New credit | 10% | Recent applications and new accounts |
| Credit mix | 10% | The variety of credit types you have |
These are general figures for the population as a whole. Other scoring models weigh factors differently, but the same themes come up.
Habits that support a healthy score
- Pay on time, every time. Setting up autopay for at least the minimum helps avoid missed payments.
- Keep balances low. Credit utilization is the share of your credit limits you’re using; lower is generally better.
- Keep older accounts open when it makes sense, since the length of your history matters.
- Apply for new credit only when you need it, since hard inquiries can have a small, temporary effect.
Money tip
If you can, pay down your card balance before the statement closing date. That can lower the balance reported to the credit bureaus.
Check your reports regularly
Errors on credit reports can drag down your scores. Our guide to checking your credit report and disputing errors explains how to review your reports and fix mistakes.
Worth noting
Be cautious of companies that promise to raise your score quickly for a fee. You can dispute inaccurate information yourself, for free.
Building credit from scratch
- A secured credit card, which uses a deposit as your credit line, is a common starting point.
- Some people become an authorized user on a family member’s well-managed account.
- Whatever you choose, small purchases paid in full each month build a positive history.
The bottom line
Pay on time, keep balances low, apply for credit sparingly and check your reports regularly. When you do borrow, compare offers using the APR rather than the monthly payment alone.
Common questions
What is a good credit score?
It depends on the scoring model and the lender. Many common scores range from 300 to 850, and higher scores generally qualify for better terms.
Does checking my credit score lower it?
No. Checking your own score or report is a soft inquiry and doesn’t affect your score. Hard inquiries from applications for new credit can have a small, temporary effect.
How long do late payments stay on my credit report?
Late payments can generally remain on credit reports for up to seven years, though their effect on your score usually lessens over time.
Do I have just one credit score?
No. Different scoring models and the three nationwide credit bureaus can produce different scores for the same person.
This article is for general information and education only and isn’t personal financial, tax or legal advice. Rates, fees and rules change, so check current details with the provider or an official source before making decisions.