A credit score is a numerical summary generated from information in a consumer's credit history. It is designed to help predict credit risk. Payment history, amounts owed, length of credit history, types of credit, and new credit are among the factors that can be considered by widely used scoring models. The exact formula depends on the scoring model.
What Is a Credit Score?
A credit score is a number calculated using information from your credit report. Lenders may use credit scores along with other information when evaluating applications for products such as credit cards, personal loans, auto loans, and mortgages.
Think of your credit report as the underlying record and your credit score as a numerical calculation based on information in that record.
Your score can change as information in your credit report changes. A payment being reported, a credit-card balance changing, a new account appearing, or an inaccurate item being corrected can all potentially affect a score depending on the scoring model.
Credit Score vs. Credit Report
Credit scores and credit reports are related, but they are not the same thing.
Credit report
A record of information about your credit accounts and credit history, such as account balances, payment history, account status, and inquiries, depending on the report and bureau.
Credit score
A numerical value calculated using information from a credit report according to a particular scoring model.
You can have several credit scores because different companies and lenders may use different scoring models or different versions of a model.
What Is a Good Credit Score?
There is no single score range that every lender or scoring model uses. For example, the commonly used FICO Score models generally use a range from 300 to 850, while some other models use different ranges.
Within a particular scoring system, scores are often grouped into categories to help describe relative credit risk. Those categories should be interpreted in the context of the specific scoring model being used.
| FICO Score range | Common FICO category |
|---|---|
| 300–579 | Poor |
| 580–669 | Fair |
| 670–739 | Good |
| 740–799 | Very Good |
| 800–850 | Exceptional |
These categories describe FICO's commonly used scoring scale. They should not be treated as universal categories for every credit score, lender, or scoring model.
How Is a Credit Score Calculated?
Credit scoring models analyze information from your credit history and assign different importance to different types of information.
A commonly used FICO framework considers five broad categories:
Payment history
Whether you have paid credit accounts on time is an important part of many scoring models. Late payments and other negative payment information can affect scores.
Amounts owed
The amount of debt you owe can matter. Revolving credit utilization, which compares credit-card balances with available limits, is particularly relevant to many scoring calculations.
Length of credit history
The age of your credit accounts and how long different accounts have been established can contribute to scoring calculations.
Credit mix
The types of credit accounts in your profile can be considered. You do not need to open accounts you do not need simply to create a particular mix.
New credit
Recent applications for credit and newly opened accounts can be considered by scoring models.
How Much Does Each Factor Affect Your Score?
People often see percentages such as 35%, 30%, 15%, 10%, and 10% associated with FICO's general educational breakdown of scoring factors.
Those figures should not be treated as a personalized formula for calculating your score. The actual impact can vary depending on the information in your credit report and the scoring model or version being used.
For example, someone with a limited credit history may have a different scoring profile from someone with many years of established accounts.
Why Payment History Matters
Payment history records whether your accounts have been paid as agreed. Because missed payments can indicate repayment problems, payment history is an important component of many credit scoring systems.
A single late payment does not necessarily determine your entire credit future. The effect can depend on factors such as how late the payment was, how recent it is, how often negative information appears, and the scoring model being used.
Practical ways to avoid missed payments
- Set up automatic payments for at least the minimum amount when appropriate.
- Use calendar reminders for statement due dates.
- Keep enough money in the payment account to cover scheduled automatic payments.
- Review account statements for unexpected changes.
Credit Utilization and Your Credit Score
Credit utilization describes how much of your available revolving credit you are using.
For example, if your credit cards have a combined limit of $10,000 and your reported balances total $2,000, your overall utilization is 20%.
| Total balances | Total limits | Utilization |
|---|---|---|
| $500 | $10,000 | 5% |
| $2,000 | $10,000 | 20% |
| $5,000 | $10,000 | 50% |
| $8,000 | $10,000 | 80% |
Many scoring models consider revolving utilization, but there is no universal percentage that guarantees a particular score.
Learn more about credit utilization →Hard vs. Soft Credit Inquiries
A credit inquiry occurs when someone accesses your credit information. Not all inquiries affect credit scores in the same way.
Hard inquiry
A hard inquiry generally occurs when you apply for credit and authorize a lender or creditor to review your credit. Hard inquiries may be considered by certain scoring models.
Soft inquiry
A soft inquiry can occur for purposes such as checking your own credit or certain prequalification processes. Soft inquiries generally do not affect your credit score.
Checking your own credit report is therefore different from applying for a new credit account.
Why Do I Have Different Credit Scores?
It is normal for consumers to see more than one credit score.
Several factors can cause differences:
- Different scoring models may calculate risk differently.
- A lender may use a different version of a scoring model than the score shown in a consumer app.
- Credit bureaus may have different information or receive updates at different times.
- Some scores are designed for specific lending products.
Because of these differences, seeing one score does not necessarily mean every lender will see exactly the same number.
Why Can a Credit Score Change?
Credit scores can change when the information used by the scoring model changes.
Balance changes
A credit-card balance may change the revolving utilization information used by a scoring model.
Payments are reported
Newly reported payment information can change the information used to calculate a score.
New accounts
Opening a new credit account can change several parts of your credit profile.
Negative information
New negative information or corrections to existing information can affect scoring.
How to Build a Stronger Credit Profile
Building credit is generally a long-term process rather than something that happens after one payment or one credit-card application.
Pay on time
Make required payments by their due dates and consider automatic payments or reminders to reduce the chance of missing one.
Keep revolving balances manageable
Monitor credit-card balances and avoid relying on credit limits as if they were available income.
Apply for credit selectively
Only apply for accounts that fit your financial needs. Multiple applications can create additional inquiries and new accounts.
Review your credit reports
Check your credit reports for accounts, balances, payment information, and other information that appears inaccurate.
Give your credit history time
The age and history of your accounts can matter, so responsible credit management over time is an important part of building a credit profile.
Common Credit Score Myths
“You need to carry a balance.”
You generally do not need to carry a credit-card balance and pay interest simply to build credit.
“Everyone has one credit score.”
Consumers can have multiple scores because scoring models, versions, bureaus, and reporting dates can differ.
“Checking your own score lowers it.”
Checking your own credit generally involves a soft inquiry and does not have the same effect as a hard inquiry from a credit application.
“A single number tells lenders everything.”
Lenders can consider information beyond a credit score, including income, debt obligations, employment information, loan terms, and their own underwriting criteria.
What a Credit Score Does Not Tell You
A credit score is not a complete picture of your financial situation.
Depending on the scoring model, a score may not directly reflect factors such as your current income, savings balance, monthly budget, employment situation, or the amount of money you have invested.
This is why lenders often use a credit score together with other information when making lending decisions.
Credit Score Checklist
Pay on time
Make required payments by their due dates.
Monitor utilization
Keep track of revolving balances relative to available limits.
Review reports
Look for inaccurate account or payment information.
Limit unnecessary applications
Apply for credit when you have a genuine need rather than simply chasing a higher score.
Credit Score FAQs
What is a credit score in simple terms?
A credit score is a number calculated from information in your credit history that is designed to help estimate credit risk.
What is the highest possible credit score?
It depends on the scoring model. The commonly used FICO Score range goes up to 850, but other scoring models can use different ranges.
What is a good credit score?
The answer depends on the scoring model. Within the commonly used FICO 300–850 scale, scores from 670 to 739 are categorized as Good, while higher ranges receive higher FICO categories.
What affects a credit score the most?
In commonly used FICO scoring models, payment history and amounts owed are major categories, but the actual effect depends on the person's credit profile and the scoring model being used.
How often does a credit score change?
There is no universal schedule. Scores can change when new information is reported to a credit bureau and a scoring model recalculates the score.
Why are my credit scores different?
Different scoring models, model versions, credit reports, reporting dates, and lender practices can result in different scores.
Does paying off a credit card improve your credit score?
Paying down a credit-card balance can reduce revolving utilization, which can affect scores depending on the scoring model and other information in your credit profile.
Can I have a good credit score with no debt?
It is possible to have a strong credit profile without carrying revolving debt. Credit scoring models evaluate credit history and reported account information rather than requiring you to carry an unpaid balance.
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