What Is a Credit Score?

A credit score is a three-digit number that indicates how likely an individual is to repay a loan or other types of debt on-time based on their previous credit history. It helps creditors determine whether someone can qualify for credit and on what terms. 

Did you know that 42% of adults in the Gen Z demographic don’t know what their credit score is? This lack of awareness can have significant consequences. While a high credit score unlocks opportunities, a low credit score can close the doors to favorable interest rates, loan approvals, and even certain job prospects.

It’s essential to understand what a credit score is and how it works so you can start taking the steps necessary to set yourself up for financial success. Read on to learn more about how credit score ranges, how credit scores are calculated, and ways to improve your credit score.  

Table of Contents: 

• Credit Score Chart & Ranges
• What Makes Up Your Credit Score
• Why Is It Important to Have a Good Credit Score?
• How to Improve Your Credit Score
• Why Are There Different Credit Scores At Each Credit Bureau
• Credit Score FAQ

What Is a Good Credit Score?

A good credit score is 670 or higher, according to FICO®. Meanwhile, anything 740 or over is considered very good, and a score that’s 800 or above is considered exceptional. According to recent credit score statistics, the average credit score is 716, which is considered good. 

Credit Score Chart & Ranges

Generally, credit scores range from 300 to 850. A higher credit score indicates  a lower risk to lenders, so you’re more likely to get approved for loans with favorable terms.  Below are the FICO credit score ranges. Keep in mind that other scoring models, such as VantageScore®, are similar but may not be exactly the same. 

Credit Score	Rating	Description	What the Score Demonstrates
<580	Poor	Significantly Below Average	High risk of default; may have difficulty obtaining credit
580–669	Fair	Below Average	Higher risk of default; may get credit with less favorable terms
670–739	Good	Near or Slightly Above Average	Lower risk of default; likely to get credit at better terms
740–799	Very Good	Above Average	Lower risk of default; likely to get favorable credit terms
800+	Exceptional	Significantly Above Average	Very low risk of default; most favorable credit terms available

What does your credit score start at?

There’s no fixed starting credit score for everyone. In fact, those without credit history may not have a credit score at all. When first building credit, most people start out with a score between 500 and 700 points. 

Why don’t I have a credit score?

If you don’t have a credit score, it’s likely because you haven’t used credit yet. Your credit history and score are created when a creditor reports one a credit account in your name to the major credit report agencies. Keep in mind that it can take six months after you open the account to generate your credit history. 

What Makes Up Your Credit Score

Scoring models calculate your credit score based on several key factors that indicate your credit risk, and here’s a detailed breakdown of the five factors that make up your credit score based on the FICO scoring model: 

• Payment history (35%): The most important factor that makes up your score is your record of paying past credit accounts on time. Late and missed payments negatively affect your score, while consistent, on-time payments will improve your credit. 
• Amounts owed (30%): If you have high balances and are using a large portion of your available credit, this may indicate a higher risk of defaulting. It is recommended to keep your credit utilization ratio under 30%. 
• Length of credit history (15%): Your credit score considers how long you’ve been using credit. A longer credit history is beneficial for your credit score. 
• New credit (10%): The number of new credit accounts you’ve opened will impact your score. Opening too many new accounts in a short time period may indicate potential financial issues and, therefore, increased risk.  
• Credit mix (10%): Having a variety of credit, such as credit cards, mortgages, car loans, and retail accounts, demonstrates your ability to handle multiple types of credit and positively influences your score.

The VantageScore model calculates credit score slightly differently. Below is a look at what makes up your credit score according to the VantageScore model: 

• Payment history (40%): Whether or not you’ve paid your bills on-time in the past. 
• Depth of credit (21%): The length of time your credit accounts have been open for and the types of credit accounts you have.  
• Credit utilization (20%): The amount of credit you use compared to your credit limit. 
• Balances (11%): Both current and delinquent balances on your credit account. 
• Recent credit (5%): The number of new credit accounts you’ve opened and the hard inquiries on your credit report. 
• Available credit (3%): The amount of credit available to you on your revolving accounts. 

Why Is It Important to Have a Good Credit Score?

It’s important to have a good credit score because you’ll be able to qualify for a variety of loan types including mortgages, credit cards, student loans and car loans. Plus, you’ll have access to better terms and interest rates which can help you save money. 

Even if you don’t have the need for credit, good credit is important for other reasons such as renting an apartment, securing insurance and even getting a job. 

How to Improve Your Credit Score

If you’re looking to improve your credit score, pay attention to the factors that make up your score, such as payment history, length of credit history, and credit utilization.  

Below are good credit habits you can implement: 

• Make payments on-time: Consistently paying your bills on time will help you improve your credit score, while even one late payment can significantly lower your score.  Consider setting up automatic payments to ensure you don’t forget to pay your bill. 
• Lower your credit utilization: Your credit utilization refers to the percentage of your available credit that you’re currently using. Try to keep your credit utilization ratio below 30%. If possible, pay off your entire balance each month. 
• Keep your oldest credit card accounts open: Avoid closing your oldest credit accounts to maintain a longer credit history. 
• Open different types of credit accounts: Diversify your credit account types by adding credit accounts, installment loans, and mortgage loans.
• Limit how often you apply for credit: Too many hard inquiries in a short amount of time can cause a drop in your credit score. As a rule of thumb, space out new credit applications by at least six months. 
• Monitor your credit report for errors: Get a copy of your credit report and look for errors. If you find any inaccuracies, dispute the errors with the credit bureaus. 

Why Are There Different Credit Scores at Each Credit Bureau?

Your credit scores may be different across the three different credit bureaus—Equifax®, Experian® and TransUnion®—because the data each credit bureau has at any given time can vary. 

For example, your creditor may choose to only report to one of the three credit bureaus. Or, creditors may report to the credit bureaus at different times, leading to one credit bureau receiving more recent information than another. 

Typically, the difference is only a few points and is no cause for concern. However, if you notice a major difference between over 50 points, this could be a red flag that one of your reports has incorrect information. In that case, review your credit report and look for any errors or inaccuracies. You’re entitled to a free credit report from each bureau every year. 

To make monitoring your credit and catching inaccuracies easier, consider a credit monitoring service like Credit.com’s Credit Report Card. 

Credit Score FAQ

Does checking your credit score lower it?

No, checking your credit score does not lower it. Checking your credit is referred to as a “soft inquiry,” which occurs when you or someone you gave authorization to checks your credit. Unlike hard inquiries, soft inquiries don’t impact your credit score.  

What is the highest credit score you can have?

The highest credit score you can have is 850, according to the most widely used scoring models, FICO and VantageScore. 

Is it possible to get an 850 credit score?

Yes, an 850 credit score is possible, although it’s very difficult to achieve. According to Experian, only 1.54% of consumers have an 850 credit score. 

What is the lowest credit score you can have?

The lowest credit score you can have is 300, although it’s very rare to have a score this low. In fact, only 16% of consumers have a credit score between 300 and 579. 

What is the average credit score?

The average credit score in the United States is 717, according to data from FICO. 

Which credit score is more important?

While there is no single credit score that is more important, FICO is the most widely used by lenders to approve loan applications. 

What credit score do you need for a credit card?

There is no exact credit score you need for a credit score since it depends on the type of credit card you’re applying for. Generally, most credit cards require a score of 700 or higher. 

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