What Is a Credit Score?
A credit score is a three-digit number — typically ranging from 300 to 850 — that represents your creditworthiness. Lenders use it to assess the risk of lending money to you. The higher your score, the more trustworthy you appear to lenders, which translates to better loan terms and lower interest rates.
The most widely used credit scoring model in the USA is the FICO® Score, though VantageScore is also commonly used by many lenders.
What the Score Ranges Mean
| Score Range | Rating | What It Means |
|---|---|---|
| 800–850 | Exceptional | Best rates and terms available |
| 740–799 | Very Good | Above-average terms from most lenders |
| 670–739 | Good | Near or above the national average |
| 580–669 | Fair | Some lenders will approve; higher rates |
| 300–579 | Poor | Limited options; may need secured products |
The 5 Factors That Make Up Your FICO Score
Your FICO Score is calculated using five categories, each weighted differently:
1. Payment History (35%)
This is the single biggest factor. Paying your bills on time — every time — has the most positive impact on your score. A single missed or late payment can cause a significant drop, especially if your score was high to begin with.
2. Amounts Owed / Credit Utilization (30%)
This measures how much of your available credit you're using. Keeping your credit utilization ratio below 30% is generally recommended. For example, if your total credit limit across all cards is $10,000, try to keep your balance below $3,000.
3. Length of Credit History (15%)
Longer credit histories tend to result in higher scores. This includes the age of your oldest account, your newest account, and the average age of all accounts. This is one reason why closing old credit cards can sometimes hurt your score.
4. Credit Mix (10%)
Lenders like to see that you can responsibly manage different types of credit — such as credit cards, auto loans, and mortgages. A varied credit mix can modestly boost your score.
5. New Credit / Hard Inquiries (10%)
Applying for new credit results in a "hard inquiry," which can temporarily lower your score by a few points. Multiple hard inquiries in a short period can signal financial stress to lenders.
Where to Check Your Credit Score for Free
You are entitled to a free copy of your credit report from each of the three major bureaus — Equifax, Experian, and TransUnion — once per year through AnnualCreditReport.com, the official federally mandated site. Many banks, credit cards, and financial apps also offer free ongoing credit score access.
Common Credit Score Myths
- Myth: Checking your own score hurts it. False. Checking your own score is a "soft inquiry" and has no impact.
- Myth: Carrying a credit card balance helps your score. False. You don't need to carry a balance — paying in full each month is ideal.
- Myth: Income affects your credit score. False. Your income is not factored into your credit score at all.
- Myth: Closing cards you don't use improves your score. Often false. Closing accounts can increase your utilization ratio and reduce average account age.
The Takeaway
Your credit score is not fixed — it changes based on your financial behavior. Understanding what drives it puts you in control. Focus on paying on time, keeping balances low, and maintaining established accounts, and your score will reflect that discipline over time.