Your credit score is a three-digit number that determines whether you get approved for a credit card, a car loan, or a mortgage , and at what interest rate. Most people know it matters. Fewer know exactly how it's calculated or what the number actually represents.
This is worth understanding in some detail, because once you see how the score is built, you can make decisions that improve it on purpose rather than hoping things work out.
What a credit score measures
A credit score is a statistical estimate of how likely you are to repay a loan on time. Lenders use it as a quick risk assessment before deciding whether to lend to you and at what terms.
There are several credit scoring models in use, but the FICO score is the most widely used for lending decisions in the United States. VantageScore is the other major model. The information below focuses on FICO, since it's what most lenders look at , though the basic structure of VantageScore is similar.
The five factors in a FICO score
According to FICO, the score is built from five categories of information from your credit report. Each carries a different weight:
Payment history : 35%
This is the biggest factor. It tracks whether you've paid your bills on time. A single 30-day late payment can drop your score significantly, especially if your credit file is thin. The good news: the older a late payment gets, the less it affects your score. Payments more than seven years old fall off your report entirely.
Amounts owed (credit utilization) : 30%
This measures how much of your available credit you're using. If you have a credit card with a $5,000 limit and you're carrying a $2,500 balance, your utilization on that card is 50%. Lower utilization is better. Most scoring guidance suggests keeping individual card utilization below 30%, with below 10% being even better for your score.
Important: utilization is measured at the moment your balance is reported to the credit bureaus, which is usually when your statement closes , not when you pay. If you use your card heavily and pay it off each month, your score may still reflect higher utilization unless you pay before the statement close date.
Length of credit history : 15%
Older accounts and a longer average age of accounts help your score. This is why closing old credit cards, even ones you don't use, can sometimes hurt your score , as it removes older history and can raise your utilization if those cards had available limits.
Credit mix : 10%
Having different types of credit (revolving accounts like credit cards alongside installment loans like a car loan or mortgage) shows lenders you can manage different obligations. This factor matters less than the others, so don't open accounts you don't need just to diversify.
New credit : 10%
Each time you apply for new credit, the lender typically pulls a hard inquiry on your credit report. Hard inquiries can ding your score by a few points temporarily. Multiple inquiries for the same type of loan (like mortgage shopping) within a short window are usually treated as one inquiry by scoring models, since comparing rates on a single loan is rational behavior.
What counts as a good credit score?
FICO scores range from 300 to 850. Here's a rough breakdown of the ranges lenders typically use:
- 300–579: Poor , limited approval options; high interest rates when approved
- 580–669: Fair , some approvals available; better terms with improvement
- 670–739: Good , most mainstream credit products available
- 740–799: Very good , favorable rates on most products
- 800–850: Exceptional , best available rates
These ranges aren't fixed across all lenders ; each lender sets its own cutoffs. But 670+ generally qualifies you for standard credit products, and 740+ puts you in line for the most competitive rates.
Where credit scores come from
Your credit score is calculated using data in your credit report, which is maintained by the three major credit bureaus: Experian, TransUnion, and Equifax. Lenders report your account activity to these bureaus, and the bureaus compile that information into your credit report. FICO and VantageScore use that report as input to generate your score.
Because your report can differ slightly between bureaus (not all lenders report to all three), your score may vary depending on which bureau a lender pulls. Small differences between bureaus are normal.
What doesn't affect your credit score
Income, employment status, and bank account balances don't factor into your FICO score. Neither does your age, race, or marital status ; these are legally prohibited from being used in credit scoring. Checking your own credit (a soft inquiry) also doesn't affect your score.
Your next step
If you want to understand your credit score better or work on improving it, you can get free credit report access at AnnualCreditReport.com (the federally authorized site). For a look at credit cards that can help you build or rebuild credit, compare current options at our sister site, Credit Card Reviews. And if you're starting from scratch, our guide on building credit from scratch walks through your options step by step.
If high credit card balances are dragging your score down, see the best ways to pay off credit card debt to bring your utilization back into a healthy range.
This article was generated with the assistance of AI and reviewed for accuracy. It is for general educational purposes only and is not financial, tax, or legal advice.