Credit Score Guide
What credit scores are, how they're calculated, what counts as good, and how to build yours.
What Is a Credit Score?
A credit score is a 3-digit number between 300 and 850 that represents how likely you are to repay debt. Lenders use it when you apply for a credit card, car loan, mortgage, or even an apartment rental. The higher the score, the better your terms.
The most widely used model is the FICO Score, used in 90% of lending decisions. VantageScore is another common model. Both use the same 300–850 range.
Credit Score Ranges
Exceptional
Best rates on loans and cards. Approved for almost anything.
Very Good
Better-than-average rates. Very likely to be approved.
Good
Near or above the national average. Qualify for most products.
Fair
Below average. May be approved but at higher interest rates.
Poor
Likely to be denied credit or offered very unfavorable terms.
The average US FICO score in 2024 was approximately 717.
How Your Score Is Calculated
Five factors make up your FICO score. Here's how much each one matters:
Payment History
35%On-time payments — the single biggest factor. Even one missed payment can drop your score significantly.
Credit Utilization
30%How much of your available credit you're using. Keep this below 30% — ideally below 10% — for the best scores.
Length of Credit History
15%How long your accounts have been open. Older accounts help. Don't close your oldest card.
Credit Mix
10%Having different types of credit (card, auto loan, mortgage) shows you can manage various credit types.
New Credit
10%Applying for new credit creates a 'hard inquiry' that temporarily lowers your score by 5–10 points.
How to Check Your Credit Score (Free)
- AnnualCreditReport.com — The official, government-mandated free report from all three bureaus (Equifax, Experian, TransUnion). Free weekly through 2026.
- Credit card issuers — Many cards (Chase, Citi, Discover, Capital One) show your FICO score free in their app.
- Credit Karma / Credit Sesame — Free VantageScore. Close to FICO but not identical.
⚠️ Soft vs Hard Inquiries:Checking your own score is a "soft inquiry" and does NOT affect your score. Only lender checks when you apply for credit ("hard inquiries") can lower it temporarily.
How to Build Credit from Scratch
No credit history at all? Here's the fastest path:
- Get a secured credit card — You deposit $200–500 as collateral, then use the card for small purchases. Pay in full every month. After 6–12 months you typically get upgraded to a regular card.
- Become an authorized user — Ask a parent or partner with good credit to add you to their card. Their history can appear on your report.
- Open a credit-builder loan — Offered by credit unions and some online banks. You pay monthly, the lender holds the funds, and reports payments to the bureaus.
- Never miss a payment — Set up autopay for at least the minimum. One 30-day late payment can drop an excellent score by 100+ points.
- Keep utilization low — Use less than 30% of your credit limit. Pay down balances before the statement closes.
How to Improve a Low Score
- Dispute errors — Check your report for mistakes (wrong balances, accounts you don't recognize). Dispute them at Equifax, Experian, and TransUnion directly. Errors are common.
- Pay down credit card balances — Dropping utilization from 80% to 30% can add 50+ points.
- Don't close old cards — Closing a card reduces available credit (raises utilization) and shrinks your history length.
- Avoid applying for multiple cards at once — Each application is a hard inquiry.
- Ask for a credit limit increase — If your income has grown, a higher limit lowers your utilization ratio without changing spending.
Why Credit Scores Matter
Mortgage rates
A 760 vs 620 score could mean $200+/month difference on a $300k mortgage.
Auto loans
Excellent credit can cut your auto loan APR from 12% to 5% or lower.
Apartment rentals
Most landlords run credit checks. Low scores may require larger deposits.
Employment
Some employers check credit (with consent) for financial roles.