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Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. SHARE: Morsa Images/Getty Images April 15, 2022 Checkmark Bankrate logo How is this page expert verified? At Bankrate, we take the accuracy of our content seriously. "Expert verified" means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is always objective and balanced. Their reviews hold us accountable for publishing high-quality and trustworthy content. Holly Johnson writes expert content on personal finance, credit cards, loyalty and insurance topics. In addition to writing for Bankrate and CreditCards.com, Johnson does ongoing work for clients that include CNN, Forbes Advisor, LendingTree, Time Magazine and more. Cathleen's stories on design, travel and business have appeared in dozens of publications including the Washington Post, Town & Country, Wall Street Journal, Marie Claire, Fodor’s Travel, Departures and The Writer. Bankrate logo The Bankrate promise
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You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. Your credit score is an important indicator of your financial health, as well as a tool you can use to live a better life. You’ve probably heard you need “good credit” to take out a mortgage or borrow money to buy a car, but there are other areas of your life where good credit can help. For example, a positive credit history can be seen as a major plus by potential employers who might ask to see a modified version of your credit report. Good credit can even help you qualify for . Not everyone knows what goes into a credit score—or the steps they can take to over time. This guide goes over the main determinants of your credit score, which factors matter the most and the steps you can take to boost your credit health over time. What is a credit score and how does it work
Your credit score is a three-digital number that represents a numerical expression of your credit health. This score is designed to help lenders assess risk—specifically, the likelihood that you will become delinquent on your credit obligations in the next 24 months. There are many different credit-scoring models out there, but the FICO credit score is the most popular and widely used. In fact, more than to help them determine consumer eligibility for their financial products. Another popular scoring model you may have heard of is the VantageScore, and there are several different models of VantageScores out there, too. Fairly recently, the UltraFICO scoring model was developed to help people improve their credit. When it comes to credit scores, and specifically FICO scores, you’ll have three different ones. That’s because each of the three credit bureaus—Experian, Equifax and TransUnion—assign you a credit score based on their internal process and the information they have in their reports. FICO scores range from 300 to 850, with and a lower risk to lenders. Elements of a credit score
Knowing how your credit score is calculated can help you figure out how to improve your credit over time. When it comes to your FICO score, the following factors are considered by each of the credit bureaus: Payment history 35 percent
Your is the most important factor that makes up your FICO score, and it’s easy to see why. Obviously, lenders want to know if you’ve paid your previous debts on time, as this helps them assess how much risk they’ll take by extending credit to you as a borrower. Amounts owed 30 percent
The amounts you owe in relation to your credit limits—also known as your —is another important factor the credit bureaus consider. This is based on the concept that borrowers with a lot of debt could be overextended, which could indicate a higher level of risk. On the flip side, carrying a low amount of debt in relation to your income typically lets creditors know you are at a lower risk of default. Length of credit history 15 percent
also plays a role in your credit score, and a longer credit history is considered better. According to , the credit bureaus take the following factors into account in this category—how long your credit accounts have been established, how long specific accounts have been established and how long it has been since you used some of your accounts. New credit 10 percent
The credit bureaus also look at how much you have, or how many accounts you’ve opened in the recent past. Generally speaking, opening too many new accounts in a short amount of time can make you seem like a higher credit risk. Credit mix 10 percent
Finally, the credit bureaus look at your, or the mix of different types of credit you have, whether that includes revolving credit accounts, retail accounts or installment loans. Having several different types of credit accounts in good standing can work in your favor in this category. How do you get a credit score
The three credit bureaus look at your credit report when determining your credit score, and in the process, they consider how you rank in the five factors we highlight above. With that being said, it’s important to point out that among the three credit bureaus. This is due to the fact that each credit bureau likely has different information about your accounts. In other words, having different credit scores isn’t necessarily a bad sign. Expert tip: Your credit report is a file kept with each of the that contains information such as your credit account history, credit inquiries you have had, public records and your personal information. What is a good credit score
When it comes to having good credit, you should have a goal to shoot for. FICO scores range from 300 to 850 as we mentioned already, so here’s how each tier of scores compares and what they mean: Exceptional credit (800+): An is well above average, and it tells lenders you are especially low risk as a borrower. Very good (740 to 799): A very good credit score is above average, and it illustrates a low level of risk. Good (670 to 739): A is at or near the U.S. average, which is why most lenders consider this score acceptable. Fair (580 to 669): are below average, and they show lenders you present a certain level of risk. However, you may still get approved for credit cards or loans with a fair credit score. Poor (579 or below): shows you have made credit mistakes in the past and that extending credit to you could be risky. What affects your credit score
By and large, how you use credit will affect your credit score. Factors like whether you and how much debt you have play the biggest role in determining your credit score, yet how much new credit you have and how long you have had certain accounts can also make a substantial impact. However, you should also know that mistakes on your credit report can impact your score—and not in a good way. Since different information is reported to your credit reports and your credit score can be different with each credit bureau, the best thing you can do is check over your credit reports for accuracy at least a few times per year. Fortunately, you can do this for free with each credit bureau—just visit . Tips for maintaining and improving your credit score
To keep your credit score in the best shape possible, you’ll want to use any credit you have responsibly and wisely. These specific tips can help: Pay your bills on time. Since your payment history is the most important factor that makes up your FICO score, you’ll want to make sure you never pay bills late. Set your payments up if you have to or set up reminders that let you know when your bills are due. Keep your credit utilization at 30 percent or below. Most experts suggest keeping your credit utilization at for the best results in this category. On a very basic level, this means having $3,000 in debt or less for each $10,000 in available credit you have. Don’t open a lot of new accounts at once. Since new credit can impact your score, try to avoid situations where you’re opening a lot of credit cards or other types of accounts at once. Keep old credit accounts open. Also, keep old accounts in good standing open—even if you’re not using them. These old accounts can help add depth to the average length of your credit history. Monitor your credit reports. As we mentioned already, you’ll want to monitor your credit reports for accuracy. Also, make sure you on your credit reports if you find them. How to check your credit score
While you can get a free copy of your credit reports from AnnualCreditReport.com, you won’t actually see your scores. Fortunately, there are plenty of ways to . For example, many of the top rewards credit cards offer a free FICO score on your monthly credit card statement. Capital One’s program and Chase’s are also available to all consumers whether you’re a customer or not, and both let you see a version of your TransUnion credit score. The bottom line
While there are outside factors that can make a challenge, you may have more power than you think when it comes to your credit score. Pay your bills early or on time, don’t max out your accounts and keep an eye on your credit reports for errors, and you should be on your way to better credit in no time. SHARE: Holly Johnson writes expert content on personal finance, credit cards, loyalty and insurance topics. In addition to writing for Bankrate and CreditCards.com, Johnson does ongoing work for clients that include CNN, Forbes Advisor, LendingTree, Time Magazine and more. Cathleen's stories on design, travel and business have appeared in dozens of publications including the Washington Post, Town & Country, Wall Street Journal, Marie Claire, Fodor’s Travel, Departures and The Writer. Related Articles