What Is a Credit Score?
Simply put, your credit score is a 3-digit number that tells banks and lenders how likely you are to repay your debt.
There are three main credit bureaus, Equifax®, Experian and TransUnion®. They have created a system on how to calculate your score, the two most popular being FICO and VantageScore. Your score typically ranges from 300-850.
- Exceptional: 800 and above
- Very Good: 740 to 799
- Good: 670 to 739
- Poor: 579 and below
*Credit score calculated based on FICO® Score 8 model. Your lender or insurer may use a different FICO Score than FICO Score 8, or another type of credit score altogether. Learn More
What goes into calculating my credit score?
Using the FICO scoring model, here is how your credit score is broken down. There are 5 categories that go into calculating your score:
- Payment history (35%)
- Amounts owed (30%)
- Length of credit history (15%)
- New credit (10%)
- Credit mix (10%)
Payment History: Have you paid your past credit accounts on time or do you fall behind on making your payments?
Amounts Owed: How much do you currently owe on your credit accounts? Just because you have a balance on credit owed, doesn’t mean that you are a high-risk borrower. But it is something that credit scores take into account.
Length of Credit History: The longer credit history you have generally increases your score. This looks at your age, how long you’ve had your credit accounts opened and how long it has been since you’ve used your accounts.
New Credit: Have you opened up any new credit accounts lately? Generally, it is a good idea not to open too many accounts at one time. This could potentially lower your score.
Credit Mix: This just considers all of your credit accounts, mortgage loans, retail accounts and installment loans. It is not necessary to have each of these accounts.
Ways to improve your credit score
First, request a copy of your annual credit report. Look for anything that might be hurting your credit score or if there is anything on there that doesn’t look right.
Second, pay down your balance on your credit card. Consider making two payments a month on it instead of just one. Credit reporters only report the balance once a month, so even if you are paying your balance off every month, they could be reporting the total right before you pay off your balance.
Another suggestion would be to become an authorized user on another account for a family member or significant other. Even if you don’t spend any money on their account, it will still show up in your credit report.
Take the first step in improving your credit score by requesting a free credit report here on our site, because your credit matters. If you are interested in learning more on how to repair your credit score, check out this page on our website.