What Is a Credit Score? Definition, Factors, and Ways to Raise It (2023)

What Is a Credit Score?

A credit score is a three-digit number that rates your creditworthiness. FICO scores range from 300 to 850. The higher the score, the more likely you are to get approved for loans and for better rates.

A credit score is based on your credit history, which includes information like the number accounts, total levels of debt, repayment history, and other factors. Lenders use credit scores to evaluate your credit worthiness, or the likelihood that you will repay loans in a timely manner.

There are three major credit bureaus in the U.S.: Equifax, Experian, and TransUnion. This trio dominates the market for collecting, analyzing, and disbursing information about consumers in the credit markets.

Key Takeaways

  • A credit score is a number that depicts a consumer’s creditworthiness. FICO scores range from from 300 to 850.
  • Factors used to calculate your credit score include repayment history, types of loans, length of credit history, debt utilization, and whether you've applied for new accounts.
  • A credit score plays a key role in a lender’s decision to offer credit and for what terms.
  • The three main U.S. credit bureaus (Equifax, Experian, and TransUnion) may each calculate your FICO score differently.

The credit score model was created by the Fair Isaac Corp., now known asFICO, and is used byfinancial institutions. While othercredit scoringsystems exist, theFICO Scoreis by far the most commonly used.

There are a number factors that go into calculating your FICO credit score, including your repayment history, your debt utilization, the length of your credit history, your credit mix, and any new account openings.

Lenders use your credit score to determines whether to approve you for products like mortgages, personal loans, and credit cards, and what interest rates you will pay.


Prospective employers may also check it to see whether you're a reliable person. Service providers and utility companies may check it to decide whether you are required to make a deposit.

How Credit Scores Work

A credit score can significantly affect your financial life. It plays a key role in a lender’s decision to offer you credit. Lenders are more likely to approve you for loans when you have a higher credit score, and are more likely to decline your loan applications when you have lower scores. You can also get better interest rates when you have a higher credit score, which can save you money in the long-term.

Conversely, a credit score of 700 or higher is generally viewed positively by lenders, and may result in a lower interest rate.Scores greater than 800 are considered excellent. Every creditor defines its own ranges for credit scores and its own criteria for lending. Here are the general ranges for how credit scores are categorized.

  • Excellent: 800–850
  • Very Good: 740–799
  • Good: 670–739
  • Fair: 580–669
  • Poor: 300–579


Your credit score also may determine the size of deposit required to get a smartphone, cable service, or utilities, or to rent an apartment.


What Is A Credit Score?


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How Your Credit Score Is Calculated

The three major credit reporting agencies in the U.S. (Equifax, Experian, and TransUnion) report, update, and store consumers’ credit histories. While there can be differences in the information collected by the three credit bureaus, five main factors are evaluated when calculating a credit score:

  1. Payment history (35%)
  2. Amounts owed (30%)
  3. Length of credit history (15%)
  4. Types of credit (10%)
  5. New credit(10%)
  • Payment history: Your payment history includes whether you've paid your bills on time. It takes into account how many late payments you've had, and how late they were.
  • Amounts owed: Amounts owed is the percentage of credit you've used compared to the credit available to you, which is known as credit utilization.
  • Length of credit history: Longer credit histories are considered less risky, as there is more data to determine payment history.
  • Credit mix: A variety of credit types shows lenders you can manage various types of credit. It can include installment credit, such as car loans or mortgage loans, and revolving credit, such as credit cards.
  • New credit: Lenders view new credit as a potential sign you may be desperate for credit. Too many recent applications for credit can negatively affect your credit score.

What Is a Credit Score? Definition, Factors, and Ways to Raise It (1)

Advisor Insight

Kathryn Hauer, CFP, Enrolled Agent
Wilson David Investment Advisors, Aiken, S.C.

If you have many credit cards and want to close some that you do not use, closing credit cards can indeed lower your score.

Instead of closing accounts, gather up the cards you don’t use. Keep them in a safe place in separate, labeled envelopes. Go online to access and check each of your cards. For each, ensure that there is no balance and that your address, email address, and other contact info are correct. Also, make sure that you don’t have autopay set up on any of them. In the section where you can have alerts, make sure you have your email address or phone in there. Make it a point to regularly check that no fraudulent activity occurs on them, since you aren’t going to be using them. Set yourself a reminder to check them all every six months or every year to make sure there have been no charges on them and that nothing unusual has happened.


VantageScore is a consumer credit rating product developed by the Equifax, Experian, and TransUnion credit bureaus as an alternative to the FICO Score.

FICO creates a single bureau-specific score for each of the three credit bureaus, using only information from that bureau. As a result, the FICO is actually three scores, not one, and they can vary slightly as each bureau will have different calculation methods. A VantageScore is a single, tri-bureau score, combining information from all three credit bureaus and used by each of them the same.


FICO score is the most popular credit score, used by about 90% of lenders.

How to Improve Your Credit Score

When information is updated on a borrower’s credit report, their credit score changes and can rise or fall based on new information. Here are some ways that your can improve your credit score:

  • Pay your bills on time: Six months of on-time payments are required to see a noticeable difference in your score.
  • Increase your credit line: If you have credit card accounts, call and inquire about a credit increase. If your account is in good standing, you should be granted an increase in your credit limit. However, it is important not to spend this amount so that you maintain a lower credit utilization rate. Meanwhile, try to pay down your debt.
  • Don’t close a credit card account: If you are not using a certain credit card, it is best to stop using it instead of closing the account. Depending on the age and credit limit of a card, it can hurt your credit score if you close the account.
  • Work with one a credit repair companies: If you don’t have the time to improve your credit score, credit repair companies can negotiate with your creditors and the threecredit agencies on your behalf, in exchange for a monthly fee.
  • Correct any errors on your credit report: You are entitled to one free credit report per year from each of the main credit bureaus. You can get your report through AnnualCreditReport.com. You can also hire a monitoring serviceto help keep your information secure.

What is a Good Credit Score to Have?

What a good credit score is will ultimately be determined by the lenders. Ranges vary depending on the credit scoring model. Generally, credit scores from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good; and 800 and higher are considered excellent.

Who Calculates Credit Scores?

There are three major credit bureaus in the United States: Equifax, Experian, and TransUnion. They each calculate your FICO score in different ways using the same information. Credit bureaus collect, analyze, and disburse information about consumers in the credit markets.

How Can I Raise My Credit Score Quickly?

To raise your credit score quickly, you can enroll in a service that includes other payment information such as your rent payments and utilities payments that are not typically included in your credit score. If you have had a good track record with these kinds of bills, enrolling in a service like Experian Boost could raise your credit score quickly.

The Bottom Line

Your credit score is a number that can have a significant impact on your financial life. If you have a good credit score, you are more likely to qualify for loans and to receive better terms that can save you money. Learning what your credit score is and what goes into calculating your credit score can help you take steps to improve it.


What Is a Credit Score? Definition, Factors, and Ways to Raise It? ›

A credit score is a number that depicts a consumer's creditworthiness. FICO scores range from from 300 to 850. Factors used to calculate your credit score include repayment history, types of loans, length of credit history, debt utilization, and whether you've applied for new accounts.

What is the definition of a credit score? ›

A credit score is a prediction of your credit behavior, such as how likely you are to pay a loan back on time, based on information from your credit reports.

How can you raise your credit score? ›

Steps to Improve Your Credit Scores
  1. Build Your Credit File. ...
  2. Don't Miss Payments. ...
  3. Catch Up On Past-Due Accounts. ...
  4. Pay Down Revolving Account Balances. ...
  5. Limit How Often You Apply for New Accounts. ...
  6. Additional Topics on Improving Your Credit.

What are the 5 factors that make up credit score? ›

Five things that make up your credit score
  • Payment history – 35 percent of your FICO score. ...
  • The amount you owe – 30 percent of your credit score. ...
  • Length of your credit history – 15 percent of your credit score. ...
  • Mix of credit in use – 10 percent of your credit score. ...
  • New credit – 10 percent of your FICO score.

What is the best definition of a credit score quizlet? ›

Credit Score. - a numerical rating based on credit report information; represents a person's level of credit worthiness; heavily influences your approval for bank loans and credit cards.

What is an example of credit score? ›

Credit Scoring Example
Maxing out a credit card650-670735-755
A 30-day delinquency600-620670-690
Settling a credit card debt615-635655-675
3 more rows
Apr 5, 2017

What is the most important factor of a credit score? ›

Payment history — whether you pay on time or late — is the most important factor of your credit score making up a whopping 35% of your score.

What are 3 factors used to determine a credit rating? ›

The main factors involved in calculating a credit score are:
  • Your payment history.
  • Your used credit vs. your available credit.
  • The length of your credit history.
  • Public records.
  • Number of inquiries into your credit file.

What is the most important factor that determines your credit score? ›

Payment history is the most important factor in maintaining a higher credit score. It accounts for 35% of your FICO score, which is the score most lenders look at. FICO considers your payment history as the leading predictor of whether you'll pay future debt on time.

How can I raise my credit score from nothing? ›

Here are the best ways to build credit:
  1. Get a Store Card. ...
  2. Apply for a Secured Credit Card at a Bank. ...
  3. Apply for a Credit-Builder Loan. ...
  4. Find a Co-Signer. ...
  5. Become an Authorized User on Another Person's Credit Card. ...
  6. Report Rent and Utility Payments to Credit Bureaus. ...
  7. Consider a Student Credit Card. ...
  8. Make On-Time Payments Every Month.
May 18, 2023

Why is it so hard to raise your credit score? ›

Several hard inquiries over a short period could be a factor preventing your credit score from going up. To help lift your credit score, try keeping the number of hard inquiries to a minimum. Hard inquiries might remain on your credit report for two years, yet the effect on your credit score decreases as time goes by.

How can I raise my credit score in a day? ›

How to boost your credit score overnight:
  1. Pay Off Your Delinquent Balances.
  2. Keep Credit Balances Below 30%
  3. Pay Your Bills on Time.
  4. Dispute Errors on Your Credit Report.
  5. Set up a Credit Monitoring Account.
  6. Report Rent and Utility Payments.
  7. Open a Secure Credit Card.
  8. Become an Authorized User.
Sep 2, 2021

What are two ways to maintain good credit? ›

How do I get and keep a good credit score?
  • Pay your loans on time, every time. ...
  • Don't get close to your credit limit. ...
  • A long credit history will help your score. ...
  • Only apply for credit that you need. ...
  • Fact-check your credit reports.
Sep 1, 2020

What are the 7 basic components of a credit score? ›

We'll break down each of these factors below.
  • Payment history: 35% of credit score. ...
  • Amounts owed: 30% of credit score. ...
  • Credit history length: 15% of credit score. ...
  • Credit mix: 10% of credit score. ...
  • New credit: 10% of credit score. ...
  • Missed payments. ...
  • Too many inquiries. ...
  • Outstanding debt.
Oct 14, 2022

What is the definition of the highest credit score? ›

An 850 credit score is considered the highest score according to the most common FICO and VantageScore credit models. There are several factors that go into determining a credit score, such as payment history, amounts owed, length of credit history, credit inquiries and credit mix.

What is a perfect credit score? ›

An 850 FICO® Score isn't as uncommon as you might think. Statistically, there's a good chance you've attended a wedding, conference, church service or other large gathering with someone who has a perfect score. As of the third quarter (Q3) of 2021, 1.31% of all FICO® Scores in the U.S. stood at 850.

What is the best credit score called? ›

A perfect credit score of 850 is hard to get, but an excellent credit score is more achievable. If you want to get the best credit cards, mortgages and competitive loan rates — which can save you money over time — excellent credit can help you qualify. “Excellent” is the highest tier of credit scores you can have.

What are the 2 types of credit scores? ›

The two most common credit scoring models are FICO Score and VantageScore. Both are designed to measure how likely you are to be able to pay back debt and are used to inform lending decisions.

Why is credit important? ›

Your credit score is an important factor in the interest rate you qualify for, and ultimately how much you'll pay over the life of the loan. For example, lenders consider someone with a good credit score less risky to lend to, so higher credit scores tend to come with lower interest rates.

What are the two biggest factors in your credit score? ›

The two major scoring companies in the U.S., FICO and VantageScore, differ a bit in their approaches, but they agree on the two factors that are most important. Payment history and credit utilization, the portion of your credit limits that you actually use, make up more than half of your credit scores.

What are the 3 biggest factors impacting your credit score? ›

Top 5 Credit Score Factors
  • Payment history. Payment history is the most important ingredient in credit scoring, and even one missed payment can have a negative impact on your score. ...
  • Amounts owed. ...
  • Credit history length. ...
  • Credit mix. ...
  • New credit.
May 31, 2017

What 4 things does your credit score depend on? ›

Factors used to calculate your credit score include repayment history, types of loans, length of credit history, debt utilization, and whether you've applied for new accounts.

What are three ways to build credit? ›

If you're having difficulty getting approved for a credit card or you're looking for alternative methods, consider these ways to build credit:
  • Make your rent and utility payments count. ...
  • Take out a personal loan. ...
  • Take out a car loan. ...
  • Get a credit builder loan. ...
  • Make payments on student loans.
Dec 20, 2022

How can I get a credit increase without asking? ›

The second way you may get a credit limit increase is if a credit card company increases your limit without a request from you. This typically occurs after you've demonstrated responsible credit habits such as making on-time payments and paying more than the minimum payment required.

Can you raise your credit score without a credit card? ›

Yes, you can establish credit and have a credit score without a credit card. Credit card companies are not the only ones that report your payment and usage history to the three credit bureaus that report on your credit score, Experian™, TransUnion® and Equifax®.

What are reasons your credit score is low? ›

Many factors contribute to a low credit score, including little or no credit history, missed payments, past financial difficulties, and even moving home regularly. Credit reference agencies collect information from public records, lenders and other service providers, before generating a credit score.

How much can your credit score go up in a month? ›

There are several actions you may take that can provide you a quick boost to your credit score in a short length of time, even though there are no short cuts to developing a strong credit history and score. In fact, some individuals' credit scores may increase by as much as 200 points in just 30 days.

What's the fastest time to build credit? ›

Every person's credit journey is unique so there's no hard-and-fast rule about how long it will take to build credit. The major credit scoring models generally require two to six months of credit activity to generate a credit score.

What bills help build credit? ›

What Bills Help Build Credit?
  • Rent Payments. Before property management platforms, renters were unable to report rent payments to credit bureaus to build their credit health. ...
  • Utility Bills. ...
  • Auto Loan Payments. ...
  • Student Loan Payments. ...
  • Credit Card Payments. ...
  • Medical Bills.
Nov 28, 2022

How quickly can you build up credit score? ›

Paying your bills on time and in full each month should get your credit score moving in the right direction almost immediately, but it can take months or even years to build an excellent score, so be patient and stick with it.

What does a 750 credit score mean? ›

A 750 credit score is considered excellent and above the average score in America. Your credit score helps lenders decide if you qualify for products like credit cards and loans, and your interest rate.

What is the best definition of a good credit score? ›

Although ranges vary depending on the credit scoring model, generally credit scores from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good; and 800 and up are considered excellent.

How to get a 720 credit score in 6 months? ›

How to Increase Your Credit Score in 6 Months
  1. Pay on time (35% of your score) The most critical part of a good credit score is your payment history. ...
  2. Reduce your debt (30% of your score) ...
  3. Keep cards open over time (15% of your score) ...
  4. Avoid credit applications (10% of your score) ...
  5. Keep a smart mix of credit types open (10%)
May 25, 2023

Is a credit score of 780 better than 800? ›

A 780 credit score is Very Good, but it can be even better. If you can elevate your score into the Exceptional range (800-850), you could become eligible for the very best lending terms, including the lowest interest rates and fees, and the most enticing credit-card rewards programs.

Can you have a 900 credit score? ›

FICO® score ranges vary — either from 300 to 850 or 250 to 900, depending on the scoring model. The higher the score, the better your credit.

How to get a 850 credit score? ›

I achieved a perfect 850 credit score, says finance coach: How I got there in 5 steps
  1. Pay all your bills on time. One of the easiest ways to boost your credit is to simply never miss a payment. ...
  2. Avoid excessive credit inquiries. ...
  3. Minimize how much debt you carry. ...
  4. Have a long credit history. ...
  5. Have a good mix of credit.
Oct 13, 2022

How good is 800 credit score? ›

A FICO® Score of 800 is well above the average credit score of 714. It's nearly as good as credit scores can get, but you still may be able to improve it a bit. More importantly, your score is on the low end of the Exceptional range and fairly close to the Very Good credit score range (740-799).

What are 4 things you can do to build a good credit history? ›

There is no secret formula to building a strong credit score, but there are some guidelines that can help.
  • Pay your loans on time, every time. ...
  • Don't get close to your credit limit. ...
  • A long credit history will help your score. ...
  • Only apply for credit that you need. ...
  • Fact-check your credit reports.
Sep 1, 2020

What's the highest credit score? ›

A perfect score of 850 will give you bragging rights, but any score of 800 or up is considered exceptional and will usually give you access to the best rates on credit cards, auto loans, and any other loans.

What is a poor credit score? ›

If your credit score lands between 300 and 579, it is considered poor, therefore lenders may see you as a risk. Here's how the FICO credit scoring system ranks credit scores: Poor: 300-579. Fair: 580-669. Good: 670-739.

How to get a 900 credit score in 45 days? ›

Here are 10 ways to increase your credit score by 100 points - most often this can be done within 45 days.
  1. Check your credit report. ...
  2. Pay your bills on time. ...
  3. Pay off any collections. ...
  4. Get caught up on past-due bills. ...
  5. Keep balances low on your credit cards. ...
  6. Pay off debt rather than continually transferring it.

How long will it take to get a 800 credit score? ›

Most people with an 800 credit score have a long credit history, just a little under 22 years. Credit history length does not represent how long you've used credit. Rather, it represents the average age of the open accounts on your credit report. If you close an old credit card, it can shorten your credit history.

How fast can I add 100 points to my credit score? ›

For most people, increasing a credit score by 100 points in a month isn't going to happen. But if you pay your bills on time, eliminate your consumer debt, don't run large balances on your cards and maintain a mix of both consumer and secured borrowing, an increase in your credit could happen within months.


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