Updated: May 09, 2025

Your credit score plays a big role in your financial life, even if you’re not borrowing money right now. It affects your ability to get approved for loans, credit cards, apartments, and even some jobs.

What Is a Credit Score?

A credit score is a three-digit number that reflects how likely you are to repay borrowed money. It’s based on your credit history, which includes your past behavior with things like credit cards, loans, and bill payments. Most scores range from 300 to 850, with higher numbers representing better credit.

The most commonly used score is the FICO score, which lenders check when deciding whether to approve your application for credit. Another model, called VantageScore, is used by some lenders and credit monitoring services. Even though the exact formulas are different, both look at similar types of information when calculating your score.

Why Your Credit Score Matters

Your credit score isn’t just about borrowing money. It can affect many parts of your financial life. If you want to rent an apartment, many landlords will check your credit. If your score is too low, they might ask for a bigger deposit or deny your application.

A higher score also means lower interest rates when you do borrow. This can save you hundreds or even thousands of dollars over time. For example, someone with a high credit score might get a car loan with a 4% interest rate, while someone with a lower score might pay 12% or more for the same loan.

Some employers—especially those in finance or security—may also check your credit report before hiring. And utility companies or phone carriers might require a deposit if your score is too low.

What Affects Your Credit Score

There are five main factors that credit scoring companies use to determine your score.

Payment history is the biggest factor. It shows whether you’ve paid your bills on time in the past. Even one missed payment can hurt your score, especially if it’s more than 30 days late.

Credit utilization looks at how much of your available credit you’re using. If you have a credit card with a $1,000 limit and a $900 balance, you’re using 90% of your credit—which is considered high. Keeping this number below 30% is ideal.

Length of credit history considers how long your credit accounts have been open. Longer histories are better because they give lenders more information to assess.

New credit refers to how many new accounts you’ve opened recently. Applying for several credit cards or loans in a short time can lower your score temporarily.

Credit mix looks at the different types of credit you have, like credit cards, auto loans, or student loans. Having a mix shows lenders you can handle various forms of credit, though it’s not necessary to have every type.

More detailed information about these factors is available at myFICO.com.

How to Check Your Credit Score

Checking your credit score is easier than ever. Many banks, credit card companies, and apps offer free credit score access to their customers. Sites like Credit Karma and Credit Sesame also allow you to see your score for free, along with tips on how to improve it.

These services usually provide your VantageScore, which is close to your FICO score but may not be identical. For an exact FICO score, you can request one from a credit bureau or check if your lender provides it.

You should also review your credit reports regularly. These show the full history that scoring companies use to calculate your score. You’re entitled to a free report once a year from each of the three major credit bureaus—Equifax, Experian, and TransUnion—through AnnualCreditReport.com.

How to Improve Your Credit Score

Improving your score takes time, but small steps can lead to big results. The most important thing is to pay all your bills on time. Even if you can only afford the minimum payment, making it on time helps build a strong payment history.

Try to keep your credit card balances low. If you’re using more than 30% of your available credit, work on paying it down. This will improve your credit utilization and boost your score.

If you don’t have any credit history yet, consider starting with a secured credit card. These require a deposit but work like a regular card. Over time, responsible use can help you qualify for better options.

You can also ask to be added as an authorized user on someone else’s credit card. If they have a good payment history and low balance, this can help improve your score without taking on your own debt.

Avoid applying for too many new accounts at once. Every application triggers a hard inquiry, which can lower your score a little bit. Space out applications if you need to open new lines of credit.

If your credit report has errors—like accounts you didn’t open or payments listed as late when they weren’t—you can dispute them. Correcting mistakes can give your score a quick boost. Learn how to dispute errors at consumerfinance.gov.

Credit Score Ranges and What They Mean

Understanding where your score falls helps you know what to expect when applying for credit. While the exact ranges vary slightly between FICO and VantageScore, they generally break down like this:

300 to 579 is considered poor. You may struggle to get approved for credit, or face high interest rates and upfront deposits.

580 to 669 is fair. You may be approved for some credit cards and loans, but not with the best terms.

670 to 739 is good. You’re likely to qualify for most loans with reasonable interest rates.

740 to 799 is very good. You can expect better-than-average loan terms and higher approval odds.

800 to 850 is excellent. You’ll qualify for the best rates and offers available.

How Long Does It Take to Build Good Credit?

If you’re starting from scratch, it usually takes three to six months of consistent, positive credit activity to establish a credit score. To move from fair to good or good to excellent can take a year or more, depending on your situation.

The more time you spend making payments on time and keeping balances low, the more your score will grow. Even if you’ve made mistakes in the past, time helps. Most negative marks like late payments or collections drop off your report after seven years.

Final Thoughts

Your credit score is a powerful financial tool that’s within your control. By understanding how it works and making smart choices—like paying bills on time and keeping your balances low—you can improve your score and unlock better financial opportunities. Whether you’re just starting out or rebuilding after setbacks, small actions today can lead to big changes down the road.