What a credit score is
The Consumer Financial Protection Bureau (CFPB) calls a credit score a prediction of your credit behavior, such as how likely you are to pay a loan back on time, based on the information in your credit reports. A company applies a mathematical formula, the scoring model, to that report and gets a number. Most scores run from 300 to 850, and a higher score usually makes it easier to qualify for a loan and may mean a lower rate or better terms.
The CFPB adds a point that explains most confusion about scores: you do not have just one. The number depends on which scoring model was used, which bureau's data it was run on, and the day it was calculated. The FICO Score is the most widely quoted model, so its bands are the ones below.
The FICO bands
| Band | FICO Score |
|---|---|
| Exceptional | 800 to 850 |
| Very Good | 740 to 799 |
| Good | 670 to 739 |
| Fair | 580 to 669 |
| Poor | below 580 |
myFICO, the consumer site of the company behind the score, says a good score is generally considered to be 670 or above, and that creditors use these general ranges to guide decisions: the higher the band, the lower the risk a lender sees. It also notes that many lenders will still approve loans in the Fair band. In practice the band matters more than the exact number: 745 and 790 sit in the same band, and the difference between 665 and 675 crosses a line.
The five factors and their weights
myFICO publishes how much each category counts in a FICO Score. The CFPB's list of what scoring models typically look at is the same set in plain words: bill-paying history, current unpaid debt, the number and types of accounts, how long they have been open, how much of your available credit you are using, new credit applications, and whether a debt went to collections or you had a foreclosure or bankruptcy.
| Category | Share of a FICO Score | What it looks at |
|---|---|---|
| Payment history | 35% | Whether bills were paid on time; late payments, collections, bankruptcies |
| Amounts owed | 30% | Balances, and above all the share of your credit limits in use (utilization) |
| Length of credit history | 15% | How long accounts have been open, and the average age |
| New credit | 10% | Recent applications and newly opened accounts |
| Credit mix | 10% | Having both revolving accounts (cards) and installment loans |
Which factors you can move, and how fast
- Payment history (35%) rewards time. A missed payment hurts at once and nothing speeds up a clean record except more months of it. Automatic minimum payments are the simplest insurance against the one event that costs the most.
- Amounts owed (30%) is the fast lever. The CFPB's advice is to keep balances low compared with your total credit limit, with no more than 30 percent as the figure experts quote, and it says you do not need to carry a balance to get a good score. Balances are reported every month, so paying a card down shows up within a cycle. The credit utilization guide works the arithmetic, and the credit card payoff calculator shows how long a balance takes to clear at a given payment.
- Length of history (15%) looks, in myFICO's words, at the age of your oldest account, the age of your newest account and the average age of all of them, and a longer history always has a positive effect. There is no shortcut; it is the one factor that only time improves.
- New credit (10%): myFICO says opening several new accounts in a short period represents greater risk, especially for a short credit history. Inquiries stay on the report for two years but FICO Scores only consider those from the last 12 months, and checking your own report does not count.
- Credit mix (10%) favours having both cards and an installment loan, but it is not worth borrowing for. It takes care of itself for most people with a car loan or a mortgage.
Why the number differs between sites
A bank's app, a card issuer's free score and a credit bureau's own number are often three different models reading three slightly different reports on three different days. The CFPB names all three variables: the scoring model, the source of the data and the calculation date. Treat a gap of 20 or 30 points between sources as normal. What matters is the band each lender sees when it pulls its own version, and all of them respond to the same two habits: paying on time and keeping balances low against limits.
A simple routine
- Set every card and loan to pay at least the minimum automatically, so payment history stays clean.
- Once a month, add up card balances and limits and keep the ratio under 30 percent, lower before a mortgage or car application. The percentage calculator does the division.
- Pay cards down on a plan rather than at random; the debt snowball planner orders them by balance or rate and shows the payoff date.
- Keep old no-fee cards open, and space out new applications.
- Check your reports for errors, since the score can only be as right as the report it is computed from. The budget planner is a place to keep the balances and due dates in one view.
Frequently asked questions
What is a good credit score?
On the FICO scale of 300 to 850, myFICO says a good score is generally considered to be 670 or above. Its bands run Poor below 580, Fair 580 to 669, Good 670 to 739, Very Good 740 to 799 and Exceptional 800 and up. Many lenders still approve loans in the Fair band, but at higher rates.
Why do I have several different credit scores?
Because there is no single score. The Consumer Financial Protection Bureau explains that a score is produced by a scoring model from the data in a credit report, and that it may differ depending on the model, the source of the data and the date it was calculated. Two bureaus can hold slightly different reports, and FICO and other models weight things differently.
What moves a credit score the fastest?
Utilization. Payment history is the biggest category at 35 percent, but it only changes when a payment is missed or a late payment ages. Amounts owed, 30 percent, is recomputed every month from the balances lenders report, so paying a card down before its statement closes can show up within a billing cycle.
Does checking my own score lower it?
No. The CFPB says reviewing your own credit reports will not affect your credit scores, and myFICO says the same for checking your report. What counts is a hard inquiry, which the CFPB says usually comes from a lender after you apply for credit; FICO Scores consider inquiries from the last 12 months and their effect is usually small.
Is 850 necessary for the best rates?
No. The bands are what lenders use, and anything in the Very Good or Exceptional range is treated as low risk. Beyond that point a higher number changes little. Keeping payments on time and utilization low does more than chasing the last few points.
Sources
- Consumer Financial Protection Bureau: What is a credit score? (a prediction of your credit behavior; the factors scoring models consider; you do not have just one score; most scores range from 300 to 850)
- Consumer Financial Protection Bureau: How do I get and keep a good credit score? (pay on time, keep balances low compared to your limits, 30 percent, do not carry a balance to get a good score)
- myFICO: What is a FICO Score? (the 300 to 850 range, the Poor to Exceptional bands, 670 or above generally considered good)
- myFICO: What's in your credit score (payment history 35%, amounts owed 30%, length of credit history 15%, new credit 10%, credit mix 10%)
- myFICO: Length of credit history (age of oldest and newest accounts and the average; a longer history always helps)
- myFICO: New credit (several new accounts in a short period mean greater risk; inquiries count for 12 months; checking your own report does not affect the score)
- Consumer Financial Protection Bureau: What is a credit inquiry? (hard inquiries from lenders can lower a score; soft inquiries, including your own requests, do not)
General information based on the sources above, not tax, legal or financial advice.