What Is a Credit Score?

A credit score is a three-digit number (300-850) that predicts how likely you are to repay borrowed money. Lenders use it to decide whether to lend to you and at what interest rate.

The Five Factors (FICO Model)

1. Payment History (35%)

The single biggest factor. Have you paid your bills on time? Even one 30-day late payment can drop your score 60-110 points and stays on your report for 7 years.

What to do: Set up autopay for at least the minimum payment on every account. Never miss a payment.

2. Credit Utilization (30%)

The percentage of your available credit that you are using. If you have a $10,000 credit limit and a $3,000 balance, your utilization is 30%.

For more on this topic, see our guide on How to Pay Off Credit Card Debt Fast: 7-Step Guide.

Target: Keep utilization below 30%. Below 10% is ideal. This is calculated per card AND across all cards.

For more on this topic, see our guide on How to Build Credit at 18 Without a Credit Card: 5 Proven Methods.

3. Length of Credit History (15%)

The average age of all your accounts. Older accounts are better. This is why you should never close your oldest credit card, even if you do not use it.

4. Credit Mix (10%)

Having different types of credit (credit cards, auto loan, mortgage, student loans) shows you can manage various debt types. Do NOT take on debt just to improve mix.

5. New Credit Inquiries (10%)

Each hard inquiry (when a lender checks your credit for a lending decision) drops your score 5-10 points temporarily. Multiple inquiries in a short period for the same type of loan (mortgage shopping, auto loan shopping) are grouped and counted as one.

Common Myths Debunked

• Checking your own score hurts it: FALSE. Checking your own score is a soft inquiry and has zero impact.
• Closing old cards improves your score: FALSE. It reduces your total available credit (increasing utilization) and shortens your average account age.
• Carrying a balance helps your score: FALSE. Pay in full every month. Interest payments do not help your score.
• Income affects your score: FALSE. Income is not a factor in any credit scoring model.

How to Check Your Score for Free

AnnualCreditReport.com provides free reports from all three bureaus. Credit Karma and most bank apps provide free FICO or VantageScore estimates.