Credit Scores Explained
Your credit score is a three-digit number that represents your creditworthiness. Learn how scores are calculated, the differences between scoring models, and what you can do to improve yours.
What is a Credit Score?
A credit score is a numerical representation of your credit risk based on the information in your credit report. Lenders use it to quickly assess how likely you are to repay a loan.
While there are many scoring models, the two most dominant are FICO® (Fair Isaac Corporation) and VantageScore®.
FICO vs. VantageScore
Although both models use a 300-850 range and consider similar factors, they weigh them differently.
| Feature | FICO Score 8 | VantageScore 3.0/4.0 |
|---|---|---|
| Usage | Used by 90% of top lenders | Growing usage, common in free credit apps |
| Min. History Required | 6 months of credit history | 1 month of credit history |
| Late Payments | All late payments hurt | Penalizes late mortgage payments more heavily |
| Paid Collections | Ignored in newer versions (FICO 9), but counted in FICO 8 | Paid collections are ignored |
| Credit Utilization | Total & per-card utilization | Total & per-card utilization |
| Hard Inquiries | Deducts points for recent inquiries | Deducts points, but window for rate shopping is shorter |
Score Ranges
Most lenders view scores in the following tiers (based on FICO 8):
| Range | Rating | Impact on Borrowing |
|---|---|---|
| 800-850 | Exceptional | Lowest interest rates, instant approval |
| 740-799 | Very Good | Great rates, likely approval |
| 670-739 | Good | Average rates, acceptable to most lenders |
| 580-669 | Fair | Subprime rates, may require deposits |
| 300-579 | Poor | Rejected for most unsecured credit |
Scoring Factors (FICO)
Understanding what makes up your score is the key to improving it.
Payment History
Lenders want to know if you pay back what you borrow.
- Late payments (30+ days) hurt significantly
- Collections & bankruptcies are severe
- Recency matters—older lates hurt less
Amounts Owed
Credit utilization: how much of your limit you're using.
- Aim for <30% utilization
- <10% is ideal for top scores
- High balances on single cards still hurt
Length of History
Average age of accounts and age of oldest account.
- Don't close old cards
- New accounts lower average age
- History builds slowly over time
Credit Mix
New Credit
Mix of account types and recent inquiries.
- Revolving (cards) + Installment (loans) is good
- Hard inquiries stay for 2 years
- Opening many accounts at once is risky
Improving Your Score
Strategies to boost your score efficiently:
Fix Errors
Dispute inaccurate late payments or collections. Removing a single error can raise your score 50-100 points.
Pay Down High Balances
Pay cards down to below 30% of their limit. Do this before the statement closing date.
Request Higher Limits
Ask issuers for a credit limit increase (without a hard inquiry) to instantly lower utilization.
Become an Authorized User
Ask a family member with good credit to add you to their card. Their history gets added to your report.
Why Do I Have Different Scores?
It's completely normal to have different scores. Here's why:
- Different bureaus — Each bureau may have different information
- Different scoring models — FICO vs VantageScore, different versions
- Different dates — Scores change as your report is updated
- Industry-specific scores — Auto and mortgage lenders use specialized scores
What matters is the overall trend—are your scores generally improving over time?
