A credit score, which runs from 300 to 850, is a numerical rating that assesses a person’s ability to repay a loan. A better credit score indicates that a borrower is less risky and more likely to pay on time. Credit ratings are often used to predict whether or not a person will pay back obligations such as loans, mortgages, credit cards, rent, and utilities. Credit scores may be used by lenders to determine loan qualifying, credit limit, and interest rate.
A credit score of 700 or more is typically regarded as favorable for a score ranging from 300 to 850. A score of 800 or above on the same scale is considered outstanding. The majority of people have credit scores ranging from 600 to 750. In 2020, the average FICO® Score in the United States was 710, up to seven points from the previous year. Creditors may be more optimistic than you will return your future bills on time if you have a higher credit score. However, when reviewing customers for loans and credit cards, creditors may define their own standards for what they regard to be excellent or negative credit ratings.
This is partly determined by the sorts of borrowers they want to recruit. Creditors may also consider how recent events may affect clients’ credit ratings and change their criteria appropriately. Although some lenders construct their own bespoke credit scoring algorithms, the two most widely utilized credit scoring models are those produced by FICO® and VantageScore®.
What Is a Good FICO® Score?
FICO® generates many sorts of consumer credit ratings. There are “basic” FICO® Ratings produced by the corporation for use by lenders in a variety of sectors, as well as industry-specific credit scores for credit card issuers and auto lenders.
FICO® Scores vary from 300 to 850, with 670 to 739 being considered “excellent.” FICOindustry-specific ®’s credit scores vary from 250 to 900. The intermediate categories, on the other hand, have the same groupings, and an “excellent” industry-specific FICO® Score is still 670 to 739.

What Is a Good VantageScore?
VantageScore’s initial two credit scoring models have 501 to 990 ranges. The two most recent VantageScore credit scores (VantageScore 3.0 and 4.0) utilize the same 300–850 range as the fundamental FICO® Scores. VantageScore indicates a good range for the most recent models as 661 to 780.

What Factors Influence Your Credit Scores?
Common variables may have an impact on all of your credit scores, and they are often classified into five categories:
- Payment history: Making on-time payments on your credit accounts will improve your credit ratings. However, skipping payments, having an account sent to collections, or declaring bankruptcy may all have a negative impact on your credit score.
- Credit utilization: includes how many of your accounts have balances, how much you owe, and how much of your credit limit you’re using on revolving accounts.
- Credit history length: This category contains the average age of all of your credit accounts, as well as the ages of your oldest and newest accounts.
- Account types include: This, also known as “credit mix,” analyzes whether you manage installment accounts (such as a vehicle loan, personal loan, or mortgage) as well as revolving accounts (such as credit cards and other types of credit lines). Demonstrating that you can safely handle both kinds of accounts often improves your ratings.
- Recent activity: This takes into consideration if you’ve lately applied for or created new accounts.
FICO® and VantageScore approach the relative value of the categories in different ways.
Factors Affecting FICO® Scores
FICO® utilizes percentages to show how significant each area is in general, while the specific percentage breakdown used to generate your credit score will be determined by your individual credit report. FICO® evaluates the following rating variables in the following order:
- Payment history: 35%
- Amounts owed: 30%
- Length of credit history: 15%
- Credit mix: 10%
- New credit: 10%
Factors Affecting VantageScore
VantageScore ranks the criteria in terms of how relevant they are in creating a credit score, although this will also rely on your individual credit report. VantageScore examines the following criteria in the following order:
- Total credit usage, balance and available credit: Extremely influential
- Credit mix and experience: Highly influential
- Payment history: Moderately influential
- Age of credit history: Less influential
- New accounts opened: Less influential
What Information Credit Scores Do Not Consider
When computing credit ratings, FICO® and VantageScore do not take the following factors into account:
- Your ethnicity, race, religion, national origin, gender, or marital status. (Under US law, credit scoring systems are not permitted to take into account these facts, as well as any receipt of public assistance or exercise of any consumer right under the Consumer Credit Protection Act.)
- It’s your age.
- Your salary, profession, title, employer, date of employment, or work history. (However, keep in mind that lenders may take this information into account when making overall approval choices.)
- Where you reside.
- Soft Inquiries. Others frequently launch soft inquiries, such as organizations making promotional credit offers or your lender doing periodic assessments of your current credit accounts. Soft inquiries are also generated when you examine your own credit report or utilize credit monitoring services from organizations such as Experian. These queries have no effect on your credit scores.
What Is the Difference Between Credit Scores?
Credit scores are used by lenders to determine loan decisions. FICO® and VantageScore develop separate credit scoring models for lenders, and both firms release new versions of their credit scoring models on a regular basis, similar to how other software companies may release new operating systems. The most current versions may include technical advancements or changes in customer behavior, or they may better conform with new regulatory requirements.
VantageScore, for example, develops a tri-bureau scoring model, which means that the same algorithm can analyze your credit report from any of the three main consumer credit agencies (Experian, TransUnion, and Equifax). In 2006, the first version (VantageScore 1.0) was created. VantageScore 4.0, the most recent version, was launched in 2017 and was built using data from 2014 to 2016. It was the first generic credit score to include trended data, or how people manage their accounts over time.
FICO® is a more established corporation that was among the first to develop credit scoring models based on consumer credit reports. It develops distinct versions of its scoring models for use with the data from each credit bureau, albeit the latest versions have a similar moniker, such as FICO® Score 8. Consumer FICO® Scores are often utilized in two ways:
- Base FICO® Scores: These scores are designed for use by any kind of lender and try to estimate the possibility of a customer falling behind on any form of credit commitment. FICO® base scores vary from 300 to 850.
- FICO® Scores for Specific Industries: FICO® develops auto ratings and bankcard scores exclusively for auto lenders and card issuers. Industry ratings vary from 250 to 900 and strive to forecast the chance that a customer would go behind on a certain kind of account.
FICO® industry-specific scores are constructed on top of a foundation FICO® Score, and FICO® publishes new suites of scores on a regular basis. For example, the FICO® Score 10 Suite was launched in early 2020. It comprises a FICO® Score 10 Suite, a FICO® Score 10 T (including trended data), and new industry-specific ratings.
Scores are also used seldom. For example, FICO® is gradually introducing the UltraFICO® Score, which enables users to connect checking, savings, or money market accounts and takes banking behavior into consideration. Lenders may also develop specialized credit scoring models for their intended consumers.
Lenders may choose the model they wish to utilize. In fact, some lenders may elect to continue with outdated versions due to the expenditure that upgrading may entail. Furthermore, many mortgage lenders employ earlier versions of the fundamental FICO® Scores to meet with requirements set out by government-sponsored mortgage firms Fannie Mae and Freddie Mac.
In addition, you may not know whose credit report and score a lender will use until you submit an application. The good news is that all consumer FICO® and VantageScore credit scores use the same underlying information to compute your credit scores—data from one of your credit reports. They are also all attempting to estimate the possibility that a person will become 90 days past due on a bill (either in general or on a particular sort) over the following 24 months.
As a consequence, the same variables might have an effect on all of your credit scores. If you watch numerous credit scores, you may see that your ratings differ depending on the scoring model and which of your credit reports it examines. However, over time, you may see that they all tend to rise and fall together.
Why Is a Good Credit Score Necessary?
In general, having high credit might make it simpler to achieve your financial and personal objectives. It might be the difference between qualifying for and being refused a big loan, like a house mortgage or a vehicle loan. And it may have a direct influence on how much interest or fees you’ll have to pay if you’re accepted.
The difference between a 30-year, fixed-rate $250,000 mortgage with a 670 FICO® Score and a 720 FICO® Score, for example, maybe $72 per month. That’s money you might be spending toward savings or other financial objectives. An excellent credit score might save you $26,071 in interest payments over the life of the loan.
Credit ratings may also influence non-lending choices, such as whether a landlord would agree to rent you an apartment.
Your credit reports (but not your consumer credit scores) might have an influence on you in other ways as well. Before making a hiring or promotion decision, certain businesses may check your credit record. In addition, in most jurisdictions, insurance companies may utilize credit-based insurance ratings to assist calculate your car, home, and life insurance rates.
How to Raise Your Credit Score
Focus on the fundamental variables that impact your credit ratings to enhance them. The essential actions you must do are quite easy at a high level:
- Make at least your minimum payment, and pay off all your debts on schedule. Even a single late payment may have a negative impact on your credit score, and it can linger on your credit record for up to seven years. If you suspect you may miss a payment, contact your creditors as soon as possible to see if they can work with you or provide hardship solutions.
- Maintain a low credit card balance. Your credit utilization rate, which compares the current amount and credit limit of revolving accounts such as credit cards, is an essential scoring element. A low credit use rate might improve your credit ratings. Those with good credit often have an overall usage rate in the single digits.
- Accounts that will be reported to credit bureaus should be opened. If you have few credit accounts, be sure that any new ones you open are posted to your credit report. These might be installment accounts like school loans, vehicle loans, house loans, or personal loans, or revolving accounts like credit cards and lines of credit.
- Only apply for credit when you really need it. Applying for a new account may result in a hard inquiry, which may have a little negative impact on your credit score. The effect is normally modest, but applying for many kinds of loans or credit cards in a short period of time may result in a higher score decline.
- Other variables might also have an influence on your results. Increasing the average age of your accounts, for example, might improve your results. However, it is often a case of waiting rather than acting.
Examining your credit ratings may also provide you with insights into what you can do to enhance them. For example, when you check your free Experian FICO® Score 8, you can also see how you’re performing in each of the credit score areas.

You’ll also receive a short snapshot of your score profile, including what’s helping and hindering your score.

What Should You Do If You Don’t Have a Credit Score?
Credit scoring models utilize your credit reports to calculate your score, however, they cannot evaluate reports with insufficient information.
FICO® Scores necessitate the following:
- An account that has been active for at least six months
- An account that has been in use for the last six months
VantageScore can evaluate your credit report if it has at least one current account, even if the account is less than a month old.
If you are not creditworthy, you may need to create a new account or add fresh activity to your credit report in order to begin restoring credit. This often entails beginning with a credit-builder loan or secured credit card or becoming an authorized user.
What Caused Your Credit Score to Change?
Your credit score might alter for many reasons, and it’s not unusual for scores to fluctuate during the month when new information is uploaded to your credit reports.
You may be able to pinpoint a single occurrence that resulted in a score change. A late payment, for example, or a new collection account would almost certainly damage your credit score. Paying off a large credit card amount and decreasing your usage rate, on the other hand, may raise your credit score.
However, certain activities may have an unexpected influence on your credit ratings. Paying off a debt, for example, may result in a decline in your scores, despite the fact that it is a beneficial activity in terms of appropriate financial management. This might be because it was the only open installment account or loan with a low amount on your credit report. After repaying the loan, you may find yourself with no open installment or revolving accounts, or with just high-balance loans.
After you have paid off your credit card debt, you may elect to discontinue using them. Avoiding debt is a good strategy, but inactivity in your accounts may result in a lower credit score. To preserve your account’s activity and develop an on-time payment history, you may choose to use a card for a little monthly subscription and then pay off the debt in full each month.
Remember that credit scoring methods rely on complex computations to generate a score. Sometimes you may believe that one occurrence caused your credit score to rise or fall, but this is really a coincidence (for example, you paid off a loan, but your score actually increased due to a lower credit utilization ratio). Furthermore, a single inquiry isn’t “worth” a set number of points; the point change is determined by your full credit record.
A new late payment, for example, might result in a substantial point decrease for someone who has never been late before, since it may suggest a change in habit and, therefore, credit risk. Someone who has previously missed numerous payments, on the other hand, may face a lesser point decrease from a new late payment since it is already thought that they are more prone to skip payments.
How to Check Your Credit Score
It used to be difficult to check your credit score. Today, however, there are several methods to check your credit scores, including a number of free choices.
One of your credit scores may be available for free from your bank, credit union, lender, or credit card provider. Experian also provides a free FICO® Score 8 based on your Experian credit report.
The source of your credit score might influence the sort of credit score you get. Some providers may provide you with a version of your FICO® Score, but others may provide VantageScore credit ratings. In any situation, the estimated score will be affected by the credit report that the scoring algorithm examines.
Some sites even allow you to check numerous credit scores at the same time. With an Experian CreditWorksSM Premium subscription, for example, you may access your FICO® Score 8 scores based on your Experian, Equifax, and TransUnion credit reports, as well as numerous additional FICO® Scores based on your Experian credit report.
Monitor Your Credit Report and Score
Checking your credit score right before you apply for a new loan or credit card can help you understand your chances of qualifying for favorable terms—but checking it further ahead of time gives you the chance to improve your score, and possibly save hundreds or thousands of dollars in interest. Experian offers free credit monitoring for your Experian report, which in addition to a free score and report, includes alerts if there’s a suspicious change in your report.
Keeping track of your score can help you take measures to improve it so you’ll increase your odds of qualifying for a loan, credit card, apartment, or insurance policy—all while improving your financial health.