A credit score is a number that lenders use to judge how risky it is to lend you money. It can affect whether you are approved for a loan or credit card, and what interest rate you pay. This guide explains how scores work, using the widely used U.S. FICO model as an example, and how to improve yours.
What is a credit score?
A credit score summarizes your credit history in a single number. In the FICO system, scores generally range from 300 to 850, and higher is better. Other scoring models, such as VantageScore, use similar ideas with slightly different rules. Other countries have their own credit reporting systems, but the principles are often alike.
What makes up your score?
| Factor | Approximate weight (FICO) |
|---|---|
| Payment history | 35% |
| Amounts owed (utilization) | 30% |
| Length of credit history | 15% |
| New credit | 10% |
| Credit mix | 10% |
7 ways to improve your credit score
- Pay every bill on time. Payment history is the biggest factor. Set up automatic payments or reminders so you never miss a due date.
- Lower your credit utilization. This is the share of your available credit you are using. Keeping balances low, often advised below 30% of your limit and lower is better, can help your score.
- Keep old accounts open. A longer credit history generally helps, so avoid closing your oldest card unless it has fees you cannot avoid.
- Limit new applications. Each application for credit can create a hard inquiry, which may cause a small, temporary dip.
- Check your credit reports for errors. Mistakes happen. In the U.S. you can get free reports from the three major bureaus through AnnualCreditReport.com. Dispute anything inaccurate.
- Pay down debt, starting with high-interest cards. Lower balances improve utilization and reduce interest costs.
- Build a mix of credit over time. You do not need to borrow just for the sake of it, but responsibly managing different types of credit can help.
Common credit score myths
- Checking your own score hurts it. False. Checking your own score is a soft inquiry and does not lower it.
- Carrying a balance improves your score. False. You do not need to pay interest to build credit; paying in full each month works.
- Closing cards always helps. Not necessarily. It can reduce available credit and shorten your history.
- Income is part of your score. Not directly. Lenders may consider income separately.
How long does it take to improve?
Small improvements, such as lowering utilization, can show up within a month or two. Recovering from late payments or defaults takes longer. Negative marks typically stay on reports for several years, though their impact fades over time. Consistency is the key.
If you have no credit history
Consider a secured credit card, becoming an authorized user on a trusted person's account, or a credit-builder loan. Use the card for small purchases and pay the balance in full each month.
Frequently asked questions
What is a good credit score?
In the FICO system, scores from around 670 to 739 are generally considered good, and 740 and above very good. Exact ranges vary by lender and model.
Does checking my credit score lower it?
No. Checking your own score is a soft inquiry and does not affect it.
How often should I check my credit report?
At least once a year, and more often if you are planning a big loan or suspect fraud.
This article is for general educational purposes only and is not financial, investment, tax or legal advice. Rules, rates and figures change and differ by country, so check current information and consider speaking with a licensed professional before making decisions.