Credit scores explained: what really moves the number
Your credit score affects the rates you pay on loans and cards. Here’s what goes into it and how to improve it.
Key takeaways
- FICO scores range from 300 to 850 and are based on five factors, led by payment history and amounts owed.
- Paying on time and keeping credit card balances low relative to your limits have the biggest impact.
- Negative items fade over time; late payments can stay on your credit report for up to seven years.
What a credit score is
A credit score is a three-digit number that estimates how likely you are to repay borrowed money. Lenders use it, along with your income and other debts, to decide whether to approve you and what rate to charge. The most widely used models are FICO and VantageScore, both typically on a 300 to 850 scale.
The five FICO factors
FICO publishes how much each category generally counts toward your score.
- Payment history (35%): whether you pay on time.
- Amounts owed (30%): especially credit utilization — your card balances divided by your limits.
- Length of credit history (15%): the age of your oldest, newest and average accounts.
- New credit (10%): recent applications and newly opened accounts.
- Credit mix (10%): having different types of credit, such as cards and installment loans.
How to raise your score
Most improvements come from a handful of habits.
- Pay every bill on time — set up autopay for at least the minimum.
- Keep utilization low; many experts suggest staying below 30%, and lower is better.
- Avoid opening several new accounts in a short period.
- Keep older accounts open when it makes sense.
- Check your credit reports and dispute any errors.
How long things last
Late payments and most negative items can remain on your credit report for up to seven years, though their impact fades with time. Hard inquiries stay for two years but usually affect your score only during the first year. Checking your own credit is a soft inquiry and doesn’t hurt your score.
Check your credit regularly
In the U.S., you can get free credit reports from Equifax, Experian and TransUnion through AnnualCreditReport.com. Many banks and card issuers also show a free credit score in their apps.
The bottom line
Credit scores reward boring, consistent habits: pay on time, keep balances low and borrow only when you need to. Give positive changes a few months to show up.
Frequently asked questions
What is a good credit score?
On the FICO scale, scores of 670 and above are generally considered good and 740 and above very good, though each lender sets its own standards.
Does paying off a loan lower my score?
Sometimes, temporarily: closing an installment loan can change your credit mix and average account age. The long-term benefit of less debt usually outweighs a small dip.
This guide is for educational purposes only and isn’t personalized financial, investment, tax or legal advice. Rules, limits and rates change, so confirm current figures with official sources or a qualified professional.