What You Need To Know About Your Credit Score

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Your credit score is a crucial indicator of your financial health and can help you achieve your financial goals, such as securing a mortgage or car loan, attracting potential employers and qualifying for lower insurance rates.

There are certainly outside factors that can make building good credit a challenge. Around a quarter of U.S. adults (25 percent) say they would deal with a major unexpected expense — such as an emergency room visit or major car repair — by financing with a credit card and paying it off over time, according to Bankrate’s 2025 Annual Emergency Savings Report.

However, many people are unaware of what influences their score or how to improve it. Here’s a breakdown of what makes up your credit score and steps for boosting your credit health.

What is a credit score?

Your credit score is a three-digit number representing your credit health. It is designed to help lenders assess risk — specifically, the likelihood that you’ll become delinquent on your credit obligations in the next 24 months.

Many different credit scoring models exist, but the FICO credit score is the most popular and widely used. More than 90 percent of top lenders rely on the FICO score to help them determine consumer eligibility for their financial products. Another popular scoring model you may have heard of is the VantageScore, and several different VantageScore models are out there, too.

How credit scores work

You’ll have a score for each credit bureau. When a lender submits a credit inquiry, an overall score based on the compiled credit score is calculated. Each of the three credit bureaus — Experian, Equifax and TransUnion — assign you a credit score based on their internal processes and information such as your credit account history, credit inquiries you’ve made, public records and other personal information.

“Equifax, TransUnion and Experian each calculate scores for you when requested by lenders or consumers, and your credit scores can fluctuate daily based on your credit activity,” notes Andrew Lokenauth, founder of Be Fluent in Finance.

With this kind of fluctuation, it’s best to periodically check your credit score and see what’s causing it to increase or decrease over time. Both your FICO score and VantageScore range from 300 to 850, with higher scores being considered better and a lower risk to lenders.

What affects your credit score?

Factors like whether you pay your bills on time and how much debt you have play the biggest role in determining your credit score, but how much new credit you have and how long you have had certain accounts can also have a substantial impact.

However, mistakes on your credit report can also impact your score — and not in a good way. Since different information is reported to your credit reports, and your credit score can be different with each credit bureau, you should check over your credit report for accuracy at least a few times per year.

Knowing how the credit bureaus calculate your credit score can help you determine how to best improve your credit over time. For your FICO score, the following factors are considered by each of the credit bureaus:

• Payment history (35%)
  

  Your payment history is the most important factor that makes up your FICO score: lenders want to know if you’ve paid your previous debts on time, as this helps them assess how much risk they’ll take by extending credit to you as a borrower. This factor takes time to establish, though, so if you’re trying to build credit as fast as you can, it’s best to pay off your balance on time and in full. In the meantime, focusing on your credit utilization is perhaps the most active factor in you can affect.

• Amounts owed (30%)
  

  Your credit utilization ratio is another important factor the credit bureaus consider. Credit utilization is the amount of credit you are currently using compared to what is available to you. Generally speaking, the lower your credit utilization ratio, the better.

  “This can typically be the area where people can make the biggest impact in changing their credit scores quickly,” says Kendall Meade, a senior financial planner with SoFi in Charleston, South Carolina. Borrowers with a lot of debt may be overextended, which could indicate to creditors a higher level of risk.

  Conversely, carrying a low amount of debt in relation to your earnings often lets creditors know you are at a lower risk of default. Carrying debt is becoming increasingly common. According to our recent Credit Card Debt Survey, 22 percent of people who carry a credit card balance have carried that balance for 5 years or more, while 48 percent of cardholders have at least one credit card that carries a balance from month to month.

  Check it out: Bankrate’s Credit Utilization Ratio Calculator

• Length of credit history (15%)
  

  How long you’ve had credit also plays a role in your credit score, and the longer credit history, the better. According to myFICO.com, the credit bureaus take the following factors into account in this category:

  • How long your credit accounts have been established
  • How long specific accounts have been established
  • How long it has been since you used each account

  “Think of credit history length like a trusty old watch — the longer it ticks, the more reliable it seems,” says Andrew Gosselin, a certified public accountant.

• New credit (10%)
  

  The credit bureaus also look at how much new credit you have, such as the number of accounts you’ve opened recently. Each credit card issuer typically has its own set of application rules that may affect your approval odds, so it’s worth keeping them in mind. Generally speaking, opening too many new accounts in a short amount of time can make you seem like a higher credit risk.

What is a good credit score?

FICO scores range from 300 to 850 — here’s how each tier of scores compares and what they mean:

• Exceptional credit (800+): An excellent credit score is well above average, and it tells lenders you are especially low risk as a borrower. Having an 800+ credit score may boost your approval odds for a few luxury-level rewards cards, but it mainly opens the door to the best credit terms and low rates and fees.
• Very good (740 to 799): A very good credit score is above average, and it illustrates a low level of risk. You should be able to qualify for many major rewards cards at this credit level.
• Good (670 to 739): A good credit score is at or near the U.S. average, which is why most lenders consider this score acceptable.
• Fair (580 to 669): Fair credit scores are below average, and they show lenders you present a certain level of risk. However, you may still get approved for loans or credit cards with a fair credit score.
• Bad (579 or below): Bad credit suggests to lenders that you have made credit mistakes in the past and that extending credit to you could be risky. This greatly reduces the range of loans and credit cards that you’re eligible for. At this credit range, secured credit cards may be the best options available.

If your score is lower than you expected, don’t fret. It takes time to build a high credit score and, no matter the score, you can get financial tools that can help you achieve your goals.

Tips for maintaining and improving your credit score

To keep your credit score in the best shape possible, use any credit you have responsibly and wisely. These specific tips can help:

• Pay your bills on time. Since your payment history is the most important factor that makes up your FICO score, make sure you never pay bills late. Set your payments up on autopay if you can, or turn on reminders that let you know when your bills are due.
• Keep your credit utilization at 30 percent or lower. Most experts suggest keeping your credit utilization at 30 percent or below for the best odds of boosting your score. On a basic level, this means carrying a balance of no more than $3,000 for every $10,000 in available credit you have.
• Don’t open a lot of new accounts at once. Since new credit can impact your score, try to avoid situations where you’re opening a lot of credit cards or other types of accounts at once.
• Keep old credit accounts open. Keep old accounts in good standing open — even if you’re not using them. These old accounts can help add depth to the average length of your credit history.
• Monitor your credit reports. It’s a good idea to regularly monitor your credit reports for accuracy. If you encounter errors on your credit reports, take the time to dispute them.

How to check your credit score

While you can get a free copy of your credit reports from AnnualCreditReport.com, you won’t actually see your scores. Fortunately, there are plenty of ways to get a free look at your credit score. For example, many of the top rewards credit cards offer a free FICO score on your monthly credit card statement.

Capital One’s CreditWise program and Chase’s Credit Journey are also available to all consumers whether you’re a customer or not, and both let you see a version of your TransUnion credit score.

The bottom line

You have more power than you think when it comes to your credit score. Pay your bills early or on time, don’t max out your accounts and keep an eye on your credit reports for errors and you should be on your way to better credit in no time.