Credit scores are three-digit numbers calculated from the data on a recorded payment history. Credit scores help lenders determine a borrower’s relative creditworthiness, or their likelihood of debt repayment. Not only can a good credit score help you save money when borrowing money, a positive payment history can help secure a job, rent an apartment and more.
The three main consumer credit reporting bureaus, TransUnion, Equifax and Experian, each have unique credit scoring models. The bureaus may collect different financial information and/or weigh these factors differently, so credit scores can vary from bureau to bureau.
What Is a Good Credit Score?
Lenders and other companies that verify credit may vary widely in credit scoring range definitions, and they may use additional financial factors to supplement a candidate’s credit score(s). However, as a general rule of thumb, a good credit score typically falls somewhere between 685 and 744 points on a 300 to 850-point scale.
What Is a Good FICO Score?
FICO credit scores are among the most commonly used scoring models, which generally range from about 300 to 850 points. Since there are a number of industry-specific models, you likely have multiple FICO scores. While these ranges also vary by lender, FICO score ranges are generally defined as follows: 1
- Exceptional: 800 or more points
- Very Good: 740 — 799 points
- Good: 670 — 739 points
- Fair: 580 — 669 points
- Poor: under 580 points
What Is a Good VantageScore?
VantageScore is another widely used credit reporting model that ranges from 300 to 850 points. The three main personal credit reporting agencies, TransUnion, Equifax and Experian, developed this model. While lenders will vary, the following ratings generally apply for VantageScore credit scores: 2
- Excellent: 750 — 850 points
- Good: 700 — 749 points
- Fair: 650 — 699 points
- Poor: 550 — 649 points
- Very poor: 300 — 549 points
Why Do Credit Scores Matter?
Credit scores are a widely used financial measurement that can affect you in a variety of ways, from the interest rates you pay to the opportunities you’re given in life. Generally, good credit reflects personal fiscal responsibility, and can help secure more favorable interest rates. On the other hand, poor credit often leads to higher interest rates, added fees and/or fewer options when it comes to borrowing money.
Although credit scores are a financial measurement, they’re often used in other situations, such as applying for a job or looking for an apartment. Good credit can indicate a more responsible candidate, whereas poor credit may hurt one’s chances of securing a position or leasing an apartment.
What Financial Factors Affect My Credit Scores?
What Are the FICO Score Factors?
A variety of financial information is used to calculate credit scores, and each credit bureau calculates the data differently. The latest FICO model uses the following data, in order of the largest to the smallest impact on a credit score: 3
- Payment history (35%): Reflects whether or not previous payments have been made on time.
- Total amount owed (30%): Includes the balance of all revolving credit accounts.
- Length of credit history (15%): Reflects factors like the ages of a borrower’s newest and oldest account and the average of all accounts, if applicable.
- Credit mix (10%): Whether or not the borrower holds a variety of personal credit types, like credit cards, personal loans and/or lines of credit. Note: It’s not essential to have multiple credit accounts, but responsible usage of more than one type can help improve a FICO score slightly.
- New credit (10%): Opening multiple forms of credit within a short period can negatively impact a FICO credit score.
What Are the VantageScore Factors?
VantageScore 4.0, the most recent scoring model, uses the following factors to calculate a credit score: 4
- Payment history (41%): Whether or not past payments have been made on time.
- Age and credit mix (20%): The type(s) of credit used, and the age of credit accounts.
- Utilization (20%): The amount of revolving credit used compared to the total amount available.
- New credit (11%): New or recently opened lines of credit, including hard credit inquiries.
- Balance (6%): The amount currently owed on current and delinquent accounts.
- Available credit (2%): The total unused portion of revolving credit account(s).
What Financial Information is Not Considered Part of Credit Scores?
While each bureau is different, they generally do not include the following information to calculate credit scores:
- Salary, income, occupation or employment information: Lenders may consider such information when reviewing loan applications, but this isn’t included as part of a credit score.
- Race, religion, marital status or color: Such factors are prohibited from scoring model formulas under U.S. law.
- Age: Information such as average account age may be included in credit score models, but not the borrower’s age.
How Does Marriage Affect My Credit Score?
Married couples may have joint credit accounts, which means that they share equal access and responsibility to the credit line. Furthermore, if your spouse uses a shared credit account, this activity is also reflected on your credit history. That’s why it’s especially important to maintain responsible credit habits on joint accounts.
However, couples do not share credit scores, and each person on a joint account will have an individual credit history and report. Additionally, personal credit accounts do not automatically change to joint accounts if you get married. Contact your creditor for more information about joint accounts.
Why Do I Have Multiple Credit Reports?
Credit scores are calculated from data on credit reports, which can vary widely from bureau to bureau. Since credit scores are used in so many industries and situations, there are different credit scoring models available to help lenders make more informed decisions. For example, auto loan lenders may want to weigh financial factors related to car leases or loans more heavily than data that’s less related. Because you have more than one score, it’s a good idea to review your full credit reports and check your scores from each of the main bureaus as often as possible.
How Can I Improve My Credit Scores?
While credit bureaus have unique scoring models, they generally include the same type of information to calculate credit scores. The following financial behaviors can help improve credit scores over time:
- Make on-time payments: Payment history has the biggest impact on your score in the most recent FICO Score and VantageScore models, both of which are widely used to measure credit. Aim to always pay all bills on time.
- Maintain a responsible credit utilization ratio: In general, aim to use no more than 30% of your total available credit limit, also called a credit utilization rate.
- Keep your accounts open: A longer credit history can lead to a higher score when compared to closing accounts and re-applying for credit later down the line.
What Can I Do I if I Don’t Have Credit Scores?
If you don’t have a credit score, this means that you may not have enough of a recorded financial history to produce a score, or you may not have a financial payment history at all. Without a credit score, you might have a harder time finding low-interest personal credit or securing other financial agreements, such as an apartment lease, without additional help like a cosigner and/or additional fee(s).
If you’ve never borrowed money in the past, the following methods can provide access to credit and help you establish a payment history:
- Secured credit cards: These work like a normal credit card, except borrowers make an initial cash deposit to serve as collateral in case the account goes into default.
- Loan co-signer: A borrower can take out a joint account or assign a co-signer, which provides access to credit for both parties. Note: Account activity impacts the credit history of both cosigners.
- Authorized card user: Similar to a loan co-signer, an authorized card user is given access to credit via a specific card account.
What Are Minimum Credit Scores?
If a borrower is new to personal credit, they may have a very low or minimum credit score, which is generally around 300 points. Additionally, the minimum qualifying credit score for a loan, lease or other kind of financial agreement will vary by company. While it may take a while, following positive financial habits, like making on-time payments and maintaining a responsible utilization rate, are two of the best ways to improve credit scores.
Where Can I Check My Credit Scores for Free?
Checking your credit scores and reports from the three major credit reporting bureaus is free at AnnualCreditReport.com. You may also be able to access your score(s) and/or credit report through your bank, directly via the reporting bureau(s) or other credit monitoring and/or third-party credit reporting companies like Credit Karma, Mint and Credit Sesame.
How Accurate Are Credit Reporting Websites?
Third-party credit reporting sites typically rely on data provided by major credit reporting bureaus. Some websites may use a combination of credit reports from two or more bureaus, whereas others use one data source. Generally, third-party credit score providers report accurate data, though it might not be as current as data from a primary credit bureau.
How Can I Correct Reporting Errors?
While reporting mistakes and identity fraud are rare, they can lead to negative marks on your credit report and impact your score. In order to avoid reporting errors, identity theft and fraud, it’s a good idea to review your full credit reports from the major bureaus as often as possible. Make sure to carefully inspect all sections of the reports, and and follow these steps if you need to dispute credit history errors.
1FICO. (n.d). What is a FICO® Score?
2Experian. (n.d.). What Is a Good Credit Score?
3FICO. (n.d.). What’s in my FICO® Scores?
4Experian. (2017). VantageScore 4.0 Overview.
The information in this article is provided for educational and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness or fitness for any particular purpose. The information in this article is not intended to be and does not constitute financial, legal or any other advice. The information in this article is general in nature and is not specific to you the user or anyone else.