A credit score is a three-digit number that lenders use to decide whether to lend you money and what interest rate to charge

Your credit score summarizes your history of borrowing and repaying money. It ranges from 300 to 850 in most scoring systems. The higher your score, the lower the risk you appear to lenders — which usually means better loan terms, lower interest rates, and approval for larger amounts. A lower score signals to lenders that you have missed payments, owed money for a long time, or borrowed more than you could repay in the past.

Three major companies — Equifax, Experian, and TransUnion — collect and maintain the data that scores are built from. These are called credit bureaus. They do not calculate your score themselves; instead, they sell your credit history to scoring companies like FICO and VantageScore, which run the numbers through their formulas. This means you may have multiple scores, and they may differ slightly depending which bureau's data was used and which scoring model was applied.

Key Takeaways

  • Your credit score comes from your payment history, amounts owed, length of credit history, credit mix, and recent credit inquiries — not from your income or savings.
  • Payment history is the single largest factor in your score, accounting for about 35 percent of the total in most models.
  • You can request a free credit report from each of the three bureaus once per year at annualcreditreport.com, which is the official government site.
  • Errors on your credit report — wrong accounts, incorrect payment status, or accounts that are not yours — can lower your score and should be disputed in writing.
  • Building a higher score takes time; missed payments stay on your report for seven years, and the damage fades gradually as you make on-time payments.

What goes into your credit score

Credit scores are built from five main categories of information, though the weight of each varies by scoring model. Payment history — whether you paid bills on time — is the heaviest factor, typically worth about 35 percent of your score. A single missed payment can lower your score by dozens of points, and the damage is worst in the first few months after the miss.

Amounts owed, or credit utilization, accounts for roughly 30 percent. This is the total debt you carry compared to your total credit limits. If you have a credit card with a $5,000 limit and a $2,000 balance, your utilization on that card is 40 percent. Scores tend to improve when utilization stays below 30 percent across all your accounts.

Length of credit history — how long you have had credit accounts open — makes up about 15 percent. Older accounts help your score more than newer ones. Credit mix, or the variety of types of credit you have (credit cards, car loans, mortgages, student loans), accounts for roughly 10 percent. Recent inquiries — times you have applied for new credit — make up the final 10 percent. Hard inquiries (when a lender checks your credit) lower your score slightly and stay on your report for two years, though the impact fades after a few months.

How credit scores are used in real decisions

Lenders use your credit score to decide whether to lend to you and at what rate. A mortgage lender might offer a 6 percent interest rate to someone with a 750 score and a 7.5 percent rate to someone with a 650 score. Over a 30-year loan, that difference costs tens of thousands of dollars. Credit scores also affect whether you can rent an apartment — many landlords run credit checks and may reject applicants with low scores or recent missed payments.

Insurance companies in most states can use credit information to set your auto and home insurance premiums. Employers in some industries can run credit checks before hiring, though they cannot see your actual score — only a modified version of your report. Utility companies may require a deposit if your credit score is low. In all these cases, the score itself is just one factor; lenders and landlords also look at income, employment history, and the reason for any past problems.

Where to find your credit score and report

You have the right to one free credit report per year from each of the three bureaus. The official source is annualcreditreport.com, run by the Federal Trade Commission. You can order all three reports at once or space them out. The report shows all accounts in your name, payment history, amounts owed, and inquiries — but it does not include your actual credit score.

Your credit score is separate. Many credit card companies and banks now show your score for free in your online account or mobile app, usually updated monthly. Websites like Credit Karma and Credit Sesame offer free scores as well, though they may use different scoring models than the ones lenders use. Paid credit monitoring services exist, but they are not necessary — the free options cover what you need to know.

How to read score ranges

Score ranges vary slightly by model, but most follow this general pattern. A score of 750 or higher is considered very good or excellent; most lenders will approve you at favorable rates. A score between 670 and 749 is good; you will likely be approved, though rates may be higher than the best available. A score between 580 and 669 is fair; approval is possible but less certain, and rates will be noticeably higher. A score below 580 is poor; approval is harder to come by, and if you are approved, rates will be steep.

These ranges are not official — different lenders set their own thresholds. Some mortgage lenders require a minimum of 620; others want 640 or higher. Credit card issuers have different standards. The ranges above reflect what most lenders use, but your actual experience depends on the specific lender and the type of credit you are seeking.

What does not affect your credit score

Your income, savings, employment history, and age do not appear on your credit report and do not directly affect your score. Lenders may ask about these things when you apply for a loan, but they are separate from your credit score. Checking your own credit report or score does not lower your score — that is called a soft inquiry and does not count against you. Hard inquiries (when a lender checks your credit) do lower your score slightly, but only inquiries from the past two years show on your report.

Debt that is not reported to credit bureaus — medical bills you paid, utilities you always pay on time, rent you pay to a landlord — does not help your score either. This is why people with no credit history (no credit cards, no loans) often have low scores or no score at all, even if they have never missed a payment in their lives.

How long negative information stays on your report

Late payments stay on your credit report for seven years from the date you first missed the payment. Accounts sent to collections also stay for seven years. Foreclosures, repossessions, and charge-offs follow the same timeline. Bankruptcies stay for seven years if you filed Chapter 13 (a repayment plan) and ten years if you filed Chapter 7 (liquidation).

The damage to your score fades over time, even while the item is still on your report. A missed payment from six years ago hurts your score far less than one from six months ago. This is why making on-time payments after a problem is the most effective way to rebuild your score. You cannot remove accurate negative information from your report, but you can dispute errors, and you can add a statement explaining the circumstances if you believe the information is misleading.

Frequently Asked Questions

Can I have different credit scores?

Yes. Each of the three bureaus may have slightly different information about you, so your score from Equifax may differ from your score from Experian or TransUnion. Additionally, FICO and VantageScore use different formulas, so a FICO score and a VantageScore from the same bureau will not match. Lenders typically use FICO scores, so that is the one to focus on.

Does paying off debt immediately raise my score?

Paying off debt helps your score, but the improvement is not instant. Your payment must be reported to the credit bureaus, which can take 30 to 45 days. Once reported, your credit utilization drops, which improves your score. However, paying off an account and closing it can sometimes lower your score temporarily because it reduces your credit mix and shortens your average account age.

What if I find an error on my credit report?

You can dispute errors for free by contacting the bureau in writing or through their online dispute process. Include a copy of your report with the error marked and explain why it is wrong. The bureau must investigate within 30 days and remove the information if it cannot verify it. You can also contact the company that reported the error (your bank, credit card issuer, or collection agency) and ask them to correct it.

How quickly can I improve my credit score?

Significant improvement takes months to years, not weeks. Paying down high credit card balances can raise your score within one or two billing cycles. Removing errors can help immediately. However, building a strong score requires consistent on-time payments over time — there is no shortcut.

Do I need to carry a balance to build credit?

No. You build credit by using credit and paying it back on time, not by carrying a balance. In fact, carrying a balance costs you money in interest and does not help your score more than paying in full does. Use a credit card for small purchases you would make anyway, then pay the full balance each month.