What is a Credit Score?

A credit score is a three-digit number between 300 and 850 that communicates a consumer’s creditworthiness based on their credit history. Lenders use credit scores to determine the risk in lending to a consumer, which impacts how much and at what interest rate the consumer can borrow money. A higher credit score indicates higher creditworthiness while a lower credit score depicts potential risk to the lender.

The FICO credit score is most commonly used (particularly for mortgage loans), though there are other credit score models such as VantageScores. Investopedia notes that around 90% of top U.S. lenders use FICO credit scores to make credit decisions since they’re more interested in gauging how likely someone is to repay their debt; VantageScores focus more on how much debt someone has and their credit utilization.

How to Check Credit Scores

There are three major credit bureaus that collect, analyze, and distribute information about consumer credit: Equifax, Experian, and TransUnion. You’re entitled to one free credit report per year from each of the major credit bureaus if you’d like to check your credit score. Your credit card company may offer you the chance to check your score more frequently as a perk of membership, so be sure to ask about that service if you’re curious.

How is My Credit Score Calculated?

Your credit score range is based on your credit history, which considers:

• The number and types of open accounts in your name
• Your total levels of debt
• Your overall repayment history
• How much of your credit is being used
• Your length of credit history

The exact math behind your credit score is considered to be proprietary information and varies based on what kind of credit score you’re reviewing. If you’re curious about your FICO credit score breakdown.

What’s a Good Credit Score?

A credit score of 700 or higher is generally considered good, Investopedia says:

• Excellent: 800–850
• Very Good: 740–799
• Good: 670–739
• Fair: 580–669
• Poor: 300–579

Raising Your Credit Score

Investopedia offers the following advice to help you improve your credit score:

1. Pay your bills on time: Six consecutive months of on-time payments has the potential to boost your credit score.
2. Increase your credit line: If your credit card account is in good standing, you can call and inquire about a credit increase to lower your credit utilization rate. Note that this strategy only works if you don’t spend the increase.
3. Avoid closing credit card accounts: The age of your credit impacts your overall credit score, so leave your accounts open and in good standing as much as possible.
4. Work with a credit repair company: There are companies out there that specialize in negotiating with creditors and the three credit bureaus on your behalf in exchange for a monthly fee.