Your credit score, explained

Your credit score is a three-digit number that quietly determines whether you can buy a house, finance a car, rent an apartment in many markets, and in some cases get hired. The way it's computed isn't a black box, the rules are public and the levers are simple. This guide explains what your score actually measures, what moves it, and what doesn't.

What a credit score actually is

A credit score is a number between 300 and 850 generated by an algorithm from the data on your credit report. The score is the algorithm's best guess at how likely you are to default on debt in the next 24 months. Lenders use it to decide whether to approve you and what interest rate to charge.

There isn't one credit score, there are several scoring models and several credit bureaus, so the same person can have ~20 different "official" scores depending on which combination a lender pulls. The two model families that matter:

• FICO Score, used in ~90% of U.S. lending decisions. The original. FICO 8 is the most-cited general score; FICO 9 and FICO 10 exist; mortgage lenders use older versions (FICO 2, 4, 5).
• VantageScore, newer competitor. Used by Credit Karma and most consumer-facing free score products. Generally tracks FICO closely but can vary by 10-30 points.

The free score you see on Credit Karma is usually a VantageScore. The score a mortgage lender pulls is a FICO. These can differ, don't panic if the mortgage office quotes a different number than the app on your phone.

The three credit bureaus

Three private companies maintain U.S. credit reports, Experian, Equifax, and TransUnion. Each maintains an independent file on you based on what lenders report to them, and not every lender reports to all three. The result: you have three credit reports, each slightly different. Most modern scoring models pull from a single bureau's data.

You can pull all three reports for free, weekly, at the only federally authorized source: annualcreditreport.com. Do this at least once a year and check for errors, about 25% of consumers find inaccuracies on at least one report.

Score ranges and what they mean

The relevant cutoff for credit cards: most prime rewards cards want 670+. Premium travel cards typically want 740+. Building-credit and secured cards approve at any score (or with no score at all).

The five factors

FICO publishes the rough weighting of its scoring factors. The exact weights vary by your specific profile (someone new to credit is scored differently than someone with 30 years of history), but the averages are:

1. Payment history (35%)

Have you paid your bills on time? This is the single biggest factor. A late payment of 30+ days that's reported to the bureaus can drop a previously-clean score by 50-100 points and stays on your report for seven years.

Payments are reported only if they're 30+ days late. Missing the due date by a day or two won't hurt your score unless the lender escalates (rare). But late fees still apply, and repeat lateness can prompt a APR jump to a penalty rate.

2. Amounts owed / utilization (30%)

How much of your available credit are you using? This is the single most actionable factor, you can move your score 30+ points within a single billing cycle by paying down balances before the statement closes.

Two utilization numbers matter:

• Per-card utilization, the balance on each individual card divided by its limit.
• Total utilization, the sum of all balances divided by sum of all limits.

Both should stay below 30%, ideally below 10%. The score impact steps roughly:

• 0% on all cards: looks dormant, may slightly underscore.
• 1-9%: ideal, scores best.
• 10-29%: good.
• 30-49%: noticeable hit.
• 50-74%: meaningful drag.
• 75%+ on any card: significant penalty even if total is low.

For deep details, see Credit utilization explained.

3. Length of credit history (15%)

FICO looks at three age numbers:

• The age of your oldest account.
• The age of your newest account.
• The average age of all your accounts.

Older = better. This is why the standard advice is "don't close your oldest card." Closing a 15-year-old card can drop your average age sharply when it eventually falls off your report (closed accounts age normally for ~10 years, then disappear).

4. Credit mix (10%)

Lenders like to see you handling multiple types of credit responsibly, revolving (credit cards) and installment (auto loans, mortgages, personal loans). Don't take out loans you don't need just to diversify, though. The score hit from having only credit cards is small.

5. New credit (10%)

How many new accounts and inquiries you've had recently. Each hard credit pull dings your score by ~5 points and stays on your report for two years (impact decays over 12 months). Opening a new account also lowers your average account age, which is a secondary hit.

Hard pulls cluster: multiple inquiries for the same loan type within a 14-45 day window typically count as one pull (this is why mortgage and auto-loan rate-shopping doesn't pummel your score). But credit cards don't cluster, five card applications in a month look like five separate inquiries.

Hard pulls vs soft pulls

Two types of credit inquiries:

• Hard pulls, when you apply for credit. Visible to other lenders, drops your score ~5 points, stays on report for 2 years.
• Soft pulls, when you check your own score, a lender pre-qualifies you, or an employer pulls. Not visible to other lenders, no score impact.

Pre-approval offers (CardMatch, Credit Karma recommendations) are soft pulls. Submitting an actual card application is a hard pull.

Things that don't affect your score

Common misconceptions:

• Your income.Lenders ask for it but it's not on your credit report and doesn't factor into your score. (It does affect approval decisions and credit limits.)
• Your bank account balance or savings. Same.
• Your race, gender, age, marital status, or employer. Federal law forbids these inputs.
• Your debit card or checking account activity. These don't appear on your credit report at all.
• Checking your own score.That's a soft pull, no impact.
• Carrying a balance vs paying in full.Both report the same way to the bureaus. Paying interest just costs you money; it doesn't build credit faster.

How to build a high score

The recipe for an 800+ score is:

• Pay every bill on time, every time. (One late payment can take a year+ to fully recover from.)
• Keep utilization under 10% on every card and total.
• Hold accounts a long time. Don't close old cards.
• Apply for new credit sparingly, at most a couple of cards a year.
• Have at least 5-7 accounts of varied types and ages.

This isn't fast. Most people who reach 800+ have done these five things consistently for at least 5-10 years.

Recovering from a damaged score

If your score is below 670 because of past mistakes, the fastest rebuild looks like:

• Catch up on any past-due accounts. Call lenders and ask about hardship programs.
• Pay down balances aggressively to drop utilization below 30% on every card.
• Don't close anything. Even cards in collections should stay open if possible while you negotiate.
• Add a positive line, a secured card or authorized-user line, to start adding new on-time payment history.
• Wait. Most negative items lose impact after 2 years and disappear after 7. Bankruptcies stay 7-10 years.

For more, see our Building credit from zero guide.

Recap

• Credit scores live on a 300-850 scale; 670+ is "good," 740+ is "very good," 800+ is "exceptional."
• The five factors are payment history (35%), utilization (30%), length (15%), mix (10%), new credit (10%).
• The two highest-leverage things you can do: pay on time, every time; keep utilization under 10%.
• Hard pulls hurt slightly; soft pulls (including checking your own score) don't.
• Time is the magic ingredient. Negative items decay; positive history accumulates.