How Credit Scores Work: FICO Score Ranges, the 5 Factors and How to Improve Your Credit Score

A three-digit number can affect whether you get approved for an apartment, what interest rate you pay on a car loan or mortgage, whether you need a deposit for utilities and sometimes even your insurance costs. Over a lifetime, the difference between a fair score and an excellent one can add up to tens of thousands of dollars in interest.

Yet most people have no idea what actually goes into their credit score. Here's the good news: the rules are public, they aren't complicated and you have far more control over your score than you might think.

What is a credit score?

A credit score is a number that predicts how likely you are to repay borrowed money on time, based on the information in your credit reports. Lenders use it to decide whether to lend to you and at what interest rate.

Credit score ranges: what's a good credit score?

The most widely used score in the US is the FICO Score, which ranges from 300 to 850. Higher is better. VantageScore, another common model created by the three credit bureaus, uses the same 300 to 850 range.

FICO's general ranges:

• Exceptional: 800 to 850
• Very good: 740 to 799
• Good: 670 to 739
• Fair: 580 to 669
• Poor: 300 to 579

The average FICO Score in the US has been around the low 700s in recent years. A score of 740 or above usually qualifies you for the best rates on most loans.

You have more than one score

You don't have just one credit score. Different lenders use different versions (including industry-specific scores for car loans and credit cards), and your score can differ between the three credit bureaus: Equifax, Experian and TransUnion, because each may have slightly different information. But they all respond to the same habits.

The 5 factors that make up your FICO Score

FICO publishes roughly how much each factor counts for most people:

1. Payment history: 35%

Do you pay on time? This is the biggest factor by far. A single payment that's 30 or more days late can hurt your score significantly, and late payments can stay on your report for up to seven years. Collections, charge-offs, bankruptcies and foreclosures also fall into this category.

2. Amounts owed: 30%

This includes your credit utilization ratio: how much of your available revolving credit you're using. If you have a $5,000 total limit and a $2,500 balance, your utilization is 50%.

Lower is better. Many experts suggest staying under 30%, and people with the highest scores often use less than 10%. Utilization is calculated both overall and per card.

The great thing about utilization: it has no long-term memory in most scoring models. Pay down your balances, and your score can improve as soon as the lower balances are reported, often within a month or two.

3. Length of credit history: 15%

How long your accounts have been open, including your oldest account, your newest and the average age of all accounts. That's why closing your oldest credit card can sometimes lower your score.

4. New credit: 10%

Opening several new accounts in a short time can be a red flag to lenders. Each application can lead to a hard inquiry, which may lower your score by a few points for a while. Hard inquiries stay on your report for two years but usually only affect your FICO Score for one.

Rate shopping tip: when you shop for a mortgage, car loan or student loan, multiple inquiries within a short window (typically 14 to 45 days, depending on the scoring model) are usually counted as just one.

5. Credit mix: 10%

Having experience with different types of credit, like credit cards (revolving) and installment loans (car loans, student loans, mortgages), can help a little. It's never worth taking on debt just for this.

What doesn't affect your credit score

• Checking your own credit (a soft inquiry)
• Your income or job title
• Your age, race, religion, gender, marital status or where you live
• Using a debit card
• Your bank account balances
• Utility and rent payments, unless they're reported to the bureaus or go to collections (some services let you add on-time rent payments to your report)

How buy now, pay later affects your credit

Buy now, pay later (BNPL) loans have exploded in popularity, and the rules are changing. In 2025, FICO announced new score versions that can include BNPL loan data. Whether your BNPL payments show up depends on the lender and the bureau. Missed payments can hurt your credit, especially if the debt goes to collections. Read our full guide to buy now, pay later.

Medical debt and your credit score

The three credit bureaus have stopped including paid medical collections and medical collections under $500 on credit reports, and they wait a year before adding unpaid medical debt. Rules around medical debt reporting have been changing, so check your reports regularly.

How to improve your credit score

Quick wins (weeks to months)

• Pay down credit card balances to lower utilization
• Ask for a credit limit increase on an existing card (without increasing spending)
• Pay before the statement closing date, so a lower balance gets reported
• Dispute errors on your credit reports

Long-term habits

• Pay every bill on time. Set up autopay for at least the minimum.
• Keep old accounts open if they don't cost you anything.
• Apply for new credit only when you need it.
• Check your credit reports regularly for errors. You can get free reports weekly at AnnualCreditReport.com. See our guide to free credit reports.

If you've missed payments

Get current as soon as possible and stay current. The impact of late payments fades over time, especially as you build a new record of on-time payments. If you're struggling, call your lender before you miss a payment. Many offer hardship programs.

How to build credit from scratch

If you have no credit history (a "thin file"), try:

• A secured credit card, backed by a cash deposit that usually becomes your credit limit
• Becoming an authorized user on a family member's card with a long, positive history
• A credit-builder loan from a credit union or community bank, where your payments are held in savings and reported to the bureaus
• A student credit card, if you're in college
• Rent and utility reporting services

Use small amounts, pay in full every month and be patient. Credit is built over months and years, not days. It usually takes about six months of activity to generate a FICO Score.

How long do things stay on your credit report?

• Late payments: up to 7 years
• Collections: up to 7 years
• Chapter 7 bankruptcy: up to 10 years
• Chapter 13 bankruptcy: up to 7 years
• Hard inquiries: 2 years
• Positive accounts in good standing: up to 10 years after closing

Credit score myths

• "Carrying a balance helps your score." It doesn't. Paying in full avoids interest and keeps utilization low.
• "Marriage combines credit scores." It doesn't. Each person keeps their own credit history, though joint accounts appear on both reports.
• "Your income affects your score." It doesn't, though lenders consider income separately.
• "Paying off a collection removes it." It usually stays on your report, though newer scoring models may ignore paid collections.

Watch out for credit repair scams

No one can legally remove accurate negative information from your report. Be wary of companies that:

• Promise to erase debt or bad credit
• Ask for payment before doing any work
• Tell you to dispute accurate information
• Suggest creating a "new credit identity"

Disputing real errors is something you can do yourself, for free. Nonprofit credit counseling agencies can also help.

Frequently asked questions about credit scores

How fast can I raise my credit score?

Paying down card balances can raise your score within a month or two. Recovering from late payments or collections takes longer.

Can I get a mortgage with a fair credit score?

Often yes, especially with government-backed loans, but you may pay a higher interest rate. Improving your score before applying can save a lot over the life of the loan.

Does closing a credit card hurt your score?

It can, by increasing your utilization and, over time, lowering the average age of your accounts.

Does checking my credit score lower it?

No. Checking your own score is a soft inquiry and doesn't affect it.

What's the fastest way to build credit with no history?

A secured credit card or becoming an authorized user, combined with on-time payments and low balances.

Your credit score is one number. Our free wellness wheel quiz gives you eight, one for each dimension of your wellbeing.