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What Is a Credit Score and what are the Credit Score Variables?
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What Is a Credit Score and What are the Credit Score Ranges?
Credit scores assess your probability of repaying new debt. Scores of 690 or above are generally considered to be good credit.
by Amanda Barroso Lead Writer | Credit scoring, budgeting personal finances Amanda Barroso is a personal financial writer she has joined NerdWallet in 2021 and focuses on credit scoring. She has also written data-driven studies and has was a contributor to the NerdWallet's "Smart Money" podcast. Before joining the team, Amanda worked for more than 10 years covering the issues that affect numerous Americans as well as writing at the Pew Research Center, a policy analyst at the National Women's Law Center and a professor at the college level. Amanda obtained a doctorate at The Ohio State University.
and Bev O'Shea personal finance writer | MSN Money, Credit.com, Atlanta Journal-Constitution, Orlando Sentinel Bev O'Shea is a former NerdWallet authority on consumer credit, scams and identity theft. She has a bachelor's level degree in journalism from Auburn University and a master's in education from Georgia State University. Prior to joining NerdWallet, she worked for daily newspapers, MSN Money and Credit.com. Her work has been featured throughout the world in The New York Times, The Washington Post, the Los Angeles Times, MarketWatch, USA Today, MSN Money and many other places. Twitter: @BeverlyOShea.
Updated Mar 28 2023
Edited by Kathy Hinson Lead Assigning Editor Personal financial, credit scoring, financial management and debt Kathy Hinson leads the Core Personal Finance team at NerdWallet. Previously, she spent 18 years with The Oregonian in Portland in capacities such as chief of the copy desk and team director of design and editing. Previous experience included copy editing and news for various Southern California newspapers, including the Los Angeles Times. She graduated with a bachelor's in journalism and mass communications at Iowa's University of Iowa.
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Credit scores affect all aspects of your life. For instance, the amount you can get from a loan or credit card, what interest rate you pay and whether you can get an apartment you want.
A higher credit score can give you access to greater credit options -- and with lower interest rates. People with credit scores that are higher than 775 or less typically have many options, including the possibility of obtaining no-interest financing for cars and for credit cards with 0% introductory interest rates.
It is important to understand how credit scores work and what the credit score ranges are.
What is an credit score?
Credit scores are a 3-digit number, generally on an scale from 300 to 850, that indicates how likely you are to pay back borrowed funds and pay off bills.
Credit scores are calculated using data about your credit account. The information is collected by credit-reporting companies, also called , and compiled into your credit reports. The three biggest companies comprise Equifax, Experian and TransUnion.
You don't have a single credit score -- you may have several and they probably vary slightly. This is because two large businesses calculate their scores. More on that in the following.
The best credit score you can receive is 850. However, there isn't much difference between the "perfect" score and an outstanding score when it comes to the rate and the types of products you are eligible for. That's why you shouldn't be anxious about achieving an 850 score, especially because scores can fluctuate frequently.
Find out how your credit is assessed
See your free score and the factors that impact it, as well as tips on how to keep building.
How can you tell the different of FICO score and VantageScore?
Two companies dominate credit scoring. It is the most well recognized score. Its principal competitor is . In general, both companies have a credit score range of 300 to 850.
Every business has different versions of its scoring formula, as well. The scoring formulas that are most often tend to be VantageScore 3.0 and FICO 8.
FICO and VantageScore draw from the same information, weighing the information slightly differently. They generally move in tandem When you have an excellent VantageScore, then your FICO will likely be very high too.
Why are my FICO score as well as my VantageScore different?
The score represents a moment in time and the score can fluctuate depending on the time you review it. The score you receive will vary based the credit bureau that provided the credit report data used to create it or the bureau supplied the data. Some credit companies do not send information about their accounts to the three bureaus, and so your credit report from each is distinct.
What are the credit score ranges?
Creditors establish their own standards for the scores they'll accept however, these are generally accepted guidelines:
A score of 720 or higher is usually considered to be a good score.
A score between 690 and 719 can be considered .
Scores ranging from 630 to 689 are .
Scores of 629 or less are
In addition to the credit rating, other factors such as your income or other debts could influence creditors decision-making on whether they will approve your application.
Did you even know...
The scoring in America United States varies a bit between the two main scoring models. The average FICO 8 score stood at 716 in August 2022. It was the same as a year earlier. [0] FICO Choices Blog . . Accessed on Aug 30, 2022.
Its VantageScore 3.0 mean was at 695 at the second quarter of 2021.
What are the factors that affect how your scores on credit?
The two major model of credit score, FICO and VantageScore, take into account the same elements, but weigh them in a different way.
In both models of scoring, two elements which matter the most are:
Paying bills in time. A misstep here can cost you dearly. If you're at least 30 days over the due date is recorded on your credit report for a period of time.
The amount you are owed. Credit utilization describes how much of your credit limit you are making use of. It is recommended to limit your use to less than 30 percent of your credit limit and lower is more beneficial. There are a variety of steps to
Much less weight goes to these elements, but they're still important to keep an eye on.
The more time you've had credit and the greater an average account's age, the better your score.
Credit mix Credit mix: Scores reward having more than one type of credit, such as the traditional loan and a , as an example.
How recently have you made an application for credit: If you make an application for credit, it could result in a temporary dip in your credit score.
Factors that don't affect your credit scores
There are some aspects that aren't included when calculating credit scores The majority of these have to do with demographics.
For example the race, ethnicity, sexual status or age aren't included in the calculation. Neither is your employment record -- which may include things such as your salary, title or employer -or the place you live.
How can you improve your credit score?
What is your credit score indicate? In one word creditworthiness. But what exactly does this mean? Credit scores are an attempt to determine your financial habits. This is why the factors that go into your score can also provide reliable ways you can build up your score:
Make sure to pay all charges at the time they are due.
Limit credit card balances to 30% of their limit and, in the ideal case, much less.
Maintain older credit cards open to ensure the age average of your accounts. You should also take into consideration the possibility of having a mix of credit cards as well as installment loans.
Space out credit application forms instead of making a large number of applications in a short period of time. Usually, lenders initiate an "hard pull" on your credit when you make an application, which will temporarily affect your credit score. Too many applications too close to each other could cause further damage.
There are several options to consider when starting out and ways to when you've got it established. Doing things like making payments towards your account balances a few times throughout the month and requesting higher credit limits could boost your score.
How can I examine and track my credit?
You can look up your personal credit score -- it's thereyou can know what the lender is likely to see.
You can obtain a score through a personal finance website such as NerdWallet that offers TransUnion VantageScore 3.0. Many personal banking apps also offer free credit scores, so you can make a habit of checking in when you log in to pay bills.
It's crucial to use the same score each time you take a look. If you don't, it's like trying to track your weight using different scales , or possibly shifting between kilograms and pounds. Choose an appropriate score and create a game plan to monitor your credit. Any changes that are made by one score are likely to be seen in other scores.
Be aware that, just like the weight of your body, scores change. As long as you maintain a healthy range, those fluctuations won't effect on your financial health.
You can protect your credit by contacting every credit bureau. It is possible to continue using credit cards, however you cannot apply for credit using your personal data because access is denied by freezing your credit. Freezing your credit is easy and takes only a few minutes, but it goes a long way in securing your finances.
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About the authors: Amanda Barroso covers consumer credit and debt at NerdWallet. She was previously employed at Pew Research Center. Pew Research Center and earned a doctorate at The Ohio State University.
Bev O'Shea is a former credit writer for NerdWallet. Her work has appeared in the New York Times, Washington Post, MarketWatch and elsewhere.
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