Credit Scores & Credit Monitoring What To Do About Bad Credit How to Read Your Credit Score Credit Scores Explained By LaToya Irby LaToya Irby Facebook Twitter LaToya Irby is a credit expert who has been covering credit and debt management for The Balance for more than a dozen years. She's been quoted in USA Today, The Chicago Tribune, and the Associated Press, and her work has been cited in several books. learn about our editorial policies Updated on May 29, 2022 Reviewed by Khadija Khartit Reviewed by Khadija Khartit Twitter Website Khadija Khartit is a strategy, investment, and funding expert, and an educator of fintech and strategic finance in top universities. She has been an investor, entrepreneur, and advisor for more than 25 years. She is a FINRA Series 7, 63, and 66 license holder. learn about our financial review board Share Tweet Pin Email In This Article View All In This Article What Your Credit Score Means Understanding Credit Score Ranges What a Good Credit Score Can Do for You How to Get Your Credit Score How to Build Your Credit Score Photo: mihailomilovanovic / Getty Images Lenders use credit scores to help assess the level of risk associated with borrowers, and some employers, landlords, and insurance companies use them to decide about job applicants, potential tenants, or policyholders, too. When it comes to loans, your credit score can either save or cost you money. Understanding your score is the first step in creating a strong credit profile. What Your Credit Score Means Your credit score represents the likelihood that you'll repay a loan based on your history with credit accounts. Credit scoring calculations use your credit history to generate a three-digit score based on five key factors: your payment history, amount of debt, length of credit history, types of credit, and recent applications for credit. High credit scores are better and represent a history of doing positive things, such as paying bills on time and using available credit responsibly, and avoiding the negatives, like late payments more than 30 days overdue, accounts going to collections, and bankruptcy. On the other hand, borrowers with lower scores typically have had trouble making payments in the past and carry more risk for lenders, resulting in higher interest rates, if they get approved. Negative information generally affects your credit score less as it gets older and you add positive information to your credit history. After seven years, most negative information won’t affect your credit score. Note There are multiple credit scoring models available and each one has its own formula for calculating your score. VantageScore and FICO are two well-known brands of scoring models. Understanding Credit Score Ranges Most credit scores range from 300 to 850, with an 850 representing a perfect credit score. The higher your credit score, the better your credit. In general, credit scores fall in the following ranges: Below 580: Poor580 to 669: Fair 670 to 739: Good 740 to 799: Very GoodAbove 800: Exceptional Note Some credit scoring models may use a slightly different range, but higher scores will always be better. What a Good Credit Score Can Do for You A good credit score offers more than just bragging rights. Having a high score makes it easier to be approved for credit cards and loans, qualify for lower interest rates, and get higher credit limits and loan amounts. Not only that, your credit score opens up a range of credit card options, including top-tier rewards credit cards. Many auto insurers use a credit-based insurance risk score to calculate your insurance premium, too. So having a good credit score allows you to pay less for insurance than if you had a lower credit score. Add cellphone retailers to the list of companies that use your credit score. With smartphone price tags commonly topping $1,000, paying for a phone in installments is budget-friendly. Depending on your carrier, your credit score may be used to determine whether you can finance a new phone and the amount you're able to finance. A good credit score may allow you to finance the phone of your choice with a low or no down payment. How to Get Your Credit Score You can find your credit score—which is based on information from your credit report—from a variety of sources. First, you can check your score for free through services like Credit Karma. Some banks, credit unions, and credit card issuers make your credit score available either on your billing statement or online, as well. Finally, you can access your credit score from any of the major credit bureaus: Equifax, Experian, and TransUnion. To help you understand your score, many of the companies that provide your credit score also will include a gauge that helps you figure out whether you have good or bad credit and the factors that influence your credit score. Note Your credit report contains the information used to calculate your credit score. As a result of the financial hardship caused by the global pandemic, you can now access your credit report for free each week through AnnualCreditReport.com, through December 31, 2022. How to Build Your Credit Score There are several ways to build your credit score so you can enjoy the benefits of good credit. If you already have a credit card or loan, making your monthly payments on time will help tremendously—payment history is 35% of your credit score. With credit cards, maintaining a healthy balance is important—30% of your score is based on the amount of debt you have, which includes the balance you're carrying on credit cards. Note Your credit utilization, which measures how much of your available credit you use, is an important part of the debt calculations that make up 30% of your score. For example, if you have three credit cards with $3,000 limits each, you have $9,000 of available credit. The general rule of thumb is to keep your balances below 30% of your credit limits. The earlier you start building your credit score, the better—15% of your credit score is based on the length of time you've been using credit. When you're just starting your credit use, your credit age will be pretty low, but as you gain experience, having well-established accounts will increase the average age of your accounts. If you're brand new to credit and don't have any accounts in your name, consider opening a secured credit card. This account requires a security deposit as collateral for the credit line, but is easier to open for those who are new to credit. Alternatively, you can be added as an authorized user to the account of a friend or family member who has a good credit history. This way, you’ll get the benefit of their entire credit history, which could help you apply for credit of your own. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Equifax. "How Long Does Information Stay on My Equifax Credit Report?" myFICO. "What Is a FICO Score?" Consumer Financial Protection Bureau. "What Is a Credit Score?" AT&T Next Up. "Monthly Installment Phone Plans." Federal Trade Commission. "Free Weekly Credit Reports During COVID Extended Through December 2022." myFICO. "What Is Amounts Owed?" Experian. "What Is a Credit Utilization Rate?" myFICO. "What's in My FICO Scores?"