Your credit score is a three-digit number that lenders use to evaluate how likely you are to repay debt. It affects whether you get approved for loans, the interest rates you're offered, and sometimes even your ability to rent an apartment or get a job.
Credit Score Ranges (FICO)
- 800–850: Exceptional — best rates available
- 740–799: Very Good — above-average rates
- 670–739: Good — near median rates
- 580–669: Fair — subprime rates, limited options
- Below 580: Poor — difficulty getting approved
How Your Score Is Calculated
FICO scores are calculated from five factors, each weighted differently. Payment history is the most important at 35%, followed by amounts owed (30%), length of credit history (15%), new credit (10%), and credit mix (10%). Missing a payment has the single largest negative impact on your score.
Payment History (35%)
Every on-time payment builds your score; every missed payment damages it. A single 30-day late payment can drop a good score by 60–100 points. Payments more than 90 days late, collections, and bankruptcies cause severe, long-lasting damage. Set up autopay for at least the minimum balance to avoid accidental misses.
Credit Utilization (30%)
Credit utilization is the percentage of your available credit you're using. Keeping it below 30% is the general rule, but below 10% is better. If your total credit limit is $10,000 and you carry a $3,000 balance, your utilization is 30%. Pay down balances or request higher limits to improve this ratio.
Strategies to Improve Your Score
- Pay every bill on time — automate payments if needed
- Pay down revolving balances to reduce utilization
- Don't close old accounts — history length matters
- Limit new credit applications to avoid hard inquiries
- Check your credit report for errors and dispute inaccuracies
- Become an authorized user on someone else's well-managed account
You can check your credit report free once per year at annualcreditreport.com from each of the three bureaus (Equifax, Experian, TransUnion). Errors are common — fix them.
