Credit Score

What is a credit score?

A credit score is a three-digit number that estimates how likely you are to pay back borrowed money on time. Lenders, landlords, and some insurers use it to decide whether to approve you and what interest rate to charge. The most common scoring models, FICO and VantageScore, run from 300 to 850, and higher is better.

Key takeaways

• Your score is calculated from the information in your credit report, not from your income or bank balance.
• Payment history is the largest factor in FICO scores, followed by how much of your available credit you use.
• A higher score usually means lower interest rates, which can save real money on a car loan, mortgage, or credit card.
• Checking your own score does not lower it.

How a credit score works

The credit bureaus collect data on your borrowing: which accounts you have, how much you owe, and whether you paid on time. A scoring model turns that data into a single number. You don't have just one score. Different models and different bureaus can produce slightly different numbers for the same person.

FICO groups its factors into five categories:

• Payment history: whether you've paid past bills on time. This matters most.
• Amounts owed: how much of your available credit you're using, known as credit utilization.
• Length of credit history: how long your accounts have been open.
• New credit: how many accounts you've recently opened or applied for.
• Credit mix: whether you've handled different kinds of credit, like cards and installment loans.

FICO explains how each factor is weighted on myfico.com. Score ranges that lenders treat as "good" or "excellent" vary by lender and model, so check there rather than relying on a fixed cutoff.

Hypothetical example: Two people apply for the same $20,000 car loan. One has a long record of on-time payments and low card balances. The other has two recent late payments and cards near their limits. The first person is likely to be offered a lower interest rate. Over a five-year loan, even a couple of percentage points can mean hundreds or thousands of dollars in extra interest for the second person.

Why it matters for your Money Type

Priceless Tay sorts money habits into 4 Money Types: Spender, Saver, Scrambler, and Strategist. A credit score matters most for the Scrambler, the person whose income is irregular or tight and whose bills often feel like chaos. When due dates pile up, a bill slips past its date, and payment history is the part of the score that takes the hit. The first fix is usually a default order for what gets paid the moment money lands, plus autopay for at least the minimum payment on every card.

Spenders, who tend to buy on impulse, often see their score dip from high card balances rather than late payments. Savers sometimes avoid credit entirely, which can leave them with a thin file and a score that's hard to generate. For Strategists, the score is a lever: before a mortgage or refinance, cleaning up utilization can help them qualify for better terms.

Common questions

Does checking my credit score hurt it?

No. Checking your own score is a soft inquiry and has no effect. Hard inquiries happen when a lender pulls your credit for an application, and those can lower your score slightly for a period of time.

How long does it take to improve a credit score?

It depends on what's pulling it down. High card balances can affect your score quickly once they're paid down and reported. Late payments and other negative items take longer, since most can stay on your report for up to seven years.

What's the difference between FICO and VantageScore?

Both are credit scoring models that use your credit report data, and both commonly use a 300 to 850 range. They weigh some details differently, so your two scores may not match. Lenders choose which model they use.

Can I have a credit score with no credit cards?

Yes. Loans such as student loans, car loans, or a credit-builder loan also create credit history. A score needs some reported account activity, so someone with no accounts at all may not have a score yet.