What Is a Credit Score? Definition, Factors, and Ways to Raise It

Credit Score

Investopedia / Joules Garcia

What Is a Credit Score?

A credit score is a three-digit number that rates your creditworthiness. FICO scores range from 300 to 850. The higher the score, the more likely you are to get approved for loans and for better rates.

A credit score is based on your credit history, which includes information like the number accounts, total levels of debt, repayment history, and other factors. Lenders use credit scores to evaluate your credit worthiness, or the likelihood that you will repay loans in a timely manner.

There are three major credit bureaus in the U.S.: Equifax, Experian, and TransUnion. This trio dominates the market for collecting, analyzing, and disbursing information about consumers in the credit markets.

Key Takeaways

  • A credit score is a number that depicts a consumer’s creditworthiness. FICO scores range from from 300 to 850.
  • Factors used to calculate your credit score include repayment history, types of loans, length of credit history, debt utilization, and whether you've applied for new accounts.
  • A credit score plays a key role in a lender’s decision to offer credit and for what terms.
  • The three main U.S. credit bureaus (Equifax, Experian, and TransUnion) may each calculate your FICO score differently.

The credit score model was created by the Fair Isaac Corp., now known as FICO, and is used by financial institutions. While other credit scoring systems exist, the FICO Score is by far the most commonly used.

There are a number factors that go into calculating your FICO credit score, including your repayment history, your debt utilization, the length of your credit history, your credit mix, and any new account openings.

Lenders use your credit score to determines whether to approve you for products like mortgages, personal loans, and credit cards, and what interest rates you will pay.


Prospective employers may also check it to see whether you're a reliable person. Service providers and utility companies may check it to decide whether you are required to make a deposit.

How Credit Scores Work

A credit score can significantly affect your financial life. It plays a key role in a lender’s decision to offer you credit. Lenders are more likely to approve you for loans when you have a higher credit score, and are more likely to decline your loan applications when you have lower scores. You can also get better interest rates when you have a higher credit score, which can save you money in the long-term.

Conversely, a credit score of 700 or higher is generally viewed positively by lenders, and may result in a lower interest rate. Scores greater than 800 are considered excellent. Every creditor defines its own ranges for credit scores and its own criteria for lending. Here are the general ranges for how credit scores are categorized.

  • Excellent: 800–850
  • Very Good: 740–799
  • Good: 670–739
  • Fair: 580–669
  • Poor: 300–579


Your credit score also may determine the size of deposit required to get a smartphone, cable service, or utilities, or to rent an apartment.


What Is A Credit Score?


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How Your Credit Score Is Calculated

The three major credit reporting agencies in the U.S. (Equifax, Experian, and TransUnion) report, update, and store consumers’ credit histories. While there can be differences in the information collected by the three credit bureaus, five main factors are evaluated when calculating a credit score:

  1. Payment history (35%)
  2. Amounts owed (30%)
  3. Length of credit history (15%)
  4. Types of credit (10%)
  5. New credit (10%)
  • Payment history: Your payment history includes whether you've paid your bills on time. It takes into account how many late payments you've had, and how late they were.
  • Amounts owed: Amounts owed is the percentage of credit you've used compared to the credit available to you, which is known as credit utilization.
  • Length of credit history: Longer credit histories are considered less risky, as there is more data to determine payment history.
  • Credit mix: A variety of credit types shows lenders you can manage various types of credit. It can include installment credit, such as car loans or mortgage loans, and revolving credit, such as credit cards.
  • New credit: Lenders view new credit as a potential sign you may be desperate for credit. Too many recent applications for credit can negatively affect your credit score.
Factors That Impact Your Credit Score

Ellen Lindner / Investopedia

Advisor Insight

Kathryn Hauer, CFP, Enrolled Agent
Wilson David Investment Advisors, Aiken, S.C.

If you have many credit cards and want to close some that you do not use, closing credit cards can indeed lower your score.

Instead of closing accounts, gather up the cards you don’t use. Keep them in a safe place in separate, labeled envelopes. Go online to access and check each of your cards. For each, ensure that there is no balance and that your address, email address, and other contact info are correct. Also, make sure that you don’t have autopay set up on any of them. In the section where you can have alerts, make sure you have your email address or phone in there. Make it a point to regularly check that no fraudulent activity occurs on them, since you aren’t going to be using them. Set yourself a reminder to check them all every six months or every year to make sure there have been no charges on them and that nothing unusual has happened.


VantageScore is a consumer credit rating product developed by the Equifax, Experian, and TransUnion credit bureaus as an alternative to the FICO Score.

FICO creates a single bureau-specific score for each of the three credit bureaus, using only information from that bureau. As a result, the FICO is actually three scores, not one, and they can vary slightly as each bureau will have different calculation methods. A VantageScore is a single, tri-bureau score, combining information from all three credit bureaus and used by each of them the same.


FICO score is the most popular credit score, used by about 90% of lenders.

How to Improve Your Credit Score

When information is updated on a borrower’s credit report, their credit score changes and can rise or fall based on new information. Here are some ways that your can improve your credit score:

  • Pay your bills on time: Six months of on-time payments are required to see a noticeable difference in your score. 
  • Increase your credit line: If you have credit card accounts, call and inquire about a credit increase. If your account is in good standing, you should be granted an increase in your credit limit. However, it is important not to spend this amount so that you maintain a lower credit utilization rate. Meanwhile, try to pay down your debt.
  • Don’t close a credit card account: If you are not using a certain credit card, it is best to stop using it instead of closing the account. Depending on the age and credit limit of a card, it can hurt your credit score if you close the account.
  • Work with one a credit repair companies: If you don’t have the time to improve your credit score, credit repair companies can negotiate with your creditors and the three credit agencies on your behalf, in exchange for a monthly fee.
  • Correct any errors on your credit report: You are entitled to one free credit report per year from each of the main credit bureaus. You can get your report through AnnualCreditReport.com. You can also hire a monitoring service to help keep your information secure.

What is a Good Credit Score to Have?

What a good credit score is will ultimately be determined by the lenders. Ranges vary depending on the credit scoring model. Generally, credit scores from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good; and 800 and higher are considered excellent.

Who Calculates Credit Scores?

There are three major credit bureaus in the United States: Equifax, Experian, and TransUnion. They each calculate your FICO score in different ways using the same information. Credit bureaus collect, analyze, and disburse information about consumers in the credit markets.

How Can I Raise My Credit Score Quickly?

To raise your credit score quickly, you can enroll in a service that includes other payment information such as your rent payments and utilities payments that are not typically included in your credit score. If you have had a good track record with these kinds of bills, enrolling in a service like Experian Boost could raise your credit score quickly.

The Bottom Line

Your credit score is a number that can have a significant impact on your financial life. If you have a good credit score, you are more likely to qualify for loans and to receive better terms that can save you money. Learning what your credit score is and what goes into calculating your credit score can help you take steps to improve it.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. Consumer Financial Protection Bureau. "What Is a Credit Score?"

  2. Cornell University, Legal Information Institute. "Credit Score."

  3. MyFICO. "What's in my FICO Score?"

  4. Experian. “What Is a Good Credit Score?

  5. VantageScore, via Internet Archive. “How It Works.”

  6. FICO Score. “FICO® Scores Are Used by 90% of Top Lenders.”

  7. Experian. "Experian Boost."

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The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.