A credit score is a number calculated by credit scoring models using information from your credit reports. Your credit score tells financial institutions your creditworthiness, which is essentially a grading scale that shows how good you are at managing your debts. A credit score ranges from 300 to 850. <\/p>\n\n\n\n
There are two main players that major credit bureaus<\/a> and other lenders look to for scores\u2014FICO\u00ae<\/sup> and VantageScore. <\/p>\n\n\n\n FICO is the older and more widely used credit scoring model by lenders, while VantageScore is a newer model created by the three major credit bureaus\u2014Equifax, Experian, and TransUnion. <\/p>\n\n\n\n Banks or lending institutions break down credit scores into categories to determine your qualifications as a borrower. Assuming you have FICO and VantageScore credit scores, you fall under one of the following categories: <\/p>\n\n\n\n FICO<\/strong><\/a> <\/p>\n\n\n\n VantageScore<\/strong><\/a> <\/p>\n\n\n\n The average FICO credit score in the US in 2023 was about 715<\/a>.\u202f <\/p>\n\n\n\n While having a good credit score<\/a> is great, it doesn\u2019t guarantee approval for loans or credit cards. These numbers serve as a benchmark of past financial behavior. Higher numbers mean you\u2019ve been more responsible and, therefore, could give banks and lenders more confidence in doing business with you. But other factors also apply. <\/p>\n\n\n\n If you\u2019ve ever applied for a credit card, tried to rent an apartment, or looked into getting a loan, you\u2019ve dealt with credit scores.\u202f <\/p>\n\n\n\n You\u2019ll start generating credit when you open your first credit card, but it\u2019s important to know how to build credit<\/a> to start off on the right foot. Here are the factors that determine your credit score.\u202f <\/p>\n\n\n\n The FICO score, named after its developer, Fair Isaac Corporation, is the longest-running credit score issuer. It was invented in 1956 and became the standard for consumer lending in 1989. To obtain a FICO score, you must have had one credit account open for at least six months.\u202f <\/p>\n\n\n\n FICO uses the following factors<\/a> to calculate your credit score, listed in order of importance:\u202f <\/p>\n\n\n\n VantageScore is a relative newcomer to the scene, debuting in 2006. It was introduced by the three major credit bureaus\u2014Equifax, Experian, and TransUnion\u2014to better account for changes in technology and borrower behavior.\u202f <\/p>\n\n\n\n VantageScore uses the following factors<\/a> to determine your score:\u202f <\/p>\n\n\n\n You have more than one credit score primarily because of the different scoring models and versions in use. There are the two main credit score issuers\u2014FICO and VantageScore. And each of those produces multiple score versions. <\/p>\n\n\n\n Also, the three major credit bureaus (Equifax, Experian, and TransUnion) that house your credit reports have information that varies slightly. That can lead to different scores even when using the same model. <\/p>\n\n\n\n Additionally, some lenders use industry-specific versions of credit scores to assess credit applications. For example, if you\u2019re applying for a car loan, the finance person at the dealership may pull a credit score optimized for auto lending. <\/p>\n\n\n\n Credit scores change based on your financial behavior. In line with the FICO and VantageScore scoring criteria outlined earlier in this piece, this includes things like: <\/p>\n\n\n\n If you routinely make credit card payments late, your credit score will typically fall. Lenders will want to see you consistently make on-time payments before any positive change. Responsible behaviors, such as paying off debts and correcting errors on your report, will cause your score to go up. <\/p>\n\n\n\n The good news is that you, as consumers, have the power to improve your credit score<\/a>. Let\u2019s explore some of the ways to raise your score. <\/p>\n\n\n\n Credit card companies factor your credit utilization rate (CUR) into your overall credit score. This is the ratio of how much credit you\u2019re using vs. the total amount of credit you have available to you. For example, if your total credit limit is $10,000 and you\u2019re carrying a $1,000 balance, you\u2019d have a 10% credit utilization rate. <\/p>\n\n\n\n Keeping this number low keeps your credit score up. While there\u2019s no exact number that helps your credit, most experts say it\u2019s a good idea to keep this number under 30%<\/a>. <\/p>\n\n\n\n Paying your bills on time is as important, if not more important, than whether you pay them in full. Late credit card, loan, and bill payments translate to financial irresponsibility in a lender\u2019s eyes. This can significantly damage your credit score. While holding a credit card balance may hurt your credit score, late payments actually cause more damage. <\/p>\n\n\n\n Before you say goodbye to a credit card for good, think about how closing that card may impact your score. It\u2019s not always beneficial to close credit card accounts.<\/a>\u202f <\/p>\n\n\n\n Remember how your credit utilization ratio is a scoring factor? <\/strong>Closing a credit card will actually lower your available credit-to-used credit ratio. Additionally, history is good when it comes to credit. Creditors want to know you\u2019ve been in the financial management game for a while. Closing an account can shorten the average age of your accounts, which affects your score.\u202f <\/p>\n\n\n\n Note that you shouldn\u2019t open credit cards solely to increase your available credit and improve your CUR. This practice is an immediate red flag to creditors. Keep an eye on your total number of accounts<\/a>. <\/p>\n\n\n\n Hard inquiries occur when a lender or creditor checks your credit report to make a lending decision, such as when you apply for a credit card, mortgage, or auto loan. <\/p>\n\n\n\n Each hard inquiry can temporarily lower your score by a few points. While a single hard inquiry might have a negligible impact, multiple inquiries within a short period can signal to lenders that you\u2019re in financial distress or taking on too much new debt, which can be risky. This can make it more challenging to secure favorable loan terms or even get approved for new credit. <\/p>\n\n\n\n Understanding credit scores and how they\u2019re calculated can help you paint an overall picture of your financial health. Once you realize how your score fits into your overall personal finances, you can prioritize taking action. Credit Karma<\/a> is an excellent tool to use in partnership with building your credit. Intuit also offers more financial literacy<\/a> resources online, including a self-paced financial curriculum<\/a> to help you become an expert in your own finances.<\/p>\n","protected":false},"excerpt":{"rendered":" Learn how credit scores impact your financial well-being and how they shape your financial prospects.<\/p>\n","protected":false},"author":151418438,"featured_media":12442,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"rkv_browse_by_id":0,"rkv_cta_id":0,"rkv_optimize_for_pagespeed":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"useModifiedDate":false,"customPublishDate":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[237495812,237496403],"tags":[],"intuit_collection":[237496499],"intuit_series":[],"coauthors":[1399],"class_list":["post-12441","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-financial-tips","category-innovative-thinking","intuit_collection-limited-content"],"yoast_head":"\nWhat are credit score ranges?\u00a0<\/h2>\n\n\n\n
\n
\n
How are credit scores calculated? <\/h2>\n\n\n\n
FICO Score\u202f <\/h3>\n\n\n\n
\n
VantageScore\u202f <\/h3>\n\n\n\n
\n
Why you have more than one credit score <\/h2>\n\n\n\n
Why your credit score changes <\/h3>\n\n\n\n
\n
How to improve your credit score <\/h2>\n\n\n\n
Keep your credit card balances low <\/h3>\n\n\n\n
Pay your bills on time <\/h3>\n\n\n\n
Keep unused credit cards open <\/h3>\n\n\n\n
Minimize hard inquiries <\/h3>\n\n\n\n
Boosting your credit score can improve your financial health <\/h2>\n\n\n\n