A credit score is a three-digit number calculated by running information on your credit report through an algorithm to determine how creditworthy you are.
Lenders use credit scores to decide how likely it is you will repay your debts on time. There are hundreds of credit scoring models in existence, though the FICO® Score* is perhaps the most common. The higher your credit scores, the better the offers you are likely to receive from lenders in the form of higher dollar amounts at lower interest rates.
In fact, higher credit scores can save you hundreds or even thousands of dollars over the life of a loan. Despite the important role credit scores play in your finances, however, many people don't know their credit score. Indeed, according to a GOBankingRates 2019 survey of 1,000 Americans, nearly 40% said they did not know their credit score.
How to Check Your Credit Scores
There are a few ways to check your credit scores:
- Visit a website that offers free credit scores. Numerous websites offer free credit scores; just pay attention to the terms before you sign up. Some free sites offer educational scores that aim to give you an understanding of how you're doing credit-wise. You can obtain your free FICO® Score through Experian—and also get access to Experian Boost™† , a tool that can help improve your credit scores by giving you credit for the utility and phone bills you're already paying.
- Check with your credit card issuer or lender. Many credit card and car loan companies offer complimentary credit scores that you can check by logging in to your account online or looking on your monthly statement. Typically, you have to opt in to receive the number.
- Visit a nonprofit credit counselor. Credit counselors can often pull your scores for free and go over the details with you. To find one, check with the National Foundation for Credit Counseling.
What Do Credit Scores Mean?
Because there are so many credit scoring models in existence, you likely have multiple scores. If you pull your score from one site or product, it will likely be slightly different from one you find through another product. So don't get hung up on one particular score or even the exact number. Instead, pay attention to what range you fall in. Most websites and card issuers will offer some context behind the score in addition to the number.
The context will typically include information about where you stand and whether your score is poor, fair, good, very good or exceptional. You will also likely find information about why your score is what it is. For more information, see "What Are the FICO Scoring Ranges?"
Knowing the credit score range you fall into can give you an idea of how lenders view your creditworthiness and which loans you might be approved for.
What Affects My Credit Scores?
It's important to understand the factors that go into determining your credit scores so you know how to improve them if necessary. For the FICO, there are five main factors that impact your score. They are all weighted differently:
- Payment history: Your payment history—how regularly you pay your bills on time—accounts for 35% of your credit score. Late or missed payments can negatively affect your score, while a pattern of making payments on time is the best way to keep your score high.
- Credit utilization: The percentage of available debt you're using, also known as your , accounts for 30% of your score. This is calculated by dividing how much credit you're using by the total amount of credit available to you. So if you have three credit cards with a combined credit limit of $10,000, and you have a total combined balance of $3,000 on all three cards, your utilization ratio is 30%. Most experts recommend keeping your ratio below 30%, and for the best scores, below 7%.
- Length of credit history: How long you've used credit, including your oldest and newest accounts—as well as the average age of all your open accounts—accounts for 15% of your score. Generally, the longer you've used credit, the higher your scores.
- New credit: This accounts for 10% of your score and takes into consideration how many accounts you've opened recently and how many recent hard inquiriesyou have on your credit report. Too many new accounts and inquiries could indicate greater credit risk.
- Credit mix: The variety of types of credit you're using accounts for 10% of your score. If you have different kinds of credit, like credit cards and installment loans, you'll score higher than if you only have one type of credit, such as retail credit cards.
When you receive your score, you should also get some guidelines on your score profile and why your score ranks where it does. This will include information on what's hurting your score and what's helping your score, as in the image below:
These guidelines will help you figure out what you need to do to maintain a good score, and what you need to do to improve it. For example, if bad payment history is one of the reasons your score is on the lower side, you should focus on paying your bills on time. Consider automating your payments so you never miss them again.