What is a credit score? What are credit score brackets?

Credit scores influence many aspects of your life: whether you get a loan or a credit card, what interest rate you pay, sometimes whether you get an apartment you want.

A higher credit score can give you access to more credit products — and lower interest rates. Borrowers with scores above 750 or so often have many options, including the ability to qualify for 0% financing on cars and for credit cards with 0% introductory interest rates.

It pays to know how credit scores work and what the credit score ranges are.

Know how your credit is scored

See your free score and the factors that influence it, plus information on ways to keep building.

A credit score is a three-digit number, usually on a scale of 300 to 850, that estimates the likelihood that you will repay borrowed money and pay your bills.

Credit scores are calculated from information about your credit accounts. This data is collected by credit reporting agencies, also known as credit bureaus, and compiled in your credit reports. The three largest bureaus are Equifax, Experian and TransUnion.

The highest credit score you can get is 850, although there isn’t much difference between a “perfect” score and a great score when it comes to the rates and products you can qualify for . In other words: don’t worry about trying to score 850, especially since scores tend to fluctuate frequently.

Creditors set their own standards for the scores they accept, but here are some general guidelines:

In addition to your credit score, factors like your income and other debts can play a role in whether or not creditors approve your application.

What is the difference between the FICO score and the VantageScore?

Two companies dominate the credit rating. The FICO score is the best known score. Its main competitor is the VantageScore. Generally, they both use a credit score range of 300 to 850.

Each company also has several different versions of their rating formula. The most widely used scoring models are VantageScore 3.0 and FICO 8.

FICO and VantageScore draw from the same data, weighting the information slightly differently. They tend to move in tandem: if you have a great VantageScore, your FICO is also likely to be high.

Why are my FICO score and VantageScore different?

A score is a snapshot, and the number may vary each time you check it. Your score may vary depending on which credit bureau provided the credit report data used to generate it, or even when the bureau provided it. Not all creditors send account activity to all three bureaus, so your credit report from each is unique.

What is the average credit score?

The average FICO 8 score was 716 in the second quarter of 2021 and the VantageScore 3.0 average was 695 in the same period.

What factors affect your credit scores?

The two main credit scoring models, FICO and VantageScore, consider roughly the same factors but weight them somewhat differently. For both scoring models, the two things that matter most are:

  • Pay bills on time. A misstep here can be costly, and a late payment 30 days or more after the due date stays in your credit history for years.

  • How much you owe. Credit usage, or how much of your credit limits you use, is almost as heavy as paying on time. It’s good to use less than 30% of your credit limits — the less the better. You can follow several steps to reduce your use of credit. The scores react quite quickly to this factor.

Much less weight goes to these factors, but they are still worth watching:

  • Credit age: The longer you’ve had credit and the higher the average age of your accounts, the better your score.

  • Composition of credit: The scores reward having more than one type of credit – a traditional loan and a credit cardfor example.

Factors that don’t affect your credit scores

There are some things that are not included in credit score calculations, and these are mostly related to demographic characteristics.

For example, your race or ethnicity, gender, marital status, or age are not part of the calculation. Neither your work history — which can include things like your salary, title, or employer — nor where you live.

How to improve your credit

What does your credit score measure? In a word: solvency. But what does that actually mean? Your credit score is an attempt to predict your financial behaviors. That’s why the factors that go into your score also point to reliable ways to increase your score:

  • Keep credit card balances below 30% of their limits, and ideally much lower.

  • Keep old credit cards open to protect the average age of your accounts, and consider having a combination of credit cards and installment loans. Space out credit applications instead of asking for a lot in a short time.

How can I check and monitor my credit?

You can get a free credit score from a personal finance website such as NerdWallet, which offers a TransUnion VantageScore 3.0.

It is important to use the same score each time you check. To do otherwise is like trying to monitor your weight on different scales – or possibly switching between pounds and kilograms. So pick a score and get a game plan for monitoring your credit. Changes measured by one score will likely be reflected in the others.

Remember that like weight, scores fluctuate. As long as you keep it within a healthy range, these swings won’t impact your financial well-being.

You can help protect your credit by freezing of your credit. You can still use credit cards, but no one can apply for credit using your personal data because access is blocked when your credit is frozen.

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