Your credit score is arguably the most important aspect of your financial life: Before you apply for a new credit card, car loan or mortgage, it's important to know your score, since it will give you insight into what products you may qualify for and what interest rates to expect.
Checking your score doesn't hurt your credit and, even if you're not applying for credit, get into the habit of checking it regularly.
If you notice a dip in your score, it may be a sign of fraud or errors on your report. You can challenge those mistakes yourself or work with a professional credit repair company, which will challenge errors on your behalf with by reaching out to Equifax, Experian and TransUnion, the three main credit bureaus.
What is a credit score?
A credit score is a three-digit number that tells lenders what kind of risk you pose of not repaying debts. , Typically ranging from 300 to 850, credit scores are tabulated through various factors, such as payment history, length of credit history and credit mix.
Credit score ranges vary based on which model a lender is using, FICO or VantageScore, and the credit bureau pulling the info, Experian, Equifax or TransUnion. The ratings typically include bad/poor, fair/average, good and excellent/exceptional.
There are many common misconceptions about what affects your credit score.
"Consumers sometimes focus on things that don't matter to their scores. The most common is information about your wealth," said credit expert John Ulzheimer, formerly of FICO and Equifax. "Income, balances in retirement accounts, equity in your home, net worth — anything that defines how much money you have or how much you're worth is not considered by your credit scores."
Other factors that don't affect your credit score include race, religion, nationality, gender, marital status, age, political affiliation, education, occupation, job title, employer, employment history, where you live or your total assets.
| Rating | Credit Score |
|---|---|
| Very poor | 300-579 |
| Fair | 580-669 |
| Good | 670-739 |
| Very good | 740-799 |
| Exceptional | 800-850 |
Types of credit scores: FICO vs. VantageScore
The two main credit scoring models are FICO and VantageScore. While FICO is used in over 90% of lending decisions, Ulzheimer recommends checking both to get an accurate picture of your financial state.
How are credit scores calculated?
FICO and VantageScore credit scores have some similarities: Both scores range from 300 to 850 and payment history is the most influential factor in determining either score. But they differ in exactly how they weigh several other factors.
FICO Score
Payment history: This looks at whether you've paid past credit accounts on time and is worth 35% of your overall score
Credit utilization rate: The total amount of credit and loans you're using compared to your credit limit,. This is worth 30% of your credit score.
Length of credit history: The length of time you've had credit is worth 15% of your overall score.
New credit: How often have you applied for and opened new accounts is worth 10% of your score.
Credit mix: The variety of credit products you have — including credit cards, installment loans, finance company accounts and mortgages — accounts for 10% of your FICO score.
VantageScore
Extremely influential: Payment history
Highly influential: Type and duration of credit and percent of credit limit used
Moderately influential: Total balances/debt
Less influential: Available credit and recent credit behavior and inquiries
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The Credit People's Credit Report Repair service is relatively affordable compared to other programs in the space. Even the most basic package (the standard package) includes unlimited challenges to all three credit bureaus. Upgrading to the premium package includes escalated disputes and monthly credit score reports and score refreshes.
Credit score vs. credit report
Your credit score differs from your credit report, which is a more holistic view of your credit with detailed information about your credit activity and current credit situation. The three main credit bureaus that issue reports are Experian, Equifax and TransUnion.
A credit report will typically contain information about your financial accounts — including the date opened, credit limit or loan amount, balance, monthly payments and payment pattern during the past several years. Any bankruptcies or negative judgments will also be noted, as will any statements of dispute you may have filed.
"Your credit scores are a proxy for the health of your credit reports," says Ulzheimer. "So if you're not going to take the time to pull and review all three of your credit reports, then at the very least you should check your credit scores."
Your name, current and previous addresses, phone number, Social Security number, date of birth, and current and previous employers. You can also find the names of anyone who has obtained a copy of your credit report.
Credit bureaus do not gather data about race, religion, medical history, sexual orientation, political affiliation, criminal record or any other information that is unrelated to credit.
How to view your credit score for free
Most credit card issuers provide free credit score access to their cardholders. CreditWise from Capital One provides free VantageScore from TransUnion, while Chase Credit Journey offers free VantageScore from TransUnion.
You can also get a free copy of your credit report from all three agencies once a year by visiting Annualcreditreport.com.
Credit score FAQs
How does your credit score impact credit card approvals?
The higher your credit score, the more cards you can qualify for and the better the rate you'll receive. If you have an excellent credit score, you'll have better odds of getting a premium credit card, such as the Chase Sapphire Reserve® (see rates and fees).
If you're new to credit or are looking to rebuild poor credit, a secured card, such as the Discover it® Secured Credit Card, is a good option. This card allows you access to a credit card after you put down a refundable security deposit.
What if I think there's a mistake in my credit report?
If you have evidence that there is an error in your credit report, gather any supporting documents and file a dispute by mail, phone or online with all the affected credit bureaus. You can also hire a credit repair company to contact the bureaus on your behalf. There is a fee, but it may be worth the time and energy to have professionals resolve the issue for you.
What is a good credit score?
FICO scores, the most common credit scoring model, range from 300 to 850. A credit score of 670 to 739 is considered good. Scores of 740 and above are considered very good, while 800 and higher are deemed "excellent."
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Meet our experts
At CNBC Select, we work with experts who have specialized knowledge and authority based on relevant training and/or experience. For this story, we interviewed credit expert John Ulzheimer, formerly of FICO and Equifax.
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