Understanding Your Credit Score
A closer look.
Our two cents
Whenever—wherever—you're trying to get credit, your credit score plays a part. Trying to rent an apartment? Your landlord may well check your credit score. Need a car loan? Your dealer or bank will check your credit score. Buying a house? Your mortgage interest rate will be affected by your credit score.
With so much resting on your credit score, you can’t afford to ignore it. Here are some basics to help you understand what to look for and why.
What is a credit score?
Your credit score is a number that helps lenders determine how likely you are to make your payments on time. It really is a summary of your credit risk, based on information from a variety of sources such as credit card companies you deal with, banks where you have loans—almost anyone who has issued you credit.
There are several agencies that create credit scores, but the most widely used are FICO® scores created by Fair Isaac Corporation.
FICO® scores can range from 300 to 850—the higher, the better. The median score is around 725, but a score of 760 or higher typically gets you the best deal on interest rates.
Understanding your FICO® score
- What it means
Score800+>EvaluationExceptional>What it meansYour score is well above the national average, and you will most likely have no problem getting credit.>
Score740–799>EvaluationVery Good>What it meansYour score is above the national average and demonstrates to lenders that you are an exceptional borrower.>
Score670–739>EvaluationGood>What it meansYour score is average to above average and demonstrates that you are a dependable borrower.>
Score580–669>EvaluationFair>What it meansYour score is below average. Some lenders might approve loans with this score.>
Score579 and lower>EvaluationPoor>What it meansYour score is well below average and demonstrates that you are a risky borrower.>
How to boost your score
Here are five things you can do to improve your credit score:
- Pay your bills on time. Your payment history accounts for about 35 percent of your score.
- Increase the length of your credit history. This accounts for about 15 percent of your score.
- Keep your credit card balances low. Ideally, you should keep the amount you borrow below 25 percent of your available credit limit. This accounts for about 30 percent of your credit score.
- Minimize the frequency of new card requests. This accounts for 10 percent of your score.
- Keep a combination of different types of installment debt (such as car loans and mortgages) and revolving debt (like credit cards). This makes up the remaining 10 percent of your score.
How your credit score is determined
Your credit score is based on five factors, each weighted differently.
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Your credit score goes a long way.