How Credit Scores Work: A Plain-English Guide
The short answer
A credit score is a three-digit number (300–850) that estimates how likely you are to pay back borrowed money on time. It's calculated from the data on your credit reports — your payment history, balances, account types, and how long you've been borrowing.
Two main systems produce these scores: FICO (used by ~90% of lenders) and VantageScore (used by free credit-monitoring tools like Credit Karma).
What goes into a FICO score
FICO weights five factors, in this order:
- Payment history (35%) — Have you paid your bills on time? Missed payments hurt the most.
- Amounts owed (30%) — How much of your available credit are you using? Lower is better.
- Length of credit history (15%) — How long have your accounts been open?
- Credit mix (10%) — Do you have a healthy mix of cards, loans, and mortgages?
- New credit (10%) — How many recent inquiries and new accounts?
Payment history and amounts owed together drive 65% of your score. Everything else is supporting cast.
The score ranges
- 300–579: Poor. Most lenders won't approve you. Those that do charge the highest rates.
- 580–669: Fair. You can get approved for credit, but at higher interest rates.
- 670–739: Good. Most lenders will work with you. This is where most Americans land.
- 740–799: Very good. You qualify for better rates than the average borrower.
- 800–850: Exceptional. Best rates available. Lenders compete for you.
What moves your score the fastest
In our experience, the three highest-leverage actions are:
- Pay down credit card balances. Utilization recalculates monthly. Going from 70% utilization to 25% can move your score 30+ points in a single billing cycle.
- Get late payments removed. A single 30-day late can drop a score 60-110 points. Disputing inaccurate lates is one of the fastest paths to score recovery.
- Stop opening new accounts. Each hard inquiry shaves 5-10 points and lowers your average account age.
What does NOT affect your score
A few myths worth killing:
- Your income is not on your credit report. It doesn't directly affect your score.
- Your savings or checking balances don't factor in.
- Soft inquiries (your own checks, pre-approved offers, employer checks) don't move your score.
- Your race, age, gender, or ZIP code are not in the FICO model.
What to do next
If you want to actually move your score, start by pulling your three credit reports for free at AnnualCreditReport.com. Look for late payments, collections, or charge-offs that don't belong to you — those are the highest-leverage fixes.
If you find errors and want help disputing them, book a free consultation and we'll walk through your reports together.
Frequently asked
What is a good credit score?
A FICO score of 670 or higher is generally considered good. 740+ is very good. 800+ is exceptional. Anything below 580 is considered poor.
How often does my credit score update?
Your credit score recalculates every time the underlying credit report data changes — which is typically every 30 to 45 days as creditors report account updates to the bureaus.
Do FICO and VantageScore use the same numbers?
No. They use different formulas, weight factors slightly differently, and can produce scores that differ by 20-50 points for the same person. Most lenders still use FICO.