Understanding and improving your credit score

Your credit score impacts all areas of your financial life, from getting approved for a credit card to the rate you qualify for on a mortgage. Not surprisingly, the higher your credit score, the better. So if you’re wondering how to improve your credit score, understanding the ins and outs of how it’s calculated can help you figure out how your actions impact your rating. Below, we’ve put together everything you need to know in order to improve your credit score.

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What is a credit score?

A credit score is a number determined by a credit bureau that helps lenders assess how well you’ve managed your financial obligations.

What makes up a credit score?

While there’s no single formula that determines a credit score, here are some categories and their relative importance.


Payment history:

Do you consistently pay your bills on time?


Total amount owed:

Try to use less than 30% of the credit available to you.


Length of credit history:

Generally, longer is better.


Credit inquiries:

Only hard inquiries—when you’re looking to open an account or take out a loan—count here.


Types of credit in use:

This includes credit cards, student loans, mortgages and more.

Source: FICO®

What do the numbers mean?

The higher the score, the more likely you are to repay your obligations and the less you are seen as a financial risk to creditors, prospective employers and landlords. Most credit scores rank individuals on a scale from 300–850.

Overall, Americans have good credit—the national average is 695.

300                              850

Poor (below 580)

Fair (580–669)

Good (670–739)

Very good (740–799)

Exceptional (800+)

Source: FICO®

How can I affect my credit score?

There are a number of ways to improve or hurt your credit score. Remember these tips when it comes to managing your finances.

Improve your score

Consistently pay bills on time and in full.

Check your credit report (Link: Making sense of your credit report: https://bettermoneyhabits.bankofamerica.com/en/credit/understanding-your-credit-report) regularly for accuracy.

Keep your account balances around or below 30% of your credit limit.

Hurt your score

Fail to pay even the minimum on credit cards and loans.

File for bankruptcy or have an account turned over to a collection agency.

Apply for a lot of credit or exceed your current account limits.

How do credit cards relate to my credit score?

Responsibly using credit cards is an easy way to help boost your score. These tips can help you develop good credit card habits.

Use them regularly

Using your card every so often keeps it active, which shows lenders that you can handle credit and ultimately helps build your score.

Pay them monthly

Even if you can’t pay them off completely, you must pay the minimum monthly payment. If possible, try to pay more than the minimum.

Manage them properly

Try to keep your account balances low and keep your total monthly debt payments, excluding your mortgage, at less than 20% of your monthly income.

Who cares about my credit score?

Your credit score may matter if you want to:

Take out a loan

Rent or buy a home

Apply for a credit card

Finance a car or other purchase

Where can I get my credit score and report?

Some banks and credit card companies provide users with their credit scores. In addition, three major credit bureaus produce credit reports, and you can request one free report annually from each. Visit AnnualCreditReport.com or call 877.322.8228 for more information.




FICO is a registered trademark of Fair Isaac Corporation in the United States and other countries.

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The material provided on this website is for informational use only and is not intended for financial or investment advice. Bank of America and/or its affiliates, and Khan Academy, assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment options.

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