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.
35%
Payment history:
Do you consistently pay your bills on time?
30%
Total amount owed:
Try to use less than 30% of the credit available to you.
15%
Length of credit history:
Generally, longer is better.
10%
Credit inquiries:
Only hard inquiries—when you’re looking to open an account or take out a loan—count here.
10%
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.
www.equifax.com
www.experian.com
www.transunion.com
