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What’s my credit score and why is it important?
What’s in a number? Understand the importance of your credit score — starting with how to find it.
Your credit score is more than a tool that helps lenders determine how much risk they take on when they lend to you. It also affects rental applications and even insurance rates.
In this guide, we show you where to find your credit score and what goes into calculating it.
What is a credit score?
A credit score is a summary of your credit history expressed as a number ranging from 300 to 850. While several different credit bureaus offer credit scores, the most widely known type of credit score is developed by FICO (Fair Isaac Corporation).
The credit score model a risk-based system that calculates the possibility of you defaulting on your next loan — the lower your score, the higher the possibility you’ll default.
Worried about your credit score? Check it today
What are the credit score tiers and ranges?
Identifying your credit score range can be quite difficult. This is because financial institutions determine ranges differently.
As a result, with one bank, your FICO score could place you in their “excellent” bracket, while the same score might place you in the “good” range with a different bank.
The following table shows credit score tiers reported by several financial services websites:
| Site | Credit score tier 1 | Credit score tier 2 | Credit core tier 3 | Credit score tier 4 | Credit score tier 5 |
|---|---|---|---|---|---|
| CafeCredit | Bad – 300-639 | Fair – 640-679 | Good – 680-719 | Best – 720-850 | N/A |
| CreditKarma | Poor – 549 or lower | Fair – 550-639 | Good – 640-719 | Excellent – 720 or higher | N/A |
| Credit Sesame | Very Poor – 499 or lower | Poor – 500-549 | Fair – 550-639 | Good – 640-719 | Excellent – 720-850 |
| Experian | Poor – 579 or lower | Fair – 580-669 | Good – 670-739 | Very Good – 740-799 | Exceptional – 800 or higher |
| NerdWallet | Poor – 350-629 | Average – 630-689 | Good – 690-719 | Excellent – 720-850 | N/A |
| WalletHub | Bad – 300-619 | Fair – 620-659 | Good – 660-719 | Excellent – 720-850 | N/A |
Source: https://www.creditkarma.com, https://www.nerdwallet.com, http://www.experian.com, https://www.creditsesame.com, https://wallethub.com, https://www.cafecredit.com.
Where can I get my credit score?
There are various ways to get your credit score:
- Your account statement. Some banks and financial institutions list your credit score on your credit card or loan account statement. Check your statement to see if this is a service offered to you.
- Credit score services. There are many free credit score services that don’t require your credit card details. Credit Sesame is one such provider, offering your credit score for free. You can also get your credit report below. Keep in mind these free services don’t provide you with your FICO score. You’ll instead get a score based on a non-FICO scoring model.
- Credit bureaus. Find out your credit score and purchase score-monitoring services directly from FICO, Experian, TransUnion or Equifax.
- Credit or housing counsellors. If you’re in need of financial counseling, credit and housing counsellors can provide you with a copy of your credit report and credit score for free.
Do you only have one credit score?
You have multiple credit scores, as each one is calculated differently depending on the credit reporting agency. Companies can request your score from any of these agencies, so may receive a different score depending on the one they call.
However, you’ll always have the same credit file. If there are no errors listed on your file, you shouldn’t expect too major of a discrepancy between your scores.
Do you own a business? Find out your business credit score.
See what your credit score is before your next credit application
What makes up your FICO credit score?
As the most common type of credit score, it’s important to know how the FICO score is calculated. There are five components which make up your FICO credit score, with each of them weighted differently:
- Payment history: 35%. Your payment history refers to whether you made payments on your credit account on time or whether you have any defaults, liens, lawsuits or bankruptcies listed on your records. If you do make a payment late, how much it affects your score will depend on how late the payment is, how much is owed, how recently it occurred and how many late payments you’ve made.
- Credit utilization: 30%. This is the total amount of your credit card balances divided by your total credit card limits. It makes up 30% of your FICO score, and 30% is the credit card utilization percentage you should aim for.
- Length of credit history: 15%. How long is your credit history? When did you first apply for a credit card or loan? The further back your history goes the better off you may be. If you have a short history, or no history at all, you may find it just as hard as someone with bad credit to be approved for a loan.
- Type of credit in use: 10%. The type of credit accounts you have also have an affect on your FICO score. Whether or not your credit accounts are open won’t matter because the fact you held them will still potentially affect your score.
- New credit: 10%. The number of credit inquiries you’ve made recently and over the past year will affect your score. It’s generally not advised to make multiple inquiries over a short space of time.
Those three digits can make a big impact on your life – good and bad – so they’re worth keeping an eye on. Monitor your credit score carefully and you may help edge it closer to the 850 mark.
Common missteps that hurt your credit score
You probably already know that being late on payments or defaulting on a loan is guaranteed to lower your credit score. Here are some other ways you can hurt your credit:
- Applying for multiple credit cards or loans. Multiple applications — not preapplications — come with multiple hard credit inquiries, which can have an adverse affect on your credit score.
- Letting your credit card balance get too high. A credit card balance worth more than 30% of your available credit — the amount you could have spend had you hit your limit each time — will result in a lower credit score.
- Closing credit cards. When you close a credit card, the amount of credit available to you goes down — causing your credit utilization to go up. Closing an old credit card can make your credit history seem shorter than it actually is, lowering your credit score slightly.
- Renting a car with anything but a credit card. Car rental companies sometimes run a credit check on customers who don’t want to pay with a credit card.
- Not paying parking tickets or medical bills. Those bills don’t simply pay themselves. After a while, medical bills and parking tickets get sent to collection agencies and becomes a line on your credit report.
- Signing up for a new phone contract. Yep, phone companies pull a hard credit check when you sign up, causing your credit score to take a temporary dip.
5 tips to improve your credit score
Some ways to increase your credit score include:
- Check your credit report. Keep an eye out for mistakes that could negatively affect your credit.
- Stay on top of your bills. Build a history of on-time repayments by signing up for autopay.
- Pay off your debts. Focus on high-interest debts to lower your debt-to-income ratio.
- Keep your credit cards open. Avoid carrying a balance, but try to maintain a good credit utilization ratio.
- Consider a credit-builder loan. Apply for a credit-builder loan to help improve your payment history without high rates.
More tips to boost your credit score
Get professional help to repair your credit score
Frequently asked questions
How long will negative information stay on my report?
It usually takes seven years for negative information to leave your credit report. In the case of bankruptcy, it will take 10 years.
How often does my credit score change?
Every time your report changes, your score changes. New information is added with every payment — or missed payment — so it’s changes consistently.
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Ask an Expert
I’m retired and I receive a estimate of 1400 a month, which 1300 is directly deposited in my south gate savings account. I was trying too get a 1500 loan to fix my home. Need d asap
Hi Paul,
Thanks for your question.
You may want to compare loans for retired people.
Kindly review the eligibility criteria and the relevant terms and conditions of the loan before submitting your application.
Cheers,
Anndy
Quick question. I have a credit score over 800 and my debt ratio is 29 percent. I am in the process of getting a loan for a house. During the process I have transferred one credit card balance to another card to take advantage of rates (both cards and my only two have been open for years and at the time of the original pull) my question is will the underwriter have a problem with that when they pull my credit again just before closing? My debt has not increased I just moved it to one card with a better rate and kept the other one at zero. I understand applying for new card, buying a car or increasing my debt is not good during these months. Just wondering if this will be an issue if at all since my debt has not increase?
Thanks
Hello John,
Thank you for reaching out to us.
Basically, there will be no problem to the approval of your credit application if and you have no problem on your credit file enquiries and payment defaults (in your credit file). Your approval for a home loan would generally be based on the lender’s overall assessment of your financial situation which includes but not limited to your income, assets, liabilities, credit history, etc.
If you think that you meet all the eligibility requirements of the home loan you’re applying for then there is nothing that you should be worried about. Your credit score of 800 is actually good – https://www.finder.com/do-balance-transfers-hurt-your-credit-score. So in case you’re looking to get a home loan, your other financial circumstances will come into play when a lender considers your application.
Also, for your additional reading and information, this article – https://www.finder.com/do-balance-transfers-hurt-your-credit-score about how a balance transfer affects your credit score may be useful.
Hope this helps on your enquiry.
Let us know if there is anything else that we may assist you with.
Cheers,
Ash