What Is a Credit Score?

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What is a credit score? Your credit score can impact everything from loan interest rates to credit cards and more. In this video, Equifax will tell you all about the credit score ranges, how credit scores are calculated and why credit scores are important. [Duration - 2:24]


  • A credit score is a three-digit number designed to represent the likelihood you will pay your bills on time.
  • There are many different types of credit scores and scoring models.
  • Higher credit scores generally result in more favorable credit terms.

A credit score is a three-digit number, typically between 300 and 850, designed to represent your credit risk, or the likelihood you will pay your bills on time. Creditors and lenders consider your credit scores as one factor when deciding whether to approve you for a new account. Your credit scores may also impact the interest rate and other terms on any loan or other credit account for which you qualify.

What is considered a good credit score?

Credit score ranges and what they mean will vary based on the scoring model used to calculate them, but they are generally similar to the following:

  • 300-579: Poor
  • 580-669: Fair
  • 670-739: Good
  • 740-799: Very good
  • 800-850: Excellent

There’s no “magic number” that guarantees you’ll be approved for a new credit account or receive a particular interest rate from a lender. However, higher scores typically suggest that you have demonstrated responsible credit behavior in the past, which may make potential lenders and creditors more confident when evaluating a new request for credit.

Why do I have different credit scores?

It’s a common misconception that you have only one credit score. In reality, there are many different credit scores and credit scoring models.

Your credit scores may vary depending on the consumer reporting agency (CRA) providing the score, the credit report on which the score is based and the scoring model.

Credit scores provided by the three nationwide CRAs — Equifax®, TransUnion® and Experian® — may also vary because your lenders may report information differently to each. Some may report information to only two, one or none at all.

It’s also possible for your credit scores to vary by industry. If you’re in the market for a new car, for example, an auto lender might use a credit score that places emphasis on your history of paying auto loans. A mortgage lender, on the other hand, might use a formula to determine your risk as a mortgage borrower.

All of these factors can lead to differences in your credit scores.

How are credit scores calculated?

Your credit scores are calculated based on the information included in your credit reports. Like your credit score, you have more than one credit report.

Your credit scores may vary depending on the scoring model used to calculate them as well as the information on the respective credit report. However, most credit scoring models consider the same factors:

  • Your payment history. This is typically the most significant factor used in calculating your credit score. Your payment history includes information on any open credit accounts in your name. It also provides data on missed or late payments, bankruptcy filings and debt collection.
  • The amount of credit used vs. your total available credit. This calculation — also known as your credit utilization rate or your debt-to-credit ratio — is another important factor to lenders. Expressed as a percentage, your credit utilization rate generally represents the amount of revolving credit you’re using divided by the total revolving credit available to you. (Revolving credit accounts are things like credit cards, while mortgages and other fixed loans are considered installment accounts.) Lenders and creditors generally like to see a credit utilization rate of 30% or lower.
  • The types of credit accounts in your name. Some formulas may also consider the types of credit accounts you have. It’s usually a good idea to keep a mix of both revolving and installment accounts. This helps show lenders and creditors you’re comfortable managing many different types of credit.
  • The length of your credit history. The overall length of your credit history can also impact your score. Formulas may consider the age of both your oldest and your newest accounts.
  • The number of recent requests for credit you’ve made. Applying for a new line of credit triggers what’s known as a “hard inquiry” on your credit report. Numerous hard inquiries within a short period of time can negatively impact your credit score as it may suggest to lenders that you’re taking on more debt than you can reasonably expect to pay back. It’s a good idea to only apply for new credit when you need it. Credit score calculations generally don’t consider “soft inquiries,” which are requests to check your credit report that are not tied to an actual credit application (for example, when you receive a pre-qualified credit card offer). Checking your own credit score also will not impact your credit score or credit history.

Why are credit scores important?

Why is it important to strive for a higher credit score? Simply put, borrowers with higher credit scores generally receive more favorable credit terms, which may translate into lower payments and less interest paid over the life of the account.

Remember, though, that everyone’s financial situation is unique. Individual lenders may also have their own criteria when it comes to granting credit, which may include information such as your income.

The types of credit scores used by lenders and creditors may vary based on their industry. For example, if you’re buying a car, an auto lender might use a credit score that places more emphasis on your payment history when it comes to auto loans.

Credit scores may also vary according to the scoring model used and which CRA furnishes the credit report. That's because not all creditors report to all three nationwide CRAs. Some may report to only two, one or none at all. In addition, lenders may use a blended credit score from the three nationwide CRAs.