Please enable JavaScript to view the comments powered by Disqus.

What You Need to Know About Your Credit Score

What You Need to Know About Your Credit Score

Editorial Disclosure: Editorial content, including card comparisons and card reviews are not provided or commissioned by the credit card issuer. Opinions expressed here are the author’s alone, not those of the credit card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer. may be compensated through Affiliate Programs for referrals.

• Updated: March 10, 2023

Your credit score is a generated number that reflects your credit history and reliability as a borrower. Based on how well you’ve repaid lines of credit, managed loans and handled other financial responsibilities listed in major credit reports, your credit score can range from 300 to 850. There are many free and secure services you can use to check your credit score, click here for your free credit score.

When you apply for any line of credit, whether it be a mortgage or a new insurance policy, a lender’s decision frequently hinges upon your credit score. It impacts your chances of being approved and determines the premium or monthly rate you will pay.

Potential borrowers with a higher credit score typically receive more lines of credit with lower monthly premiums. Those with a low credit score, on the other hand, are forced to pay higher premiums and may have difficulty finding a willing lender at all.

Despite how often credit scores are used, many people do not understand the basics about a credit score and how it changes. Let’s take a closer look at what you need to know about your credit score. Keep Reading: 5 benefits of having good credit

What makes up my credit score?

There are actually thousands of available credit scores that are determined by unique algorithms, information sources and grading systems, but the FICO score is the most commonly referenced. In fact, it is so popular that some people confuse the terms ‘credit score’ and ‘FICO score’ to mean the same thing.

Credit scores vary depending on the credit reporting agency, but what your FICO score says about your reliability as a borrower typically holds true for all scoring agencies. Below you will find a breakdown of what goes into a credit score with an in-depth look at how your FICO score is determined.

Your FICO score is calculated by weighing five different variables, listed in relative importance:

Photo Credit:


Payment History (35%)

Your FICO score is most affected by your payment history, which reflects whether or not you are making payments on-time and in accordance with the terms. Major credit bureaus, such as Equifax, TransUnion and Experian, produce reports concerning your payment history that show:
  • Payments completed as agreed for accounts loans and lines of credit.
  • Accounts, loans or lines of credit with payments that are more than 30 days past due.
  • How much you owe on delinquent accounts.
  • How far behind you are with any delinquent accounts.
  • Accounts that have been sent to a collections agency and how much you owe.
  • Court orders for repayment or bankruptcy filings.

Amounts Owed (30%)

Lenders want to know how much you owe and your spending habits to understand how likely you are to have trouble paying back the loan. If you already owe a large amount, you are less likely to be able to repay new debts. The variables that determine the ‘amounts owed’ section are:
  • Balance on currently held installment loans and credit cards.
  • Number of accounts with a balance.
  • Credit utilization ratio, or how much credit you are using compared to the amount of credit available to you.

Length of Credit History (15%)

Borrowers who have a proven history of managing money responsibility are more attractive to lenders. Periods of on-time payments and positive financial activity are weighed against missed payments and financial hardship. As a result, your FICO score factors in the length of time you have been using lines of credit and loans. Keep Reading: What is more important, credit score or credit history?

New Credit (10%)

Lenders want to know just how desperate you are for an additional line of credit. If you have submitted an application to a number of banks in the hopes of a loan, lenders will be aware that you pose a greater risk for financial instability.

This component of your FICO score lets creditors know:
  • Loans and lines of credit you have opened recently and how it compares to the amount taken out in your credit history.
  • The date your latest account was opened.
  • Credit applications you’ve submitted within the past year.
  • The date of your last credit inquiry.

Types of Credit Used (10%)

This part of your FICO score represents your financial experience and management skills as determined by the types of accounts used, number of each type of account and how long it has been since you used each account. Your combined use of personal loans, mortgages, credit cards and all other forms of credit is represented in ‘Types of credit used’.

How can I find out my credit score?

If you want to know your credit score, you can hire a credit reporting agency or review your free annual credit report. While there are free credit scores attached to trial memberships, most credit scoring agencies require you to pay to receive your actual credit score. 

Another option is to see if it is included with your credit card benefits. Many credit cards have expanded their card member services to include a free FICO score. This provides a relatively accurate picture of how your credit score is changing on a monthly basis, but you’ll need to consult your credit report to review the details.

You can check your credit reports for free once a year through Experian, Equifax and TransUnion. Though you won’t see your credit score expressed in a number, you will be able to carefully review the underlying credit report. By carefully reviewing your credit report on an annual basis, you can identify and correct any errors or fraud that might affect your credit score.

How does my credit score fluctuate?

Keep in mind that your credit score reflects the activities listed on your major credit reports. As a result, that number will fluctuate as you open new accounts, make major purchases, apply for credit cards or even alter your spending habits.

All of this information is used to provide a fresh calculation when someone makes an inquiry to a credit scoring agency. To illustrate how much credit scores can change, people have reported a monthly change of 20 points without having changed anything significant in their financial profile.

While you might not be able to see results immediately as you make or miss a given payment, you will see positive or negative trends emerging overtime. It is essential to focus on the long-term trends of your credit score as the overall indicator of your financial health. Keep Reading: How to handle credit report errors

What helps or hurts my credit score?

The first thing you should do is consult your credit report to make sure there are no errors that could negatively affect your credit score. After you’ve reviewed your credit report, start implementing the following tips about building good credit and learn what to avoid if you want to increase your credit score.

Building Good Credit: What helps my credit score?

  • Complete all payments on-time and in line with the agreed upon terms.
  • Maintain a low monthly balance on all types of revolving credit, especially credit cards.
  • Manage credit cards responsibly. While it is a good idea to have a credit card, you must follow through with on-time payments to help rebuild your credit score.
  • Get back on track with a repayment plan if you have fallen behind. As time goes on, a previous delinquency in your credit history carries less weight, as long as you are now making payments on time. The general timeframe before a delinquency can be removed is 7 years so waiting to address your financial problems only delays improving your credit score.

Avoiding Bad Credit: What hurts my credit score?

  • Don’t close credit cards, even if you don’t use them often. It will not increase your credit score in the short-term and may actually harm your credit in the long run. Your credit utilization ratio will increase by eliminating available credit.
  • Don’t shift debt around. This only leads to more debt in the future and shows that you could be a risky borrower.
  • Avoid being sent to collections. When a delinquent payment shows up on your credit report, you will notice a dip in your credit score.
  • Don’t apply for a new line of credit unless it is absolutely necessary. is a credit card comparison site. We have been providing our customers with the best credit card offers available since 2010. If you are looking for a new credit card, visit us here

We think you'll also enjoy
Trouble at airport
The Latest Hack: Your Air Miles
Hands in the air emv article
How are new EMV® Chips helping to protect consumers?
Thanksgiving dinner
How to Save Money on Groceries During the Holidays


We want to hear from you and encourage a lively discussion among our users. Please help our site stay clean and safe by following our posting guidelines, and avoid disclosing any personal information such as phone numbers or bank account information.

The comments posted below are not provided, reviewed or approved by the card issuers or advertisers. Additionally the card issuer does not assume responsibility to ensure that all posts and/or questions are answered.