Your credit score is a three digit number that lenders use to decide whether to give you money and how much to charge for it. Most people know that much. Fewer people understand how the number is actually generated, which leads to a lot of wasted effort trying to improve it in the wrong ways.
The five factors and their weights
FICO scores, which are used in about 90% of lending decisions in the U.S., break down into five categories. The weights are approximate because FICO adjusts them slightly based on your individual credit profile, but the general breakdown has been consistent for years.
Payment history is 35% of your score. This is the big one. Have you paid your bills on time? Late payments, collections, bankruptcies, and charge offs all live here. A single 30 day late payment can drop your score by 80 to 100 points, depending on how high it was to start. The more recent the missed payment, the bigger the damage.
Amounts owed is 30%. This isn’t just how much debt you have in total. It’s primarily about your credit utilization ratio, which is how much of your available credit you’re using. If you have $10,000 in total credit limits and $3,000 in balances, your utilization is 30%. Lower is better. People with the highest scores typically keep utilization under 10%.
Length of credit history is 15%. This looks at the age of your oldest account, the age of your newest account, and the average age of all accounts. Older is better. This is why financial advisors tell you not to close old credit cards even if you don’t use them.
Credit mix is 10%. Scoring models like to see that you can handle different types of credit: revolving accounts (credit cards), installment loans (car loans, mortgages), and sometimes retail accounts. You don’t need one of each, but having only one type can hold your score back slightly.
New credit is 10%. Every time you apply for credit, a hard inquiry appears on your report. Multiple inquiries in a short period suggest you’re desperate for credit, which is a risk signal. The exception is rate shopping for mortgages or auto loans, where multiple inquiries within a 14 to 45 day window count as one.
What the ranges mean
FICO scores range from 300 to 850. Here’s roughly how lenders interpret them:
- 800 to 850 is exceptional. You’ll get the best rates available on everything.
- 740 to 799 is very good. You’ll qualify for most products at competitive rates.
- 670 to 739 is good. You’ll get approved for most things, but not always at the best rates.
- 580 to 669 is fair. Options start narrowing. Higher interest rates, lower limits, possible deposit requirements.
- 300 to 579 is poor. Most traditional lenders will deny you. Secured cards and subprime loans are your main options.
The jump from 670 to 740 is where the biggest real world difference happens. That’s the threshold where you go from “acceptable borrower” to “preferred borrower” for most lenders, and the interest rate savings can be significant. On a 30 year mortgage, the rate difference between a 680 and a 750 score can cost you tens of thousands of dollars over the life of the loan.
FICO vs. VantageScore
FICO isn’t the only scoring model. VantageScore, developed by the three credit bureaus, uses a similar 300 to 850 range but weighs factors differently. The free score you see on your banking app or Credit Karma is usually a VantageScore, not FICO.
This matters because the score your bank shows you might be 30 to 50 points different from what a lender sees when they pull your FICO. Don’t panic if your “free” score and your mortgage lender’s number don’t match. They’re different models looking at the same data and coming to slightly different conclusions.
Things that don’t affect your score
Your income doesn’t factor into your credit score at all. Neither does your savings, investments, or net worth. A millionaire who’s never borrowed money can have a lower credit score than a middle income person who’s managed credit cards responsibly for 15 years.
Debit card usage doesn’t count. Checking and savings account balances don’t count. Rent payments usually don’t count unless your landlord reports to the bureaus (most don’t) or you use a third party reporting service.
Your race, religion, gender, marital status, and nationality are legally prohibited from influencing your score. Your age isn’t used directly either, though the age of your accounts (which correlates with your actual age) does matter.
Why your score fluctuates
Credit scores update whenever new information hits your credit report. Your card issuer might report your balance on the 15th of each month. If you check your score on the 14th, it reflects last month’s balance. Check on the 16th, and it reflects the current one. A big purchase that you plan to pay off can temporarily spike your utilization and drop your score, even if you pay the bill in full three days later.
This is why people obsess over the exact day their balance gets reported. If you’re applying for a mortgage next week, paying down your cards a few days before the statement date can temporarily boost your score for the lender’s pull. It’s a real optimization, not a hack.
Minor fluctuations of 5 to 15 points month to month are completely normal and nothing to worry about. Focus on the trend over six months, not the daily number.