Credit score
A three-digit number (usually 300–850) lenders use to estimate how likely you are to repay borrowed money on time.
A credit score summarises your borrowing history into a single number that lenders use to make decisions: whether to approve a loan, what interest rate to offer, and what credit limit to extend.
In the US, FICO scores range from 300 to 850. Above 740 is generally considered "very good"; above 800 is "exceptional." The score is calculated from five factors, in rough order of weight:
- Payment history (~35%) — have you paid on time
- Credit utilisation (~30%) — what % of your available credit you're using
- Length of credit history (~15%) — average age of your accounts
- Credit mix (~10%) — variety of credit types (cards, loans, mortgage)
- New credit (~10%) — recent applications
The single biggest lever is paying on time, every time. The second is keeping utilisation below 30% (ideally below 10%). Both compound — one late payment can drop a 780 score 90+ points and take a year to repair.
Check your score once a quarter via your bank or a free service. Don't pay for it.
See also
- Debt-to-income ratio (DTI) — Total monthly debt payments divided by gross monthly income. Lenders use it to decide whether you can afford more borrowing.
- APR (Annual Percentage Rate) — The yearly cost of borrowing money, expressed as a percentage and including most fees — not just the interest rate.
- Revolving credit — A line of credit (most commonly a credit card) you can borrow against repeatedly up to a limit, paying only a minimum each month.
- Refinancing — Replacing an existing loan with a new one — usually to lower the interest rate, change the term, or change the monthly payment.
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