Glossary · Investing and personal finance
Credit score
A credit score is a three-digit number, from 300 to 850 for the main US scores, that tells lenders how likely you are to repay a loan on time.
Also called: FICO score, VantageScore, personal credit rating
All accounts, Aug 2026. Borrowers with low scores usually pay more.
In plain words
Before lending you money, a bank wants to know: will this person pay me back? Instead of reading your whole financial history, it looks at a summary number, your credit score. In the US the most used ones, FICO and VantageScore, run from 300 to 850; higher is better.
The score is calculated from your credit report: the record of your loans and cards kept by the credit bureaus (in the US, Equifax, Experian and TransUnion). Paying on time, using little of your available credit and having a long history push it up; missed payments, maxed-out cards and lots of new applications push it down.
It matters because it sets the price of borrowing. The same mortgage, car loan or credit card can cost much more with a low score, and some landlords and insurers look at it too.
Example
How much of your credit you use
- You have two credit cards with limits of $4,000 and $6,000: $10,000 in all.
- You owe $3,000 on them, so you are using 30% of your available credit.
- Pay the balance down to $1,000 and that drops to 10%, which usually helps the score within a month or two.
- Closing the $6,000 card would cut your limit to $4,000 and push it back up to 25%.
Amounts owed, measured mainly by this share, make up about 30% of a FICO score; only payment history counts for more.
One level deeper
FICO publishes the rough weights of its score: payment history about 35%, amounts owed 30%, length of credit history 15%, new credit 10% and the mix of credit types 10%. Income, savings and your job are not part of it: the score measures how you handle debt, not how rich you are.
Under US law (as of 2026), a payment 30 or more days late can stay on a credit report for seven years, and a bankruptcy for up to ten. Checking your own score does not lower it; a lender’s “hard” inquiry when you apply for credit can lower it a little for a while.
A personal credit score is not the same as a credit rating, the grade agencies such as S&P and Moody’s give to companies and governments, though the idea is the same: a judgment of how likely a borrower is to repay.
Why it matters
It decides whether you can borrow and at what price, which over a lifetime of mortgages and loans can add up to tens of thousands of dollars.
It can affect renting a home, some insurance prices and, for some jobs, hiring checks.
It rewards boring habits: paying on time and borrowing well below your limits.
A common mistake
Myth: Checking my credit score will lower it.
In fact: Checking your own score or report is a “soft” inquiry and has no effect. Only “hard” inquiries, when a lender pulls your report because you applied for credit, can lower it slightly, and only for a while.
Questions people ask
What is a good credit score?
On the 300–850 FICO scale, scores from 670 are generally called good, from 740 very good and from 800 exceptional. Each lender sets its own cut-offs.
How long does it take to build credit?
A FICO score needs at least one account that has been open for six months or more and reported to a bureau in the last six months. A good score usually takes a few years of on-time payments.
Does paying off a loan raise my credit score?
Paying down credit card balances usually helps quickly, because it lowers the share of credit you use. Paying off an installment loan, like a car loan, can even dip the score slightly, because one active account closes; the record of on-time payments stays.
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About the numbers
- The numbers on this page are recalculated from the data every night; the sources are listed at the end of the page.
- Credit card interest rate at commercial banks, all accounts: Board of Governors of the Federal Reserve System, G.19 Consumer Credit, series TERMCBCCALLNS; retrieved from FRED, Federal Reserve Bank of St. Louis.
- This page explains a term. It is not investment advice.