A credit score is a three-digit number that lenders use to predict whether you will repay borrowed money on time

Your credit score ranges from 300 to 850. The higher the number, the lower the risk you appear to lenders. A score of 670 or above is generally considered good; below 580 is considered poor. Banks, credit card companies, landlords, and sometimes employers look at this number to decide whether to lend you money, what interest rate to charge you, or whether to rent to you.

Your credit report is the detailed record that the score is built from. It lists every loan you have taken, every credit card you have opened, every payment you have made or missed, and every time a lender has checked your credit. Three companies—Equifax, Experian, and TransUnion—collect and store this information. They are called credit bureaus. Each one keeps its own file on you, which is why your score can differ slightly between them.

Key Takeaways

  • Your credit score is calculated from payment history, amounts owed, length of credit history, credit mix, and recent inquiries—in that order of importance.
  • You have three separate credit reports, one from each bureau, and you can view each one free once per year at annualcreditreport.com.
  • Missed payments, high credit card balances, and recent hard inquiries lower your score; on-time payments and low balances raise it.
  • Errors on your report are common and can be disputed directly with the bureau that reported them.

What goes into your credit score

Credit scores are calculated using five categories of information from your report. Payment history makes up 35 percent of your score—this is whether you paid bills on time. A single missed payment can lower your score by 100 points or more, depending on how late it was and how good your score was before.

Amounts owed makes up 30 percent. This includes how much you owe across all accounts and, more importantly, how much of your available credit you are using. If you have a credit card with a $5,000 limit and a $4,500 balance, you are using 90 percent of that limit, which hurts your score. Using less than 30 percent of your available credit is ideal.

Length of credit history makes up 15 percent. This rewards you for keeping accounts open over time. Closing old credit cards can actually lower your score because it shortens your average account age. Credit mix makes up 10 percent—lenders like to see that you can handle different types of credit, such as credit cards, car loans, and mortgages. Recent inquiries make up the final 10 percent. When you explore for new credit, the lender checks your report, and that check (called a hard inquiry) temporarily lowers your score by a few points.

How to get your credit report and check for errors

You are may have access to to one free credit report from each of the three bureaus every 12 months. The official source is annualcreditreport.com, which is run by the three bureaus themselves. You can request all three reports at once or spread them out over the year. Do not use other websites that claim to offer free reports—many charge hidden fees or sign you up for paid monitoring services.

When you receive your report, read it carefully. Look for accounts you do not recognize, payments marked as late that you made on time, and duplicate entries. Errors are surprisingly common. If you find a mistake, contact the bureau that reported it in writing (email or certified mail). Include a copy of your report with the error circled, a brief explanation of why it is wrong, and any supporting documents like a cancelled check or bank statement showing you paid on time.

The bureau must investigate your dispute within 30 days. If they find the information is wrong, they will remove it or correct it. If they find it is accurate, it stays on your report. You can also add a brief written statement to your report explaining your side of the story, though this does not change your score.

Why your score matters for borrowing

Lenders use your score to decide three things: whether to lend to you at all, how much interest to charge you, and what terms to offer. Someone with a score of 750 might get a car loan at 4 percent interest, while someone with a score of 620 might be offered 8 percent for the same car. Over five years, that difference costs thousands of dollars in extra interest.

Your score also affects whether you can borrow at all. Many lenders have a minimum score requirement—often 620 for a car loan or 580 for a mortgage with a government-backed may provide. Below that threshold, you may be turned down or steered toward predatory lenders charging much higher rates. Landlords often check credit scores too; a low score can result in a rejected rental process or a requirement to pay a larger deposit.

What raises and lowers your score over time

Your score is not fixed. It changes every month as new information is added to your report. Paying bills on time is the single most powerful way to raise your score. Even one on-time payment helps, and the longer the streak, the more your score recovers. Paying down credit card balances also raises your score quickly—if you can get your utilization below 30 percent, you may see an improvement within a month or two.

Conversely, missed payments, collections accounts, and foreclosures lower your score significantly and stay on your report for seven years. A bankruptcy stays for seven to ten years depending on the type. Hard inquiries (from explore for new credit) lower your score by a few points but fade after a few months. Soft inquiries (when a company checks your credit without your permission, like a credit card company checking whether to send you an offer) do not affect your score at all.

The difference between your score and your report

Your credit report is the raw data. Your credit score is a number calculated from that data. Think of the report as your financial biography and the score as a grade based on it. You can have a detailed, accurate report and still have a low score if that report shows missed payments or high debt. Conversely, you could have a short report with few accounts and a decent score if everything on it is paid on time.

Different lenders use different scoring models too. The most common is the FICO score, which ranges from 300 to 850. VantageScore is another model, also ranging from 300 to 850. Some lenders use industry-specific scores—mortgage lenders sometimes use a slightly different FICO model than credit card companies. This is why your score might vary depending on who is checking it and when.

Monitoring your credit without paying for it

Many credit card companies and banks now offer free credit score monitoring to their customers. Check your monthly statement or log into your online account to see if yours does. You can also use free services like Credit Karma or Credit Sesame, which show you your score and report for free (they make money by showing you ads for credit products).

The trade-off with free services is that they may not update as frequently as paid services, and they may not include all the details from your full report. For most people, checking your free annual report once a year and monitoring your score through your bank or a free app is enough. You do not need to pay for credit monitoring unless you are concerned about identity theft or actively working to rebuild your credit and want to track progress weekly.

Frequently Asked Questions

How long do negative items stay on my credit report?

Late payments, collections, and charge-offs stay for seven years from the date of the first missed payment. Bankruptcies stay for seven years (Chapter 13) or ten years (Chapter 7). After that time, they fall off automatically. Positive information like on-time payments can stay indefinitely.

Does checking my own credit score lower it?

No. Checking your own credit score or report is a soft inquiry and does not affect your score. Only hard inquiries—when you explore for a loan or credit card and a lender checks your credit—lower your score slightly.

Can I improve my credit score quickly?

Paying down credit card balances can raise your score within a month or two. Paying bills on time starts helping when ready, though rebuilding from a low score takes months or years. There is no legitimate way to raise your score overnight.

What if I find an error on my credit report after I have already been denied for a loan?

Dispute the error with the bureau when ready. Once it is corrected, you can reapply with the lender. Some lenders will reconsider if you show them the corrected report. Keep documentation of the dispute and the correction in case you need to prove the error existed.

Do I need to use a credit repair service?

No. Credit repair companies charge fees to dispute errors on your behalf, but you can dispute errors yourself for free by contacting the bureau directly. Legitimate credit repair companies cannot do anything you cannot do yourself.