By Gayle SatoYour 9 Most Common Credit Questions, Answered
Understanding how to build or rebuild credit can raise a lot of questions. Learning what lenders are looking for in a credit score, what role your credit report plays and what you can do to improve your credit may all seem critical—and overwhelming at the same time.
Below are answers to nine of our most commonly asked questions about credit, along with links to related stories if you want to dive deeper. With this essential knowledge, you'll have much of the insight you need to help you succeed in your credit journey and improve your financial security.
What Is a Good Credit Score?
Here's how the two major consumer credit scoring models, FICO® and VantageScore®, break down credit scores by range:
| FICO® | VantageScore | |
|---|---|---|
| Very Poor | 300-579 | 300-499 |
| Poor | 500-600 | |
| Fair | 580-669 | 601-660 |
| Good | 670-739 | 661-780 |
| Very Good/Excellent | 740-799 | 781-850 |
| Exceptional | 800-850 |
By these measures, a good credit score ranges from 670 to 739 on the FICO® scale and 661 to 780 with VantageScore credit score. A lender may have different criteria, however. Many banks, for example, consider a score of 700 and above to be good. And many of the best rates and terms are available for applicants with even higher scores—in the very good or exceptional range.
When you're looking for a loan or credit card, it pays to shop around. The same credit score might qualify you for a great rate with one lender and a more expensive loan with another.
For more, see:
What Is the Difference Between a Credit Score and a Credit Report?
Your credit report provides a detailed record of your credit and payment history. It shows how much debt and how many open accounts you have (and with whom), how long you have been managing credit accounts, and a historical record of how and when you've paid your bills. You may have credit reports with one or more of the national consumer credit bureaus: Experian, TransUnion and Equifax.
While your credit report provides lots of information on your credit account management, a credit score is a single number calculated using the information in your credit report. Credit scores are calculated by credit scoring companies including FICO® and VantageScore and typically range from 300 to 850.
Lenders and credit card companies use both your credit score and report to determine how well you manage credit and how much risk they assume when they offer you a loan or credit card.
For more, see:
Why Do I Have So Many Different Credit Scores?
If you've received your credit score from your credit card issuer, your bank or a credit reporting agency such as Experian, you've probably already noticed that your scores are different from day to day and place to place. There are many reasons why you have multiple credit scores, but for starters, here's a short list of factors that can result in your having different scores in different places:
- Each of the three credit bureaus maintains its own credit history on you. Because that data can vary, your scores from each bureau can vary as well.
- FICO® and VantageScore use different credit scoring models to calculate your score.
- Within FICO® and VantageScore, there are even more scoring models. For example, FICO® calculates separate scores for auto lending, mortgages and credit card applications.
- Banks and other lenders may use their own algorithms to calculate custom scores.
Rather than fixating on a single score or worrying about the differences between one score and another, you may find it helpful to think of yourself as having a range of credit scores. If you maintain good credit habits like paying all your bills on time every month, keeping credit card balances low and maintaining a good credit mix, a few points of fluctuation among scores will not matter: You'll have solid credit scores across the board. The same holds true if you do not manage your credit accounts well: Your scores may vary slightly depending on where you get them, but they'll reflect your overall credit management behavior.
For more, see:
What Factors Affect My Credit Score?
The scoring algorithms applied to calculate your credit score are complex—but the five factors used to determine your credit score are straightforward:
- Payment history: How you manage credit payments is the biggest factor in your credit score, accounting for 35% of your FICO® Score☉.
- Credit utilization: How much of your available revolving credit (such as credit cards) you're using is the second most important factor in your credit score calculation, accounting for 30% of your FICO® Score.
- Length of credit history: How long you've managed credit makes up 15% of your FICO® Score.
- Credit mix: How many different types of credit accounts you manage makes up 10% of your FICO® Score.
- New credit: New credit accounts as well as the inquiries performed when you applied for credit make up another 10% of your FICO® Score.
Building and maintaining good credit is as simple—and complicated—as using your credit responsibly in these five areas.
For more, see:
How Can I Improve My Credit Score?
By understanding how your credit score is calculated, you can reverse engineer a better score. Consider the five criteria FICO® and VantageScore use to determine your score—payment history, credit utilization, length of credit history, credit mix and new credit—and look for ways to optimize.
Many tactics take time. For instance, you can (and should) maintain a perfect payment history starting today, but any payments made 30 days or more past due or collections you've already experienced will remain on your credit report for seven years from the first date the account became late. If you're looking to improve your score in the short term, paying down outstanding credit card debt can help reduce your credit utilization ratio and thus improve your score. Or consider factoring in on-time phone and utility bill payments using Experian Boost®ø Work? to improve your score instantly.
For more, see:
How Often Is My Credit Score Updated?
Your credit score can change whenever new relevant information is reported to your credit file. Since this can happen at any time, your score could be different daily or even by the minute depending on when you or a lender requests it.
Here are a few examples of updates that can affect your credit score:
- Payments
- Changes to an account balance
- Increases or decreases in your outstanding debt
- New credit inquiries
Because your credit score can change frequently, don't worry excessively about minor fluctuations. On the other hand, monitoring your credit regularly using a service like Experian's free credit monitoring can help you stay on top of cyclical changes to your credit score—and help you detect new credit inquiries that may be the result of identity fraud.
For more, see:
Can I Get a Loan or Credit Card With Bad Credit?
You can find loans and credit cards even if your credit needs a little help. However, the lower your credit score, the less appealing your options may be. Typically, borrowers with fair or poor credit can expect to pay higher interest rates and fees and may need to provide a refundable security deposit on new credit card accounts.
Borrowers should avoid payday and other types of predatory lenders, who may offer credit without a credit check in exchange for triple-digit interest rates and terms that are nearly impossible to meet.
Need ideas? You can explore options with personalized recommendations on credit cards and personal loans based on your credit score using Experian's card comparison tool.
For more, see:
How Do I Dispute Something on My Credit Report?
If your credit report shows information you believe to be inaccurate, you can file a dispute with any of the three credit bureaus. You can dispute information on your Experian credit report by phone or mail, but the fastest route to resolution is online using the Experian Dispute Center. Get full details about the Experian dispute process, what you need to file a dispute and what to expect as the process plays out.
For more, see:
How Can I Get My Credit Score and Credit Report?
Monitoring your credit report and score regularly helps you monitor your progress and keep an eye out for fraud. Many financial institutions provide free credit reports, including your bank and credit issuer.
You can request a free credit report once a week from all three credit reporting agencies by visiting AnnualCreditReport.com. Signing up for a free Experian account online allows you to access your credit report and score anytime; scores and reports are refreshed every day. You can also use Experian's free credit monitoring to receive alerts on changes to your credit score, new information in your credit report and credit inquiries.
For more, see:
What makes a good credit score?
Learn what it takes to achieve a good credit score. Review your FICO® Score for free and see what’s helping and hurting your score.
Get your FICO® ScoreNo credit card required
About the author
Gayle Sato
Gayle Sato writes about financial services and personal financial wellness, with a special focus on how digital transformation is changing our relationship with money. As a business and health writer for more than two decades, she has covered the shift from traditional money management to a world of instant, invisible payments and on-the-fly mobile security apps.
Read more from Gayle