What Is a Credit Score?
Quick Answers
Score range
300 to 850
Good score
670 to 739
Excellent score
800+
Payment history
35% of FICO score
A credit score is a three-digit number (typically 300-850) that represents your creditworthiness -- and it's one of the most powerful numbers in your financial life, directly determining your loan rates.
Your credit score is calculated by credit bureaus (Equifax, Experian, TransUnion) using information from your credit report. The most widely used model is the FICO Score, which ranges from 300 to 850. A higher score means you're considered lower risk to lenders, which translates directly into lower interest rates on loans and credit cards.
The difference between a 620 and a 760 credit score on a $300,000 mortgage can mean thousands of dollars in interest over the life of the loan. Improving your credit score before applying for a major loan is one of the highest-return financial moves you can make.
FICO Score Ranges
- 800-850 (Exceptional): Best rates available on all loan types. Lenders compete for your business.
- 740-799 (Very Good): Near-best rates. Qualifies for most loan programs with excellent terms.
- 670-739 (Good): Standard rates. Approved for most loans with reasonable terms.
- 580-669 (Fair): Higher rates. May need FHA or other government-backed loans.
- 300-579 (Poor): Difficulty qualifying for most loans. May require secured credit or co-signer.
How FICO Scores Are Calculated
Payment History: 35% | Amounts Owed: 30%
Length of History: 15% | New Credit: 10% | Credit Mix: 10%
Payment history is the single most important factor -- paying every bill on time has the biggest positive impact. The second biggest factor is credit utilization (amounts owed relative to your credit limits) -- keeping this below 30% is recommended, and below 10% is ideal for top scores.
Credit Score Example: 620 vs. 760 on a $300,000 Mortgage
620 score, illustrative rate 7.25%: $2,046.53/mo
760 score, illustrative rate 6.25%: $1,847.15/mo
Difference: $199/mo, and about $71,800 more total interest over 30 years
Actual rates vary by lender and market conditions, but the pattern holds: lenders price risk directly into your rate through loan-level pricing adjustments tied to your score. A one-point credit tier jump can be worth more to your total loan cost than almost any other single factor you control before applying.
Common Credit Score Mistakes
- Closing old credit cards to "clean up" your file: Closing a card reduces your total available credit (raising your utilization ratio) and can shorten your average account age -- both of which can lower your score, not help it.
- Applying for several loans or cards right before a mortgage application: Each hard inquiry can ding your score slightly, and new accounts lower your average account age. Avoid new credit applications for at least 6 months before applying for a mortgage.
Frequently Asked Questions
What credit score do I need for a mortgage?+
Conventional loans typically require a minimum score of 620. FHA loans accept scores as low as 580 (or 500 with a larger down payment). For the best rates on any loan, aim for 740 or higher.
How long does it take to improve a credit score?+
Significant improvements can happen in 36 months if you pay down balances, clear errors from your report, and maintain perfect payment history. Rebuilding from serious negatives (bankruptcy, collections) takes 17 years.
Does checking my own credit score hurt it?+
No. Checking your own credit is a "soft inquiry" and has no impact on your score. Only hard inquiries (from lenders when you apply for credit) can temporarily lower your score.
Why do I have different scores from different bureaus?+
Each credit bureau may have slightly different information reported to them, and lenders may report to only one or two bureaus. Scores can also differ based on which scoring model is used (FICO 8, FICO 9, VantageScore, etc.).
What hurts a credit score the most?+
Missing payments is the most damaging factor. A single 30-day late payment can drop a good score by 60-110 points. Maxing out credit cards, having accounts sent to collections, or filing for bankruptcy also cause major damage.
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About the Author: De Van Do
De Van Do is the author and site builder behind MyLoanCalcs.com. With a background in technology, De Van Do built this site out of an interest in making financial calculations clear and accessible. De Van Do is not a licensed loan officer, mortgage broker, or financial advisor -- content on this site is for informational purposes only.