How Credit Scores Work: FICO Ranges and the 5 Factors

Your credit score is a three-digit summary of how you have handled borrowed money — and it quietly prices your life. It influences whether you are approved for a card or mortgage, the interest rate you pay, and sometimes even apartment applications. The good news: the scoring system is knowable, and the habits that improve it are the same habits that keep you out of debt trouble.

FICO ranges at a glance

The most widely used scores are FICO Scores, which run from 300 to 850. FICO publishes these general ranges: 800–850 Exceptional; 740–799 Very Good; 670–739 Good; 580–669 Fair; 300–579 Poor. Lenders set their own cutoffs, but as a rule of thumb, scores in the mid-700s and above qualify for the best advertised rates, while scores under 580 make borrowing expensive or unavailable. VantageScore, the other major model, uses the same 300–850 scale. You have many scores — different models, different bureaus — but they move together when your habits change.

The five factors (and what each is worth)

Habits that actually move the needle

1. Never miss a payment. Autopay at least the minimum on every account. Payment history is the biggest factor and late payments linger for years.
2. Keep utilization low. If you have a $5,000 limit and a $2,400 balance, you are using 48%. Paying down to under 30% helps; under 10% is better still. Paying mid-cycle, before the statement closes, lowers the balance that gets reported.
3. Don’t close old cards casually. Closing reduces your total limit (raising utilization) and eventually shortens your history. A no-fee old card kept open with a small recurring charge helps more than it hurts.
4. Apply for new credit sparingly, and rate-shop smart: mortgage and auto inquiries within a short window are typically grouped by scoring models.
5. Check your reports. You can pull free weekly reports from all three bureaus at AnnualCreditReport.com — the only federally authorized site. Dispute errors; the CFPB explains how, and mistakes are more common than people think.

Myths worth dropping

• Checking your own score hurts it — false. That is a soft inquiry and has no effect.
• Carrying a balance builds credit — false. You build credit by using the card and paying on time; interest paid buys you nothing.
• Income is part of your score — false. Income matters to lenders, but it is not a scoring factor.
• Paying off a card erases its late payments — false. History stays; time and new good behavior dilute it.

If high utilization is your main problem, the fastest score improvement usually comes from the same plan that saves you interest: a focused payoff. See How to Pay Off Credit Card Debt and run your balances through the debt payoff calculator. And if a home purchase is on your horizon, give yourself months of score-building lead time before you read How Much House Can I Afford?

Frequently asked questions

Sources: FICO (myFICO.com), score ranges and factor weightings; Consumer Financial Protection Bureau (ConsumerFinance.gov), credit reports and scores; AnnualCreditReport.com.

This article is educational and is not financial, tax, or legal advice. See our disclaimer.