The most commonly used credit scoring models range from 300 to 850. Each lender sets its own standards for what constitutes a good credit score. But, in general, scores fall along the following lines:
Excellent credit: 720 and higher
Good credit: 690-719
Fair credit: 630-689
Bad credit: 629 or lower
Your credit score is determined by several factors, listed in the order of importance:
Payment history: your record of on-time payments and any negative marks, such as missed payments, accounts sent to collections or bankruptcies.
Credit utilization: balances you owe and how much of your available credit you're using.
Age of credit history: how long you've been using credit.
Applications: how frequently you've applied for credit recently.
Type of credit: how many and what kinds of credit accounts you have, such as credit cards, installment debt (such as mortgage and car loans) or a mix.
A credit score does not consider your income, savings or job security. That’s why, in addition to your credit score, lenders also may check what you owe, how much you earn and assets you have.
To build your credit score, follow these tips:
- Pay all your bills, not just credit cards, on time. Late payments and accounts charged off or sent to collections will hurt your score.
- Use no more than 30% of your credit limit on any card — less, if possible. The best scores go to people using 10% or less of their credit limits.
- Keep accounts open and active when possible — that gives you a longer payment history and can help your "credit utilization," or how much of your limits you're using.
- Avoid opening too many new accounts at once. New accounts lower your average account age and each application causes a small ding to your score. We recommend spacing credit applications about 6 months apart. Make sure you conduct thorough research on the best credit card for your needs before applying.
- Check your credit reports and dispute errors.
If you're just starting out or haven't used credit in at least six months, you might not have a score. Don't worry, NerdWallet has a guide to help you get started with building credit.