Understanding your credit score
If your entire financial life could be summed up in one number, it would be your credit score.
What is a credit score?
A credit score is a three-digit number that reflects how responsible you are when it comes to borrowing money. Creditors consider this number when deciding whether or not to approve you for a credit card, a loan, or a mortgage — and what interest rate to offer you. The higher your credit score, the better.
What is a FICO score?
While there are dozens of credit scores,1 the one that's used by 90% of top lenders is your FICO score.2 FICO scores range from 300 to 850 and are based on the information that the three major credit bureaus — Experian, Equifax, and TransUnion — have on file for you.3
What your credit score number means
So what's considered good credit? And when should you worry? Experian breaks down the FICO score ranges:
- Exceptional = 800 and higher
- Very Good = 740 to 799
- Acceptable = 670 to 739
- Fair = 580 to 669
- Poor = 579 and lower
People with “very good" and “exceptional" credit scores can borrow money at the lowest interest rates. Those with “fair" and “poor" scores have to pay higher interest rates to borrow money — if they're approved at all.
How credit scores are determined
While the exact algorithm used to calculate your credit score is proprietary, here are the five major factors that influence your FICO score:
- Payment history (35%): The most important factor in determining your credit score is your payment history. Missing just one payment can negatively affect your score, while always paying your bills on time will boost your score higher.
- Amount owed (30%): Lenders like to see that you aren't too reliant on credit. Maxing out your credit cards is a big red flag. In fact, experts recommend using no more than 30% of your total available credit.4
- Length of credit history (15%): A short credit history or no credit history at all can also hurt your score because your behavior is less predictable. The longer you've been using credit, the better.
- New credit (10%): Opening a lot of accounts within a short period of time can also be a red flag that you're unable to keep up with your bills. It's a good idea to pace yourself when opening new credit cards or taking out loans.
- Credit mix (10%): Lenders like to see that you can handle a variety of credit types. A mix of credit cards and different types of loans will help strengthen your credit score.
How to check your credit report and credit score
Your credit score is based on your credit report, which is a summary of your financial information and behavior. For example, your credit report shows how much available credit you have, how much debt you owe, whether you pay your bills on time, and if you have any accounts that have gone to collections.
You can check your credit report from each of the three major credit bureaus once a year for free at annualcreditreport.com.5 Review them for any errors that could negatively affect your score. If you do find an error, you can dispute it online through that credit bureau's website.
- Equifax: 1-800-685-111, www.equifax.com
- Experian: 1-888-397-3742, www.experian.com
- TransUnion: 1-800-888-4213, www.transunion.com
While your credit report doesn't include your credit score, most credit card companies offer free FICO scores to their customers. Sites like Credit Karma6 and Credit Sesame7 provide free credit scores, though they don't offer FICO scores. Still, they can give you an idea of where you stand.
If you need help understanding your credit score or want to learn more about how to improve your credit, stop by a Synovus branch and talk with us or call us at 1-888-SYNOVUS (1-888-796-6887).
Important Disclosure Information
This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
- Ann Carrns, “Why You Have 49 Different FICO Scores," New York Times, https://www.my_co.com/credit-education/credit-scores/how-lenders-use-credit-scores, accessed February 11, 2019. Back
- “How Lenders Use FICO Scores in Credit Checks," myFICO, https://www.my_co.com/credit-education/credit-scores/how-lenders-use-credit-scores, accessed February 11, 2019. Back
- “What Are the Different Credit Scoring Ranges?" Experian, https://www.experian.com/blogs/ask-experian/infographic-what-are-the-di_erent-scoring-ranges, accessed February 11, 2019. Back
- Latoya Irby, “What Is a Good Credit Utilization Ratio?" The Balance, https://www.thebalance.com/what-is-a-good-credit-utilization-ratio-960548, accessed February 11, 2019. Back
- AnnualCreditReport.com, accessed February 14, 2019. Back
- CreditKarma.com, accessed February 14, 2019. Back
- CreditSesame.com, accessed February 14, 2019. Back