⚡ Key Takeaways
- Payment history (35%) and utilization (30%) control 65% of your score
- You have dozens of different credit scores — they can vary by 50+ points
- FICO 8 is most common for credit cards; FICO 2/4/5 for mortgages
- Credit Karma shows VantageScore — often 20-40 points different from what lenders see
What is a Credit Score?
A credit score is a three-digit number (typically 300-850) that predicts how likely you are to repay debt. It's calculated by analyzing data from your credit report — a detailed record of your borrowing history maintained by three bureaus: Equifax, Experian, and TransUnion.
Here's the critical thing to understand: you don't have one credit score. You have dozens. Different scoring companies (FICO, VantageScore) create different models, and each bureau may have slightly different data about you.
Credit Score Ranges (FICO)
The 5 Factors That Determine Your Score
FICO publicly discloses the weighted categories that make up your score. Understanding these is the foundation of any credit-building strategy.
35% Payment History
This is the most important factor — do you pay your bills on time? The algorithm looks at:
- On-time payments across all credit accounts
- Severity of delinquency — 30 days late is bad, 90+ days is much worse
- Recency — a late payment from last month hurts more than one from 5 years ago
- Public records — bankruptcies, foreclosures, collections
⚠️ Warning: A single 30-day late payment can drop your score by 60-110 points if you had excellent credit. Late payments stay on your report for 7 years.
30% Credit Utilization
Utilization is how much of your available credit you're using. If you have a $10,000 credit limit and a $3,000 balance, your utilization is 30%.
The conventional advice says "keep utilization under 30%." That's outdated. People with 800+ scores average just 4.1% utilization. The optimal range is 1-9%.
💡 Good news: Unlike payment history, utilization has no memory in current FICO models. Pay down your balances and your score can improve within 30 days.
→ Deep dive: Credit Utilization Mastery Guide
15% Length of Credit History
This factor considers:
- Age of oldest account
- Age of newest account
- Average age of all accounts
People with perfect 850 scores have an average oldest account of 30 years. This is why building credit early matters, and why you shouldn't close old accounts.
10% Credit Mix
The algorithm likes to see you can handle different types of credit:
- Revolving credit — credit cards, lines of credit
- Installment loans — mortgages, auto loans, student loans, personal loans
Don't open accounts just for credit mix — it's only 10%. But if you only have credit cards, adding a credit builder loan can help.
10% New Credit (Inquiries)
When you apply for credit, lenders do a "hard pull" of your report. Too many hard inquiries in a short time signals desperation.
- Hard inquiries stay on your report for 2 years
- They only affect your score for 12 months
- Each inquiry typically costs less than 5 points
- Rate shopping protection: Multiple mortgage/auto inquiries within 14-45 days count as one
FICO vs VantageScore: What's the Difference?
There are two major credit scoring companies, and they calculate scores differently:
| Feature | FICO | VantageScore |
|---|---|---|
| Market Share | ~90% of lending decisions | ~10% |
| Minimum History | 6 months + recent activity | 1-2 months |
| Paid Collections | FICO 8: Still hurts FICO 9: Ignored |
3.0+: Ignored |
| Trended Data | FICO 10T only | VantageScore 4.0 |
| Where You See It | Experian, bank apps, myFICO | Credit Karma, Credit Sesame |
⚠️ Important: Credit Karma shows VantageScore, not FICO. Your VantageScore can be 20-50+ points different from what a mortgage lender sees. Don't be surprised by the gap.
Why You Have Multiple Scores
Here's why checking your score can be confusing:
- Different bureaus have different data. Not all creditors report to all three bureaus. One bureau might have an account the others don't.
- Multiple FICO versions exist. FICO 8, FICO 9, FICO 10, FICO 10T, FICO Auto Score, FICO Bankcard Score... there are over 50 FICO score variants.
- Updates happen at different times. Creditors report at different times during the month. One bureau might have newer data than another.
What Scores Do Lenders Actually Use?
| Lender Type | Most Common Score Used |
|---|---|
| Mortgages (Fannie/Freddie) | FICO 2 (Experian), FICO 5 (Equifax), FICO 4 (TransUnion) — uses middle score |
| Credit Cards | FICO 8 or FICO Bankcard Score |
| Auto Loans | FICO Auto Score 8 (range: 250-900) |
| Personal Loans | FICO 8 or 9 |
| Apartments | Varies — often custom "ResidentScore" from TransUnion |
Common Myths Debunked
"Carrying a balance builds credit"
FALSE. You never need to pay interest to build credit. Pay in full every month — the scoring model can't tell the difference.
"Checking your score hurts it"
FALSE. Checking your own score is a "soft inquiry" with zero impact. Hard inquiries only happen when you apply for new credit.
"Closing old cards improves your score"
FALSE. Closing cards reduces your available credit (raising utilization) and eventually removes account age. Keep old cards open.
"Income affects your credit score"
FALSE. Income is not a factor in credit score calculations. You can have excellent credit with modest income.
What's Next?
Now that you understand how scores work, learn how to improve yours: