What Is a Credit Score?

How Credit Scores Are Calculated and What Is a Good Credit Score

Credit scores are three-digit numbers lenders use to help inform them whether or not you may qualify for a loan. Lenders also use credit scores to help them determine the interest rate they might offer you. If you want to buy a home or refinance a home you own, lenders are likely to look at your credit score before they offer you a mortgage.

Many people have a credit score between 550 and 750, with a higher score being better than a lower one. Since your credit score can affect your ability to buy or refinance a home, as well as the amount of money you’ll pay in interest over the life of the loan, it's a good idea to know your credit score and make sure it is as high as possible when applying for a loan.

How Credit Scores are Calculated

Your credit score is calculated from the information in your credit report. Credit reports contain details about your financial history, including:

Payment history

The history of the payments you've made on loans is an important factor in your credit score. Lenders like to see you consistently pay your bills on time before they offer you a loan. If you see errors in your payment history in your credit report, you'll want to work with the credit bureaus to get them corrected.

Amounts owed

How much you currently owe, as well as the number of loans and credit accounts you have, affect your credit score. For example, if you’ve reached the maximum balance on several credit cards, this can influence your credit score. The Consumer Financial Protection Bureau (CFPB) states that some experts advise you to try to limit the credit you use to 30 percent of your credit limit, while others experts say you should use less than 10 percent.

Length of credit history

How long you’ve had accounts and loans impacts your credit score. When you’ve reliably made your loan payments over a long period of time, this can raise your credit score.

Credit mix

Lenders look at the types of credit you have, such as mortgage, car loans, student loans, credit card debt, and more. Having a mix of credit card accounts and installment loans you’ve managed responsibility might help improve your credit score, according to the Fair Isaac Corporation (FICO).

New credit

How often you apply for new credit also impacts your score. The CFPB notes that if you apply for a lot of credit over a short period of time, it may appear to lenders that your economic circumstances have changed in a negative way.

What Is a Good Credit Score?

There’s no single answer to the question, "What is a good credit score?" Different lenders have different standards for credit scores they’ll accept on the loans they offer. The three credit major reporting agencies do not rank credit scores in exactly the same way.

Experian and Equifax both rank credit scores in the ranges you see below. They believe any score above 670 is good and any score below 580 is poor.

Last reviewed and updated September 2025 by Freedom Mortgage.