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How to read and understand your credit scores

Updated August 15, 2020

This date indicates our editors’ last comprehensive review and may not reflect recent changes in individual terms.

Written by: Rebecca Moran

A credit score is just a three-digit number, but it can have a significant impact on your financial life. Your credit scores (most people have more than one) can affect your ability to qualify for a loan or get a credit card by giving potential lenders a sense of how likely you are to repay your debts.Understanding credit score ranges can help you assess whether your credit may need some work. And knowing the factors that affect your credit scores can help you identify how to improve them over time.

What is a credit score?

A credit score is a number based on the information in your credit reports. Most credit scores range from 300 to 850, and where your score falls in this range represents your perceived credit risk. In other words, it tells potential lenders how likely you are to pay back what you borrow.

Your credit scores can affect whether a lender approves you for a mortgage, auto loan, personal loan, credit card or other type of credit. And if you’re approved, your credit scores can also help determine the interest rate and terms you’re offered.

How credit scores are created

Credit scores are calculated using the information in your credit reports. Each of the three main consumer credit bureaus — Equifax, Experian and TransUnion — produces a credit report with information from lenders, credit card issuers and other financial institutions.

Your credit reports include information about your credit history and activity. The credit bureaus rely on credit scoring models such as VantageScore and FICO to translate all this information into a number.

While each credit scoring model uses a unique formula, the models generally account for similar credit information. Your scores are typically based on factors such as your history of paying bills, the amount of available credit you’re using and the types of debt you have (we’ll cover these factors in detail later).

Federal law prohibits credit scores from factoring in personal information like your race, gender, religion, marital status or national origin. That being said, it’s not necessarily true that the American financial system is unbiased — or that credit lending and credit scoring systems don’t consider factors affected by bias. To learn more about racial justice in lending and initiatives seeking to create change, connect with organizations leading the fight, like the ACLU.

How to get your free credit scores

On Credit Karma, you can get your free VantageScore 3.0 credit scores from Equifax and TransUnion.

You can also get your credit scores from the three main consumer credit bureaus, though you may be charged a fee. (You’re entitled to a free copy of your credit reports from each of the three credit bureaus every year, but not your scores.)

You might also be able to get your scores from your credit card company or lender, or from a reputable credit counselor.


Why you could have different credit scores

It’s perfectly normal to have different credit scores from different credit bureaus. Here are a few reasons why your credit scores may differ.

  • There’s more than one credit scoring model. As noted above, the credit bureaus may use different credit scoring models to calculate your scores. Since different scoring models have different ranges and factor weightings, this often leads to different scores.
  • Some lenders may use different types of credit scores for different types of loans. For example, an auto lender may use an auto industry-specific credit score. These scores tend to differ dramatically from standard consumer credit scores.
  • Some lenders may only report to one or two credit bureaus. This means a credit-reporting bureau could be missing information that would raise or lower your score.
  • Lenders may report updates to the credit bureaus at different times. If one credit bureau has information that’s more current than another, your scores might differ between those bureaus.

With all of these factors at play, you’ll frequently see minor fluctuations and variations across your scores. Instead of focusing on these small shifts, consider your credit scores a gauge of your overall credit health and think about how you can continue to build your credit over time.

If you think your credit scores are different because of errors on one or several of your credit reports, you can dispute those errors with each credit bureau. Credit Karma’s free credit-monitoring tool can also help you stay on top of your credit and catch any errors that may affect your scores.


Credit score ranges

Knowing where your credit score falls within the FICO and VantageScore ranges can help you get a sense of whether you might qualify for a loan or credit card — and what kind of rate you might be offered.

There are a few key differences between the VantageScore and FICO models, including how they weigh different factors in determining your scores. Both have a score range of 300 to 850, but they differ as to which ranges are considered poor, fair, good or excellent.

Credit score range VantageScore 3.0        FICO       
Excellent 781–850 800–850
Very good N/A 740–799
Good 661–780 670–739
Fair 601–660 580–669
Poor 500–600 < 580
Very poor < 500

What is a good credit score and why does it matter?

So, what’s a good credit score? Though it varies across credit scoring models, a score of 670 or higher is generally considered good. For FICO, a good score ranges from 670 to 739. VantageScore deems a score of 661 to 780 to be good.

A credit score that falls in the good to excellent range can be a game-changer. While financial institutions look at a variety of factors when considering a loan or credit application, higher credit scores generally correlate with a higher likelihood of getting approved.

A good credit score can also unlock the door to lower interest rates and more-competitive terms. And if you have excellent credit scores, you have an even better chance of being offered the best rates and terms available.

On the other hand, if you have poor or bad credit scores, you may be able to get approved by some lenders, but your rates will likely be much higher than if you had good credit. You may also be required to make a down payment on a loan or get a cosigner.


Factors that affect your credit scores

The individual components vary based on the credit-scoring model used. But in general, your credit scores depend on these factors.

Most important: Payment history
For both the FICO and VantageScore 3.0 scoring models, a history of on-time payments is the most influential factor in determining your credit scores. Your payment history helps a lender or creditor assess how likely you are to pay back a loan.

Very important: Credit usage or utilization
Your credit utilization is calculated by dividing your total credit card balances by your total credit card limits. A higher credit utilization rate can signal to a lender that you have too much debt and may not be able to pay back your new loan or credit card balance.

The Consumer Financial Protection Bureau recommends keeping your credit utilization ratio below 30%. This may not always be possible based on your overall credit profile and your short-term goals, but it’s a good benchmark to keep in mind.

Somewhat important: Length of credit history
A longer credit history can help increase your credit scores by showing that you have more experience using credit. Your history includes the length of time your credit accounts have been open and when they were last used. If you can, avoid closing older accounts, which can shorten your credit history.

Somewhat important: Credit mix and types
A healthy mix of accounts, including revolving lines of credit (like credit cards) and installment loans (such as car loans, student loans, personal loans and mortgages) can help build your scores. Lenders want to see that you’re able to handle and pay back different types of credit.

Less important: Recent credit
When you apply for credit or a loan, the financial institution will conduct a hard inquiry on your credit that shows up on your credit reports. Credit scoring models consider these recent hard inquiries when calculating your scores. Opening multiple new accounts within a short time period could suggest to a lender that you’re struggling financially.


Credit Score FAQ

Are Credit Karma’s credit scores accurate?

The VantageScore 3.0 credit scores you see on Credit Karma come directly from Equifax and TransUnion, and they should reflect any information reported by those credit bureaus.

Remember that most people have a number of different credit scores. The scores you see on Credit Karma may not be the exact scores a lender uses when considering your application. Rather than focus on your exact scores (which change often), consider your scores on Credit Karma a general measure of your credit health.

Does checking my credit scores affect my credit?

Checking your credit scores and reports on Credit Karma won’t hurt your credit — it’s a soft inquiry. In fact, keeping tabs on your credit scores is a good way to spot potential issues early. For example, if your scores suddenly drop, it could be a sign that there’s an error in your credit report information or that you may be a victim of identity theft.

Is it possible to get an 850 credit score?

Getting an 850 credit score is possible, but uncommon. Only about 1% of all FICO scores in the United States are 850, according to Experian. Those with credit scores of 850 generally have a low credit utilization rate, no late payments on their credit reports and a longer credit history.

But keep in mind that having “perfect” credit scores isn’t necessary. You can still qualify for the best loan rates and terms if your credit scores are considered “merely” excellent (roughly 800 or higher).

What credit scores do I need to get approved for a credit card?

There’s no universal minimum credit score needed to get approved for a credit card. Credit card issuers have different score requirements for their credit cards, and they often consider factors beyond your credit scores when deciding to approve you for a card.

In general, if you have higher scores, you’re more likely to qualify for most credit cards. But if your credit is fair or poor, your options will be more limited and you may receive a lower credit limit and higher interest rate.

Which credit score is more important?

No one credit score holds more weight than the others. Different lenders use different credit scores. Regardless of the score used, making on-time payments, limiting new credit applications, maintaining a mix of credit cards and loans, and minimizing debt can help keep your credit in good shape.