Credit Score

Your credit score is a three-digit number that summarizes your credit history and predicts how likely you are to repay debt. FICO scores (the most widely used) range from 300 to 850. VantageScore, another common model, uses the same range but weights factors differently.

FICO score components are: payment history (35% — paying on time is the single biggest factor), credit utilization (30% — keeping balances below 30% of credit limits), length of credit history (15% — older accounts are better), credit mix (10% — having both revolving and installment credit), and new credit (10% — too many recent applications is negative).

Score ranges are generally interpreted as: 800-850 (exceptional), 740-799 (very good), 670-739 (good), 580-669 (fair), and below 580 (poor). Each range affects the interest rates and terms you'll receive. The difference between a 660 and 760 credit score on a $300,000 mortgage could be 0.5-1% in interest rate — $30,000-$60,000 over the loan's life.

Improving your credit score focuses on: making all payments on time (set up autopay), reducing credit card balances below 30% of limits (below 10% is ideal), not closing old credit cards (keep them open for history length), limiting new credit applications, and checking your credit reports for errors.

Credit scores are free to check through many banks and credit card companies, and the three annual free reports from annualcreditreport.com. Checking your own credit does not hurt your score (it's a "soft inquiry"). Only lender-initiated "hard inquiries" from applications temporarily affect your score.