The important things about credit score

A credit score is one of the most powerful numbers in your financial life. It affects your ability to rent an apartment, buy a car, get a mortgage, or even land certain jobs. Yet many people don’t fully understand how their credit score works or what steps they can take to improve it.

A credit score is typically a three-digit number ranging from 300 to 850, with higher scores indicating better creditworthiness. The most widely used scoring models, such as FICO and VantageScore, consider five main factors: payment history, amounts owed, length of credit history, new credit, and credit mix.

The most important factor is your payment history, which accounts for about 35% of your score. Paying your bills on time every month is the single best thing you can do to maintain or boost your score. Even one missed payment can drop your score significantly and stay on your credit report for up to seven years.

The second biggest factor is how much you owe, especially your credit utilization ratio—the amount of credit you’re using compared to your total credit limit. It’s generally recommended to keep your utilization below 30%, but ideally below 10% for the best scores. For example, if you have a credit limit of $1,000, you should aim to keep your balance below $100. Length of credit history refers to how long your accounts have been open.

A longer history typically helps your score, which is why you shouldn’t close old credit cards unless absolutely necessary. New credit accounts and credit inquiries also affect your score, though to a lesser extent. Opening too many new accounts in a short period can signal risk and temporarily lower your score.

Finally, credit mix refers to the variety of credit types you have, such as credit cards, auto loans, and mortgages. Having a mix shows that you can manage different kinds of credit responsibly. To improve your credit score, start by checking your credit report for errors through free tools like AnnualCreditReport.com. Dispute any inaccuracies with the credit bureaus. Set up automatic payments to avoid missed due dates, and work on paying down existing balances strategically.

If you’re just starting out or rebuilding credit, consider getting a secured credit card or becoming an authorized user on a responsible person’s account. Improving your credit score takes time and consistency, but the rewards—lower interest rates, better loan terms, and greater financial flexibility—are well worth the effort.