How Credit Scores Work: FICO and VantageScore Explained

A credit score is a three-digit number that estimates how likely you are to repay borrowed money on time, and it is built from the data in your credit reports ^[1]. Most scores run from 300 to 850 ^[1]. The two main brands, FICO and VantageScore, look at the same basic things: whether you pay on time, how much of your available credit you use, how long you have had credit, how often you apply for new credit, and what kinds of accounts you hold ^[2][3]. Payment history carries the most weight in both ^[4][3]. The rest of this guide explains each factor, why your numbers differ from site to site, and how to work out your own credit use.

What a credit score is and who uses it

A scoring company runs the data in your credit report through a formula, called a scoring model, and the output is your score ^[1]. Lenders use it when they decide whether to approve a card, car loan or mortgage, and also to set your interest rate and credit limit ^[1]. Landlords and insurers can use scores too ^[1].

A higher number tells a lender that you look like a lower risk. FICO says that lower risk usually means easier approval, lower rates and higher limits ^[2].

Your score is not a record of your whole financial life. FICO lists things its scores do not use, including your age, race, religion, sex, marital status, where you live, your salary, your job title and your employer ^[4]. A lender may still ask about your income when you apply. That is a separate check, not part of the score ^[4].

The five FICO factors and their weights

FICO publishes the rough weight of each part of its score. These percentages are for the general population. FICO notes that the importance of each category can be different for different people ^[4].

Source for the weights: FICO ^[4].

Payment history (35%)

This is the largest single factor. FICO says your past record of paying on time tends to be the best single sign of how you will pay in the future ^[4]. It counts payments on credit cards, store cards, installment loans and mortgages. It also counts how late any missed payments were, how much is still owed on them, and how long ago they happened ^[5].

One or two late card payments do not wreck an otherwise strong history, according to FICO ^[4]. Older problems count less than recent ones, so a steady run of on-time payments helps over time ^[5].

Amounts owed (30%)

This factor is about debt, but FICO says the share of your credit you are using matters more than the raw dollar total ^[6]. That share is called your credit utilization ratio: your revolving balances (mostly credit cards) divided by your total credit limits. A high ratio can suggest you are stretched thin ^[4].

FICO also looks at how many accounts carry balances and how much of each installment loan you still owe compared with the original amount ^[6]. It gives an example: if you borrowed $10,000 for a car and have repaid $2,000, you still owe more than 80% of the loan ^[6].

Length of credit history (15%)

FICO looks at the age of your oldest account, your newest account and the average age of all of them ^[4]. A longer history helps, but it is not required. People with fairly new credit can still score well if the rest of the report looks good ^[7].

New credit (10%)

Each time you apply for credit, the lender's request shows on your report as an inquiry. FICO counts inquiries from the last 12 months, though they stay on the report for two years ^[8]. For most people, one extra inquiry costs fewer than five points ^[8]. Opening several accounts in a short time can look risky, especially if your history is short ^[4].

Credit mix (10%)

Credit mix means the types of credit on your report, such as cards, store accounts, installment loans and mortgages ^[4]. FICO says you do not need one of each, and that mix is unlikely to decide whether you get approved ^[4].

How VantageScore weighs the same information

VantageScore is a rival scoring model that draws on files from all three national credit bureaus, and it also uses a 300 to 850 range ^[3]. It names its factors a little differently and uses different weights for each version. Here is how VantageScore describes two of its models ^[3]:

VantageScore groups scores into tiers: 781 to 850 is superprime, 661 to 780 is prime, 601 to 660 is near prime and 300 to 600 is subprime ^[3]. It also says version 4.0 can look at your utilization over as much as two years, while 3.0 looked at only the most recent month ^[3].

Score ranges: what counts as good

Base FICO Scores run from 300 to 850 ^[2]. FICO describes the bands this way ^[2]:

Each lender sets its own cutoffs. A "good" score in these tables does not promise approval or a set rate.

Why you have many scores, not one

It is normal to see a different number on your bank app, a free score site and a lender's letter. The Consumer Financial Protection Bureau (CFPB) explains that a score depends on which model made it, which data it used and even the day it was calculated ^[1]. Three common reasons:

1. Different bureaus. Equifax, Experian and TransUnion each keep their own file on you. Some lenders do not report to all three, so an account may appear on one or two reports only ^[3].
2. Different models. FICO and VantageScore weigh data differently, as the tables above show ^[4][3].
3. Different versions. FICO has several versions, and each one weighs your report a little differently ^[9]. FICO also builds versions for specific industries, such as auto lenders and card issuers ^[2].

Because you cannot always know which score a lender will pull, it makes sense to watch the trend in your reports rather than chase one number.

Credit utilization: a worked example

Utilization is one of the few factors you can change quickly. Here is how to work it out.

Say you have two cards:

• Card A: $3,000 limit, $1,200 balance
• Card B: $2,000 limit, $300 balance

Step 1. Add the balances: $1,200 + $300 = $1,500.

Step 2. Add the limits: $3,000 + $2,000 = $5,000.

Step 3. Divide: $1,500 ÷ $5,000 = 0.30, or 30%.

Card A on its own is at 40% ($1,200 ÷ $3,000), so it is closer to its limit than the overall figure suggests.

Now say you pay Card A down to $100 before its statement closes. Your total balance becomes $400, and $400 ÷ $5,000 = 8%.

Two details matter here:

• The reported balance is usually the statement balance. FICO says the balance on your report is generally what the lender sent to the bureau, often from your latest statement. So you can pay in full every month and still show a balance ^[6]. Paying before the statement date lowers the number that gets reported.
• Low beats zero in some cases. FICO says a low ratio can sometimes help more than using none of your credit at all ^[6]. VantageScore suggests staying under 30% while keeping the ratio above 0% ^[3].

You do not need to carry a balance from month to month or pay interest to get credit for using a card. Using it lightly and paying the bill is enough to create a record.

Common credit score myths

Myth: Checking your own score lowers it. It does not. FICO says pulling your own report directly from a bureau or an approved service does not affect your FICO Scores ^[8]. AnnualCreditReport.com also notes that checking your report there is a soft inquiry that does not touch your scores ^[10].

Myth: Shopping around for a loan wrecks your score. FICO groups several inquiries for the same kind of loan made within a short window into one. Older FICO versions use a 14-day window and newer ones use 45 days ^[8]. For mortgage, auto and student loans, FICO also ignores inquiries made in the 30 days before the score is figured ^[8]. VantageScore treats hard inquiries within 14 days as one ^[3]. Keep your rate shopping within about two weeks to be safe with any version.

Myth: A higher income means a higher score. Your salary is not part of a FICO Score ^[4].

Myth: You need to carry a balance to build credit. As shown above, the reported figure is usually your statement balance, so paying in full still leaves a record of use ^[6].

Myth: A late payment stays forever. VantageScore says late payments stay on your report for seven years, and their effect fades as they age ^[3].

Myth: You should open different kinds of loans to improve your mix. FICO says mix is only 10% of the score and is unlikely to be what decides approval ^[4]. Taking on a loan you do not need adds an inquiry and new debt.

How to raise your score over time

There is no quick fix for an accurate report, but the factors above point to a clear routine:

1. Pay every bill by its due date. Payment history is the largest FICO factor ^[4]. If you have missed payments, getting current and staying current lets old problems count for less as they age ^[5].
2. Lower your card balances. Paying down revolving debt lowers your utilization, which sits inside the 30% amounts-owed factor ^[6].
3. Keep older accounts in good standing. The age of your oldest account and the average age of all accounts both feed the length factor ^[4].
4. Apply for new credit only when you need it. Each application adds an inquiry, and new accounts lower your average account age ^[8].
5. Check your reports for errors. A wrong late payment or an account that is not yours can pull your score down, and you can dispute it for free ^[10].

If debt is the main problem, FICO suggests contacting your creditors or a credit counseling service for help with a budget or a repayment plan ^[5]. A nonprofit counselor is a reasonable place to start before paying anyone who promises to "fix" your credit.

Frequently asked questions

How often does my score change? FICO says your score updates often because the data in your reports keeps changing ^[2].

Does a hard inquiry hurt for long? FICO Scores only count inquiries from the past 12 months, even though they stay on your report for two years ^[8].

Which score do lenders use most? FICO says its scores are used by 90% of top lenders ^[2]. VantageScore says all of the top 10 U.S. banks use its scores or related tools ^[3]. Lenders choose which model and version to pull.

Your next step

Pull your free credit reports from all three bureaus at AnnualCreditReport.com, which lets you check each one every week ^[10]. Add up your card balances and limits using the steps above to find your utilization. Then set up automatic minimum payments on every account so a missed due date never lands on your payment history. Our guide on how to read your credit report and dispute errors walks through what to check line by line.