Updated: Apr 19, 2025

Your credit score can impact everything from loan approvals to apartment rentals—and even your car insurance rates. Understanding how it works and learning how to improve it can open the door to better financial opportunities and lower interest rates.

What Is a Credit Score and Why Does It Matter?

A credit score is a three-digit number that lenders use to assess how likely you are to repay borrowed money. It typically ranges from 300 to 850, with higher scores indicating better creditworthiness. The most common scoring models are FICO and VantageScore, both of which look at your credit history to calculate your score.

Lenders use your credit score when you apply for a loan, credit card, mortgage, or car lease. A higher score usually means you’re more likely to get approved and receive better terms, such as lower interest rates or higher credit limits. But your credit score doesn’t just affect loans—it can also impact your ability to rent an apartment, get a cell phone plan, or even land a job in some industries.

What Factors Affect Your Credit Score?

There are five main factors that go into your credit score. Understanding each one can help you know where to focus your efforts.

• Payment History (35%): This is the most important factor. Making your payments on time every month has the biggest impact on your score. Even one missed or late payment can cause your score to drop significantly.

• Credit Utilization (30%): This refers to the percentage of your credit limit you’re using. Keeping your balances below 30% of your total credit limit is ideal. For example, if you have a credit card with a $1,000 limit, try to keep your balance under $300.

• Length of Credit History (15%): The longer you’ve had credit accounts, the better. Lenders like to see a track record of responsible borrowing. If you’re new to credit, this factor will improve over time.

• Credit Mix (10%): Having different types of credit—such as a credit card, car loan, and student loan—can slightly boost your score.

• New Credit (10%): Applying for several new accounts in a short time can temporarily lower your score. Each application usually results in a hard inquiry, which can cause a small dip.

You can learn more about these factors directly from myFICO.

How to Check Your Credit Score for Free

Checking your credit score regularly is the first step toward improving it. Many banks and credit card companies now offer free credit score access to their customers. You can also check your credit score for free through websites like Credit Karma or Credit Sesame. These platforms give you an estimate of your score and break down the factors affecting it.

It’s also important to review your full credit report to look for errors or signs of identity theft. You’re entitled to one free report per year from each of the three major credit bureaus—Equifax, Experian, and TransUnion—through AnnualCreditReport.com. During certain times, like the COVID-19 pandemic, they’ve offered free weekly reports as well.

Simple Steps to Improve Your Credit Score

Improving your credit score doesn’t happen overnight, but small actions over time can make a big difference. Here are some of the most effective ways to boost your score:

1. Pay All Your Bills on Time
This includes credit cards, loans, utilities, rent, and even medical bills. Set up reminders or automatic payments to avoid late fees and keep your record clean.

2. Pay Down Credit Card Balances
If your balances are high, work on paying them down to reduce your credit utilization. You can start with the card that has the highest interest rate or the smallest balance—whichever strategy works best for you.

3. Don’t Close Old Accounts
Keeping older accounts open can help increase your average account age, which benefits your score. Unless the card has an annual fee or you’re at risk of overspending, consider leaving it open.

4. Limit New Credit Applications
Only apply for new credit when you really need it. Too many hard inquiries in a short time can hurt your score.

5. Ask for a Credit Limit Increase
If you have a good history with a credit card issuer, you can request a higher limit. This can lower your utilization rate—just be careful not to spend more just because your limit increased.

How Long Does It Take to See Improvement?

How quickly your score improves depends on your starting point and the actions you take. If your score dropped due to one late payment, you might see improvement in a few months by catching up and staying current. If you’re rebuilding from more serious issues like collections or bankruptcy, it may take a year or more of consistent, responsible behavior.

In general, expect it to take at least 3 to 6 months of positive credit habits to see noticeable changes. However, every credit profile is different, and some people may see results faster or slower depending on their individual situation.

Secured Cards and Credit Builder Tools

If you’re just starting out or your score is very low, getting approved for traditional credit can be difficult. A secured credit card is a great way to build or rebuild credit. You deposit a set amount of money (usually $200–$500), which becomes your credit limit. You use the card like any other credit card, and your payment history is reported to the credit bureaus.

Some banks and fintech companies also offer credit-builder loans. These are small loans where the money is held in a secured account until you’ve repaid it. Your on-time payments are reported to the credit bureaus, helping you establish a positive history.

Companies like Self and Chime offer credit-building tools with minimal risk and no credit check to get started.

Mistakes to Avoid

While you’re working to improve your score, avoid these common credit pitfalls:

• Paying only the minimum: This can lead to high interest charges and long-term debt. Always pay as much as you can afford.

• Maxing out your credit cards: High balances hurt your utilization ratio, even if you pay on time.

• Ignoring bills in collections: Unpaid collections can damage your score for years. If possible, negotiate a payment plan or settlement.

• Closing multiple accounts at once: This reduces your available credit and can shorten your credit history, both of which can lower your score.

Credit Score Ranges: What Is a Good Score?

Understanding where you stand can help you set realistic goals. Here’s a general breakdown of credit score ranges used by most lenders:

Final Thoughts

Your credit score plays a major role in your financial life, but it’s something you can actively improve with time and effort. By understanding how it works, checking your reports, and making smart credit decisions, you can raise your score and gain access to better financial opportunities. Whether you’re rebuilding from a rough patch or just getting started, even small steps can make a big impact on your financial future.