A credit score is a three-digit number, typically between 300 and 850, designed to represent your credit risk, or the likelihood you will pay your bills on time.

Credit scores are calculated using information in your credit reports, including your payment history, the amount of debt you have, and the length of your credit history. Higher scores mean you have demonstrated responsible credit behavior in the past, which may make potential lenders and creditors more confident when evaluating a request for credit.

Credit score ranges vary based on the credit scoring model used, but are generally similar to the following:

300-579: Poor
580-669: Fair
670-739: Good
740-799: Very good
800-850: Excellent
There are many different scoring models, and some use other data, such as your income, when calculating credit scores. Credit scores are used by potential lenders and creditors, such as banks, credit card companies or car dealerships, as one factor when deciding whether to offer you credit, like a loan or a credit card.

Why are credit scores important?

Why is it important to strive for a higher credit score? Simply put, those with higher credit scores generally receive more favorable credit terms, which may translate into lower payments and less paid in interest over the life of the account.

Remember, though, that everyone’s financial and credit situation is different. Different lenders may also have different criteria when it comes to granting credit, which may include information such as your income.

The types of credit scores used by lenders and creditors may vary based on their industry. For example, if you’re buying a car, an auto lender might use a credit score that places more emphasis on your payment history when it comes to auto loans.