Credit Score Fundamentals
Your credit score is like a grade that summarizes your reputation as a borrower.
There are several types of credit scores, but the FICO® score is the most common. Scores range from 300 to 850 – and the higher the better. Generally, a score above 670 is considered to be good and a score below 580 may indicate problems. Your credit score can change over time, and your number today may be different in six months or a year, depending on the information in your credit report and how you manage the components that determine your score.
Five Components of a FICO® Credit Score
Payment history (35%)
Shows how you’ve paid your accounts over the length of your credit. The key here is to pay your bills on time and don’t miss payments.
Amounts owed (30%)
Includes the total amount you owe including a breakdown by account. It also includes the available credit on revolving accounts such as credit cards along with the balance owed on loans compared to the original amount.
Length of credit history (15%)
Shows how long your credit accounts have been open. If you’re just starting out, potential lenders do not have a baseline to determine your credit worthiness. Focus on practicing good habits over time.
Credit mix (10%)
Types of credit accounts you have, including credit cards, auto loans, mortgages, student loans, etc. It is helpful to show good credit habits with different types of credit.
New credit (10%)
When you apply for new credit, inquiries impact your FICO® score for 12 months. Adding multiple credit accounts over a short period of time can have a negative impact.
Personal Financial Counselor
Financial counselors are available on most military installations to help Service members with questions about credit reports and credit scores.