Credit Scores

A credit score represents the amount of credit risk a person has. These scores are calculated using the person’s financial history and are used by lenders to determine how likely the person is to be able to pay back loans on time.

Jennifer Schell Headshot
Fact Checked
Fact Checked

Annuity.org content is meticulously reviewed to ensure it meets our high standards for readability, accuracy, fairness and transparency.

Annuity.org articles are spellchecked, grammatically correct and typo-free. Annuity.org editors may revise content for clarity, logic, flow and meaning. Annuity.org only uses credible sources of information.

This includes reputable industry sources, select financial publications, credible nonprofits, official government reports, court records and interviews with qualified experts.

Cite Us
How to Cite Annuity.org's Article

APA Schell, J. (2022, July 18). Credit Scores. Annuity.org. Retrieved August 17, 2022, from https://www.annuity.org/personal-finance/credit-scores/

MLA Schell, Jennifer. "Credit Scores." Annuity.org, 18 Jul 2022, https://www.annuity.org/personal-finance/credit-scores/.

Chicago Schell, Jennifer. "Credit Scores." Annuity.org. Last modified July 18, 2022. https://www.annuity.org/personal-finance/credit-scores/.

Why Trust Annuity.org
Why You Can Trust Annuity.org
Content created by Annuity.org and sponsored by our affiliates.

Annuity.org has been providing consumers with the tools and knowledge needed to confidently make financial decisions since 2013.

We accept limited advertising on our site to help fund our work, including the use of affiliate links. We may earn a commission when you click on the links at no additional cost to you.

The content and tools created by Annuity.org adhere to strict editorial guidelines to ensure quality and transparency.

What Are Credit Scores?

Your credit score is a number that represents how likely you are to be able to pay back a loan on time and in full. The higher your credit score is, the less credit risk you are considered to have.

Credit scores are calculated using a scoring formula that considers your credit history. There are different ways to calculate a credit score, but most companies use the FICO scoring model.

Purpose of Credit Scores

Credit scores are used by lenders to determine how risky it would be to loan someone money. They’re also often used by landlords, insurance companies and even potential employers. Having a good credit score can help you get a credit card, secure a loan, buy a house, rent an apartment or get better rates on insurance policies.

Your credit score both affects and is affected by your personal finances. A low credit score can represent a significant obstacle to improving your financial situation; it could make it more difficult to get loans or find a job or a place to live. That’s why it’s crucial to understand what your credit score is and how your financial choices can impact your score.

What Are the Credit Score Ranges?

Different credit bureaus calculate scores in different ways, but generally, most credit scores range from 300 to 850. Each score is ranked in different categories — poor, fair, good, very good and exceptional. The higher your score is, the more creditworthy you are.

What Is a Good Credit Score?

The most popular credit score brand is the FICO score, which ranges from 300 to 850. There are numerous ways to calculate your FICO credit score, and your actual score might vary depending on who is calculating it and when.

Most credit bureaus consider a “good” FICO score to be between 670 and 739. A FICO score between 740 and 799 is defined as “very good,” and any score over 800 is considered “exceptional.”

Did You Know?
Nearly 70% of Americans have a FICO credit score that’s rated “good” or better.
Source: Experian

What Is the Average Credit Score?

The average credit score in the U.S. in 2021 was 714, according to data from Experian, one of the biggest credit bureaus in the country. The average FICO score increased 4 points from 710 in 2020, marking a record high for the nation’s credit score averages.

Your credit score changes over time, and the older you are, the more likely you are to have a higher credit score. Experian’s data highlighted the average credit scores in different age groups across the country.

Average FICO Score by Age Group

Age GroupAverage FICO Score
18-24679
25-40686
41-56705
57-75740
76+760
Source: Experian

Young people had the lowest average credit score at just 679. The averages steadily increased through the age groups, with Generation X (ages 41-56) achieving an average score of 705. Americans 76 and older had the highest average FICO scores, with an average score of 760.

What Is a “Good” FICO Score

How Can You Improve Your Credit Score?

If your credit score is preventing you from improving your financial wellness, there are steps you can take to raise your score. There’s no one-size-fits-all solution to fixing your credit, but there are some general guidelines to follow that can help you improve your score.

Ways to Improve Your Credit Score
Pay loans on time, every time.
Your payment history is weighted most heavily in calculating your FICO score, so paying off loans and credit cards on time is the most important thing you can do to improve your credit score. If you can’t afford to pay off your credit card bill in full, you should at least make the minimum payment before the due date.
Keep your credit utilization low.
Credit scoring companies look at how close you are to “maxing out” your lines of credit, which is known as the credit utilization ratio. A high credit utilization ratio can negatively impact your credit score. You should try to keep your credit card balances below 30% of your credit limit.
Only apply for credit you need.
You might consider applying for a greater line of credit to improve your credit utilization ratio but applying for a lot of credit in a short period of time may actually hurt your score. Credit companies see this as a sign that you may be hurting financially.
Check your credit report for errors.
Your credit score is calculated from your credit report, which lists information about debts you owe and your debt payment history. Check for any errors that may be harming your score. If you find mistakes, then you can dispute them for free with the credit bureaus that listed the errors.

How Are Credit Scores Calculated?

Credit bureaus, credit monitoring services, lenders and other financial organizations all have their own ways of calculating credit scores. This means that you may see slightly different numbers at any given time, depending on where you are getting your score from.

The factors that can cause your score to vary include which credit reporting company your score is using data from, which scoring model is used and when your score is calculated. No matter which elements are in play, your credit score is generally based on your financial history.

There are several factors that are consistently used to calculate credit scores.

Factors That Impact Your Score

Companies that calculate credit scores do so by applying a mathematical formula called a scoring model to information from your credit report.

Factors That Impact Your Credit Score
  • Your history of paying bills on time
  • Your current unpaid debt
  • How long you’ve had credit
  • How much of your credit you’re using
  • How much new credit you have
  • How recently you have applied for credit

Factors That Don’t Impact Your Score

Because your credit score is essentially a report card of your personal finances, you may be wondering if other aspects of your financial situation are also influencing your credit score. But credit scores mainly focus on the choices you make with respect to paying back money you owe. Factors like the ones listed below have no effect on your credit score.

Factors That Won’t Impact Your Credit Score
  • Your salary or net worth
  • Receiving welfare payments
  • Paying taxes late
  • Getting married or divorced
  • Having a credit application denied
  • Checking your credit report or score
Factors that impact credit score

How Do You Check Your Credit Score?

Checking your credit score is easy to do and doesn’t impact your credit in any way. You can purchase your credit score from the major credit bureaus like FICO or VantageScore, or from one of many online credit monitoring services.

You may be able to see your credit score for free if you have a credit card or an auto loan. Many of these companies provide their customers’ credit scores on the loan or credit card’s monthly statements.

If you have concerns about your credit score, you can speak to a non-profit credit counselor. These professionals not only show you your credit score, but they can help you understand it and make a plan to improve your credit.

How Often Do Credit Scores Update?

Your credit score can update frequently as the information in your credit report changes. The major credit reporting agencies update credit reports whenever a lender passes on new information about your credit history.

Lenders typically report new information at least once per month, and it takes a few days for that information to be added to your file at the credit bureaus. Once that data is added to your credit report, you’re likely to have a new credit score.

Please seek the advice of a qualified professional before making financial decisions.
Last Modified: July 18, 2022

13 Cited Research Articles

Annuity.org writers adhere to strict sourcing guidelines and use only credible sources of information, including authoritative financial publications, academic organizations, peer-reviewed journals, highly regarded nonprofit organizations, government reports, court records and interviews with qualified experts. You can read more about our commitment to accuracy, fairness and transparency in our editorial guidelines.

  1. Brown, H. & Marutiak, E. (2022, April 12). Credit: Build & Improve It! Retrieved from https://www.moneysmartweek.org/2022/Credit
  2. Consumer Financial Protection Bureau. (2020, September 4). Where Can I Get My Credit Score? Retrieved from https://www.consumerfinance.gov/ask-cfpb/where-can-i-get-my-credit-score-en-316/
  3. Consumer Financial Protection Bureau. (2020, September 1). How Do I Get and Keep a Good Credit Score? Retrieved from https://www.consumerfinance.gov/ask-cfpb/how-do-i-get-and-keep-a-good-credit-score-en-318/
  4. Consumer Financial Protection Bureau. (2020, September 1). What Is a Credit Score? Retrieved from https://www.consumerfinance.gov/ask-cfpb/what-is-a-credit-score-en-315/
  5. Debter, L. (2015, July 22). 9 Things That Surprisingly Won’t Affect Your Credit. Retrieved from https://www.forbes.com/sites/laurengensler/2015/07/22/9-things-that-surprisingly-wont-affect-your-credit/?sh=5231dff35131
  6. DeNicola, L. (n.d.) What Is a Good Credit Score? Retrieved from https://www.experian.com/blogs/ask-experian/credit-education/score-basics/what-is-a-good-credit-score/
  7. Equifax. (n.d.) 7 Things That Won’t Hurt Your Credit Scores. Retrieved from https://www.equifax.com/personal/education/credit/score/7-things-that-wont-hurt-credit-scores/
  8. Federal Trade Commission. (2021, December). Understanding Your Credit. Retrieved from https://consumer.ftc.gov/articles/understanding-your-credit
  9. Federal Trade Commission. (2021, May). Credit Scores. Retrieved from https://consumer.ftc.gov/articles/credit-scores
  10. Federal Trade Commission. (2021, May). Disputing Errors on Your Credit Reports. Retrieved from https://consumer.ftc.gov/articles/disputing-errors-your-credit-reports
  11. Harzog, B. (2021, March 4). How Often Do Your Credit Report and Credit Score Update? Retrieved from https://money.usnews.com/credit-cards/articles/how-often-does-my-credit-report-update
  12. Horymski, C. (2022, February 22). What Is the Average Credit Score in the U.S.? Retrieved from https://www.experian.com/blogs/ask-experian/what-is-the-average-credit-score-in-the-u-s/
  13. Knueven, L. (2022, April 26). The Average Credit Score by Age, State, and Year. Retrieved from https://www.businessinsider.com/personal-finance/average-credit-score