A credit score is a three-digit number calculated to indicate your creditworthiness. The higher the score, the more creditworthy you are to a lender. A credit score is calculated from the information in your credit report and considers your on-time payments, the length of your payment history, your mix of different types of credit accounts, and other such factors. It is important to know that your score does not take your age, income, employment, marital status, or your bank account balances into account.

You can learn more about credit scores and scoring models from the Consumer Financial Consumer Financial Protection Bureau website.

A good score may mean you have easier access to more credit and lower interest rates. The consumer benefits of a good credit score go beyond the obvious. For example, underwriting processes that use credit scores allow consumers to obtain credit much more quickly than in the past.

Five major categories make up a credit score:

40% Payment History: Essentially, lenders want to know whether you’re good about paying your loans on time.

23% Credit Usage: Credit usage, also known as credit utilization, is the ratio between the total credit used and your total credit limit on your revolving accounts. It is best to keep your credit usage below 30%.

21% Credit Age: The average of your oldest open credit accounts to your newest open credit accounts determines your credit age. In general, the longer your credit history the better, particularly accounts with a good payment history and no late payments.

11% Credit Mix: It’s important to have a mix of different types of credit like revolving credit and installment loans. Your score will likely be higher if you have a good payment history with both, installment loans, like student loans and mortgages, and revolving credit, like credit cards.

5% Inquiries: Any time you apply for a credit card, or a lender checks your credit for a loan, it’s known as an inquiry. Hard inquiries show on your credit report when your credit is pulled by a lender for a car loan, mortgage, or credit card. However, soft inquiries don’t show on your credit report and occur when you check your credit, or a lender pre-approves you for an offer.

Applying for several credit cards or opening multiple credit accounts in a short period creates hard inquiries and could signal an increased credit risk to a lender.

One of the most important misperceptions about credit scores is what information the VantageScore® model, or any credit scoring model for that matter, is NOT used. The VantageScore® model does not consider race, color, religion, nationality, sex, marital status, age, salary, occupation, title, employer, employment history, where you live or where you shop.