10 credit score facts you need to know

By CreditNinja
Modified on June 6, 2023
credit score facts

A credit score is an essential financial tool that you can use to your advantage. Credit scores can positively or negatively affect important life decisions. For example, if you have a bad FICO score, a landlord may deny your application for your dream apartment. Having a bad credit score may affect borrowing by costing you more money when you take out a loan. 

What Is a Credit Score?

A credit score, also known as a FICO score, is a calculation of your financial background. The Fair Isaac Corporation started implementing credit scores in 1989. 

Prior to the invention of credit scores, people interested in borrowing money from a financial institution had to present themselves in a particular way to impress lenders. Individuals dressed in business attire stood a better chance of getting approved for a loan simply because they appeared professional. If you appeared before a lender wearing worn-out jeans and sneakers, a bank agent may have denied funding simply for looking like a blue-collar worker. 

Loan approval was entirely biased before the use of credit scores. These days, your credit score depends on your credit history and not on your zip code. It is also more accessible than ever to apply for the money you need online. Thanks to the credit scoring model, the approval process is quicker and more straightforward. 

10 Credit Score Facts To Know

Your credit plays a pivotal role in life. It’s sound financial advice to take the time to understand more about credit scores, credit scoring models, and how a credit report works. Here are 10 facts about credit scores you should know!

Fact One: Credit Scores Do Not Start at Zero

Before you apply for credit and start accumulating points, your FICO score does not exist. No one starts off with the same base score. Once you obtain a credit line, your financial choices will determine how high or low your credit score is on your credit report. 

You may expect your first credit report as soon as your first credit card bill arrives in the mail, but you may not get it for months! Credit accounts typically require three to six months of activity to calculate a FICO score. Your wait time largely depends on your lender. 

Credit bureaus do not require financial institutions to report your financial activity, but many lenders do so. Most lenders wait until the end of the first billing cycle to report your financial activity to at least one of the three credit bureaus. 

Fact Two: Credit Scores Depend on Five Factors

To calculate a credit score, the three credit reporting bureaus use five distinct categories. Learn about these categories below: 

Payment History

Your payment history accounts for 35% of your credit score calculation. This is the most significant scoring factor. Luckily, your payment history is also the easiest to affect. If you want a good credit score, focus on paying your monthly debts on time. When borrowers miss payments, lenders charge a late fee, and their FICO scores decrease by a few points.  

Total Debt

The total debt you have accounts for 30% of your overall FICO score. Financial experts advise borrowers to keep their debt low to maintain a good credit score. Your debt should not exceed 30% of your total available credit. For example, if you have a $15,000 credit limit across three credit cards, you should not owe more than $4,500 at any one time. 

If you have maxed out the credit limit of one credit card, you don’t have to worry about a low credit score as long as you don’t borrow more than 30% of your available credit. Having too much debt lowers your score and makes you appear financially irresponsible to creditors and major credit reporting agencies. 

Length of Credit History

The age of your credit accounts affects your credit score by 15%. The longer you leave your accounts open, the better. The average age of all your credit accounts determines your credit score. If you have a credit account you do not use, you may have thought about closing it. You can close credit card accounts, and your credit will not be negatively affected. 

New Credit Inquiries 

The number of financial inquiries you make accounts for 10% of your credit score calculation. To avoid dips in your credit score, you should not make more than six inquiries annually. If you need money, shop around for lenders that offer free preapproval estimates or loans with no credit check. Some lenders require soft credit checks when you initially inquire to inspect your credit score and credit history. A soft credit check will not affect your credit score, but a hard credit check will. 

Credit Mix 

The type of financial accounts you have is significant. Your credit mix accounts for 10% of your total credit score. Managing different types of accounts, such as installment credit and revolving credit, can help boost your credit score. 

  • Installment Credit — An installment credit is a loan that is repaid in monthly installments. For example, personal loans, auto loans, student loans, etc. 
  • Revolving Credit — Creditors can renew revolving credit once the debt is repaid by the borrower. For example, credit cards, personal lines of credit, and home equity lines of credit.

Fact Three: There Are Five Score Ranges

Five credit score ranges indicate how reliable you are as a borrower. Generally, most lenders prefer good credit scores, which is anything above 670. Anyone with a credit score below 670 may have difficulty qualifying for new credit and low-interest rates. However, specific loan options are for borrowers with bad credit scores, such as personal loans.    

These are the five credit score ranges:

  • Poor — 300-579
  • Fair — 580-669
  • Good — 670-739
  • Very Good — 740-799
  • Excellent — 800-850

Fact Four: You Can Check Your Credit Score for Free

Thanks to the Fair Credit Reporting Act, you can get a credit score report for free online! Everyone is entitled to one free credit report annually from each of the three credit bureaus. This means you can get a free report from Equifax, Experian, and TransUnion. 

If you request one credit report from each credit bureau every four months, you can stay up to date on your credit score. Most credit card companies offer free credit scores, such as Discover, Chase, and Bank of America, to name a few. You can easily adjust your financial habits and actively make sound economic decisions with a free credit score. 

Fact Five: Checking Your Credit Score Won’t Affect Your Score

You can look at your FICO score as much as you want without negatively affecting it. This type of personal inquiry is known as a soft credit check. Soft credit checks do not appear on your credit report and do not lower your current score. 

Fact Six: Parking Tickets Do Not Affect Credit Scores

There are a lot of bills that affect credit, such as phone bills, utility bills, and even rent payments. One type of bill that does not have adverse consequences on your credit history is parking tickets. The reason is that public record information is kept from credit reports.      

However, if parking tickets go unpaid, they may be sent to a collection agency. When this occurs, your credit score is affected through credit scoring models. When a collection amount is thirty days past due, it remains on your credit report for seven years. An unpaid collection bill ties into your payment history, which directly impacts your credit score by 35%. The damaging effects to your credit depend on the amount of money you owe and the credit scoring model used. 

It’s best to pay off any outstanding parking tickets quickly to avoid long-lasting impacts on your credit history. If you need money to pay bills, consider applying for installment loans with instant approval. 

Fact Seven: Your Credit Report Can Have Mistakes

You should always take advantage of your free annual credit report from the three credit bureaus. Once you obtain your three credit reports, go over them carefully and ensure there is no incorrect information. Verify that your personal information is correct and that there are no unknown accounts listed and no incorrect balances. 

If you notice a mistake on your credit report, it’s important to dispute the error. There are two ways to dispute an error, you can either contact the credit bureau agency or the furnisher. 

Contact the Credit Bureau Agency

To dispute a claim with one or more of the three credit bureaus, you will need to submit a dispute letter by mail or online. Dispute forms can be found on the credit bureaus website. Your letter should contain:

  • A detailed description of the mistake
  • Copies of supportive documents
  • Your personal information
  • A request to remove or correct the error

You may also ask for a return receipt. That way, you get confirmation that your letter was received. 

Contact the Information Furnisher

An information furnisher is an individual or company that reported information to the credit bureaus. For example, your landlord may have accidentally reported a missed payment. To dispute information provided by an information furnisher, you can send a dispute letter. This letter should contain the same information listed above. To confirm the correction of the credit report error, you can contact the credit reporting agency directly.   

Fact Eight: A Perfect Credit Score Is Possible

A perfect credit score is 850 points, the highest possible score a borrower can achieve. Achieving such a high score is possible but may not be necessary. The national average for a credit score is 711. Most financial institutions prefer to work with borrowers with a good credit rating above 670. If your score is lower, you may be denied credit or offered subpar loan terms, such as high-interest rates. 

Having FICO scores higher than the national average can result in financial benefits. Having exceptional credit can help you get lower interest rates, extended repayment lengths, and higher loan amounts. Your credit directly affects your financial opportunities, so it’s always a good idea to strive for a higher score. 

If your current credit score hurts to look at, don’t stress too much! You can quickly improve a bad credit score by changing your financial habits and making conscious spending decisions. The best way to slowly improve your credit over time is to avoid missed payments. If you already do that, you can start improving your debt to credit ratio. When you avoid maxing out your overall credit limit, your credit report will demonstrate your financial competence. 

Fact Nine: Applying for Too Many Loans Is Bad 

You may not impact your credit score when you inquire about new credit. However, applying for too many loans or credit lines can damage FICO scores. When you start building a financial history, you may feel inclined to apply for as many credit lines as you can. But if you submit more than six applications for loans in a given year, your Fair Isaac score will suffer. 

Fact 10: Negative Information Is Not Permanent

Credit reports with negative information may lower your credit, but there is a silver lining. Your past financial mistakes will one day disappear from your credit reports! Take a look at how long information typically stays on credit histories. 

  • Missed Payments — Up to seven years from the delinquency date
  • Foreclosures — Up to seven years from the delinquency date
  • Bankruptcy — Seven to ten years depending on the chapter of bankruptcy filed
  • Collections — Up to seven years from the delinquency date
  • Repossessions — Up to seven years from the delinquency date
  • Hard Credit Checks — Up to two years from inquiry date


History of FICO 
How Long After Getting My First Credit Account Will a Score Be Created?
Does Your Credit Score Start at Zero?
How do I dispute an error on my credit report?
How Long Does Information Stay on My Equifax Credit Report?

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