10 facts about credit scores you need to know

credit score facts

Credit score facts you need to know include knowing that consumers do not start with a 0 credit score, your payment history is the most crucial factor that affects your score, and more. This article discusses 10 facts about credit scores to help you build good credit. If you are one of the 26 million Americans with no credit score, rest easy knowing you can learn how to build a credit history from scratch!1 

What Are Credit Scores?

Credit scores, or FICO scores, are three-digit calculations of your financial background. The Fair Isaac Corporation started implementing credit scores in 1989. 

Before 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. Loan approval was entirely biased before the use of credit scores. These days, credit scores depend 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 Facts About Credit Scores You Should Know

Your credit plays a pivotal role in life. Understanding your credit score is critical, but it’s also important to know how credit scoring models and credit reports work. Here are 10 facts about credit scores you should know!

Fact 1: 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 score is on your credit report. 

You may expect your first credit report as soon as your first credit card bill arrives, but you may not get it for months! Credit accounts typically require 3 to 6 months of activity to update credit reports and calculate a FICO score. Your wait time largely depends on your lender. 

Fact 2: Credit Scores Depend on Five Factors

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

Payment History

Your history of payments accounts for 35% of your credit calculation. If you want a good credit score, avoid late payments. When borrowers have late payments, lenders charge a late fee, and their FICO scores decrease by a few points. Bad credit scores affect borrowing by costing you more money when you take out a loan. 

Total Debt

The total debt you have accounts for 30% of your overall FICO score. Financial experts advise borrowers to keep their outstanding 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 of that credit limit at any one time. 

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 pre-approval estimates or no credit check loans

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. 

Fact 3: 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:

RatingScore RangeDescription
Poor300-579Indicates a high risk to lenders and may result in being denied credit or subject to high interest rates.
Fair580-669Considered below average by many lenders, borrowers may face higher interest rates.
Good670-739Reflects responsible credit management, and most lenders consider this an acceptable score.
Very Good740-799Above the average score of U.S. consumers and suggests better interest rates and terms may be offered.
Excellent800-850Demonstrates an exceptional credit history and typically qualifies for the best interest rates and terms.

Fact 4: You Can Check Your Credit for Free

Thanks to the Fair Credit Reporting Act, you can get credit reports for free online! Everyone is entitled to one free credit report annually from each of the main credit bureaus. 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 5: Checking Your Credit 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 6: 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 is affected through credit scoring models. 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 7: 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 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: 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 must submit a dispute letter by mail or online. Dispute forms can be found on the credit bureau’s 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 reports 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 8: A Perfect 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 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 FICO score is low, 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 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 9: 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 possible. But if you submit more than six loan applications 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

FAQs About Credit Scores

What are some common myths about credit scores I should be aware of?

There are plenty of misconceptions floating around. For instance, some people think checking their credit hurts it—that’s a myth! It’s a soft inquiry and doesn’t affect your score. Another myth is that you only have one credit score. In reality, you have multiple credit scores, as different credit bureaus may have different information on you.

How do the three major credit reporting bureaus affect my credit score?

The three major credit bureaus—Equifax, Experian, and TransUnion—collect and maintain credit information about you. Each bureau may have slightly different data, resulting in multiple credit scores. It’s a good idea to check your credit reports from all three to ensure accuracy.

Why is my credit utilization ratio important, and how does it affect my credit score?

Your credit utilization ratio is a key factor in your credit score. It reflects the amount of credit you use compared to your total available credit. Keeping this ratio below 30% is generally advised, as a higher credit utilization rate can indicate to lenders that you’re a higher-risk borrower.

If I pay off my credit card balances each month, how does that impact my credit score?

Paying off your credit card balances in full each month is excellent for your credit score. It shows lenders that you’re responsible with credit and can manage your debts effectively. Plus, it keeps your credit utilization ratio low.

How often should I check my Equifax credit report?

You’re entitled to one free Equifax credit report, along with your reports from the other two major credit bureaus, once every 12 months through It’s wise to take advantage of this to spot any errors or fraudulent activity early on.

Does my credit score reflect my entire financial history?

Your credit score reflects the information in your credit report, which typically includes your credit activity for the past 7-10 years. It doesn’t show your entire financial history but gives lenders a recent snapshot of your creditworthiness.

The Bottom Line on Credit Scores From CreditNinja 

Your credit score directly affects your finances. High scores can help you get lower interest rates, better rental options, higher credit limits, and more. But bad credit can cost you a lot. The good news is that CreditNinja offers numerous financial articles on personal finance improvement! 

Check out the CreditNinja Dojo for additional information on credit scores, such as knowing which credit report you should request first, how to improve your creditworthiness, and more!


  1. 26 Million American Adults Have No Credit History │ DS News
  2. History of FICO │ FICO
  3. How Long After Getting My First Credit Account Will a Score Be Created? │ Experian
  4. Does Your Credit Score Start at Zero? │ Experian
  5. How do I dispute an error on my credit report? │ Consumer Finance
  6. How Long Does Information Stay on My Equifax Credit Report? │ Equifax
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