Personal Finance 101: Credit Scores (2023)

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What Is a Credit Score?

• A credit score is a number that represents a borrower’s creditworthiness.
• The score is calculated by credit bureaus that track consumers’ borrowing and payment patterns.
• With good credit management, you can improve your credit score over time.

Your credit score is a three-digit number that represents the likelihood you will pay what you owe on a loan or a bill. Lenders, insurers, and others consider your score as a measure of credit risk to help decide whether to extend credit to you and, if so, what terms to offer.

While there is more than one credit score system in existence, the most widely used is the one developed by data analytics company Fair Isaac Corp. It’s called the FICO score.

FICO scores range from 300 to 850, with the average score in the U.S. in 2020 standing at 711. That range is not formally divided into separate classifications, but as a guideline:

• 300-579 is considered poor
• 580-669 is below average
• 670-739 is the average range
• 740-799 is very good
• 800-850 is exceptional

(Video) How to get a credit score over 800!! | Personal Finance 101

Components of a Credit Score

Several pieces of information about your current debt obligations and credit history factor into your credit scores. These five elements are:

35%: Your payment history—whether you’ve consistently made timely payments on your debts
30%: The amounts you owe on your accounts
15%: The length of your credit history
10%: The number of accounts you’ve attempted to open in the past 12 months
10%: The number and types of accounts you hold

When Do Credit Scores Matter?

Your credit scores can come into play in several situations, chief among them being applications for credit. When you apply for a credit card, a mortgage, or an auto loan, the prospective lender will evaluate your credit score and other factors to determine whether to grant your request and, if so, what terms to set.

If the lender decides your credit scores are too low, you may be:
• Denied the line of credit.
• Approved for a lower amount.
• Approved for a “subprime” loan that comes with a higher interest rate.
• Asked to find someone with better credit who will be jointly responsible for your loan or credit card bill.

Conversely, a higher credit score will generally lower your costs to borrow. Here’s an example:
• On a $216,000 30-year, fixed-rate mortgage, a person with a credit score of 760 can expect to pay about $2,400 less per year than a person with a credit score of 620, according to That’s tens of thousands of dollars in savings over the life of the mortgage.

Your credit score also may affect other payment contracts. Some landlords (but not all) look at credit scores before signing leases with tenants. Car insurance companies may set your rates based partly on your score. And utilities may require you to get a letter of guarantee from someone with stronger credit before doing business with you.

(Video) Credit Score 101 | Personal Finance Crash Course

What is UltraFICO?

A new version of the score, called “UltraFICO,” was rolled out in 2019. It is designed to give consumers with a lower credit rating a boost to their score based on “indicators of responsible financial behavior.” UltraFICO differs in that it takes into account how consumers save money. It is currently an opt-in program that is separate from the traditional FICO score and is not offered to those who already have good credit ratings.

Here are some UltraFICO factors that could boost your score:
Save Your Cash. For the first time, having a consistent amount in your checking and savings accounts can help you get a better credit score. Having at least $400 in savings and no negative balances for three months will now improve your score.
Keep Your Bank. Maintaining a long-term bank account can help show companies a degree of financial stability.
Pay Your Bills on Time. Although paying a bill a few days late might not adversely impact your credit score, paying on time will now definitely help boost it.
Avoid Negative Balances. If you don’t overdraw your bank account, you will be demonstrating that you are responsible and able to handle the benefits of having more credit offers.

Having more credit than you are using is also a good idea—as is keeping open your oldest credit card and not opening too many credit accounts in a short period of time. If you see a boost in your credit score due to UltraFICO, remember that your score could also change quickly if you immediately use your new score to get a new credit account and max it out.

So while the new score may help you boost your score quickly, it also keeps closer tabs on your behavior. And while you will receive more credit for being responsible, the downsides are also just as real.

How to Understand Your Credit Report

Your credit score is based on, but distinct from, your credit report. In the United States, there are three main credit bureaus: Equifax, Experian, and TransUnion. Each one independently gathers data on your debts and credit history and publishes a separate credit report, but they all include the same basic categories of information:

Identifying information, such as your name, address, and date of birth—none of which counts toward your score.
Lines of credit. Loans and credit cards will be listed, along with the date you opened each account, its balance, and your payment history.
Public records, such as bankruptcies, civil lawsuits, and debts reported by collection agencies.
Credit inquiries. Every time you apply for a line of credit, the lender will make a “hard inquiry” into your credit history, which will show up on your credit report. However, a “soft inquiry”—which includes instances when you check your own credit or when a lender checks your credit to pre-approve you for an offer—will not.

(Video) personal finance 101, personal finance basics, and fundamentals

Though it seems comprehensive, not every type of information about your life shows up on your credit report. For instance, credit reports don’t include gender, race, religion, and political affiliations, nor do they report certain financial data such as income, rent payments, late utility payments, and medical debts less than six months old. As a result, none of these items figure into your credit score.

You Can Have More Than One Credit Score

It’s not uncommon for your credit report from one bureau to include information that another bureau missed. For instance, the FICO score based on your Equifax credit report might differ from the FICO score based on your Experian or TransUnion report.

In addition, each of the three credit-reporting agencies has developed its own proprietary algorithm for calculating a credit score, typically in a range similar to FICO’s. Recently, the three agencies collaborated on the development of the VantageScore. It divides your credit report into six categories of information instead of five and weighs the categories differently. For example, both FICO and VantageScore give the most weight to your payment history, but VantageScore puts more emphasis on the age and type of credit—and less emphasis on how much you owe—than FICO does.

New versions of the scores are also being rolled out. Credit novices and those with less-than-stellar credit, for example, now have two new tools: UltraFICO and Experian Boost. Both reward good financial habits that go unrecognized by current credit scoring models, but they require disclosing data on banking habits.

How to Access Your Credit Score

By federal law, everyone can access a free credit report and score from each credit bureau once a year through Many major banks also make it easy to view your credit score. There are also several nonbank sources for free credit scores; these sites are more likely to show you a VantageScore than a FICO score.

You may find that an insufficient credit history means you have no credit score. Though having no score can hamper your attempts to open lines of credit, it is not the same as having “bad credit.” You simply need to build your credit history to generate a score.

(Video) Personal Finance Basics: How to Raise Your Credit Score

How to Improve Your Credit Score

Many items stay on your credit report for a period of time even after they’re resolved. So, improving your credit score takes time. Here are five ways to do it:

Make payments on time. One of the most straightforward ways to improve your payment history is to make regular, on-time payments on your credit accounts and your mortgage, if you have one.Lenders review your credit report because they’re highly interested in if you pay your bills on time and can show them whether you would be reliable.
Reduce your debt. Scaling back on discretionary spending to pay down your debts is a great way to improve your score.
Keep credit card balances low but keep the accounts open. Paying down credit card debts reduces your total debt load and lowers the percentage of available credit you’re using. As a guideline, experts often recommend using 30% or less of available credit, or your credit utilization ratio, to show lenders that you can manage credit responsibly.
Don’t open new accounts you don’t need. Recently opened accounts can put a small dent in your score. If there’s a compelling reason to open a new account, you should. But opening many credit accounts in a short amount of time can be risky, especially for people without a long credit history.Plus, applying for too much credit results in multiple hard inquiries on your credit report from lenders, which can negatively impact your credit rating. On the flip side, keeping unused credit card accounts open can lower your credit utilization ratio, which can help your credit score.
Monitor your credit report and correct errors promptly. Name misspellings, duplicate accounts, and incorrect and outdated payment statuses are just a few of the common mistakes that 1 in 5 consumers finds anddisputes on their credit reports. Correcting these types of errors can lead to favorable credit-score changes.

Personal Finance 101: Credit Scores (1)

This chart is titled "A Breakdown of Your FICO Score". Payment history: 35%. Amounts owed: 30%. Length of credit history: 15%. New credit: 10%. Credit mix: 10%. Source: “How are my FICO scores calculated?,”

Param Anand Singh writes about money, investing, art, and culture from his home in Henderson, New York.

Many things affect a credit score but practicing good budgeting habits can help you build or improve yours. Learn more about budgeting basics.

(Video) Credit Scores and Reports 101 (Credit Card and Loan Basics 2/3)

This article is part of Synchrony Bank’s Personal Finance Series: Level 101. View all topics in the series here.


What is credit score in personal finance? ›

A credit score is usually a three-digit number that lenders use to help them decide whether you get a mortgage, a credit card or some other line of credit, and the interest rate you are charged for this credit. The score is a picture of you as a credit risk to the lender at the time of your application.

What is a good FICO score for a personal loan? ›

It's possible to get a personal loan with a lower credit score, but a FICO® Score that falls in the good range (670-739) or higher will give you access to a broader array of lenders and better interest rates.

What credit score is required for synchrony bank? ›

Most credit cards offered by Synchrony Bank are designed for people with fair (640 – 699), good (700 – 749) or excellent (750 – 850) credit.

How to get 800 credit score in 45 days? ›

How to get 800 credit score in 45 days?
  1. Check your credit report. ...
  2. Pay your bills on time. ...
  3. Pay off any collections. ...
  4. Get caught up on past-due bills. ...
  5. Keep balances low on your credit cards. ...
  6. Pay off debt rather than continually transferring it.

What is the lowest credit score? ›

What is a FICO Score?
  • Very poor: 300 to 579.
  • Fair: 580 to 669.
  • Good: 670 to 739.
  • Very good: 740 to 799.
  • Excellent: 800 to 850.

Will I get finance with a poor credit score? ›

Yes you can get car finance with bad credit. Having bad credit doesn't mean you can't borrow money to buy the vehicle you need for finance, but it may mean some lenders won't approve you.

What is the lowest credit score for personal loan? ›

Generally, borrowers need a credit score of at least 610 to 640 to even qualify for a personal loan. To qualify for a lender's lowest interest rate, borrowers typically need a score of at least 690.

What does your credit score have to be to get a 10000 dollar loan? ›

To get approved for a $10,000 personal loan, you'll typically need a credit score of 620 or higher — though keep in mind that some lenders are willing to work with borrowers who have scores lower than this.

How much credit do you need for a 20k loan? ›

You will likely need a credit score of 660 or higher for a $20,000 personal loan. Most lenders that offer personal loans of $20,000 or more require fair credit or better for approval, along with enough income to afford the monthly payments.

What is the easiest Synchrony card to get? ›

Easy Credit Cards To Get (Low or No Credit)

We recommend the The OpenSky® Secured Visa® Credit Card which doesn't require a credit check and is a solid option for those looking to boost their credit score. By boosting your score, you'll have a much stronger chance of applying for more premium (and rewarding) cards.

What credit score do you need for Marshalls card? ›

What credit score is needed for a Marshalls Credit Card? You'll need a credit score of 620 or above to qualify for a TJX Rewards credit card.

What kind of credit score do you need for PayPal credit? ›

Alternative Credit Card Option

The PayPal Cashback Credit Card requires at least good credit (a credit score of 700+) to get approved.

Can you get a 900 credit score? ›

Depending on the type of scoring model, a 900 credit score is possible. While the most common FICO and VantageScore models only go up to 850, the FICO Auto Score and FICO Bankcard Score models range from 250 to 900.

What raises credit score? ›

Factors that contribute to a higher credit score include a history of on-time payments, low balances on your credit cards, a mix of different credit card and loan accounts, older credit accounts, and minimal inquiries for new credit.

How accurate is credit karma? ›

Here's the short answer: The credit scores and reports you see on Credit Karma come directly from TransUnion and Equifax, two of the three major consumer credit bureaus. The credit scores and reports you see on Credit Karma should accurately reflect your credit information as reported by those bureaus.

How fast will your credit score go up? ›

The length of time it will take to improve your credit scores depends on your unique financial situation, but you may see a change as soon as 30 to 45 days after you have taken steps to positively impact your credit reports.

What is the highest poor credit score? ›

In the FICO scoring model, scores range from 300 to 850. This number represents the likelihood that a borrower will repay a loan.
Here's how the FICO credit scoring system ranks credit scores:
  • Poor: 300-579.
  • Fair: 580-669.
  • Good: 670-739.
  • Very Good: 740-799.
  • Exceptional: 800-850.
Aug 16, 2022

What is the fastest way to boost credit score? ›

4 tips to boost your credit score fast
  1. Pay down your revolving credit balances. If you have the funds to pay more than your minimum payment each month, you should do so. ...
  2. Increase your credit limit. ...
  3. Check your credit report for errors. ...
  4. Ask to have negative entries that are paid off removed from your credit report.

Can I get a car with 500 credit score with no money down? ›

Yes, a 500 credit score will still qualify you for a car loan. However, credit scores affect the types of loans you are eligible for, as well as interest rates, loan amounts, and more. If you have a credit score that needs improving, it won't stop you from getting a car loan, only the terms.

What 3 things can cause a low credit score? ›

Common causes of a bad credit rating include failing to stick to your credit agreement, paying the bare minimum on your credit card each month, and falling victim to identity theft.

Can you get finance with 500 credit score? ›

There is no minimum Credit Score for securing a loan of any kind, including Car Finance. A score as low as 200 will impact the charges and interest (APR) you'll be offered on you loan, however.

What is the easiest loan to get approved for? ›

The easiest loans to get approved for are payday loans, car title loans, pawnshop loans and personal loans with no credit check. These types of loans offer quick funding and have minimal requirements, so they're available to people with bad credit.

Can you get a $5,000 loan with bad credit? ›

You can apply for unsecured loans up to $5000 even if you have bad credit. You'll need to prove affordability and meet the eligibility requirements.

Can I get a bank loan with a 550 credit score? ›

Though it may be more challenging to find a lender that's willing to work with you, it is indeed possible to obtain a loan with a credit score of 550. Most lenders require a minimum credit score of between 600 and 650, but some lenders specialize in personal loans for those with lower scores.

What credit score do I need for a $9000 loan? ›

You will likely need a credit score of at least 600 for a $9,000 personal loan. Most lenders that offer personal loans of $9,000 or more require fair credit or better for approval, along with enough income to afford the monthly payments.

What's the average payment on a $10000 personal loan? ›

The monthly payment on a $10,000 loan ranges from $137 to $1,005, depending on the APR and how long the loan lasts. For example, if you take out a $10,000 loan for one year with an APR of 36%, your monthly payment will be $1,005.

What credit score do you need to get a $500000 loan? ›

You generally need a credit score of 670 or higher, although 775 and up is better for a $500K loan. To compare top options for good credit borrowers, check out our guide. A personal guarantee.

What is the minimum income for personal loan? ›

You need at least $10,500 in annual income to get a personal loan, in most cases. Minimum income requirements vary by lender, ranging from $10,500 to $100,000+, and a lender will request documents such as W-2 forms, bank statements, or pay stubs to verify that you have enough income or assets to afford the loan.

How much is a $20000 loan for 5 years? ›

A $20,000 loan at 5% for 60 months (5 years) will cost you a total of $22,645.48, whereas the same loan at 3% will cost you $21,562.43. That's a savings of $1,083.05.

How much loan can I get with a 600 credit score? ›

You can borrow anywhere from a few thousand dollars to $100,000+ with a 600 credit score. The exact amount of money you will get depends on other factors besides your credit score, such as your income, your employment status, the type of loan you get, and even the lender.

What store card can I get with a 550 credit score? ›

The best store credit cards for bad credit are the Fingerhut Credit Account and the Montgomery Ward Credit Account. Both of these store credit cards accept applicants with bad credit scores, have $0 annual fees, and report to the major credit bureaus.

What store card can I get with a 580 credit score? ›

Here are some of the easiest department store credit cards to get:
  • Target Credit Card: For people with fair credit. ...
  • Walmart® Store Card: For people with fair credit. ...
  • Kohl's Credit Card: For people with fair credit. ...
  • JCPenney Credit Card: For people with fair credit. ...
  • Fingerhut Credit Account: For people with bad credit.
Nov 28, 2022

Which bank approves credit card easily? ›

1. HDFC Bank instant approval credit card. HDFC Bank credit cards are not only 100% secure, but they also provide instant activation and ownership. here, a potential customer is taken to the end-to-end instant digital application page wherein the issuance happens at a single click.

What is the minimum credit score for a JCPenney card? ›

You'll likely need good credit to qualify for a JCPenney Credit Card account. This means having a score of at least 640 or higher.

What score do you need for Macy's credit card? ›

Most applicants who are approved for a Macy's Credit Card have a FICO® Score of 600 or higher. If you're aiming for the Macy's American Express® Card, you'll likely need a score of at least 670; ideally, your score should be 700 or higher.

What is TJ Maxx credit card credit limit? ›

T.J. Maxx credit cards often have low credit limits, and many cardholders start with a credit limit of $200. There is the possibility of receiving a higher credit limit depending on your creditworthiness.

What credit score is needed for Amazon card? ›

Approval odds

Typically, you can qualify for Synchrony's Amazon store cards with a fair credit score (580 to 669). On the other hand, you'll likely need at least a good credit score (670 to 739) to qualify for one of the Amazon Visa cards from Chase.

What credit score do you need for Affirm? ›

Affirm doesn't specify what credit score you'll need to qualify. Qualification is based on your overall credit history, your history with Affirm, and current economic conditions. Generally, the better your credit, the easier it will be to get approved for a point-of-sale installment loan.

Why was i denied PayPal Credit? ›

Your card is associated with a specific PayPal account, and you're not logging in with that particular account. Your card was associated with a PayPal account that has since been closed. You've linked the card to a PayPal account, but have not yet confirmed it. You've exceeded your card limit with the PayPal system.

Is 977 a good credit score? ›

We provide a score from between 0-999 and consider a 'good' score to be anywhere between 881 and 960, with 'fair' or average between 721 and 880.

How rare is an 800 credit score? ›

Your 800 FICO® Score falls in the range of scores, from 800 to 850, that is categorized as Exceptional. Your FICO® Score is well above the average credit score, and you are likely to receive easy approvals when applying for new credit. 21% of all consumers have FICO® Scores in the Exceptional range.

What credit score is needed to buy a 300k house? ›

A conventional loan requires a credit score of at least 620, but it's ideal to have a score of 740 or above, which could allow you to make a lower down payment, get a more attractive interest rate and save on private mortgage insurance.

What are the 3 things that build your credit score? ›

But here are some things to consider that can help almost anyone boost their credit score:
  • Review your credit reports. ...
  • Pay on time. ...
  • Keep your credit utilization rate low. ...
  • Limit applying for new accounts. ...
  • Keep old accounts open.

How can I raise my credit score 500 points fast? ›

Ways to Start Rebuilding From a Credit Score of 500
  1. Pay Your Bills on Time. Payment history is an important factor in calculating your credit scores. ...
  2. Maintain a Low Credit Utilization Ratio. ...
  3. Consider a Secured Credit Card. ...
  4. Look Into Credit Counseling.
May 16, 2022

What will not raise your credit score? ›

Accounts that are incorrectly listed as having late or delinquent payments. The same debt listed at least twice. Credit limits for accounts that aren't accurately reported.

How far off is Credit Karma from FICO? ›

Your Credit Karma score should be the same or close to your FICO score, which is what any prospective lender will probably check. The range of your credit score (such as "good" or "very good") is more important than the precise number, which will vary by source and edge up or down often.

Why is my FICO score so much higher than Credit Karma? ›

Some lenders report to all three major credit bureaus, but others report to only one or two. Because of this difference in reporting, each of the three credit bureaus may have slightly different credit report information for you and you may see different scores as a result.

Do banks use TransUnion or Equifax? ›

In conclusion. Credit card issuers and lenders may use one or more of the three major credit bureaus—Experian, TransUnion and Equifax—to help determine your eligibility for new credit card accounts, loans and more.

What is a credit score quizlet personal finance? ›

Credit Score. Your credit score is a numerical rating of your credit-worthiness (how likely you are to pay off your debts). In the United States, the most commonly used credit score is the FICO score. Credit score is based on the information in credit reports from the three main credit bureaus. Credit Limit.

Why is credit important in personal finance? ›

Credit is part of your financial power. It helps you to get the things you need now, like a loan for a car or a credit card, based on your promise to pay later. Working to improve your credit helps ensure you'll qualify for loans when you need them.

What is a credit score and why is it important? ›

A credit score is a number from 300 to 850 that rates a consumer's creditworthiness. The higher the score, the better a borrower looks to potential lenders. A credit score is based on credit history: number of open accounts, total levels of debt, repayment history, and other factors.

How is credit score calculated? ›

This is based on the entire amount you owe, the number and types of accounts you have, and the amount of money owed compared to how much credit you have available. High balances and maxed-out credit cards will lower your credit score, but smaller balances may raise it – if you pay on time.

What is a fair credit score look like? ›

Fair credit scores typically range from the upper 500s to the mid-600s, depending on the credit-scoring model. While there's room to improve your scores if they're in this range, you'll likely still be able to get a credit card or loan. But you may not qualify for the best rates or terms available.

What credit score is mainly used? ›

FICO scores are the most widely used credit scores in the U.S. for consumer lending decisions. There are multiple FICO credit scoring models, each of which uses a slightly different algorithm.

What is the highest personal credit score? ›

A perfect score of 850 will give you bragging rights, but any score of 800 or up is considered exceptional and will give you access to the best rates on credit cards, auto loans, and any other loans.


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