A credit score is a three-digit number that tells lenders how likely you are to pay back what you borrow. It affects whether you are approved for a credit card, the interest rate on a car loan or mortgage, and sometimes whether a landlord will rent to you. A difference of a few dozen points can change the cost of a 30-year mortgage by thousands of dollars.

The good news is that scores are not mysterious. The most widely used model, the FICO score, is built from five categories, and the company publishes how much each one counts.

Where your score comes from

Your score is calculated from your credit reports, the records of your accounts kept by the three nationwide credit bureaus: Equifax, Experian and TransUnion. Each bureau may hold slightly different information, which is why you can have slightly different scores at each one. Most FICO scores range from 300 to 850, and higher is better.

The five factors

According to FICO, its scores are weighted roughly like this for the general population:

  1. Payment history: 35%. Whether you pay on time. A payment that is 30 or more days late can be reported and can lower your score significantly, and it can stay on your report for up to seven years.
  2. Amounts owed: 30%. Especially how much of your available revolving credit you are using, known as credit utilization. Owing $4,500 on cards with a combined $5,000 limit looks much riskier than owing the same amount against a $20,000 limit.
  3. Length of credit history: 15%. How long your accounts have been open, including your oldest account and the average age of all of them.
  4. New credit: 10%. How many accounts you have opened recently and how many hard inquiries, which happen when you apply for credit.
  5. Credit mix: 10%. Whether you handle different kinds of credit, such as cards, an auto loan or a mortgage.

Two of those five, paying on time and keeping balances low, make up nearly two-thirds of the score. That is where your effort pays off most.

Practical ways to raise your score

  • Automate at least the minimum payment on every card and loan, so a busy month never turns into a late payment.
  • Pay card balances down before the statement closing date. Many issuers report the balance on your statement to the bureaus, so paying earlier lowers the utilization lenders see.
  • Keep utilization low. There is no magic number, but lower is better, and people with the highest scores tend to use only a small fraction of their limits.
  • Think twice before closing your oldest card. Closing it can shorten your history and reduce your available credit, which raises utilization.
  • Space out applications. Several hard inquiries in a short time can cost points. Rate shopping for a single mortgage or auto loan within a short window is usually treated as one inquiry.

Myths that cost people points

  • “Checking my score hurts it.” It doesn’t. Checking your own score or report is a soft inquiry and has no effect.
  • “I need to carry a balance to build credit.” You don’t. Paying your statement in full every month avoids interest and still builds history.
  • “Income affects my score.” It doesn’t. Lenders may ask about income, but it is not part of your credit report.
  • “Paying off a collection removes it.” Not automatically. A paid collection can still appear on your report, though newer scoring models may treat paid collections more favorably.

Check your reports for free

Federal law gives you free credit reports, and the bureaus now let you check them every week at AnnualCreditReport.com, the official site. Look for accounts you don’t recognize, late payments you believe are wrong and incorrect personal details. If you find an error, you can dispute it directly with the bureau that reports it, and it must investigate.

You can also freeze your credit at each bureau for free. A freeze stops new lenders from pulling your report, which blocks most identity thieves from opening accounts in your name. You can lift it temporarily when you apply for credit yourself.

What we think

Credit scores reward boring, consistent habits. Pay every bill on time, keep balances low compared with your limits and let your accounts age. Those three things matter far more than any trick you will see promoted online.

The step most people skip is checking their reports. Mistakes are common, disputing them is free and a single wrong late payment can cost more points than months of careful behavior earn. Put a reminder in your calendar to check all three reports a few times a year.