Credit is rated by running your credit history through a scoring model that weighs five categories of behavior and produces a three-digit number between 300 and 850. The two dominant models, FICO and VantageScore, pull from the same credit bureau data but weigh it differently, which is why the score a credit card app shows you can differ from the one a mortgage lender pulls. Payment history matters most in both systems, and lenders group the resulting numbers into tiers that drive approval odds and interest rates.
Where the Data Comes From
The rating starts with the three nationwide credit bureaus: Equifax, Experian, and TransUnion.1Consumer Financial Protection Bureau. List of Consumer Reporting Companies The bureaus don’t build the scores themselves. They collect information reported by banks, card issuers, mortgage servicers, and other lenders, then sell that data to scoring companies and to any lender who wants to underwrite you. Most creditors update your account status about once a month, usually on your statement closing date, so a payment made yesterday may not appear on your report for a few weeks.
What the bureaus store: account balances, credit limits, payment history, account opening dates, and bankruptcies pulled from public court records. Tax liens and civil judgments used to appear on credit reports but were removed between 2017 and 2018 under the National Consumer Assistance Plan, leaving bankruptcy as the only public record item on a standard report.2Consumer Financial Protection Bureau. A New Retrospective on the Removal of Public Records
The Fair Credit Reporting Act governs the whole system. Bureaus have to follow reasonable procedures for accuracy, investigate disputes, and correct or delete information that turns out to be wrong or unverifiable.3Office of the Law Revision Counsel. 15 USC 1681i – Procedure in Case of Disputed Accuracy Willful violations can expose them to actual or statutory damages between $100 and $1,000, plus punitive damages and attorney fees.4Office of the Law Revision Counsel. 15 USC 1681n – Civil Liability for Willful Noncompliance
The Five Factors That Determine Your Score
FICO, the most widely used model, breaks your file into five weighted categories. The weights aren’t a secret, and knowing them explains most of what moves a score up or down.5myFICO. How Are FICO Scores Calculated
- Payment history — 35%. Whether you pay on time is the single biggest driver. A payment reported 30 days late hurts your score, and the damage escalates at 60, 90, and 120 days past due. After about 120 days, the account is often charged off and sent to collections, creating a second negative entry.
- Amounts owed — 30%. This is mostly about credit utilization: the percentage of your available revolving credit you’re using. A $3,000 balance on a $10,000 limit is 30% utilization. Lower is better. Under 30% is a common benchmark, but people with the highest scores tend to sit well below 10%. The model looks at both individual card utilization and your total across all revolving accounts.
- Length of credit history — 15%. The model considers the age of your oldest account, your newest account, and the average age across everything. Closing an old card can shorten your average, which is why keeping old accounts open often matters even when you rarely use them.
- New credit — 10%. Each time you apply for a loan or card, the lender pulls your report, creating a hard inquiry. Inquiries stay on the report for two years, though FICO only factors in inquiries from the past 12 months. When you rate-shop for a mortgage, auto loan, or student loan, multiple inquiries within a 45-day window count as one.
- Credit mix — 10%. Experience with different types of credit, like a card, an auto loan, and a mortgage, gives a modest boost. This is the smallest factor, and opening accounts you don’t need just to diversify isn’t worth the trade-off in inquiries and a shorter average account age.
VantageScore uses similar categories but doesn’t publish exact percentages. It calls payment history “extremely influential,” utilization and balances “highly influential,” and credit age, mix, and recent inquiries progressively less important. The practical guidance is the same either way: pay on time, keep balances low, and don’t open accounts impulsively.
FICO vs. VantageScore
Both models produce a score on the 300-to-850 scale, but they diverge in ways that matter.6myFICO. Credit Scores
The biggest gap is who can get scored at all. FICO requires at least one account open for six months or longer and at least one account reported to a bureau within the past six months.7myFICO. What Are the Minimum Requirements for a FICO Score VantageScore has no minimum account age and no recent-activity requirement; a single account, a bankruptcy filing, or a collection is enough to generate a number. That makes VantageScore far more accessible for people new to credit or returning to it after a long gap.
The models also treat paid collections differently. VantageScore 4.0 ignores paid collections entirely. Classic FICO models may also ignore paid collections, and they disregard collection accounts with an original balance under $100. Older FICO versions, which many lenders still use, are less forgiving.
Medical debt has been getting special treatment, though the ground keeps shifting. The three bureaus voluntarily agreed in 2022 to stop reporting paid medical debt, to exclude unpaid medical debt under $500, and to wait at least a year before adding any medical collection. The CFPB finalized a rule in late 2024 that would have banned medical debt from credit reports outright, but a federal court vacated that rule in July 2025, finding it exceeded the agency’s authority under the FCRA.8Consumer Financial Protection Bureau. CFPB Finalizes Rule to Remove Medical Bills from Credit Reports The bureaus’ voluntary protections still apply, but they aren’t locked in by federal law.
There isn’t just one FICO score either. FICO 8 is the most widely used version across the lending industry.9myFICO. Learn About FICO Score Versions and Their Uses Mortgage lenders have historically used much older versions (FICO 2, 4, and 5), which is why the free score from your card issuer often doesn’t match what a mortgage lender pulls. The Federal Housing Finance Agency approved FICO 10T and VantageScore 4.0 for use by Fannie Mae and Freddie Mac in October 2022, and the transition to those newer models for mortgage lending has been underway.10U.S. Federal Housing Finance Agency. Credit Scores
What Trended Data Changes
Traditional models rate you on a snapshot. FICO 10T and VantageScore 4.0 add trended data, analyzing up to 24 months of monthly balances, payment amounts, and credit line changes. Instead of just seeing a $3,000 balance today, the newer models can tell whether that balance has been shrinking or growing. Two borrowers with identical balances on scoring day can end up with different scores because one is paying down and the other is drifting toward the limit. The newer models can also incorporate alternative data like rent payments, which helps people with thin traditional files.10U.S. Federal Housing Finance Agency. Credit Scores
What the Score Ranges Mean
Lenders group the 300-to-850 range into tiers that shape approval odds and pricing:6myFICO. Credit Scores
- Poor, below 580. Well below the national average. Most conventional lenders decline applications in this range or require substantial collateral and high rates.
- Fair, 580 to 669. Below average but not disqualifying. Approval is possible for many products, but expect above-average interest rates.
- Good, 670 to 739. Near or slightly above the national average. Most lenders see this as an acceptable risk and offer competitive terms.
- Very Good, 740 to 799. Above average. Borrowers here consistently qualify for favorable rates and higher limits.
- Exceptional, 800 to 850. Top tier. In practice, borrowers above roughly 760 often qualify for the same best-available rates, so the difference between 800 and 850 is mostly bragging rights.11FICO. The Perfect Credit Score – Understanding the 850 FICO Score
Industry-specific FICO scores for auto lending and credit cards use a slightly wider 250-to-900 scale, but the same tier logic applies.
The tiers translate into real money. As of early 2026, the spread between a 620 FICO and a 760 FICO on a 30-year conventional mortgage was roughly 0.85 percentage points. On a $300,000 loan, that gap adds up to tens of thousands of dollars in additional interest over the life of the loan. Even a 40-point improvement can move you into a lower rate bracket.
Credit ratings reach beyond lending. In most states, auto and homeowners insurers use a credit-based insurance score, drawn from the same bureau data but not identical to FICO or VantageScore, when setting premiums. California, Hawaii, Maryland, and Massachusetts restrict or prohibit the practice.12National Association of Insurance Commissioners. Credit-Based Insurance Scores Aren’t the Same as a Credit Score Landlords, utility providers, and some employers also pull credit reports. Employers must get your written permission first and see a modified report without your score.13Federal Trade Commission. Background Checks on Prospective Employees – Keep Required Disclosures Simple
How Long Negative Marks Stay
Federal law caps how long negative items can appear on your report.14Office of the Law Revision Counsel. 15 US Code 1681c – Requirements Relating to Information Contained in Consumer Reports
- Late payments, collections, and charge-offs: seven years from the date of the first missed payment that led to the delinquency.
- Foreclosures: seven years.
- Chapter 13 bankruptcy: seven years from the filing date.
- Chapter 7 bankruptcy: ten years from the filing date.
- Hard inquiries: two years, though their scoring impact fades after about 12 months.
These are maximums. Bureaus can remove items sooner and voluntarily do for some categories like paid medical debt. Once the clock runs out, the mark should drop off automatically; if it doesn’t, that’s grounds to dispute it.
Checking Your Own Rating
You’re entitled to one free credit report per year from each of the three bureaus through AnnualCreditReport.com, and the bureaus have permanently extended a pandemic-era program that lets you pull each report once a week at no charge.15Federal Trade Commission. You Now Have Permanent Access to Free Weekly Credit Reports Those reports show your full history but usually don’t include a score. Many banks and card issuers now provide a free FICO or VantageScore as a cardholder benefit, which gives you a reasonable read on where you stand even though it may not be the exact version a particular lender will pull.