What Is a Credit Score and How to Improve It (2025 Guide)

Every financial move you make, from taking out a loan to paying your bills, impacts your credit score. But what is a credit score exactly, and why does it matter? Here's your comprehensive guide to understanding credit scores, and actionable steps on how to improve yours.

Understanding Credit Scores

A credit score is a three-digit number that lenders use to assess how likely you are to repay your debts. Credit scores range from 300, considered very poor, to 850, considered exceptional. These scores are calculated using data from your credit reports and are crucial in many financial situations. They can determine if you're approved for a loan, the interest rates you'll pay, or even if you can rent an apartment.

What Is a Good Credit Score?

Credit scores are generally divided into five categories: poor, fair, good, very good, and exceptional. While the exact credit score ranges can vary slightly between different scoring models, a good credit score is typically considered to be 670 or higher.

How Is Your Credit Score Calculified?

Credit scores are based on several factors:

• Payment history: Do you pay your bills on time?

• Credit utilization: How much of your available credit are you using?

• Length of credit history: How long have you been borrowing money?

• New credit: Have you recently applied for a lot of credit?

• Credit mix: Do you have a mix of different types of credit (credit cards, auto loans, mortgages, etc.)?

How Often Does Your Credit Score Update?

Your credit score can change whenever new information is added to your credit report, which can be daily. Lenders typically report information to the credit bureaus every 30 to 45 days, but the frequency can vary.

How to Check Your Credit Score for Free

There are several ways to check your credit score for free. Many credit card issuers offer this as a benefit to their customers. Additionally, several online services and apps provide free credit scores, typically in exchange for advertising.

How to Raise Your Credit Score Fast

Improving your credit score takes time, but there are steps you can take to raise your credit score fast.

• Pay your bills on time: This is the most important factor in your credit score.

• Lower your credit utilization: Try to use less than 30% of your available credit.

• Don't close old credit cards: The length of your credit history contributes to your score.

• Dispute any errors on your credit report: Errors can negatively affect your score.

Best Credit Score Monitoring Apps

Monitoring your credit score can help you understand how your financial behavior affects your score. Here's a roundup of some of the best credit score monitoring apps:

• Credit Karma: Offers free credit scores and reports, along with credit monitoring.

• Experian: Offers a free credit score and report card, along with credit monitoring services.

• myFICO: Offers comprehensive credit and identity monitoring services, but requires a subscription.

How to Build Credit from Scratch

Building credit from scratch can seem daunting, but it's entirely doable. Here's how:

• Apply for a secured credit card: These cards require a cash deposit that serves as your credit limit.

• Become an authorized user: If a family member has good credit, they can add you as an authorized user on their credit card.

• Get a credit-builder loan: These loans, offered by some credit unions and banks, are designed specifically to help people build credit.

Using the Credit Score Improvement Calculator

The credit score improvement calculator can help you estimate how long it might take to improve your credit score based on the actions you plan to take. It's a useful tool to plan your credit improvement strategy.

Conclusion

Understanding your credit score and how it's calculated provides a foundation for improving your financial health. Remember, improving your credit score is a marathon, not a sprint. However, with consistent effort and smart financial decisions, you can raise your score and improve your financial future.