Understanding your credit

by | May 20, 2021

Confused about credit? Wondering if your score really matters? You’ve got questions and ScoreShuttle has the answers in this simple guide to help you better understand your credit.

What is credit?

Credit is a tool used by lenders, service providers, and a variety of financial institutions to determine whether or not you are a desirable candidate to loan money to or provide services for. According to Experian, credit is typically categorized by a score between 300 and 850. Among other factors, you credit and score will heavily influence whether or not you get approved for items such as a credit card, auto loan, and mortgage. It will also help decide the interest rate and loan terms, if any, you could be offered.

How is my credit score determined?

Now that you know what credit is, the next step to understanding your credit is to take a look at the science behind determining your score. As you use credit, the various creditors gather information about your financial activity and report it to the three credit bureaus: Experian, TransUnion, and Equifax.

There are a variety of scoring models and formulas used to come up with a credit score. And because of this, your score can fluctuate from one credit check to the next. Two of the most popular models are FICO and VantageScore. Here is a look at they compare.


Fair Isaac Corporation’s, FICO score, is one of the most familiar credit-scoring models among consumers. There are dozens of FICO versions available which may vary depending on who is requesting the credit score such as a bank or car dealer. The type of loan you are getting may also make a difference. Regardless of the version being used, the five factors below will all play a role.

Payment history: 35%

Your payment history is the largest portion of your credit score. Which is true for most scoring models. This category looks at how often you’ve made on-time payments as well as how many late or missed payments are on your report.

Amounts owed: 30%

Amounts owed looks at how much debt you carry each month. This category is also commonly referred to as your credit utilization ratio. For best results, strive to keep your revolving monthly balance at or under 30% of your available credit limit.

Length of credit history: 15%

This factor looks at how long you’ve been using credit. The longer you’ve been responsibly managing credit, the more favorable you may rank in this category. With this in mind, it may be wise to keep your oldest, good-standing line of credit open versus closing it.

Credit mix: 10%

Credit mix considers the types of credit you have and how well you manage them. A mix of various types of credit such as loans and credit cards could help contribute to good credit health.

New credit: 10%

This factor looks at how often you apply for and open new lines of credit. In general, it’s best to limit hard credit checks and spread out new enrollments over time rather than getting several all at once.


Developed by the three credit reporting bureaus, the VantageScore model considers similar factors as FICO but titles and weighs them differently. Like FICO, there are a variety of VantageScore models available and calculations may sway slightly in each. Here is a brief look at the VantageScore 3.0 model.

  • Payment history: 40%
  • Depth of credit (aka credit history): 21%
  • Credit utilization: 20%
  • Balances: 11%
  • Recent behavior and inquiries: 5%
  • Available credit: 3%

VantageScore also looks at trends over time. For example, do you only make minimum payments, or are you demonstrating an effort to pay off debt quickly?

What is a ‘good’ credit score?

As we mentioned above, credit scores usually range between 300 to 850. However, depending on the scoring model, this exact range may vary. To sum up which numbers are generally considered bad and good, here is a look at the model Experian uses.

  • Very Poor: 300 – 579
  • Fair: 580 – 669
  • Good: 670 – 739
  • Very Good: 740 – 799
  • Exceptional: 800 – 850

Why does my credit score matter?

To put it simply, the higher your score the more big-ticket items you may qualify for. This is because lenders generally associate good credit with fiscal responsibility. Therefore, having good to exceptional credit means you may be more likely to get approved for items like a car, credit card, or mortgage. In addition to approval, your credit will also be a major deciding factor on the interest rate, deposit, and loan terms you could be offered.

By the same token, your credit will also help determine how much you may spend on credit-based items. Broadly put, poor credit could cost you hundreds to thousands of dollars in added fees and costly interest over time. In contrast, exceptional credit can do the exact opposite – which could add up to significant savings. See how much good credit could save you.

Can I control my credit?

Yes! The first step in taking control of your credit is knowing where you stand. By checking your initial score, you can get a gauge of your current credit status. If you use ScoreShuttle to check your $0 credit score, it’s considered a soft credit check, which means it won’t hurt your score to take a peek. Additionally, it’s wise to review your report regularly and practice good credit health at all times. This includes monitoring your report for accuracy and being responsible with your financial activity.

How do I achieve good credit?

There are many ways to achieve good credit and each person’s credit journey is unique. Generally speaking, showing a responsible history of borrowing and paying back funds, such as a credit card, is a great place to start. Here are some other financial staples that can help you maintain good credit health.

Always pay your bills on time

As shown above, payment activity makes up the largest chunk of your credit score. By simply paying your bills on time, you can positively contribute to your credit profile.

Keep your credit utilization ratio at or under 30%

In a nutshell, a low utilization ratio means you quickly resolve debt and do not carry a balance over 30% of your credit limit. To help you achieve a low utilization ratio, only purchase items you can confidently afford to pay off each month and avoid maxing out your credit cards.

Dispute credit report errors

Credit report errors are not supposed to be a part of any scoring calculation. However, they can unexpectedly land on anyone’s credit report. And if left unchecked, report errors can potentially cause a credit score drop. Item such as an inaccuracy or fraud could be considered an error and may damage your credit. The fastest way to potentially remove a report error is to dispute it online. If you suspect an error on one, two, or all three of your credit reports, you can use ScoreShuttle to file a dispute in just a few clicks.

Is 3-bureau credit management really necessary?

In short, yes. The best way to understand your credit is to manage your reports with Experian, TransUnion, and Equifax. Here’s why. Creditors can choose if and where they want to report your payment activity. Because of this, your credit score can fluctuate depending on the bureau used. And like it or not, lenders also have a choice when it comes to which credit bureau’s data they use when determining your creditworthiness. This means that even if you are happy with your credit score at one bureau, it may not be consistent across the board. If your lender uses data from a bureau you are not managing, it could change the outcome of your deal. With this in mind, is wise to keep tabs on your credit with all three.
Access My 3-Bureau Credit Report and Scores

Credit in a nutshell

The basics above are a great starting point to help you better understand your credit. But credit is complex and there are a variety of scenarios that can positively or negatively contribute to your creditworthiness. For best credit results, monitor your 3-bureau reports regularly, dispute errors, and strive to practice good credit health daily.

Resources: [https://www.experian.com/blogs/ask-experian/credit-education/faqs/what-is-credit/] [https://www.myfico.com/credit-education/whats-in-your-credit-score][https://vantagescore.com/pdfs/VantageScore3-0_WhitePaper.pdf]

Disclaimer: The content above is general in nature and is not a comprehensive list of the many factors that could contribute to your credit. This information is not meant to give credit advice or guidance on credit improvement. Always be sure to do your own research on which credit strategies are right for you.

Links to third-party websites are provided for convenience only. ScoreShuttle does not endorse nor support the content of third-party links and is not responsible for the content of a third-party website. By clicking on a third-party link, you will leave the ScoreShuttle portal. Privacy and security policies may differ from those practiced by ScoreShuttle.

Liz Richards

Liz Richards

Credit Content Specialist

Liz Richards is a content creator specializing in credit wellness and best budgeting practices. As an in-house ScoreShuttle contributor, Liz transforms complex financial topics into easy-to-digest tips that consumers can use to manage their credit and financial worthiness.

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