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It’s common knowledge that a person’s credit score can have a significant impact on their ability to get competitive deals on loans and credit cards. And those opportunities can potentially save borrowers many thousands of dollars over a lifetime. But exactly what the credit rating scale involves is a mystery to many people. That’s a problem for potential applicants who’d like to build their score before shopping around for a loan.
Read on to gain insights into how credit scores are calculated, what the different credit ranges mean, and what you can do to qualify for prime interest rates.
Key Points
• Credit scores typically range from 300-850, and higher scores can help borrowers qualify for lower interest rates, potentially saving thousands of dollars over time.
• The three major credit bureaus — Equifax®, Experian®, and TransUnion® — collect consumer credit data and provide it to lenders in credit reports.
• The FICO® Score is calculated using factors such as payment history (35%) and credit utilization (30%), making them the most influential components.
• Keeping your credit utilization ratio at or below 30% — and ideally closer to 10% — can positively impact your credit score.
• Paying down high-interest credit card debt can build your credit score and reduce overall debt faster because credit cards often carry significantly higher interest rates than loans such as mortgages or student loans.
The Three Major Credit Bureaus
Credit bureaus are independent agencies that collect and maintain consumer credit information and then resell it to businesses in the form of a credit report. The Fair Credit Reporting Act allows the government to oversee and regulate the industry.
There are three major credit bureaus that most lenders pull data from:
• Equifax
• Experian
• TransUnion
Commonly used credit scoring systems are FICO and VantageScore, each of which ranges from 300-850.
What Actually Factors Into Your Credit Score?
Here’s a closer look at the popular FICO Score system, which uses a scoring model that sources data from credit bureaus to calculate your score. Elements used in the FICO scoring model (as of this writing, the latest version is FICO Score 10) include:
• Payment history: 35%
• Credit utilization: 30%
• Length of credit history: 15%
• Credit mix: 10%
• New credit: 10%
Wondering what those terms mean? Here’s a closer look:
Payment History
Payment history looks at whether you pay your bills in a timely manner. Do you have a history of paying bills a couple of weeks late, or are you the type who always pays your cable bill even before it’s due? That’s the kind of thing that will come into play here.
Credit Utilization
“Amount owed” is pretty self-explanatory — it’s how much total debt you’re currently carrying. Your “credit utilization ratio” may not be quite so clear. That’s the amount of credit you actually use compared to the amount of credit available to you. Lenders generally like to see a credit utilization ratio of 30% or lower. Some even recommend no more than 10%.
Here’s an example: Say you owe $500 on each of two credit cards, and one has a credit limit of $1,000 and the other has a limit of $3,000. The amount you owe is $1,000 out of a credit limit of $4,000. So you are using 25% of your available credit. Your credit utilization is therefore 25%.
Length of Credit History
This factor looks at the age of your oldest and newest accounts and the average age of all your accounts. To lenders, longer is better.
Credit Mix
Credit mix considers the variety of your debt — is it primarily credit card debt? Do you carry student loan debt or have a mortgage? A desirable mix is a combination of revolving debt (including lines of credit and credit cards) and installment debt (loans with fixed repayment terms, such as student loans and car loans).
New Credit
New credit looks at what accounts have recently been opened in your name and if you’ve taken out any new debts. Trying to access a considerable amount of credit in a short period of time can have a negative impact on your credit score.
Recommended: Credit Card Utilization: Everything You Need To Know
How’s Your Credit?
Where your credit score falls on the scoring table determines how “good” your credit is. Here’s a breakdown of the credit rating scale according to FICO standards.
• Excellent or Exceptional: 800-850
• Very Good: 740-799
• Good: 670-739
• Fair: 580-669
• Poor: 300-579
Ready for a plot twist? Your credit score may not be consistent. Here are some reasons why:
• There are different scoring systems and variations in how various lenders and creditors report information.
• Also, FICO can tweak its algorithm depending on the type of loan you’re applying for. If you’re looking to get an auto loan, your industry-specific FICO Score may emphasize your payment history with auto loans and deemphasize your credit card history. In effect, each consumer has multiple credit scores.
• You may also hear the phrase “educational credit score.” This can refer to the proprietary scoring models used by TransUnion and Equifax, not necessarily used by lenders, which can help educate consumers about their credit scores. Since they may or may not reflect the credit score that potential lenders use, it can be wise to make sure you know what kind of credit score you are viewing.
You are probably curious how your credit score stacks up to the national average. The average three-digit number in the U.S. is currently 714.
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Trying to Build Your Credit Score With Credit Card Debt
You’ll notice that a lot of information around building your credit scores focuses on debt reduction. After all, 30% of your FICO Score is based on outstanding debt. By paying that down on time, you may be able to build your credit score. For this reason, one potential action item for those trying to have a positive impact on their credit history is to work on paying down credit card debt.
Credit card debt may be the highest-interest debt you’re carrying. Compare these numbers:
• The average credit card interest rate on interest-accruing accounts with balances was 21.52% in February 2026, according to the Federal Reserve.
• A rate of 6.39% was established for federal undergraduate student loans for the 2025-2026 school year.
• As of April 2026, the average mortgage rate for fixed-rate, 30-year conforming loans is 6.37%.
That means if you have credit card debt, it could be your fastest-growing debt. With credit card consolidation, you may be able to significantly reduce your outstanding debt. Here are a few techniques:
• One way to get out of credit card debt is to consolidate it into a lower-interest option. With a balance transfer credit card, you can move your high-interest debt to a 0% interest card. The catch is that the 0% interest is temporary, and after a given amount of time (typically 12-21 months), the interest rate shoots up.
• Another option is to take out a personal loan, which could allow you to consolidate multiple high-interest credit card debts into one monthly payment, often at a lower interest rate. For example, in February 2026, the average interest rate on a 24-month personal loan was 11.40% vs. 21.52% for credit cards, as noted above. Personal loans are typically unsecured loans with a fixed interest rate and terms of 1-7 years. This could help you pay off your debt more quickly, which might help build your score.
• One other tip for potentially building your credit score: Thoroughly review your credit report for errors. Mistakes happen, and some of them can bring down your score. You can file a dispute online to correct or remove the information.
Recommended: Using a Personal Loan to Pay Off a Credit Card
The Takeaway
Credit scores, calculated based on information in your credit report, influence the interest rates you qualify for on loans and credit cards. The higher your score, the less you’ll likely pay in interest. The factors that determine your score include your history of on-time payments, your total debt compared to the amount of credit available to you, the types of debt you have managed, how much credit you have recently sought, and the age of your accounts.
One particularly effective way to build your credit score is to pay down credit card debt. A common way to consolidate high-interest credit card debt is with a low-interest personal loan.
Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.
FAQ
What are the levels of credit ratings?
Credit score ratings generally range from 300-850. The levels of credit ratings are typically:
• Excellent (or Exceptional): 800-850
• Very good: 740-799
• Good: 670-739
• Fair: 580-669
• Poor: 300-579
How does the credit rating scale work?
Credit rating scales typically work by factoring in various indicators of an individual’s creditworthiness. For example, common components of your credit score will be your history of on-time payments, your credit utilization ratio, the length of your credit history, your credit mix, and how many new accounts you have applied for and how recently. These can indicate how well you have managed debt in the past and how likely you are to be responsible with credit in the future.
How rare is a 700 credit score?
The current average credit score in the U.S. is 714, so a score of 700 or higher isn’t that rare. To be more specific, recent reports indicate that in 2025, 20.1% of Americans had a score of 670-739, 27.5% were in the 740-799 range, and 22.8% had a score of 800-850. In addition, credit scores tend to be higher among older generations.
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