What is a Credit Score?
At A Glance: A credit score is a numerical representation of your creditworthiness based on information in your credit report. Lenders use credit scores to evaluate risk when approving loans, including mortgages, auto loans, and credit cards. Higher credit scores generally qualify borrowers for better interest rates and loan terms.
A credit score tells lenders about your creditworthiness (how likely you are to pay back a loan based on your credit history). It is calculated using the information in your credit reports. FICO® Scores are the standard for credit scores—used by 90% of top lenders. Read on to learn more about credit scores and how they’re used by lenders.
What is a credit score and how do lenders use it?
A credit score is a numerical representation of a person’s creditworthiness based on their credit history. Most credit scores have a range from 300 to 850, with higher scores indicating better credit health.
When you apply for credit, lenders want to know what risk they'd take by lending money. Credit scores are calculated to help lenders, landlords and other decision-makers assess the likelihood a borrower will repay a debt or meet other financial obligations.
Lenders use credit scores to help determine:
- Whether to approve mortgage applications, auto loans, personal loans, and credit cards
- What interest rates to offer, with higher credit scores typically qualifying for lower rates
- How much credit to extend, as higher scores can result in higher credit limits
It's important to understand that not every credit score offered for sale online is a FICO ® Score. Learn the difference between credit scores and FICO Scores.
About FICO Scores
The FICO® Score, created by Fair Isaac Corporation, is the most widely used credit score. 90% of top lenders use FICO® Scores to help them make billions of credit-related decisions every year. FICO® Scores are calculated based on information in a consumer's credit report maintained by the credit bureaus, Experian, Equifax, and TransUnion.
Most credit scores have a 300-850 score range. The higher the score, the lower the risk to lenders. A "good" credit score is considered to be in the 670-739 score range.
What credit scores mean to lenders
| Credit Score Ranges | Rating | Description |
| <580 | Poor | This credit score is well below the average score of U.S. consumers and demonstrates to lenders that the borrower may be a risk. |
| 580-669 | Fair | This credit score is below the average score of U.S. consumers, though many lenders will approve loans with this score. |
| 670-739 | Good | This credit score is near or slightly above the average of U.S. consumers and most lenders consider this a good score. |
| 740-799 | Very Good | This credit score is above the average of U.S. consumers and demonstrates to lenders that the borrower is dependable. |
| 800+ | Exceptional | This credit score is well above the average score of U.S. consumers and clearly demonstrates to lenders that the borrower is an exceptionally low risk. |
How lenders often interpret credit scores
- Lower scores may limit loan options or result in higher interest rates
- Good to very good scores generally qualify borrowers for competitive rates
- Exceptional scores indicate low risk and can unlock the best available terms
Is there a minimum credit score lenders require?
There is no single minimum credit score required by all lenders. Each lender sets its own criteria based on risk tolerance, loan type, and additional factors such as income, debt, and credit history.
Learn more about the minimum requirements to have a FICO Score.
Why can your credit score differ across bureaus?
Credit scores may vary across bureaus because:
- Not all lenders report to all three bureaus: This creates variations in the information available to each bureau and could result in a difference in scores.
- Reporting timelines may differ: If a lender reports your account activity to one bureau earlier than another, the bureaus may show different statuses for the same account.
- Different scoring models or versions may be used: Multiple scoring models exist, and each may weigh credit factors differently. Lenders may also use multiple versions of the same scoring model, leading to variations in calculated scores.
- Errors or hard inquiries may only appear on one report: Errors, such as incorrect account balances or duplicate entries, can appear in one bureau’s report but not another.
Why your credit scores will change over time
As the information in your credit report changes, so will any new credit score based on your credit report. Your credit score from a month ago is probably not the same score a lender would get from the credit bureau today. This could be because of your payment history since on-time payments can improve your score, but missed or late payments can lower it. Your credit utilization (the percentage of your available credit that you’re using) may also change; and high utilization can lower your score. New credit inquiries, aging accounts, changes to account balances and other factors can also influence your score.
Other credit scores or FICO® Scores?
While FICO Scores are used by 90% of top lenders, other credit scores are made available to consumers. Different credit scores may evaluate your credit report differently than FICO® Scores. When purchasing a credit score for yourself, most experts recommend getting FICO® Scores, as FICO Scores are used by 90% of top lenders.
Understanding how credit scores work and how lenders use them can help you prepare for major financial decisions like applying for a mortgage. Monitoring your credit reports and FICO® Scores ensures lenders see the most accurate picture of your creditworthiness when it matters most.
FAQs: Credit scores and mortgages
What’s the minimum credit score mortgage lenders accept?
There is no single minimum credit score accepted by all mortgage lenders. Requirements vary by lender and loan type, and other factors such as income and debt also influence approval decisions.
What credit score qualifies you for a mortgage?
Many lenders approve mortgages across a range of credit scores, but higher scores generally improve approval chances and help borrowers qualify for better interest rates and terms.
What are mortgage preapproval requirements by credit score?
Mortgage preapproval requirements vary by lender, but credit score is a key factor used alongside income, employment history, debt-to-income ratio, and credit report information.
Are FICO® Scores used for mortgage decisions?
Yes. FICO® Scores are used by 90% of top lenders, including mortgage lenders, to assess borrower risk.