Understanding Credit Scores

August 10, 2021

Credit scores may seem simple on the surface: your credit score is a number that represents how good your credit is, and the higher the better.

Couple using a credit card to make an online purchase

But what type of credit score are you looking at, and how is the score calculated? Why does your score keep changing, and why is the score you see in your banking app not the same as the one your lender sees?

Credit scores can be confusing and complex, so read on to learn how credit scores work, the different types of credit scores and where you can find your credit scores.

How Do Credit Scores Work?

A credit score is a number that summarizes your credit profile and predicts the likelihood you'll repay future debts. Your credit score is generated based on a computer model, and lenders use different scoring models for different purposes.

Credit scoring models work by evaluating the performance of all credit users to create a scoring system ranging from good to impaired credit. Your credit behaviors are then compared to that range, and you are assigned a numerical score.

The factors that make up a credit score vary by model, but most include:

  • payment history
  • amounts owed
  • length of credit history
  • types of credit used
  • new or recent credit

By using credit scores, lenders and creditors treat each person objectively. Because the same standards apply to every applicant, credit scores assess risk in the same way for every borrower, every time.

Credit scores do not factor in demographic differences among people, such as income or age. Someone with a high-income level could have a low credit score if they don't make payments on time. Likewise, a person earning a lower income could have a higher credit score if they're timely in making payments.

It's important to note that your credit score changes as you go about your daily life, using credit cards and paying your bills.

Types of Credit Scores

FICO® Credit Score

The credit scoring model most commonly used by lenders is the FICO® score.

Within FICO, there are different versions of scores:

  • FICO 8, which is the most widely used
  • FICO Auto Scores, which is used in auto lending
  • FICO 3 and Bankcard Scores, which are used in credit card decision making
  • FICO 2, 4 and 5, which are commonly used in mortgage lending
  • FICO 9, which is similar to FICO 8 but weighs medical collections and rent payments differently

FICO scores range from 300 to 850 points. Typically, a score more than 650 is considered "fair," scores more than 700 are considered "good," and scores more than 750 are considered "excellent." 

UltraFICO™ Credit Score

Developed in 2018 to help consumers with low credit scores get better lending products, UltraFICO can be a helpful option for those with limited credit histories, or who need to rebuild credit and have positive banking activity.

UltraFICO pulls information from checking, savings or money market accounts to support an existing credit report. Consistent amounts of money in those accounts and the length of time the account has been open can positively affect the score.

You can opt in to get an UltraFICO score, which is a pilot program through the credit bureau Experian®.


The VantageScore® is a model developed and owned collaboratively by the three main credit bureaus, Equifax®, Experian® and TransUnion®.

As with the FICO score, your VantageScore credit scoring range is 300-850 points. The factors affecting a VantageScore are slightly different than the factors that make up a FICO score, but they still fall into similar categories.

Educational Credit Score

An educational credit score generally comes from one or two credit bureaus. Your educational credit score may contain less information than other credit scores pulled by creditors.

If you use a free credit score app or request your free score directly through a credit bureau's website, an educational credit score is the one you may see.

Although these scores may be somewhat different than a FICO or VantageScore that lenders or creditors use, they are useful for keeping an eye on your credit. In addition, requesting an educational credit score does not impact your credit score. 

Where Can I Find My Credit Scores?

You can learn which retailers are authorized to provide FICO scores, but be aware that you will need to pay to see your score.

Experian also offers a free FICO 8 score, and some banks or other credit card issuers offer free FICO scores or VantageScore monitoring to consumers. 

You can see your educational VantageScore through free apps such as Credit Karma, NerdWallet, WalletHub or others.

To learn more about managing credit, use our suite of financial capability and homeownership education resources, CreditSmart® — also available in Spanish. From managing debt to buying a home, you can learn it all at your pace, on your terms. Learn more about CreditSmart.

Freddie Mac CreditSmart

CreditSmart®: Financial Education on Your Terms

Education has power, and it’s in your hands with the CreditSmart® suite of financial and homeownership education resources. Whether you’re renting a home, are on the path to homeownership or saving for the future, CreditSmart — also available in Spanish — has something for you.

Learn more

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