What’s a credit score and why is it important?

It's easy to ignore your credit score until it stops you from getting what you need. Learning more about your score, from how it works to how it stacks up, can help you build a better score.

A credit score is typically a three-digit number ranging from 300-850. Lenders use it to assess how likely you are to repay what you owe. It's figured based on your credit history, including details about your past and current debts, payment habits, and more. The higher your score, the better.

Having a good credit score can open access to more favorable loans, better terms, credit card approvals, lower interest rates, and more. But a lower credit score can limit financial opportunities and make your life more expensive.

What’s the average credit score?

The average FICO® credit score in the U.S. is 714. Although the average score remains unchanged from 2021, it's still at an all-time high. The average VantageScore is 702. FICO and VantageScore look at many of the same factors, such as payment history and the amount you owe, but they weigh them a little differently. That could mean that your FICO and VantageScore vary slightly, but they should fall in the same range.

Older consumers tend to have higher scores, but every generation's score is rising. Baby boomers' average score in 2022 was 742, compared to 687 for millennials and 679 for Gen Z. That’s a positive trend as it shows that more people of all ages are becoming financially savvy and taking steps to improve their credit.

Average credit score in the U.S. remains 714

Source: Experian as of Q3, 2022(1)

What’s a bad credit score?

There’s no magic cut-off number that lenders use but a bad FICO score is generally considered to be anything below 670. A score between 580 and 669 is considered fair, and one between 300 and 579 is poor. In the VantageScore model, a score between 300 and 660 is considered a bad credit score.

A lower score may make it harder to qualify for credit compared to prime borrowers or you may have to pay a higher interest rate or put down a deposit. A score may be low from late or missed payments, high levels of debt, bankruptcy, or other items on a credit report.

If your credit score is low, you're not alone. According to FICO, about 15% of U.S. consumers have a credit score below 600. No one has a low score for quite the same reasons, and often those reasons are out of their control.

The good news is that you can improve your credit score. Here are steps you can take to begin building a better credit score.

Step 1: Check your credit score

First things first, you need to know your credit score. You can get a free credit report every 12 months from the major credit bureaus through AnnualCreditReport.com. Also, many banks and credit card companies will check their customers’ credit scores for free.

Step 2: Review your credit report

When you get your credit report, make sure everything is correct because mistakes can lower your credit score. If you find something wrong, work with the credit bureau to fix it. Addressing and correcting any inaccuracies will help safeguard your credit profile and help you maintain a better credit score.

Step 3: Pay your bills on time

Paying your bills on time is the most important thing you can do to build your credit score because your payment history makes up 35% of your FICO score. Using autopay, which automatically pays your bills from your bank account each month, can help prevent late payments, along with monthly reminders on your phone to check and pay your bills. Also, look at your due dates to make sure your payment will post on time.

Step 4: Pay down your debt

Use any extra money to start paying down your debts, prioritizing those with the highest interest rates or work your debts smallest to largest. If possible, try to keep your credit card balances below 30% of your credit limits, as a higher percentage can hurt your score. Regular, on-time payments demonstrates responsible credit behavior and will gradually improve your score. In addition, consider contacting your creditors or a credit counselor for help setting up a payment plan or negotiating lower interest rates.

Step 5: Be patient

Just like any other worthwhile goal in life, improving your credit score won't happen overnight. It will take making consistent, responsible financial decisions over time. Every step you take towards reducing your debt, paying your bills on time, and managing your credit responsibly is one step closer to your goal. Over time, your credit score will reflect your efforts.

Having bad credit is not a measure of who you are. It's simply a financial situation that you can change. You’re already taking the right steps by learning more about your credit score, what it means, and how you can change it.

If less-than-perfect credit is keeping you from getting what you need now, Snap Finance can help. Snap offers lease-to-own financing for all credit types.(2)

Learn how Snap can help you shop now and pay later.

The advertised service is a lease-to-own agreement provided by Snap RTO LLC. Lease-to-own financing is not available to residents of Minnesota, New Jersey and Wisconsin.

(1) Poremski, Chris. “What Is the Average Credit Score in the U.S.” Experian, February 24, 2023.

(2) Not all applicants are approved. While no credit history is required, Snap obtains information from consumer reporting agencies in connection with submitted applications, and your score with those agencies may be affected.