Most Americans have a selectively accurate understanding of how credit scores work: More than 80% know, for example, that high credit card balances will hurt you — and that a score of 700 (or higher) is considered "good," according to a new survey by VantageScore and the Consumer Federation of America.
Beyond that, knowledge gets a little spottier.
And millennials generally scored lower than older respondents in the survey, with less awareness of what makes a good score and — for about half of young people surveyed — zero experience ever pulling a free copy of their credit score or report.
But, if you're among the confused, don't lose faith. This crash course on credit scores will set you straight: Here are four basic facts to know.
There's not just one type of credit score
Already confused? Here's why talking about credit scores is a little complicated: There isn't just one kind of credit score.
Even if you typically check only, say, your VantageScore, when potential lenders or landlords pull your credit, they might look at your FICO score instead — all the more reason to make sure you always check different versions of your score, not just one.
Additionally, there is technically no one official cutoff for a "good" credit score, as agencies calculate scores according to varying guidelines, with somewhat differing weights and factors. That said...
The highest-possible score is 850 (usually)
Across the different models, scoring typically ranges between 300 and 850, though older versions of the scale can go higher than 900.
In general, anything above 700 is typically regarded as "good," while numbers above 740 or 750 are typically regarded as "excellent credit." What you definitely don't want is a credit score below 600.
Below 600: Bad
600 to 649: Poor
650 to 699: Fair
700 to 749: Good
750 or higher: Excellent
There are a number of ways to look up your score for free, and if you've got a credit card then you might already be able to see your score included on your statements.
Other options include going through non-governmental organizations, sites like Credit.com (which will perform only "soft" credit checks, which cannot hurt your score like a "hard" inquiry) or a credit reporting agency (which may charge).
Your score reflects a mix of different factors
There are generally five different variables taken into account when calculating your credit score, Credit.com's editorial director Kali Geldis said, including payment history, your debt load, your age, your mix of credit, and how often you apply to refinance or add new cards. These can have a pretty big impact, especially over time.
The longer your positive (think: good behavior) credit history is, the more likely your score will improve on its own.
"[Young people are] probably not going to think about buying a house until they're in their 30s, by which time it's too late to suddenly improve your credit score," Robert Harrow, a credit card expert at ValuePenguin, said. "This is something that takes time to build, so if you want low interest rates on your mortgage, for example, you need to start thinking about this now."
And remember, credit card debt is not the only kind of debt included in your score.
"Have you been able to actively manage ... student loans and auto payments along with credit cards?" Geldis said. "Lenders want to see you have a good and varied history. It's a good predictor for the lender that you'll be able to handle their loan."
Be careful and strategic when taking on new debt: Applying to lots of different loans makes it look like you're in financial hot water.
Yes, you can improve your credit score
Once you know your score, then you can start building it up. The most basic thing you can do is remember to cover bills in full and on time — or twice a month, if you want to see score improvement even faster.
"Paying back debt in a timely manner helps you build a good credit score," Harrow said.
Bear in mind that just because you've gotten a $10,000 line of credit, doesn't mean you should necessarily use it.
"The best practice is to use 30% or less of that total available credit," Geldis said. "Ten percent or less is what people with the best credit scores have."
This will get you results down the line, because, as noted above, the length of your credit history affects your score as well. If you've been consistently using less than a third of your line of credit or paying off various forms of debt for 30 years, you've had plenty of opportunities to mess up — yet you didn't. That's encouraging to prospective lenders.
"The best thing people can do is fall back in very good practices and stick to them," Harrow said.
In short: Get smart now, reap the benefits later.