Credit, demystified.

Your credit score is a three-digit number, usually from 300 to 850. It estimates one thing: how likely you are to fall 90 or more days behind on a new account in the next two years. Higher means less likely, and less risk to the lender.

It is computed from your credit report, the file the bureaus keep about every loan, card, and inquiry tied to your name. Three things follow from that:

• One file, one formula, one moment. A score is built from your file at one bureau, by one scoring model, on the day someone asks.
• Nothing is stored. Scores are recomputed on demand. There is no official number sitting somewhere.
• So you have several. The same person can have different scores on the same day, as Figure 1 shows.

The bands are where the number starts to mean something. Under 670 a lender prices you as a risk. From 740 up, most doors open at the best rates.

In the U.S., three private companies collect what lenders report about you and sell it back to other lenders: Equifax, Experian, and TransUnion. Each keeps its own file. They mostly agree, but nothing keeps them in sync, and a lender that sends an update to all three has no say over when each one posts it.

A lender chooses which bureau to pull from, sometimes two, sometimes all three. That is how you can be approved on one report and declined on another in the same week: they were reading different files.

• Some lenders skip a bureau. A small lender or a store card may report to only one or two, so an account can be on one file and missing from another.
• Each file is free to read. AnnualCreditReport.com is the federally authorized source: all three bureaus, as often as once a week.
• Reports are not scores. A report is the file itself. The number is not on it.

The reports and scores guide goes deeper: what is on the file, and where to see your FICO^® Score 8 from each bureau for free.

Two companies make the formulas. FICO is the older one and the default for most lending decisions. VantageScore is newer and is what most free score apps show. Each makes several versions, plus versions tuned to an industry, so a car lender, a card issuer, and a mortgage underwriter can read the same file and see three different numbers.

• FICO 8 is the workhorse. Most card decisions use it. The Auto and Bankcard versions serve those industries, and mortgages use older versions from all three bureaus.
• Newer formulas watch trends. FICO 10T and VantageScore 4.0 can read two years of balances, not only this month’s snapshot.
• The free app is a gauge. Its number is not wrong, but it may not be the one a lender pulls. Track FICO 8 and treat the rest as direction.

FICO publishes the rough weight of each input. The exact math is private, but the percentages are the public benchmark and hold across most versions. Payment history and amounts owed together are about 65% of the score. That is where almost every high-impact move lives.

• Payment history, 35%. Whether payments are made on time.
• Amounts owed, 30%. Driven mostly by balances compared with limits.
• Length of history, 15%. Average account age, and the age of the oldest account.
• Credit mix, 10%. Experience with both cards and installment loans.
• New credit, 10%. Recent hard inquiries and newly opened accounts.

Utilization is the share of your card limits you are using. It is measured on each card and across all of them, and a high number on either can signal risk. The guideline is under 30%. Lower reports better, and under 10% is where the best scores sit.

What makes it fast: the bureaus see the balance your issuer reports when the statement closes, not every purchase. Paying before the close keeps the reported number low. You still make at least the minimum by the due date.

• Watch each card, not only the total. One card at 70% costs points even when the rest sit at zero.
• It has no memory. Only the latest statement counts, so a high month is forgotten the moment a low one reports. The AZEO guide is the version of this that squeezes out the last few points.
• A bigger limit does the same job. The same balance reports as a smaller share. The limit-increase guide covers when and how to ask.
• You never need to carry a balance. Paying in full by the due date builds credit and costs no interest.

On-time payments build trust over years. One payment reported 30 days late can erase a lot of it in a month. Late payments are grouped by severity, 30, 60, 90, 120 or more days, then charge-off, and the damage scales with both severity and recency. An old 30-day late matters less than a recent one.

• Set autopay for at least the minimum on every account, then pay more when you can.
• A late mark stays about seven years, even after the balance is paid.
• Thirty days is the line. A payment is normally reported late only once it is 30 days past due. Fees and interest can start sooner.
• If you slip once, ask. Issuers sometimes remove a first late mark as a goodwill adjustment. It is not guaranteed, and it costs nothing to request.

Whenever someone looks at your file, that is an inquiry. A hard inquiry comes from an application you submit, and it can move the score a little. A soft inquiry, from a prequalification, an account review, or checking your own score, moves nothing.

• Two years on the report, one year in the score. A hard inquiry stays visible for two years and usually stops counting after one.
• Rate shopping is protected for car, home, and student loans. Pulls inside the window, 14 to 45 days depending on the formula, count as one. Card applications get no such treatment, so space them out.
• A limit request may be either. Some issuers soft-pull, some hard-pull, some depend on how you ask. Check first.

Length of history looks at things like your average account age and the age of your oldest account. Both reward patience. A closed account in good standing keeps counting for years before it falls off.

Credit mix is whether you have handled both kinds of credit: revolving accounts like cards, and installment loans like a car, student, or home loan.

• Opening an account lowers your average age. Do it for a card you want, not for the mix.
• Closing a card removes its limit at once, which raises utilization on everything else.
• Never borrow just for variety. Mix is 10% of the score. Payment history and balances are 65%.

Your card has two dates and they do different jobs. On the closing date it takes a picture of what you owe. That picture is your statement, and it is what the bureaus see. The due date is the deadline to pay it, about three weeks later.

That is why your card can show a due date a few days before the closing date. They belong to different statements: the bill due this month is for the statement that closed last month, and the next one has been filling since.

The due date decides whether you paid on time. The closing date decides what balance everyone else sees.

• After the close, it is next month’s. Anything you buy after the closing date lands on the next statement.
• Pay the full statement by the due date and you owe no interest on it.
• Pay only part and the deal is off. Interest then runs on everything, new purchases included, until you pay a full statement again.
• Late and interest are separate problems. Missing the due date costs a fee at once, but nothing reaches your report until you are 30 days past due.

Lenders do not stream anything to the bureaus. They report in batches, usually once a month and often just after the statement closes. The bureau posts the update to your file, and the next time someone asks for a score, the formula runs on the updated file.

That cadence is why score changes feel late. Pay a card down today and the score may not show it for several weeks, depending on where you are in the cycle. Credit reports are snapshots, not a live feed of your spending.

Credit is not a leaderboard. It is a discount. A better score can mean lower rates on cards and loans, larger limits, better insurance pricing where credit-based insurance scores are allowed, easier apartment approvals, and the premium rewards cards.

On a large loan, a modest rate difference changes the payment every month, and the total interest by thousands.

That is the whole system: three files, a formula, five inputs, and two dates on your card. The next step is turning it into habits, and there are only four. Start with the one that covers the biggest risk in your own file. Starting from no file at all? The starting-credit guide is the five-year plan.