CardClub Education

Introduction to Credit Scoring

Everything You'd Ever Want To Know About Credit Scores

Content image
Credit scores aren't just numbers. They're the result of incredibly complex, sensitive, proprietary algorithms. Unlock the secrets of your score, with CardClub.


Credit score is the most-important factor when it comes to navigating the world of credit cards. It's the key to unlocking favorable interest rates, loan approvals, and countless other financial opportunities. But what exactly is a credit score? Who calculates it? And, what constitutes a "good" score? In this comprehensive guide, we'll unravel the mysteries of credit scores, shedding light on their origin, the role of credit bureaus, and what those three-digit numbers truly mean.


Credit scores, often referred to as FICO scores, condense your creditworthiness into a single, easily digestible metric. They consider numerous data points, like payment history and the number of credit cards you own, and apply complex algorithms to generate a three-digit score. This number provides a quick snapshot of a person's trustworthiness with borrowed money. Credit scores typically range from 300 to 850, divided into four distinct tiers with specific labels. In the context of credit cards, the words "excellent", "good", "average", and "poor" actually have distinct, specific meanings, as defined by the Consumer Financial Protection Bureau.


Refers to a score of 720 or above.


Refers to scores between 690 and 719.

"Fair" or "Average"

Refers to scores between 630 and 689.


Refers to scores below 629.

There are also two extremes to consider: the very top, and the very bottom of the scale.


Any score above 750 is considered "super-prime" which indicates an almost-perfect borrowing history and access to exclusive perks and rates. It is extremely difficult to achieve a score above 750.


Scores below 580 are considered "subprime" and indicate financial distress. It signals a high debt load, past defaults and/or bankruptcies, spotty payment history, and the highest-possible risk to lenders. Borrowers with subprime scores may find it difficult to obtain credit.


The FICO score is considered by most to be the one, true credit score.

... But there are 49 different versions of it.

Until very recently, FICO scores were inaccessible to consumers. Their inventor - the Fair Issac Corporation - maintains an unusual monopoly on consumer credit ratings, and so carefully restricts the information they collect. To make things even more confusing, the FICO score is itself a composite calculation, based on three other credit scores, determined by three entirely-separate companies. They are TransUnion, Experian, and Equifax: the three consumer reporting agencies. They purchase data on individuals from a variety of sources (banks, credit card companies, auto lenders, etc.) and compile the data in reports. Then, the reports are set upon by proprietary algorithms, which numerically score individuals.

FICO updates its algorithm far more frequently than the three consumer reporting agencies do. That’s why there are forty-nine separate scores, and that’s why lenders so strongly prefer it over the rating agencies’ scores. Each update produces a “more accurate” result. And the old algorithms stay in use, because specific industries often prefer previous versions of the FICO algorithm, since their existing risk models were constructed around that math. So, it's not your average score that matters, but the particular score your lender is looking at. 90% of the time: it’s a FICO score.

Of the 50 different versions of FICO score, only 9 are currently available to individuals. In every case, you have to pay for it. However, since the credit reporting agencies are allowed to re-sell their data - it’s created an enormous, "alternative" credit scoring industry.

These companies purchase consumer data from the rating agencies and create their own version of a credit score. You’ve probably seen commercials for them: CreditKarma, CreditSesame… But these credit scores are fake.

Since the "fake" scores are created from the same data as FICO scores, there’s usually a strong correlation between the two. However, the companies that issue these ballpark scores are unregulated. FICO, as the sole arbiter of official information, has to answer to the federal government. CreditKarma does not. The algorithms are different, and there are often major discrepancies between the FICO score and these “alternative” scores.

Look: we’re professionals, and this makes our heads spin. We think the history and function of FICO is fascinating, but most people just want to know their score. Here's how you can access the real one:

Accessing Your Score:

Many banks, credit unions, and companies have a partnership with FICO that allows them to offer free credit monitoring services to their customers. There's a good chance that your financial institution has already purchased your FICO score, on your behalf.

Financial Institutions Offering Free FICO Access:

1st United Credit Union

American Express

Bank of America


Capital One

J.P. Morgan Chase Bank


Commerce Bancshares


First Commonwealth Bank

First National Bank of Omaha

First Premier Bank

Harvard University Employees Credit Union

Polish & Slavic Federal Credit Union

Premier America Credit Union

Star One Credit Union

Synchrony Bank

US Bank

Wells Fargo

This list was sourced directly from the Consumer Financial Protection Bureau and has been independently verified for accuracy.

Final Thoughts:

Seeing your score for the very first time can be distressing. Don't panic; everyone's score starts out low. Since credit scores represent risk, it wouldn't make sense to grant the highest-achievable score and titrate down.

Thankfully, credit improves more quickly at the beginning. Actions that damage your score carry more weight than actions that improve your score, because the latter is more common than the former. So, if you set your bills to autopay and don't overspend: you'll rack up nothing but good marks during the first few years. In fact, applying for your first real credit card, making on-time payments, and spending less than a third of your limit for the first year can boost a newbie's score by up to 100 points.

If you're ready to learn more, the next logical step is understanding how interest rates work. For that, read our article "Understanding APR"

Related Topics

Blog post image

Introduction to Credit Cards

Credit is needlessly complex. So, we created a simple and comprehensive guide to the basics. Start with this article, and we'll help cut through the noise.

Blog post image

Understanding APR

Credit cards are a special type of loan known for imposing heavy interest, in exchange for the freedom they provide. In order to compare cards, it's key to understand interest, APR, and how they relate.

Blog post image

Fees and Charges

Credit card companies employ a bevy of tactics to profit off the convenience offered by their product. Fees, penalties, and surcharges all come with the territory. Don't be caught unaware.

Join the Club

We care about your data. Read our privacy policy.