Understanding the U.S. Credit Score: What It Is and Why It Matters

If you’re new to the United States, there’s one number that may feel invisible—but has an outsized impact on nearly every part of your life here: your credit score.

Whether you’re applying for a credit card, renting an apartment, or even signing up for a mobile phone plan, your credit score can determine what you get access to—and what you don’t. But what exactly is a credit score? How is it calculated? And what if you’ve just arrived in the U.S. and don’t have one yet?

What is a credit score?

A credit score is a three-digit number that represents your creditworthiness—in other words, how likely you are to repay borrowed money. It helps banks, landlords, and other institutions quickly assess your financial reliability. The score typically ranges from 300 to 850, with higher numbers indicating stronger credit.

In the U.S., credit scores are most commonly generated by FICO or VantageScore, based on data in your credit report from the three major credit bureaus: Experian, Equifax, and TransUnion.

If you’ve never borrowed money in the U.S., or don’t have any accounts reported to the credit bureaus, you may be considered “credit invisible”. You will not have a number (not even 300), and you will instead have no credit file at all—so normally, when you apply for a loan or a rental, you simply won’t show up in their search which means they likely won’t lend to you.

One important thing to note here is that many people you speak to simply won’t understand that you don’t have a credit score at all—as anyone who is born in the U.S. would have had one (a poor one, at that).

How Is a Credit Score Calculated?

If you do have a credit history, your credit score is calculated based on five key factors. Each of these factors play a different part in getting your score increased.

Scores are divided into brackets which imply your trustworthiness to lenders:

300–579: Poor
580–669: Fair
670–739: Good
740–799: Very Good
800–850: Excellent

The factors that contribute to your score are:

1.Payment History (35%)

This is the most important factor. Lenders want to see that you pay your bills on time. Even one missed payment can have a significant negative impact.

2. Amounts Owed / Credit Utilization (30%)

This looks at how much of your available credit you’re using. Ideally, you want to keep your credit usage below 30% of your total limit. In the US, having more lines of credit (e.g. credit cards, loans) is considered a good thing, and not using it is a true sign of trustworthiness.

3. Length of Credit History (15%)

The longer you’ve had credit, the better. This includes the age of your oldest account, newest account, and the average age of all accounts. This one is going to hurt you in the beginning so try and start cards that you know will be worthwhile in the long-term (e.g. free credit cards with no annual fee) because you will want to hold onto them for life if you can.

4. Credit Mix (10%)

Having a mix of different types of credit (credit cards, auto loans, student loans, etc.) can help your score, especially if you manage them responsibly. As a new arrival, this again will be difficult and only some avenues will be available to you but over time, you will see this improve.

5. New Credit Inquiries (10%)

There are two types of inquiries you can make to request your credit score in an application: a “soft inquiry” or a “hard inquiry”. Applying for new credit or a landlord doing their due diligence can result in a “hard inquiry,” which may lower your score temporarily. Too many inquiries in a short period can signal risk, so you want to be selective with where you apply and give yourself the best chance at the outset.

Why Does Your Credit Score Matter?

In the U.S., your credit score can affect far more than just your ability to borrow money. A good score can open doors—while no score or a poor score can quietly block them.

Here are some things your credit score can impact:

• Renting an apartment – Many landlords run credit checks before approving a lease and you will just not be the ideal candidate.
• Applying for a credit card or loan – Your score affects your approval and importantly also your interest rate.
• Setting up utilities or a phone plan – A low or nonexistent score may mean paying a deposit or only being allowed to pre-pay.
• Getting a mortgage or buying a car – Better scores mean better rates and terms and the size of the loan you are offered.
• Employment opportunities – Some employers (in regulated industries) review credit reports however this is less common.

In short: a good credit score can save you thousands of dollars over time, while also making life in the U.S. smoother and more flexible.

What If You Don’t Have a U.S. Credit Score Yet?

If you’ve just moved to the U.S., it’s likely you don’t have a credit score and that's fine! That doesn’t mean you’ve done anything wrong—it just means the credit bureaus don’t have any data to calculate your score. But without a score, you may face challenges so it’s best to start applying for credit as soon as you have done the proper research.

How to Start Building a Credit Score

Whether you’re starting from zero or rebuilding, here are practical ways to get moving:

1. Open a credit builder loan or a secured credit card – This is one of the easiest ways to build credit if you don’t qualify for a traditional credit card yet.
2. Always pay on time – Your payment history has the biggest impact on your score.
3. Keep balances low – Use only a small portion of your available credit if you get a credit card and pay it off prior to the final due date if you need to use more.
4. Avoid applying for too much at once – Too many applications can ding your score so you should be extra selective.
5. Monitor your credit – Use free apps or services to track your progress and spot issues early like CreditKarma.

Your credit score may just be a number, but in the U.S., it holds serious weight. Building a strong score can unlock financial freedom and opportunity—and it all starts with understanding how the system works.