How are credit scores calculated?

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Credit Score words on a report card with stamp and number 760 to illustrate creditworthiness of an applicant hoping to borrow money in a loan or mortgage

How credit scores are calculated

FICO® Scores are calculated from many different pieces of credit data in your credit report. This data is grouped into five categories as outlined below. The percentages in the chart reflect how important each of the categories is in determining how your scores are calculated.

Your score considers both positive and negative information in your credit report. Late payments will lower your scores, but establishing or re-establishing a good track record of making payments on time will raise your score. Credit scores also take into account public records such as bankruptcies, judgements and tax liens.

How a credit score breaks down

Calculate credit score pie chart, how it is calculated.

  • 30% – Amounts Owed
    • Having credit accounts and owing money on them does not necessarily mean you are a high-risk borrower with a low score. This look at the proportion of your available credit versus your open credit. Are your credit cards maxed out? Using more than 50% of your available credit suggests a higher risk as borrower and therefore a lower score. Try to keep your usage under 10% or 30% for higher scores.
  • 35% – Payment History
    • The first thing any lender wants to know is whether you’ve paid past credit accounts on time. This is one of the most important factors in a credit score.
  • 10% – New Credit
    • Research shows that opening several credit accounts in a short period of time represents a greater risk – especially for people who don’t have a long credit history.
  • 15% – Length of Credit History
    • In general, a longer credit history will increase your score. However, even people who haven’t been using credit long may have high FICO Scores, depending on how the rest of the credit report looks. It takes into account how long your accounts have been established, including the age of your oldest account, the age of your newest account and an average age of all accounts. It also looks at how long it has been you used certain accounts and how long specific accounts have been open.
  • 10% – Credit Mix
    • FICO Scores will consider your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans.

These percentages are based on the importance of the five categories for the general population. For particular groups—for example, people who have not been using credit long—the relative importance of these categories may be different.


Importance of categories varies per person

Your credit scores are calculated based on these five categories. For some groups, the importance of these categories may vary; for example, people who have not been using credit long will be factored differently than those with a longer credit history.

The importance of any one factor in your credit score calculation depends on the overall information in your credit report. For some people, one factor may have a larger impact that it would for someone with a much different credit history. In addition, as the information in your credit report changes, so does the importance of any factor in determining your FICO® Scores.

Therefore, it’s impossible to measure the exact impact of a single factor in how your credit score is calculated without looking at your entire report. Even the levels of importance shown in the scores chart are for the general population, and will be different for different credit profiles. When I run someone’s credit I have access to a credit simulator that can approximate the effect on your score made by particular actions but it is only an estimate.


Your scores only look at information in your credit report

Your credit score is calculated from your credit report. May accounts you might pay on time every month do not report to the credit bureaus. Things like rent, cell phone and insurance are not counted when calculating your credit score. However, lenders look at many things when making a credit decision such as your income, how long you have worked at your present job and the kind of credit you are requesting.



Do you have a question about what you can do to improve your credit? Give me a call and make an appointment for a no-cost consultation!

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