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What is My Credit Score? How is a Credit Score Calculated?

by Gerri Detweiler

How My Credit Score is Calculated

What is my credit score?” is a question we’re asked all the time. It’s often followed by “How is my credit score calculated?” Both are important questions that, when you understand them, can help you build and keep strong credit – and save a lot of money as a result.

A credit score is a set of numbers calculated to help lenders and insurance companies predict how current or future customers might behave. Lenders use credit scores to help answer questions like, “Will this customer likely pay his bill on time? How profitable do we expect this account to be for us?” Or, in the case of an insurance company, the question might be “Is she more likely to file a claim?”

Credit scoring can get very technical, because there are many factors that go into calculating credit scores, and there are many different credit scores out there. But they all take into account some basic factors. If you understand those, you’ll have a good overview of how these formulas work. We’ll look at those factors in a moment.

Before we do, it’s important to point out that credit scores are calculated using information in credit reports. Credit reports are compiled by three major consumer reporting agencies: Equifax, Experian, and TransUnion. If you want to understand your credit scores, it’s helpful to get your credit reports so you can see what information is being used to calculate your scores.

As we just mentioned, there are many different credit scores out there. The majority of those used by lenders and insurers are created either by FICO or by VantageScore Solutions. These companies calculate credit scores by taking a look at large amounts of credit report information over time to see what factors are associated with consumers who pay their bills on time, and what kind of things those who don’t have in common.

You Have Many Credit Scores

You know how a car comes in different models? If you want a Prius, you can get a Prius or a Prius c, v or or plug in. They are all hybrid vehicles, but each model is a little different. And of course, you can customize the car you buy to some extent by picking different features to go with the model you choose.

The same thing applies to credit scores. Even among VantageScore and FICO scores, there are different models and they can be customized for specific purposes. In other words, you don’t have a single FICO score or one VantageScore. There are many scores that can be calculated at any given time, based on the information in your credit reports.

The Five Main Factors

Remember, though, we mentioned that there are certain factors that tend to impact credit scores, no matter which credit score model is being used.

Payment History

Here, scores will look at things related to how you pay your bills such as:

  • How many late payments the credit report lists.
  • How late they were (30, 60 or 90 days for example).
  • How recently those problems occurred.

Frequent, recent and severely delinquent accounts have a greater impact on the score, regardless of the amount.

This part of the score also takes into account serious negative items such as charge-offs, collection accounts, foreclosures, bankruptcy etc. Payment history is the most important factor in calculating credit scores. It often account for more than a third of the score.


This is usually the second most important factor behind payment history. For this factor, the scoring model will look at factors such as how many accounts you have with balances, and how close you are to your credit limits on each of your credit cards. The total amount of debt you carry less of a factor, though, in most scoring models. Instead, it’s how you manage that debt that counts most heavily.


When someone accesses your credit information, an “inquiry” is placed on your credit report and remains there for two years. Not all inquiries affect your credit scores, though. So-called “soft” inquiries don’t count, for example. These include those generated for preapproved offers, when your existing creditor reviews your account, or those for insurance or employment purposes. And it doesn’t hurt to check your own credit report or score either, so you shouldn’t worry that monitoring your credit scores will somehow hurt them.

Finally, if you are shopping for a mortgage, auto loan, or student loan, each of those types of inquiries will be grouped together and count as one – provided they are confined to a short period of time. (The specific amount of time varies depending on which scoring model is used, but if you shop within a two week period, you should be fine, regardless of which one is used.)

Inquiries are not a major factor, but they do count. If you are hoping to get a mortgage or car loan – loans where every point can count – in the near future, you may want to be careful about shopping for new credit to avoid unnecessary inquiries.

Types of Accounts

To build a strong credit history, it’s helpful to have a variety of different types of accounts. This factor looks as the mix of your credit, including whether you have both revolving accounts such as credit cards and installment accounts such as a mortgage, car loan, and/or student loans. You don’t need to have all of those accounts, but if you only have a credit card or a student loan, for example, it will be tough to get a very high credit score.

Age of Credit History

Here is one place where old age definitely counts! The score will look at how long you’ve had a credit history, the average age of all your accounts, how recently you have opened new accounts, and how old your oldest account is. The more established your credit history, the better.

What About Me?

How well are you doing on each of these factors that make up your score? Find out by getting your credit score for free using’s free Credit Report Card. (This is not a trial offer; no payment information is required). Along with your score, you will also get a grade for each of the main factors that make up your score, as well as helpful information for what to do if your score isn’t strong in some areas.

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  • Meet Our Expert

    gerri_detweiler GravatarGerri Detweiler is's Director of Consumer Education. She focuses on helping people understand their credit and debt, and writes about those issues, as well as financial legislation, budgeting, debt recovery and savings strategies. She is also the co-author of Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights, and Reduce Stress: Real-Life Solutions for Solving Your Credit Crisis as well as host of
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