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How Is My Credit Score Calculated?

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How are credit scores calculated?

You can get a free credit score almost instantly from a number of sources. But figuring out just how credit scores are calculated isn’t as simple.

The basis of any of your credit scores is easy enough to figure out. It’s your credit report. More specifically, the data from your credit report is plugged into an algorithm that spits out a number on a set scale. Voila: your credit score. Beyond that, it gets complicated.

The Five Credit Scoring Factors

Think of credit scoring algorithms as a secret chocolate chip cookie recipe — the companies that create the cookies (credit scoring models like FICO or VantageScore 3.0, for example) are understandably not keen on sharing the exact recipe. But, they do share some of the important things consumers need to do in order to earn a good credit score — the five major credit scoring factors.

These are the things you should focus on if you want to build and maintain a credit score that can help you get a mortgage, buy a car, get a credit card and achieve a whole host of other financial goals. (You can see where you stand on the five major factors by getting a free credit report summary, complete with two free credit scores, on You need quality ingredients to make an amazing cookie, and the five major credit scoring factors are your ingredients. Here’s what you need to know.

Payment History

Your payment history is the largest influencer of your credit scores. In fact, it makes up roughly 35% of your credit scores — more than any other single factor — so it’s quite important. Payment history is exactly what it sounds like: the record on your credit reports of whether you pay your bills on time or not.

The payment history appears on your credit reports from the three major U.S. credit reporting agencies — TransUnion, Equifax and Experian. The history that’s considered comes from your credit card payments, installment loans (like a car payment), finance company accounts and mortgages.

And the reason this aspect of your scores carries such a big weight is because it best reflects whether you’ll repay your loans on time or if you’re going to be a risk in the eyes of lenders. If you’ve missed a payment here or there, it will have a negative impact, though that impact fades with time as long as you don’t make any other late payments in the meantime. And if you have a pristine repayment history, congratulations — but don’t expect perfect scores, as there are still four other factors to consider.

Negative items that could lower your score: Late or missed payments, accounts that go to collections, liens, foreclosures, bankruptcy and judgments.

Debt Usage

The amount of debt you carry is the second largest influencer on your credit scores, making up roughly 30% of your scores. Having a small amount of debt won’t damage your scores, but you don’t want to max out credit cards if you’re trying to improve your credit.

So how do you know where the debt sweet spot is? The general rule is to keep the amount of debt you owe on your credit cards below at least 30%, ideally 10%, of your available credit line. (You can read this guide to learn more about how much debt is too much debt.) Keep in mind that this ratio of the credit you’re using to your total credit limits, aka credit utilization, is determined based off of the credit card balances reported to the credit bureaus, which are often your statement balances. This confuses many people who pay their credit cards in full every month — their credit report shows a balance, but they know they’re paid in full. The amount that’s reported to the credit bureau, NOT the balance you’re actually paying interest charges on, is what matters for your credit utilization. Some people opt to pay off their credit cards before the statement balance is created in order to show a $0 statement balance and a low utilization.

Negative items that could lower your score: Things that will make you look like a high credit risk, like having maxed-out credit cards or too many accounts with high balances.

The Age of Your Credit

This aspect of your credit scores considers the age of your accounts, not your age.  How long you’ve managed credit is one determiner of your credit scores that you have very little control over, as time is the biggest influencer.

This factor accounts for roughly 15% of your credit scores and looks at your track record of how long you’ve had various credit accounts and how you’ve managed them during that time. The longer you’ve had credit, the better. Of course, no matter how long you’ve had the credit, managing it well is still quite important.

Negative items that could lower your score: Recently opened accounts that don’t have a track record, no credit history or very little history.

Types of Accounts

The different types of accounts appearing on your credit history, also called your “credit mix,” make up about 10% of your credit scores. Two major account types are considered — revolving credit (accounts with different payments each month based on a balance, like credit cards) and installment accounts (a loan with a fixed payment over a given span of time, like student loans or a mortgage).

There is no real “ideal” version of a credit mix, as what’s right for you might not work as well with someone else’s credit profile. It isn’t essential to have each one, but it’s a good idea to have a variety to show you can responsibly manage different types of debts.  

Negative items that could lower your score: Only having one type of credit account like credit cards in your credit history.

Your History of Applying for Credit

The number of credit inquiries appearing on your history makes up about 10% of your credit scores as well. Basically, this is tracking whenever your credit reports are pulled. That means every time your credit reports are reviewed, like for a new credit card or loan application, it is documented. This tells lenders how actively you’re shopping for credit and how frequently.  

There are two general categories of inquiries that can appear on your profile — hard inquiries and soft inquiries.

Hard inquiries appear when you apply for some form of credit from a lender. This can include a car loan, student loan, mortgage, new credit card (whether applying online, from a “pre-approved” mail offer, or retailer at the register) and more. The best way to think of this is when you purposefully choose to have your credit reviewed in order to get a new line of credit. These inquiries stay on your credit reports for 2 years and can be seen by lenders or anyone who pulls your reports.

Soft inquiries are a record of having your credit pulled for a reason other than determining your eligibility after a credit application. This can include when you ask for a copy of your own credit reports (which you can do for free once each year by visiting, a promotional review (in order to send you information about a credit card pre-approval), potential employers looking at a version of your credit reports as part of a job application process, or a lender you already have credit with reviewing your reports. These inquiries only stay on your reports for 6 months and don’t appear to anyone who reviews them, other than you. They also do not impact your scores, but are included on your credit reports so you can know who’s looking at your credit profile.

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