How Is My Credit Score Calculated?

Credit scores seem pretty simple, right? They’re a three-digit number that conveys your creditworthiness to lenders. You score goes up if you’re being financially responsible, but it can go down if you’re not too careful. But how does it really work? And how is your credit score calculated?

Confused? Don’t worry—we’re here to help you understand the ins and outs of your credit score. Once you get how credit scores work, you might even be able to get your credit score where you want it to be.

How Is Credit Score Determined?

Your credit score isn’t just a random number. It reflects how likely you are to pay a loan back. There are five specific factors that go into how your score is calculated. Let’s break them down:

  1. Payment History: This reflects whether or not you make payments on time on each of your accounts. Payment history makes up 35% of your credit score.
  2. Credit utilization: This covers much of your available credit you’ve used. If possible, stick to 30% or less of your total available credit. Credit utilization accounts for 30% of your credit score.
  3. Credit age: Credit age shows how long you’ve had credit, and how old each of your accounts is. Try not to close older accounts unless they’re full of negative information. Credit age makes up 15% of your credit score.
  4. Credit mix: This covers the types of revolving and fixed-payment credit accounts you hold. Lenders like a diverse credit mix. This factor accounts for 10% of your credit score.
  5. Credit inquiries: This illustrates how many times you’ve applied for new credit in the last few months or years. New credit applications make up 10% of your credit score.

Credit bureaus use information from all five of these categories to build your credit score. The precise algorithms they use are kept under wraps—but there are things you can do to improve your credit score if you understand each score-building factor.

Tip: Some lenders report accounts to all three credit bureaus, while others report to just one or two agencies, so your credit reports won’t look the same across the board. To get an accurate picture of your credit, request reports from each credit reporting agency at least once a year.

1. Payment History

Your payment history—whether you pay your bills on time or not—is the single biggest factor in your credit score. All three credit bureaus hold payment history information on each of your accounts.

So, why is payment history such a major influence on your credit score? In short, because it indicates borrower reliability. If you repay your debts on time, lenders consider you a better risk. 

Missed payments ding your credit score, while continuously on-time payments boost your score. If you miss a payment by accident or because of financial hardship, get back on track as quickly as you can. Over time, the impact of that missed payment will fade.

2. Credit Utilization

The second-largest credit score factor is credit utilization. How much of your available credit you use accounts for 30% of your score. Generally speaking, credit utilization refers to revolving debt—credit cards, store cards or home equity lines of credit, for instance—rather than fixed loan debt.

It’s okay to have a little debt, but try not to use over 30% of your available credit. And whatever you do, don’t max out your cards. Credit card balances are reported on statement cutoff dates, so if you’ve accidentally gone over 30% on any given month, try to make an early payment to reduce your utilization.

Keep in mind that credit utilization is how much you borrow over allyour accounts. If you have one credit card with a $1,000 limit and another credit card with a $2,000 limit, your “safe” utilization amount is about $600 across both accounts—or 30% of $2,000. In other words, you can hold a $600 balance on your $1,000 card and a $0 balance on your $2,000 without messing up your credit, because your credit utilization ratio takes bothcredit limits into account.

Tip: Credit reports aren’t updated in real time. It can take up to 60 days for credit utilization information to show up.

3. Credit Age

Your credit age is based on the age of your oldest account. The older your credit, the more robust this part of your scoring model will get. You don’t have too much control over your credit age, so it only accounts for 15% of your FICO score.

One of the most important things you can do to keep your credit age solid is to not close older accounts. Keep your longest-held accounts open unless you have to close them for a good reason or they’re full of negative information. Lenders like to see that you have a long history of responsibly managing your credit accounts.

4. Credit Mix

Lenders like to see evidence that you can handle numerous types of debt—and that’s why credit mix is part of the FICO picture. Credit mix—the number of different credit cards, personal loans and other kinds of debt you hold—makes up 10% of your FICO score. 

Strictly speaking, there’s no ideal credit mix, but it won’t hurt to hold a couple of different types of accounts. Don’t apply for loans or credit cards arbitrarily, though, because every hard inquiry will ding your credit score a little. If you’re looking to boost your score, focus on credit utilization and payment history before credit mix.

5. Credit inquiries

New credit inquiries make up about 10% of your credit score. In simple terms, every time you make a new credit application for revolving or installment credit, potential lenders pull your credit report. This is called a hard inquiry, which are documented to keep track of how actively you shop for credit.

Hard inquiries are recorded when you apply for loans or credit cards, and can ding your credit. That’s why you want to keep your credit applications to a minimum. Plus, if you shop for credit a lot, lenders think you’re in financial trouble even if you’re not. Hard inquiries stay on your credit report for two years, but they make the most impact on your score in the first 12 months.

Hard inquiries aren’t the same as soft inquiries. Soft inquiries happen when you pull your own credit, or when lenders pre-screen or pre-qualify you for credit offers. They don’t make an impact on your credit score at all.

What Are Some Reasons for a Soft Inquiry?

Here are four reasons you might see soft inquiries on your credit report:

  1. You ask for a copy of your own credit report.
  2. A credit card company reviews your general credit history to pre-screen or pre-approve you for a financial product.
  3. A potential employer views your credit report after you apply for a job.
  4. A lender you already have credit with reviews your report.

Soft inquiries stay on your report for 24 months, but they don’t appear to anyone but you, and they don’t hurt your credit score.

Other Factors That Affect Your Credit

We’ve explored all five official FICO scoring factors—but are there other things that can affect your credit score? In a word, yes—both directly and indirectly. 

Rent and Utility Payments

When they’re paid on time, utilities won’t negatively affect your credit. In fact, you can use the Build It tool from ExtraCredit to add your positive utility bill payment history to your credit report—since they aren’t traditionally reported to the credit bureaus. If you don’t pay your utility bills on time, you may be sent to collections. And collections accounts do have a negative impact on your credit.


Tax liens don’t appear on credit reports any more, but large tax bills can impact your ability to pay other debts. If you fall behind on other bills, late payments and collection accounts can reduce your credit rating. You may be able to negotiate an affordable installment agreement with the IRS if you owe taxes at the end of the year.

Tip: Court judgments and tax liens used to appear on credit reports. In 2017, however, TransUnion, Equifax and Experian decided to stop reporting both types of derogatory marks. In spring 2018, all three credit bureaus removed judgments and liens from consumers’ credit reports.

What Is Considered a Good Credit Score?

Credit scores run the gamut from bad to excellent—and if you know where you stand, you can take steps to improve your financial future. According to Experian, the average credit score in the US is currently 711, which is considered good.

Credit scoring models differ from one another, but the FICO range looks like this:

  • Poor: 300-579
  • Fair: 580-669
  • Good: 670-739
  • Very Good: 740-799
  • Exceptional: 800-850

How Your Credit Score Affects You

A thin credit file or a poor credit history can make it difficult to get credit. Unfortunately, lenders consider people with limited credit or poor credit high-risk borrowers. If you have a poor credit score, you’ll also find it hard to obtain low interest rates, and high-interest loans end up costing more in the long run.

Poor credit scores can make life difficult. If you’re ready to change your financial profile for the better, take a close look at your credit report. Highlight and challenge any mistakes, get payments on track and reduce your utilization to improve your credit score over time. If you have a bigger credit issue or you need help repairing your report, you can work with a credit repair agency.

Improve Your Credit Score

If you’re curious about your credit score, sign up for a free Credit Report Card from You’ll see your VantageScore 3.0 credit score, and you’ll get a basic overview of your credit profile, which you can use to make a credit improvement plan.

Want a more in-depth picture of your credit? In that case, opt for ExtraCredit. You’ll gain access to five useful tools—Build It, Guard It, Track It, Reward It and Restore It—and a whole lot of vital credit-centric information.

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