Credit Q&A: How Is My Credit Score Calculated?

Jeanine Skowronski

Q: How exactly is my credit score calculated?

A: Credit scoring models are numerous and also fairly nuanced so how a score is determined will vary, depending on whose doing the calculations. However, most models look at the same major categories:

Payment history. This involves whether or not you’ve paid your bills on time and how long any existing delinquencies have been left to linger.

Existing debt. Since a lender is generally pulling credit to see if you’re going to pay back a prospective loan, scoring models look at how much debt you already have on the books. Lenders also factor in how much credit you are using versus how much credit you have available to you, which is something we frequently refer to as the credit utilization ratio.

Age of credit report. Commonly referred to as “time in file,” this category is determined by both the age of your oldest credit line and the average age of all the accounts appearing on your credit report.

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Types of credit on the books. Credit is typically divvyed into two categories. Revolving accounts (i.e. credit cards) limit the line of credit, but have balances that fluctuate. Installment accounts, like car loans or mortgages, require consumers to pay a fixed amount each month until the entire balance has been depleted. Top credit scorers have a careful balance of both accounts on record.

New credit activity. This involves credit card inquiries generated whenever a consumer applies for a new line of credit and whether or not a new account was actually opened.

The weight assigned to each of these categories will vary from system to system as will the terminology used to tag each component. FICO, for instance, refers to existing debt, which accounts for 30% of its score, as “amounts owed.”

VantageScore, on the other hand, refers to this category as “total of balances,” which only accounts for 9% of the score, largely due to the fact that credit utilization has its own separate category.

You can find more complete breakdowns of the FICO scoring model and the Vantage Score model on their respective websites if you want to get a better idea of what categories tend to hold the most weight. (Generally speaking, however, this involves your payment history and your credit-to-debt ratio.)