How Credit Scores are Calculated

Credit scores are based on the information in your credit report, and each bureau has its own formula for calculating your score. In addition, each lender may have its own proprietary formula for calculating a score. So you don't have just one credit score, but rather multiple. Your credit scores can change monthly as new information is reported about you to the bureaus.

While your credit score can be a moving target, and the exact scoring formulas of the bureaus and financial institutions remain a mystery, we do know that the following factors are approximately weighted as such:

Payment History – 35%

Late payments, delinquencies, bankruptcies—anything that indicates a past failure to pay on time will hurt your credit score. The more recent these problems occur, the more they drag down your credit score.

Current Debt – 30%

If your debt-to-credit line ratio is too high (i.e. you’re maxed out on your credit cards), your score will suffer. Keeping your credit card balances low will help keep your credit score high. 

Length of Credit History – 15%

The longer you've had accounts open, the better. Someone without a proven track record of paying down debts is likely to have a lower credit score.

New Credit – 10%

The more credit lines you have available to you, the more lenders will think that you are a risk. This is because you can easily increase your outstanding debt—causing you not to be able to meet all of your payments. Opening too many new lines of credit in a short period of time can significantly lower your credit score.

Types of Credit – 10%

A healthy mix of different types of credit and loans—such as credit cards, retail accounts, installment loans, mortgages, and consumer finance accounts—will boost your score. The exact desired proportion is not entirely clear, so just try to aim for the best mix that works for you (taking care to make timely payments on each account and paying off balances in full when you can).