5 Factors Taken Into Account When Calculating A Credit Score
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Reviewed by Calculator Editorial Team
Your credit score is a numerical representation of your creditworthiness, used by lenders to determine whether to approve your loan applications. While the exact scoring models vary between credit bureaus (Equifax, Experian, and TransUnion), they all consider five key factors. Understanding these factors can help you improve your score and manage your credit effectively.
1. Payment History
Payment history accounts for 35% of your FICO score and 30% of your VantageScore. This factor tracks your record of paying bills on time, including:
- Credit card payments
- Loan payments
- Utility bills
- Medical bills
Late payments, missed payments, or collections can significantly lower your score. On-time payments demonstrate financial responsibility and improve your score over time.
Tip: Set up automatic payments to ensure you never miss a due date.
2. Credit Utilization
Credit utilization (30% of FICO score, 25% of VantageScore) measures how much available credit you're using compared to your total credit limits. It's calculated as:
Ideally, keep your utilization below 30%. High utilization (over 50%) can hurt your score. For example, if you have $10,000 in available credit and use $4,000, your utilization is 40%.
Tip: Pay down balances to reduce your utilization ratio.
3. Length of Credit History
This factor (15% of FICO score, 20% of VantageScore) considers how long you've had credit accounts open. A longer history shows lenders you're a reliable borrower. New accounts can temporarily lower your score.
For example, if you've had a credit card for 10 years and a car loan for 5 years, your length of credit history is 10 years.
4. Credit Mix
Credit mix (10% of FICO score, 15% of VantageScore) evaluates the types of credit you have. A healthy mix includes:
- Credit cards
- Installment loans (e.g., car loans)
- Mortgages
- Retail accounts
Having different types of credit shows lenders you can manage various types of debt responsibly.
5. New Credit
New credit (10% of FICO score, 10% of VantageScore) considers how recently you've applied for new credit. Opening too many accounts in a short period can lower your score.
For example, applying for a credit card and a personal loan within a month might temporarily lower your score.
Tip: Space out new credit applications to avoid score drops.
How Credit Scores Are Calculated
While the exact scoring models are proprietary, credit bureaus use these five factors to generate your score. The weights vary between FICO and VantageScore models:
| Factor | FICO Weight | VantageScore Weight |
|---|---|---|
| Payment History | 35% | 30% |
| Credit Utilization | 30% | 25% |
| Length of Credit History | 15% | 20% |
| Credit Mix | 10% | 15% |
| New Credit | 10% | 10% |
Your score typically ranges from 300 to 850, with higher scores indicating better creditworthiness.
FAQ
How often does my credit score change?
Your credit score can change daily based on new information reported to credit bureaus. Payment history changes have the most immediate impact.
Can I check my credit score for free?
Yes, you can check your credit score for free through annualcreditreport.com or services like Credit Karma and Credit Sesame.
What's the best credit score?
The highest possible score is 850, but most lenders consider 720+ excellent and 670+ good. The exact cutoff varies by lender.
How long does it take to improve my credit score?
Improving your score takes time, typically 6-12 months, depending on the changes you make and how quickly they're reported.