Understanding Your Credit Score

Understanding Your Credit Score

You know how important your credit scoe is to your financial health, but do you know how your credit score gets calculated?

There are five categories that make up your FICO credit score, the model that most lenders use. Knowing what gets calculated – and how – will help you understand how to keep your credit score healthy.

Understanding your FICO Score

10% new credit

10% credit mix currently in use

15% length of credit history

35% payment history

30% amount owed

Payment history – Your payment history is the most important part of your credit score, comprising more than 1/3 of your total credit score. 

Amount Owed – The amount of debt you owe represents 30% of your credit score. Less debt is better, in terms of a higher credit score.

Length of Credit history – The length of time your accounts have been open and how long since the most recent action determines your credit history length. If you don’t have a credit history, you should begin using a credit card – and never miss a payment.

Credit Mix Currently in Use – The different types of credit (installment loans and/or revolving credit) that you are using makes up 10% of your FICO score.

New Credit – 10% of your credit score is made up of new credit that you’ve recently taken on. Too much new credit could lower your credit score.

The 3 Major Credit Bureaus

There are 3 major credit bureaus, and each calculates their own score using FICO software. Your score may vary slightly based on the information each bureau has.

TransUnion – scores range 300-850
Experian – scores range 300-850
Equifax– scores range 340-820

Credit score ranges

Worse <520

Very poor 520-579

Poor: 580-619

Below Average: 620-679

Average: 680-719

Above Average: 720-739

Very Good: 740-779

Excellent: 780-850

Credit Score Fast Facts

Did you know?

Married couples have separate FICO scores.  

You need a credit history before you have a credit score. 

It’s against the law to consider aga, race, religion and national origin when determining your credit score.

What Damages your Credit Score?

Missed payments

Overspending using credit

Closing credit cards that have a positive credit history

Applying for credit too frequently

Replying only on one form of credit to build credit history

Negative Credit Score Items

How long do negative items impact your credit score?

-    Up to 2 years – Inquiries, Credit Checks

-    Up to 7 years – Charge-off Accounts, Closed Accounts, Collection Accounts Judgements, Late Payments, Tax Liens, Bankruptcy/Chapter 13

Free Annual Report

All Americas are entitled to one free credit report in every 12 month period from each of the three credit bureaus. Visit AnnualCreditReport.com to access your free report. Requesting your credit score can also be requested – but for a fee.

TransUnion, Equifax and Experian logos are registered trademarks of TransUnion, Equifax and Experian respectively.