How Your Credit Score Is Calculated

These days, having a good credit score is key to gaining access to all kinds of things. Because of this, of course, it behooves you to do whatever you can to get your score up as high as possible. And learning exactly how a credit score is calculated is important if you want to know what you have to do to boost your score and open all sorts of new doors for you as a consumer.

What Exactly Is a Credit Score?

A credit score is a three-digit number that guesses, in essence, how you’ll pay your bills. It can range from 300 to 850 and a good credit score is considered anything above 680.

What Is Used to Calculate Your Score?

When a financial lender or creditor is calculating your credit score, they look at five things, each of which carries a different weight in determining your score. They are as follows (percentages are approximate):

  • Payment history: counts for 35 percent
  • Debt level: counts for 30 percent
  • Length of credit history: counts for 15 percent
  • Inquiries: counts for 10 percent
  • Mix of credit: counts for the last 10 percent

Payment History

When looking at your payment history, lenders want to ensure that you’re going to pay them back. They are simply looking at whether or not you pay back your bills, and if you do so on time. As with most things, lenders tend to be more forgiving if you missed a payment or two in the past than if you’ve missed payments in the last few months.

Debt Level

Your debt level is how much debt you have compared to how much of a credit line you have. The closer your debt is to the credit line, the lower your credit score will be. Experts say to keep your credit balance at 30 percent of your limit to keep a good credit score.

Length of Credit History

Your length of credit history is pretty straightforward — it’s the amount of time you’ve had credit. Remember that credit card you got at 18? It’s a good idea to keep it and use it once in a while. Having paid off accounts for a long time is favorable to your credit score number.


Whenever a lender accesses your credit history, it shows up on your credit report as an inquiry and consequently affects your credit score. This happens every time you apply for a new credit card or a new loan. The fewer number of credit inquiries, the better. Some creditors see a large number of inquiries as a sign that you might be taking on too much debt.

Mix of Credit

Your having a mix of credit is a favorable sign in the eyes of future lenders. They like to see that you can manage your credit, and different forms of it. It’s OK to have a couple of credit cards, as long as you pay them off in a timely fashion. It’s also good to have loans that you pay off on time, such as a car loan, student loan and mortgage. These all help create a mix of credit that lenders look for.

Using all of the aforementioned factors, your credit score is determined. While it’s not an exact formula or science, the five items that are considered are used as indicators to predict how you will pay your future bills. And in the end, the greater your credit score, the better.

Remember, to help ensure a high credit score, always pay your bills on time.