How is Your Credit Score Calculated?

Most financial institutions in the U.S. use FICO® credit scores as a basis for providing loans to consumers. A score can range from 300 (lowest) to 850 (highest). The credit score, along with other varialbles, impacts pricing adjustments. This means your credit score is is directly related to loan qualification and interest rate. The higher the score, the lower your rate and the more credit you may be able to qualify for in the future. Here’s how this score is broken down:

35% Payment History: How have you repaid your debt in the past? Generally, anything negative will drive down your score and anything positive will drive up your score.
30% Credit Utilization: This focuses on how much available credit you have. The people with the best credit scores typically have anywhere from 7-20% of their overall debt used.
15% Length of History: It is impossible for a person who is new to credit to have a perfect score. You have to prove over time that you can manage credit responsibly.
10% New Credit: How many credit inquiries or new lines of credit (including credit cards) do you have? More is not better in this instance. Be sure to save any new credit you request for when you truly need it. You need to use the credit you have, but use it wisely.
10% Credit Mix: What type of loans do you have? A credit card? An auto loan? A home loan? In most instances, lenders find that borrowers with a good mix of credit may be less of a risk for them.

It is the consumers responsibility to monitor the information being reported.  It’s always encouraged to review your credit report to help build and maintain good credit and check for suspicious activity. By law, you have the right to get a free copy of your credit report every year. To obtain your free report, visit annualcreditreport.com. Your credit score is calculated based on the information in your credit report. There are many ways to get your credit score including: visiting a nonprofit credit counselor, using a credit score service or purchasing your score from a credit reporting company.