Key Points
- A credit score is a number, usually from 300 to 850, that a scoring model calculates from the data in your credit report to predict how likely you are to repay.
- FICO says its scores weigh payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and credit mix (10%).
- VantageScore 4.0 uses a different blend, led by payment history at 41%, which is one reason you have more than one score.
- Income, age, race, where you live and your job are not part of a FICO Score, and checking your own credit never lowers it.
- The CFPB says you can check your reports from Equifax, Experian and TransUnion free every week at AnnualCreditReport.com.
A credit score is calculated by a scoring model that reads the information in your credit report, such as whether you pay on time and how much of your available credit you use, and turns it into a three-digit number. Most scores run from 300 to 850, and a higher number tells lenders you are more likely to repay.
This guide explains how FICO and VantageScore weigh each factor, what is left out, why your score varies and how to check your reports for free, using Consumer Financial Protection Bureau (CFPB), FICO and VantageScore information. It is general information, not financial advice.
What is a credit score?
The CFPB’s explainer What is a credit score? defines it as “a prediction of your credit behavior, such as how likely you are to pay a loan back on time, based on information from your credit reports.” Companies create the number with a mathematical formula called a scoring model.
Lenders use scores to decide whether to approve a mortgage, credit card, auto loan or other credit, and to set your interest rate and credit limit. Scores are also used for tenant screening and insurance. Usually, a higher score makes it easier to qualify and may bring a better rate or terms.
Where does the data come from?
Every score starts with a credit report from one of the three nationwide credit reporting companies, Equifax, Experian and TransUnion. The CFPB says scoring models typically look at your bill-paying history, unpaid debt, the number and type of accounts, how long they have been open, how much available credit you use, new applications, and any collections, foreclosures or bankruptcies.
FICO says a FICO Score is calculated only from the information in your credit report (the exception is its UltraFICO Score, which can use banking data you choose to share).
How is a FICO Score calculated?
FICO groups the data in your report into five categories and publishes how important each one is, while noting that the weights can vary from person to person.
| FICO factor | Weight | What it looks at |
|---|---|---|
| Payment history | 35% | Whether you have paid past accounts on time |
| Amounts owed | 30% | Total debt and how much of your available credit you use |
| Length of credit history | 15% | Age of your oldest and newest accounts and the average age of all accounts |
| New credit | 10% | Recently opened accounts and recent credit applications |
| Credit mix | 10% | The kinds of credit you have, such as cards, retail accounts, installment loans and mortgages |
Source: FICO, What’s in your credit score?
Payment history (35%)
Payment history is the biggest single factor. FICO says your track record of paying on time tends to be the strongest predictor of whether you will pay future debts as agreed, which is why a lender’s first question is whether you have paid past accounts on time. FICO adds that a good overall history can outweigh one or two late card payments.
Amounts owed and credit utilization (30%)
This category covers how much you owe in total and how much of your available credit you are using. The share of your revolving limits in use is called your credit utilization ratio. FICO says using a high percentage of your available credit can signal that you are overextended, while a low percentage can help. Having debt does not automatically make you a high risk.
The CFPB says scoring models look at how close you are to being “maxed out,” and that experts advise keeping your credit use at no more than 30 percent of your total limit. Closing cards and moving balances onto one card can hurt if it raises the share of your total limit in use. You do not need to carry a balance to get a good score; paying in full each month helps get the best scores and keeps interest costs low.
Length of credit history (15%)
FICO looks at the age of your oldest, newest and average accounts. A longer history generally helps, but FICO says it is not required for a good score if the rest of your report is strong.
New credit (10%)
Opening several new accounts in a short time represents greater risk, according to FICO, especially for people with a short credit history. Each application can add an inquiry to your report. Inquiries stay on your report for two years, but FICO Scores only consider those from the last 12 months.
Credit mix (10%)
FICO considers your mix of cards, retail accounts, installment loans and mortgages. You do not need one of each, and because the category is only 10%, FICO says it most likely will not decide whether you get credit.
How does VantageScore weigh the factors?
VantageScore, the other major scoring brand, also produces scores on a 300 to 850 scale but uses six categories with different weights. In its consumer guide, VantageScore lists these weights for its 4.0 model:
| VantageScore 4.0 factor | Weight |
|---|---|
| Payment history | 41% |
| Depth of credit (age and type of accounts) | 20% |
| Credit utilization | 20% |
| Recent credit | 11% |
| Balances | 6% |
| Available credit | 2% |
Its user guide says the 4.0 model also uses “trended” data, tracking how balances, utilization and payments change over up to 24 months. VantageScore says it can score some people with limited histories who conventional models skip because they require at least six months of history or a recent update to the file.
What is not in your credit score?
FICO says its scores do not consider your race, color, religion, national origin, sex or marital status, your age, where you live, or child or family support obligations. They also leave out your salary, occupation, title, employer and employment history, the interest rate on any account, and the type of credit you are requesting.
Lenders can still weigh your income, job history and the kind of loan you want in their own decision. The score is one input, not the whole application.
Why do you have more than one credit score?
The CFPB says you do not have just “one” credit score. A score depends on the model used, which can vary with the kind of loan; on which bureau supplied the data; and even on the day it was calculated. FICO also has several score versions, and each lender chooses which one it asks the bureau to calculate.
So the number in a free app may not match the one a lender pulls. That gap matters most for big loans; our guide to what sets the mortgage rate you are offered shows how scores feed into pricing.
Do credit checks lower your score?
It depends on who checks. When you look at your own report or score, the CFPB says it does not affect your scores. A hard inquiry, which happens when a lender checks your credit because you applied, typically has a small negative effect. FICO says that for most people one extra inquiry takes less than five points off a FICO Score, though the effect can be bigger if you have few accounts or a short history.
Rate shopping has special treatment. The CFPB says multiple mortgage credit checks within a 45-day window are recorded as a single inquiry. FICO says older versions of its formula group inquiries within any 14-day span and newer versions within 45 days, and that for mortgage, auto and student loans its scores ignore inquiries made in the 30 days before scoring.
How long does negative information stay on your report?
According to the CFPB, credit reporting companies can generally report most negative information for seven years. Bankruptcies can stay for up to ten years, and lawsuits or judgments can be reported for seven years or until the statute of limitations runs out, whichever is longer. Positive, on-time history can stay longer, even after an account is closed.
The CFPB warns against paying upfront fees to “repair” your credit. No one can legally remove accurate negative information. If your report has errors, you can dispute them yourself at no cost.
How to check your credit reports for free
The CFPB says you can get a free report from each of Equifax, Experian and TransUnion once a week at AnnualCreditReport.com, the site authorized by federal law, or by calling (877) 322-8228. You also have a legal right to one free report from each company every 12 months, plus extra free reports in cases such as being denied credit based on your report.
If you are not planning to borrow soon, a credit freeze blocks new lenders from seeing your file without affecting your score; our guide on how to freeze your credit at all three bureaus walks through it.
What helps a credit score over time?
The CFPB says there is no secret formula, but its guidance lines up with the factor weights above:
- Pay every loan on time, using automatic payments or reminders, and get current if you have fallen behind.
- Keep balances low compared with your total credit limits.
- Let a long history work for you by managing accounts well over time.
- Apply only for credit you need, since many applications in a short period can make it look like you are dealing with financial setbacks.
- Check your reports, dispute errors and keep an eye on unused old accounts for identity theft.
For people new to credit, the CFPB points to products such as secured credit cards and credit builder loans, which are designed to help establish a history.
The bottom line
A credit score is a model’s reading of your credit report. FICO puts the most weight on paying on time and keeping balances low, VantageScore does something similar with its own weights, and neither uses your income, age or address. Because models, versions and bureau data differ, expect more than one number. To see how interest rates and lending conditions move the cost of borrowing, follow the LiveNewsWorld Markets Live center.
Sources
- Consumer Financial Protection Bureau, What is a credit score?; How do I get and keep a good credit score?
- Consumer Financial Protection Bureau, What happens when a mortgage lender checks my credit?; How long does information stay on my credit report?; How do I get a free copy of my credit reports?
- FICO (myFICO), What’s in your credit score?; Credit checks and inquiries
- VantageScore, The Guide to Your VantageScore Credit Score; Lender FAQs; VantageScore 4.0 User Guide
