Contributed by Jean Stein, Consultant at CSC Credit Repair in Charleston, South Carolina

How is My Credit Score Calculated?

Maintaining a strong credit score is one of the keys to succeeding financially. Your report determines your ability to rent a house, get a loan, or even land a job in some cases.

Knowing this, you are probably thinking, how is my credit score calculated then? It is an important concept to understand so you can improve it if be. Several factors determine your score, and we will take a look at these in the sections below.

What Do The Numbers Mean?

When you apply for a copy of your credit report, FICO will assign you a number between 300 and 850. That is your score.

The report will also show a record of your credit history which you can study and query if need be. Quite simply though, the higher the number, the better your score.

Why Should My Credit Score Matter?

The better your credit score, the easier it will be to get any sort of credit line. With a good score and history, banks or lending institutions will more readily extend you a loan as well as favorable interest rates.

Making a major purchase such as a car or house is often made easier if you can borrow the money and pay off a loan to the bank. It is these sorts of instances where you want a high score to ensure you get the best terms. Innovo Credit Repair can help!

Prospective landlords, employers, and insurance companies also study your score to determine how stable or responsible you are with your money.

What Factors Determine My Credit Score?

To answer the question of how is my credit score calculated, you need to consider several credit score factors. These factor into the algorithm credit bureaus use to work out your number.

Payment History

Your payment history is one of the most important factors to consider when calculating your credit score. When people look into your credit report, they are trying to figure out the likelihood of you making repayments on time.

Whether you took out a credit account at your local store or are busy paying off your student loans, this will come into consideration. Payments made on time and zero markers against your account will give you a healthy score.

Available Credit

Available credit, or utilization ratio, is the process of looking at the total of credit you have accessible. For example, if you have a credit card account, lenders will look to see how close you are at maxing out this account. The reason for this is to establish how likely it is for you to miss payments and find yourself in arrears.

Basically, the further you are from maxing out an account points to your ability to manage finance responsibly. As a general rule of thumb, it is best to keep your spending below 20% of your total credit limit.

Type of Credit

When determining your credit rating, bureaus will also consider the various accounts you have under your name. These accounts include revolving debt and installment loans, which are mainly made up of student accounts and personal debts.

Lenders and creditors will also look at how many of these accounts you have. Depending on the type of credit, this will have a different reflection on your score. If you find yourself questioning, why is my credit score low? it could be because you are carrying too much debt across too many accounts.

New Credit Applications

Before taking out a new credit account, it’s important to first establish your existing history. When looking at your financial rating, your credit age is largely used to measure the amount of experience you have as a debtor.

Having fewer accounts open is better financial practice as it will appear that you are under less financial pressure. FICO weights your new credit ranking as 10% of your final score.

If you open up several new accounts within a short period this may negatively affect the length of your credit history. It will shorten it, and as a result, drop your score.

Credit History Length

In the simplest terms, credit history refers to the amount of experience you have with using credit. Financial bureaus such as FICO will take this history under advisement, and factor it into the calculations of your score. FICO weights this to make up 15% of your final score.

To work out your credit age, first add up the age of your oldest and newest accounts. After that, divide this by the number of accounts you have. This will also give both yourself and potential lenders an indication of how long you have been using credit, as well as how recently you have opened up a new account.

The purpose of this financial interrogation is to establish how responsible you are at paying off credit obligations over time.

Hard Credit Inquiries

A hard inquiry, otherwise known as hard pulls, occurs when potential lenders and creditors analyze your credit application before making their final decision. It commonly occurs when mortgages, loans, or credit cards are being requested, and the person applying for the funds has to authorize the process.

Multiple hard inquiries within a short time frame could make your account appear as high-risk. Luckily, when making larger purchases or applying for a mortgage loan, multiple inquiries can be counted as one as long as they are within a certain period. This time frame is dependent on the scoring model used but is usually within 14 - 45 days.

No Credit History At All

The last factor to consider when contemplating how is my credit score calculated is to ensure that you do actually have a recorded history. While logic might tell you that not borrowing money, going into debt, or opening accounts will put you in better stead for securing a large loan in the future, the reality is that without a history, your score is going to remain low.


Knowing how your score is calculated and the factors which come into play means you can see to it that you improve your credit rating. The last thing you want is for a bad score to negatively affect your financial stability in the future. Need a little help? Innovo Credit Repair has several offices throughout the Southern United States, including Little Rock (LRC), Montgomery (MGA), Greensboro (GBC) and more!