How Credit Scores Are Calculated

A credit score is a number reflecting the weight given to many of the variables within your credit history.

FICO credit scores are based on five main types of credit information.

1. Past payment history
   Past payment performance such as late payments, collections, judgments and bankruptcies, past due amounts, and tax liens account for approximately 35 percent of the weight of the score.
   
   
2. Outstanding debt
   Credit utilization or the amount of outstanding debt weighs in at approximately 30 percent of a consumer's score.
   
   
3. How long you've had credit
   The length of a consumer's credit history (how long accounts have been open) accounts for approximately 15 percent of the score.
   
   
4. New applications for credit
   Inquiries or applications for new credit equal approximately 10 percent of the score.
   
   
5. Types of credit
   The type of credit (revolving versus finance company accounts, etc.) used equals 10 percent. Originators can recognize which type of credit information is negatively impacting the borrower's score by referring to the reason of factor codes that are issued along with the scores in the report.

Factors Not Included in Credit Scores

US law is very specific about what cannot go into a credit score without being in direct violation with federal law. Information regarding race, religion, gender, marital status, the consumer's job position, income earned, height, weight, type of neighborhood, or birthplace may not be included. There has been a lot of concern regarding discrimination of minorities by the scoring system.

Credit Scores May Vary Among Credit Bureaus

It isn't unusual to have some score variations because each credit bureau calculates your score based solely on the information it keeps on you. One credit bureau may not have as much information about you as another or may not be as up to date -- and they don't share information with each other. So it's better to check credit reports and scores from all credit bureaus.