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How is your credit score calculated?

Aug 18, 2023

Credit scores are calculated using the information found in your credit reports. It’s a common myth that you have only one credit score. In reality, credit scores can vary depending on the scoring model used to calculate them.

Your credit score could also vary based on which nationwide consumer reporting agency — Equifax, TransUnion or Experian — provides the data. This is because not all lenders and creditors report to all three agencies. Some report to only one or two, or even none at all. Thanks to all these variables, you have multiple credit reports and credit scores.

Although scoring models vary, they usually consider the following:

  • Payment history
    Your payment history, or how consistently you pay your bills on time, is usually the biggest factor in calculating your credit score. Because it’s such an important component, late or missed payments can have a significant overall impact on your score.
  • Credit utilization rate
    Your credit utilization rate is the amount of revolving credit you’re using divided by your total available credit across those accounts. Lenders often like to see a credit utilization rate at or below 30 percent. Having available credit indicates that you’re only using the credit that you need, which may be a positive sign for lenders.
  • Credit age
    Lenders generally want to see established lines of credit. This means that you should keep credit accounts open (even if you no longer use them) because closing them could shorten the overall length of your credit history.
  • Credit mix
    Credit mix refers to your variety of account types, including credit cards, student loans and mortgages. Maintaining variety, along with a solid payment history, can suggest to lenders that you understand the fundamentals of credit.
  • Amount you owe
    The amount you owe at any given time is the sum of your balances across your lines of credit. It’s typically best to pay off all your balances every month, if possible. Doing so helps keep the amount you owe low and shows lenders that you can make on-time payments.
  • Hard inquiries
    Hard inquiries occur when a lender or creditor checks your credit after you apply for a new line of credit. Frequent hard inquiries can negatively impact your credit score and may suggest to lenders that you are trying to take out more credit than you could reasonably repay.

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