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How Do They Calculate My Credit Score?


Your credit score is calculated from many elements in your credit report. That mix of elements includes:

  • 35% payment history
  • 30% amounts owed
  • 15% length of credit history
  • 10% new credit
  • 10% types of credit

Note that your payment history (do you pay your bills on time?) is the largest single factor in determining your score. Your payment history and the amount you owe on both revolving (e.g. credit card) and installment debt (e.g. auto loan) account for almost 2/3’s of your score.

National credit scores have only been around since 1981. They were introduced that year by Fair Isaac Corporation (FICO). The purpose of the FICO score was to create an impartial and consistent way to evaluate credit history—and thereby assess credit risk.

Today your credit score is not only used to determine if you will be extended credit, it also determines how much that credit will cost you. You have 3 different scores, one from each of the major credit bureaus (Equifax, Experian, and TransUnion). The score is calculated by Fair Isaac, but is based upon the data at the credit bureau.

The Federal Trade Commission provides a site for you to obtain a free annual copy of your credit report once a year so that you may review your credit report for errors annual, which is strongly encouraged. The site is Be careful, however, there are a lot of web sites that are imposters where the “free” report comes with strings attached in the form of some service that you are eventually charged for.


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