How Is My Credit Score Determined?

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Have you ever asked yourself “How is my credit score determined”? The answer is complex but it can be broken down into a more easily understood overview.

Each of the three major credit bureaus, Experion, Transunion, and Equifax, use different methods for calculating your credit score. No one outside of these companies knows the exact process and formulas they use. Even still the score between the three shouldn’t vary too greatly. As a guideline here are the factors that are used to determine your credit score.

How is My Credit Score Determined: Credit Score Chart

How you pay your bills 35%

The most important factor is how you’ve paid your bills in the past. The most recent activity is weighed most heavily. Paying on time and keeping your accounts in good standing is very important to a good credit score.

How much you owe and your available credit 30%

The total amount you owe on your mortgage, car loans, and credit card balances. The amount of credit available is also taken into consideration. If you have a large number of cards all pushing the credit limits you could be considered a risk. Maxing out your cards can hurt you. Keeping a low balance and paying on time will help your credit score.

The length of credit history 15%

The longer you’ve had a credit history, especially a good one, the better. Additional points are given if you’ve been with the same creditors for a long time, it shows stability.

Mix of credit 10%

A variety of credit is a good thing. Showing you can pay on installments, such as a car loan, and paying on credit cards, which is a revolving loan shows flexibility. The more varied the sources the better, as long as you are paying on time.

New credit applications 10% 

This shows that you have an interest in acquiring new credit. Don’t go overboard but new credit in addition to your established credit shows growth.

These are the five key factors in determining your credit score. There’s no need to obsess over each individual factor but they are important to be aware of. Keep your payments on time and under the limit and you will do wonders for increasing your score.

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