How your credit score is calculated

This topic can get lengthy, so we’re going to keep it short and give you just what you need to know about how credit scores are calculated. The first thing to know is that there are many ways of calculating a credit score – these are known as scoring models. The two most prominent scoring models are FICO (which stands for Fair Isaac and Company) and VantageScore. FICO is the most used by lenders; VantageScore is used by folks like Credit Karma and Credit Sesame. Here’s how they’re calculated:


Payment history: 35%

Credit utilization: 30%

Length of credit history: 15%

Credit diversity: 10%

New credit: 10%


Payment history: 40%

Length of credit history and credit diversity: 21%

Credit utilization: 20%

Total balances: 11%

Recent behavior: 5%

Available credit: 3%

Glossary of Terms

Length of credit history. Sometimes known as credit age, this is a measure of how long you’ve had credit. The longer, the better.

Credit utilization. This is what percentage of your available credit card balances you’re using. As a rule of thumb, try to keep it under 15%.

Credit diversity. People use different terms for this (credit use, types of credit, etc.) but what it really measures is how diverse your credit is. More diversity is good: If you’re able to successfully manage multiple types of credit, that’s a sign that you’re responsible and credit-worthy, so your score will go up.

New Credit/Recent Behavior. Basically, this is credit inquiries (but in the case of VantageScore can include newly opened accounts). They don’t like to see a bunch of inquiries or new accounts all at once.

Available Credit. This is the total amount of credit you have available to use, without taking into account your balances.

The Takeaway

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