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A Foolish Take: How Your Credit Score Is Calculated

By John Maxfield – Jun 19, 2017 at 12:00PM

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Credit agencies look at five factors to determine your credit score.

Whether you like it or not, your credit score is incredibly important.

It dictates the interest rate you'll be offered on a mortgage or car loan. It determines whether you qualify for a credit card. Phone, television, and internet service providers often review prospective customers' credit histories. Even employers have started to consider the creditworthiness of job applicants.

The good news is that it isn't hard to raise your credit score if it's low. To do so, however, it helps to know how your credit score is calculated.

The five components of a person's credit score.

Data source:

As this shows, your credit score is a function of five variables, which are weighted by importance:

  • Payment history is the most important, making up 35% of your score.
  • The amount of debt you already carry accounts for 30% of your score.
  • The length of your credit history is next, coming in at 15%.
  • Your credit mix weighs in at 10%, referring to the types of credit you've used in the past (mortgage, credit cards, etc.).
  • And recently opened accounts make up the final 10%.

If you want to improve your score, you'd be well-advised to address any deficiencies in this order.

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