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What is a Credit Score?

Credit scores are numeral models that help lenders determine how likely it is that you will pay back a loan on time. You have many different credit scores including the FICO® and VantageScore. Each of these credit scores use a unique mathematical formula which is called a scoring model. Credit scores will typically range from 300 to 850. High scores mean you have good credit. Don’t have a credit score? Read this to know what you should do.


If you apply for a mortgage, auto loan, credit card, or other credit products, the lender will use your score to decide if they will offer it to you. Your credit score also impacts the interest rate you receive and how much money they’re willing to lend or your credit limit. Other companies use credit scores too. For example, an insurance company may use it as a factor that decides what your insurance rate is.

What is a Credit Report?

Credit reports are an important part of how credit scores are calculated. A credit report is history of debt repayment and management. It includes information like how much debt you have and all the credit accounts you’ve had over the years.   If you apply for a loan or credit card, your credit report also keep track of this. These requests are known as a “hard inquiry” because the lender has your permission to check your credit due to your application. “Soft inquires” occur for various other reasons like checking your credit, a lender pre-qualifying you for a credit product, or a company that you have a relationship with checking your information. These types of inquires don’t’ affect your credit score but they show up on your credit report.   Lenders and other entities supply the information that is contained within a credit report. For example, if you have mortgage loan then your lender is sending information about your monthly payment history and balance information.  You can get a free copy of your credit report from each of the three credit reporting agencies: Equifax, Experian, and TransUnion. It can be done by visiting and you’re entitled to one free report per year from each agency. It’s recommended that you check it at least one a month to make sure the information is accurate.


How are Credit Scores Calculated?

The actual calculation of a credit score is not known for any of the credit scoring models. However, it is known what factors are used to help calculate a credit score. These factors are the same for each type of credit score, though their weight is different. Here, we will talk more specifically about the weights given to the FICO(R) score.


Payment History – 35%. Your payment history is your track record of paying your credit accounts on time. This factor carries the single biggest weight of 35% of your FICO score. Therefore if you miss one payment, this could have a big, negative impact on your credit score.



Accounts Owed – 30%. Commonly this is called your credit utilization. This is the percentage of credit you’re using (the balance that you carryover each month) versus how much credit you have. Let’s say you have a credit card that has a $1000 credit limit. If you are carrying a balance of $300, then that means you’re credit utilization is 30%. Keep in mind that your accounts owed looks at credit utilization ratio on all your revolving accounts.



Length of Credit History – 15%. Credit history looks at how long you’ve had credit accounts which includes the average age of your accounts, the age of your oldest account, and the age of your newest account. It also considers how long it’s been since certain accounts have been used and the length of time specific credit accounts have been opened.


Credit Mix – 10%. Credit cards, installment loans, mortgage loans, and other credit products are also a factor in how your credit score is calculated. It accounts for only 10% the weighted calculation and you don’t have to have one of each these products.


New Credit – 10%. How many credit accounts you open over a period of time is the final factor that is used to determine your credit score. It looks riskier to a lender or creditor if you open a several accounts over a short period. You should avoid opening up new accounts too fast if possible.


Where can I view my Credit Score?

Your credit score is actually not available on your credit report. Many credit card issuers provide access to your credit score to their cardholders. Please note that issuers may provide different credit scores from each other. Generally you can check your credit score by accessing your issuer’s website or app and finding the section for credit score.   There are also some free credit score resources that are available through some issuers that don’t require you to a cardholder. These free resources include CreditWise from CaptialOne, Discover Credit Scorecard, and Chase Credit Journey.



How can I build good Credit?

Now you know what a credit score is, how it’s calculated, and where to access it. But how do you establish good credit? Here are some tips and habits that will help maintain and build a good credit score.

  • Pay all your credit cards and loans on time. This is the heaviest influencer of all the factors and also the easiest to control. You can sign up for autopay with just about every creditor out there. Don’t risk missing a payment because you forgot and take advantage of this service.
  • Don’t lose your oldest account. Even if you don’t use that student credit card you’ve had for over ten years, keep it open.
  • Keep your credit utilization low. The general recommendation is to keep it under 30%. Besides that, it’s just a good idea to not carry a lot of debt. Credit cards in particular have higher interest rates that can really add up.
  • Learn from other experts in the industry. Aside from The Phenix Group credit repair blog, Feedspot also shares a list of informative credit repair blogs that you can read.