How Is Your Credit Score Calculated?

July 1, 2024

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If you’re planning on buying a home, improving your credit score can make a huge difference in the interest rate you’re able to get on your mortgage, which can make a huge difference in your monthly payments.

But it can be challenging to improve your credit score if you don’t know how that score is determined. Understanding what factors the credit bureau uses to determine your credit score can help you figure out where you can actually improve, and what changes are going to have the most impact.

So how, exactly, do they calculate your score?

A recent article from reviewed the main variables credit bureaus use to determine credit score, including:

  • Payment history. Your payment history, and how many payments you’ve made on time, plays the biggest role in your credit score, accounting for 35 percent.
  • Debt-to-income utilization. This looks at how much debt you’ve accumulated vs. how much available credit you have access to. Keeping your debt-to-income utilization below 30 percent is ideal. Anything above that will work against you, and this metric accounts for 30 percent of your credit score.
  • Length of credit history. Lenders want to lend to people with established credit history, which is why your length of credit history accounts for 15 percent of your credit score.
  • Other factors. The other factors used to calculate your credit score include credit mix (10 percent) and new credit accounts (10 percent).