How Your Credit Score Is Calculated


A credit score is simply a calculated set of numbers to help financial lenders and other services to accurately determine how a potential client might perform relative to meeting their financial obligations. It helps them predict such things as whether or not someone is likely to pay a bill on time.

Calculating a credit score is a sophisticated process due to the many factors that must be considered prior to assessing it. To add to the confusion, there are several different kinds of credit scores as well. However, they basically all use the same formulas in order to achieve their results.

Credit Reports

It’s important to note that credit scores come from the data contained in credit reports. Credit reports are primarily generated by three major agencies regarding consumer reports: TransUnion, Experian, and Equifax. It’s in your best interest to periodically review your credit report so you can see how your score is calculated as a result of the information it contains.

As previously mentioned, there are various credit scores circulating out there. Most of those used by lenders and insurers are produced by either VantageScore Solutions or FICO. Both of these industries determine credit scores by evaluating vast amounts of data over time to decide which factors correlate to those clients who promptly pay their bills and the common denominator between those who do not.

Everyone Has Several Scores

Even amid FICO and VantageScore scores, there are various models that can be personalized to suit certain purposes. That is to say, no one has just one VantageScore or one FICO score. At any given time, several scores may be calculated depending on the data listed in the credit report.

The Five Key Factors That Go Into Calculating Credit Scores

Payment History

Credit scores evaluate certain criteria relative to paying bills including:

  • The number of late payments
  • How late were the payments (For example: 30, 60, or 90 days late)
  • How recent have the issues occurred

Recent, frequent, and critically delinquent accounts play a huge role in arriving at a score no matter what the amount.
Other negative calculating factors include bankruptcy, foreclosures, collection accounts, and charge-offs. Payment history is the most critical component in determining a credit score. Typically, it accounts for over a third of the total score.


Debt is generally the second key factor in score calculation. The scoring model will evaluate things like how many open accounts you have with a balance and how close you are to the credit limit for each account. For most scoring models, the overall amount of debt isn’t as important as how it’s managed.

Credit Inquiries

Shopping for new or additional credit will place an “inquiry” on your report and remain on it for two years. Be aware that not all inquiries are the same. For example, a “soft inquiry” doesn’t count or affect your score. These include inquiries generated for employment or insurance reasons, existing credit reviews, or preapproved offers. Thankfully, occasionally checking your personal credit score or report will not affect it either.

Lastly, shopping for student, auto, or mortgage loans are the kind of inquiries that are grouped together and counted as a single inquiry given they are within a certain timeline – two weeks is generally acceptable.
Although inquiries are not a huge contributing factor, they still count. Therefore, be careful when shopping for new credit.


In order to build a solid credit history, it’s beneficial to maintain a variety of accounts. This particular factor evaluates your mix of credit. In other words, it will be harder to get a high credit score if you only have a student loan or a credit card.

Length of Credit History

Your credit score assesses how many years you’ve actually had a credit history, how old is your oldest account, how recent any new ones were opened, and the average age of each of your accounts. The longer your history’s been established the better effect it will have on your score.

What If My Credit Score Is Low?

Now that you understand how your score is calculated, you may be wondering what to do if you do not have the ‘ideal credit score’ – especially for those of you on the market for a new home or vehicle.  There are a number of options when it comes to repairing our credit.  But if time is not on your side there is a great solution for those of you who need a vehicle quickly.  Frank’s Auto Credit of Manchester, CT GUARANTEES your automotive loans – even if your score has been damaged!  Interested? Fill out or convenient online application here!

Have poor credit and but need  a  car?  Contact or (860) 649-3000