How Is Your Credit Score Calculated

Young woman holding French bulldog checks how her credit score is calculated on laptop.

Your credit score is your first impression. It's that first photo you feature on your profile, where you want to look your best. A good credit score (FICO 700 or higher) shows that you might be relationship material. Now, how exactly is that credit score calculated?

Payment History (35% Of Your Credit Score)
Tracks if you've paid your bills on time for 7 years, but the past 2 years are weighed more heavily. Kind of like looking at someone else's social profile. You don't overthink their 2010 activities, but you 100% judge them on what they posted last week.

Bottom line: Pay on time, all the time.

Amounts Owed (30% Of Your Credit Score)
Shows how much you owe against how much credit you have available. Lenders like to see you using 25% of less of what you could borrow. So if you have a $10,000 credit line, don't owe more than $2,500.

Bottom line: Don't max yourself out.

Length Of Credit History (15% Of Your Credit Score)
Would you date someone who's never been in a long-term relationship? Lenders like to see a long track record, but if you're just starting out, move slowly. If you open too many new accounts at once, you'll lower your average account age.

Bottom line: Keep your oldest credit card, even if you're not using it. And stay friends with your exes; life's just easier that way.

Types Of Credit Used (10% Of Your Credit Score)
Aim for a mix of both credit cards and loans (car, home, business, student). Don't get unnecessary credit, but establish diversity over time.

Bottom line: Variety is sexy.

New Credit (10% Of Your Credit Score)
The number of accounts you've opened recently, and how many potential lenders have checked your credit in the past 12 months. Taking on too much new credit makes it looks like you're in financial trouble. And no one likes looking desperate. If you're applying for a large loan like a mortgage, avoid opening smaller accounts beforehand. Bottom line: Keep it classy and pursue one option at a time.

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