How Credit Scores Are Calculated

Credit scores are calculated by software that reads the information in your credit report and turns it into a three-digit number. For FICO scores, that information falls into five categories: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and credit mix (10%). The exact formula is proprietary, but knowing what each category measures tells you where your effort pays off most.

Below, you’ll find what each factor looks at, an example profile scored factor by factor, and the common myths that lead people to waste effort.

The five FICO factors at a glance

myFICO publishes the general weight of each category for the population as a whole:

Those percentages are averages. FICO notes that the importance of each factor varies from person to person. For someone with a short credit history, for example, the factors balance differently than for someone with 20 years of accounts.

1. Payment history (35%)

This is the single largest factor, and it answers one question: do you pay as agreed? It includes your record on credit cards, retail accounts, installment loans and mortgages, along with serious negative items such as collections and bankruptcies.

A few details matter:

• Severity. A payment that’s 90 days late hurts more than one that’s 30 days late, and a collection or bankruptcy is more serious still.
• Recency. According to myFICO, the older a credit problem, the less it counts. A late payment from five years ago weighs less than one from last month.
• How long it stays. The CFPB notes that late payments generally stay on your credit report for about seven years, and some bankruptcies for about ten.

The practical takeaway: one late payment isn’t the end of the world, but it’s the factor you can least afford to neglect. Automatic minimum payments are a simple safety net.

2. Amounts owed (30%)

This category looks at how much you owe, but the key piece for most people is credit utilization: your revolving balances divided by your credit limits. Using a large share of your available credit can signal that you’re stretched thin.

FICO considers utilization both across all your cards and on each individual card. It also looks at how many accounts carry balances and how much you still owe on installment loans compared with the original amounts. Our guide to credit utilization goes deeper on how this is measured and how to lower it.

The good news is that utilization has no long memory in most FICO versions. It’s based on the balances currently reported, so paying balances down can help your score fairly quickly.

3. Length of credit history (15%)

This factor considers how long your accounts have been open, including the age of your oldest account, the age of your newest account and the average age of all your accounts. A longer history gives the model more evidence about how you handle credit.

You can’t speed this one up, but you can avoid setting it back. Opening several new accounts at once lowers your average age, and closing an old card can, over time, affect the age picture too.

4. New credit (10%)

When you apply for credit, the lender usually makes a hard inquiry. According to myFICO, inquiries stay on your report for up to two years, but FICO scores only consider inquiries from the last 12 months.

Two important exceptions:

• Checking your own credit is a soft inquiry and doesn’t count.
• Rate shopping is treated kindly. Multiple inquiries for a mortgage, auto loan or student loan within a short window are counted as one, so you can compare lenders without being penalized for each application. Depending on the score version, that window is 14 or 45 days.

5. Credit mix (10%)

FICO considers whether you have a mix of revolving credit (like cards) and installment loans (like a car loan or mortgage). Showing you can handle different types can help a little, but it’s a minor factor. It’s never worth taking on a loan you don’t need just to improve your mix.

A worked example: one profile, factor by factor

Let’s walk through a hypothetical borrower, Sam, and see where each factor stands.

Sam’s accounts:

Payment history: Sam has never missed a payment. This is the strongest part of the profile.

Amounts owed: Sam’s card balances total $4,500 against $10,000 in limits, so overall utilization is 45%. Card 2 alone is at 60% ($3,000 ÷ $5,000). This is the weakest part of the profile.

Length of history: Sam’s three cards are 10, 4 and 1.5 years old, plus a 2-year-old loan, for an average age of about 4.4 years ((10 + 4 + 1.5 + 2) ÷ 4). If Sam opened a new card today, the average across five accounts would fall to 3.5 years ((10 + 4 + 1.5 + 2 + 0) ÷ 5).

New credit: Sam hasn’t applied for anything in over a year, so no inquiries are being counted.

Credit mix: Cards plus a car loan is a reasonable mix.

Where Sam should focus

Utilization is the clear opportunity. Suppose both card balances charge a 24% APR and Sam pays $400 a month toward the combined $4,500 with no new charges. Sam would be debt-free on the cards in 13 months, paying about $649.10 in interest along the way, and utilization would fall steadily the whole time.

You can try your own balance, rate and payment in the credit card payoff calculator. For which card to pay first when you have more than one, see debt snowball vs. debt avalanche.

What doesn’t affect your score

FICO scores don’t consider your income, job, age, race, marital status or where you live. They also don’t consider the interest rates on your accounts, or whether you’re working with a credit counselor. Lenders may ask about income separately when you apply, but it isn’t part of the score.

Common myths

• “You need to carry a balance to build credit.” False. Paying your statement in full still shows on-time payment and activity, and saves you interest.
• “Checking my score will lower it.” Checking your own credit is a soft inquiry with no effect.
• “Closing old cards helps.” It can actually raise your utilization by removing available credit.
• “Paying off a collection erases it.” Paying is often wise, but the record may remain on your report for the standard period. Newer scoring models may treat paid collections differently than older ones.

Not all scores are FICO scores

Other models, such as VantageScore, use similar information but group and weigh it in their own way, and each model has multiple versions. Lenders also choose which version they use. That’s one reason the score you see in an app can differ from the one a lender pulls. Our guide to what a good credit score is explains the FICO ranges and what they mean.

The bottom line

A FICO score boils down to five questions: Do you pay on time? How much of your available credit are you using? How long have you had credit? Have you applied for a lot recently? Do you handle different types of credit? Payment history and amounts owed make up about two-thirds of the score, so paying every bill on time and keeping card balances low will do far more than any trick. When you’re ready to act, our guide on how to improve your credit score turns these factors into a step-by-step plan.

This content is for educational purposes only and isn't financial advice. Calculator results are estimates based on the numbers you enter. For decisions about your situation, consider talking with a qualified professional. Read our full disclaimer.