The credit score is a number that is associated with your credit history. Many creditors and lenders will use the credit score to determine if you are able to receive credit. The credit score is calculated using a complex formula that not only includes the information in your credit report, but also the information of many other consumers. If you are asking ‘how is a score calculated?’ take a look.

The FICO score is one of the most common methods used to determine a credit score. However, the three major credit-reporting agencies use their own method that is based on the FICO score method. Equifax uses the BEACON score, TransUnion uses the Empirica score and Experian uses the Experian/Fair Isaac Risk Model. That is why you may see a varying score from each of the three credit bureaus. Not only does each report have different information, they also use a different formula to arrive at your score. The answer to ‘how is a score calculated?’ is more complex than many people believe. For the most part, individuals are only required to know how to read credit report information.

A credit score can have a dramatic impact on the interest rates that you receive, answering the question “Why is it important to check my credit report information?” When you are applying for a mortgage, it can make a significant difference in the amount of your monthly payment.

Factors Used To Determine Your Score

  • How well you pay your bills. This will account for thirty five percent of your score. More of the emphasis is placed on your most recent activity.

  • The amount of your debt. This factor is thirty percent of your credit score. If you have a great deal of outstanding debt, or if you have a higher amount of credit available to you, even if you don’t use it, you will be considered more of a credit risk. To check your current status, order a copy of a no-fee credit report.

  • The amount of credit history. Those who have a longer credit history of consistently paying their bills on time will receive the most points. Having credit with the same lenders for a long period of time is also a factor in your favor. If you find any discrepancies on your trw credit report, it is important to obtain a credit report address to begin the resolution process.

  • The mix of your credit products. This means that you have different types of credit accounts. Loans, credit cards, mortgages are all examples of types of credit accounts. This is ten percent of your score.

  • The number of credit inquiries on your report. This also takes into consideration those that are shopping for the best rates for their credit products. However, it has been shown that those who are repeatedly looking for credit are at an increased risk of defaulting on the credit or loan or about to declare bankruptcy.

This is the information that you will need to answer how is a score calculated.