Here’s a table summarizing how credit scores are calculated in the USA by FICO® and VantageScore®:
| Factor | FICO® Score Weighting | VantageScore® Weighting | Details |
|---|---|---|---|
| Payment History | 35% | 40% | Considers whether you’ve paid past credit accounts on time. Late payments, delinquencies, and bankruptcies negatively impact this factor. |
| Amounts Owed | 30% | 20% | Looks at the total amount of debt owed and credit utilization ratio. High credit utilization can negatively affect this factor. |
| Length of Credit History | 15% | Part of 21% | Evaluates the age of your oldest credit account, the age of your newest account, and the average age of all accounts. A longer credit history is favorable. |
| Credit Mix | 10% | Part of 21% | Considers the variety of credit accounts (credit cards, mortgages, auto loans, etc.). A diverse mix of credit accounts is beneficial. |
| New Credit | 10% | 5% | Includes the number of new accounts opened recently and recent credit inquiries. Too many new accounts or inquiries can be seen as a risk. |
| Total Balances | N/A | 11% | Evaluates the total amount of recently reported balances (in dollars) across your credit accounts. |
| Recent Credit Behavior | N/A | Part of 5% | Considers recent credit activity and inquiries into your credit. |
| Available Credit | N/A | 3% | Looks at the total amount of credit available to you. |
In the United States, credit scores are calculated primarily by three major credit bureaus: Equifax, Experian, and TransUnion. The most commonly used credit scoring models are FICO® Scores and VantageScore®. Here’s a breakdown of how these scores are calculated:
FICO® Scores
FICO® Scores are calculated based on five main factors:
- Payment History (35%)
- This is the most significant factor and looks at whether you’ve paid past credit accounts on time.
- Late payments, delinquencies, and public records like bankruptcies can negatively impact this score.
- Amounts Owed (30%)
- This factor considers the total amount of debt you owe and your credit utilization ratio (the percentage of available credit that you’re using).
- High credit utilization can indicate that you are overextended, which can negatively affect your score.
- Length of Credit History (15%)
- This factor looks at how long your credit accounts have been open and the age of your newest account.
- Generally, a longer credit history will positively impact your score.
- Credit Mix (10%)
- This considers the variety of credit accounts you have, such as credit cards, mortgage, auto loans, etc.
- A diverse mix of credit accounts can be beneficial.
- New Credit (10%)
- This includes the number of new accounts you’ve opened recently and the number of recent credit inquiries.
- Opening several new accounts in a short period can be seen as a risk.
VantageScore®
VantageScore uses similar factors but with slightly different weightings and categories:
- Payment History (40%)
- Like FICO, this is the most critical factor, assessing your record of on-time payments.
- Age and Type of Credit (21%)
- This combines the age of your credit accounts and the mix of credit types.
- Credit Utilization (20%)
- This evaluates the ratio of your current total debt to your total available credit.
- Total Balances (11%)
- This looks at the total amount of recently reported balances (in dollars) across your credit accounts.
- Recent Credit Behavior and Inquiries (5%)
- This considers your recent credit activity and inquiries into your credit.
- Available Credit (3%)
- This looks at the total amount of credit available to you.
Additional Factors
- Soft Inquiries vs. Hard Inquiries: Soft inquiries (such as those for pre-approved offers) do not affect your credit score. Hard inquiries (when you apply for credit) can lower your score slightly.
- Public Records: Negative public records, such as bankruptcies or tax liens, can significantly impact your credit score.
Calculation Process
- Data Collection: Credit bureaus collect information from lenders, creditors, and public records.
- Scoring Models: The collected data is input into scoring models (FICO® or VantageScore®), which then produce a numerical score ranging typically from 300 to 850.
- Score Updates: Credit scores are updated based on new information, which can change frequently as new data is reported to the bureaus.
Importance
A higher credit score indicates lower credit risk, which can lead to better loan terms, lower interest rates, and higher chances of credit approval.
Additional Information
- Soft Inquiries vs. Hard Inquiries: Soft inquiries (pre-approved offers, etc.) do not affect your credit score. Hard inquiries (credit applications) can lower your score slightly.
- Public Records: Negative public records, like bankruptcies or tax liens, significantly impact your credit score.
- Data Collection: Credit bureaus collect information from lenders, creditors, and public records.
- Score Updates: Credit scores are updated based on new information reported to the bureaus, and can change frequently.