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Credit Score Calculation demystified! 5 Factors that affect your credit score

Do you know your credit score?

Your credit report is like a file on you and your credit history. It basically tells lenders how risky of a borrower you are. So when it comes time to purchasing your new home or new car, you want your credit report and credit score to be in top financial shape!

Your credit report will include your personal information, a summary of your financial accounts and history, if you have filed for bankruptcy, and any inquiries that have been made from lenders. Then all of this information is calculated in a super fancy, complex formula to equate your credit score.

You want to get in the habit of checking your credit score at least once per year. You can go to sites like to access your credit report for free once per year and then pay an additional fee to get your credit score. Other sites such as Credit Karma will allow you to access your credit score for free on a regular basis.

So what goes into calculating your credit score? Well, there are 5 factors that contribute to the credit score and knowing what they are will make it easier to increase your credit score and creditworthiness. The five factors include:

1. Payment History– i.e. Are you paying your bills on time? This accounts for about 35% of your score.

2. Total Amount Owed– According to, you should strive to keep your score healthy by using less than 30% of available credit across all your credit cards. This factor accounts for 30% of your score.

3. Length of Credit History– This factor accounts for 15% of your score. Getting an early start on building credit is essential. I usually recommend parents to help their children open up a credit card starting in high school, and help them understand the importance of establishing and being responsible with their credit.

4. New Credit– i.e. Number of recently opened accounts and credit inquires. This accounts for 10% of your score.

5. Types of Credit Used– i.e. Car loan, mortgage, and credit cards. This accounts for 10% of your score.

The goal is for your score to be above 760. This means you have excellent credit.

Call to Action

Request your credit report today by logging onto one of the three different credit reporting bureaus: Equifax, Experian, or TransUnion. Each one of them is required by law to give you one free credit report per year. You can also visit to view your credit score for free on a regular basis. Having a good credit score is critical when building your financial future. For more information on how to build a better credit score visit LearnVest.