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What’s in Your Credit Score

Brendan Harkness

Brendan Harkness

Updated Dec 20, 2016

A credit score is a measure of how risky you are as a borrower. It’s created based on your past experiences with loans, credit cards, and other financial products.

The higher your credit score, the lower a risk you are to lenders and the better terms you can get on your borrowing. In real world terms, this means that, in general, lenders will work harder to attract people with a high credit score. That includes offering loans and credit cards with lower interest rates, low-to-no fees and more extras, like offering gifts when you get a new credit card.

It’s important to keep in mind that you don’t have just one credit score. There are dozens of different credit scoring models in use for different purposes. This is why you might look up a credit score and get one number, but then when you apply for a loan the bank will end up with a different credit score.

For a long time, the FICO Credit Score was the only game in town when it came to credit scoring. FICO, established by Fair Isaac Corporation, remains the main type of credit score used by lenders to evaluate credit applicants, and it’s what people usually mean when they talk about credit scores. Even under the FICO brand, however, there are different types of FICO scores.

More recently, the three major credit rating agencies (Equifax, Experian and Trans Union) have banded together to create another credit score called Vantage, which relies on a slightly different set of weighted criteria and a different scale for measuring risk.

Insider Tip: Wondering how you can use credit cards to improve your credit? Read our guide to building credit with credit cards.

The following sections show the criteria used to create FICO and Vantage scores and their relative importance in your credit score.

They use pretty much the same categories and the same scoring range. The higher your score, the better off you are.

Q&A Video: What’s the Most Important Lesson to Learn about Credit Scores?

FICO and VantageScore Scoring Criteria

FICO Scoring Criteria

(scores range from 300 to 850)

What’s In Your Credit Score?

This chart shows the criteria used to create FICO scores and their relative importance in your credit score.

VantageScore 3.0 Scoring Criteria

(scores range from 300 to 850)

  • 40% Payment history
  • 20% Credit utilization
  • 11% Balances (total amount owed)
  • 21% Depth of credit (length of credit history, types of credit)
  • 5% Recent credit
  • 3% Available credit

Because it is the more widely used credit score, let’s look more closely at each element in the FICO score.

Insider Tip: Looking to get your FICO credit score or an estimate for free? Check out this wiki page for a list of sources, which is maintained by the Reddit community.

The Individual Elements of a FICO Score

Payment History

Your payment history accounts for 35% of your FICO score, making it the most important component. Pay your bills on time and you’ll do very well in this category. Late payments, collections, charge-offs, judgments, bankruptcies and other negative payment history will hurt your score.

Amounts Owed (Including Overall Credit Utilization)

How much debt you’re carrying accounts for 30% of your FICO score. In this category takes into account all of your debt balances but your credit card debt carries the most impact here. If you carry a lot of credit card debt, your scores will suffer.

Carrying a balance on multiple cards is also a negative. To maximize your credit scores it’s best to keep your credit card balances as low as you can in relation to your credit limits.

Credit File Age

How long you’ve had credit accounts for 15% of the points in your score. To measure how long you’ve had credit the score will factor in each account’s “opened” date on your credit reports. The longer you’ve had credit, the older your credit history will be and the more points you’ll earn.

Variety of Accounts

Having a variety of different types of accounts shows a healthy, diverse mix of credit and makes up 10% of your credit score points. A healthy mix of credit includes accounts like credit cards, car loans and mortgage loans.

Having only one type of account, say credit cards only, won’t earn you as many score points as showing that you’re able to manage and maintain a variety of account types such as a car loan and/or a mortgage, for example.

Applications for New Credit

Your recent searches for credit are worth 10% of your credit score points. In the credit industry, an application for new credit means a “hard” inquiry on your credit report and signals that you’re actively looking for credit.

Having too many inquiries is a sign of risk and shows that you’re excessively shopping for credit, which can lower your scores. Knowing what counts and by how much should you a much better understanding of how your credit score is calculated. It can also help you pinpoint any problem areas and make adjustments to improve your scores now that you know the basics.

What’s Not In My Credit Score?

Your FICO and VantageScore credit scores only takes into account information contained on your credit reports. They do not take into account the following (according to FICO and VantageScore):

  • Your gender
  • Your age
  • Your race
  • Your religion
  • Your marital status
  • Your national origin
  • Your place of residence
  • Your salary or any other work information
  • Interest rates being charged on credit cards
  • Child support/family support obligations
  • Whether or not you’re using credit counseling services

What’s a Good Credit Score or a Bad Credit Score?

The question of who determines a good or bad score has all sorts of incorrect answers. It’s not the credit bureaus, it’s not FICO and it’s not VantageScore. None of them use credit scores to lend money so, frankly, their opinion as to what’s good or bad isn’t terribly meaningful.

Lenders use credit scores to help predict risk, and their opinions are the only ones that matter. Every lender is going to have a slightly different definition of a “bad,” “fair,” “good,” and “excellent” credit score.

This is a pretty good example of the breakdown:

Credit Score Range Ranking
> 760 Excellent Credit
700 – 759 Good Credit
660 – 699 Fair Credit
< 660 Varying Degrees of Bad Credit
No credit history Limited/No Credit

While you’re certainly likely get approved for credit with scores below 760, there’s no guarantee that you’ll qualify for the best deals. The best published interest rates are reserved for consumers who have scores at or above 760. That’s why you have to be at or above that score in order to have what is considered an excellent credit score.

Excellent credit scores can lead to:

  • Easier approval for loans
  • Better interest rates
  • Lower insurance premiums
  • No down payment on utilities
  • And much more…

If your scores are below 660, which is the generally recognized dividing line between prime and subprime, then you’re in a position to either be denied credit or find yourself saddled with very high interest rates.

Why Are My Credit Scores Different at Each Credit Bureau?

Equifax, Experian and TransUnion. It’s easy to lump all three of these agencies into one group and assume that because they all do the same thing, they must be a partners. The reality, however, is that each of these three entities are separate companies—separate, competing companies. And as competitors, they do not share information or transmit data between themselves.

Each of these three agencies compile, maintain and manage roughly 220,000,000 credit files in their individual databases. There’s no law that says each of these companies has to share or cross-reference their data. And finally, because they are three competing companies, they don’t compile, code and categorize their data in exactly the same ways.

This is one reason why your credit report from Experian won’t look like your credit report from Equifax or TransUnion. And because they don’t share their data, the information the have in their database might not be identical either. And even if your three credit reports contain the same exact account information, there’s no guarantee that it’s updated at the same time each month across the credit bureaus.

The Biggest Threats to Your Credit Score

Q&A Video: What Factors Have the Largest Impact on My Credit Scores?

Late Payments

If you want to maintain high credit scores then you cannot miss payments, it’s that simple. What many consumers do not understand is just how damaging even one past due account can be to their credit scores. Credit scoring models like FICO and VantageScore are designed to predict the likelihood that a consumer will become 90 past due on any credit obligation within the next 2 years, and anything you do that suggests you’re willing to miss payments is the first step toward lower credit scores.

If you are currently past due on an account, or if your credit reports show a history of late payments on other credit obligations, then it doesn’t take a rocket scientist to figure out that the odds are much higher that you will become past due again in the future. Credit scoring models will penalize you for that elevated risk with lower scores. Lenders will use those lower scores to either deny your applications or saddle you with higher rates and more restrictive terms.

Too Much Credit Card Debt

The idea that late payments damage credit scores is an easy concept for most consumers to understand. However, the fact that having too much credit card debt can also lower a consumer’s credit scores is often surprising. The assumption is that as long as you make your payments on time then all is well.

Credit card debt is capable of lowering a consumer’s credit scores almost as much as late payments. Nearly 30% of the points in your FICO and VantageScore credit scores come from the “Debt Category.” While not all of that 30% is based on credit card balances, those card balances are a significant factor within the category. Credit scoring models reward consumers for maintaining low balances relative to their credit limits.


Co-signing is by far one of the most dangerous things you can do with your credit reports and credit scores. When you co-sign for a loan with someone else you are equally liable for the debt, just as if you applied for it on your own. There is no difference.

If the primary borrower missed payments on the account the co-signer’s credit reports and credit scores will suffer the consequences.

If the primary borrower charges a large balance on a credit card then, again, the co-signer’s credit reports and credit scores will suffer.

If the loan or credit card goes into default then the co-signer will be pursued for payment by the collectors as if he were the primary borrower.

If you are being asked to co-sign for a loan, then the lender believes it’s too risky to do business with the primary borrower by himself.

Are you really willing to put your credit on the line for someone that a lender believes is an unacceptable credit risk? If you are then just be sure that you are fully prepared to pay for the credit obligation yourself since the odds are very high the primary borrower will not manage the account properly.

3rd Party Collections

If a lender or creditor can’t get you to pay, they’ll turn the account over to collections and you’ll end up with a collection on your credit report. Collections will remain on your credit reports for 7 years. Collections are never good for your credit.


For auto, boats or motorcycle loans, the lender has the option of repossessing the collateral if you don’t pay them.

NOTE: Voluntary repossessions are just as damaging as involuntary repossessions.

Foreclosures/Short Sales

If you don’t pay your mortgage, the lender will eventually foreclose in order to take back the home. Short sales, on the other hand, happen when a lender agrees to accept less than what you owe to consider the debt paid.

Regardless of what many real estate agents claim, a short sale is just as bad as a foreclosure from a credit report and credit score standpoint. Short sales are reported as charge-offs or settlements, and both are accurate because the loan wasn’t “paid in full” according to the original terms.


If you don’t pay a collection, the collector can sue you. Judgments are a public record and can be reported in your credit reports for 7 years. And depending on your state laws, judgments may also give collectors the ability to garnish wages or seize bank accounts.

Tax Liens

Tax liens are yet another public record you’ll want to avoid. If you don’t pay the government, the debt will never go away — unpaid tax liens will remain in your credit reports indefinitely. However, withdrawn tax liens will be removed immediately but the credit bureaus.

Negative Narratives

Narratives are the textual statements that appear on your credit reports associated with credit entries. For example, an account might be listed as “partial payment plan.” The account might seem neutral but the language is considered negative. These negative narratives account for a significant but unquantified amount of negative credit entries.

Myths and Facts about Credit Scores

Will Reissued Credit Cards Hurt My Credit Score?

Generally when a credit card is reissued the lender will report the “date opened” on the new account as the date of the original opening. The credit limit and balance on the newly reissued account will likely be the same as the original account.

If these data points are the same there will be no impact to the consumer’s credit scores. There is a possibility, albeit slight, that a newly reissued credit card might have a brand new “date opened.” If that happens then your credit scores could go down a modest amount.

When you add a new date opened to a credit report it lowers the average age of your credit history, which can lead to lower credit scores. Most credit card issuers are aware of this problem and will avoid it by keeping the same date opened throughout all the reissues of the card.

If you’ve received a new card in the mail, here are some likely reasons as to why:

  • Your card is about to expire.
  • Your credit card was damaged (i.e. the magnetic strip no longer works properly).
  • You requested for your card to be updated to a different design. I did this a few months ago with my Discover Card and everything except for the expiration date was the same.

New Credit Cards with a New Account Number

In certain instances a credit card issuer will actually close a customer’s old account and open a new account in its place. These new credit cards are often referred to as “reissued” cards. The reissuing of credit card accounts is occurring much more commonly thanks to high profile data breaches.

Credit cards with new account numbers are generally reissued for one of the following reasons:

  • The original credit card was lost or stolen.
  • The account was sold to another lender.
  • Fraud (suspected or confirmed).

Will Inactive Credit Cards Hurt My Credit Score?

The fact that an account hasn’t been used in some time is not considered negative, or positive. Indirectly, however, an inactive credit card account can impact your credit negatively and yes, it depends on the actions taken by the issuer after you stop using the credit card account.

Credit reports do not indicate whether or not an account is active or inactive. Neither do they maintain a “scoreable” chronological history of previous balances. And even if you decide to stop using a credit card, your credit card issuer may continue to report monthly updates to the credit reporting agencies while the account is still open.

This makes it impossible to accurately determine an account’s activity just by looking at a credit report. The point here is that credit reports don’t know or indicate whether you’re using an account or not.

If you have some credit cards that you don’t use, you can keep them active by using them occasionally. In most cases, using your cards about once every 6 months should usually keep them active.

Because your credit scores are based on the information in your credit reports, and there is no definitive method for determining account activity, choosing to not use your credit cards won’t impact your credit reports or your credit scores.

What does impact your credit reports and scores, however, is how your credit card issuer reacts to your decision to stop using the account. This can make for a somewhat confusing situation, because every issuer can act as they see fit and you might not know what to expect.

Q&A Video: Does Opening a New Credit Card Hurt My Credit Score?

Will My Credit Score Go down If I’m Denied a Credit Card?

When you apply for credit you give a creditor permission to pull one or more of your consumers credit reports and credit scores, normally a FICO® credit score. When the lender pulls your credit report from the credit bureaus they leave evidence behind called the credit inquiry, which is simply a record of who pulled your report and on what date.

This credit inquiry will have a negative effect on your scores, but it will usually be very small. It will stay on your credit report for two years, but it will only affect your credit scores for less than a year.

Other than the credit inquiry, there is no other information about your application. The credit card issuer’s decision to deny your application is not included in your credit reports. As such, their decision has no impact on your credit scores.

There is no exception to this rule. If it’s not on a credit report, it won’t impact your scores one way or the other. The only evidence that you applied for a credit card, or any other loan, is the credit inquiry. And, because credit card issuers only pull one of your three credit reports there will only be one inquiry on one of your three credit reports. Further, the only evidence that your loan was approved is the fact that eventually the account may be reported to the credit bureaus by the lender.

Will I Have Perfect Credit if I Pay my Cards on Time?

Always paying your credit cards on time will definitely be good for your credit, but it’s not enough to have perfect credit.

There are several other factors involved in creating your credit score rather than just your history of timely payments:

  • Amounts owed (how much credit card debt you have)
  • Length of credit history
  • New credit
  • Types of credit used

Why Don’t I Have a FICO or VantageScore Credit Score?

Credit scores are based on the information reported in your credit reports. If you don’t have a credit report, you won’t have a credit score. That said, even if you have a credit report, it doesn’t necessarily guarantee that you’ll have a credit score. This is because credit score models have specific minimum requirements that credit report data must meet in order for a score to be generated.

If you have a credit report but aren’t able to generate a score, it typically means the information in your credit report is either too recent —which usually happens to consumers that are new to credit and just starting out; or the information isn’t current or recent enough —which usually happens to consumers that haven’t used credit in a long time or have opted to go cash only and avoid credit altogether.

Trying to obtain a credit score in either of these cases would return a notice of “insufficient credit history” instead of generating an actual credit score.

Minimum Requirements for a FICO Score

To explain, let’s take a look at the minimum requirements for the FICO credit score model, the score most widely used by lenders and the score that consumers are most familiar with. In order for a FICO score to be generated, your credit report must meet the following minimum requirements:

  • You credit report must have at least one account that’s been open for six months or longer. It only takes one account but if you’re new to credit, your credit report won’t generate a FICO score until your first credit account is six months old.
  • Your credit report must have at least one undisputed account that has been updated in the last six months. If you only have one account, and the account is in dispute, you won’t have a FICO score.
  • Your credit report must be free of “deceased” indicators — including accounts that you might possibly share with another person that has been reported as “deceased” to the credit reporting agencies. If there is any record of you or a joint account holder being  “deceased,” a score will not be generated.

Possible Reasons Why You Don’t Have a FICO Score

Based on these requirements, and to help give you a better understanding, here are some examples of why you might not have a score:

  • The accounts in your credit report are too new, meaning they were recently opened and are all less than six months old.
  • The accounts in your credit report haven’t been updated or have shown no activity in the last six months.
  • If all of the eligible accounts —accounts that DO meet the minimum six month age and recent activity requirement — are in currently in dispute, you won’t have a FICO score.

VantageScore Credit Score

VantageScore Solutions’ credit score, the VantageScore credit score, has a very inclusive scoring criteria. In their latest model version they are able to score some 30 – 35 million more credit files than other scoring models. They are able to generate a score based on the presence of credit account, public record or even just inquiry data

Regardless of whether you’re talking FICO or VantageScore on thing is clear…If you have at least one undisputed credit account on your credit reports that is well aged and has been updated in the recent past you’re going to have a credit score.

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