How is My Credit Score Range Calculated?

Understanding how to continuously improve your credit score range is important to credit health. The most significant factor in calculating your credit score is your loan and credit card payment history. Late or missed payments will hurt your score, as will accounts sent to collections, foreclosures, and bankruptcies. It’s never too late to start tracking your credit score:

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Factors That Impact Your Credit Score Range

Credit utilization

The next most important factor in credit score range calculation is credit utilization, also called your debt-to-credit ratio. This ratio measures your used credit (what you owe) as a percentage of your available credit (your credit limit). The lower this ratio is, the better. And although it’s calculated across all your credit cards and loans together, a maxed out credit card will hurt your credit score even if your overall credit utilization is low. Some credit score calculations also include the amount of your total debt.

Length of credit history

The third most important consideration is the length of time covered by your credit history. The longer, the better, as a long credit history indicates an established and reliable borrower. Credit score calculations may consider how long both your oldest and most recent accounts have been open, so opening multiple new accounts in a short period can lower your credit score.

Credit diversity

Some lenders like to see that a prospective borrower is capable of managing multiple accounts of different types, so credit diversity –the number, type, and variety of your credit accounts– is also factored into your credit score.

Number of credit inquiries

Finally, the number of credit inquiries issued on your behalf can affect your credit score. “Soft” inquiries, such as checking your own credit score with a reporting bureau or pre-qualifying for a loan, won’t affect your score. But “hard” inquiries, conducted by lenders checking your credit when you apply for a loan, can lower your credit score even if you aren’t approved for the loan. Lenders do try not to penalize consumers for shopping around, though; multiple hard inquiries within a few weeks for the same type of loan (a mortgage, for example, or a car loan) are often treated as a single inquiry for purposes of credit score calculations.

How Does Your Credit Score Range Measure Up?

This online tool allows you to check your credit score for free. Wondering how you compare to your fellow consumers? The average credit score for Americans aged 35-49 is 655, and the average for those aged 50-69 is 700. The credit score range 670-739 is considered “good,” and the credit score range 740-799 “very good.”

Why Do You Have More Than One Credit Score?

Just when you thought you had this all figured out, you learn that you actually have not one credit score, but several — and they might all be different! What’s going on here?

First of all, there are three major credit reporting bureaus in the U.S.: Equifax, Experian and TransUnion. Not all lenders report to all the bureaus, so the information they have on you may differ, and each bureau updates its records at different times. This means that your credit score as calculated by Equifax last week, before you paid off your auto loan, might be different from your credit score as calculated by TransUnion this week — or even from your credit score as calculated by Equifax this week. On top of this, there are two major scoring models used for credit score calculations: FICO and VantageScore. Each of these models has multiple versions released over the years, as well as versions tailored to the concerns of specific types of lenders — some focus on auto loans, others on credit cards. And some lenders use their own scoring models entirely.

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Before you panic about potential discrepancies between your VantageScore 3.0 and your Equifax Credit Score, know that 90% of all lending decisions in the U.S. are based on FICO scores. Sure, you may have dozens of other credit scores, but variations in your credit score range are likely to be small. Keep an eye on one or two of them, and you’ll have a good idea of what shape your credit is in. We’ll focus here on FICO scores, since they’re by far the most commonly used by lenders.

FICO Score Factors

FICO scores are calculated on a credit score range of 300-850 points. Your payment history, on both loans and credit cards, comprises 35% of your total credit score. Your credit utilization and total debt account for another 30%. That’s two-thirds of your score, right there, just based on making your payments on time and not maxing out your cards! The rest of your credit score is based on the length of your credit history (15%), your credit diversity (10%), and inquiries or new credit accounts (10%).

Factors That Do Not Affect Your Credit Score

Just in case you were wondering, your credit score is not impacted by race, religion, nationality, age, sex, marital status, location, occupation, salary, title, employer, or employment history.

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