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Financial Guidance Library

Helping others achieve financial success

Financial Guidance Library

What’s In Your Credit Score?

Many financial institutions use your credit score to determine if you will qualify for a loan and what interest rate you’ll get. But that’s not the only way the score is used today. Many employers check credit scores with job applications, and insurance companies use the score to help determine premiums.

Fifty characteristics from your credit file make up the credit score, which will range from 300 to 850. The equation used by the Fair Isaac Company – often called FICO – to calculate this powerful number is top secret. But, there is general information available for how the score is determined.

There are five categories to your credit score and each one carries a different weight. Here’s a breakdown:

Payment history – 35 percent


  • Have you paid your bills on time?

  • Do you have any bills in collections?

  • Have you filed for bankruptcy?

Amounts owed – 30 percent


  • How much money do you owe?

  • How many accounts have balances?

  • How much available credit are you using?

Credit history – 15 percent


  • How long have your accounts been opened?

  • How long has it been since you have used certain accounts?

New credit – 10 percent


  • Are you taking on more debt?

  • How many new accounts do you have?

  • How long since you have opened a new account?

Types of credit – 10 percent


  • Do you have a “healthy” mix of credit?

  • Do you show responsible behavior for both installment and revolving credit?

Surprisingly, some information is not included in your score, although lenders may consider these factors when making a loan decision. Here are just a few:


  • Salary

  • Occupation

  • Employment history

  • Current interest rates being charged

  • Child support or family obligations

Your credit score is important because it will follow you the rest of your life. But a poor credit score doesn’t have to haunt you forever. There are several ways to improve the score even if it takes a little time.

Make sure you pay your bills on time. If not, get them current and keep them current. Delinquent payments are the biggest penalty to your score. As you start making timely payments, you will see your score increase.

Pay off debt rather than moving it around. Transferring balances from one credit card to another will only hurt your score. You want to keep your balance less than 30 percent of the available credit line.

Credit reports are important in today’s world. Remember, the law allows you to check your report once a year for free. It won’t hurt your score if you are doing this directly from a credit reporting agency. Visit www.annualcreditreport.com.

Jennifer Panther is a certified financial counselor. Her column, On Balance, runs once a month in The Herald.