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How Is My Credit Score Calculated?

Until recently, scores were generally not available to consumers because many contracts between lenders and their credit bureaus specifically limited disclosure of this information. Due to changes in the FCRA (Fair Credit Reporting Act), you are now entitled to request credit score information as part of your disclosure.

A credit score is a statistical evaluation of an individual's ability and willingness to repay credit cards and loans as agreed. Mortgage lenders, brokers and other types of credit grantors use scores to evaluate a consumer's ability to take on additional debt. The numerical credit score is based on a combination of financial, demographic and credit history information, which allows the lender to evaluate whether credit should be extended.

All credit score models are not exactly alike. Several companies develop score models, which they sell to lenders. Others provide score models to Consumer Reporting Agencies, which market this service to lenders. This is important to keep in mind as your score may differ based on the type of score and from whom the statistical information is obtained.

In mortgage lending, Fair Isaac (FICO) is a commonly used scoring company that bases their model on consumer credit information. Each credit scoring model looks at the credit information contained in the files from TransUnion, Equifax or Experian and develops the score based on this data. FICO scores range from a low of 300 to a high of 850, depending upon the credit repository and model used. A score at 620 or better is generally required to obtain standard financing at competitive rates. Mortgage lenders usually require a minimum of two, and preferably three scores from the national credit repositories. Each lender devises which of the scores, or combination, are used for making a credit decision.

While the exact mathematical formula for generating a score is a trade secret, some factors that might be considered are:

Information on a Credit Report

  • Credit payment history
  • Types of credit
  • Overall current and available credit debt
  • Monthly payments and average balances maintained
  • Public record information

Information on a Credit Application

  • Length of time at current and past residences
  • Loan-to-value
  • Current length of employment
  • Salary and investment income
  • Checking and savings accounts

The credit score is a dynamic product and cannot easily be improved. One way to improve your score is to constantly pay bills on time. Think of a score as a "snapshot" of credit risk – it reflects your risk picture at a specific point in time. A snapshot doesn't change, but when you take another one, you will probably look a little different. Similarly, when your credit information changes, your score changes to reflect that.

For more detailed information about FICO scores, visit Fair Isaac at