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By Ayesha Haider, BA, MBA, AFC Candidate

Your credit score is often the first indicator that banks and landlords and financial institutions turn to when assessing your financial health and deciding whether to do business with you. But what exactly makes up a credit score? Are certain items given more weight than others in determining a score? And how good or bad is your score compared to the rest of the Nation?

Let’s start with the basics:

What is a credit score?

A credit score is a number derived from your current and past financial behaviors which lenders and other organizations use to assess how much risk they will be taking on by extending you credit. There are numerous credit scores that are used by financial institutions, and each of these has a different formula for calculating your level of risk. The most well-known and widely used score is the Fair Isaac Corporation’s FICO score.

What makes up a credit score?

A credit score is determined by collecting and classifying individuals’ financial transactions. The FICO score is calculated based on payment history (35%), amounts owed (30%), length of credit history (15%), credit mix (10%) and new credit (10%). Keep in mind that your credit score is constantly changing with every financial decision you make – from taking out a new loan, to paying your bills every month – so it is important to know what will have an adverse or beneficial effect on your score.

What is not included in a credit score?

Your credit score will never be affected by your race, religion, national origin, sex or marital status. It will also not take into account where you live, your salary or employment history, age or the interest rates that you are currently being charged. Oftentimes, your credit score may suffer as a result of stolen identity, illness or other unforeseen life events. It is important to know that you reserve the right to have a personal statement included in your credit report that can be viewed by potential lenders and may assist in explaining a poor credit score.

How “good” is my score?

A good or bad credit score really depends on which score you are looking at and what financial transactions you will be using your credit score for. Most scores range from 301 to 850 with anything above 650 being considered a “good” score and anything below this number to be considered “bad”. Experian’s 2015 state of credit report shows that the average score for Americans last year was 669 (up three points from the 2014 average of 666).

Knowing how your credit score is calculated and what it is used for is the first step to working towards (or maintaining) a favorable credit score. To obtain your FICO score, visit the myFICO website or visit your base Personal Financial Counselor who may be able to obtain your score free of charge.

Credit Scores- What's New- (1)Join us next week on Tuesday, May 3 at 11 a.m. ET for Credit Scores: What’s New? with Dr. Barbara O’Neill and Rod Griffin from Experian. This 90-minute webinar will cover the fundamentals of credit reporting and credit scoring and what you must do to get the credit you want and need. This webinar is approved for 1.5 CEUs for AFCs through AFCPE and CPFCs through FinCert.