How to Compute Credit Report Scores

The Fair Isaac Corporation developed the algorithm to calculate the FICO credit score, the most widely used credit score in the United States. However, the company only releases the factors that are used in the calculation, maintaining the exact formula as proprietary information. Having a high credit score benefits you because lenders will be more likely to offer you offer you credit at lower rates because you pose a lower credit risk. The FICO credit scores range from 300 to 850, with 850 being a perfect score.

Instructions

1

Consider your payment history. The FICO algorithm bases 35 percent of your total credit score on how you have made payments in the past. To get a higher score, you should have made all of your payments on time. When you have payments that are late or past due, the formula considers how late the payment was and how long ago the missed payment occurred. For example, a 30-day late payment five years ago would adversely affect your score more than a 90-day late payment in the past six months.

2

Consider the amount of money that you owe on your various accounts, because it accounts for 30 percent of your credit score. The score takes into account the amount you owe, how much of your available balance you are using and the types of accounts you owe money on. For example, owing $100,000 on a mortgage does not have nearly the negative effect that owing $100,000 on unsecured credit lines like credit cards would. Also, owing $3,000 on your credit cards looks much worse if your total credit limit is $3,500 than if it is $10,000.

3

Consider the length of your credit history, as it accounts for 15 percent of your credit score. The longer you have maintained a variety of accounts, the higher your score will be. Higher credit scores will usually require different types of credit lines such as a mix of installment loans and credit cards.

4

Consider how much credit you have recently applied for, because it counts for 10 percent of your credit score. Each time you apply for a new line of credit and your credit report is pulled, an inquiry is recorded on your credit report and remains on your report for two years. The more inquiries you have, the lower your score will be.

5

Consider the mix of credit you use as it counts toward 10 percent of your score. Higher scores will result from using a mix of credit types rather than relying on only one, such as a credit card.