#credit score calculator
How to Calculate a Credit Score
Transcript: How to Calculate a Credit Score
Hi, I m Kaytie Sproul, here for About.com, and today we re going to take a look at how to calculate a credit score.
Information About How to Calculate a Credit Score
Having a good credit score is a valuable asset in our modern world, whether it s to get favorable borrowing terms, pass a pre-employment screening, or get approved for that apartment you ve been hoping to move into.
Range of Credit Scores
Credit scores can range from 350, all the way up to 850, and are determined by a number of factors. Generally speaking, a good credit score is one that is somewhere above 700, while an excellent score would range in the high 700 s on up. The average credit score, however, seems to hover around the high 600 s. The company whose formula determines your credit score is Fair Isaac, and while this formula has not been publicly disclosed, we do know a few key bits of information that can help us guess our scores with a fair level of accuracy.
More Information About How to Calculate a Credit Score
We know that Fair Isaac gives the following weight to each aspect of your credit history to determine your score. Proof that you pay your bills in full and on time is very important, as payment history makes up 35 percent of the score. The amount of debt you have makes up 30 percent of the score, so owing too much will ultimately hurt your score. It s best to keep your debt level around 30 percent of your credit limit, or less. The length of your credit history makes up 15 percent of the score; therefore, the longer you ve had credit, the more favorably you ll be viewed.
Finally, the number of credit inquiries, and types of credit used each make up ten percent of the score. Too many inquiries is sometimes seen as a signal of financial trouble, while having different types of credit shows that you can properly handle a mix of credit. It s important to know how credit is determined and how to stay on top of it because having a good credit score opens many doors in business and in life.