How Are Credit Scores Calculated? | Equifax®

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  • You don ’ t have just one credit score
  • credit scores may vary because of respective reasons

  • Payment history, the number and type of credit accounts, your used vs. available credit and the duration of your credit history are factors frequently used to calculate credit scores

many people are surprised to find out they don ’ t have just one credit score. Credit scores will vary for several reasons, including the company providing the score, the data on which the score is based, and the method of calculating the score .
credit scores provided by the three major credit rating chest of drawers — Equifax, Experian and TransUnion — may besides vary because not all lenders and creditors report information to all three major credit agency. While many do, others may report to two, one or none at all. In accession, the credit scoring models among the three major credit chest of drawers are different, a well as those used by other companies that provide credit scores, such as FICO or VantageScore .
The types of credit scores used by lenders and creditors may vary based on their diligence. For model, if you ’ rhenium buying a cable car, an car lender might use a accredit score that places more vehemence on your payment history when it comes to car loans. In summation, lenders may besides use a blend accredit grudge from the three major recognition chest of drawers .
In general, here are the factors considered in citation score calculations. Depending on the seduce exemplar used, the weight each factor carries a far as impacting a credit score may vary .

  • The number of accounts you have
  • The types of accounts
  • Your used credit vs. your available credit
  • The length of your credit history
  • Your payment history

hera is a general breakdown of the factors citation scoring models consider, keeping in judgment there are many different credit score models .

Payment history
When a lender or creditor looks at your credit report card, a key question they are trying to answer is, “ If I extend this person credit rating, will they pay it back on time ? ” One of the things they will take into consideration is your requital history – how you ’ ve repaid your credit rating in the past. Your payment history may include credit cards, retail department shop accounts, installation loans, car loans, scholar loans, finance company accounts, home equity loans and mortgage loans .
Payment history will besides show a lender or creditor details on late or miss payments, bankruptcies, and collection information. Credit scoring models by and large look at how late your payments were, how much was owed, and how recently and how frequently you missed a requital. Your recognition history will besides detail how many of your credit accounts have been delinquent in sexual intercourse to all of your accounts on file. so, if you have 10 credit accounts, and you ’ ve had a late payment on 5 of those accounts, that ratio may impact credit scores .
Your payment history besides includes details on bankruptcies, foreclosures, engage attachments and any accounts that have been reported to collection agencies .
by and large speaking, credit grade models will consider all of this data, which is why the requital history section may have a big impact in determining some citation scores.

Used credit vs. available credit
Another gene lenders and creditors are looking at is how a lot of your available accredit – the “ credit limit ” – you are using. Lenders and creditors like to see that you are responsibly able to use citation and pay it off, regularly. If you have a mix of credit accounts that are “ maxed out ” or at their restrict, that may impact accredit scores .
Type of credit used
credit score calculations may besides consider the different types of credit accounts you have, including revolving debt ( such as credit cards ) and episode loans ( such as mortgages, home equity loans, car loans, student loans and personal loans ) .
Another factor is how many of each type of explanation you have. Lenders and creditors like to see that you ’ re able to manage multiple accounts of unlike types and credit marking models may reflect this .
New credit
recognition mark calculations may besides consider how many new credit accounts you have opened recently. New accounts may impact the length of your credit history .
Length of credit history
This section of your credit history details how retentive unlike credit accounts have been active. Credit score calculations may consider both how long your oldest and most late accounts have been open. broadly speaking, creditors like to see that you have a history of responsibly paying off your credit accounts.

Hard inquiries
“ hard inquiries ” occur when lenders and creditors check your credit in reaction to a credit application. A large number of hard inquiries can impact your credit rating score. however, if you are shopping for a newly car or mortgage lend or a new utility provider, the multiple inquiries are generally counted as one inquiry for a given period of time. That period of clock time may vary depending on the recognition scoring model, but it ‘s typically from 14 to 45 days .
credit seduce calculations do not consider requests a creditor has made for your credit report card for a preapproved credit offer, or periodic reviews of your credit report by lenders and creditors you have an existing account with. Checking your own credit besides doesn ’ t affect accredit scores. These are known as “ indulgent inquiries. ”

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Category : Finance