What Is in a Credit Score?

What Is in a Credit Score?

A credit score is a three-digit number used by financial institutions to evaluate your creditworthiness, or the likelihood that you’ll pay back your debts. When a consumer applies for a credit card, mortgage, student loan, auto loan or other line of credit, a lender usually pulls a credit score to help the lender decide whether or not to extend credit.

There are six key credit-influencing factors that are commonly used in calculating your credit score, although the actual credit score number may differ depending on which credit bureau (Equifax, Experian or TransUnion) pulls the information and what kind of credit score model is used.

Here are the six main factors and how they can impact your credit score.

1. Open Credit Card Utilization

Your open credit card utilization rate is your available credit compared with how much you're using at any given time. It can be calculated by taking your total open credit card balances and dividing that number by your total open credit card limits. The resulting percentage is your utilization rate.

It's important to note that your credit card utilization rate is not calculated by looking at the balance you carry over from month to month. It is calculated using the balance you have at the time that your credit card issuer reports to the credit bureau. Therefore, it is not necessary to carry over a balance from month to month. You could maintain a healthy credit card utilization through regular credit card use and paying off your balance every month.

2. Percent of On-Time Payments

Your percentage of on-time payments represents how often you make payments on time. It's often a heavily weighted factor in calculating a credit score, so just one or two late payments could significantly affect your score.

Paying bills on time is one of the best ways to keep up good credit health; it shows lenders and creditors that you're reliable and will pay back your debts.

3. Number of Derogatory Marks

These include accounts in collections, bankruptcies, foreclosures and liens. Your credit score will be severely negatively affected by a derogatory mark on your credit report. Derogatory marks typically take seven to ten years to clear from credit history, and they generally cannot be removed earlier.

A derogatory mark could severely influence your chances of getting approved for credit; it indicates to a lender that you may have significantly mismanaged credit in the past.

4. Average Age of Open Credit Lines

This factor averages the ages of your open credit cards, mortgages, auto loans, student loans and other lines of credit on your credit report. If your credit history is lengthy, lenders have more information to accurately assess creditworthiness. It's also frequently an indication that you have been able to successfully manage your credit.

For this reason, closing your oldest credit card account is typically ill-advised. It will shorten the average length of your open credit lines and reduce your available credit, possibly increasing your credit utilization rate. Think carefully about when you may want to close an old credit card account, and when you may want to avoid doing so.

5. Total Number of Accounts

This credit score factor totals up your number of credit cards, auto and student loans, mortgages and other lines of credit. Consumers with a higher number of credit accounts generally have better credit scores, since they've been approved for credit by more lenders. Also, having various types of credit--both revolving and installment--on your profile can positively contribute to your creditworthiness.

However, it's typically not recommended to open several new lines of credit simply to increase your total number of credit accounts. This factor of your credit score is usually weighed less heavily than the rest. If you are in the market to apply for new credit, make sure you first read reviews and research which product is right for you.

6. Total Hard Credit Inquiries

The final factor commonly used in your credit score is your total number of hard credit inquiries. Hard inquiries occur when a financial institution, such as a lender or credit card issuer, checks your credit in order to decide whether to approve you for a loan or credit card. A hard inquiry may occur when you apply for any of the following:

  • Auto loan
  • Student loan
  • Business loan
  • Personal loan
  • Credit card
  • Mortgage

One hard inquiry could negatively affect your credit score by a few points, but the effect typically will begin to lessen after a couple of months. Multiple hard inquiries generally will more significantly impact your credit score, and can communicate to lenders that you are desperate for credit or are unable to qualify for credit. For this reason, it's a good idea to avoid applying for several lines of credit at once.


It's important to know that, while some of these factors are weighted more heavily than others, no one factor works independently of the others. Each one can contribute to your overall credit score.

To see how your credit score may be affected by each of these factors, log on to Credit Karma regularly.

Disclaimer: All information posted to this site was accurate at the time of its initial publication. Efforts have been made to keep the content up to date and accurate. However, Credit Karma does not make any guarantees about the accuracy or completeness of the information provided. For complete details of any products mentioned, visit bank or issuer website.

All Comments

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1 Contribution
257 People Helped

Helpful to 257 out of 300 people

I am totally amazed at the credit rating agencies.  They have independent power and are not responsible to anyone.  In 2010, my FICO- II score dropped 30 points in four months, and I didn't do anything but pay my bills.  No new credit, etc.  FICO's response was that they changed their algorithm. 

Today, my TransUnion new score is 775 out of a possible 850; my Vantage score is 990 out of 990; my auto score is 905 our to 950; and my home score is 912 our of 950.  All scores computed from the same database on the same day.  Why the variances? Use of different algorithms.  Who controls the algorithms?  The rating agencies.  What can you do about it----nothing! I filed a complaint against the rating agencies in 2010 to the FTC, and to date, they have acknowledged receipt but have not responded.  They are not going to repond.  The rating agencies run wild.

I don't need new credit.  I am 73 years old, and have assets.  However, I do pay auto and home insurance each year and not having my home and auto scores maxed-out affects what I pay for home and auto insurance each year.  Probably costs me several hundred dollars for my private residence and rentals.

I repeat, the credit rating agencies have more power over your financial life than you can imagine, and they report to no one.  Not one government agency will get involved in the algorithms used by rating agencies.  It's their call.  Not even the new Consumer Protection Agency will touch this subject.  I know.  I tried to get them involved. 

Read and weep.

"The Big Kahuna"

1 Contribution
210 People Helped

Helpful to 210 out of 238 people

It should be noted that Credit Karma's scores are not completely accurate. My TU score on here read 727 only 2 days ago and still does while yesterday when I got prequalified on a home loan the pulled credit report read 750.  The only consolation that I have is that they were wrong in the right direcction. However, it is clear that my scores are very stable 750/751/753, because my balances remain about the same and I don't have very many open accounts. In any case, Credit Karma is a useful tool to get a handle on your debt.

Top Contributor
1028 Contributions
2487 People Helped

Helpful to 76 out of 89 people

Here is a better way to think of the different Credit Score.

Just as different Gas stations have different types of Grades of Gas and Blends  the Credit bureaus have Different Credit Scores.

So we have ExxonMobil, Chevron and Phillips 66   they each have Grades of gas and they each put something different into it so they say to make your car run better.

Well TransUnion, Experian and Equifax have different Credit Scores  each Credit Score is like a different blend of gas.  They also have the FICO Score but that is not given out to the public from each of their sites.  If you want you FICO Score you have to get it from www.myFICO.com and pay to get it.  or have one of the Credit Cards like the Discover IT card that will give it to you each month from one of the Credit Bureaus.

There is also the Vantage Credit Score that should be close to your FICO score ( or so they say ) but that is hard to compare.  CreditKarma is using a OLD Out Dated Vantage Score that is more less useless to us.

So the Credit Scores your see here take with a grain of salt.  Same thing for the scores you get from TransUnion,  Experian and Equifax take those with a gain of salt.  These are not FICO scores.

Again the only way to get your FICO Score is to Pay for it at  www.myFICO.com   or by one of the Credit Cards that supply one of the Credit Bureaus FICO scores on your statement.

Hope this helps out.

1 Contribution
32 People Helped

Helpful to 32 out of 36 people

Just to set a few things straight... I've spoken a lot to each of the three credit bureaus as well as to two different reps from Fair Isaac (makers of FICO).  According to TransUnion, Experian, and Equifax reps, the credit bureaus do not offer a FICO score.  A FICO score is based on a complex math computation based on the data stored on your credit report.  Each credit bureau provides their own listing of items about you that they call your credit report.  The three bureaus may or may not have the same information about you.  When a company (like CreditKarma) generates a FICO score for you they take the information from your credit report from one or more of the credit bureaus and run the complex calculation on it to generate a score.  This means that which credit bureau(s) they use to garner information about you changes your score completely.  As if that wasn't misleading enough already, Fair Isaac states that there isn't just one FICO score.  There are multiple type of FICO score based on what type of viewpoint you want about the person in question and, even more confusing, there are multiple VERSIONS of each math formula used to generate each of these FICO scores.  If you get a FICO score from Credit Karma it may or may not be anywhere near a FICO score from ANY other source.  In the end, FICO scores are useful for comparing against past and future FICO scores FROM THE SAME CREDIT BUREAU AND PREPARED BY THE SAME END COMPANY.  Basically, compare your current Credit Karma FICO score with past and future Credit Karma FICO scores and you will have a general idea of whether your credit is improving or worsening.  

One finaly caveat to add...FICO formulas get changed occasionally which means the way a company (like Credit Karma) comes up with your FICO score may not be the same way they did it the month before.  That means your score can go up or down without ANY changes to the information at any of the three bureaus.  How do you get around this?...Pay attention to your full credit REPORT from all three bureaus and stop worrying about your score.

3 Contributions
34 People Helped

Helpful to 28 out of 37 people

I want to know why I have such a good credit rating on Credit Karma, but the othe scores are not favorable at all.  I have NEVER missed or been late on a payment EVER.  I personally have never been in an auto accident nor have I had a moving violation in the 34 years of driving so why is my auto and home score poor?  I don't understand your calculations and how these very so drastically. 

2 Contributions
20 People Helped

Helpful to 20 out of 25 people

A credit score is the tool the finance companies use to determine what interest rate you are qualified for when you take out a loan or credit card of any kind. The truth is the same people who are in control of that score are the exact same people who issue you the loan. So it benefits them for you to have a lower score.Since they can make more money off of you through interest rates. Thier motivation is not to allow you a good score.It's just the opposite. the meager score you have is the score they believe will give you just enough hope.So you do not lose interest in using this system which they have full control over.Once you wake up and notice this. We'll start trading among ourselvces again.And they will start losing all of that money. Then and only then will they change thier motivations and want to do w/e they can to get back into your wallets.

1 Contribution
18 People Helped

Helpful to 18 out of 21 people

my score on credit karma has been constantly 55 to 60 points below what is pulled from the major three credit companies. Doesn't make sense. Can anyone explain why this may be?  I cant rely on CK for a true score.

3 Contributions
35 People Helped

Helpful to 19 out of 26 people

I had things against my credit, paid them off, opened a couple small accounts to start building credit. With the internet , everything you look at online is tracked, so if your looking at houses or cars, then you have morgage lenders and car fiance companies running your credit without you asking them to. I was building up a decent score had a "C" now I have a "D" or back to "F" because of all these inquiries. I never invited these people to investigate my credit. Capital one sent me things in the mail nearly every day for a week pre approved based on my credit, which meant they had gone into my credit file, then they sent another, so I finally broke down and filled it out what did they do, they turned me down, after pulling my score down with their multiple enteries into my credit checking my score uninvited. Additionally Quicken Loans and Lending Tree has done this. So watch where you travel on your computer, or use a fake name address and phone number if you fill anything out on line that your looking at or it may hurt your credit you are trying to build.  Seems like they don't play very fair. Then if you want to buy a car, you get the best rates on fiancing based on your credit score. That is naturally give to the Rich and take from the poor attitute. " As the song says, "ONLY IN AMERICAN"  

How long does it take for those inquiries to disappear.? I see some on there that has been there a year.

3 Contributions
35 People Helped

Helpful to 16 out of 21 people

When you pay off debts in the credit breau, why isn't that information removed then. Rather than still show up as deliquent accounts.

How long does hard inquires stay on your account ? How can companies do hard inquiries without your permission ?

How long does soft inquiries stay on your account, and why are companies allowed to look at your credit without your consent, subtracting points and offering you pre approved credit, based on what you now have in your credit history. It seems to me they are kinda peeping through your window and should be arrested or at least fined, but it is not going against them, it is hurting us the consumer, they want to sell to.

3 Contributions
211 People Helped

Helpful to 53 out of 70 people

Why is there not a separate scoring system for senior citizens who have worked hard to have house, car, etc. paid for and don't use credit cards very often simply because we have no reason to do so?

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