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What Drives a Credit Score?

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I frequently get questions from consumers wanting to understand what credit information in their credit report is most important or most heavily weighted in the calculation of their credit score.  Each person’s score is unique as it reflects projected risk based on credit information resident on that person’s credit file at the time the lender requests a score and credit report to make a lending decision.

Both FICO and VantageScore provide information regarding each category of credit behavior their scores take into account, and the relative importance of each in determining a credit score.

Pie Chart: Credit attributes contributing to a VantageScore. Source:www.VantageScore.com

Pie Chart: Credit attributes contributing to a FICO Score. Source:www.myfico.com

You can see that there is some variation in categories used by each of the two companies, as well as the percent of contribution a given category represents.  Each company that develops a credit risk scoring system has its own unique approach and the final scoring models will differ. While the pie charts do illustrate variations, they also show that there are similarities in the two models.  Both scoring systems show that the three fundamental aspects of good credit management practices are what really drive a good credit score and hold true regardless of score version:

  • Make sure you consistently pay your bills on time
  • Keep credit debt levels reasonably low (credit cards, installments loans, etc.)
  • Only seek and obtain new credit when needed

Following these guidelines will help you maintain a good score or help raise a lower score over time.

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Image: www.fico.com

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  • http://www.orchardbankus.com orchard bank

    Thank you for this informative post about what drives a credit score. I also agree that the good credit management practices are probably the most important factor of any good credit score.

  • http://creditscorecheck.org.uk Credit Score Check

    Each company that develops a credit risk scoring system has its own unique approach and the final scoring models will differ.

  • David Donovan

    I would like to Thank Citi Bank. For saying my interest would be 6.?, then after Bush gave them $25. Million they raise my interest to 33.99. Thank you Citi bank for relief of my credit score.

  • michelle miller

    Is it true if you pay off a credit card w/ another credit card w/ a lower intrest rate can hurt your credit score

  • James Davis

    I care less about a credit score. There are so many ways to check a persons credit other than useing a credit score to know if the person is a good risk or not. There are people that have a poor credit score that are good risks for credit. I have found out the people with a few bucks are a poorer risks than the people that have little.

  • k owusu

    I just cannot understand why people cannot live within their means. It just buggles my mind. I don’t remember the last time I saw my credit report and don’t know what my credit score is and I just don’t care. I have always live within my means. I don’t have a credit card and I have never had a need to use one. I have always paid as I go or as I need. I just can’t understand why people get themselves held hostage by their credit, credit report and credit score.

  • dean

    I beleive a good credit score is way overrated. The last time I checked, my score was around 800. My house mortgage is nearly paid off and I do not plan to borrow money again.

    My girl friends score is 650. She recently went to Chevy dealership and financed a new $50,000 Silverado. The interest rate was 4%.

    So why do we put so much importance on credit rating?

  • Elle

    I think the credit bureau needs to maintain the overall comment line ie duragotory, account to new (I have accounts open since 05) how long until this goes away?

  • Jason Tomlinson

    I understand that people feel that debt, sorry credit is important to have, I just do not understand it. The “What is in your FICO score” chart is correct. I could also say it another way. Debt history, Amount of debt owed, Length of time you have been in debt, New debt and type of debt. Why does everyone want to be in debt. Seems to me if you didn’t have all these payments from debt, you would have MONEY!!! I think I would rather hve the money.

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