What’s In Your Credit Score

Written by Steven Merkel on .

A credit score is how lenders estimate how much risk a particular applicant has of not repaying loaned money. By examining a person’s credit score, a bank can determine how much money to loan and at what interest rate. The lower the credit score, the more "risk" a bank would take in loaning money, so the higher the interest rate. There are three credit reporting agencies, Equifax, Experian, and Transunion. These bureaus use the Fair Isaac method to determine your credit score.

The Fair Isaac method or FICO score is based on several amounts of information including; payment history, amounts owed, length of credit history, new credit, and how many types of credit used. All of these areas affect your score, however some are more important than others. For instance, your credit history makes up 35% of your score and the amounts owed is 30%. So clearly these two areas are the most important, compared to your length of credit at 15%, new credit at 10%, and how many types of credit used at 10%. Here is a list of what each section contains:

Payment History

Amounts Owed

Length of Credit History

New Credit

Types of Credit Used

You may request your credit score from any of the three credit bureaus, Equifax, Experian, and Transunion.